S-1/A

As filed with the Securities and Exchange Commission on February 20, 2002

Registration No. 333-76842          

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Amendment No. 1

to

FORM S-1

REGISTRATION STATEMENT

Under

THE SECURITIES ACT OF 1933

MedSource Technologies, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	3841	52-2094496
(State of Incorporation)	(Primary S.I.C. Code Number)	(IRS Employer Identification No.)

110 Cheshire Lane, Suite 100

Minneapolis, MN 55305

(952) 807-1234

(Address, including zip code and telephone number, of registrant’s principal executive offices)

Richard J. Effress

Chairman of the Board of Directors and Chief Executive Officer

MedSource Technologies, Inc.

110 Cheshire Lane, Suite 100

Minneapolis, MN 55305

(952) 807-1234

(Name, address, including zip code and telephone number, including area code, of agent for service)

Copies to:

Edward R. Mandell Jenkens & Gilchrist Parker Chapin LLP 405 Lexington Avenue New York, NY 10174 Telephone No.: (212) 704-6000 Telecopier No.: (212) 704-6288 Joseph J. Caffarelli Senior Vice President and Chief Financial Officer MedSource Technologies, Inc. 110 Cheshire Lane, Suite 100 Minneapolis, MN 55305 Telephone No.: (952) 807-1234 Telecopier No.: (952) 807-1235 Patrick O’Brien Ropes & Gray One International Place Boston, MA 02110 Telephone No.: (617) 951-7000 Telecopier No.: (617) 951-7050

Approximate date of commencement of proposed sale to public:    From time to time after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. ¨

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

PROSPECTUS (Subject to Completion)

Issued                     , 2002

                     Shares

MedSource Technologies, Inc.

COMMON STOCK

MedSource Technologies, Inc. is offering shares of its common stock. This is our initial public offering and no public market currently exists for our shares. We anticipate that the initial public offering price will be between $            and $            per share.

We have applied for approval for quotation of our common stock on the Nasdaq National Market under the symbol “MEDT.”

Investing in our common stock involves risks. See “Risk Factors” beginning on page 9.

PRICE $         A SHARE

	Price to Public	Underwriting Discounts and Commissions	Proceeds to Company
Per Share	$	$	$
Total	$	$	$

MedSource Technologies, Inc. and two selling stockholders have granted the underwriters the right to purchase up to an additional                     shares and             shares, respectively, to cover over-allotments.

The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Morgan Stanley & Co. Incorporated expects to deliver the shares to purchasers on                 , 2002.

MORGAN STANLEY BEAR, STEARNS & CO. INC.

WACHOVIA SECURITIES THOMAS WEISEL PARTNERS LLC

, 2002

The inside front cover includes 12 pictures of various MedSource manufactured products. The page also includes the following text: "MedSource Technologies, Inc. is a leading provider of engineering, product development and manufacturing services, and supply chain management solutions to the medical device industry."

TABLE OF CONTENTS

	Page
Prospectus Summary	3
Risk Factors	9
Forward-Looking Statements	19
Use of Proceeds	20
Dividend Policy	21
Capitalization	22
Dilution	24
Selected Unaudited Pro Forma Condensed Combined Financial Information	25
Selected Consolidated Financial Data	30
Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Selected Financial Data of Predecessor Companies	41
Management’s Discussion and Analysis of Financial Condition and Results of Operations of Predecessor Companies	43

	Page
Business	47
Management	58
Related Party Transactions	67
Principal and Selling Stockholders	72
Description of Capital Stock	75
Shares Eligible for Future Sale	79
Underwriting	81
Legal Matters	83
Experts	83
Where You Can Find Additional Information	84
Index to Consolidated Financial Statements and Predecessor Company Financial Statements	F-1

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. We are offering to sell shares of common stock and seeking offers to buy shares of common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is current only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of common stock. Unless otherwise provided, in this prospectus, the “Company,” “we,” “us” and “our” refer to MedSource Technologies, Inc. and its subsidiaries.

Until                          , 2002, all dealers that buy, sell or trade shares of our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information that you should consider before investing in our common stock. You should read the entire prospectus, including the more detailed information and the financial statements appearing elsewhere in this prospectus.

Our Business

We are a leading engineering and manufacturing services provider to the medical device industry. Our customers include many of the largest medical device companies in the world, such as Boston Scientific, Guidant, Johnson & Johnson affiliates and Medtronic, as well as other large and emerging medical device companies. We provide product development and design services, precision metal and plastic part manufacturing, including milling, lathe turning, wire forming, stamping, plastic tubing and injection molding, and product assembly services. In addition, we provide supply chain management services, including the sourcing of components that we do not manufacture internally, such as electronic circuitry, from third party suppliers for the devices we assemble for our customers. Through these products and services, we offer our customers a single source solution for their device development and manufacturing needs, accelerated product development time, and reduced costs, allowing them to focus on their core competencies such as research and sales and marketing. Examples of the medical devices and components we manufacture for our customers include endoscopic instruments, set screws and pins for pacemakers, interventional catheters and guidewires and orthopedic implants such as hips and knees. Our revenues and adjusted EBITDA grew from $89.4 million and $14.4 million, respectively, in fiscal 2000 to $128.5 million and $16.1 million, respectively, in fiscal 2001. On a pro forma basis, our fiscal 2001 revenues and adjusted EBITDA would have been $149.8 million and $19.1 million, respectively. Our net loss in fiscal 2000 and 2001 was $14.4 million and $29.1 million, respectively, and $30.4 million on a pro forma basis in fiscal 2001.

The global medical device market in 2000 exceeded $170 billion, with the United States portion alone constituting approximately $70 billion, according to Frost & Sullivan. Our initial target markets are the surgical instrumentation, electro-medical implant, interventional and orthopedic markets. We selected these target markets based on their size, growth, margins, customer dynamics and competitive environment. We believe that medical device companies’ cost of goods sold largely represents the market for medical engineering and manufacturing services. Based on Frost & Sullivan data, we believe the cost of goods sold for our four target markets currently represents at least a $10 billion annual worldwide opportunity.

According to Frost & Sullivan, outsourcing of manufacturing by medical device companies in the United States grew at an annual rate in excess of 18% from 1999 to 2000. We believe that manufacturing outsourcing by medical device companies will continue to increase at approximately the same rate through 2005 and expect several trends to drive this growth, including:

· the need for faster product innovation, which requires accelerating product development cycle times;

· cost containment pressures in healthcare, which necessitate a more efficient supply chain; and

· increased competition and industry consolidation.

As a result of these factors, medical device companies are focusing on their core competencies in research and sales and marketing and are outsourcing other functions such as manufacturing and related engineering and product development services. We believe that the medical engineering and manufacturing services industry is

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highly fragmented with over 4,000 companies, many of which have annual revenues of less than $3.5 million and limited capabilities that do not satisfy current market requirements. We believe we address this market opportunity by providing our customers:

· a single source solution;

· accelerated time to market;

· quality products and practices;

· reduced costs; and

· a financially stable product and service provider.

The key elements of our strategy are to:

· focus on manufacturing excellence and leading process technologies;

· strengthen our customer relationships by collaborating in the design and engineering of new products;

· drive additional component manufacturing business by continuing to expand our device assembly services;

· pursue product line transfers and acquisitions of customers’ manufacturing assets; and,

· selectively acquire companies to complement our product and service offerings.

We began operations during March 1999 through the acquisition of seven companies with complementary capabilities, and subsequently broadened our capabilities through five additional acquisitions. Since our launch, we have focused our efforts on integrating and growing our business and have made significant investments in our product design and development capabilities, sales and marketing teams, operations, quality systems and information technology infrastructure to support that growth. We currently have 15 manufacturing facilities with approximately 600,000 total square feet and approximately 1,350 employees.

Recent Development

On January 4, 2002, we acquired HV Technologies, a specialized manufacturer of polyimide and composite micro-tubing that is used in interventional and minimally invasive catheters, delivery systems and instruments. The acquisition of HV Technologies advances our position in the interventional device market by expanding our offering of proprietary manufacturing capabilities to our customers.

We were formed under the name Veratek International, Inc. in Delaware in April 1998, changed our name to MedSource Technologies, Inc. in January 1999 and began operations in March 1999. Our principal executive offices are located at 110 Cheshire Lane, Suite 100, Minneapolis, Minnesota 55305 and our telephone number is (952) 807-1234. Our internet address is www.medsourcetech.com. Information on our web site is not part of this prospectus.

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The Offering

Common stock to be offered by us	shares
Common stock to be outstanding after this offering	shares
Over-allotment option	shares of our common stock to be sold by us and an aggregate of 325,000 shares of our common stock to be sold by two selling stockholders.
Use of proceeds	For repayment of debt, redemption of our Series E and Series F preferred stock issued in connection with our acquisition of HV Technologies in January 2002, payment of accrued dividends on our Series B preferred stock, termination of certain management agreements and working capital and other general corporate purposes, including acquisitions, all as further described under the caption “Use of Proceeds.”
Dividend policy	We do not intend to pay dividends on our common stock. We plan to retain earnings for use in the operation of our business and to fund future growth.
Proposed Nasdaq National Market symbol	MEDT

Except as otherwise indicated, whenever we present the number of shares of common stock outstanding, we have given effect, as of December 30, 2001, to the following issuances of our common stock upon completion of this offering:

· the conversion of all of our:

· Series A preferred stock into an aggregate of 1,918,500 shares of our common stock;

· Series B preferred stock into an aggregate of 3,327,280 shares of our common stock;

· Series C preferred stock into an aggregate of                shares of our common stock (assuming that the initial public offering price is the midpoint of the price range on the cover of this prospectus), but if the initial public offering price is at the high end of the price range on the cover of this prospectus, the Series C preferred stock will convert into an aggregate of          shares of our common stock and if the initial public offering price is at the low end of the range on the cover of this prospectus, the Series C preferred stock will convert into an aggregate of          shares of our common stock, all as further described in the second paragraph under the caption “Description of Capital Stock — General”;

· Series D preferred stock into an aggregate of 1,766,620 shares of our common stock; and

· Series Z preferred stock into an aggregate of 650,000 shares of our common stock; and

· the exercise of a warrant to purchase 525 shares of our Series C preferred stock, and the conversion of that preferred stock into an aggregate of                shares of our common stock (assuming that the initial public offering price is the midpoint of the price range on the cover of this prospectus), but if the initial public offering price is at the high end of the price range on the cover of this prospectus, the Series C preferred stock will convert into an aggregate of          shares of our common stock and if the initial public offering price is at the low end of the range on the cover of this prospectus, the Series C preferred stock will convert into an aggregate of          shares of our common stock, all as further described in the second paragraph under the caption “Description of Capital Stock — General.”

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We calculated the number of shares outstanding after this offering on the assumption that the underwriters do not exercise their over-allotment option, and we also excluded:

· 3,017,595 shares of our common stock issuable, at a weighted average exercise price of $15.60 per share, upon exercise of stock options outstanding as of December 30, 2001;

· 1,657,612 shares of our common stock available for future grant under our 1999 stock plan as of December 30, 2001;

· 500,000 shares of our common stock available for purchase under our employee stock purchase plan as of December 30, 2001; and

· 200,000 shares of our common stock issuable upon exercise of outstanding warrants as of December 30, 2001 at an exercise price of $0.01 per share.

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Summary Consolidated Financial Data

The following table summarizes historical and pro forma consolidated financial data for our business. You should read this table along with “Selected Unaudited Pro Forma Condensed Combined Financial Information,” “Selected Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes appearing elsewhere in this prospectus.

The unaudited pro forma statement of operations data set forth below for the year ended June 30, 2001 show our pro forma results of operations as if our acquisition of ACT Medical in December 2000 and as if our acquisition of HV Technologies in January 2002 and our related issuances of Series E preferred stock and warrants and Series F preferred stock had all occurred on July 2, 2000, and the unaudited pro forma statement of operations data set forth below for the six months ended December 30, 2001 show our pro forma results of operations as if the acquisition of HV Technologies in January 2002 and the related issuance of Series E preferred stock and warrants and Series F preferred stock had all occurred on July 2, 2000, as further discussed under the caption “Selected Unaudited Pro Forma Condensed Combined Financial Information.”

The unaudited pro forma balance sheet data set forth below and the unaudited pro forma as adjusted balance sheet data set forth below both give effect to our acquisition of HV Technologies in January 2002 and our related issuances of Series E preferred stock and warrants and Series F preferred stock as if they had all occurred on December 30, 2001, as further discussed under the caption “Selected Unaudited Pro Forma Condensed Combined Financial Information.” The unaudited pro forma as adjusted balance sheet data set forth below also give effect to this offering and the conversion of all of our outstanding convertible preferred stock and the exercise of the warrant as described in the first and second paragraphs of the table under “Summary — The Offering” on page 5.

	Fiscal Year Ended						Pro Forma Fiscal Year Ended June 30, 2001(b)			Six Months Ended December 30,						Pro Forma Six Months Ended December 30, 2001(b)
	July 1, 2000(a)			June 30, 2001						2000			2001
Statement of Operations Data:	(In thousands, except share and per share data)
Revenues	$	89,352		$	128,462		$	149,769		$	55,491		$	72,155		$	76,486
Costs and expenses:
Cost of products sold		59,811			94,386			108,126			41,514			54,616			56,565
Selling, general and administrative expense		21,167			26,199			31,334			11,771			14,080			16,151
Amortization of goodwill and other intangibles(c)		4,255			5,640			6,544			2,432			169			169
Restructuring charge(d)		—			11,464			11,464			—			—			—
Total costs and expenses		85,233			137,689			157,468			55,717			68,865			72,885
Operating income (loss)		4,119			(9,227	)		(7,699	)		(226	)		3,290			3,601
Interest (expense), net		(10,682	)		(10,213	)		(10,155	)		(5,417	)		(4,886	)		(4,867	)
Other income (expense)		(7	)		53			64			(361	)		(27	)		(19	)
Loss before income taxes		(6,570	)		(19,387	)		(17,790	)		(6,004	)		(1,623	)		(1,285	)
Income tax benefit (expense)		535			(70	)		(70	)		—			—			—
Net loss		(6,035	)		(19,457	)		(17,860	)		(6,004	)		(1,623	)		(1,285	)
Preferred stock dividends and accretion of discount on preferred stock		(8,345	)		(9,688	)		(12,514	)		(4,654	)		(5,322	)		(6,077	)
Net loss attributed to common stockholders	$	(14,380	)	$	(29,145	)	$	(30,374	)	$	(10,658	)	$	(6,945	)	$	(7,362	)
Net loss per share attributed to common stockholders (basic and diluted)	$	(3.10	)	$	(5.55	)	$	(5.00	)	$	(2.03	)	$	(1.32	)	$	(1.21	)
Weighted average number of shares of common stock outstanding (basic and diluted)		4,633,571			5,252,749			6,076,974			5,251,833			5,256,058			6,080,280
Other Data:
Net cash provided by (used in) operating activities(e)	$	6,290		$	1,253					$	5,342		$	(4,024	)
Net cash used in investing activities(e)		(22,244	)		(11,627	)					(5,963	)		(5,115	)
Net cash provided by (used in) financing activities(e)		16,356			28,453						27,686			2,167
EBITDA(f)		12,867			3,021		$	5,988			5,022			7,201		$	7,664
Adjusted EBITDA(f)(g)		14,373			16,140			19,107			5,746			8,132			8,595

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	As of December 30, 2001
	Actual			Pro Forma(b)		Pro Forma As Adjusted(b)
	(In thousands)
Balance Sheet Data:
Cash and cash equivalents	$	13,317		$	9,307	$
Working capital		25,916			22,916
Total assets		201,334			220,498
Total debt (h)		86,356			86,356
Mandatory redeemable convertible stock		103,085			106,721
Total stockholders’ equity (deficit)		(14,324	)		188

(a) Our fiscal years originally ended on the Saturday closest to June 30. Effective July 1, 2001, our fiscal year end was changed to June 30.

(b) In connection with our acquisition of HV Technologies in January 2002, we issued an aggregate of $6.0 million of our Series E preferred stock in December 2001 and January 2002, and we issued warrants to purchase an aggregate of 200,000 shares of our common stock at $0.01 per share. We recorded a discount of $2.3 million to the carrying value of the Series E preferred stock equal to the consideration allocated to the warrants. We will accrete this discount over the 12 month period ending December 31, 2002 because we plan to redeem our Series E preferred stock by that date. The effect of the accretion is excluded from the pro forma and pro forma as adjusted presentation.

(c) The Statement of Operations Data for the six months ended December 30, 2001 does not include a charge for the amortization of goodwill. Effective with our quarter ended September 30, 2001, we adopted the provisions of Statement of Financial Accounting Standards, or SFAS, No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets, and, accordingly, we reclassified certain identifiable intangibles to goodwill and will no longer amortize goodwill and intangible assets that are deemed to have indefinite lives under SFAS 142. Had we continued to amortize goodwill during the six months ended December 30, 2001, amortization expense in that period would have increased by approximately $2.8 million or $0.53 per common share.

(d) In June 2001, we completed a strategic review of our manufacturing operations and support functions. Based on this review and with board approval, we began actions to eliminate redundant facilities. These actions resulted in pre-tax charges of $11.5 million. The charges include employee termination benefits of $3.8 million, other exit costs of $2.2 million, impairment of goodwill and other intangibles of $3.6 million and impairment of property, plant, and equipment of $1.9 million.

(e) Because of the subjectivity inherent in the assumptions concerning the nature and timing of the uses of cash generated by the pro forma interest and other expenses, cash flows from operating, investing and financing activities are not presented for the pro forma periods.

(f) EBITDA represents earnings before interest expense, income taxes, depreciation and amortization. EBITDA should not be considered in isolation from, or as a substitute for, net income, cash flow from operations or other cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of our profitability or liquidity. Rather, EBITDA is presented because it is a widely accepted supplemental financial measure, and we believe that it provides relevant and useful information. A calculation of EBITDA may not be comparable to similarly titled measures reported by other companies, since all companies do not calculate this non-GAAP measure in the same manner. Our EBITDA calculation is not intended to represent cash provided by (used in) operating activities since it does not include interest and taxes and changes in operating assets and liabilities, nor is it intended to represent a net increase in cash since it does not include cash provided by (used in) investing and financing activities.

(g) Adjusted EBITDA excludes costs of management agreements that we have entered into with Kidd & Company and Whitney & Co. We incurred fees under these agreements of $0.4 million for the period from March 31, 1999 (inception) through July 3, 1999, $1.5 million for the year ended July 1, 2000, $1.7 million for the year ended June 30, 2001, $0.7 million for the six months ended December 30, 2000 and $0.9 million for the six months ended December 30, 2001. These agreements will terminate upon completion of this offering. Adjusted EBITDA also excludes restructuring charges of $11.5 million for year ended June 30, 2001.

(h) In connection with the repayment of our debt, as discussed under the caption “Use of Proceeds,” we will expense $3.0 million of unamortized deferred financing costs, $2.5 million of unamortized discount and a redemption premium of $1.6 million (assuming the redemption is prior to March 30, 2002).

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RISK FACTORS

You should carefully consider the risks described below, together with all of the other information included in this prospectus, before deciding whether to invest in our common stock. The following risks and uncertainties are not the only ones we face. However, these are the risks our management believes are material. If any of the following risks materializes, our business, financial condition or results of operations could be harmed. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.

Risks Related to Our Business

Adverse trends or business conditions affecting the medical device industry or our customers could harm our operating results.

Our business depends on trends in the medical device industry, which is subject to rapid technological changes, short product life-cycles, frequent new product introductions and evolving industry standards, as well as economic cycles. Conditions or technological innovations adversely affecting any of our major customers, the medical device industry in general or the surgical instrumentation, electro-medical implant, interventional and orthopedic markets we target in particular, could adversely affect our operating results. For example, the discovery and market acceptance of non-device treatments for specific medical conditions could make the medical devices used to treat these conditions obsolete. In addition, the products and services that we provide to our customers generally are specific to a particular medical device being developed or marketed by them. If a customer’s medical device does not gain or maintain market acceptance because of competing medical devices or treatments, changing market conditions, unfavorable regulatory actions or other reasons, our revenues from that customer and our results of operations would be adversely affected.

Because a significant portion of our revenue comes from a few large customers, any decrease in sales to these customers could harm our operating results.

The medical device industry is concentrated, with relatively few companies accounting for a large percentage of sales in the surgical instrumentation, electro-medical implant, interventional and orthopedic markets that we target. Accordingly, our revenue and profitability are highly dependent on our relationships with a limited number of large medical device companies. In fiscal 2001, our top four customers accounted for approximately 41% of our revenues, with one customer accounting for 18% of our revenues and another accounting for 12% of our revenues. In fiscal 2000, our top four customers accounted for approximately 42% of our revenues, with one customer accounting for 16% of our revenues and another accounting for 14% of our revenues. We provide products and services to several different divisions of our top customers. We are likely to continue to experience a high degree of customer concentration, particularly if there is further consolidation within the medical device industry. We cannot assure you that there will not be a loss or reduction in business from one or more of our major customers. In addition, we cannot assure you that revenues from customers that have accounted for significant revenues in the past, either individually or as a group, will reach or exceed historical levels in any future period. The loss or a significant reduction of business from any of our major customers would adversely affect our results of operations.

Our growth may be slow if the trend toward outsourcing by medical device companies does not continue or if our customers decide to manufacture internally products that we currently provide.

To date, we have benefited from the growing trend of medical device companies to outsource all or a portion of their engineering, product development, manufacturing and assembly requirements. Although we expect medical device companies to increase their outsourcing of these requirements in the future, we cannot be certain that this trend will continue or that, if it continues, we will benefit from it. Even if the outsourcing trend in the industry continues, one or more of our principal customers could decide to decrease its reliance on or use of outsourcing, which would reduce our customer base.

Also, as part of our growth strategy, we are seeking to accept full supply chain management and manufacturing responsibility for selected product lines from our customers and, in some cases, to acquire the related manufacturing assets from these customers. While we believe that product line transfers and asset

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acquisitions of this kind are becoming increasingly attractive to our customers, we have only consummated one of these transactions to date. We cannot be sure that opportunities of this nature will be available, especially if the trend toward outsourcing does not continue.

We have few contracts with our customers that ensure us future business, and cancellations, reductions or delays in customer orders could harm our operating results.

Generally, we work with our customers on a project-by-project or purchase order-by-purchase order basis, without any long term revenue, volume or other commitments to ensure us future business. Customer orders typically may be cancelled and volume levels may be changed or delayed at any time. We cannot assure you that we can replace delayed, cancelled or reduced projects with new business in a timely manner. Also, we may not fully recover our costs in connection with cancelled, delayed or reduced projects.

Our quarterly operating results fluctuate significantly, and if we fail to meet the expectations of securities analysts or investors, our stock price may decrease.

Our operating results have fluctuated in the past from quarter to quarter and are likely to fluctuate significantly in the future due to a variety of factors, including:

· the timing of actual customer orders and the accuracy of our customers’ forecasts of future production requirements;

· the introduction and market acceptance of our customers’ new products and changes in demand for our customers’ existing products;

· changes in the relative portion of our revenue represented by our various products, services and customers, including the relative mix of our business across our target markets;

· changes in competitive or economic conditions generally or in our customers’ markets;

· changes in availability or costs of raw materials or supplies; and

· demand for our products and services, which, during our limited operating history, has been higher than average during the last quarter of our fiscal year and lower than average during the first quarter of our fiscal year.

For all these reasons, our quarterly results are difficult to predict and should not be relied upon as an indication of future performance. Fluctuations in our quarterly results could result in our failing to meet the expectations of the investment community, which could adversely affect the market price of our common stock even if those fluctuations are unrelated to our long term operating performance or prospects.

Failure to successfully manage our growth and integrate acquired businesses may adversely affect our financial performance.

We were formed in March 1999 through the acquisition of seven separate businesses. In January 2000, we acquired the business of Tenax Corporation; in February 2000, we acquired Apex Engineering; in May 2000, we acquired Thermat Precision Technology, Inc.; in December 2000, we acquired ACT Medical, Inc.; and in January 2002, we acquired HV Technologies. As a result, we are experiencing rapid growth that could strain our managerial and other resources.

The successful integration and operation of an acquired business requires communication and cooperation among key managers, the transition of customer relationships, the management of ongoing projects of acquired

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companies and the management of new projects across previously independent facilities. Acquisitions also involve a number of other risks, including:

· the diversion of management attention;

· difficulties in integrating the operations and products of an acquired business or in realizing projected operational results, synergies and cost savings;

· inaccurate assessments of undisclosed liabilities; and

· potential loss of key customers or employees of the acquired businesses.

Customer satisfaction or performance problems with an acquired company could also harm our reputation as a whole, and any acquired business could significantly underperform relative to our expectations. Because all of our acquisitions were completed in the past 36 months, we are currently facing all of these challenges and our ability to meet them over the long term has not been established. For all these reasons, our pursuit of an overall acquisition strategy or any individual completed, pending or future acquisition may adversely affect the realization of our strategic goals.

In addition, while we anticipate cost savings, operating efficiencies and other synergies as a result of our acquisitions, the consolidation of functions and the integration of departments, systems and procedures present significant management challenges. We cannot assure you that we will:

· successfully accomplish those actions as rapidly as anticipated;

· achieve the cost savings and efficiencies that we expect from our acquisitions;

· successfully manage the integration of new locations or acquired operations;

· fully use new capacity; or

· enhance our business as a result of any past or future acquisition, including those mentioned above.

The acquisition of new operations can also introduce new types of risks to our business. For example, new acquisitions may require greater levels of financing or greater effort to address United States Food and Drug Administration, or FDA, regulation or similar foreign regulation.

We may face product liability claims that could result in costly litigation and divert the attention of our management.

We may be exposed to product liability claims and product recalls, including those which may arise from misuse or malfunction of, or design flaws in, our customers’ products, whether or not such problems directly relate to the products and services we have provided. Generally, we do not at this time have agreements in place with our customers governing liability for product liability and recalls. Even where we have agreements with customers that contain provisions attempting to limit our damages, these provisions may not be enforceable or may otherwise fail to protect us from liability. Product liability claims or product recalls, regardless of their ultimate outcome, could require us to spend significant time and money in litigation or require us to pay significant damages. The occurrence of product liability claims or product recalls could cause our results of operations to be adversely affected.

We carry $20.0 million of product liability insurance coverage which is limited in scope. Our management believes that our insurance coverage is adequate given the risks we face. We cannot assure you that we will be able to maintain this insurance or to do so at reasonable cost and on reasonable terms. We also cannot assure you that this insurance will be adequate to protect us against a product liability claim that may arise in the future.

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If we experience decreasing prices for our products and services and we are unable to reduce our expenses, our results of operations will suffer.

We may experience decreasing prices for the products and services we offer due to:

· pricing pressure experienced by our customers from managed care organizations and other third-party payors;

· increased market power of our customers as the medical device industry consolidates; and

· increased competition among medical engineering and manufacturing services providers.

If the prices for our products and services decrease for whatever reason and we are unable to reduce our expenses, our results of operations will be adversely affected.

If our manufacturing processes, products and services fail to meet the highest quality standards, our reputation could be damaged and our results of operations could be harmed.

Quality is extremely important to us and our customers due to the serious and costly consequences of product failure. Our success depends in part on our ability to manufacture to exact design specifications precision engineered plastic and metal components, subassemblies and finished devices from multiple materials. If our products and services fail to meet the highest quality standards or fail to adapt to evolution in those standards, our reputation could be harmed and our competitive position could be damaged. In addition, our quality systems and certifications are critical to the marketing success of our products and services. If we fail to maintain our quality systems or certifications, our reputation could be damaged and our results of operations could be adversely affected.

Competition from our customers’ internal operations as well as from other medical engineering and manufacturing service providers could result in downward pressure on prices, fewer new business opportunities and loss of market share.

Our current and prospective customers often evaluate our product and service offerings against the merits of internal design and engineering, manufacturing, assembly and supply chain management. In this sense, we often compete for business with the internal resources of our customers, many of whom are leading medical device companies with long-standing internal design and engineering, manufacturing and supply chain management capabilities. Our success therefore depends heavily upon our ability to demonstrate and deliver cost savings and accelerated time to market for our customers as compared to use of internal resources, without loss of quality, confidentiality or reliability.

In addition, we believe the medical engineering and manufacturing services industry is very competitive and fragmented with over 3,000 companies, many of which are specialized. To the extent that medical device companies seek to outsource more of the design, prototyping and manufacturing of their products, we will face increasing competitive pressures to broaden our capabilities and grow our business in order to maintain our competitive position, and we may encounter competition from other companies with design, technological and manufacturing capabilities similar or superior to ours.

If we fail to comply with the covenants under our new senior credit facility or other indebtedness, are unable to pay interest and principal when due or experience increased interest costs, our operating results and financial condition could be harmed.

Failure to comply with the covenants under our senior credit facility or with respect to any future indebtedness may result in an event of default. If an event of default occurs and is not cured or waived, substantially all of our indebtedness could become immediately due and payable. We anticipate that upon the closing of this offering our total debt will be approximately $40 million and our annual interest expense will be approximately $             million. The ability to pay interest and principal on our debt obligations will depend on our future operating performance, which will be affected by prevailing economic conditions and financial, business and other factors, many of which are beyond our control. There can be no assurance that our operations will generate earnings in any future period sufficient to cover the fixed charges. In addition, we may experience variable financial results as a consequence of floating interest rate debt. As interest rates fluctuate, we may

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experience increases in interest expense, which may materially affect financial results. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” on page 38.

If we cannot obtain the additional capital required to fund our operations and finance acquisitions on favorable terms or at all, we may have to delay or abandon our growth strategy.

Our growth strategy will require additional capital for, among other purposes, completing acquisitions of companies and customers’ product lines and manufacturing assets, integrating acquired companies and assets, acquiring new equipment and maintaining the condition of existing equipment. In connection with this offering, we intend to repay all of our subordinated indebtedness and replace our existing senior credit facility with a new senior credit facility. If cash generated internally is insufficient to fund capital requirements, or if funds are not available under our new senior credit facility, we will require additional debt or equity financing. Adequate financing may not be available or, if available, may not be available on terms satisfactory to us. If we raise additional capital by issuing equity or convertible debt securities, the issuances may dilute the share ownership of the existing investors. In addition, we may grant future investors rights that are superior to those of our existing investors. If we fail to obtain sufficient additional capital in the future, we could be forced to curtail our growth strategy by reducing or delaying capital expenditures and acquisitions, selling assets or restructuring or refinancing our indebtedness. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” on page 36.

Our growth may be limited and our competitive position may be harmed if we are unable to identify and consummate future acquisitions.

Our continued growth may depend on our ability to identify and acquire on acceptable terms companies that complement or enhance our business. We may not be able to identify or complete future acquisitions. Some of the risks that we may encounter include expenses associated with, and difficulties in identifying, potential targets, the costs associated with incomplete acquisitions and higher prices for acquired companies because of competition for attractive acquisition targets. If we fail to acquire additional capabilities, we may be unable to compete with other companies in our industry that are able to provide more complete outsourcing capabilities and services to medical device companies, which could adversely affect our results of operations.

A substantial amount of our assets represents goodwill, and our net income will be reduced if our goodwill becomes impaired.

As of December 30, 2001, approximately $97 million, or 48%, of our total assets represented goodwill. Goodwill is generated in our acquisitions when the cost of an acquisition exceeds the fair value of the net tangible and identifiable intangible assets we acquire. We historically have recorded goodwill on our balance sheet and amortized it, generally on a straight-line basis over twenty years. Recently, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard, or SFAS, No. 142, Goodwill and Other Intangible Assets, which we adopted effective July 1, 2001. Goodwill is no longer amortized under generally accepted accounting principles as a result of SFAS No. 142. Instead, goodwill is subject to an impairment analysis at least annually based on the fair value of the reporting unit. We could be required to recognize reductions in our net income caused by the write-down of goodwill, if impaired, that if significant could materially and adversely affect our results of operations.

We depend on outside suppliers and subcontractors, and our production and reputation could be harmed if they are unable to meet our volume and quality requirements and alternative sources are not available.

Our current capabilities do not include all elements that are required to satisfy all of our customers’ requirements. As we increasingly position ourselves to provide our customers with a single source solution, we may rely increasingly on third party suppliers, subcontractors and other outside sources for components or

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services. Manufacturing problems may occur with these third parties. A supplier may fail to develop and supply products and components to us on a timely basis, or may supply us with products and components that do not meet our quality, quantity or cost requirements. If any of these problems occur, we may be unable to obtain substitute sources of these products and components on a timely basis or on terms acceptable to us, which could harm our ability to manufacture our own products and components profitably or on time. In addition, if the processes that our suppliers use to manufacture products and components are proprietary, we may be unable to obtain comparable components from alternative suppliers.

If we are unable to maintain our expertise in manufacturing processes or if our customers demand capabilities that we cannot provide, we will be unable to compete successfully.

We use highly engineered, proprietary processes and sophisticated machining equipment to meet the specifications of our customers. Without the timely incorporation of new processes and enhancements, particularly relating to quality standards and cost-effective production, our manufacturing capabilities would likely become outdated, which would cause us to lose customers. In addition, new or revised technologies could render our existing process technology less competitive or obsolete or could reduce demand for our products and services. It is also possible that finished medical device products introduced by our customers may require fewer of our components or may require components that we lack the capabilities to manufacture or assemble. In addition, we cannot assure you that any investment that we make in new technologies will result in commercially viable processes for our business.

Although we anticipate that our manufacturing and marketing expertise will enable us to successfully develop and market our capabilities, any failure by us to anticipate or respond in a cost-effective and timely manner to technological developments or changes in industry standards or customer requirements, or any significant delays in capability development or introduction could adversely affect our results of operations.

There are operational and financial risks associated with our new facility in Mexico that could harm our operating results.

We operate a manufacturing facility in Navojoa, Mexico and are in the process of significantly expanding that facility. Our operations at this facility currently comprise a small portion of our business; however, we expect that these operations will increase as we expand our device assembly service offering. Our operations in Mexico may expose us to risks and uncertainties that are different from those we experience in the United States, including political, social and economic instability, difficulties in staffing and managing international operations and controlling manufacturing quality, product or material transportation delays or disruption, trade restrictions, currency fluctuation and changes in tariffs, regulatory restrictions and import and export license requirements. In addition, we will be subject to currency fluctuations with respect to our labor and facilities costs in Mexico. If any of these risks materializes, our business may be harmed.

Our cost of products sold may be harmed by fluctuations in the availability and price of raw materials.

Raw materials needed for our business are susceptible to fluctuations in price and availability due to transportation costs, government regulations, price controls, changes in economic climate or other unforeseen circumstances. In particular, stainless steel, titanium and platinum are used in some of our products and are in limited supply and subject to fluctuations in price. Our cost of products sold may be adversely impacted by decreases in the availability and increases in the market prices of the raw materials used in our manufacturing processes. There can be no assurance that price increases in raw materials can be passed on to our customers through increases in product prices. Even when we are able to pass along all or a portion of our raw material price increases, there is typically a lag time between the actual cost increase of raw materials and the corresponding increase in the price of our products.

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We and our customers are subject to governmental health, safety and consumer product regulations that are burdensome and carry significant penalties for noncompliance.

We and our customers are subject to federal, state and local health and safety and consumer product regulation, including regulation by the FDA, and to similar regulatory requirements in other countries. These regulations govern a wide variety of activities from product safety and effectiveness to design and development to labeling, manufacturing, promotion, sales and distribution. We believe that we are in compliance with the requirements of FDA, of state and local authorities and, as applicable, of equivalent foreign authorities. In the event that we build or acquire additional facilities outside the United States, we will be subject to medical device manufacturing regulation in those jurisdictions as well. Also, our customers’ products are subject to regulation, including manufacturing standards, of other countries in which they sell their products. As a result, we also may be obliged to comply with these manufacturing standards.

To maintain manufacturing approvals, we are generally required, among other things, to register certain of our manufacturing facilities with the FDA and with certain state and foreign agencies, maintain extensive records and submit to periodic inspections by the FDA and certain state and foreign agencies. We may be required to incur significant expenses and to spend significant amounts of time to comply with these regulations or to remedy violations of these regulations. These efforts could be burdensome. In addition, any failure by us to comply with applicable government regulations could result in cessation of portions or all of our operations, imposition of fines and restrictions on our ability to carry on or expand our operations. Compliance by our customers with governmental regulations and their remedying of violations of these regulations also may be time consuming, burdensome and expensive and could negatively affect our customers’ abilities to sell their products, which in turn could adversely affect our ability to sell our products and services.

The regulations to which we are subject are complex, change frequently and have tended to become more stringent over time. In addition, future laws and regulations may increase governmental involvement in healthcare and lead to increased compliance costs.

Our facilities are subject to environmental regulation that exposes us to potential financial liability.

Federal, state and local laws impose various environmental controls on the management, handling, generation, manufacturing, transportation, storage, use and disposal of hazardous chemicals and other materials used or generated in our manufacturing activities. If we fail to comply with any present or future environmental laws, we could be subject to future liabilities or the suspension of production. We cannot assure you that our operations will not require expenditures for clean-up in the future. Although we do not anticipate that these remediation efforts will be material, we cannot assure you that the costs associated with these efforts will not have an adverse effect on our business, financial condition or results of operations. Changes in environmental laws may impose costly compliance requirements on us or otherwise subject us to future liabilities and additional laws relating to the management, handling, generation, manufacture, transportation, storage, use and disposal of materials used in or generated by the manufacture of our products may be imposed. In addition, we cannot predict the effect that these potential requirements may have on us or our customers.

Accidents at our facilities could delay production, adversely affect our operations and expose us to financial liability.

Our business involves complex manufacturing processes and hazardous materials that can be dangerous to our employees. Although we employ safety procedures in the design and operation of our facilities and we have not experienced any serious accidents or deaths, there is a risk that an accident or death could occur in one of our facilities. Any accident could result in significant manufacturing delays or claims for damages resulting from injuries, which would harm our operations and financial condition. The potential liability resulting from any such accident or death could cause our business to suffer. Any disruption of operations at any of our facilities could harm our business.

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If we lose our key personnel, our ability to operate our company and our results of operations may suffer.

Our future success depends in part on our ability to attract and retain key executive, engineering, marketing and sales personnel. Our key personnel include Mr. Effress and our other executive officers and the loss of certain key personnel could have a material adverse effect on us. We face intense competition for these professionals from our competitors, our customers and other companies operating in our industry. To the extent that the services of members of our senior management team and key technical personnel would be unavailable to us for any reason, we would be required to hire other personnel to manage and operate our company and to develop our products and technology. We cannot assure you that we would be able to locate or employ such qualified personnel on acceptable terms.

If we are unable to attract additional qualified personnel, our growth strategy could be adversely affected.

Our success will depend in large part upon our ability to attract, train, retain and motivate highly skilled employees and management. There is currently aggressive competition for employees who have experience in the engineering and technology used in our products and services. We compete intensely with other companies to recruit and hire from this pool. The industries in which we compete for employees are characterized by high levels of employee attrition. Although we believe we offer competitive salaries and benefits, we may have to increase spending in order to retain personnel.

Our business is indirectly subject to healthcare industry cost containment measures that could result in reduced sales of medical devices containing our components.

Our customers and the healthcare providers to whom our customers supply medical devices may rely on third party payors, including government programs and private health insurance plans, to reimburse some or all of the cost of the procedures in which medical devices that incorporate components manufactured or assembled by us are used. The continuing efforts of government, insurance companies and other payors of healthcare costs to contain or reduce those costs could lead to patients being unable to obtain approval for payment from these third party payors. If that occurred, sales of finished medical devices that include our components may decline significantly, and our customers may reduce or eliminate purchases of our components.

We and our customers may be subject to infringement claims by third parties that could subject us to financial liability or limit our product and service offerings, and our competitive position could be harmed if we are unable to protect our intellectual property.

Litigation to enforce and defend patent and other intellectual property rights is common in the medical device industry. Although we do not believe that any of our products, services or processes infringe the  intellectual property rights of third parties, we may be accused of infringing the rights of others. Our customers’ products also may be the subject of third-party infringement claims, which could seek damages from both the customer and from us. With most of our customers, we do not have formal agreements governing allocation of liability for such claims. Even where we do not have liability to third parties, an infringement claim against one of our customers could result in reduced demand for our products and services or increased pricing pressure. Any infringement claim, significant charge or injunction against our products or those of our customers could harm our business.

We rely on a combination of patent, trade secret and trademark laws, confidentiality procedures and contractual provisions to protect our intellectual property, which relates principally to proprietary manufacturing processes. We cannot be sure that the steps we take to protect our proprietary rights will adequately deter unauthorized disclosure or misappropriation of our intellectual property, technical knowledge, practice or procedures. We may be required to spend significant resources to monitor and defend our intellectual property rights, we may be unable to detect or defend against infringement of these rights and we may lose any competitive advantage associated with these rights.

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Risks Related to this Offering and Our Stock

Our stock price could be extremely volatile and, as a result, you may not be able to resell your shares at or above the price you paid for them.

Before this offering there has not been a public market for our common stock, and an active public market for our common stock may not develop or be sustained after this offering. Further, the market price of our common stock may decline below the price you paid for your shares.

Among the factors that could affect our stock price are:

· industry trends and the business success of our customers;

· loss of a key customer;

· fluctuations in our results of operations;

· our failure to meet the expectations of the investment community and changes in investment community recommendations or estimates of our future results of operations;

· strategic moves by our competitors, such as product announcements or acquisitions;

· regulatory developments;

· litigation;

· general market conditions; and

· other domestic and international macroeconomic factors unrelated to our performance.

The stock market has recently experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the market price of our common stock.

In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted. If a securities class action suit is filed against us, we would incur substantial legal fees and our management’s attention and resources would be diverted from operating our business in order to respond to the litigation.

There may be sales of a substantial amount of our common stock 180 days after this offering, or earlier, by our stockholders, and these sales could cause our stock price to fall.

MedSource and each of its directors, executive officers and stockholders have entered into a lock-up agreement with Morgan Stanley on behalf of the underwriters for a period of 180 days after the date of this prospectus. Sales of substantial amounts of our common stock in the public market after this offering, or the perception that such sales will occur, could adversely affect the market price of our common stock and make it difficult for us to raise funds through equity offerings in the future. A substantial number of outstanding shares of common stock and shares issuable upon exercise of outstanding options and warrants will become available for resale in the public market at prescribed times. Of the             shares to be outstanding after the offering,             shares offered by this prospectus will be eligible for immediate sale in the public market without restriction by persons other than our affiliates. The remaining         %, or            shares, of our total outstanding shares will become available for resale in the public market as shown in the chart below.

Number of Shares	Date Available for Resale
	Immediately
	90 days after this offering (            , 2002)
	180 days after this offering             , 2002) or earlier in the sole discretion of Morgan Stanley & Co. Incorporated
	Various dates beginning in             , 2002.

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Beginning 180 days after this offering (             , 2002), holders of              shares of our common stock may require us to register their shares for resale under the federal securities laws, and holders of an additional            shares of our common stock are entitled to have their shares included in the registration statement, all subject to reduction upon the request of the underwriter in the offering, if any. Registration of those shares would allow the holders to immediately resell their shares in the public market. Any such sales or anticipation thereof could cause the market price of our common stock to decline.

In addition, after this offering, we intend to register             shares of common stock subject to outstanding options or reserved for issuance under our stock purchase plan. For more information, see “Shares Eligible for Future Sale.”

Our principal stockholders and management own a significant percentage of our company and will be able to exercise significant influence over our company and their interests may differ from those of other stockholders.

After this offering, our executive officers and directors and principal stockholders and their affiliated entities will together control approximately     % of our outstanding common stock. Accordingly, these stockholders, if they act together, will be able to control the composition of our board of directors and many other matters requiring stockholder approval and will continue to have significant influence over our affairs. They may exercise this influence in a manner that advances their best interests and not necessarily those of other stockholders. This concentration of ownership also could have the effect of delaying or preventing a change in our control or otherwise discouraging a potential acquirer from attempting to obtain control of us.

Provisions in our charter documents and Delaware law may deter takeover efforts that you feel would be beneficial to stockholder value.

Our certificate of incorporation and bylaws and Delaware law contain provisions which could make it difficult for a third party to acquire us without the consent of our board of directors. These provisions include a classified board of directors and limitations on actions by our stockholders. In addition, our board of directors has the right to issue preferred stock without stockholder approval that could be used to dilute a potential hostile acquiror. Delaware law also imposes restrictions on mergers and other business combinations between us and any holder of 15% or more of our outstanding common stock. While we believe these provisions provide for an opportunity to receive a higher bid by requiring potential acquirers to negotiate with our board of directors, these provisions apply even if the offer may be considered beneficial by some stockholders, and a takeover bid otherwise favored by a majority of our stockholders might be rejected by our board of directors.

You will suffer immediate and substantial dilution.

The initial public offering price of our common stock will be substantially higher than the net tangible book value per share. Accordingly, if you purchase common stock in this offering, you will incur immediate and substantial dilution of $         per share in your investment. This dilution is due in large part to earlier investors in us having paid substantially less than the initial public offering price when they purchased their shares. The exercise of outstanding options and warrants to purchase shares of our common stock will result in additional dilution per share. To the extent we raise additional capital by issuing equity securities, our stockholders may experience substantial additional dilution.

We do not intend to pay dividends, and absence of dividends could reduce our attractiveness to investors.

Some investors favor companies that pay dividends, particularly in market downturns. We currently intend to retain any future earnings to finance the continued development and expansion of our business, and therefore, we do not anticipate paying cash dividends on our common stock in the future. In addition, our new senior credit facility will restrict our payment of dividends. Because we likely will not pay dividends, your return on this investment likely depends on your ability to sell our stock for a profit.

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FORWARD-LOOKING STATEMENTS

You should not rely on forward-looking statements in this prospectus. This prospectus contains forward-looking statements within the meaning of federal securities laws that relate to future events or our future financial performance. 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.

Some of the factors that may cause actual results to differ materially from the results expressed or implied by these forward-looking statements are set forth under “Risk Factors.”

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We do not intend to update any of the forward-looking statements after the date of this prospectus or to conform these statements to actual results.

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USE OF PROCEEDS

Our net proceeds from the sale of             shares of common stock in this offering at an assumed initial public offering price of $            per share will be approximately $            million (approximately $            million if the underwriters’ over-allotment option is exercised in full), after deducting the underwriting discount and estimated offering expenses payable by us.

We intend to use those proceeds as follows:

	Approximate dollar amount
	(In millions)
Refinancing of our senior credit facility(a)	$	30.4
Repayment of our 12.5% senior subordinated notes(b)		21.6
Redemption of our Series E preferred stock and our Series F preferred stock(c)		10.4
Payment of accrued and unpaid dividends on our Series B preferred stock(d)		4.3
Fees under agreements with Kidd & Company and Whitney Mezzanine Management Company(e)		3.7
Working capital and other general corporate purposes, including potential acquisitions(f)
Total	$

(a) As of the date of this prospectus, we owed $68.3 million under our existing senior credit facility. We expect to repay this facility in full with $28.3 million of the proceeds of this offering and $40.0 million from our new senior credit facility while incurring $2.1 million in fees on our new facility, described below under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — New Senior Credit Facility.” The outstanding loans under our existing senior credit facility mature between March 2005 and March 2007 and presently bear interest at rates ranging from 5.4% to 6.9% per year.

(b) The senior subordinated notes mature in 2009, but we will prepay the notes in full, together with a redemption premium of $1.6 million, with the proceeds from this offering, as further discussed below under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Senior Subordinated Notes.”

(c) Our Series E preferred stock and Series F preferred stock were issued in connection with our acquisition of HV Technologies in January 2002. The Series E preferred stock was issued to investors for cash that was paid to shareholders of HV Technologies, and the Series F preferred stock was issued to one of the shareholders of HV Technologies. Our Series E preferred stock and our Series F preferred stock accrue dividends at the rate of 6% per year until December 31, 2002 and January 4, 2003, respectively, and accrue dividends at 16% per year on a retroactive basis thereafter. We expect to use a portion of the proceeds of this offering to redeem our Series E preferred stock before December 31, 2002, and we will use a portion of the proceeds of this offering to redeem our Series F preferred stock within 45 days after we complete this offering.

(d) This amount represents payment of accrued and unpaid dividends on our Series B preferred stock as of the date of this prospectus, which accrues dividends at the rate of 6% per year. As discussed above under the first paragraph after the table under the caption “Summary — The Offering” on page 5, the Series B preferred stock will convert into common stock upon completion of this offering.

(e) This amount represents amounts payable to terminate agreements with Kidd & Company and Whitney Mezzanine Management Company, together with accrued and unpaid fees thereunder, all described below under the caption “Related Party Transactions — Certain Services provided to us by Related Parties.”

(f) From time to time, in the ordinary course of business, we evaluate possible acquisitions of, or investments in, businesses, products and technologies that are complementary to our business. We currently have no arrangements, agreements or understandings for any such acquisitions or investments.

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We will pay an aggregate of $25.9 million of the proceeds of this offering to related parties, as further described below under the caption “Related Party Transactions.”

The amounts and timing of our use of the proceeds of this offering will depend upon numerous factors, including the amount of proceeds actually raised in this offering, the timing of any acquisitions we complete, the availability of debt financing and the amount of cash generated by our operations. Until used as described above, we intend to invest the proceeds of this offering in short-term, investment-grade securities.

The above description represents our present intentions based on our current plans and business conditions. Unforeseen events or changed business conditions, however, could result in the application of the net proceeds from this offering in a manner other than as described in this prospectus. Our management will have broad discretion to allocate the net proceeds from this offering.

DIVIDEND POLICY

We anticipate that we will retain future earnings, if any, to finance the continued development and expansion of our business. In addition, our new senior credit facility will restrict our payment of dividends. Any future determination with respect to the payment of dividends will be dependent upon, among other things, our earnings, capital requirements, the terms of our then existing indebtedness, applicable requirements of Delaware corporate law, general economic conditions and other factors considered relevant by our board of directors.

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CAPITALIZATION

The following table sets forth our capitalization as of December 30, 2001:

· on an actual basis;

· on a “pro forma” basis to reflect our acquisition of HV Technologies in January 2002 and the related issuance of our Series E preferred stock and warrants and Series F preferred stock as if they had all occurred on December 30, 2001; and

· on a “pro forma as adjusted” basis to reflect, in addition to the pro forma adjustments discussed above, (1) the sale of             shares of common stock by us in this offering at an assumed initial public offering price of $             , after deducting the underwriting discount and estimated offering expenses payable by us; (2) the conversion of the preferred stock and the exercise of the warrant as described in the first and second paragraphs after the table under the caption “Summary — The Offering” on page 5; and (3) the application of the net proceeds of this offering, together with proceeds of approximately $40.0 million from the new senior credit facility described in footnote (a) below.

This table should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Selected Unaudited Pro Forma Condensed Combined Financial Information” and our consolidated financial statements and related notes appearing elsewhere in this prospectus.

	As of December 30, 2001
	Actual			Pro Forma			Pro Forma As Adjusted
	(In thousands, except share data)
Cash and cash equivalents	$	13,317		$	9,307		$
Existing senior credit facility, including current portion	$	68,327		$	68,327		$	—
New senior credit facility, including current portion(a)		—			—			40,000
12.5% senior subordinated notes, including current portion and unamortized discount(b)		20,000			20,000			—
Other long-term debt including current portion		511			511			511
Mandatory redeemable stock:
Series B, Series C, Series D and Series F preferred stock, par value $.01 per share, 499,029 shares authorized in the aggregate actual, 499,029 shares authorized in the aggregate pro forma, none authorized pro forma as adjusted, 408,360 shares outstanding in the aggregate actual, 412,360 outstanding in the aggregate pro forma, and none outstanding pro forma as adjusted		103,085			106,721			—
Stockholders’ equity:
Preferred stock, par value $.01 per share, 1,000,000 shares authorized		—			—			—
Series A, Series E and Series Z preferred stock, par value $.01 per share, 171,000 shares authorized in the aggregate actual and aggregate pro forma, none authorized pro forma as adjusted, 108,870 shares outstanding in the aggregate actual, 109,370 shares outstanding in the aggregate pro forma, and none outstanding pro forma as adjusted		1			1
Common stock, par value $.01 per share, 40,000,000 shares authorized, actual and pro forma, 70,000,000 shares authorized pro forma as adjusted, 5,256,158 shares outstanding actual, 6,080,380 shares outstanding pro forma and         shares outstanding pro forma as adjusted		53			61
Additional paid-in capital		39,380			53,884
Accumulated other comprehensive loss		(2,407	)		(2,407	)
Accumulated deficit		(51,208	)		(51,208	)		(c	)(d)
Unaccrued compensation		(143	)		(143	)
Total stockholders’ equity		(14,324	)		188
Total capitalization	$	177,599		$	197,395		$

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(a) Concurrently with this offering, we intend to replace our existing senior credit facility with a new $85.0 million senior credit facility described under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — New Senior Credit Facility.”

(b) In connection with the repayment of our debt, as discussed under the caption “Use of Proceeds,” we will expense $3.0 million of unamortized deferred financing costs, $2.5 million of unamortized discount and a redemption premium of $1.6 million.

(c) As discussed in the second paragraph under the caption “Description of Capital Stock — General,” our Series C preferred stock converts into a number of shares of our common stock that depends upon the public offering price of our common stock. The pro forma as adjusted accumulated deficit therefore reflects a deemed preferred stock dividend of $         million as the value of the additional shares of our common stock issued to the holders of our Series C preferred stock upon conversion in this offering. We determined the value of the dividend in accordance with Emerging Issues Task Force, or EITF, 00-27 by multiplying the number of additional shares of our common stock that are issuable upon conversion of our Series C preferred stock, determined as set forth in the second paragraph under the caption “Description of Capital Stock — General,” by the value of our common stock on the date that investors first committed to purchase our Series C preferred stock.

(d) In connection with our acquisition of HV Technologies in January 2002, we issued an aggregate of $6.0 million of our Series E preferred stock in December 2001 and January 2002, and we issued warrants to purchase an aggregate of 200,000 shares of our common stock at $0.01 per share. We recorded a discount of $2.3 million to the carrying value of the Series E preferred stock equal to the consideration allocated to the warrants. We will accrete this discount over the 12 month period ending December 31, 2002 since we plan to redeem our Series E preferred stock by that date.

The above table excludes the shares of common stock issuable upon exercise of outstanding options and warrants described in the second paragraph after the table under the caption “Summary — The Offering” on page 5.

23

DILUTION

Our pro forma net tangible book value (deficit) as of December 30, 2001 is $             million, or $             per share of common stock. Pro forma net tangible book value (deficit) per share represents the amount of total tangible assets less total liabilities, divided by the number of outstanding shares of common stock after giving effect to the conversion of all outstanding convertible preferred stock and the exercise of the warrant described in the first paragraph after the table under “Summary—The Offering” on page 5.

After giving effect to the sale of             shares of common stock offered by us in this prospectus at an assumed initial public offering price of $             per share, less the underwriting discount and estimated offering expenses payable by us, our pro forma net tangible book value as of December 30, 2001 would have been $            million, or $             per share. This represents an immediate increase in the pro forma net tangible book value to existing stockholders of $             per share and an immediate dilution to new investors of $             per share. The following table illustrates this dilution on a per share basis:

Initial public offering price per share			$
Pro forma net tangible book value per share as of December 30, 2001		$
Increase per share attributable to new investors	$
Pro forma net tangible book value per share after this offering			$
Dilution per share to new investors			$

The following table summarizes, on a pro forma basis as of December 30, 2001, the difference between the number of shares of common stock purchased from us, the total consideration paid to us and the average price per share paid (1) by our existing stockholders and (2) by the new investors purchasing stock in this offering:

	Shares Purchased			Total Consideration			Average Price Per Share
	Number	Percent		Amount	Percent
Exiting stockholders		%			%		$
New investors
Total		100.0	%		100.0	%

The above table excludes the outstanding options and warrants described in the third paragraph after the table under “Summary — The Offering” on page 5. The exercise of all options outstanding as of December 30, 2001 having an exercise price less than the assumed initial public offering price would increase the dilutive effect to new investors to $            per share.

24

SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following selected unaudited pro forma condensed combined statement of operations, for the year ended June 30, 2001 is presented as if the acquisition of ACT Medical in December 2000 and as if the acquisition of HV Technologies during January 2002 and the related issuance of Series E preferred stock and warrants and Series F preferred stock had all occurred on July 2, 2000. The historical balances for the ACT Medical statement of operations are for the unaudited six month period from July 1, 2000 through the December 31, 2000 date of acquisition. The results of ACT Medical for the period from January 1, 2001 through June 30, 2001 are included in our results of operations.

The acquisition of HV Technologies, a specialized manufacturer of polyimide and composite micro-tubing used in interventional and minimally invasive catheters, delivery systems and instruments, enables us to expand our offering of proprietary manufacturing capabilities to our customers in the interventional device market. We determined the purchase price for HV Technologies by evaluating a number of factors including HV Technologies’ profit margins and earnings growth rates, trade secrets and manufacturing capabilities and customer relationships as well as asset values, and we have allocated the amount by which the purchase price exceeded the fair value of the assets acquired to goodwill.

The following selected unaudited pro forma condensed combined statement of operations for the six months ended December 30, 2001 is presented as if the acquisition of HV Technologies during January 2002 and the related issuance of Series E preferred stock and warrants and Series F preferred stock had all occurred on July 2, 2000.

The following selected unaudited pro forma condensed combined balance sheet as of December 30, 2001 is presented as if the acquisition of HV Technologies during January 2002 and the related issuance of Series E preferred stock and warrants and Series F preferred stock had all occurred on December 30, 2001.

The following selected unaudited pro forma condensed combined financial information should be read in conjunction with the historical financial statements of MedSource and ACT Medical and the notes thereto appearing elsewhere in this prospectus. The historical financial statements of HV Technologies are not separately presented in this prospectus.

The following selected unaudited pro forma condensed combined financial information does not purport to represent the results that would have been reported had such events actually occurred on the dates specified, nor is it indicative of our future results.

25

MEDSOURCE TECHNOLOGIES, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED JUNE 30, 2001

	Historical						Pro Forma						Historical			Pro Forma
	MedSource			ACT Medical			Adjustments			Combined			HV Technologies			Adjustments			Combined
	(In thousands, except share and per share amounts)
Revenues	$	128,462		$	12,786		$	—		$	141,248		$	8,521		$	—		$	149,769
Costs and expenses:
Cost of products sold		94,386			9,988			—			104,374			3,752			—			108,126
Selling, general and administrative expenses		26,199			3,257			—			29,456			1,878			—			31,334
Amortization of goodwill and other intangibles		5,640			58			(58	)(a)		6,544			—			—			6,544
								904	(b)
Restructuring charge		11,464			—			—			11,464			—			—			11,464
Total costs and expenses		137,689			13,303			846			151,838			5,630			—			157,468
Operating (loss) income		(9,227	)		(517	)		(846	)		(10,590	)		2,891			—			(7,699	)
Interest (expense), net		(10,213	)		(560	)		560	(c)		(10,213	)		7			51	(c)		(10,155	)
Other income (expense)		53			—			—			53			285			(274	)(d)		64
(Loss) income before income taxes		(19,387	)		(1,077	)		(286	)		(20,750	)		3,183			(223	)		(17,790	)
Income tax benefit (expense)		(70	)		—			—			(70	)		(181	)		181	(d)		(70	)
Net (loss) income		(19,457	)		(1,077	)		(286	)		(20,820	)		3,002			(42	)		(17,860	)
Preferred stock dividends and accretion of discount on preferred stock		(9,688	)					(1,317	)(e)		(11,005	)		—			(1,509	)(f)		(12,514	)
Net (loss) income attributed to common stockholders	$	(29,145	)	$	(1,077	)	$	(1,603	)	$	(31,825	)	$	3,002		$	(1,551	)	$	(30,374	)
Net loss per common share attributed to common stockholders — basic and diluted	$	(5.55	)							$	(6.06	)							$	(5.00	)
Weighted average common shares — basic and diluted		5,252,749									5,252,749						824,222	(g)		6,076,971

See notes to pro forma condensed combined financial information.

26

MEDSOURCE TECHNOLOGIES, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF DECEMBER 30, 2001

	Historical					Pro Forma
	MedSource			HV Technologies		Adjustments			Combined
	(In thousands, except share and per share amounts)
Assets
Current assets:
Cash and cash equivalents	$	13,317		$	1,100	$	500	(h)	$	9,307
							(5,610	)(i)
Accounts and notes receivable, net		21,313			869		—			22,182
Inventories		16,548			936		—			17,484
Prepaid expenses and other current assets		3,515			71		—			3,586
Deferred income taxes		1,335			—		—			1,335
Total current assets		56,028			2,976		(5,110	)		53,894
Property, plant and equipment, net		40,219			2,147		—			42,366
Goodwill, net		96,813			—		19,151	(j)		115,964
Other identifiable intangible assets, net		4,263			—		—			4,263
Deferred financing costs		3,022			—		—			3,022
Interest escrow fund		599			—		—			599
Other assets		390			—		—			390
Total assets	$	201,334		$	5,123	$	14,041		$	220,498
Liabilities, mandatory redeemable convertible stock and stockholders’ equity (deficit)
Current liabilities	$	30,112		$	866	$	—		$	30,978
Long term debt, less unamortized discount and current portion		78,237			562		(562	)(k)		78,237
Deferred income taxes		1,335			—		—			1,335
Other long-term liabilities		2,889			150		—			3,039
Mandatory redeemable stock		103,085			—		3,636	(l)		106,721
Stockholders’ equity (deficit)
Series A, Series E and Series Z preferred stock		1			—		—			1
Common Stock		53			50		8	(l)		61
							(50	)(m)
Additional paid-in capital		39,380			—		500	(h)		53,884
							14,004	(l)
Accumulated other comprehensive loss		(2,407	)		—		—			(2,407	)
Retained earnings (accumulated deficit)		(51,208	)		3,495		(3,495	)(m)		(51,208	)
Unearned compensation		(143	)		—		—			(143	)
Total stockholders’ equity (deficit)		(14,324	)		3,545		10,967			188
Total liabilities, mandatory redeemable convertible stock and stockholders’ equity (deficit)	$	201,334		$	5,123	$	14,041		$	220,498

See notes to pro forma condensed combined financial information.

27

MEDSOURCE TECHNOLOGIES, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED DECEMBER 30, 2001

	Historical						Pro Forma
	MedSource			HV Technologies			Adjustments			Combined
	(In thousands, except share and per share amounts)
Revenues	$	72,155		$	4,331		$	—		$	76,486
Costs and expenses:
Cost of products sold		54,616			1,949			—			56,565
Selling, general and administrative expense		14,080			2,071			—			16,151
Amortization of goodwill and other intangibles		169			—			—			169
Total costs and expenses		68,865			4,020			—			72,885
Operating income		3,290			311			—			3,601
Interest (expense), net		(4,886	)		(2	)		21	(n)		(4,867	)
Other income (expense)		(27	)		117			(109	)(o)		(19	)
(Loss) income before income taxes		(1,623	)		426			(88	)		(1,285	)
Income tax benefit (expense)		—			(318	)		318	(o)		—
Net (loss) income		(1,623	)		108			230			(1,285	)
Preferred stock dividends and accretion of discount on preferred stock		(5,322	)		—			(755	)(p)		(6,077	)
Net (loss) income attributable to common stockholders	$	(6,945	)	$	108		$	(525	)	$	(7,362	)
Net loss per common share attributed to common stockholders — basic and diluted	$	(1.32	)							$	(1.21	)
Weighted average shares — basic and diluted		5,256,058						824,222	(q)		6,080,280

See notes to pro forma condensed combined financial information.

28

MEDSOURCE TECHNOLOGIES, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

1. Unaudited Pro Forma Statement of Operations Adjustments for the Year Ended June 30, 2001

We have made the following pro forma adjustments to arrive at our pro forma statement of operations for the year ended June 30, 2001:

(a) Represents elimination of the amortization of goodwill that existed on ACT Medical’s balance sheet at the time of the acquisition.

(b) Represents the amortization of goodwill and other intangibles resulting from the acquisition of ACT Medical.

(c) Represents elimination of the interest income and interest expense incurred by ACT Medical or HV Technologies, as applicable, because the debt associated with the interest expense was paid off in connection with the acquisition.

(d) Represents elimination of HV Technologies licensing and royalty income related to licenses cancelled in connection with the acquisition and elimination of HV Technologies income tax expense.

(e) Represents recognition of the dividends and amortization of discount on the preferred stock issued in conjunction with the acquisition of ACT Medical.

(f) Represents recognition of the dividends and accretion of discount on the Series E and Series F preferred stock.

(g) Represents shares of common stock issued in connection with the acquisition of HV Technologies.

2. Unaudited Pro Forma Balance Sheet Adjustments as of December 30, 2001

We have made the following pro forma adjustments to arrive at our pro forma balance sheet as of

December 30, 2001:

(h) Represents receipt of an additional $0.5 million of Series E preferred stock and related warrants to finance our acquisition of HV Technologies. The total Series E preferred stock and warrants are recorded at their respective allocated fair market values of $3.7 million and $2.3 million, respectively. We will accrete the discount allocated to the Series E preferred stock over the 12 month period ending December 31, 2002 because we plan to redeem the Series E preferred stock by that date.

(i) Represents cash paid to acquire HV Technologies.

(j) Represents excess of purchase price over book value of assets acquired in the acquisition of HV Technologies based on a preliminary purchase price allocation. As we finalize the purchase price allocation, we may reallocate a portion of the purchase price to identifiable intangibles, which we would amortize over the economic life of those intangibles.

(k) Represents repayment of debt of HV Technologies on the date of acquisition.

(l) Represents issuance of Series F preferred stock and common stock in consideration of the acquisition of HV Technologies. The Series F preferred stock is recorded at its fair market value of $3.6 million. We will record an expense of $0.4 million when we redeem the Series F preferred stock.

(m) Represents elimination of existing equity of HV Technologies as of December 30, 2001.

3. Unaudited Pro Forma Statement of Operations Adjustments for the Six Months Ended

December 30, 2001

We have made the following pro forma adjustment to arrive at our pro forma statement of operations for the six months ended December 30, 2001:

(n) Represents elimination of interest expense incurred by HV Technologies because the debt associated with the interest expense was paid off in connection with the acquisition.

(o) Represents elimination of HV Technologies licensing and royalty income related to licenses cancelled in connection with the acquisition and elimination of HV Technologies income tax expense.

(p) Represents recognition of the dividends and accretion of discount on the Series E and Series F preferred stock.

(q) Represents shares of common stock in connection with the acquisition of HV Technologies.

29

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data as of and for the dates and periods indicated have been derived from our consolidated financial statements. The selected consolidated statement of operations data for our fiscal period from March 31, 1999 (inception) through July 3, 1999 and our fiscal years ended July 1, 2000 and June 30, 2001 and the selected consolidated balance sheet data as of July 1, 2000 and June 30, 2001 were derived from the historical consolidated financial statements that were audited by Ernst & Young LLP, whose report appears elsewhere in this prospectus. The selected consolidated balance sheet data as of July 3, 1999 were derived from historical consolidated financial statements audited by Ernst & Young LLP, which do not appear elsewhere in this prospectus. The selected consolidated statement of operations data for the six months ended December 30, 2000 and December 30, 2001 and the selected consolidated balance sheet data as of December 30, 2001 have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus, which, in the opinion of management, reflect all adjustments (consisting of normal recurring adjustments) necessary for the fair presentation of the financial condition and results of operations for those periods.

You should read the selected consolidated financial data set forth below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes appearing elsewhere in this prospectus.

	Period from March 31, 1999 (inception) through July 3, 1999(a)			Fiscal Year Ended						Six Months Ended December 30,
				July 1, 2000(a)			June 30, 2001			2000			2001
	(In thousands, except share and per share data)
Statement of Operations Data:
Revenues	$	21,968		$	89,352		$	128,462		$	55,491		$	72,155
Costs and expenses:
Cost of products sold		13,437			59,811			94,386			41,514			54,616
Selling, general and administrative expense		4,458			21,167			26,199			11,771			14,080
Amortization of goodwill and other intangibles(b)		4,135			4,255			5,640			2,432			169
Organization and start-up costs		4,981			—			—			—			—
Restructuring charge(c)		—			—			11,464			—			—
Total costs and expenses		27,011			85,233			137,689			55,717			68,865
Operating (loss) income		(5,043	)		4,119			(9,227	)		(226	)		3,290
Interest expense, net		(2,658	)		(10,682	)		(10,213	)		(5,417	)		(4,886	)
Other income (expense)		(289	)		(7	)		53			(361	)		(27	)
Loss before income taxes		(7,990	)		(6,570	)		(19,387	)		(6,004	)		(1,623	)
Income tax benefit (expense)		2,975			535			(70	)		—			—
Net loss		(5,015	)		(6,035	)		(19,457	)		(6,004	)		(1,623	)
Preferred stock dividends and accretion of discount on preferred stock		(2,078	)		(8,345	)		(9,688	)		(4,654	)		(5,322	)
Net loss attributed to common stockholders	$	(7,093	)	$	(14,380	)	$	(29,145	)	$	(10,658	)	$	(6,945	)
Net loss per share attributed to common stockholders (basic and diluted)	$	(1.60	)	$	(3.10	)	$	(5.55	)	$	(2.03	)	$	(1.32	)
Weighted average number of shares of common stock outstanding (basic and diluted)		4,448,000			4,633,571			5,252,749			5,251,833			5,256,058
Other Data:
Net cash (used in) provided by operating activities	$	(244	)	$	6,290		$	1,253		$	5,342		$	(4,024	)
Net cash used in investing activities		(93,744	)		(22,244	)		(11,627	)		(5,963	)		(5,115	)
Net cash provided by (used in) financing activities		95,796			16,356			28,453			27,686			2,167
EBITDA(d)		(329	)		12,867			3,021			5,022			7,201
Adjusted EBITDA(d)(e)		5,007			14,373			16,140			5,746			8,132

30

	Period from March 31, 1999 (inception) through July 3, 1999(a)		Fiscal Year Ended
			July 1, 2000(a)		June 30, 2001			Six Months Ended December 30, 2001
Balance Sheet Data (at end of period):	(In thousands)
Cash and cash equivalents	$	1,808	$	2,210	$	20,289		$	13,317
Current assets		18,109		28,903		59,577			56,028
Property and equipment, net		21,550		34,956		38,873			40,219
Total assets		126,792		151,722		205,300			201,334
Total debt		81,224		98,653		89,544			86,356
Mandatory redeemable convertible stock		16,250		22,293		98,867			103,085
Total stockholders’ equity (deficit)		21,248		15,072		(13,261	)		(14,324	)

(a) Our fiscal years originally ended on the Saturday closest to June 30. Effective July 1, 2001, our fiscal year end was changed to June 30.

(b) The Statement of Operations Data for the six months ended December 30, 2001 is not comparable to prior periods because we have stopped amortizing goodwill. Effective with our quarter ended September 30, 2001, we adopted the provisions of SFAS No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets, and, accordingly, we reclassified certain identifiable intangibles to goodwill and will no longer amortize goodwill and intangible assets that are deemed to have indefinite lives under SFAS 142. Had we continued to amortize goodwill during the six months ended December 30, 2001, amortization expense in that period would have increased by approximately $2.8 million, or $0.53 per common share.

(c) In June 2001, we completed a strategic review of our manufacturing operations and support functions. Based on this review and with board approval, we began actions to eliminate redundant facilities. These actions resulted in pre-tax charges of $11.5 million. The charges include employee termination benefits of $3.8 million, other exit costs of $2.2 million, impairment of goodwill and other intangibles of $3.6 million and impairment of property, plant, and equipment of $1.9 million.

(d) EBITDA represents earnings before interest expense, income taxes, depreciation and amortization. EBITDA should not be considered in isolation from, or as a substitute for, net income, cash flow from operations or other cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of our profitability or liquidity. Rather, EBITDA is presented because it is a widely accepted supplemental financial measure, and we believe that it provides relevant and useful information. A calculation of EBITDA may not be comparable to similarly titled measures reported by other companies, since all companies do not calculate this non-GAAP measure in the same manner. Our EBITDA calculation is not intended to represent cash provided by (used in) operating activities since it does not include interest and taxes and changes in operating assets and liabilities, nor is it intended to represent a net increase in cash since it does not include cash provided by (used in) investing and financing activities.

(e) Adjusted EBITDA excludes costs of management agreements that we have entered into with Kidd & Company and Whitney & Co. We incurred fees under these agreements of $0.4 million for the period from March 31, 1999 (inception) through July 3, 1999, $1.5 million for the year ended July 1, 2000, $1.7 million for the year ended June 30, 2001, $0.7 million for the six months ended December 30, 2000, and $0.9 million for the six months ended December 30, 2001. These agreements will terminate upon completion of this offering. Adjusted EBITDA also excludes management fees for all periods presented, start-up costs of $5.0 million for the period ended July 3, 1999 and restructuring charges of $11.5 million for year ended June 30, 2001.

31

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion in conjunction with “Selected Consolidated Financial Data,” our financial statements and related notes appearing elsewhere in this prospectus. The following discussion contains forward-looking statements that involve risks and uncertainties. These statements refer to our future plans, objectives, expectations and intentions. These statements may be identified by the use of words such as “believes,” “expects,” “anticipates,” “intends,” “plans” and similar expressions. Our actual results could differ materially and adversely from those anticipated in such forward-looking statements. Factors that could contribute to these differences include, but are not limited to, the risks discussed below and elsewhere in this prospectus, particularly under the caption “Risk Factors.”

A discussion about the financial results of six of our seven predecessors, Kelco Industries, W.N. Rushwood d/b/a Hayden Precision Industries, National Wire and Stamping, The MicroSpring Company, Portlyn and Texcel, appears under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Predecessor Companies.” No discussion about the financial results of our seventh predecessor, Brimfield Precision, is presented in this prospectus.

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:

· surgical instrumentation devices and components;

· electro-medical devices and components;

· custom interventional devices and components; and

· custom orthopedic devices and instruments.

Our revenues have grown from $89.4 million in fiscal 2000 to $128.5 million in fiscal 2001, or $149.8 million on a pro forma basis in fiscal 2001.

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. During March 1999, with additional equity capital from Whitney & Co., we acquired seven unaffiliated businesses to begin our operations. The original seven acquisitions were Kelco Industries, W.N. Rushwood d/b/a Hayden Precision Industries, National Wire and Stamping, The MicroSpring Company, Portlyn, Texcel and Brimfield Precision. Our first fiscal period, which ended July 3, 1999, consisted of only three months of consolidated results, which included material one-time expenses for business combination and formation.

Since our initial acquisitions, we have acquired five additional businesses. We acquired Tenax in January 2000, Apex Engineering in February 2000 and Thermat Precision in May 2000. The acquisition of Tenax provided injection molding capability, the acquisition of Thermat added injection molding and precision metal injection manufacturing capabilities to our operations, enabling us to manufacture low cost precision stainless steel components, and the acquisition of Apex Engineering provided mold design and plastic injection molding and mold making capabilities. We acquired ACT Medical in December 2000. The acquisition of ACT Medical enhanced our product design and development engineering expertise and provided a low cost assembly operation in Mexico. We acquired HV Technologies in January 2002. The acquisition of HV Technologies, a specialized manufacturer of polyimide and composite micro-tubing used in interventional and minimally invasive catheters, delivery systems and instruments, enables us to expand our offering of proprietary manufacturing capabilities to our customers in the interventional device market. All of our acquisitions were accounted for using the purchase method of accounting.

32

Results of Operations

Revenues

In the case of the sale of products, we recognize revenue at the time products are shipped. Product shipments are supported by purchase orders from customers that indicate the price for each product. In the case of 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 fiscal 2001, 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. Historically, most of our revenues were derived from the manufacture of 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. Nevertheless, we will continue to aggressively pursue components sales opportunities.

Our top four customers accounted for 41% of our revenues for the year ended June 30, 2001, with one customer accounting for 18% of our revenues and another accounting for 12% of our revenues. For the six months ended December 30, 2001, our top four customers accounted for 48% of our revenues, with one customer accounting for 24% of our revenues and another accounting for 12% of our revenues. We expect revenues from our largest customers to continue to constitute a significant portion of our total revenues.

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.

Gross margins as a percentage of revenues declined from 33% for the year ended July 1, 2000 to 27% for the year ended June 30, 2001. For the six months ended December 31, 2001, margins declined one percentage point from the prior year period. 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 number 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, resulting in lower gross margins but with lower capital investment. This increase in assembly revenues was combined with an acquisition strategy to support the growth of additional assembly opportunities. In this regard, we acquired Tenax during January 2000, Apex Engineering in February 2000 and ACT Medical in December 2000, and all had lower gross margins than our base business. In the future, we expect that these factors, which contributed to declining margins, will be mitigated by increased operational efficiencies from higher volumes and benefits from our plant consolidation strategy, as well as from the impact of the recent acquisition of HV Technologies with gross margins that are more comparable to those of our components business. Moreover, we are presently focused on a balanced growth strategy and pursue both component manufacturing and assembly opportunities.

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Selling, general and administrative expense includes local 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.

We have accounted for all of our acquisitions by using the purchase method of accounting. Until our year ended June 30, 2001, we amortized the goodwill and other intangibles attributable to our acquisitions and incurred associated amortization expense of $4.3 million in fiscal 2000 and $5.6 million in fiscal 2001. In connection with our implementation of SFAS No. 142, “Goodwill and Other Intangibles,” we no longer amortize goodwill. Instead, as discussed below, we will periodically test goodwill and intangibles for impairment and record an expense if those assets become impaired, as further discussed under the caption “— Recent Accounting Pronouncements.”

In connection with our acquisition of HV Technologies in January 2002, we issued Series E preferred stock and warrants to purchase an aggregate of 200,000 shares of our common stock and we issued Series F preferred stock. We recorded a discount of $2.3 million to the carrying value of the Series E preferred stock equal to the consideration allocated to the warrants. We will accrete this discount over the twelve month period ending December 31, 2002 because we plan to redeem our Series E preferred stock by that date.

As discussed in the second paragraph under the caption “Description of Capital Stock — General,” our Series C preferred stock converts into a number of shares of our common stock that depends upon the initial public offering price of our common stock in this offering. Our net income for the year ending June 30, 2002 will therefore reflect a deemed preferred stock dividend of approximately $         million as the value of the additional shares of our common stock issued to the holders of our Series C preferred stock upon conversion. We determined the value of the dividend in accordance with EITF 00-27 by multiplying the number of additional shares of our common stock that are issuable upon conversion of our Series C preferred stock, determined as set forth in the second paragraph under the caption “Description of Capital Stock — General,” by the value of our common stock on the date that investors first committed to purchase our Series C preferred stock.

Six Months Ended December 30, 2001 Compared to Six Months Ended December 30, 2000

Revenues for the six-month period ended December 30, 2001 totaled $72.2 million compared to $55.5 million for the same period of the prior year, an increase of 30%, of which 22% was due to the acquisition of ACT Medical during December 2000, and 8% was due to base business growth. Our base business growth was driven by increased demand from both established and new customers for both new and existing products.

Cost of products sold for the six-month period ended December 30, 2001 totaled $54.6 million compared to $41.5 million for the six-month period ended December 30, 2000. The increase in cost of products sold principally resulted from the increased revenues over the same period of the prior year.

Gross margin was 24% for the six months ended December 30, 2001 compared to 25% for the same period of the prior year. The 1% decrease in gross margin reflected the acquisition of ACT Medical which had lower margins than our existing businesses. The margins attributed to ACT Medical were lower than the margins of our base business because the revenues of ACT Medical consisted largely of device assembly services. Assembly services generally have a greater material content compared to component sales and a lower value-added content, which results in lower margins.

Selling, general, and administrative expense for the six-month period ended December 30, 2001 was $14.1 million, or 19% of revenues, compared to $11.8 million, or 21% of revenues, for the same period of the prior year. The increase in expense was attributable primarily to our acquisition of ACT Medical. Base business selling, general and administrative expense for the six month period ended December 30, 2001 was

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$12.5 million, representing a 6% increase compared to the same period of the prior year. The increase principally reflected higher selling and marketing expenses to support future growth. We anticipate selling, general and administrative expense as a percentage of revenues to increase slightly during the remainder of our fiscal year.

Interest expense, net for the six-month period ended December 30, 2001 was $4.9 million, compared to $5.4 million for the same prior year period. This decrease was due to the lower amounts outstanding under our senior credit facility.

Comparison of Fiscal Years Ended June 30, 2001 and July 1, 2000

Revenues for our fiscal year ended June 30, 2001 totaled $128.5 million compared to $89.4 million for the fiscal year ended July 1, 2000, an increase of 44%. Approximately two-thirds of this increase was due to acquisitions during fiscal year 2001 and 2000, with the other third due to base business growth. The strong performance in our base business was driven by increased demand for both new and existing products from established customers as well as new customers.

Cost of products sold for the fiscal year ended June 30, 2001 totaled $94.4 million compared to $59.8 million for the fiscal year ended July 1, 2000. The increase in cost of products sold resulted principally from the increased revenues over the prior fiscal year.

Gross margins declined from 33% for the year ended July 1, 2000 to 27% for the year ended June 30, 2001. The decrease in gross margin during fiscal year 2001 compared to fiscal year 2000 reflected the full year impact of businesses acquired during fiscal 2000 and 2001, all with lower margins than the base businesses, and growth in revenues from lower margin assembly of completed devices.

Selling, general and administrative expense was $26.2 million, or 20% of revenues, for the fiscal year ended  June 30, 2001 and $21.2 million, or 24% of revenues, for the fiscal year ended July 1, 2000. Of the $5.0 million increase in selling, general and administrative expense, $2.5 million was attributable to the acquisition of ACT Medical in December 2000, while annualized operating expenses for the businesses acquired during fiscal 2000 accounted for $1.1 million of the increase. The balance of the increase occurred largely as a result of our investment in our sales and marketing infrastructure to support future growth.

During June 2001, we completed a strategic review of our manufacturing operations and support functions and recorded a restructuring charge of $11.5 million. Since their acquisition, certain of our manufacturing facilities have operated with excess capacity. 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. Criteria in our evaluation included current capacity utilization, uniqueness of manufacturing capabilities, current operating costs, difficulty and cost associated with relocation and recertification of key equipment, and customer supply requirements. Facilities at Danbury, Connecticut and Pittsfield and East Longmeadow, Massachusetts will be closed or sold with production absorbed into existing facilities in Pennsylvania, Minnesota, New Hampshire, and Mexico. We expect that one of the facilities will be closed or sold prior to July 1, 2002 and that the other two plants will be closed or sold by February 2003. Because we expect that we will not retain all of the customers served by these three facilities, we wrote off a portion of the customer base intangible asset ($0.6 million) as well as the entire remaining acquired workforce intangible for each facility ($0.5 million). In addition, because we believed the residual goodwill recorded at each acquisition was significantly related to the local operations, we concluded that goodwill was impaired by the closure of the facilities and wrote off the related goodwill ($2.6 million). Other recorded charges related to the restructuring include employee termination benefits expected to be paid based on our announced termination benefits policy ($2.6 million), costs of plant and equipment not expected to be recovered ($1.9 million), and other exit costs ($2.2 million), including costs related to lease termination, facilities restoration, equipment dismantlement and disposal, legal costs and other costs. Costs related to the realignment of leadership positions in the corporate support organization also were accrued as of June 30, 2001 ($1.2 million). Based on actual expenses incurred during fiscal 2001, we expect to save $3 million to $4 million annually after we close or sell all three plants.

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Net interest expense was $10.2 million for the fiscal year ended June 30, 2001 compared to $10.7 million for the fiscal year ended July 1, 2000. This decrease was due to the lower amounts outstanding under our existing senior credit facility.

We incurred charges related to the accrual of dividends and accretion of discount on preferred stock of $9.7 million for our fiscal year ended June 30, 2001, compared to $8.3 million for our fiscal year ended July 1, 2000. The increase was due to the increase in the amount of preferred stock outstanding during fiscal year 2001. Following completion of this offering, the preferred stock will be redeemed as described under the caption “Use of Proceeds” or will convert into common stock. We will record a discount of $2.5 million to the carrying value of the Series E preferred stock equal to the consideration allocated to the warrants. We plan to accrete this discount over the twelve month period ending December 31, 2002 since we plan to redeem our Series E preferred stock by that date. We also will have accrued approximately $0.4 million relating to dividends on our Series E and Series F preferred stock prior to redemption.

Comparison of Fiscal Year Ended July 1, 2000 and Period from March 31, 1999 (Inception) through  July 3, 1999

We began operations on March 30, 1999, and our first fiscal period ended July 3, 1999. This first fiscal period therefore only consisted of three months consolidated results, which included material one-time expenses for our business combination and formation. The following comments present comparisons to annualized results for our period ended July 3, 1999.

Revenues for the fiscal year ended July 1, 2000 were $89.4 million, compared to annualized revenues, excluding a one-time payment resulting from the cancellation of a customer contract, of $71.7 million for our period ended July 3, 1999. The increase in revenues was partially due to the acquisitions of Apex Engineering, Tenax and Thermat Precision in fiscal 2000 and partially from increased sales to our top volume customers, especially those purchasing components.

Gross margin as a percentage of revenues for the twelve-month period ended July 1, 2000 was 33% compared to 39% annualized results for our period ended July 3, 1999. The gross margin shortfall compared to our annualized fiscal 1999 results was predominantly the result of four factors. First, significant increased volume of new business led to increased overtime, manufacturing outsourcing, and professional services as well as normal inefficiencies of first run parts, which decreased margins by approximately one percentage point. Second, we experienced reduced volume in our laser welding business as we refocused the business on medical customers, decreasing margins by approximately two percentage points. Third, we provided increased prototyping services, which deliver low or no margins. Fourth, we lost a major contract in 1999. These decreases were partially offset by significant improvement in other areas of our business with strong revenue growth driving high contribution margins.

Operating expenses, as a percentage of net sales, for the fiscal year ended July 1, 2000 were 22%. There is no relevant comparison to annualized fiscal 1999 results.

Other expenses of $10.7 million for the fiscal year ended July 1, 2000 mainly consisted of net interest expense.

Liquidity and Capital Resources

As of December 30, 2001, we had cash and cash equivalents totaling $13.3 million. Following completion of this offering, our principal sources of liquidity will be cash provided by operations and borrowings under our new senior credit facility. Prior to this offering, our principal uses of cash have been to finance acquisitions, meet debt service requirements and finance capital expenditures. We expect that these uses will continue in the future.

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Net cash used in operating activities totaled $4.0 million for the six-month period ended December 30, 2001 compared to net cash provided by operating activities of $5.3 million for the same period of the prior year. The increase in cash used in operating activities over the prior year period is primarily the result of a $3.2 million decrease in accounts payable and accrued liabilities, including the payment of the fiscal 2001 bonus and other incentive payments for management and other employees of $2.7 million during August 2001, as well as a decrease in accounts payable of $1.6 million, primarily as a result of the timing of payments for precious metals, and a build up of inventory of $3.2 million mainly to support increased third quarter revenue production. Cash provided by operating activities was $1.3 million for the year ended June 30, 2001 compared to $6.3 million for year ended July 1, 2000. This decrease occurred because the growth of our base business, acquisitions during fiscal 2001 and a full year of results for acquisitions completed during fiscal year 2000 were more than offset by increased strategic investments in our sales and marketing, operations and quality teams, as well as our corporate support staff.

Management believes that current cash balances and cash generated from operations, combined with the net proceeds of this offering and the projected unused available borrowings totaling approximately $45.0 million under our new senior credit facility, will be adequate to fund requirements for working capital and capital expenditures through fiscal 2003.

Cash used in investing activities was $5.1 million for the six months ended December 30, 2001, compared to $6.0 million for the six months ended December 30, 2000. This decrease was due to an absence of acquisition activity. Cash used in investing activities was $11.6 million for the fiscal year ended June 30, 2001, compared to $22.2 million for the fiscal year ended July 1, 2000. The decrease was primarily the result of a $15.1 million decrease in net cash used in acquisitions, partially offset by an increase in capital expenditures of $4.7 million. We expect capital expenditures in fiscal 2002 and fiscal 2003 to be approximately $11.5 million and $13.0 million, respectively, subject to acquisition activity.

Cash provided by financing activities was $2.2 million for the six months ended December 30, 2001 compared to $27.7 million provided by financing activities for the six months ended December 30, 2000. The decrease was primarily due to lower proceeds from the sale of preferred stock. Cash provided by financing activities was $28.5 million for the fiscal year ended June 30, 2001 compared to $16.4 million for the fiscal year ended July 1, 2000. This increase resulted from net proceeds of $37.9 million from the sale of our Series C preferred stock, partially offset by $9.6 million in debt repayments.

New Senior Credit Facility

Concurrent with this offering, we intend to replace our existing senior credit facility with a new $85.0 million senior credit facility that would provide a $25.0 million revolving credit facility, a $40.0 million term loan and $20.0 million for an acquisition to be approved by our lenders and that is completed within six months of this offering. All loans under the new senior credit facility would mature on the fifth anniversary of the date of this offering. We will be required to make annual payments of $4.0 million, $6.0 million, $8.0 million, $10.0 million and $12.0 million of principal under the term loan in each of the first five years following this offering, payable quarterly, beginning  at the end of the first full quarter following this offering. We will also be required to make annual repayments of 15%, 20%, 30% and 35% of the principal due under any amounts that we borrow for acquisitions in the second, third, fourth and fifth years after the completion of this offering, payable quarterly. We expect to pay costs and fees of $2.1 million to enter into the new senior credit facility.

At our option, interest rates applicable to loans under our new senior credit facility will be either:

· the bank’s prime rate plus a margin, which depends upon our leverage ratio, ranging from zero to 125 basis points; or

· LIBOR plus a margin, which depends upon our leverage ratio, ranging from 175 to 300 basis points.

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The new senior credit facility will require us to maintain a “leverage ratio” of at least 3.0 to 1.0 and will contain affirmative and negative covenants and limitations, including, but not limited to, restrictions on our ability to pay dividends and make other payments, enter into sale transactions, limitations on liens and limitations on our ability to incur additional indebtedness. In addition to the requirements that we obtain the consent of the lenders under our new senior credit facility to borrow the $20.0 million that is available for an acquisition within six months of this offering, we will also need their consent to make any other acquisition in which we pay more that $     million or to pay more than $     million for all of the acquisitions that we complete during any fiscal year.

The new senior credit facility will also contain various events of default, including, but not limited to, defaults upon the occurrence of a change of control of MedSource and defaults for non-payment of principal interest or fees, breaches of warranties or covenants, bankruptcy or insolvency, ERISA violations and cross-defaults to other indebtedness.

Following this offering and the use of the proceeds of this offering, we will have an outstanding balance of approximately $40.0 million under our new senior credit facility.

Existing Senior Credit Facility

Prior to completion of this offering, we relied upon an existing credit facility that provided for an aggregate of $65.0 million under two term loans, an aggregate of $30.0 million for acquisitions and an aggregate of $25.0 million under a revolving credit facility, which includes a sub-limit for letters of credit. At December 30, 2001, we had $17.0 million outstanding under the first term loan, $39.0 million outstanding under the second term loan, $12.3 million outstanding under the acquisition line and nothing outstanding under the revolving credit facility.

As of December 30, 2001, the interest rate on the first term loan was 5.4%, the interest rate on the second term loan was 5.6% and the interest rate on the acquisition line was 5.4%.

During July 1999, we entered into two interest rate swap transactions, designed to be interest rate hedges, for the majority of the first and second term loans. We offered to either continue these swap agreements or enter into similar swap agreements to hedge our exposure to interest rate risk under our new senior credit facility.

Senior Subordinated Notes

During March 1999, we sold an aggregate of $20.0 million of our 12.5% senior subordinated notes due 2008. We pledged $7.5 million of the proceeds that we received from the issuance of the notes to secure payments due thereunder. As of December 30, 2001, there was an unamortized discount of $2.5 million on these notes.

We intend to repay these notes in full out of the proceeds of this offering, as described under the caption “Use of Proceeds.” On any repayment of the notes that occurs prior to March 30 of the calendar year set forth below, we are required to pay the redemption prices set forth below (expressed as a percentage of the outstanding principal amount), plus accrued and unpaid interest:

Period	Redemption Price
2002	108	%
2003	107	%
2004	106	%
2005 and thereafter	105	%

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Issuances of Preferred Stock for Cash

In March 1999 and May 1999, we received an aggregate of $24.4 million from the issuance of our Series B preferred stock.

In October 2000 and June 2001, we received an aggregate of $40.3 million from the issuance of our Series C preferred stock. In connection with the issuance of our Series C preferred stock in October 2000, we paid a cash fee of $2.1 million to a placement agent and issued a warrant to purchase an additional 525 shares of our Series C preferred stock to the placement agent.

In December 2001, we received an aggregate of $5.5 million from the issuance of our Series E preferred stock, and we received an additional $0.5 million in January 2002. In connection with these issuances, we also issued warrants to purchase an aggregate of 200,000 shares of our common stock at $0.01 per share. The warrants entitle the holders thereof to purchase an additional 45,000 shares on each of the first five anniversaries of the date of issuance of the Series E preferred stock of which the Series E preferred stock remains outstanding. We intend to use a portion of the proceeds of this offering to redeem the Series E preferred stock by December 31, 2002, which is prior to the first anniversary of the date of its issuance.

Quarterly Results

The following tables set forth selected unaudited quarterly consolidated financial information for the ten quarters ended December 30, 2001. This unaudited quarterly consolidated information, in the opinion of management, includes all adjustments necessary for a fair presentation of such information in accordance with generally accepted accounting principles. These quarterly results are not necessarily indicative of future results, growth rates or quarter-to-quarter comparisons.

We have completed five acquisitions since October 2, 1999, but the quarterly consolidated financial information set forth below is presented on an actual historical basis, not on a pro forma basis for any of those acquisitions. The increase in revenues over the periods presented resulted from both acquisitions and growth in our base business. In addition, during our limited operating history, excluding the impact of acquisitions, we have experienced higher than average revenues during the last quarter of our fiscal year and lower than average revenues during the first quarter of our fiscal year, but we cannot predict whether this will continue.

	Quarter Ended
	October 2, 1999			January 1, 2000			April 1, 2000			July 1, 2000			September 30, 2000			December 30, 2000			March 31, 2001			June 30, 2001			September 30, 2001			December 30, 2001
	(In millions)
Statement of Operations Data:
Revenues	$	18.9		$	19.4		$	24.7		$	26.4		$	27.6		$	27.9		$	34.8		$	38.2		$	33.9		$	38.3
Costs and expenses:
Cost of products sold		12.1			12.1			16.5			19.1			20.8			20.7			26.1			26.8			26.1			28.5
Selling, general and administrative expense		3.9			4.0			5.2			8.1			5.6			6.1			7.3			7.2			6.4			7.7
Amortization of goodwill and other intangibles(a)		1.0			1.1			1.1			1.1			1.2			1.2			1.7			1.5			0.1			0.1
Restructuring charge(b)		—			—			—			—			—			—			—			11.5			—			—
Operating income (loss)		1.9			2.2			1.9			(1.9	)		—			(0.1	)		(0.3	)		(8.8	)		1.3			2.0
Interest expense, net		(2.3	)		(2.2	)		(2.7	)		(3.5	)		(2.9	)		(2.5	)		(2.3	)		(2.5	)		(2.5	)		(2.4	)
Other expense		—			—			—			—			(0.2	)		(0.2	)		0.3			0.1			—			—
Income tax benefit (expense)		0.3			0.1			0.3			(0.1	)		—			—			—			(0.1	)		—			—
Net loss	$	(0.1	)	$	0.1		$	(0.5	)	$	(5.5	)	$	(3.1	)	$	(2.8	)	$	(2.3	)	$	(11.3	)	$	(1.2	)	$	(0.4	)
Other Data:
EBITDA(c)	$	3.8		$	4.2		$	4.3		$	0.6		$	2.5		$	2.4		$	3.4		$	(5.3	)	$	3.2		$	4.0

(a) The information for the three months ended September 30, 2001 and December 30, 2001 does not include a charge for the amortization of goodwill. Effective with our quarter ended September 30, 2001, we adopted the provisions of SFAS No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets, and, accordingly, we reclassified certain identifiable intangibles to goodwill and will no longer amortize goodwill and intangible assets that are deemed to have indefinite lives under SFAS 142. Had we

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continued to amortize goodwill during the three months ended September 30, 2001 and December 30, 2001, amortization expense in each of these periods would have increased by approximately $1.4 million, or $0.27 per common share and $0.26 per common share, respectively.

(b) In June 2001, we completed a strategic review of our manufacturing operations and support functions. Based on this review and with board approval, we began actions to eliminate redundant facilities. These actions resulted in pre-tax charges of $11.5 million. The charges include employee termination benefits of $3.8 million, other exit costs of $2.2 million, impairment of goodwill and other intangibles of $3.6 million and impairment of property, plant, and equipment of $1.9 million.

(c) EBITDA represents earnings before interest expense, income taxes, depreciation and amortization. EBITDA should not be considered in isolation from, or as a substitute for, net income, cash flow from operations or other cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of our profitability or liquidity. Rather, EBITDA is presented because it is a widely accepted supplemental financial measure, and we believe that it provides relevant and useful information. A calculation of EBITDA may not be comparable to similarly titled measures reported by other companies, since all companies do not calculate this non-GAAP measure in the same manner. Our EBITDA calculation is not intended to represent cash provided by (used in) operating activities since it does not include interest and taxes and changes in operating assets and liabilities, nor is it intended to represent a net increase in cash since it does not include cash provided by (used in) investing and financing activities.

Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk.    Amounts outstanding under our existing senior credit facility bear interest at a floating rate, and we expect that amounts outstanding under our new senior credit facility will also bear interest at a floating rate. To reduce our exposure to interest rate risk, we entered into interest rate swap agreements, and we expect to either continue these swap agreements or enter into similar swap agreements to hedge our exposure to interest rate risk under our new senior credit facility. Under the existing swap agreements, we swap a variable interest rate for fixed interest rates ranging from 6.245% to 6.395%. Changes in the fair value of the swaps are recorded in Accumulated Other Comprehensive Loss in Stockholders’ Equity. The effect of a 10% increase in interest rates would have resulted in an immaterial increase in interest expense during our year ended June 30, 2001.

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 June 30, 2001 would not have had a material impact on our operating results for the fiscal year then ended.

Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board issued SFAS No. 141, Accounting for 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. Other intangible assets will continue to be amortized over their useful lives.

We 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 have been subsumed into goodwill in accordance with SFAS 141, increasing goodwill by $34.6 million as of the date of adoption. Effective with the July 1, 2001 adoption of SFAS 142, goodwill will no longer be amortized but is instead subject to an annual impairment test. The transitional impairment test that we conducted in connection with the adoption of SFAS 142 resulted in no impairment being required. As a result of our adoption of SFAS 142, our amortization expense will be reduced by approximately $5.8 million or $1.10 per common share for fiscal 2002 and $2.8 million or $0.53 per common share for the six months ended December 30, 2001 (based on the common shares outstanding prior to this offering). See note 6 to our audited financial statements.

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SELECTED FINANCIAL DATA OF PREDECESSOR COMPANIES

We began operations on March 30, 1999 through the acquisition of seven unaffiliated businesses, to which we refer as our “predecessor companies.” The following tables set forth certain historical financial data of six of the individual predecessor companies derived from audited financial statements included elsewhere in this prospectus and from audited and unaudited financial statements that are not included in this prospectus.

	Kelco Industries, Inc.						W.N. Rushwood, Inc. d/b/a Hayden Precision Industries
	Year Ended April 30,				Eleven Months Ended March 30,		Year Ended December 31,									Three Months Ended March 30,
	1997		1998		1999		1996			1997			1998			1999
	(In thousands)
Statement of Operations Data:
Net sales	$	19,518	$	23,192	$	22,877	$	6,149		$	6,003		$	9,777		$	2,227
Gross profit		7,883		9,742		9,954		1,977			1,719			3,096			506
Operating expenses		2,738		2,830		2,899		954			949			1,072			195
Operating income (loss)		5,145		6,912		7,054		1,023			770			2,024			311
Other income (expense)		56		99		189		(142	)		(201	)		(241	)		(100	)
Income before taxes		5,201		7,011		7,243		881			569			1,783			211
Income taxes		—		—		—		—			—			—			—
Net income (loss)	$	5,201	$	7,011	$	7,243	$	881		$	569		$	1,783		$	211
Balance Sheet Data (at end of period):
Total assets	$	9,803	$	13,484	$	18,962	$	3,821		$	3,712		$	7,677		$	7,875
Long-term debt		5		—		—		2,193			1,804			3,174			3,744
Shareholders’ equity		7,905		11,229		16,215		572			1,041			2,296			2,422

	National Wire and Stamping, Inc.										The MicroSpring Company, Inc.
	Year Ended December 31,							Three Months Ended March 30,			Year Ended December 31,								Three Months Ended March 30,
	1996			1997		1998		1999			1996		1997			1998			1999
	(In thousands)
Statement of Operations Data:
Net sales	$	6,823		$	9,513	$	8,619	$	1,636		$	11,264	$	11,782		$	10,176		$	1,792
Gross profit		2,921			3,730		3,618		669			5,520		3,321			2,896			394
Operating expenses		2,237			3,112		3,057		800			2,060		3,420			3,343			1,314
Operating income (loss)		684			618		561		(131	)		3,460		(99	)		(447	)		(920	)
Other income (expense)		(47	)		65		126		125			52		7			(32	)		1
Income before taxes		637			683		687		(6	)		3,512		(92	)		(479	)		(919	)
Income taxes		257			275		264		45			83		31			7			3
Net income (loss)	$	380		$	408	$	423	$	(51	)	$	3,429	$	(123	)	$	(486	)	$	(922	)
Balance Sheet Data (at end of period):
Total assets	$	3,038		$	3,894	$	4,373	$	3,250		$	4,983	$	6,185		$	3,984		$	3,895
Long-term debt		112			117		107		—			—		250			250			—
Shareholders’ equity		2,036			2,290		2,757		2,664			3,916		3,377			2,990			3,076

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	Portlyn Corporation												Texcel, Inc.
	Year Ended December 31,									Three Months Ended March 30,			Year Ended December 31,									Three Months Ended March 30,
	1996			1997			1998			1999			1996			1997			1998			1999
	(In thousands)
Statement of Operations Data:
Net sales	$	5,578		$	6,955		$	5,773		$	1,180		$	2,303		$	4,310		$	6,184		$	2,045
Gross profit		2,835			3,391			2,573			473			708			1,677			2,295			941
Operating expenses		2,905			3,259			2,572			522			521			900			952			270
Operating income (loss)		(70	)		132			1			(49	)		187			777			1,343			671
Other income (expense)		1			(76	)		(74	)		(14	)		(94	)		(62	)		(68	)		(11	)
Income before taxes		(69	)		56			(73	)		(63	)		93			715			1,275			660
Income taxes		—			—			—			—			42			307			15			14
Net income (loss)	$	(69	)	$	56		$	(73	)	$	(63	)	$	51		$	408		$	1,260		$	646
Balance Sheet Data (at end of period):
Total assets	$	1,646		$	2,710		$	1,886		$	1,818		$	1,216		$	2,324		$	3,278		$	3,363
Long-term debt		28			113			82			75			462			504			451			770
Shareholders’ equity		647			651			578			514			377			749			2,009			1,265

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF PREDECESSOR COMPANIES

You should read the following discussion of our predecessor companies, Kelco Industries, W.N. Rushwood d/b/a Hayden Precision Industries, National Wire and Stamping, The MicroSpring Company, Portlyn and Texcel, in conjunction with their financial statements and related notes appearing elsewhere in this prospectus.

A discussion about our financial results appears under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” elsewhere in the prospectus.

Kelco Industries

Kelco Industries was a manufacturer of precision machined parts, primarily for medical device companies.

Comparison of Eleven Months Ended March 30, 1999 and Twelve Months Ended April 30, 1998

Net sales for the eleven-month period ended March 30, 1999 totaled $22.9 million compared with $23.2 million for the previous twelve-month period, a decrease of 1%. The eleven-month period had approximately 8% fewer days, but sales volume increased approximately 7% over the prior year.

Gross margin as a percentage of net sales for the eleven-month period ended March 30, 1999 was 43%, versus 42% for the previous twelve months. The 1% improvement was due primarily to reduced platinum material costs.

Operating expenses for the eleven-month period ended March 30, 1999 totaled $2.9 million, or 14% of net sales, and for the twelve month period ended April 30, 1998 totaled $2.8 million, or 12% of net sales. The increase in operating expenses was the result of costs of disposing of assets.

W.N. Rushwood d/b/a Hayden Precision Industries

Hayden Precision Industries was a manufacturer of components used primarily in surgical instrumentation for the medical and dental industries.

Comparison of Annualized Three Months Ended March 30, 1999 and Twelve Months Ended December 31, 1998

Net sales for the three months ended March 30, 1999 were $2.2 million, or $8.9 million on an annualized basis. This represented a decline of $0.8 million, or 9%, over 1998. The sales decrease was driven primarily by anticipated new surgical instrumentation product introductions that lowered demand for existing products during the three months ended March 30, 1999.

Gross margin as a percentage of net sales for the three months ended March 30, 1999, annualized, decreased to 23% from 32% in 1998. A combination of increased costs due to facility expansion, higher than normal scrap and “learning curve” costs associated with new product introductions were the main drivers.

Annualized operating expenses for the three month period ended March 30, 1999 were $0.8 million, or 9% of net sales, versus $1.1 million, or 11% of net sales, for the year ended December 31, 1998. The operating expense decrease was attributable to a reduction in administrative salaries.

Comparison of Twelve Months Ended December 31, 1998 and Twelve Months Ended December 31, 1997

Net sales for the year ended December 31, 1998 increased $3.8 million or 63% versus the prior year. This increase was driven by rapid growth in the surgical instrumentation market during 1998.

Gross margin as a percentage of net sales for the year ended December 31, 1998 increased to 32% from 29% in the prior year. This improvement in margin was driven primarily by increases in volume and a resulting leverage of fixed costs.

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Operating expenses for the year ended December 31, 1998 increased over the prior year by $0.1 million, or 13%. This increase reflects the hiring of a controller in 1998 and increases in bonus amounts due to a larger employee base to support the growth in sales. However, operating expenses as a percentage of net sales dropped from 16% in 1997 to 11% in 1998 due to the growth in sales.

National Wire and Stamping

National Wire and Stamping was an engineering and manufacturing company specializing in metal stamping and wire forming, primarily for the medical device industry. When we acquired National Wire, its total sales had decreased in the prior year due to a decrease in sales to non-medical device companies.

Comparison of Annualized Three Months Ended March 30, 1999 and Twelve Months Ended December 31, 1998

Net sales for the three months ended March 30, 1999 were $1.6 million, or $6.5 million annualized. This represented a decrease of $2.1 million or 24% over 1998. The primary driver of the decline was a continued reduction in the non-medical business during the first quarter of 1999.

Gross margin as a percentage of net sales for the three months ended March 30, 1999, annualized, decreased to 41% from 42% in the prior year. Margins were negatively impacted by lower plant capacity utilization as a result of lower volumes.

Operating expenses for the three month period ended March 30, 1999, annualized, were $3.2 million, or 49% of net sales, versus $3.1 million, or 35% of net sales, for the year ended December 31, 1998. The increase was due to a one-time payoff of deferred compensation contracts to current and former employees during the first quarter of 1999.

Comparison of Twelve Months Ended December 31, 1998 and Twelve Months Ended December 31, 1997

Net sales for the year ended December 31, 1998 declined 9% to $8.6 million versus $9.5 million for the year ended December 31, 1997. The main driver of the sales decline was a reduction in major non-medical accounts for stamping and assembly.            

Gross margin as a percentage of net sales for the year ended December 31, 1998 increased to 42% from 39% in the prior year. The improvement in margin can be attributed to the loss of lower margin sales and a shift in product mix from industrial to medical.

Operating expenses for the year ended December 31, 1998 were $3.1 million, or 35% of net sales, versus $3.1 million, or 33% of net sales, for the year ended December 31, 1997.

The MicroSpring Company

The MicroSpring Company was engaged in manufacturing metal-based spring components, developing and manufacturing percutaneous transluminal coronary angioplasty, or PTCA, guidewires, manufacturing interventional neuroradiology guidewires and providing design and engineering services.

Comparison of Annualized Three Months Ended March 30, 1999 and Twelve Months Ended December 31, 1998

Net sales for the three months ended March 30, 1999 were $1.8 million, or $7.2 million on an annualized basis. This represented a decrease of $3.0 million or 30% versus full year 1998. The decline in annualized 1999 sales resulted primarily from a customer retirement of a significant guidewire product line due to its replacement following the acquisition of a business that manufactured a product targeted to similar markets.

Gross margin as a percentage of net sales for the three months ended March 30, 1999, annualized, decreased to 22% from 28% in the prior year. The deterioration in gross margin reflects the loss of high margin guidewire business coupled with pricing pressures.

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Annualized operating expenses for the three-month period ended March 30, 1999, excluding a one-time charge to compensation of $0.5 million for shares issued to a principal owner, were $3.3 million, or 45% of net sales, versus $3.3 million, or 33% of net sales, for the year ended December 31, 1998.

Comparison of Twelve Months Ended December 31, 1998 and Twelve Months Ended December 31, 1997

Net sales for the year ended December 31, 1998 totaled $10.2 million compared with $11.8 million for the prior year, a decline of 14%. The sales decline was driven by the loss of stent business from one customer whose market share declined.

Gross margin as a percentage of net sales for the year ended December 31, 1998 remained unchanged from the prior year at 28%.

Operating expenses for the year ended December 31, 1998 were $3.3 million, or 33% of net sales versus $3.4 million, or 29% of net sales, during the prior year.

Portlyn

Portlyn manufactured components and surgical instruments used in the medical device industry, primarily to its customers’ proprietary design specifications. Portlyn also sold an insignificant amount of products directly to end-users.

Comparison of Annualized Three Months Ended March 30, 1999 and Twelve Months Ended December 31, 1998

Net sales for the three months ended March 30, 1999 were $1.2 million, or an annualized $4.7 million. This represented a decrease of $1.0 million or 18% over full year 1998. The sales decline was primarily driven by a reduction in the surgical instrumentation business throughout 1998. The decline began during 1997 with the decline in instrument product shipments to both the domestic and European markets as customers experienced excess inventories and declining sales.

Gross margin as a percentage of net sales for the three months ended March 30, 1999, annualized, decreased to 40% from 45% in the prior year. Reduced volumes in the high margin surgical instrumentation business was the primary driver of the margin decline.

Operating expenses for the three-month period ended March 30, 1999, annualized, decreased $0.5 million or 19% over full year 1998. The operating expense decline was primarily driven by reduced key employee compensation. Operating expenses as a percentage of sales for the three-month period ended March 30, 1999 totaled 44% compared to 45% in the prior year, remaining virtually unchanged.            

Comparison of Twelve Months Ended December 31, 1998 and Twelve Months Ended December 31, 1997

Net sales for the year ended December 31, 1998 declined 17% to $5.8 million, compared with $7.0 million for the year ended December 31, 1997. The decline in sales was primarily due to a reduction in the surgical instrumentation business.

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Gross margins as a percentage of net sales for the year ended December 31, 1998 decreased to 45% from 49% in the prior year. This margin decline was attributed to the loss of higher margin sales, a shift in product mix and increased labor costs. These factors were partially offset by a reduction in material costs to 16% of sales in 1998, versus 20% in 1997.

Operating expenses for the year ended December 31, 1998 were $2.6 million or 45% of net sales, compared with $3.3 million and 47% for the prior year. The decline in operating expenses was primarily driven by reduced key employee compensation.

Texcel

Texcel was a contract precision laser welding service provider and component manufacturer. With respect to laser welding services, Texcel performed seam and bond welding services using hermetic and multi-fiber laser welding machinery, laser marking, leak testing and documentation services on customer-owned materials. With respect to component manufacturing, Texcel purchased raw materials and preformed welding services leading to final assembly of a finished product to the customer.

Comparison of Annualized Three Months Ended March 30, 1999 and Twelve Months Ended December 31, 1998

Net sales for the three-month period ended March 30, 1999, annualized, increased versus full year 1998 by $2.0 million or 32%. The sales increase was driven primarily by the rapid expansion of the telecommunications market segment.

Gross margin as a percentage of net sales for the three-month period ended March 30, 1999, annualized, increased to 46% from 37% in 1998. The margin improvement was attributable primarily to the telecommunications business growth coupled with increased manufacturing efficiencies.

Operating expenses for the three-month period ended March 30, 1999, annualized, were $1.1 million, or 13% of net sales, versus $1.0 million, or 15% of net sales, for the year ended December 31, 1998. The increase was due primarily to an active recruitment effort targeted at both engineering and quality professionals to support sales growth.

Comparison of Year Ended December 31, 1998 and Twelve Months Ended December 31, 1997

Net sales for the year ended December 31, 1998 increased $1.9 million or 43% versus the prior year ended December 31, 1997. The sales increase was driven primarily by growth in the medical sector, including both surgical instruments and biomedical implants. In addition, the telecommunication business also experienced growth.

Gross margin as a percentage of net sales for the year ended December 31, 1998 was 37%, declining slightly over gross margin as a percentage of net sales of 39% for the prior year ended December 31, 1997. The decline was driven by new product development costs.

Operating expenses for the year ended December 31, 1998 were $0.9 million, or 15% of net sales, as compared to $0.9 million, or 21% of net sales, for the year ended December 31, 1997.

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BUSINESS

Overview

We are a leading engineering and manufacturing services provider to the medical device industry. Our customers include many of the largest medical device companies in the world, such as Boston Scientific, Guidant, Johnson & Johnson affiliates and Medtronic, as well as other large and emerging medical device companies. We provide product development and design services, precision metal and plastic part manufacturing, including milling, lathe turning, wire forming, stamping, plastic tubing and injection molding, and product assembly services. In addition, we provide supply chain management services, including the sourcing of components that we do not manufacture internally, such as electronic circuitry, from third party suppliers for the devices we assemble for our customers. Through these products and services, we offer our customers a single source solution for their device development and manufacturing needs, accelerated product development time, and reduced costs, allowing them to focus on their core competencies such as research and sales and marketing. Examples of the medical devices and components we manufacture for our customers include endoscopic instruments, set screws and pins for pacemakers, interventional catheters and guidewires and orthopedic implants such as hips and knees.

We began operations during March 1999 through the acquisition of seven companies with complementary capabilities and subsequently broadened our capabilities through five additional acquisitions. Since our launch, we have focused our efforts on integrating and growing our business and have made significant investments in our product design and development capabilities, sales and marketing teams, operations, quality systems and information technology infrastructure to support that growth. We currently have 15 manufacturing facilities with approximately 600,000 total square feet and approximately 1,350 employees.

Market Opportunity

The Market for Medical Devices

According to a report prepared for us by Frost & Sullivan, the global medical device market in 2000 exceeded $170 billion, with the United States portion alone constituting approximately $70 billion. This market has grown consistently over the past ten years due to the continued increase in overall healthcare expenditures resulting from the demographic shift towards an older population and the development of new and innovative products. Spending for medical devices, like the rest of healthcare expenditures, has realized strong growth with little sensitivity to recession.

The medical device market may be separated into many distinct product segments, with the defining characteristic being the medical specialty served. The products in the medical device market can also be broadly categorized as either value-added or commodity products. Value-added products such as electro-medical and orthopedic implantable devices, general surgical instrumentation and minimally invasive surgical instruments typically have lower unit sales and higher profit margins. Commodity products such as needles, syringes, gloves and gowns typically have higher unit sales and lower profit margins. Frost & Sullivan estimates that the global market for value-added products in 2000 exceeded $100 billion.

Initially, we are targeting outsourcing opportunities in select value-added medical device markets: surgical instrumentation, electro-medical implants, interventional and orthopedics. We believe that these markets are currently the most attractive based on their size, growth, profit margins, customer dynamics, competitive environment and need for the engineering and manufacturing services we offer. We selectively serve customers in other value-added portions of the medical device market.

According to Frost & Sullivan, our four target markets accounted for at least $14 billion of medical device sales in the United States during 2000, with each of the target markets individually accounting for more than $3 billion in sales. We believe that the ratio of United States sales to international sales in our four target markets is consistent with Frost & Sullivan’s estimated ratio of United States sales (approximately 40%) to international sales (approximately 60%) for the 2000 global medical device market as a whole. This indicates that the total global market for end-user sales in our four target markets in 2000 exceeded $35 billion.

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Global Medical Device Markets

MEDICAL DEVICE MARKETS	EXAMPLES		MAJOR MEDICAL DEVICE COMPANIES
MedSource Target Markets
Surgical Instrumentation	—  Arthroscopic —  Ophthalmology	—  Endo-laparoscopic —  Electro-surgical	—  Boston Scientific —  Johnson & Johnson	—  Stryker —  Tyco
Electro-Medical Implants	—  Pacemakers —  Defibrillators	—  Hearing assist devices —  Heart pumps	—  Biotronik —  Guidant	—  Medtronic —  St. Jude
Interventional	—  Stents —  Angioplasty	—  Catheter ablation —  Distal protection	—  Boston Scientific —  Guidant	—  Johnson & Johnson —  Medtronic
Orthopedics	—  Spinal fixation —  Hip implants	—  Knee implants	—  Biomet —  Johnson & Johnson	—  Stryker —  Zimmer
Other Markets
Other Value-Added Products	—  Respiratory —  Renal / hemodialysis	—  Urology —  Dental	—  Abbott —  Baxter	—  C.R. Bard —  Fresenius
Commodity Products	—  Needles / syringes —  Gloves / gowns	—  Wound care	—  Allegiance —  Becton Dickinson	—  3M —  Tyco
Imaging Equipment	—  MRI —  Ultrasound	—  X-ray	—  General Electric —  Philips	—  Siemens —  Toshiba

We believe that the market opportunity for medical engineering and manufacturing services is largely represented by the cost of goods sold of medical device companies. Applying Frost & Sullivan’s estimated average gross margin for value-added medical device products of 70%, we believe that on a global basis our four target markets currently represent at least a $10 billion annual cost of goods sold opportunity. In addition, there are market opportunities for us outside of cost of goods sold, consisting largely of a portion of the development and selling, general and administrative expenditures that support the cost of goods sold in these markets.

Medical Device Company Outsourcing Trend

Frost & Sullivan estimates that the growth in manufacturing outsourcing by medical device companies in the United States from 1999 to 2000 was in excess of 18%. Frost & Sullivan further estimates that in the United States in 2000, 25% of the cost of goods sold for value-added products was outsourced and projects that by 2005, 42% of the cost of goods sold for value-added products will be outsourced. Frost & Sullivan also estimates that the United States medical device market will grow at approximately 6% per year over the next five years. Based on these estimated increases in outsourcing and market growth, we expect that outsourcing of value-added products by medical device companies in the United States will grow at approximately 18% per year through 2005. We believe that international markets will experience similar growth rates in manufacturing outsourcing as the United States.

In the past, medical device companies relied very little on manufacturing outsourcing because: (1) the cost benefits of outsourcing were not as important due to the limited cost pressures that existed before managed care became prevalent; (2) they were unwilling to outsource to a supply base which, due to the small size and limited capabilities of most supplier companies, was not prepared for the heavy ramp-up and delivery requirements of new product introductions; and (3) suppliers were typically diversified across several industries and therefore did not focus on the requirements of the medical device industry, such as FDA compliance and medical quality standards. Additionally, we believe that many of the leading medical device companies, such as Johnson & Johnson, Medtronic and Boston Scientific, have relied upon acquisitions to accelerate their earnings growth. As these companies have become larger, the number of meaningful acquisition candidates for them has decreased. As a result, we believe that these medical device companies will increase their focus on improving the internal research of new products, strengthening end-market distribution, and improving operational efficiencies.

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The medical device industry has experienced rapid change in the past decade and we expect many of these developments to lead medical device companies to increase their use of manufacturing outsourcing. We believe the key drivers of this increase in outsourcing include:

· the need for innovation and accelerated time-to-market, including design for manufacturability and rapid prototyping to support new product introductions;

· cost containment pressures from healthcare providers such as managed care organizations, which necessitate a more efficient supply chain; and

· increased competition and industry consolidation.

As a result of these factors, medical device companies are increasingly focusing on their core competencies in research and sales and marketing, and outsourcing other functions such as manufacturing and related engineering and product development activities. We believe that the medical engineering and manufacturing services industry is highly fragmented with over 4,000 companies, many of which have annual revenues of less than $3.5 million and limited capabilities that do not satisfy current market requirements. We believe our products and services address this market opportunity.

Our Products and Services

We offer our customers a broad range of products and services for their medical engineering and manufacturing needs, including:

· Product design and development.    Our product design, design for manufacturability and prototyping capabilities allow us to participate early in the product development process to help reduce our customers’ costs, accelerate product development times and secure ongoing manufacturing relationships. Equipping our facilities with rapid prototyping technologies and using these technologies across multiple disciplines (e.g., machining and plastic molding) is an important element of our product development services. In providing these services, our internal application engineering group and internal product design engineers provide our customers with expertise in desired disciplines (e.g., mechanical design, electrical design, electronics and software).

· Precision metal and plastic parts manufacturing.    Precision metal manufacturing is a core element of our manufacturing capabilities. Our metal manufacturing capabilities include milling, lathe turning, drilling, grinding, polishing, lapping, laser cutting, sintering, wire forming, stamping and precision metal injection manufacturing with materials as diverse as stainless steel and titanium. Trends in the medical industry towards minimally-invasive surgical techniques have made our micro-machining capabilities increasingly important. These micro-machining capabilities include computer numerically controlled, or CNC, multi-axis and Swiss-machining, as well as electric discharge machining, or EDM. Our plastic part manufacturing capabilities include tubing (dip coating and extrusion), molding (injection, insert and thermoforming) and machining.

· Product assembly services and supply chain management.    Our product assembly and supply chain management capabilities allow us to provide customers with completed medical devices and subassemblies. Our assembly capabilities include mechanical, electromechanical and instrumentation assembly, as well as functional testing, inspection, complex integration (with advanced materials), kitting and packaging. We use our supply chain management services to source components and services, either from internal operations or from third party suppliers, for the devices we assemble. Our assembly and supply chain management capabilities enable us to extend our vertically integrated manufacturing business and further distinguish us from suppliers with more limited capabilities.

We provide our products and services to each of the following primary target markets:

· Surgical instrumentation devices and components,  for both the minimally invasive and general surgery markets. Surgical instruments are typically produced from metal or plastic materials and, in the case of powered products, electronic components. We manufacture a variety of surgical products for

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our customers such as clip appliers, endoscopic instruments, forceps, electrocautery blades, staple cartridges and suturing devices.

· Electro-medical implant devices and components,  for the cardiac rhythm management, or CRM, neurologic, and hearing assist markets, including pacemakers and defibrillators. These products are high precision and are typically produced from metal and plastic materials and electronic components. We provide our customers with laser welding services and manufacture guidewires, set screws and pins for pacemakers, ferrules, connector blocks and other components.

· Custom interventional devices and components,  for the cardiology, radiology, neuroradiology, vascular access and electrophysiology markets. Interventional products are typically produced from a combination of metal and plastic materials. We manufacture a variety of interventional products for our customers, including precision catheters, PTCA guidewires, electrophysiology catheters and distal protection devices.

· Custom orthopedic devices and instruments,  for the reconstructive, spinal implant and trauma markets. Orthopedic products are typically produced from metal, plastic and ceramic materials. We manufacture a variety of orthopedic implants for our customers, such as hips, knees, spinal cages, hooks and plates and instruments for the placement of these implants.

Our Customer Solution

Our medical engineering and manufacturing capabilities enable our customers to concentrate their internal resources on developing innovative technologies and broadening their product offerings. The key components of our customer solution are:

· Provide a single source solution.    By providing a broad range of engineering, development, manufacturing, assembly and supply chain management capabilities, we offer our customers the ability to outsource all or part of the production of a device to a single provider. We have won several significant projects under which we design, manufacture and package finished devices for leading global medical device companies. In addition, we work closely with smaller, emerging medical device companies as their engineering and manufacturing partner.

· Accelerate product development cycle time.    Our experience in design engineering and rapid prototyping positions us as a valuable resource early in the new product development process and enables critical processes to occur simultaneously, which reduces the overall time-to-market. We employ over 130 engineers of whom approximately 50 are devoted to new product introductions. Our engineers provide technical expertise to transform our customers’ concepts into finished devices that can be efficiently manufactured on a commercial scale.

· Provide quality products and practices.    Quality is of the highest importance to our customers due to the serious and costly consequences of product failure. We operate our facilities under a single integrated quality system. Each of these facilities has been certified by independent certification bodies to comply with the ISO 9001 quality management standard and ISO 13485 medical device-specific standard. We believe that our quality system also complies with the FDA quality system regulation, which establishes good manufacturing practice requirements for product design, manufacture, management, packaging, labeling, distribution and installation.

· Reduce costs for customers.    We reduce our customers’ total costs associated with manufacturing by:

– designing for manufacturability;

– providing purchasing power on raw materials and machinery; and

– delivering manufacturing processes that lower costs through increased efficiencies and continuous improvement efforts.

In addition, by offering a single source solution encompassing design, engineering, manufacturing and other services such as assembly, sterilization and packaging, we are able to lower the total cost of the products that we deliver to our customers by designing optimal manufacturing processes and reducing coordination costs, redundant engineering and overhead related to quality and purchasing.

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· Offer financial stability.    We believe the medical engineering and manufacturing services industry includes over 3,000 companies, many of which have annual revenues of less than $5 million. We believe our customers prefer working with large and well capitalized medical engineering and manufacturing service providers such as MedSource, who can ensure a stable supply of products and services. Additionally, we have the financial capacity to allow us to respond rapidly to our customers’ requirements, such as higher production volumes.

Our Strategy

Our objective is to be the leading medical engineering and manufacturing services provider to established, as well as emerging, medical device companies. We expect to grow by focusing our sales and marketing teams on cross-selling our design and engineering, manufacturing, assembly and supply chain management services to both existing customers and new customers.

The key elements of our business strategy include:

· Focus on manufacturing excellence and leading process technologies.    We are committed to maintaining and improving our manufacturing processes and services, which we believe has made us an efficient and high quality medical engineering and manufacturing services provider. Our manufacturing capabilities are supported by advanced manufacturing process technologies and a strong culture of continuous improvement. We are implementing a manufacturing strategy founded on the principles of employee excellence, technology deployment, quality-driven operations, an integrated low-cost manufacturing network, lean manufacturing and customer satisfaction.

· Strengthen our customer relationships by collaborating in the design and engineering of new products.    Working closely with customers in the design and engineering of new products provides significant opportunity to anticipate customers’ needs and secure ongoing manufacturing relationships. Increasingly, our customers provide only functional or system performance specifications and request that we provide much of the design and engineering specifications associated with new products or product modifications. Our ability to provide product design and development services enables us to secure long term manufacturing relationships for finished devices, sub-assemblies and components.

· Drive additional component manufacturing business by continuing to expand our device assembly services.    As we increase our assembly business, we have the opportunity to also increase our manufacturing of components because the assembler, or sub-assembler, of a device typically controls the source of the components used in that device. Our manufacturing capabilities position us well to produce many of the components for the products we assemble.

· Pursue product line transfers and acquisitions of customers’ manufacturing assets.    We believe that the transfer of the manufacturing responsibility for product lines and our acquisition of customer manufacturing facilities will provide a vehicle for substantial growth, as well as a mechanism to develop closer relationships with leading medical device companies. These transactions allow our customers to reduce capital employed and focus resources on their core competencies, including research and sales and marketing. During October 2001, we acquired a manufacturing assembly facility for a product line from one of our major customers, a leading medical device company. As part of this transaction, we signed a multi-year supply agreement with this customer. We believe that product line transfers and asset acquisitions of this kind are becoming increasingly attractive to our customers.

· Selectively acquire new companies.    We plan to make select acquisitions of complementary medical engineering and manufacturing services providers that bring desired capabilities, customers or geographic coverage and either strengthen our position in our target markets or provide us with a significant presence in a new market. We have an experienced business development team focusing on acquisitions and integrating these acquisitions into our operations. Since our formation through the acquisition of seven companies in March 1999, we have completed five additional acquisitions. We believe that our ability to identify, close and integrate acquisitions is a competitive advantage.

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We intend to continue to build our brand name and deploy our sales and marketing team, as well as to use our information technology infrastructure, to further implement our strategy. In addition, we believe that our scale and resources provide our customers with security and reliability.

Sales and Marketing

Our sales organization uses a team approach that integrates approximately 50 account managers, application engineering managers, customer support managers and project managers. This team approach is designed to allow us to serve our customers while providing a single point of contact through each phase of a project. We believe this customer team approach distinguishes us by enabling us to handle complex projects involving outsourcing of completed medical devices from design to delivery.

We have a group of applications engineering managers who are trained in our various manufacturing technologies and processes. These managers assist our customers’ engineering groups and our sales professionals by specifying the best manufacturing technology for a particular device or component. These managers are supported by our process experts in each of the facilities who provide functional expertise in each of the various manufacturing processes.

Our market development team provides strategic marketing support to our sales and operations organizations. Market development helps to optimize the allocation of our sales and application engineering resources across our four key target markets and aligns their efforts with our manufacturing capabilities and capacity. In addition, this team plays an important role in tailoring our broad product and service offerings, including key account and market strategies, pricing strategies, capability bundling strategies, marketing campaigns and establishing strategic alliances with business partners in each of our target markets.

We invest significant resources to develop the MedSource brand name by participating in a number of medical related tradeshows, including medical design and manufacturing shows in the United States and Europe and by advertising our capabilities in a number of medical device and equipment industry magazines and trade publications.

Customers

We serve leading medical device companies as well as many other private and public emerging medical device companies. During fiscal 2001, we had sales to over 200 medical device companies, and our customers include eight of the largest ten medical device companies (by revenues), including Boston Scientific, Guidant, Johnson & Johnson affiliates and Medtronic. Johnson & Johnson affiliates and Medtronic each accounted for more than 10% of our revenues during our year ended June 30, 2001 and during our six months ended December 30, 2001.

We work with our customers on a product by product basis and often work with many different divisions of our largest customers. To date, most of our new sales have been made to existing customers that, we believe, have typically ordered new products from us based upon their previous satisfactory experiences. The products that we manufacture are made to order based on the customer’s specifications and may be designed using our design and engineering services. Our customers retain ownership of and the rights to their product’s design while we generally retain the rights to any of our proprietary manufacturing processes.

Information Technology

We believe that our use of information technology will be a competitive advantage. We are installing the Oracle 11i enterprise resource planning, or ERP, system in all of our facilities. We successfully completed the implementation at our initial site and are in the process of installing the Oracle 11i software and business processes at additional sites. We also installed the Oracle integrated financial reporting system at all locations and generally convert newly acquired facilities to this system within six months to one year. In addition, we have standardized our computer aided design, or CAD, and computer aided manufacturing, or CAM, software at our facilities.

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We expect these systems to provide several key benefits to us, our customers and our suppliers. The systems enable the sharing of customer, supplier and engineering data across our company. We believe that this will enable us to better understand and predict customer demand, take advantage of economies of scale, provide greater flexibility to move product design between sites and improve the accuracy of capturing and estimating our manufacturing and engineering costs. In addition, the systems provide greater visibility into the operations of the enterprise through integrated financial and management reporting capabilities. This system also benefits our suppliers by giving them more accurate and timely information about our requirements. Overall, these systems will provide the infrastructure that will enable us to provide additional value to our customers through improved supply chain management capability, reduced costs and accelerated product development.

Manufacturing

To achieve excellence in manufacturing, we combine advanced manufacturing technology, such as CAD/CAM, with manufacturing techniques such as just-in-time manufacturing and total quality management, or TQM. Just-in-time manufacturing is a production technique that minimizes work-in-process inventory and manufacturing cycle time while enabling delivery of products to customers in the quantities and time frame required. TQM is a management philosophy that seeks to impart high levels of quality in every operation. TQM is accomplished by setting quality objectives for every operation, tracking performance against those objectives, identifying work flow and policy changes required to achieve higher quality levels, and committing executive management to support changes required to deliver higher quality.

To serve our market as a comprehensive manufacturing solution for medical device companies, we address customers’ requirements from a “quote-to-order,” “order-to-fill” and a post-order perspective. We have identified the key processes within this structure and are currently implementing standard operating procedures to create a seamless process within our organization structure and with our customers. This approach to customer service is vital in maintaining and developing customer relationships and differentiating us from our competitors.

We intend to continue to offer our customers advanced manufacturing process technologies, which currently include computer integrated manufacturing, CNC machines, laser cutting, injection molding, stamping, dip coating, extruding and our patented precision metal injection manufacturing. Our flexible manufacturing capability allows us to efficiently produce both high-volume products and low-volume products. Our investment in new equipment will position us to continue to provide efficient and flexible medical engineering and manufacturing services to medical device companies.

We operate a multi-facility manufacturing network strategically located throughout the United States and in Mexico. 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. Criteria in our evaluation included current capacity utilization, uniqueness of manufacturing capabilities, current operating costs, difficulty and cost associated with relocation and recertification of key equipment, and customer supply requirements. Facilities at Danbury, Connecticut and Pittsfield and East Longmeadow, Massachusetts will be closed or sold with production absorbed into existing facilities in Pennsylvania, Minnesota, New Hampshire, and Mexico. We expect that one of the facilities will be closed or sold prior to July 1, 2002 and that the other two plants will be closed or sold by February 2003.

Overall, we have not experienced any significant capacity constraints within our manufacturing network. We expect that we will still have adequate capacity to meet future growth requirements.

Quality

We believe that product quality is a critical success factor in the medical engineering and manufacturing services market. We strive for continuous improvements of our processes and have adopted a number of quality improvement and measurement techniques to monitor our performance.

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We operate our facilities under a single integrated quality system and they comply with the ISO 9001 quality management standard and the ISO 13485 medical device-specific quality management standard, and they are certified to such standards by independent certification bodies. The ISO 9001 standard specifies quality system requirements for product design and production. ISO 13485 establishes additional, more specific requirements for medical devices in particular. Newly acquired facilities are promptly brought into conformity with our integrated quality system, generally within six months to one year. We believe our quality system also complies with FDA quality system regulations with respect to all of our products, services and internal processes. With our integrated company-wide quality system in place, customers are able to audit select MedSource facilities knowing that every facility that has been integrated into the system is subject to the same quality system and process controls, as applicable to the facility’s particular operations. This system can provide significant time and cost savings for customers, as well as reduced risk of non-conforming products resulting in customer dissatisfaction, product recall or patient adverse events. The FDA quality system regulation establishes good manufacturing practice requirements for product design, manufacture, management, packaging, labeling, distribution and installation.

Supply Arrangements

We have established relationships with many of our materials providers. However, most of the raw materials that are used in our products are subject to fluctuations in market price. 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. In the short term, we generally cannot pass these cost increases on to our customers.

Our current internal manufacturing and engineering capabilities do not include all elements that are required to satisfy all of our customers’ requirements. When we do not possess the appropriate manufacturing or engineering capabilities internally, such as electronic circuitry manufacturing, we will subcontract with third party providers for the necessary components or services. As we provide our customers with a fully integrated supply chain solution, we will continue to rely on third party suppliers, subcontractors and other outside sources for components or services that we cannot provide through our internal resources.

To date we have not experienced any difficulty obtaining necessary raw materials or subcontractor services.

Intellectual Property

The products that we manufacture are made to order based on the customer’s specifications and may be designed using our design and engineering services. Our customers retain ownership of and the rights to their product’s design while we generally retain the rights to any of our proprietary manufacturing processes. We generally rely on know-how to manufacture products to our customers’ specifications.

We use a combination of patents, licenses and trade secrets to establish and protect the proprietary rights to our technologies and products used in connection with precision metal injection manufacturing processes, guidewire technology, plastic tubing manufacturing processes and surgical instruments manufacturing processes.

We own an aggregate of two United States and one foreign patents in connection with our precision metal injection manufacturing processes. We also have five foreign pending patent applications at various stages of approval. The United States patents relating to our precision metal injection manufacturing processes expire in 2015, and our foreign patent expires in 2016. In addition, we are a party to several license agreements with third parties pursuant to which we have obtained, on varying terms, non-exclusive rights to patents held by third parties in connection with precision metal injection manufacturing technology.

We own an aggregate of nine United States patents that we use in connection with the manufacture of our guidewire products. We also have one United States and six foreign pending patent applications at various stages of approval. The United States patents relating to our guidewire products expire between 2010 and 2015.

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We own an aggregate of seven other United States patents that we use in connection with other manufacturing processes. We also have one United States pending patent application. The United States patents relating to these other manufacturing processes expire between 2014 and 2019.

We do not believe that the expiration of any of our patents or the termination of any of our licenses would have a material effect on our business.

It is our policy to require all employees, consultants and other parties to execute confidentiality agreements. These agreements prohibit disclosure of confidential information to third parties except in specified circumstances. In the case of employees and consultants, the agreements generally provide that all confidential information relating to our business is the exclusive property of MedSource.

We have an agreement with one of our employees that provides him with an exclusive license to our precision metal injection technology for use only outside the medical industry in the event that his employment terminates. In the event that the employee is terminated by us without cause, the license will be royalty-free. Otherwise, we will receive royalties from any sublicense of these intellectual property rights by the employee. In addition, we must obtain the employee’s consent if we desire to sublicense or exploit this technology for non-medical applications.

Competition

We compete with different companies depending on the type of product or service offered or the geographic area served. Our management believes that the primary basis of competition in our targeted markets is existing customer relationships, as well as reputation, quality, delivery, responsiveness, breadth of capabilities and price. We have as customers many of the leading medical device companies in our four target markets. In addition, we believe that our integrated quality system and manufacturing network allow us to compete favorably in terms of breadth of product and service offerings, quality, responsiveness and price. We are not aware of a single competitor that operates in all of our target markets or offers the same range of products and services that we offer. To remain competitive, we must continue to provide a single source solution, accelerate product development time, provide quality products and practices, reduce costs for our customers and offer financial stability.

Our existing or potential competitors include the internal operations of medical device companies themselves and other medical engineering and manufacturing services providers. Other medical engineering and manufacturing services providers currently compete in some but not all of the same target markets that we do. We believe that the medical engineering and manufacturing services industry is highly fragmented with over 4,000 companies that have limited manufacturing capabilities and limited sales and marketing expertise. Many of these 4,000 companies have less than $3.5 million in annual revenues from medical device companies.

Government Regulation

We are a medical engineering and manufacturing services provider. Some of the products and components of products that we manufacture may be considered finished medical devices, and the manufacturing processes used in the production of finished medical devices are subject to FDA inspection and assessment, and must comply with the FDA quality system regulation. The FDA quality system regulation establishes good manufacturing practice requirements for product design, manufacture, management, packaging, labeling, distribution, and installation for medical devices. Additional FDA regulations impose requirements for record keeping, reporting, facility and product registration, product safety and effectiveness, and product tracking. Failure to comply with these regulatory requirements may result in civil and criminal enforcement actions, including financial penalties, seizures, injunctions and other measures. Our products must also comply with state and foreign requirements. Also, in order to comply with regulatory requirements, our customers may wish to audit our operations to evaluate our quality systems. Accordingly, we routinely permit audits by our customers.

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In addition, the FDA and state and foreign governmental agencies regulate many of our customers’ products as medical devices. FDA approval is required for those products prior to commercialization in the United States, and approval of regulatory authorities in other countries may also be required prior to commercialization in those jurisdictions. Moreover, in the event that we build or acquire additional facilities outside the United States, we will be subject to the medical device manufacturing regulations of those countries. Some other countries may rely upon compliance with United States regulations or upon ISO certification as sufficient to satisfy certain of their own regulatory requirements for a product or the manufacturing process for a product.

Other than as described in the prior two paragraphs, our business is not subject to direct governmental regulation other than the laws and regulations generally applicable to businesses in the jurisdictions in which we operate, including those federal, state and local environmental laws and regulations governing the emission, discharge, use, storage and disposal of hazardous materials and the remediation of contamination associated with the release of these materials at our facilities and at off-site disposal locations. Our manufacturing activities involve the controlled use of, and some of our products contain, small amounts of hazardous materials. Liabilities associated with hazardous material releases arise principally under the Clean Water Act, the Clean Air Act, the Resource Conservation and Recovery Act and the Comprehensive Environmental Response, Compensation and Liability Act and analogous state laws which impose strict, joint and several liability on owners and operators of contaminated facilities and parties that arrange for the off-site disposal of hazardous materials. We are not aware of any material noncompliance with the environmental laws currently applicable to our business and we are not subject to any material claim for liability with respect to contamination at any company facility or any off-site location. We cannot assure you, however, that we will not be subject to such environmental liabilities in the future as a result of historic or current operations.

Properties

Currently, our principal operations are conducted at the following locations:

Location	Approx. Square Feet	Leased/ Owned
Brimfield, Massachusetts	30,000	Owned
Brooklyn Park, Minnesota	70,000	Leased
Corry, Pennsylvania	40,000	Leased
Danbury, Connecticut(a)	87,000	Leased
E. Longmeadow, Massachusetts(a)	15,000	Leased
Englewood, Colorado	35,000	Leased
Laconia, New Hampshire	31,000	Leased
Minneapolis, Minnesota(b)	7,000	Leased
Navojoa, Mexico	38,000	Leased
Newton, Massachusetts	69,000	Leased
Norwell, Massachusetts	37,000	Leased
Orchard Park, New York	41,000	Leased
Pittsfield, Massachusetts(a)	26,000	Owned
Redwood City, California	28,000	Leased
Santa Clara, California	10,000	Leased
Trenton, Georgia	42,000	Leased
Total	606,000

(a) One of these facilities will be closed or sold prior to July 1, 2002, and the other two plants will be closed or sold by February 2003.

(b) Corporate offices.

We believe these facilities and the manufacturing and assembly capacity they provide are adequate for our current and foreseeable purposes and that additional space and capacity will be available when needed.

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Employees

We currently employ approximately 1,350 people. None of our employees is represented by a labor union. We have not experienced any work stoppages, and we consider our relations with our employees to be good.

Litigation

From time to time, we are involved in legal proceedings in the ordinary course of our business. We are not currently involved in any pending legal proceedings that we believe could have a material adverse effect on our financial position or results of operations.

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MANAGEMENT

The following table sets forth our directors, executive officers and key employees and their ages as of February 19, 2002:

Name	Age	Position
Richard Effress	31	Chairman of the Board, Chief Executive Officer and Co-founder
Joseph Caffarelli	56	Senior Vice President, Chief Financial Officer and Treasurer
Dan Croteau	36	Vice President—Corporate Development
Jim Drill	37	Vice President—Sales and Marketing
Bill Ellerkamp	42	Vice President—Market Development
Karl Hens	41	Vice President—Technology
Rick McWhorter	53	Senior Vice President—Operations
Ralph Polumbo	50	Vice President—Human Resources and Integration
Rich Snider	50	Vice President—New Product Introduction
Douglas Woodruff	44	Vice President—Regulatory Affairs and Quality Assurance
Joseph Ciffolillo (a)(b)	63	Director
John Galiardo (a)	68	Director
Wayne Kelly	39	Director and Vice President
William Kidd	60	Director and Co-founder
T. Michael Long (a)(b)	58	Director
Ross Manire (b)	49	Director
Carl S. Sloane (a)(b)	65	Director

(a) Member of the Compensation and Benefits Committee.

(b) Member of the Audit Committee.

Richard Effress was a co-founder of MedSource, has been the Chairman of our board of directors since inception and became Chief Executive Officer in January 2000. From May 1997 until March 1999, he worked as a partner at Kidd & Company, a venture management firm, of which he is also a founder. While at Kidd & Company he participated in the development of Chatham Technologies, a provider of custom electronic enclosure systems for the communications industry. Previously, he was an associate at Kidd, Kamm & Company, a private equity investment firm, and an investment banking analyst at Donaldson, Lufkin Jenrette Securities Corporation. Rich received a B.S. from the Wharton School of the University of Pennsylvania and an M.B.A. from Harvard Business School, where he was a Baker Scholar.

Joseph Caffarelli joined MedSource in February 2001 as Senior Vice President, Chief Financial Officer and Treasurer. From April 1999 until January 2001, he was Senior Vice President and Chief Financial Officer of Airspan Networks, a wireless communications equipment company, and from November 1994 until March 1999, he was the Executive Vice President and Chief Financial Officer of Physio-Control, a medical equipment company. Joe also served in numerous senior financial management positions at General Electric, a diversified industrial corporation. Joe received a B.A. from the State University of New York.

Dan Croteau joined MedSource in June 1999 as Director of Business Development, became our Vice President—Business Development in January 2000 and became our Vice President—Corporate Development in December 2001. From September 1997 until June 1999, he was a consultant at Booz Allen & Hamilton in Sydney, Australia. Previously, he worked at General Electric, a diversified industrial corporation, in various technical marketing, sales, and general management roles. Dan has a B.S. from the University of Vermont and an M.B.A. from Harvard Business School.

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Jim Drill joined MedSource in February 1999 as Vice President—Sales and Marketing. From 1991 until 1999, he worked at Parametric Technology Corporation, a developer and marketer of design and manufacturing software platforms, where he was Senior Vice President—North America West and served in several other senior sales management positions throughout the United States and Europe. Prior to that he worked at International Business Machines, a computer manufacturer. Jim has a B.S. from the University of Wisconsin-Madison.

Bill Ellerkamp joined MedSource in March 2000 as Vice President—Market Development. From 1995 until 2000, he worked at TFX Medical, a supplier of engineered components, assemblies and products to medical device and equipment original equipment manufacturers, most recently as President. Prior to that he spent over ten years in Europe with Teleflex and Rusch International in various sales and marketing positions. Bill has a B.A. from Colgate University and an M.B.A. from the London Business School.

Dr. Karl Hens joined MedSource in May 2000 as Vice President—Technology. From December 1995 until its acquisition by MedSource, Karl was the founder, President and Chief Executive Officer of Thermat Precision Technology, a precision metal injection manufacturing company. Previously, he held a faculty position at The Pennsylvania State University and was a founding partner of the Powder Metallurgy Lab. Karl has a B.S. from the University of Waterloo, and an M.S. and Ph.D. from Rensselaer Polytechnic Institute.

Rick McWhorter joined MedSource in March 2001 as Senior Vice President—Operations. From 1977 until 2000, he worked at Baxter Healthcare International, a global healthcare manufacturing company, where he was most recently Vice President—Manufacturing of Baxter’s I.V. Systems group. Prior to that he worked at Ludlow Corporation, a textile manufacturing company. Rick has a B.S. and M.B.A. from Delta State University.

Ralph Polumbo joined MedSource in April 1999 as Vice President—Human Resources and Integration. From 1995 until 1999, he worked at Rubbermaid, a company that produces and markets products principally in the home, juvenile and commercial products categories, where he held several positions including Vice President of Integration and Vice President of Human Resources for Rubbermaid’s Home Products division. Previously, he worked at The Stanley Works, a tool manufacturer, in a variety of positions including Vice President of Human Resources and Vice President of Operations. Ralph has a B.S. from the Wharton School of the University of Pennsylvania and a Masters of Labor and Industrial Relations from Michigan State University.

Rich Snider joined MedSource in February 2000 as Vice President—New Product Introduction. From 1996 until 2000, he worked at Bridge Medical, a start-up medical device and information company, where he was a Vice President and co-founder. Rich served in various senior management positions at Amcare Health Services, McGaw, and Quest Medical. Rich has a B.S. degree in Mechanical Engineering from Southern Methodist University and an M.B.A. from Louisiana State University.

Doug Woodruff joined MedSource in January 2000 as Vice President—Regulatory Affairs and Quality Assurance. From 1998 until 2000, he was the Vice President—Quality Assurance and Technical Services for Tenax Corporation, a company acquired by MedSource. From 1996 to 1998 he was the Director of Quality Assurance and Regulatory Affairs for the Meadox Division of Boston Scientific, a medical technology company. Doug has a B.S. and M.S. from Washington State University.            

Joseph Ciffolillo has been a director of MedSource since April 2001. From 1983 until his retirement in 1996, he worked at Boston Scientific, a medical technology company, most recently as Chief Operating Officer. Prior to Boston Scientific, he worked in several positions at Johnson & Johnson, a diversified medical products company, where he last served as president of Johnson & Johnson Orthopedics. He serves as a director of Boston Scientific and as Chairman of the Advisory Board of the Health Science Technology Division of Harvard University and Massachusetts Institute of Technology. Joe received his B.A. from Bucknell University.

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John Galiardo has been a director of MedSource since January 2000. From 1977 until his retirement in 1999, he worked at Becton Dickinson, a medical technology company, where he was Vice Chairman and General Counsel. He is a director of Gynetics, a healthcare products company, VISX Incorporated, a company that develops products and procedures to improve eyesight using lasers, and the New Jersey Manufacturers Insurance Companies, an insurance company. Jack received a B.S. from the University of Maryland and an L.L.B. from Columbia Law School.

Wayne Kelly joined MedSource in March 1999 as the Vice President of our Brooklyn Park, Minnesota facility, and served in that position until March 2001, at which time he assumed his current position as a company Vice President. He has been a director of MedSource since March 1999. From 1983 until March 1999, he held various positions at Kelco Industries, a company acquired by MedSource in March 1999. Wayne received a B.S. from the University of Minnesota.

William Kidd was a co-founder of MedSource and has been a director since our inception. Bill was a founding partner of Kidd & Company, a venture management firm he founded in 1997. Prior to Kidd & Company, Bill was a founding partner of Kidd, Kamm & Company, a private equity investment firm. Bill received a B.A. and M.B.A. from Cornell University.

T. Michael Long has been a director of MedSource since October 2000. He has been a Partner of Brown Brothers Harriman & Co., an investment bank, since 1983 and has been with Brown Brothers Harriman since 1971. He serves as a director of HCA, a company that owns and operates hospitals and related health care entities, Vaalco Energy Company, an independent energy company, and Genesee & Wyoming, a company that operates short line and regional freight railroads and provides related rail services. Michael received a B.A. from Harvard University and an M.B.A. from Harvard Business School.

Ross Manire has been a director of MedSource since November 2000. Ross is President of Flextronics Enclosures, a division of Flextronics International, an electronics contract manufacturer. He is the former President and CEO of Chatham Technologies, Inc., which merged with Flextronics in September 2000. Prior to joining Chatham in 1999, Ross was Senior Vice President of the Carrier Systems Business Unit of 3Com Corporation, a provider of networking solutions, a position he held since 1997. Previously, he served in various executive positions with U.S. Robotics including Chief Financial Officer, Senior Vice President, Operations, and General Manager, Network Systems Division. Ross holds a B.A. from Davidson College and an M.B.A. from the University of Chicago.

Carl S. Sloane was a director of MedSource from January 2000 through October 2000 and re-joined our board in January 2002. He was the Ernest L. Arbuckle Professor of Business Administration at Harvard Business School from 1991 until his retirement in 2000, and is presently Professor Emeritus. Previously, Carl spent thirty years in management consulting, the last twenty with the firm he co-founded, Temple, Barker & Sloane, Inc., and its successor firm, Mercer Management Consulting, where he served as Chairman and Chief Executive Officer. He is also an independent consultant and serves as a director of Ionics, Incorporated, a water purification company, Rayonier Inc., a forest products company, Sapient Corp., a business and technology consultancy, and The Pittston Co., a company engaged in security and gold, timber and natural gas operations.

Our board of directors currently consists of eight members. Prior to the closing of this offering, our board of directors will be divided into three classes, with each director serving a three-year term and one class being elected at each year’s annual meeting of stockholders.             ,             and             will be in the class of directors whose initial term expires at the 2002 annual meeting of stockholders.             ,             and             will be in the class of directors whose initial term expires at the 2003 annual meeting of the stockholders.             and             will be in the class of directors whose initial term expires at the 2004 annual meeting of stockholders.

Our executive officers are elected by the board of directors and serve until their successors have been duly elected and qualified or until their earlier resignation or removal. There are no family relationships among any of our directors or officers.

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Committees of the Board of Directors

Audit Committee.    The audit committee, which consists of Messrs. Ciffolillo, Long, Manire and Sloane, assists the board in fulfilling its responsibilities of ensuring that management is maintaining an adequate system of internal controls to assure:

· that assets are safeguarded and that financial reports are properly prepared;

· consistent application of generally accepted accounting principles; and

· compliance with management’s policies and procedures.

In performing these functions, the audit committee meets periodically with the independent auditors and management to review their work and confirm that they are properly discharging their responsibilities. The audit committee also:

· recommends an independent audit firm to audit financial statements and to perform services related to audits;

· approves the audit fees payable to the independent audit firm and reviews the scope and results of audits with the independent auditors;

· reviews with management and the independent auditors our annual operating results;

· considers the adequacy of our internal accounting control procedures; and

· considers our auditors’ independence.

Compensation and Benefits Committee.    The primary function of the compensation and benefits committee is to determine management and executive compensation and establish health and benefit plans and other compensation policies. The compensation and benefits committee is also responsible for the administration of our stock plans, including reviewing management recommendations with respect to grants of awards and taking other actions that may be required in connection with our compensation and incentive plans.

Compensation and Benefits Committee Interlocks and Insider Participation

Mr. Effress served on our compensation and benefits committee from March 1999 until he became our Chief Executive Officer in January 2000. Since then, he has participated in discussions concerning management and executive officer compensation. The members of our compensation and benefits committee are Messrs. Ciffolillo, Galiardo, Long and Sloane.

Director Compensation

We reimburse directors for reasonable expenses incurred in attending board or committee meetings. Following the offering, we will pay non-employee directors $10,000 per year, payable, at their option, in cash or shares of our common stock. We also expect to grant to each non-employee director an option to purchase 2,100 shares of our common stock in connection with this offering and additional grants each year thereafter.

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Executive Compensation

The following table sets forth the compensation earned by our Chief Executive Officer and our four other most highly compensated executive officers during our fiscal year ended June 30, 2001:

					Long-Term Compensation Awards
	Annual Compensation				Number of Securities Underlying Options	All Other Compensation
	Salary		Bonus
Richard Effress	$	250,000	$	50,000	300,000	$    —
Chairman and Chief Executive Officer
Jim Drill		208,333		41,466	10,000	—
Vice President—Sales and Marketing
William Ellerkamp		178,750		35,750	27,500	—
Vice President—Market Development
Ralph Polumbo		175,000		35,000	—	—
Vice President—Human Resources and Integration
Rich Snider		175,000		30,641	10,000	—
Vice President—New Product Introduction

Option Grants in Fiscal 2001

The following table shows grants of stock options to our Chief Executive Officer and to the other executive officers named in the Summary Compensation Table above during our fiscal year ended June 30, 2001.

All options were granted under our 1999 stock plan. These options were granted at exercise prices at least equal to the fair market value of our common stock as determined by our board of directors on the dates of grant. The percentage of options granted is based on options to purchase an aggregate of 1,555,660 shares of our common stock granted by us during the fiscal year ended June 30, 2001 to our employees, including the named executive officers.

The potential realizable value amounts in the last two columns of the following chart are based on the assumption that our common stock appreciates at the annual rate shown, compounded annually, from the date of grant until the expiration of the 10-year term. Potential realizable value has been calculated using the initial public offering price of $             per share, although we estimate that, in each case, the fair market value of our stock at the time the option was granted was less than that amount. These number are calculated based on the requirements of the SEC and do not reflect our estimate of future stock price growth.

Name	Individual Grants						Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option
	Number of Securities Underlying Options Granted	Percent of Total Options Granted to Employees in Fiscal Year (%)		Exercise Price per Share ($)		Expiration Date
							5%	10%
Richard Effress	300,000	19.3	%	$	16.24	11/21/10
Jim Drill	—	—			—	—
William Ellerkamp	27,500	*			16.24	11/21/10
Ralph Polumbo	—	—			—	—
Rich Snider	10,000	*			17.00	2/6/11

* Less than one percent.

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Option Values as of June 30, 2001

The following table provides summary information concerning stock options held as of June 30, 2001 by our Chief Executive Officer and by the other executive officers named in the Summary Compensation Table above. The value of in-the-money options represents the difference between the exercise price of the option and an assumed initial public offering price of $             per share.

	Shares Acquired on Exercise	Value Realized		Number of Securities Underlying Unexercised Options as of June 30, 2001		Value of Unexercised In-the-Money Options as of June 30, 2001
Name				Exercisable	Unexercisable	Exercisable	Unexercisable
Richard Effress	—	$	—	75,000	225,000
Jim Drill	—		—	67,500	82,500
William Ellerkamp	616			12,509	66,875
Ralph Polumbo	—		—	32,500	37,500
Rich Snider	7,500			11,250	66,250

1999 Stock Plan

In March 1999, we adopted our 1999 Stock Plan, which, as amended to date, authorizes the issuance of up to 4,430,000 shares of common stock, subject to adjustment upon the occurrence of any stock dividend or other distribution, consolidation, combination, exchange of shares or other specified corporate transaction or event.

In accordance with our stock plan, our board of directors or a board committee composed of non-employee directors may grant non-qualified stock options or shares of common stock subject to restrictions or contingencies to employees (including directors and officers who are employees) and to consultants and directors who are not employees of MedSource or any of its subsidiaries. The term of any particular grant, including any performance-based requirements, exercise price, vesting terms and other restrictions are determined by the board or by the committee of the board that makes the grant.

The exercise price of non-qualified options may be above, at or below fair market value of the common stock on the date of grant. The exercise period may be set by the board or the committee that makes the grant but may not exceed ten years. Stock options will be exercisable at such times and upon such conditions as the board or the committee that makes the grant may determine, as reflected in the applicable grant.

A restricted stock award is an award of common stock that is subject to any vesting, performance criteria, restrictions on transferability and other restrictions, if any, that the board or the committee making the grant may impose at the date of grant. These restrictions may lapse separately or in combination at such times, under such circumstances, in such installments or otherwise, as the board or the committee making the grant may determine. Except to the extent restricted under the grant relating to the restricted stock, a participant granted restricted stock will have all of the rights of a stockholder, including, without limitation, the right to vote and the right to receive dividends. The board or the committee making the grant has the authority to cancel all or any portion of any outstanding restrictions.

Except as otherwise determined by the committee making the grant, options and restricted shares granted under the plan may not be transferred other than by will or by the laws of descent and distribution.

Our 1999 Stock Plan terminates in 2009. As of February 19, 2002, we had outstanding options to purchase an aggregate of 3,111,452 shares of common stock under the plan at exercise prices ranging from $12.00 per share to $20.00 per share. Our standard form of stock option contract provides for vesting of options at a rate of 25% after the first year of employment and 25% each year thereafter until all options have vested and become exercisable. The vesting of some or all of the options granted to some of our executives and directors accelerates upon the occurrence of specified change in control transactions.

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ACT Medical, Inc. 1998 Omnibus Stock Plan

In connection with our acquisition of ACT Medical in December 2000, we assumed the ACT Medical 1998 Omnibus Stock Plan. The ACT Medical stock plan terminates in December 2008. As of February 19, 2002, we had outstanding options to purchase an aggregate of 242,259 shares of our common stock under the ACT Medical stock plan at exercise prices ranging from $3.39 per share to $20.00 per share. The standard form of stock option contract for options granted under the ACT Medical stock plan provides for vesting of options at a rate of 25% after the first year of employment and 25% each year thereafter until all options have vested and become exercisable. The vesting of some or all of the options granted to some of our executives and directors accelerates upon the occurrence of specified change in control transactions. We do not expect to grant any additional options under the ACT Medical stock plan.

2001 Employee Stock Purchase Plan

Our 2001 Employee Stock Purchase Plan was adopted by our board of directors in December 2001 and by our stockholders in                 , 2002. This plan provides our employees with an opportunity to purchase our common stock through accumulated payroll deductions. We initially reserved 500,000 shares of common stock for issuance under this purchase plan. As of the date of this prospectus, we had not issued any shares under this plan, but we will be begin issuing shares upon completion of this offering. The number of shares reserved for issuance under the purchase plan will be subject to an annual increase on the first day of each fiscal year equal to the lowest of: 750,000 shares; 2.5% of our outstanding stock on that date; or such lesser amount as may be determined by our board of directors.

Our purchase plan will be administered by our board of directors or by a committee appointed by our board of directors. The purchase plan permits an eligible employee to purchase our common stock through payroll deductions of up to 10% of his or her compensation or such other amount as the persons administering the plan may determine. Employees are eligible to participate in this purchase plan if they are customarily employed by us at least 20 hours per week and more than five months in any calendar year and only to the extent that they do not own more than 5% of our outstanding shares.

Unless our board of directors or the committee administering the plan determines otherwise, this purchase plan will be implemented in a series of consecutive offering periods, each approximately six months in duration. Offering periods will begin on the first trading day on or after May 1 and November 1 of every year and terminate on the last trading day in the period six months later, provided that the first offering period will commence on the effective date of this offering and will end on April 30, 2002, or the last trading day prior thereto.

If we are acquired and the successor corporation does not assume all outstanding options under this purchase plan, then the offering and purchase periods then in progress may be shortened so that all options will be automatically exercised immediately prior to the date of acquisition.

The price at which common stock will be purchased under this purchase plan is equal to at least 85% of the fair market value of the common stock on the first day of the applicable offering period or on the last day of the applicable purchase period, whichever is lower. Employees may end their participation in the offering period at any time, and participation automatically ends on termination of employment.

Our board of directors may not, without the adversely affected optionee’s prior written consent, amend, modify or terminate this purchase plan at any time if the amendment, modification or termination would impair the rights of plan participants. This purchase plan will terminate in November 30, 2011, unless terminated earlier in accordance with its provisions.

Employment Arrangements

We have entered into an employment agreement with Mr. Effress. The agreement provides for a base salary of $275,000, with a bonus opportunity of at least 100% of his base salary at target performance. Mr. Effress is subject to a noncompetition covenant during his employment with us and for one year after termination of his employment.

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We have entered into an employment agreement with Mr. Caffarelli. The agreement provides for a base salary of $225,000, with a bonus opportunity of at least 50% of his base salary at target performance. Mr. Caffarelli is subject to a noncompetition covenant during his employment with us and for one year after termination of his employment.

We have entered into an employment agreement with Mr. Drill. The agreement, which expires in April 2002, provides for a base salary of $225,000, with an annual bonus determined by our board of directors. Mr. Drill is subject to a noncompetition covenant during his employment with us and for a period of time thereafter not to exceed one year, during which we pay him severance equal to his base salary, less any amount he receives from a new employer.

We have entered into an employment agreement with Mr. Ellerkamp. The agreement provides for a base salary of $178,750, with a bonus opportunity of at least 50% of his base salary at target performance. Mr. Ellerkamp is subject to a noncompetition covenant during his employment with us and for one year after termination of his employment.

We have entered into an employment agreement with Mr. McWhorter. The agreement provides for a base salary of $225,000, with a bonus opportunity of at least 50% of his base salary at target performance. Mr. McWhorter is subject to a noncompetition covenant during his employment with us and for one year after termination of his employment.

We have entered into an employment agreement with Mr. Polumbo. The agreement, which expires in April 2002, provides for a base salary of $190,000, with an annual bonus determined by our board of directors.  Mr. Polumbo is subject to a noncompetition covenant during his employment with us and for a period of time thereafter not to exceed one year, during which we pay him severance equal to his base salary, less any amount he receives from a new employer.

Additionally, Messrs. Effress, Caffarelli, Croteau, Drill, McWhorter, Polumbo, Snider and Woodruff have entered into severance agreements that provide for them to receive an amount equal to their base salary for one year following a termination by us without cause. The amount would be reduced by any amounts they receive from any new employer during the year (but they will in any event receive an amount at least equal to their base salary for six months) and its receipt is conditioned upon their agreement not to compete with us or solicit our employees or customers during that one-year period. If any of these employees are terminated without “cause” or leave MedSource with “good reason” within one year following a change of control of MedSource, we would be required to pay them a lump sum equal to two times the highest annual compensation they received during their three prior years of employment and would be required to provide them with health benefits for 24 months following termination.

Upon a change of control, the options held by our executive officers and certain of our other employees will become immediately exercisable as to 50% of the total shares subject to the options, including any portion then already exercisable. In addition, some or all of the options held by each of Messrs. Effress, Caffarelli, Croteau, Drill, Ellerkamp, Hens, McWhorter, Polumbo, Snider and Woodruff will become immediately exercisable in full in the event of a change of control.

Business Conduct Policy

All of our employees, including the aforementioned executives, are required as a condition of employment to read and sign our business conduct policy which includes acceptable behaviors regarding lawsuits and government investigations, anti-trust, equal employment opportunity, electronic mail, and safety and health.

The policy also restricts them from:

· holding a direct or indirect financial interest, other than no more than 1% of the outstanding securities of a publicly traded company, in a firm that either provides services or supplies materials or equipment to us or with whom we compete, or to whom we provide services or products;

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· speculating or dealing in equipment, supplies, materials, or property that we purchase or sell;

· accepting cash, commissions or other payments, or borrowing money, from suppliers, customers, individuals or firms with whom we do business or compete;

· accepting gifts, favors or entertainment or other personal items of more than nominal value from suppliers, customers, individuals or firms with whom we do business or compete;

· misusing for personal gain information to which they have access by reason of their position, or disclosing confidential or proprietary information to competitors, to any other person or to others at MedSource who have no business “need to know”; and

· appropriating for their personal benefit or diverting to others a business opportunity in which we might reasonably be expected to be interested, without first making the opportunity available to us.

Employees are also required to read and sign a confidentiality agreement, which includes non-disclosure and non-solicitation requirements as a condition of employment.

Cash Incentive Plans

Our management bonus plan provides for annual bonus awards to eligible employees if company-wide target performance is achieved. Awards are based on achievement of pre-determined financial and operational objectives. The plan may be changed or discontinued at the sole discretion of the board.

We are also implementing a variable compensation plan to cover all employees at all locations.

Limitation of Liability and Indemnification Matters

Our certificate of incorporation limits the liability of our stockholders, directors and officers to the maximum extent permitted by Delaware law. Delaware law provides that a director of a corporation will not be personally liable for monetary damages for breach of fiduciary duty as a director, except for liability:

· for any breach of the director’s duty of loyalty to us or our stockholders;

· for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;

· under Delaware law regarding unlawful dividends and stock purchases; or

· for any transaction from which the director derived an improper personal benefit.

As permitted by Delaware law, our certificate of incorporation and bylaws provide that we must indemnify our stockholders, directors, officers, employees and agents to the fullest extent permitted by Delaware law. We have obtained directors’ and officers’ insurance to cover our directors, officers and some of our employees for certain liabilities. We believe that these indemnification provisions and agreements and this insurance are necessary to attract and retain qualified directors and officers. The limitation of liability and indemnification provisions in our certificate of incorporation and bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might benefit us and other stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers as required by these indemnification provisions.

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RELATED PARTY TRANSACTIONS

Transactions with Promoters and Related Parties in Connection with Our Formation

In connection with our formation in March 1999, we issued the following securities:

Stockholder	Aggregate Investment	Securities Received
· J.H. Whitney III, L.P.	· $21.5 million	· 292,941 shares of our Series B preferred stock(a)
· Whitney Strategic Partners III, L.P.	· $0.5 million	· 7,058 shares of our Series B preferred stock(b)
· J.H. Whitney Mezzanine Fund, L.P.	· $15.0 million	· $15.0 million senior subordinated note and 48,750 shares of our Series Z preferred stock(c)
· Richard J. Effress	· $0.2 million	· 452,650 shares of our common stock
· William J. Kidd, Carla G. Kidd, his wife, and various trusts for the benefit of their children	· $1.2 million	· 2,374,280 shares of our common stock

(a) Upon completion of this offering these shares will convert into an aggregate of 2,929,411 shares of our common stock, which means that the stockholder will have paid $7.33 per share.

(b) Upon completion of this offering these shares will convert into an aggregate of 70,588 shares of our common stock, which means that the stockholder will have paid $7.33 per share.

(c) At the time of the investment, we allocated $12.3 million to the note and $2.7 million to the Series Z preferred stock. Upon completion of this offering these shares will convert into an aggregate of 487,500 shares of our common stock, which means that the stockholder will have paid $5.50 per share.

Our senior subordinated notes bear interest at 12.5% per year. We have therefore paid J.H. Whitney Mezzanine Fund $1.9 million per year in interest during each year that the notes have been outstanding.

At the same time that we issued the Series B preferred stock described above to the affiliates of Whitney & Co., Richard Effress and William J. Kidd, among others, entered into a share transfer agreement with those affiliates of Whitney & Co. The share transfer agreement provides that in the event we:

· sell all or substantially all of our assets;

· liquidate;

· undergo a change in control; or

· complete an initial public offering of common stock that provides us with net proceeds of at least $40.0 million;

then, in each instance, Mr. Effress, Mr. Kidd and others may be required by the affiliates of Whitney & Co. to transfer to them a number of shares of common stock that, when added to the number of shares of Series B preferred stock owned by them (on an as-converted basis) would give the affiliates of Whitney & Co., a specified internal rate of return. In no event will Mr. Effress, Mr. Kidd and others transfer more than 1,500,000 shares of common stock to the affiliates of Whitney & Co. pursuant to the prior sentence. Based on an assumed initial public offering price of $            per share, no transfer of shares will be required. The share transfer agreement will terminate following completion of this offering.

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Series C Preferred Stock Issued to Related Parties

In October 2000, we issued the following securities:

Stockholder	Aggregate Investment	Series C Preferred Stock Received
· The 1818 Fund III, L.P.	· $35.0 million	· 35,000 shares of our Series C preferred stock
· Limited partnership controlled by Ross Manire	· $0.5 million	· 500 shares of our Series C preferred stock
· John Galiardo	· $0.2 million	· 200 shares of our Series C preferred stock
· Richard J. Effress	· $0.5 million	· 537.5 shares of our Series C preferred stock
· William J. Kidd, Carla G. Kidd, his wife, and various trusts for the benefit of their children	· $3.3 million	· 3,255 shares of our Series C preferred stock

Assuming that the initial public offering price is the midpoint of the price range on the cover of this prospectus (and subject to adjustment depending upon the initial public offering price of our common stock in this offering, as provided in the second paragraph under the caption “Description of Capital Stock — General”), the stockholders will have paid $       per share of common stock and the shares issued to:

· The 1818 Fund III will convert into an aggregate of            shares of our common stock;

· the limited partnership controlled by Ross Manire will convert into an aggregate of        shares of our common stock;

· John Galiardo will convert into an aggregate of         shares of our common stock;

· Richard J. Effress will convert into an aggregate of          shares of our common stock; and

· William J. Kidd, Carla G. Kidd and various trusts for the benefit of their children will convert into an aggregate of        shares of our common stock.

In June 2001, we issued an aggregate of 300 shares of our Series C preferred stock to a corporation controlled by Joseph Ciffolillo, a director, for aggregate consideration of $0.3 million. Assuming that the initial public offering price is the midpoint of the price range on the cover of this prospectus (and subject to adjustment depending upon the initial public offering price of our common stock in this offering, as provided in the second paragraph under the caption “Description of Capital Stock — General”), the shares issued to that corporation will convert into an aggregate of         shares of our common stock and it will have paid $         per share of that common stock upon completion of this offering.

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Series E Preferred Stock Issued to Related Parties

In connection without our issuance during December 2001 of an aggregate of 6,000 shares of our Series E preferred stock, together with warrants to purchase an aggregate of 200,000 shares of our common stock at $0.01 per share, we issued the following securities:

Stockholder	Aggregate Investment	Securities Received
·    Ross Manire	·    $0.5 million	· 500 shares of our Series E preferred stock, together with warrants to purchase an aggregate of 16,667 shares of common stock at $0.01 per share
·    Carl Sloane	·    $0.3 million	· 250 shares of our Series E preferred stock, together with warrants to purchase an aggregate of 8,333 shares of our common stock at $0.01 per share
·    William J. Kidd, Carla G. Kidd, his wife, and various trusts for the benefit of their children	·    $1.2 million	· 1,185 shares of our Series E preferred stock, together with warrants to purchase an aggregate of 39,500 shares of our common stock at $0.01 per share

The Series E preferred stock that we issued will not convert upon completion of this offering.

We used the proceeds of the issuance of our Series E preferred stock and warrants to finance our acquisition of HV Technologies.

At the same time we issued our Series E preferred stock, we obtained the consent of certain affiliates of Whitney & Co. to complete our acquisition of HV Technologies, amended certain of the financial covenants to which we were subject under an agreement we had with those affiliates in order to make the covenants less restrictive and agreed to register one-half of the Series Z preferred stock owned by Whitney Mezzanine Fund in this offering for sale upon exercise, if any, of the underwriters’ over-allotment option. In connection with that consent, we paid Whitney Mezzanine Fund a fee of $37,500, and we increased by $0.8 million the amount payable by us to Whitney Mezzanine Fund upon redemption of our 12.5% senior subordinated notes assuming that we redeem these notes by March 30, 2002.

Certain Services Provided to us by Related Parties

During March 1999, Kidd & Company agreed to perform management and acquisition-related services for us until March 2006. In exchange for these services, we paid Kidd & Company a $2.0 million fee at inception and have agreed to pay an annual fee equal to $1.0 million plus a percentage of the aggregate consideration paid by us in future acquisitions. We have also agreed to reimburse Kidd & Company for the reasonable out-of-pocket costs and expenses that it incurs, and will indemnify Kidd & Company and its agents for damages that they suffer, in connection with providing these services. We paid Kidd & Company fees of $0.3 million, $1.1 and  $1.1 million under these agreements for the period ended July 1, 1999 and for the years ended July 1, 2000 and June 30, 2001, respectively, and $0.5 million for the six month period ended December 30, 2001.

During March 1999, Whitney Mezzanine Management Company, LLC, an affiliate of Whitney & Co., also agreed to perform management services for us until March 2006. In exchange for these services, we have agreed to pay Whitney Mezzanine Management Company an annual fee equal to the sum of $0.4 million plus a percentage of the aggregate consideration paid by us in connection with future acquisitions. We have also agreed to reimburse Whitney Mezzanine Management Company for the reasonable out-of-pocket costs and expenses that it incurs, and will indemnify Whitney Mezzanine Management Company and its agents for damages that they suffer, in connection with providing these services. We paid Whitney Mezzanine Management Company fees of $0.1 million,  

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$0.4 million and $0.5 million under this agreement for the period ended July 1, 1999 and for the years ended July 1, 2000 and June 30, 2001, respectively, and $0.2 million for the six months period ended December 30, 2001.

We have not paid Kidd & Company or Whitney Mezzanine Management Company fees due to them under the agreements described above since the end of November 2001. Instead, with their consent, we accrued fees of $0.1 million and $0.1 million to Kidd & Company and Whitney Mezzanine Management Company, respectively, through December 2001. We expect to accrue an additional $0.4 million and $0.2 million to Kidd & Company and Whitney Mezzanine Management Company, respectively, prior to completion of this offering. All of these accrued and unpaid fees will be paid upon completion of this offering.

We entered into the agreements with Kidd & Company and Whitney Mezzanine Management Company when we began operations during March 1999. At that time, we had a limited amount of management support and relatively few staff to help us with matters such as budgeting, financial planning, implementation of our business plan and identification of candidates for senior management positions. Over time, we have developed additional internal resources, and our management believes that the services that Kidd & Company and Whitney Mezzanine Company agreed to perform for us are currently performed in-house or will not be required in the future. As a result, Kidd & Company agreed to terminate these agreements in exchange for a cash payment of $2.0 million upon completion of this offering, and Whitney Mezzanine Management Company has agreed to terminate this agreement in exchange for a cash payment of $0.9 million upon completion of this offering.

Payment of Proceeds of this Offering to Related Parties

As described under the caption “Use of Proceeds,” we expect to pay a portion of the proceeds of this offering to related parties as follows:

Related Party	Amount of Payment	Purpose
· J.H. Whitney III, L.P. and Whitney Strategic Partners III, L.P.	· $3.9 million	· Accrued and unpaid dividends on our Series B preferred stock
· J.H. Whitney Mezzanine Fund, L.P.	· $16.2 million	· Redemption (with premium) on our $15.0 million senior subordinated promissory note
· Whitney Mezzanine Management Company, LLC	· $1.2 million	· Accrued and unpaid fees due under, and termination of, management agreement
· Ross Manire	· $0.5 million	· Redemption of our Series E preferred stock issued to finance our acquisition of HV Technologies, together with accrued and unpaid dividends thereon
· Carl Sloane	· $0.3 million	· Redemption of our Series E preferred stock issued to finance our acquisition of HV Technologies, together with accrued and unpaid dividends thereon
· Kidd & Company, LLC	· $2.5 million	· Accrued and unpaid fees due under, and termination of, management agreements
· William J. Kidd, Carla G. Kidd, his wife, and various trusts for the benefit of their children	· $1.3 million	· Redemption of our Series E preferred stock issued to finance our acquisition of HV Technologies, together with accrued and unpaid dividends thereon

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Other Transactions with Related Parties

We lease our Brooklyn Park, Minnesota facility from the father of Wayne Kelly, a director, under two different leases that we entered into during March 1999. For the period from March 30, 1999 (inception) through July 3, 1999 and years ended July 1, 2000 and June 30, 2001, our rent payments under the leases were approximately $0.1 million, $0.4 million and $0.4 million, respectively, and we expect to pay $0.4 million in our fiscal year ending June 30, 2002. The leases expire at the end of March 2009 and provide for aggregate annual payments of $0.4 million through March 2005 and aggregate annual payments of $0.5 million from April 2005 through March 2009. We have recently been informed that the landlord is selling the property to an unaffiliated third party.

We have also entered into registration rights agreements with some of our principal stockholders as described under “Description of Capital Stock — Registration Rights Agreements.”

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PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth information, as of February 19, 2002, regarding the beneficial ownership of:

· our common stock by each person or group of affiliated persons that beneficially owns more than 5% of our outstanding common stock;

· our common stock and our Series E preferred stock by each of our directors;

· our common stock and our Series E preferred stock by each of our executive officers named in the Summary Compensation Table; and

· our common stock and our Series E preferred stock by all of our directors and executive officers as a group.

Unless otherwise indicated below, the address for each listed director and executive officer is MedSource Technologies, Inc., 110 Cheshire Lane, Suite 100, Minneapolis, Minnesota 55305. We have determined beneficial ownership in accordance with the rules of the SEC and, as a result, include voting and investment power with respect to shares. To our knowledge, except under applicable community property laws or as otherwise indicated, the persons named in the table have sole voting and sole investment control with respect to all shares shown as beneficially owned. The percentage of ownership of common stock for each stockholder is based on 16,702,635 shares of our common stock outstanding as of February 19, 2002 assuming the conversion of all outstanding convertible preferred stock and the exercise of the warrant described in the first paragraph after the table under “Summary — The Offering” on page 5. The percentage of ownership of Series E preferred stock for each stockholder is based on 6,000 shares of our Series E preferred stock outstanding as of February 19, 2002. The number of shares of our common stock outstanding used in calculating the percentage for each listed person includes the shares of our common stock underlying the options and warrants held by that person that are exercisable within 60 days following February 19, 2002. The number of shares of our common stock outstanding as of February 19, 2002 is subject to adjustment as described in the second paragraph under the caption “Description of Capital Stock — General.”

	Common Stock				Series E Preferred Stock
		Percentage of Shares Beneficially Owned				Percentage of Shares Beneficially Owned
Beneficial Owner	Number of Shares Beneficially Owned	Before Offering		After Offering	Number of Shares Beneficially Owned	Before Offering		After Offering
Richard Effress(a)(b)	637,907	3.8	%	%	—	—	%	—	%
Jim Drill(c)	110,000	*			—	—		—
Bill Ellerkamp(d)	20,000	*			—	—		—
Ralph Polumbo(e)	55,000	*			—	—		—
Rich Snider(f)	47,500	*			—	—		—
Joseph Ciffolillo(g)	30,299	*			—	—		—
John Galiardo(b)(h)	27,630	*			—	—		—
Wayne Kelly(i)	60,932	*			—	—		—
William J. Kidd(b)(j)	1,695,414	10.5			324	5.4		5.4
T. Michael Long(k)	2,538,360	15.2			—	—		—
Ross Manire(b)(l)	62,303	*			500	8.3		8.3
Carl S. Sloane(m)	21,458	*			250	*		*
Funds affiliated with Whitney & Co.(n)(o)	3,487,500	20.9			—
The 1818 Fund III, L.P.(b)(p)	2,538,360	15.2			—

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	Common Stock			Series E Preferred Stock
		Percentage of Shares Beneficially Owned			Percentage of Shares Beneficially Owned
Beneficial Owner	Number of Shares Beneficially Owned	Before Offering	After Offering	Number of Shares Beneficially Owned	Before Offering	After Offering
Carla G. Kidd(b)(q)	1,695,414	10.5		324	5.4	5.4
Edward R. Mandell, as trustee(r)	955,980	5.7		861	14.4	14.4
All directors and executive officers as a group (15  persons)(b)(s)	5,445,702	34.5		787	13.1	13.1
Selling stockholders(t):				—	—	—
Whitney Mezzanine Fund, L.P.(p)	487,500	2.9		—	—	—
German American Capital Corporation(u)	162,500	*		—	—	—

* Represents less than 1% of our outstanding common stock.

(a) Includes (1) 150,000 shares of our common stock issuable upon exercise of options that are exercisable on or within 60 days of February 19, 2002 and (2) 38,981 shares of our common stock issuable upon conversion of 537.5 shares of our Series C preferred stock. Does not include shares owned by a trust established for the benefit of Mr. Effress’s current and future children, as to which Mr. Effress disclaims beneficial ownership.

(b) The number of shares of our common stock issuable upon conversion of our Series C preferred stock is subject to adjustment depending on the initial public offering price of our common stock, as discussed in the second paragraph under the caption “Description of Capital Stock — General.”

(c) Includes 105,000 shares of our common stock issuable upon exercise of options that are exercisable on or within 60 days of February 19, 2002.

(d) Includes 19,384 shares of our common stock issuable upon exercise of options that are exercisable on or within 60 days of February 19, 2002.

(e) Includes 50,000 shares of our common stock issuable upon exercise of options that are exercisable on or within 60 days of February 19, 2002.

(f) Includes 40,000 shares of our common stock issuable upon exercise of options that are exercisable on or within 60 days of February 19, 2002.

(g) Includes (1) 9,375 shares of our common stock issuable upon exercise of options that are exercisable on or within 60 days of February 19, 2002 and (2) 20,924 shares of our common stock issuable upon conversion of 300 shares of our Series C preferred stock.

(h) Includes (1) 13,125 shares of our common stock issuable upon exercise of options that are exercisable on or within 60 days of February 19, 2002 and (2) 14,504 shares of our common stock issuable upon conversion of 200 shares of our Series C preferred stock.

(i) Includes 37,500 shares of our common stock issuable upon exercise of options that are exercisable on or within 60 days of February 19, 2002.

(j) Includes (1) 62,552 shares of our common stock issuable upon conversion of 862.5 shares of our Series C preferred stock that are owned directly by Mr. Kidd, (2) 62,552 shares of our common stock issuable upon conversion of 862.5 shares of our Series C preferred stock that are owned by Mr. Kidd’s wife, and (3) 287 shares of our Series E preferred stock owned by Mr. Kidd’s wife. Does not include 952,256 shares of our common stock or 861 shares of our Series E preferred stock owned by various trusts established for the benefit of Mr. Kidd’s children. Mr. Kidd disclaims beneficial ownership of the shares owned by these trusts. If Mr. Kidd were deemed to beneficially own the shares owned by these trusts, he would beneficially own 2,647,670 shares, or 15.8% or our common stock before this offering and     % after this offering, and 1,185 shares, or 19.8%, of our Series E preferred stock before and after this offering.

(k) Mr. Long, a general partner of Brown Brothers Harriman & Co., which is the general partner of The 1818 Fund III, L.P., may be deemed to be the beneficial owner of shares held of record by The 1818 Fund III, L.P. due to his role as co-manager of The 1818 Fund III, L.P. Mr. Long disclaims beneficial ownership of the shares beneficially owned by The 1818 Fund III, L.P., except to the extent of his pecuniary interest therein.

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(l) Includes (1) 9,375 shares of our common stock issuable upon exercise of options that are exercisable on or within 60 days of February 19, 2002; and (2) 36,262 shares of our common stock issuable upon conversion of 500 shares of our Series C preferred stock, which are beneficially owned by Manire Limited Partnership. Mr. Manire is a director and officer of Odyssey Corp., the general partner of Manire Limited Partnership.

(m) Includes (1) 13,125 shares of our common stock issuable upon exercise of options that are exercisable on or within 60 days of February 19, 2002 and (2) 8,333 shares of our common stock issuable upon exercise of warrants.

(n) Represents 2,929,412 shares of our common stock owned by J.H. Whitney III, L.P., 70,588 shares owned by Whitney Strategic Partners III, L.P. and 487,500 shares owned by J.H. Whitney Mezzanine Fund, L.P. J.H. Whitney Equity Partners III, LLC, of which Peter M. Castleman, Joseph D. Carrabino, Jr., James H. Fordyce, Jeffrey R. Jay, William Laverack, Jr., Daniel J. O’Brien and Michael R. Stone are the members, is the general partner of J.H. Whitney III and Whitney Strategic Partners III and has voting and investment power over their shares. Whitney GP, LLC, of which Peter M. Castleman, Joseph D. Carrabino, Jr., James H. Fordyce, Jeffrey R. Jay, William Laverack, Jr., Daniel J. O’Brien and Michael R. Stone are the members, is the general partner of Whitney Mezzanine Fund and has voting and investment power over its shares. Each of these funds is affiliated with Whitney & Co.

(o) If the underwriters exercise the over-allotment option in full, Whitney Mezzanine Fund will beneficially own 243,750 shares, or     % of our common stock after this offering. The address of each beneficial owner is                             , Stamford, Connecticut 06901.

(p) Represents shares owned of record by The 1818 Fund III, L.P. Brown Brothers Harriman & Co. is the general partner of The 1818 Fund III. Includes 2,538,360 shares of common stock issuable upon conversion of 35,000 shares of our Series C preferred stock. Mr. Long and Michael C. Tucker are partners of Brown Brothers Harriman & Co. and have the power to vote and dispose of these shares, but each disclaims beneficial ownership except to the extent of his pecuniary interest. The address of each beneficial owner is 59 Wall Street, New York, New York 10005.

(q) Includes (1) 62,552 shares of our common stock issuable upon conversion of 862.5 shares of our Series C preferred stock, (2) 62,552 shares of our common stock issuable upon conversion of 862.5 shares of our Series C preferred stock that are owned by Mrs. Kidd’s husband and (3) 37 shares of our Series E preferred stock owned by Mrs. Kidd’s husband. Does not include 952,256 shares of our common stock or 861 shares of our Series E preferred stock owned by various trusts established for the benefit of Mrs. Kidd’s children. Mrs. Kidd disclaims beneficial ownership of the shares owned by these trusts. If Mrs. Kidd were deemed to beneficially own the shares owned by these trusts, she would beneficially own 2,647,670 shares, or 15.8% of our common stock before this offering and     % after this offering, and 1,185 shares, or 19.8%, of our Series E preferred stock before and after this offering. The address of the listed beneficial owner is c/o Kidd & Company, LLC, Three Pickwick Plaza, Greenwich, Connecticut 06830.

(r) Represents shares owned by trusts established for the benefit of Mr. and Mrs. Kidd’s children, which includes 108,786 shares of our common stock issuable upon conversion of 1,500 shares of our Series C preferred stock. Also represents 3,724 shares owned by a trust established for the benefit of Mr. Effress’s current and future children. The address of Mr. Mandell is c/o Jenkens & Gilchrist Parker Chapin LLP, 405 Lexington Avenue, New York, New York 10174.

(s) Includes (1) 521,667 shares of our common stock issuable upon exercise of options that are exercisable on or within 60 days of February 19, 2002; and (2) 2,806,883 shares of common stock issuable upon conversion of 38,900 shares of our Series C preferred stock.

(t) As part of the underwriters’ over-allotment option, Whitney Mezzanine Fund and German American Capital have agreed to sell up to 243,750 and 81,250 shares of our common stock, respectively, to the underwriters for the purpose of covering over-allotments at the price offered to the public less underwriting discounts and commissions.

(u) If the underwriters exercise the over-allotment option in full, German American Capital will beneficially own 81,250 shares, or less than one percent, of our common stock after the completion of this offering.

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DESCRIPTION OF CAPITAL STOCK

General

Immediately following the closing of this offering, our authorized capital stock will consist of 70,000,000 shares of common stock, par value $.01 per share, and 1,000,000 shares of preferred stock, par value $.01 per share, of which 6,000 shares are designated Series E preferred stock and 4,000 shares are designated Series F preferred stock. As of February 19, 2002, there were outstanding 6,080,380 shares of common stock held of record by 50 stockholders, options and warrants to purchase an aggregate of 3,185,225 shares of common stock, 6,000 shares of Series E preferred stock held of record by 28 stockholders and 4,000 shares of Series F preferred stock held of record by one stockholder. We expect to use a portion of the proceeds of this offering to redeem our Series E preferred stock before December 31, 2002 and our Series F preferred stock within 45 days after we complete this offering.

Our Series C preferred stock converts into a number of shares of common stock that depends upon the initial public offering price of our common stock in this offering. We issued 40,000 shares of our Series C preferred stock during October 2000 and an additional 300 shares of our Series C preferred stock during April 2000. Dividends on our Series C preferred stock accrued at an annual rate of 6% of the liquidation preference of $1,000 per share, compounded quarterly, from the date of issuance until October 25, 2001 and accrue at an annual rate of 8% of the liquidation preference of $1,000 per share, compounded quarterly, from and after October 25, 2001. Each share of Series C preferred stock converts into a number of shares of our common stock equal to the liquidation preference per share of $1,000 plus accrued and unpaid dividends divided by a conversion price of $15.00. If the value of the number of shares of our common stock into which each share of our Series C preferred stock converts upon completion of this offering (valued at the initial public offering price of our common stock in this offering) is less than $1,300, then the holder of each share of our Series C preferred stock will upon conversion thereof receive a number of additional shares of our common stock so that the aggregate value of the number of shares of our common stock received upon conversion of each share of our Series C preferred stock is $1,300. However, in no event will we adjust the conversion price to an amount less than 75% of $15.00 or issue more than 88.89 shares of our common stock upon conversion of a share of our Series C preferred stock.

All of our Series A, Series B, Series C and Series D preferred stock, which will convert into common stock as described in the first paragraph after the table under the caption “Summary -- The Offering” on page 5, have been accumulating dividends since issuance. As of December 30, 2001, we had accumulated and unpaid dividends of $6.4 million, $4.3 million, $3.2 million and $2.1 million on the Series A, Series B, Series C and Series D preferred stock, respectively, and no dividends were accrued and unpaid on the Series A preferred stock. We will pay an aggregate of $4.3 million out of the proceeds of this offering to the holders of our Series B preferred stock when it converts. As described in the prior paragraph, the number of shares of common stock that will be received by the holders of our Series C preferred stock when it converts is based upon the amount of accrued and unpaid dividends owed to those holders. Accrued and unpaid dividends outstanding on our Series A and Series D preferred stock will be extinguished when they convert.

Common Stock

Subject to preferences that may apply to shares of preferred stock outstanding at the time, the holders of outstanding shares of common stock are entitled to receive dividends out of assets legally available therefor at such times and in such amounts as our board of directors may from time to time determine. Each stockholder is entitled to one vote for each share of common stock held on all matters submitted to a vote of stockholders. Cumulative voting for the election of directors is not provided for in our certificate of incorporation, which means that the holders of a majority of the shares voted can elect all of the directors then standing for election. Our board of directors is divided into three classes, with each director serving a three-year term and one class being elected at each year’s annual meeting of stockholders. The common stock is not entitled to preemptive rights and is not subject to conversion or redemption. Each outstanding share of common stock is, and all shares of common stock to be outstanding upon completion of this offering will be, fully paid and nonassessable.

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Preferred Stock

Pursuant to our certificate of incorporation, our board of directors has the authority, without further action by the stockholders, to issue up to 1,000,000 shares of preferred stock in one or more series and to fix the designations, powers, preferences, privileges, and relative participating, optional or special rights as well as the qualifications, limitations or restrictions thereof, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rights of the common stock. Our board of directors, without stockholder approval, can issue preferred stock with voting, conversion or other rights that could adversely affect the voting power and other rights of the holders of common stock. Preferred stock could thus be issued quickly with terms calculated to delay or prevent a change in control or make removal of management more difficult. Additionally, the issuance of preferred stock may have the effect of decreasing the market price of the common stock, and may adversely affect the voting and other rights of the holders of common stock. At present, we have no plans to issue any additional preferred stock following this offering.

The holders of our Series E preferred stock are entitled to cumulative dividends at the annual rate of $60 per share during the first year from issuance, payable at the discretion of our board of directors, and will be entitled to $160 per share on a retroactive basis after the first anniversary of issuance. Upon our liquidation, before any payment on any class or series of our capital stock that ranks junior as to liquidation to the Series E preferred stock, the holders of shares of Series E preferred stock are entitled to receive, for each share of Series E preferred stock, cash in an amount equal to the original issuance price of the Series E preferred stock plus all accumulated but unpaid dividends thereon. Our Series E preferred stock has the same preference as our Series F preferred stock with respect to liquidation. The holder of each share of the Series E preferred stock has a limited right to convert only during the 20 day period following our change of control into the number of shares of our common stock that have an aggregate market value at the time of conversion equal to $1,000 per share of Series E preferred stock plus all accrued and unpaid dividends. Holders of shares of our Series E preferred stock are entitled to vote on any matter on which the holders of common stock are entitled to vote, except for the election of directors. On any matter on which the holders of our Series E preferred stock are entitled to vote, they are entitled to cast a number of votes equal to the number of shares of common stock issuable upon exercise of the warrants that were issued to them when they acquired the Series E preferred stock. We may, at our option, at any time, redeem our Series E preferred stock for an amount equal to the original issuance price of the Series E preferred stock plus all accumulated but unpaid dividends thereon.

The holders of our Series F preferred stock are entitled to cumulative dividends at the annual rate of $60 per share during the first year from issuance, payable at the discretion of our board of directors, and will be entitled to $160 per share on a retroactive basis after the first anniversary of issuance. Upon our liquidation, before any payment on any class or series of our capital stock that ranks junior as to liquidation to the Series F preferred stock, the holders of shares of Series F preferred stock are entitled to receive, for each share of Series F preferred stock, cash in an amount equal to the original issuance price of the Series F preferred stock plus all accumulated but unpaid dividends thereon. Our Series F preferred stock has the same preference as our Series E preferred stock with respect to liquidation. The holder of each share of the Series F preferred stock has a limited right to convert only during the 20 day period following our change of control into the number of shares of our common stock that have an aggregate market value at the time of conversion equal to $1,000 per share of Series E preferred stock plus all accrued and unpaid dividends. Holders of shares of our Series F preferred stock are not entitled to vote on any matter, except as required by law. We may, at our option, at any time, redeem our Series F preferred stock for an amount equal to the original issuance price of the Series F preferred stock plus all accumulated but unpaid dividends thereon.

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Warrants

The holders of our Series E preferred stock have been granted warrants to purchase an aggregate of 200,000 shares of our common stock at $.01 per share. The warrants entitle the holders thereof to purchase an additional 45,000 shares on each of the first five anniversaries of the date of issuance of the Series E preferred stock that the Series E preferred stock remains outstanding. We intend to use a portion of the proceeds of this offering to redeem the Series E preferred stock by December 31, 2002, which is prior to the first anniversary of the date of its issuance.

Registration Rights

The holders of             shares of our common stock, subject to adjustment depending upon the number of shares of our common stock issued upon conversion of our Series C preferred stock, have the right to require us to register those shares under the Securities Act 180 days following this offering if:

· the holders of at least 50% of the shares from either of two groups that are party to a registration rights agreement that we entered into in March 1999 make the request to register at least 25% of those shares; or

· the holders of at least 25% of the shares that were party to a registration rights agreement that we entered into in October 2000 make the request.

If on the first anniversary of the date on which the holders who are party to the March 1999 registration rights agreement could require us to register shares under the Securities Act, those holders have not required us to effect a registration in which Indosuez MST Partners, which holds Series B preferred stock that will convert into common stock upon completion of this offering, could participate, then Indosuez MST Partners has the right to require us to register 327,280 shares under the Securities Act.

If we register any of our common stock for our own account or for the account of any of our security holders following this offering, the holders described in the two paragraphs above and the holders of an additional 9,815,783 shares of common stock are generally entitled to include their shares of common stock in the registration, subject to the ability of the underwriters to limit the number of shares included in the offering under certain circumstances. Furthermore, the holders of all of the foregoing shares may require us to register their shares on a Form S-3 registration statement when we are eligible to use a Form S-3.

We will bear all fees, costs and expenses of any registration statement filed in accordance with the terms of the registration rights agreements described above, other than underwriting discounts and commissions.

Delaware Anti-Takeover Law and Charter Provisions

Provisions in our certificate of incorporation and bylaws may have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, control of us. Such provisions could limit the price that investors might be willing to pay in the future for shares of our common stock. These provisions allow us to issue preferred stock without any vote or further action by the stockholders, require advance notification of stockholder meetings and nominations of candidates for election as directors, provide for a classified board of directors, limit our board to ten directors unless increased by a two-thirds vote of the board, prohibit stockholders from calling a special meeting and require a two-thirds vote of our stockholders to amend any of the foregoing provisions. These provisions may make it more difficult for stockholders to take corporate actions and could have the effect of delaying or preventing a change in control.

In addition, we are subject to Section 203 of the Delaware General Corporation Law. This law prohibits a Delaware corporation from engaging in any business combination with any interested stockholder, unless any of the following conditions are met. First, this law does not apply if prior to the date of the transaction, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder. Second, the law does not apply if upon consummation of the

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transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding those shares owned by persons who are directors and also officers and those shares owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer. Third, the law does not apply if, at or after the date of the transaction, the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock which is not owned by the interested stockholder.

Transfer Agent and Registrar

The transfer agent and registrar for our common stock will be             . The transfer agent’s telephone number is (      )       -        .

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SHARES ELIGIBLE FOR FUTURE SALE

Immediately prior to this offering, there was no public market for our common stock. Future sales of substantial amounts of common stock in the public market could adversely affect the market price of our common stock.

Upon completion of this offering, we will have outstanding an aggregate of              shares of common stock, assuming no exercise of options after            , 2002. Of these shares, the            shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act, except for any shares purchased by “affiliates” of MedSource as that term is defined in Rule 144 under the Securities Act. Shares purchased by affiliates may generally only be sold pursuant to an effective registration statement under the Securities Act or in compliance with limitations of Rule 144 as described below.

The remaining            shares of common stock held by existing stockholders were issued and sold by us in reliance on exemptions from the registration requirements of the Securities Act.                of these shares will be subject to “lock-up” agreements providing that the stockholders will not offer, sell or otherwise dispose of any of the shares of common stock owned by them for a period of 180 days after the date of this prospectus. Morgan Stanley & Co. Incorporated, however, may in its sole discretion, at any time without notice, release all or any portion of the shares subject to lock-up agreements. The            shares will become eligible for sale as follows:

Date Available for Resale	Shares Eligible For Sale	Comment
Immediately		Shares not subject to lock-up agreements
90 days (            , 2002)		Shares not subject to lock-up and salable under Rule 701
180 days (            , 2002)		Lock-up released, shares salable under Rules 144 (subject, in some instances, to volume limitations) and 701
Various dates beginning in            , 2002		Shares saleable under Rule 144 (subject, in some instances, to volume limitations)

Immediately after the completion of this offering, we intend to file a registration statement on Form S-8 under the Securities Act to register all of the shares of common stock issued or reserved for future issuance under our stock plans and our stock purchase plan. Based upon the number of shares subject to outstanding options as of January 15, 2002 and currently reserved for issuance under our stock plans and stock purchase plan, this registration statement would cover approximately 5.2 million shares. Shares registered under the registration statement will generally be available for sale in the open market immediately after the 180 day lock-up agreements expire (            , 2002) or earlier in the sole discretion of Morgan Stanley & Co. Incorporated.

Also beginning six months after the date of this offering, holders of            shares of our common stock, including shares issuable upon conversion of preferred stock, will be entitled to rights with respect to registration of these shares for sale in the public market. Registration of these shares under the Securities Act would result in these shares becoming freely tradable without restriction under the Securities Act immediately upon effectiveness of the registration.

Rule 144

In general, under Rule 144 as currently in effect, beginning 180 days after the date of this prospectus, a person who has beneficially owned shares of our common stock for at least one year from the later of the date these shares were acquired from us or from one or our affiliates would be entitled to sell in “broker’s

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transactions” or to market makers, within any three-month period, a number of shares that does not exceed the greater of:

· 1% of the number of shares of our common stock then outstanding (which will equal approximately                     shares immediately after this offering); or

· the average weekly trading volume of our common stock as reported through Nasdaq’s automated quotation system during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.

Sales under Rule 144 are generally subject to the availability of current public information about MedSource.

Rule 701

In general, under Rule 701 as currently in effect, any of our employees, directors, officers, consultants or advisors who purchase shares from us in connection with a compensatory stock or option plan or other written agreement before the effective date of this offering is entitled to sell such shares 90 days after the effective date of this offering in reliance on Rule 144, in the case of affiliates, without having to comply with the holding period requirements of Rule 144 and, in the case of non-affiliates, without having to comply with the public information, holding period, volume limitation or notice filing requirements of Rule 144.

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UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting agreement dated the date of this prospectus, the underwriters named below, for whom Morgan Stanley & Co. Incorporated, Bear, Stearns & Co. Inc., First Union Securities, Inc. and Thomas Weisel Partners LLC are acting as representatives, have severally agreed to purchase, and MedSource has agreed to sell to them, severally, the number of shares indicated below:

Underwriter	Number of Shares
Morgan Stanley & Co. Incorporated
Bear, Stearns & Co. Inc.
First Union Securities, Inc.
Thomas Weisel Partners LLC.
Total

The underwriters are offering the shares of common stock subject to their acceptance of the shares from MedSource and subject to prior sale. The underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the shares of common stock offered by this prospectus are subject to the approval of certain legal matters by their counsel and to certain other conditions. The underwriters are obligated to take and pay for all of the shares of common stock offered by this prospectus if any such shares are taken. However, the underwriters are not required to take or pay for the shares covered by the underwriters over-allotment option described below.

The underwriters initially propose to offer part of the shares of common stock directly to the public at the public offering price listed on the cover page of this prospectus and part to certain dealers at a price that represents a concession not in excess of $            a share under the public offering price. Any underwriter may allow, and such dealers may reallow, a concession not in excess of $            a share to other underwriters or to certain dealers. After the initial offering of the shares of common stock, the offering price and other selling terms may from time to time be varied by the representatives.

MedSource and two selling stockholders have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to 243,750 and 81,250 additional shares, respectively, of common stock at the public offering price listed on the cover page of this prospectus, less underwriting discounts and commissions. The underwriters may exercise this option solely for the purpose of covering over-allotments, if any, made in connection with the offering of the shares of common stock offered by this prospectus. To the extent the option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase about the same percentage of the additional shares of common stock as the number listed next to the underwriter’s name in the preceding table bears to the total number of shares of common stock listed next to the names of all underwriters in the preceding table. If the underwriters’ option is exercised in full, the total price to the public would be $            , the total underwriters’ discounts and commissions would be $        , the total proceeds to MedSource would be $            and the total proceeds to the selling stockholders would be $                .

The underwriters have informed MedSource that they do not intend sales to discretionary accounts to exceed five percent of the total number of shares of common stock offered by them.

We have applied for quotation of our common stock on the Nasdaq National Market under the symbol “MEDT.”

MedSource, each of its directors, executive officers and certain stockholders have agreed that, without the prior written consent of Morgan Stanley & Co. Incorporated on behalf of the underwriters, they will not, during the period ending 180 days after the date of this prospectus:

· offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of

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directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock; or

· enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common stock;

whether any transaction described above is to be settled by delivery of common stock or such other securities, in cash or otherwise.

The restrictions described in this paragraph do not apply to:

· the sale of shares to the underwriters;

· the issuance by MedSource of shares of common stock upon the exercise of an option or a warrant or the conversion of a security outstanding on the date of this prospectus of which the underwriters have been advised in writing; or

· transactions by any person other than MedSource relating to shares of common stock or other securities acquired in open market transactions after the completion of the offering of the shares.

In order to facilitate the offering of the common stock, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the common stock. Specifically, the underwriters may sell more shares than they are obligated to purchase under the underwriting agreement, creating a short position. A short sale is “covered” if the short position is no greater than the number of shares available for purchase by the underwriters under the over-allotment option. The underwriters can close out a covered short sale by exercising the over-allotment option or purchasing shares in the open market. In determining the source of shares to close out a covered short sale, the underwriters will consider, among other things, the open market price of shares compared to the price available under the over-allotment option. The underwriters may also sell shares in excess of the over-allotment option, creating a “naked” short position. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase in the offering. In addition, to cover over-allotments or to stabilize the price of the common stock, the underwriters may bid for, and purchase, shares of the common stock in the open market. Finally, the underwriting syndicate may reclaim selling concessions allowed to an underwriter or a dealer for distributing the common stock in the offering, if the syndicate repurchases previously distributed common stock in transactions to cover syndicate short positions, in stabilizaion transactions or otherwise. Any of these activities may stabilize or maintain the market price of the common stock above independent market levels. The underwriters are not required to engage in these activities and may end any of these activities at any time.

It is anticipated that Morgan Stanley DW Inc., an affiliate of Morgan Stanley & Co. Incorporated, through Morgan Stanley Online, its online service, may be a member of the syndicate and engage in electronic offers, sales and distribution of the shares being offered.

First Union Securities, Inc., one of the underwriters, is an indirect, wholly-owned subsidiary of Wachovia Corporation. Wachovia Corporation conducts its investment banking, institutional and capital markets businesses through its various bank, broker-dealer and nonbank subsidiaries (including First Union Securities, Inc.) under the trade name of Wachovia Securities. Any references to Wachovia Securities in this prospectus, however, do not include Wachovia Securities, Inc., member NASD/SIPC and a separate broker-dealer subsidiary of Wachovia Corporation and an affiliate of First Union Securities, Inc., which may or may not be participating as a selling dealer in the distribution of the securities offered by this prospectus.

First Union Securities, Inc. is acting as the exclusive arranger for the structuring, arranging and syndication of our new $85 million senior credit facility. First Union National Bank, an affiliate of First Union Securities, Inc., may act as the administrative agent and/or lender for this new credit facility.

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Thomas Weisel Partners LLC served as placement agent with respect to our offering of our Series C preferred stock in October 2000 and received a customary placement fee consisting of $2.1 million in cash and a warrant to purchase 525 shares of our Series C preferred stock.

MedSource and the selling stockholders, on the one hand, and the underwriters, on the other hand, have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act.

Directed Share Program

At the request of the Company, the underwriters have reserved for sale, at the initial offering price, up to                  shares offered in this prospectus for directors, officers, employees, business associates, and related persons of the Company. The number of shares of common stock available for sale to the general public will be reduced to the extent such persons purchase such reserved shares. Any reserved shares which are not so purchased will be offered by the underwriters to the general public on the same basis as the other shares offered in this prospectus.

Pricing of the Offering

Prior to this offering, there has been no public market for the common stock. The initial public offering price will be determined by negotiations between MedSource and the representatives. Among the factors to be considered in determining the initial public offering price will be the future prospects of MedSource and its industry in general, sales, earnings and certain other financial operating information of MedSource in recent periods, and the price-earnings ratios, price-cash flows, price-sales ratios, market prices of securities and certain financial and operating information of companies engaged in activities similar to those of MedSource. The estimated initial public offering price range set forth on the cover page of this preliminary prospectus is subject to change as a result of market conditions and other factors.

LEGAL MATTERS

The validity of the common stock offered by this prospectus will be passed upon for MedSource by Jenkens & Gilchrist Parker Chapin LLP, New York, New York. A member of that firm is the trustee of various trusts that own an aggregate of 955,980 shares of our common stock and, as a result, has the power to vote and dispose of those shares. Ropes & Gray, Boston, Massachusetts, will pass upon legal matters relating to this offering for the underwriters.

EXPERTS

Ernst & Young LLP, independent auditors, have audited our consolidated financial statements and schedule at July 1, 2000 and June 30, 2001, and for the three-month period from March 30, 1999 (Inception) through July 3, 1999 and the years ended July 1, 2000 and June 30, 2001, as set forth in their report. We included our consolidated financial statements and schedule in the prospectus and elsewhere in the registration statement in reliance on Ernst & Young LLP’s report, given on their authority as experts in accounting and auditing.

The financial statements of ACT Medical, Inc. as of December 29, 2000 and for the period from January 1, 2000 to December 29, 2000, appearing in this prospectus and elsewhere in the registration statement have been audited by Grant Thornton LLP, independent auditors, as stated in their report appearing herein and are included in reliance upon the report of such firm, given upon their authority as experts in accounting and auditing.

Bertram, Vallez, Kaplan & Talbot, Ltd., independent auditors, have audited the financial statements and schedule of Kelco Industries, Inc. at March 30, 1999, and for the period from May 1, 1998 through March 30, 1999, as set forth in their report. We included the Kelco Industries, Inc. financial statements and schedule in the

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prospectus and elsewhere in the registration statement in reliance on Bertram, Vallez, Kaplan & Talbot, Ltd.’s report, given on their authority as experts in accounting and auditing.

James F. Yochum, CPA, independent auditor, has audited the financial statements of W.N. Rushwood, Inc. (d/b/a Hayden Precision Industries) at December 31, 1998 and March 30, 1999, and for the year ended December 31, 1998 and the three-month period ended March 30, 1999, as set forth in his report. We included the W.N. Rushwood, Inc. (d/b/a Hayden Precision Industries) financial statements in the prospectus and elsewhere in the registration statement in reliance on James F. Yochum’s report, given on his authority as an expert in accounting and auditing.

Ernst & Young LLP, independent auditors, have audited the financial statements of National Wire and Stamping, Inc. at December 31, 1998 and March 30, 1999, and for the year ended December 31, 1998 and the three-month period ended March 30, 1999, as set forth in their report. We included the National Wire and Stamping, Inc. financial statements in the prospectus and elsewhere in the registration statement in reliance on Ernst & Young LLP’s report, given on their authority as experts in accounting and auditing.

Ernst & Young LLP, independent auditors, have audited the financial statements and schedule of The MicroSpring Company, Inc. at March 30, 1999, and for the three-month period ended March 30, 1999, as set forth in their report. We included The MicroSpring Company, Inc. financial statements and schedule in the prospectus and elsewhere in the registration statement in reliance on Ernst & Young LLP’s report, given on their authority as experts in accounting and auditing.

The financial statements and schedule of The MicroSpring Company, Inc as of December 31, 1998, and for the year then ended included in this prospectus of MedSource Technologies, Inc., have been so included in reliance on the reports of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting.

Ernst & Young LLP, independent auditors, have audited the financial statements of Portlyn Corporation at December 31, 1998 and March 30, 1999, and for the year ended December 31, 1998 and for the three-month period ended March 30, 1999, as set forth in their report. We included the Portlyn Corporation financial statements in the prospectus and elsewhere in the registration statement in reliance on Ernst & Young LLP’s report, given on their authority as experts in accounting and auditing.

Ernst & Young LLP, independent auditors, have audited the financial statements and schedule of Texcel, Inc. at December 31, 1998 and March 30, 1999, and for the year ended December 31, 1998 and the three-month period ended March 30, 1999, as set forth in their report. We included the Texcel, Inc. financial statements and schedule in the prospectus and elsewhere in the registration statement in reliance on Ernst & Young LLP’s report, given on their authority as experts in accounting and auditing.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares sold in this offering. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules thereto. For further information with respect to us and our common stock, reference is made to the Registration Statement and the exhibits and schedules filed as a part thereof. You should read the documents filed with the SEC as exhibits to the registration statement for a more complete description of the matter involved.

We will be filing quarterly and annual reports, proxy statements and other information with the SEC. You may read and copy any document that we file at the public reference facilities of the SEC at Room 1300, 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. Our SEC filings are also available to the public from the SEC’s web site at http://www.sec.gov.

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MEDSOURCE TECHNOLOGIES, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

AND PREDECESSOR COMPANY FINANCIAL STATEMENTS

Consolidated Financial Statements of MedSource
Report of Independent Auditors	F-3
Consolidated Balance Sheets as of July 1, 2000 and June 30, 2001 and Unaudited Balance
Sheet as of December 30, 2001	F-4
Consolidated Statements of Operations for the Period from March 30, 1999 (Inception) through
July 3, 1999, the Year Ended July 1, 2000 and the Year Ended June 30, 2001 and Unaudited
Consolidated Statements of Operations for the Six-Month Periods Ended December 30,
2000 and 2001	F-5
Consolidated Statement of Changes in Mandatory Redeemable Convertible Stock and
Stockholders’ Equity (Deficit) for the Period from March 30, 1999 (Inception) through July 3,
1999, the Year Ended July 1, 2000 and the Year Ended June 30, 2001 and Unaudited
Statement of Changes in Mandatory Redeemable Convertible Stock and
Stockholders’ Equity (Deficit) for the Six-Month Period Ended December 30, 2001	F-6
Consolidated Statements of Cash Flows for the Period from March 30, 1999 (Inception) through
July 3, 1999, the Year Ended July 1, 2000 and the Year Ended June 30, 2001 and Unaudited
Statements of Cash Flows for the Six-Month Periods Ended December 30, 2000 and 2001	F-8
Notes to Consolidated Financial Statements	F-9
ACT Medical, Inc. Financial Statements
Report of Independent Certified Public Accountants	F-29
Balance Sheet as of December 29, 2000	F-30
Statement of Operations for the Period from January 1, 2000 to December 29, 2000	F-31
Statement of Stockholders’ Equity for the Period from January 1, 2000 to December 29, 2000	F-32
Statement of Cash Flows for the Period from January 1, 2000 to December 29, 2000	F-33
Notes to Financial Statements	F-34
Financial Statements of Predecessor Companies:
Kelco Industries, Inc. Financial Statements
Report of Independent Accountants	F-41
Balance Sheet as of March 30, 1999	F-42
Statement of Income for the Period from May 1, 1998 through March 30, 1999	F-43
Statement of Changes in Stockholders’ Equity for the Period from May 1, 1998 through
March 30, 1999	F-44
Statement of Cash Flows for the Period from May 1, 1998 through March 30, 1999	F-45
Notes to Financial Statements	F-46
W.N. Rushwood, Inc. (d/b/a Hayden Precision Industries) Financial Statements
Report of Independent Auditors	F-49
Balance Sheets as of December 31, 1998 and March 30, 1999	F-50
Statements of Income and Retained Earnings for the Year Ended December 31, 1998 and
the Three-Month Period Ended March 30, 1999	F-51
Statement of Cash Flows for the Year Ended December 31, 1998 and the Three-Month
Period Ended March 30, 1999	F-52
Notes to Financial Statements	F-53

F-1

National Wire and Stamping, Inc. Financial Statements
Report of Independent Auditors	F-56
Balance Sheets as of December 31, 1998 and March 30, 1999	F-57
Statements of Operations for the Year Ended December 31, 1998 and
the Three-Month Period Ended March 30, 1999	F-58
Statement of Changes in Stockholders’ Equity for the Year Ended December 31, 1998 and the Three-Month Period Ended March 30, 1999	F-59
Statements of Cash Flows for the Year Ended December 31, 1998 and
the Three-Month Period Ended March 30, 1999	F-60
Notes to Financial Statements	F-61
The MicroSpring Company, Inc. Financial Statements
Report of Independent Auditors	F-66
Report of Independent Accountants	F-67
Balance Sheets as of December 31, 1998 and March 30, 1999	F-68
Statements of Operations for the Year Ended December 31, 1998 and
the Three-Month Period Ended March 30, 1999	F-69
Statement of Changes in Stockholders’ Equity for the Year Ended December 31, 1998 and the Three-Month Period Ended March 30, 1999	F-70
Statements of Cash Flows for the Year Ended December 31, 1998 and
the Three-Month Period Ended March 30, 1999	F-71
Notes to Financial Statements	F-72
Portlyn Corporation Financial Statements
Report of Independent Auditors	F-77
Balance Sheets as of December 31, 1998 and March 30, 1999	F-78
Statements of Operations for the Year Ended December 31, 1998 and
the Three-Month Period Ended March 30, 1999	F-79
Statements of Changes in Stockholders’ Equity for the Year Ended December 31, 1998 and the Three-Month Period Ended March 30, 1999	F-80
Statements of Cash Flows for the Year Ended December 31, 1998 and
the Three-Month Period Ended March 30, 1999	F-81
Notes to Financial Statements	F-82
Texcel, Inc. Financial Statements
Report of Independent Auditors	F-85
Balance Sheets as of December 31, 1998 and March 30, 1999	F-86
Statements of Operations for the Year Ended December 31, 1998 and the Three-Month Period Ended March 30, 1999	F-87
Statements of Changes in Stockholders’ Equity for the Year Ended December 31, 1998 and the Three-Month Period Ended March 30, 1999	F-88
Statements of Cash Flows for the Year Ended December 31, 1998 and for the Three-Month Period Ended March 30, 1999	F-89
Notes to Financial Statements	F-90

F-2

REPORT OF INDEPENDENT AUDITORS

The Board of Directors

MedSource Technologies, Inc.

We have audited the accompanying consolidated balance sheets of MedSource Technologies, Inc. and subsidiaries as of July 1, 2000 and June 30, 2001 and the related consolidated statements of operations, changes in mandatory redeemable convertible stock and stockholders’ equity (deficit), and cash flows for the period from March 30, 1999 (inception) through July 3, 1999 and for the years ended July 1, 2000 and June 30, 2001. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of MedSource Technologies, Inc. and subsidiaries at July 1, 2000 and June 30, 2001, and the consolidated results of their operations and their cash flows for the period from March 30, 1999 (inception) through July 3, 1999 and for the years ended July 1, 2000 and June 30, 2001, in conformity with accounting principles generally accepted in the United States.

/s/    Ernst & Young LLP

Minneapolis, Minnesota

August 3, 2001

F-3

MEDSOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share Amounts)

	July 1, 2000			June 30, 2001			December 30, 2001
							(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	2,210		$	20,289		$	13,317
Accounts and notes receivable (net of allowances of $427 at 2000, $596 at 2001 and $804 at December 30, 2001)		14,227			21,504			21,313
Inventories		10,953			13,350			16,548
Prepaid expenses and other current assets		892			3,099			3,515
Deferred income taxes		621			1,335			1,335
Total current assets		28,903			59,577			56,028
Property, plant, and equipment, net		34,956			38,873			40,219
Goodwill, net		42,961			62,210			96,813
Other identifiable intangible assets, net		35,508			39,035			4,263
Deferred financing costs		4,028			3,386			3,022
Interest escrow fund		4,349			1,849			599
Other assets		1,017			370			390
Total assets	$	151,722		$	205,300		$	201,334
Liabilities, mandatory redeemable convertible stock, and stockholders’ equity (deficit)
Current liabilities:
Accounts payable	$	3,665		$	8,691		$	7,019
Accrued compensation and benefits		5,767			6,341			5,166
Other accrued expenses		5,199			5,784			3,999
Reserve for restructuring		—			5,928			5,809
Current portion of long-term debt		9,545			7,215			8,119
Total current liabilities		24,176			33,959			30,112
Long-term debt, less unamortized discount and current portion		89,108			82,329			78,237
Deferred income taxes		621			1,335			1,335
Other long-term liabilities		452			2,071			2,889
Mandatory redeemable convertible stock:
6% Series B preferred stock, par value $0.01 per share: Authorized shares—400,000 Issued and outstanding shares—332,728 at 2000, 2001 and December 30, 2001		22,293			26,289			27,252
6% Series C preferred stock, par value $0.01 per share: Authorized shares—52,029 Issued and outstanding shares— -0- at 2000 and 40,300 at 2001 and December 30, 2001		—			39,190			40,949
6% Series D preferred stock, par value $0.01 per share: Authorized shares—43,000 Issued and outstanding shares— -0- shares at 2000, 35,165 at 2001 and 35,391 at December 30, 2001		—			33,388			34,884
Stockholders’ equity (deficit):
Preferred stock, par value $.01 per share: Authorized shares—1,000,000		—			—			—
Series A convertible preferred stock, par value $0.01 per share: Authorized shares—100,000 Issued and outstanding shares—38,370 at 2000, 2001 and December 30, 2001		—			—			—
Series E preferred stock, par value $0.01 per share: Authorized shares—6,000 Issued and outstanding shares— -0- shares at 2000, 2001 and 5,500 at December 30, 2001		—			—			—
Series Z convertible preferred stock, par value $0.01 per share: Authorized shares—65,000 Issued and outstanding shares—65,000 at 2000, 2001 and December 30, 2001		1			1			1
Common stock, par value $0.01 per share: Authorized shares—40,000,000 Issued and outstanding shares—5,235,450 at 2000, 5,255,758 at 2001 and 5,256,158 at December 30, 2001		52			52			53
Additional paid-in capital		33,591			33,875			39,380
Accumulated other comprehensive loss		—			(1,560	)		(2,407	)
Accumulated deficit		(18,572	)		(45,415	)		(51,208	)
Unearned compensation		—			(214	)		(143	)
Total stockholders’ equity (deficit)		15,072			(13,261	)		(14,324	)
Total liabilities, mandatory redeemable convertible stock, and stockholders’ equity (deficit)	$	151,722		$	205,300		$	201,334

See accompanying notes.

F-4

MEDSOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

`(In Thousands, Except Share and Per Share Amounts)

	Period From March 30, 1999 (Inception) Through July 3, 1999			Year Ended						Six Months Ended December 30,
				July 1, 2000			June 30, 2001			2000			2001
										(Unaudited)
Revenues	$	21,968		$	89,352		$	128,462		$	55,491		$	72,155
Cost and expenses:
Cost of products sold		13,437			59,811			94,386			41,514			54,616
Selling, general, and administrative expense		4,458			21,167			26,199			11,771			14,080
Amortization of goodwill and other intangibles		4,135			4,255			5,640			2,432			169
Organization and start-up costs		4,981			—			—			—			—
Restructuring charge		—			—			11,464			—			—
		27,011			85,233			137,689			55,717			68,865
Operating (loss) income		(5,043	)		4,119			(9,227	)		(226	)		3,290
Interest expense, net		(2,658	)		(10,682	)		(10,213	)		(5,417	)		(4,886	)
Other income (expense)		(289	)		(7	)		53			(361	)		(27	)
Loss before income taxes		(7,990	)		(6,570	)		(19,387	)		(6,004	)		(1,623	)
Income tax benefit (expense)		2,975			535			(70	)		—			—
Net loss		(5,015	)		(6,035	)		(19,457	)		(6,004	)		(1,623	)
Preferred stock dividends and accretion of discount on preferred stock		(2,078	)		(8,345	)		(9,688	)		(4,654	)		(5,322	)
Net loss attributed to common stockholders	$	(7,093	)	$	(14,380	)	$	(29,145	)	$	(10,658	)	$	(6,945	)
Net loss per share attributed to common stockholders—basic and diluted	$	(1.60	)	$	(3.10	)	$	(5.55	)	$	(2.03	)	$	(1.32	)
Weighted average common shares outstanding—basic and diluted		4,448,000			4,633,571			5,252,749			5,251,833			5,256,058

See accompanying notes.

F-5

MEDSOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN MANDATORY REDEEMABLE

CONVERTIBLE STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(In Thousands)

	Mandatory Redeemable Convertible Stock
	Series B Preferred Stock		Series C Preferred Stock		Series D Preferred Stock
Sale of Series B preferred stock, net of costs of $2,128 and discount of $7,500	$	14,771	$	—	$	—
Sale of Series Z preferred stock, net of costs of $312		—		—		—
Stock issued for acquired businesses		—		—		—
Sale and issuance of Series A preferred stock		—		—		—
Sale of common stock		—		—		—
Accretion of discounts on mandatory redeemable convertible preferred stock		1,130		—		—
Accrued dividends on mandatory redeemable convertible preferred stock		349		—		—
Net loss and comprehensive net loss for the period from March 30, 1999 (inception) through July 3, 1999		—		—		—
Balance at July 3, 1999		16,250		—		—
Stock issued for acquired businesses		—		—		—
Accretion of discounts on mandatory redeemable convertible preferred stock		4,522		—		—
Accrued dividends on mandatory redeemable convertible preferred stock		1,521		—		—
Net loss and comprehensive net loss for the year		—		—		—
Balance at July 1, 2000		22,293		—		—
Cumulative effect change due to implementation of SFAS No. 133		—		—		—
Change in fair value of interest rate swaps		—		—		—
Net loss for the year		—		—		—
Comprehensive loss for the year
Sale and issuance of Series C preferred stock, net of costs of $3,061		—		37,239		—
Issuance of Series D preferred stock and options for acquired business		—		—		31,575
Issuance of stock pursuant to option exercises		—		—		374
Accretion of discounts on mandatory redeemable convertible preferred stock		2,379		275		391
Accrued dividends on mandatory redeemable convertible preferred stock		1,617		1,676		1,048
Amortization of unearned compensation		—		—		—
Balance at July 1, 2001		26,289		39,190		33,388
Change in fair value of interest rate swaps		—		—		—
Net loss for the period		—		—		—
Comprehensive loss for the period		—		—		—
Issuance of stock pursuant to option exercises		—		—		48
Sale of Series E preferred stock and common stock purchase warrants		—		—		—
Accretion of discounts on mandatory redeemable convertible preferred stock		118		206		399
Accrued dividends on mandatory redeemable convertible preferred stock		845		1,553		1,049
Amortization of unearned compensation		—		—		—
Balance at December 30, 2001 (Unaudited)	$	27,252	$	40,949	$	34,884

See accompanying notes.

F-6

Stockholders’ Equity (Deficit)
Series A Convertible Preferred Stock		Series Z Convertible Preferred Stock		Series E Preferred Stock		Common Shares	Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Loss			Accumulated Deficit			Unearned Compensation			Total Stockholders’ Equity (Deficit)
$	—	$	—	$	—	—	$	—	$	7,500	$	—		$	—		$	—		$	7,500
	—		1		—	—		—		3,262		—			—			—			3,263
	—		—		—	425		—		14,667		—			—			—			14,667
	—		—		—	—		—		312		—			—			—			312
	—		—		—	4,023		44		1,956		—			—			—			2,000
	—		—		—	—		—		—		—			(1,130	)		—			(1,130	)
	—		—		—	—		—		—		—			(349	)		—			(349	)
	—		—		—	—		—		—		—			(5,015	)		—			(5,015	)
	—		1		—	4,448		44		27,697		—			(6,494	)		—			21,248
	—		—		—	787		8		5,894		—			—			—			5,902
	—		—		—	—		—		—		—			(4,522	)		—			(4,522	)
	—		—		—	—		—		—		—			(1,521	)		—			(1,521	)
	—		—		—	—		—		—		—			(6,035	)		—			(6,035	)
	—		1		—	5,235		52		33,591		—			(18,572	)		—			15,072
	—		—		—	—		—		—		1,097			—			—			1,097
	—		—		—	—		—		—		(2,657	)		—			—			(2,657	)
	—		—		—	—		—		—		—			(19,457	)		—			(19,457	)
																					(22,114	)
	—		—		—	—		—		—		—			—			—			—
	—		—		—	—		—		—		—			—			(286	)		(286	)
	—		—		—	21		—		284		—			—			—			284
	—		—		—	—		—		—		—			(3,045	)		—			(3,045	)
	—		—		—	—		—		—		—			(4,341	)		—			(4,341	)
	—		—		—	—		—		—		—			—			72			72
	—		1		—	5,256		52		33,875		(1,560	)		(45,415	)		(214	)		(13,261	)
	—		—		—	—		—		—		(847	)		—			—			(847	)
	—		—		—	—		—		—		—			(1,623	)		—			(1,623	)
	—		—		—	—		—		—		—			—			—			(2,470	)
	—		—		—	—		1		5		—			—			—			6
	—		—		—	—		—		5,500		—			—			—			5,500
	—		—		—	—		—		—		—			(723	)		—			(723	)
	—		—		—	—		—		—		—			(3,447	)		—			(3,447	)
	—		—		—	—		—		—		—			—			71			71
$	—	$	1	$	—	5,256	$	53	$	39,380	$	(2,407	)	$	(51,208	)	$	(143	)	$	(14,324	)

See accompanying notes.

F-7

MEDSOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

	Period From March 30, 1999 (Inception) Through July 3, 1999			Year Ended						Six Months Ended December 30,
				July 1, 2000			June 30, 2001			2000			2001
										(Unaudited)
Operating activities
Net loss	$	(5,015	)	$	(6,035	)	$	(19,457	)	$	(6,004	)	$	(1,623	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation		868			4,500			6,555			3,177			3,769
Amortization of goodwill and other intangibles		4,135			4,255			5,640			2,432			169
Amortization of deferred financing costs and discount on long-term debt		365			1,295			1,122			482			563
Amortization of unearned compensation		—			—			72			—			71
Restructuring charges		—			—			11,464			—			—
Deferred taxes		(2,975	)		(685	)		—			—			—
Gain on sale of equipment		—			—			(29	)		(18	)		—
Changes in operating assets and liabilities, net of effect of businesses acquired:
Accounts and notes receivable		(776	)		(3,168	)		(4,296	)		1,927			191
Inventories		2,186			(1,915	)		(1,775	)		153			(3,198	)
Prepaid expenses and other current assets		(305	)		65			(836	)		(291	)		(416	)
Interest escrow fund		651			2,500			2,500			1,250			1,250
Accounts payable, accrued compensatoin and benefits, accrued expenses, and other		490			5,493			476			2,244			(4,751	)
Other		132			(15	)		(183	)		(10	)		(49	)
Net cash (used in) provided by operating activities		(244	)		6,290			1,253			5,342			(4,024	)
Investing activities
Acquisition of businesses, net of cash acquired		(91,560	)		(15,458	)		(378	)		(975	)		—
Other additions to plant and equipment, net		(2,184	)		(6,786	)		(11,491	)		(5,134	)		(5,115	)
Proceeds from sale of equipment		—			—			242			146			—
Net cash used in investing activities		(93,744	)		(22,244	)		(11,627	)		(5,963	)		(5,115	)
Financing activities
Proceeds from issuance of long-term debt, net of financing costs, and interest escrow fund		68,646			19,506			105			—			—
Payments of long-term debt		(696	)		(3,150	)		(5,549	)		(5,452	)		(3,387	)
Proceeds from sale of Series C and D preferred stock, net of costs		—			—			37,897			37,138			48
Proceeds from sale of Series A, B, E, and Z preferred stock, common stock and common stock purchase warrants, net of costs		27,846			—			—			—			5,506
Net payments on lines of credit		—			—			(4,000	)		(4,000	)		—
Net cash provided by financing activities		95,796			16,356			28,453			27,686			2,167
Increase (decrease) in cash and cash equivalents		1,808			402			18,079			27,065			(6,972	)
Cash and cash equivalents at beginning of period		—			1,808			2,210			2,210			20,289
Cash and cash equivalents at end of period	$	1,808		$	2,210		$	20,289		$	29,275		$	13,317
Supplemental disclosure of cash flow information
Cash paid for interest	$	2,089		$	9,616		$	9,319		$	5,428		$	4,759
Cash paid for income taxes	$	—		$	179		$	150		$	106		$	—
Preferred and common stock issued for acquisitions	$	14,667		$	5,902		$	31,289		$	31,289		$	—

See accompanying notes.

F-8

MEDSOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    Organization and Description of Business

MedSource Technologies, Inc. (the Company) was formed as a Delaware corporation on April 14, 1998. For the period from April 14, 1998 through March 30, 1999 (inception of operations), the Company had no employees or other operations. On March 30, 1999, the Company acquired seven businesses (see Note 3—Acquisitions).

The Company and its subsidiaries operate in one business segment and provide product development and design services, precision metal and plastic part manufacturing, product assembly services and supply chain management primarily for the medical device industry. The Company’s operations and customer base are located primarily in North America.

2.    Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated.

Unaudited Interim Information

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended December 30, 2001 are not necessarily indicative of the results that may be expected for the year ending June 30, 2002.

Stock Split

In January 2000, the Company’s common stock was split 10-for-1 and all share references to common stock have been adjusted to give effect to the split and the balance sheet and statement of changes in mandatory redeemable preferred stock and stockholders’ equity include adjustments to amounts for the prior period to give effect to the split.

Fiscal Year End

The Company’s fiscal year historically ended on the Saturday closest to June 30. Effective July 1, 2001, the Company’s fiscal year end was changed to June 30.

Cash Equivalents

Cash equivalents include money market mutual funds and other highly liquid investments purchased with maturities of three months or less. The cash equivalents are carried at cost, which approximates market.

Inventories

Inventories are stated at the lower of cost, using the FIFO (first-in, first-out) method, or market.

F-9

MEDSOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Property, Plant, and Equipment

Property, plant, and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Amortization of capital leases and leasehold improvements is provided on a straight-line basis over the lives of the related assets or the life of the lease, whichever is shorter, and is included with depreciation expense.

Goodwill and Other Intangible Assets

Goodwill represents the cost in excess of the fair value of the tangible and identified intangible assets of the businesses acquired and, prior to July 1, 2001, was being amortized on a straight-line basis over 20 years based on the operating histories and market niches of these businesses. The identified intangible assets acquired in connection with the acquisition of businesses prior to July 1, 2001, consist mainly of customer bases, amortized over 20 years; the value of the acquired work forces, amortized over five years; patents, amortized over the life of the patents; and covenants not to compete, amortized over the life of the agreements. Included in amortization for the period ended July 3, 1999 is a $3.1 million charge representing the intangible value, recorded at acquisition, of a customer contract terminated in the period subsequent to the acquisition (see Significant Customers).

Effective July 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets. Under FAS No. 142, goodwill must be tested for impairment annually, or more often if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount, using a two-step approach. Step one is to compare the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test will be performed to measure the amount of impairment loss, if any. Step two compares the implied fair value of reporting unit goodwill with the carrying amount of that goodwill. The implied fair value of goodwill shall be determined in the same manner as the amount of goodwill recognized in a business combination is determined. If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss shall be recognized in an amount equal to that excess. The Company has one operating segment consisting of multiple manufacturing facilities with similar economic characteristics producing goods for a similar set of customers (i.e., the medical device industry). Thus the Company has concluded that it currently has one reporting unit for purposes of the goodwill impairment test. The Company intends to use the fair value of its common stock in combination with, as necessary, the present value of its estimated future cash flows or other market valuation techniques to measure the fair value of the reporting unit. The annual impairment test will be performed at the beginning of the Company’s fourth quarter.

See Note 6—Goodwill and Other Intangible Assets for effects of adoption of Statements of Financial Accounting Standards 141 and 142 in fiscal year 2002.

Impairment of Long-Lived Assets

The Company evaluates long-lived assets, including goodwill and other intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the estimated future cash flows (undiscounted and without interest charges) from the use of an asset are less than the carrying amount, a write-down would be recorded to reduce the related asset to the amount of discounted estimated future cash flows, for assets in use, or to estimated fair value for assets held for sale.

In conjunction with the restructuring charges recorded in fiscal 2001 (see Note 13—Restructuring Charges), the Company recognized impairment to goodwill and other intangibles of $3.6 million and impairment to property, plant, and equipment of $1.9 million.

F-10

MEDSOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Deferred Financing Costs

Costs incurred in connection with arranging the Company’s long-term debt agreements are capitalized and amortized over the life of the related debt issue using the effective interest method. Accumulated amortization was $1.1 million at July 1, 2000, $1.9 million at June 30, 2001, and $2.3 million at December 30, 2001 (unaudited).

Organization and Start-Up Costs

Organization and start-up costs are expensed as incurred.

Deferred Income Taxes

Deferred income taxes are determined using the liability method, which gives consideration to the future tax consequences associated with differences between the financial accounting and tax basis of assets and liabilities. This method also gives immediate effect to changes in income tax laws.

Mandatory Redeemable Securities

Mandatory redeemable preferred stock is recorded at fair value at date of issuance, net of related costs. Fair value of the Series B preferred stock at date of issuance is based on the net proceeds received reduced by the intrinsic value of the contingent additional consideration which may be received pursuant to the Share Transfer Agreement described in Note 10—Mandatory Redeemable Convertible Stock and Stockholders’ Equity. The mandatory redeemable preferred stock is redeemable on the redemption date at its face amount plus accrued dividends as described in Note 10.

The discount to the face amount of the mandatory redeemable preferred stock representing the intrinsic value of the contingent additional consideration related to Series B preferred stock was amortized as an additional preferred return over 21 months, which was management’s estimate of the period before the contingency would be resolved. The additional reduction from the face amount of the mandatory redeemable preferred stock representing issuance costs is being amortized as an additional preferred return over the period from date of issuance until the mandatory redemption date.

Preferred Stock Dividends

The Company accrues dividends on mandatory redeemable preferred stock. Dividends on other series of preferred stock do not accrue until declared by the Board of Directors.

Revenue Recognition

The Company recognizes revenue at the time products are shipped or services are rendered. Product shipments are supported by purchase orders from customers that indicate the price for each product. In the case of 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 fiscal 2001, service revenues were less than 10% of total revenues. Revenues for product shipments and services rendered must also have reasonable assurance of collectibility from the customer. Reserves for returns and allowances are recorded against revenues based on management’s estimates and historical experience.

Shipping and Handling Costs

The Company includes shipping and handling costs in the cost of products sold.

F-11

MEDSOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Stock-Based Compensation

The Company has elected to follow Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, in the primary financial statements and to provide the supplemental disclosures required by Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS No. 123) (see Note 10—Mandatory Redeemable Convertible Stock and Stockholders’ Equity).

Concentration of Credit Risks

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash equivalents and accounts receivable. The Company performs ongoing credit evaluations of its customers, does not generally require collateral or other security, and maintains an allowance for potential credit losses.

Significant Customers

Customers that accounted for more than 10% of consolidated revenues are as follows:

	Period From March 30, 1999 (Inception) Through July 3, 1999		Year Ended
			July 1, 2000		June 30, 2001		Six Months Ended December 30, 2001
							(unaudited)
Customer A	—		14	%	18	%	24	%
Customer B	28	%	16		12		12

At July 1, 2000 and June 30, 2001, receivables from these customers represented 13% and 11%, respectively, of total accounts receivable.

For the period ended July 3, 1999, $3.1 million of revenues from Customer B represent the settlement received from the termination of a contract.

Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash equivalents, accounts receivable, accounts payable, and debt instruments. The carrying amounts of financial instruments other than the debt instruments are representative of their fair values due to their short maturities. The Company’s principal long-term debt agreements bear interest at market rates; thus, management believes their carrying amounts approximate fair value. Management believes the carrying amount of the remaining loans is not materially different from estimated fair value.

Net Loss Per Common Share

Net loss per common share attributed to common stockholders is based on the net loss for the period adjusted for dividend requirements on all preferred stocks and accretion during the period of discounts on mandatory redeemable preferred stock. The resulting net loss attributed to common stockholders is divided by the weighted average number of shares of common stock outstanding during the period to arrive at the basic net loss per share attributed to common stockholders. For all periods presented, the impact of the inclusion of potentially dilutive securities related to the assumed exercise or conversion of options and convertible securities was anti-dilutive.

F-12

MEDSOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Hedging Activities

The Company adopted Financial Accounting Standards Board Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS No. 133), in its fiscal year beginning July 2, 2000. The statement requires the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through earnings. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative’s change in fair value will be immediately recognized in earnings. (See Note 7—Long-Term Debt.)

Reclassification

Certain prior year amounts have been reclassified to conform with the current year presentation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

3.    Acquisitions

On March 30, 1999, the Company completed the following acquisitions:

	Purchase Price						Location of Operations
Company	Cash		Shares of Series A Preferred (p) or Common (c) Stock		Fair Value of Shares
	(In Thousands)				(In Thousands)
Kelco Industries, Inc.	$	49,595	12,000	(p)	$	4,020	Minnesota
W.N. Rushwood, Inc., d/b/a Hayden Precision Industries		11,644	7,270	(p)		2,435	New York
National Wire and Stamping, Inc.		5,600	9,170	(p)		3,072	Colorado
The Microspring Company, Inc.		5,050	425,000	(c)		2,125	Massachusetts
Portlyn Corporation		5,354	3,000	(p)		1,005	New Hampshire
Texcel, Inc.		5,286	6,000	(p)		2,010	Massachusetts
Brimfield Precision, Inc.		6,157	—			—	Massachusetts
	$	88,686			$	14,667

The cash amounts reflected above include payments to the former owners and the payoff of certain debt at acquisition.

The Series A preferred and common stock issued in conjunction with the acquisitions were valued at their estimated fair market value. Costs incurred in connection with the acquisitions made on March 30, 1999 totaled approximately $3.9 million and the Company recorded a deferred tax liability of $3.7 million for the differences in book and tax basis of assets acquired.

F-13

MEDSOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

A summary of the combined purchase price allocation for the acquisitions made on March 30, 1999 is as follows (in thousands):

Fair value of tangible assets acquired, net of liabilities assumed and deferred taxes	$	31,289
Identified intangible assets, net of deferred taxes		37,120
Goodwill		38,896
	$	107,305

During fiscal year ended July 1, 2000, the Company completed the following acquisitions:

Company	Cash		Shares of Common Stock	Fair Value of Shares		Location of Operations
	(In Thousands)			(In Thousands)
Tenax	$	7,700	50,000	$	375	Connecticut
Apex Engineering, Inc.		1,954	236,950		1,777	Massachusetts
Thermat Precision Technology, Inc.		4,045	500,000		3,750	Pennsylvania
	$	13,699			5,902

The cash amounts reflected above include payments to the former owners and the payoff of certain debt at acquisition. Costs incurred with the acquisitions totaled approximately $1.8 million.

The total purchase consideration does not reflect contingent consideration related to earn-out arrangements included in the Apex Engineering, Inc. (Apex) Purchase Agreement. The Apex Purchase Agreement provides for a post-closing adjustment whereby additional contingent consideration would be payable to Apex (as defined in the Apex Purchase Agreement). The Company has determined that there is no additional earn-out consideration to be paid.

A summary of the combined purchase price allocations for the acquisitions in fiscal 2000 is as follows (in thousands):

Fair value of tangible assets acquired, net of liabilities assumed and deferred taxes	$	13,724
Identified intangible assets, net of deferred taxes		1,222
Goodwill		6,484
	$	21,430

During fiscal 2001, the Company finalized its purchase price allocations related to the acquisitions made in 2000. In conjunction with the final allocations, approximately $4.5 million was reclassified from goodwill to identified intangibles.

During fiscal year ended June 30, 2001, the Company completed the acquisition of ACT Medical, Inc., a Massachusetts company with additional facilities in Santa Clara, California and a contract for production and assembly services in Navojoa, Mexico. The acquisition was completed by the issuance of 33,423 shares of 6% Series D Cumulative Convertible Redeemable Preferred Stock, rollover of options for an additional 6,920 shares of Series D preferred stock, and cash payments of $1.0 million to stockholders electing to receive cash instead of stock. The rollover of options represented replacement of outstanding options to purchase the common stock of ACT Medical that had been issued under a plan sponsored by ACT Medical with options to purchase the Series

F-14

MEDSOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

D preferred stock of the Company. The fair value of the options to purchase the Series D preferred stock of the Company of $3.4 million was included in the purchase price, and the intrinsic value related to the unvested options was recorded as unearned compensation. The acquisition was recorded using the purchase method of accounting, and the operating results are included in the Company’s consolidated statements of operations since the date of acquisition (December 30, 2000). The total purchase price was allocated as follows pending any changes as final asset values are determined (in thousands):

Fair value of tangible assets acquired, net of liabilities assumed, and deferred taxes	$	2,014
Identifiable intangible assets, net of deferred taxes		3,648
Goodwill		28,075
	$	33,737

The following unaudited pro forma summary presents the consolidated results of operations as if the acquisition had occurred at the beginning of the fiscal period (in thousands, except per share):

	Year Ended
	July 1, 2000			June 30, 2001
Net revenues	$	116,298		$	141,248
Loss before taxes		(5,395	)		(20,750	)
Net loss		(5,408	)		(20,820	)
Net loss attributed to common stockholders		(16,385	)		(31,825	)
Net loss per share attributed to common stockholders	$	(3.54	)	$	(6.06	)

4.    Inventories

Inventories consist of the following (in thousands):

	July 1, 2000		June 30, 2001		December 30, 2001
					(Unaudited)
Raw materials	$	4,207	$	6,287	$	8,135
Work in progress		3,936		5,051		5,850
Finished goods		2,810		2,012		2,563
Total	$	10,953	$	13,350	$	16,548

The fair value of tangible assets acquired on March 30, 1999 included $1.7 million related to the excess of the fair value of inventories over their historical cost on the acquired companies’ financial statements. This excess fair value was charged to the cost of products sold in the period ended July 3, 1999 when the inventories were sold.

The fair value of tangible assets acquired in the acquisitions during the year ended July 1, 2000 included $0.1 million related to the excess of the fair value of inventories over their historical cost on the acquired company’s financial statements. This excess fair value was charged to the cost of products sold in the year ended July 1, 2000 when the inventories were sold.

The fair value of tangible assets acquired in the acquisition during the current year did not result in any excess of fair value of inventories over their historical cost.

F-15

MEDSOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

5.    Property, Plant, and Equipment

Property, plant, and equipment consists of the following (in thousands):

	Estimated Useful Lives (Years)	July 1, 2000			June 30, 2001			December 30, 2001
								(Unaudited)
Land		$	198		$	198		$	198
Buildings and improvements	1 to 20		1,987			1,987			1,987
Leasehold improvements	2 to 20		2,654			3,173			3,344
Machinery and equipment	3 to 15		30,870			35,530			38,151
Furniture and fixtures	1 to 7		3,211			4,613			4,852
Automobiles	2 to 3		107			86			101
Construction in progress			1,276			5,176			7,247
Total			40,303			50,763			55,880
Less accumulated depreciation and amortization			(5,347	)		(11,890	)		(15,661	)
Net property, plant, and equipment		$	34,956		$	38,873		$	40,219

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 have been 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, 2002 adoption of FAS 142, goodwill is no longer amortized but is instead subject to an annual impairment test. The transitional impairment test conducted in connection with the adoption of FAS 142 resulted in no impairment being required.

F-16

MEDSOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Goodwill and other identifiable intangible assets resulting from acquisitions of businesses and the formation of the Company consist of the following (in thousands):

	July 1, 2000			June 30, 2001			December 30, 2001
							(Unaudited)
Goodwill	$	45,462		$	67,268		$	109,860
Less accumulated amortization		(2,501	)		(5,058	)		(13,047	)
	$	42,961		$	62,210		$	96,813
Other identifiable intangibles:
Customer base	$	37,553		$	39,155		$	—
Acquired workforce		2,747			3,437			—
Patents and intellectual properties		622			4,383			4,383
Covenants not to compete		476			476			476
		41,398			47,451			4,859
Less accumulated amortization		(5,890	)		(8,416	)		(596	)
	$	35,508		$	39,035		$	4,263

The increase in goodwill and decrease in customer base and acquired workforce at December 30, 2001, results from the adjustment to subsume those intangibles into goodwill in accordance with FAS 142.

With the adoption of FAS 142, the Company ceased amortization of goodwill as of July 1, 2001. The following table presents the results of the Company for all periods presented on a comparable basis (in thousands, except per share data):

	Period From March 30, 1999 (Inception) Through July 3, 1999			Fiscal Year Ended						Six Months Ended December 30,
				July 1, 2000			June 30, 2001			2000			2001
										(Unaudited)
Net loss attributed to common stockholders, as reported	$	(7,093	)	$	(14,380	)	$	(29,145	)	$	(10,658	)	$	(6,945	)
Add back goodwill, workforce, and customer base amortization (net of tax)		4,125			4,211			5,268			2,118			—
Adjusted net loss attributed to common stockholders	$	(2,968	)	$	(10,169	)	$	(23,877	)	$	(8,540	)	$	(6,945	)
Basic and diluted net loss per share:
Net loss attributed to common stockholders, as reported	$	(1.60	)	$	(3.10	)	$	(5.55	)	$	(2.03	)	$	(1.32	)
Goodwill, workforce, and customer base amortization (net of tax)		.93			.91			1.00			.40			—
Adjusted net loss attributed to common stockholders	$	(0.67	)	$	(2.19	)	$	(4.55	)	$	(1.63	)	$	(1.32	)

The estimated amortization expense for the intangible assets for each of the five fiscal years subsequent to June 30, 2001 is $0.4 million per year.

F-17

MEDSOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

7.    Long-Term Debt

Long-term debt consists of the following (in thousands):

	July 1, 2000			June 30, 2001			December 30, 2001
							(Unaudited)
A Term Loan	$	22,250		$	19,000		$	17,000
B Term Loan		39,600			39,200			39,000
Senior Subordinated Notes		20,000			20,000			20,000
Acquisition Loans		15,118			13,413			12,327
Revolving Loans		4,000			—			—
Other		701			612			511
		101,669			92,225			88,838
Less:
Unamortized discount on Senior Subordinated Notes		(3,016	)		(2,681	)		(2,482	)
Current portion		(9,545	)		(7,215	)		(8,119	)
	$	89,108		$	82,329		$	78,237

Credit Agreement

The Company entered into a Credit Agreement (Agreement) dated March 30, 1999 with various banks. The Company received $25 million pursuant to an A Term Loan, $40 million pursuant to a B Term Loan, and commitments for $30 million of Acquisition Loans and $25 million of Revolving Loans.

The A Term Loan, Acquisition Loans, and Revolving Loans bear interest at either (1) a base rate (defined as the higher of  ¹/2 of 1% in excess of the Federal Funds Note Rate and 1% in excess of the Adjusted Certificate of Deposit Rate) plus an applicable margin ranging from 1.25% to 2.50% depending on the Company’s adjusted leverage ratio, as defined, or (2) LIBOR plus an applicable margin ranging from 2.25% to 3.50% depending on the Company’s adjusted leverage ratio, as defined. The B Term Loan bears interest at either (1) the base rate (defined above) plus 2.75% or (2) LIBOR plus 3.75%. The choice of the interest rate is at the Company’s election. At June 30, 2001, the interest rates on the A Term and B Term Loans were based on LIBOR and were 7.4375% and 7.6875%, respectively. Interest is payable quarterly.

The A Term Loan requires quarterly principal payments of $1.0 million from September 15, 2001 to March 15, 2002; $1.25 million from June 15, 2002 to March 15, 2004; and $1.5 million from June 15, 2004 to March 15, 2005. The B Term Loan requires quarterly principal repayments of $0.1 million from September 15, 2001 to December 15, 2006 with a final payment of $37.0 million on March 15, 2007. The Acquisition and Revolving Loans have maturity dates of March 15, 2005; however, Acquisition Loans have repayment requirements on a quarterly basis based on a percentage (ranging from 2.50% to 8.00%) of the total outstanding balance that began on June 15, 2000. In addition to these payment requirements, the Company is also required to apply some or all of the cash proceeds from specified types of future transactions to repay borrowings under the Agreement.

The Agreement also requires the Company to pay fees equal to 0.375% to 0.750% (depending on the Company’s adjusted leverage ratio) on the aggregate unutilized commitments.

F-18

MEDSOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The assets of the Company and its subsidiaries are pledged as collateral under the Agreement. In addition, the Agreement prohibits the payment of cash dividends and limits the amount of capital expenditures. The Agreement also requires the Company to be in compliance with various financial covenants. The Company was in compliance with the covenants at June 30, 2001 and believes it will be in compliance with the covenants in the future.

Effective as of July 6, 1999, the Company entered into two interest rate swap transactions with a bank, designed to be interest rate hedges for the A and B Term Loans. The A and B Term Loan hedges are for original notional amounts of $24.5 million and $40 million, respectively, and reflect reductions to mirror the required principal payments on the related loans through March 15, 2001 and then reductions exceeding the required principal payments through their expiration dates of December 15, 2003 and June 15, 2005, respectively. Pursuant to the A and B Term Loan hedges, the Company pays to the bank on a quarterly basis an amount equal to a fixed rate (6.245% for the Term A Loan hedge and 6.395% for the B Term Loan hedge) on the notional amount and receives from the bank an amount equal to the three-month USD-LIBOR-BBA rate on the notional amounts on the same dates. These derivative instruments are considered cash flow hedges and are valued and accounted for pursuant to SFAS No. 133. (See Note 2—Significant Accounting Policies.)

In conjunction with the adoption of SFAS No. 133, the Company recognized the fair value of the interest rate swaps and recorded a cumulative effect adjustment of $1.1 million to other comprehensive income. During the year, the Company recognized the change in the fair value of the interest rate swaps by recording an other comprehensive loss of $2.7 million. An additional other comprehensive loss of $0.8 million (unaudited) was recorded through December 30, 2001 to recognize the change in fair value.

Senior Subordinated Notes

On March 30, 1999, the Company received $20 million in exchange for $20 million face amount of Senior Subordinated Promissory Notes (the Notes) and 65,000 shares of Series Z preferred stock (see Note 10—Mandatory Redeemable Convertible Stock and Stockholders’ Equity). The deemed value of the Series Z preferred stock of $3.6 million was recorded as a discount on the Notes and is being amortized to interest expense using the effective interest method over the life of the Notes. The Notes bear interest on the face amount at 12.5% and are due March 29, 2008. Interest is payable quarterly beginning June 30, 1999, and $7.5 million of the proceeds from the Notes was placed in an escrow fund from which scheduled interest payments through March 31, 2002 will be made.

The Notes have mandatory prepayment and early redemption provisions. Subject to the subordination provisions of the Notes, upon the consummation of an initial public offering, unless the holders of the Notes have waived their rights, the Company is required to use 30% of the net cash proceeds to ratably prepay the Notes at the early redemption price. The Notes must also be prepaid upon a change in control, as defined. The early redemption price is 104% in 2001 and decreases 1% per year until 2005 when it becomes 100%. The Company may prepay the Notes at any time at the applicable early redemption price.

F-19

MEDSOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Maturities of long-term debt outstanding at June 30, 2001, are summarized by fiscal year as follows (in thousands):

2002	$	7,215
2003		8,763
2004		9,961
2005		8,663
2006		423
Thereafter		57,200
	$	92,225

8.    Related-Party Transactions

Closing Fees and Management Fees

In the period ended July 3, 1999, the Company paid fees and expenses of approximately $4.7 million to entities associated with certain of the Company’s directors and stockholders. These payments were for services rendered and reimbursement of expenses incurred in connection with assisting the Company in its organization, establishing its strategy, identifying sources of financing (debt and equity), identifying target acquisitions, and closing the financings and acquisitions.

The Company also has entered into management services agreements (MSAs) with these entities whereby the Company pays fees plus reimbursement of out-of-pocket expenses for management services rendered. Fees incurred for the period ended July 3, 1999 and for the years ended July 1, 2000 and June 30, 2001 totaled $0.4 million, $1.5 million, and $1.7 million, respectively. In addition, pursuant to the MSAs, the Company will pay fees based on a percentage of the aggregate consideration of each future business acquisition, plus reimbursement of out-of-pocket expenses. Such fees and expenses totaled $0.5 million and $0.6 million relating to the acquisitions made in the years ended July 31, 2000 and June 30, 2001, respectively. The MSAs have a seven-year term with annual one-year renewals unless terminated by either party. Under certain conditions, including successful completion of an initial public offering, the Company has a right to eliminate the MSAs.

Real Estate Leases

Certain of the Company’s subsidiaries lease their facilities from related parties. Total rent expense under these leases for the period ended July 3, 1999 and for the years ended July 1, 2000 and June 30, 2001 was approximately $0.3 million, $1.1 million, and $0.7 million, respectively. Future minimum lease commitments at June 30, 2001 in connection with these related-party leases are approximately $0.8 million per year with a total future commitment of $6.7 million.

F-20

MEDSOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

9.    Income Taxes

The income tax benefit (expense) consists of the following (in thousands):

	Period From March 30, 1999 (Inception) Through July 3, 1999		Year Ended
			July 1, 2000			June 30, 2001
Current:
Federal	$	—	$	—		$	—
State		—		(150	)		(70	)
		—		(150	)		(70	)
Deferred:
Federal		2,603		599			—
State		372		86			—
		2,975		685			—
	$	2,975	$	535		$	(70	)

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of deferred tax assets and liabilities are as follows (in thousands):

	July 1, 2000			June 30, 2001
Deferred tax assets:
Organization costs	$	2,337		$	1,798
Nondeductible reserves and current liabilities		621			1,335
Restructuring reserve		—			3,704
Net operating loss carryforwards		4,145			8,708
Valuation reserve		(1,853	)		(6,147	)
Total deferred tax assets		5,250			9,398
Deferred tax liabilities:
Identified intangible assets		(3,275	)		(6,187	)
Property, plant, and equipment		(433	)		(1,530	)
Goodwill		(1,542	)		(1,662	)
Other		—			(19	)
Total deferred tax liabilities		(5,250	)		(9,398	)
Net deferred tax liabilities	$	—		$	—

Deferred tax assets and liabilities are reflected in the balance sheet as follows (in thousands):

	July 1, 2000			June 30, 2001
Net current deferred assets	$	621		$	1,335
Net noncurrent deferred liabilities		(621	)		(1,335	)
Net deferred tax assets/liabilities	$	—		$	—

F-21

MEDSOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company has U.S. net operating loss carryforwards of approximately $21.8 million which expire at different times beginning in 2019 and extending through 2021.

A reconciliation between the income tax benefit computed at the federal statutory rate and the recorded income tax benefit (expense) is as follows (in thousands):

	Period From March 30, 1999 (Inception) Through July 3, 1999			Year Ended
				July 1, 2000			June 30, 2001
Income tax benefit computed at the federal statutory rate	$	2,796		$	2,300		$	6,785
State income taxes, net of federal benefit		399			178			899
Restructuring reserve, portion not deductible for tax purposes		—			—			(882	)
Amortization of goodwill, not deductible for tax purposes		(32	)		(153	)		(401	)
Valuation reserve		—			(1,853	)		(6,462	)
Other		(188	)		63			(9	)
Income tax benefit (expense)	$	2,975		$	535		$	(70	)

10.    Mandatory Redeemable Convertible Stock and Stockholders’ Equity

Mandatory Redeemable Convertible Stock

Series B

On March 30, 1999, the Company sold 300,000 shares of 6% Series B Cumulative Convertible Redeemable Preferred Stock (the Series B preferred stock), $0.01 par value per share, for cash in a private placement. On May 14, 1999, the Company sold an additional 32,728 shares for cash in a private placement.

Cumulative dividends accrue at an annual rate of 6% compounded quarterly. Dividends are payable in cash upon the occurrence of (a) a change in control of the Company, as defined, (b) the sale or disposition of substantially all of the Company’s assets, or (c) the conversion of the Series B preferred into common stock. However, in no event shall the Company be required to pay any dividends if such payment is prohibited under the terms of its senior credit facility.

The Series B preferred stock may be converted to common stock at any time. The initial conversion rate is one share of Series B preferred stock for 10 shares of common stock, subject to anti-dilution provisions. The Series B preferred stock is automatically converted into common stock at the closing of a qualified initial public offering, as defined, at a price that, together with the shares issued to the holders of the Series B preferred stock pursuant to the Share Transfer Agreement described below in the second paragraph under the caption “Stockholder Agreements,” would result in the holders of the Series B preferred stock realizing at least a 30% internal rate of return, as defined.

The holders of the Series B preferred stock are entitled to vote on all matters with the holders of common stock on an as-if-converted basis. In addition, the approval of at least two-thirds of all issued and outstanding Series B preferred stock is required for various matters including the payment of dividends and the purchase or redemption of capital stock.

F-22

MEDSOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

On March 29, 2008, any outstanding shares of Series B preferred stock are subject to mandatory redemption at the greater of their original issue price plus accrued dividends or the amount to which the holders of the Series B preferred stock would have been entitled if the Company were liquidated and the Series B preferred stock had been converted to common stock immediately prior to redemption.

Prior to the occurrence of a change of control, as defined, that occurs prior to October 25, 2001, the Company must offer to purchase all outstanding Series B preferred stock that is issued and outstanding at a purchase price per share equal to the original issue price plus accrued dividends.

See Stockholder Agreements below for additional contingent consideration which may be received by the holders of the Series B preferred stock.

Series C

On October 24, 2000, the Company sold 40,000 shares of 6% Series C Cumulative Convertible Redeemable Preferred Stock (the Series C preferred stock), $0.01 par value per share, for cash in a private placement. On April 18, 2001, the Company sold an additional 300 shares for cash in a private placement. In addition to the shares purchased at a price of $1,000 per share, each purchaser also received an option to purchase an additional .2857 shares at a price of $1,000 per share for each share acquired. The option is exercisable prior to or coincident with the earlier to occur of (i) a qualified public offering (as defined) and (ii) October 24, 2001. The options were not exercised and expired on October 24, 2001.

Cumulative compounding dividends accrue at an annual rate of 6% until October 25, 2001 and 8% thereafter. Dividends are payable in cash, but in no event shall the Company be required to pay any dividends if such payment is prohibited under the terms of its senior credit facility.

The Series C preferred stock may be converted to common stock at any time. Subject to antidilution provisions and other adjustments, each share of Series C preferred stock converts into a number of shares of common stock equal to the liquidation preference per share of $1,000 plus accrued and unpaid dividends divided by the conversion price, which was initially $20.00 per share and was reduced to $15.00 per share in October 2001. The Series C preferred stock is automatically converted into common stock upon the occurrence of a qualified public offering, as defined, at a price that would, subject to certain limitations, guarantee a minimum return on the investment in the Series C preferred stock. If the value of the number of shares of common stock into which each share of Series C preferred stock converts upon completion of a qualified public offering (valued at the price at which shares are offered to the public in such public offering) is less than $1,300, then the holder of each share of Series C preferred stock will upon conversion thereof receive a number of additional shares of common stock so that the aggregate value of the number of shares of common stock received upon conversion of each share of Series C preferred stock is $1,300. However, in no event will the Company be required to adjust the effective conversion price to an amount less than 75% of $15.00. Any additional shares of common stock issued to the holders of the Series C preferred stock in order to satisfy the guaranteed minimum return will be deemed to be a preferred stock dividend in accordance with EITF 00-27 and will be valued at the fair value of the common stock on the date that the investors first committed to purchase the Series C preferred stock.

The holders of the Series C preferred stock are entitled to vote on all matters with the holders of common stock on an as-if-converted basis. In addition, the approval of at least two-thirds of all issued and outstanding shares of the Series C preferred stock is required for various matters including issuance of senior stock, payment of dividends, and the purchase or redemption of capital stock.

Subject to adjustments for stock splits, stock dividends, and similar transactions and events, each share of Series C preferred stock is redeemable after October 20, 2005, at the option of the Company, for a price per share equal to $1,000 plus accrued and unpaid dividends. In addition, the Series C preferred stock shall be redeemed on the earlier of (i) any date on which there is a mandatory redemption of any class of preferred stock and (ii) October 20, 2009.

F-23

MEDSOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Prior to the occurrence of a change of control, as defined, that occurs prior to October 25, 2001, the Company must offer to purchase all outstanding Series C preferred stock that is issued and outstanding at a purchase price per share equal to $1,000 plus accrued dividends.

The Company also gave the agent on the private placement of the Series C preferred stock, a warrant to acquire 525 shares of the Series C preferred stock at a price of $1,000 per share was valued at $116,000. The warrant is exercisable for up to five years from the date of issuance or, if earlier, must be exercised upon completion of an initial public offering or a sale of the Company.

Series D

In conjunction with the acquisition of ACT Medical, Inc. (see Note 3), the Company issued 33,423 shares of 6% Series D Cumulative Convertible Redeemable Preferred Stock (the Series D preferred stock), $0.01 par value per share, and rolled over options for an additional 6,920 shares of Series D preferred stock.

Cumulative dividends accrue at an annual rate of 6% until the first anniversary of the original issue date and 8% thereafter. Dividends are payable in cash only in connection with a redemption of the shares or upon liquidation of the Company. Upon conversion of any shares of Series D preferred stock, all accumulated but unpaid dividends thereon shall be extinguished. However, in no event shall the Company be required to pay any dividends prior to liquidation or upon redemption if such payment is prohibited under the terms of its senior credit facility or any senior preferred stock.

The Series D preferred stock may be converted to common stock at any time. The initial rate is one share of Series D preferred stock for 50 shares of common stock, subject to anti-dilution provisions. The Series D preferred stock is automatically converted into common stock upon the occurrence of an IPO, as defined.

The holders of the Series D preferred stock are entitled to vote on all matters, other than the election of directors, with the holders of common stock on an as-if-converted basis.

Each share of Series D preferred stock is redeemable after the fifth anniversary of the effective time of the merger, at the option of the Company, for a price per share equal to $1,000 plus accrued and unpaid dividends. In addition, the Series D preferred stock shall be redeemed on the earlier of (i) any date on which the then outstanding senior preferred stock is redeemed and (ii) the twentieth anniversary of the effective time of the merger.

Other Preferred and Common Stock

Series A

On March 30, 1999, the Company issued 37,440 shares of Series A Preferred Stock (the Series A preferred stock), $.01 par value per share, in connection with the acquisition of businesses (see Note 3—Acquisitions). In addition, the Company also issued 600 shares of Series A preferred stock to key employees of an acquired company in conjunction with the acquisition. The fair value of these shares totaled approximately $201,000 and was included in the Company’s organization and start-up costs in the period ended July 3, 1999. Subsequent to March 30, 1999, the Company sold an additional 330 shares of Series A preferred stock to key employees for cash at fair value as determined at March 30, 1999.

The Series A preferred stock is entitled to receive cumulative dividends on each share at the annual rate of $60. Except in connection with any redemption of the Series A preferred stock or upon liquidation of the Company, dividends on the Series A preferred stock are not paid in cash. Each share of Series A preferred stock is convertible at the option of the holder into 50 shares of common stock, subject to anti-dilution provisions. Upon conversion, all accumulated unpaid dividends are extinguished.

The Company may, at its option, redeem the Series A preferred stock on a pro rata basis among the holders, at an amount equal to its liquidation preference. The liquidation preference for the Series A preferred stock is $1,000 per share plus accumulated unpaid dividends.

F-24

MED SOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Series Z

On March 30, 1999, the Company sold 65,000 shares of Series Z Convertible Nominal Value Redeemable Preferred Stock (the Series Z preferred stock), $0.01 par value per share, for cash in a private placement (see Note 7—Long-Term Debt). The Series Z preferred stock has no dividend rights and is senior only to the common stock with respect to rights on liquidation. The Series Z preferred stock can be converted at the option of the holder into common stock at any time. The initial conversion rate is one share of Series Z preferred stock for 10 shares of common stock, subject to anti-dilution provisions.

On March 29, 2009, the Company, at its option, may redeem outstanding shares of Series Z preferred stock at its liquidation preference of $0.001 per share.

Common Stock

On April 14, 1998, the Company was incorporated with the sale of 100 shares of common stock at $1 per share. In February 1999, an additional 65 shares were sold to individuals at $1,000 per share. On March 30, 1999, in conjunction with the acquisitions and the commencement of business operations, the stock was split 2,209-for-1 (adjusting the pre-split shares to 363,594 shares) and an additional 38,706 shares were sold for cash to existing stockholders. The amount paid for the common stock was based on fair value. Also on March 30, 1999, 42,500 shares of common stock were issued in connection with the acquisition of a business (see Note 3—Acquisitions). In January 2000, the Company’s common stock was split 10-for-1 and all share references to common stock have been adjusted to give effect to the split and the balance sheet and statement of changes in mandatory redeemable preferred stock and stockholders’ equity include adjustments to amounts for the prior period to give effect to the split. The adjusted post-split outstanding common shares was 4,448,000. Subsequent to the stock split, 786,950 shares of common stock were issued in connection with new acquisitions.

As of June 30, 2001, the Company had 339,971 shares of authorized but undesignated and unissued preferred stock, par value $0.01 per share.

Stockholder Agreements

Agreements executed on March 30, 1999 and amended on October 24, 2000 among all holders of Series B preferred stock, Series C preferred stock and Series Z preferred stock and holders of 90% of the common stock provide for restrictions on the sale or transfer of shares, drag-along and tag-along rights in connection with sales of shares, registration rights, rights of certain stockholders or groups of stockholders to elect or designate members of the Board of Directors, and rights of the principal holders of Series B, Series C and Z preferred stock to sell the Company in the event that a “liquidity event” has not occurred by March 30, 2005. A “liquidity event” is deemed to have occurred if (a) the Company is sold or liquidated, (b) with respect to the principal holders of the Series B and Series Z preferred stock, more than 50% of the Series B and Series Z preferred stock has been converted or transferred by those holders or (c) with respect to the principal holder of the Series C preferred stock, more than 50% of the Series C preferred stock has been converted or transferred by that holder. The agreements terminate upon completion by the Company of an initial public offering.

Also on March 30, 1999, the holders of the Series B preferred stock and certain holders of the common stock entered into a Share Transfer Agreement and Escrow Agreement. Pursuant to these agreements, the holders of common stock placed 1,500,000 shares into escrow. The escrowed shares will be released, either fully or partially, back to the common stockholders or to the holders of the Series B preferred stock based on rates of return to the holders of the Series B preferred stock as of the earliest valuation transaction, as defined.

The fair value of the contingent additional consideration which may be given to the holders of the Series B preferred stock pursuant to the Share Transfer Agreement, based on the intrinsic value of the underlying contingent shares at the inception of the agreement, was reflected as an additional discount on the Series B preferred stock with the offsetting credit to additional paid-in capital.

F-25

MEDSOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Accumulated Unpaid Dividends

Dividends accumulated and unpaid on the Series A, Series B, Series C, and Series D preferred stock through June 30, 2001 are $5.2 million, $3.5 million, $1.7 million, and $1.0 million, respectively. No dividends may be paid on the common stock until accumulated unpaid dividends are paid on the preferred stock. The accumulated and unpaid dividends of the Series B, Series C, and Series D preferred stock are accrued and have been added to the carrying value of the stock with an offsetting charge to accumulated deficit. Dividends are only required to be paid on the Series A preferred stock upon a liquidation or redemption. The Company’s debt agreements prohibit the Company from paying any dividends in cash.

Stock Options

The Company has reserved 4,430,000 shares of its common stock for issuance to directors, officers, employees, and consultants under the 1999 Stock Plan (the Plan). The table below shows the activity in the Plan:

	Options Outstanding		Shares Reserved		Weighted Average Initial Exercise Price
At inception of Plan	—		1,750,000
Granted	945,720		(945,720	)	$	12.00
Balance at July 3, 1999	945,720		804,280
Granted	840,459		(840,459	)		14.57
Canceled	(345,109	)	345,109			12.07
Balance at July 1, 2000	1,441,070		308,930
Reserved	—		1,680,000
Granted	1,555,660		(1,555,660	)		17.13
Exercised	(20,308	)	—			13.99
Canceled	(401,038	)	401,038			14.40
Balance at June 30, 2001	2,575,384		834,308			15.54
Reserved	—		1,000,000
Granted	363,211		(363,211	)		17.38
Exercised	(400	)	—			12.00
Canceled	(188,761	)	188,761			16.17
Balance at December 30, 2001 (Unaudited)	2,749,434		1,659,858		$	15.74

The options outstanding at June 30, 2001 include 542,086 options with an initial exercise price of $12.00 per share, 380,692 options with an initial exercise price of $14.00 per share, 757,126 options with an exercise price of $16.24 per share, 674,980 options with an exercise price of $17.00 per share, and 220,500 options with an exercise price of $20.00 per share. Options granted through June 30, 2001 are exercisable for 10 years from date of grant and vest 25% a year. The initial exercise price of the options applies to the options vesting at the first anniversary date. Options vesting at the second, third, and fourth anniversary dates have exercise prices equal to 110%, 121%, and 133.1%, respectively, of the initial exercise price of the options except for the options granted during the year ended June 30, 2001 and options granted in year ended July 1, 2000 at $16.24 for which the exercise price remains fixed. There are 271,043 options outstanding with an initial exercise price of $12.00 per share and 95,173 options outstanding with an initial exercise price of $14.00 that are fully vested and exercisable at June 30, 2001. The weighted average fair values per share of options to purchase common stock granted in fiscal years 2001 and 2000 were $2.80 and $1.92, respectively.

As permitted under SFAS No. 123, the Company has not recognized compensation expense for the theoretical value of its options at the grant date. In determining the fair value of options granted, the Company used the minimum value option-pricing model with the following weighted average assumptions: risk–free

F-26

MEDSOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

interest rate of 5.5%; dividend yield of zero; and an expected option life of four years. Had compensation cost for the Company’s stock option plan been based on the fair value of options at the grant date amortized over the vesting period, the Company’s pro forma net loss attributed to common stockholders and net loss per share attributed to common stockholders would have been:

	2000			2001
Pro forma net loss attributed to common stockholders	$	(14,384	)	$	(29,627	)
Pro forma net loss per share attributed to common stockholders	$	(3.10	)	$	(5.64	)

Reserved Shares of Common Stock

The Company has reserved the following shares of common stock as of June 30, 2001:

Conversion of Series A preferred	1,918,500
Conversion of Series B preferred	3,327,280
Conversion of Series C preferred (including options and warrants)	2,617,000
Conversion of Series D preferred (including options)	2,017,142
Conversion of Series Z preferred	650,000
1999 Stock Plan	3,409,692
Total	13,939,614

11.    Employee Benefits

401(k) Plans

Certain of the Company’s subsidiaries offer their qualified employees the opportunity to participate in defined contribution retirement plans qualifying under the provisions of Section 401(k) of the Internal Revenue Code. During the year ended July 1, 2000, the Company implemented a company-wide plan and, during the current year, all plans were consolidated into it.

Expenses recorded by the Company with respect to 401(k) plans for the period ended July 3, 1999 were less than $0.1 million and for the years ended July 1, 2000 and June 30, 2001 were $0.9 million and $0.6 million, respectively.

12.    Leases

The Company has operating leases relating principally to its buildings. Total rent expense for the period ended July 3, 1999 and for the years ended July 1, 2000 and June 30, 2001 (including amounts to related parties—see Note 8—Related-Party Transactions) was approximately $0.4 million, $2.0 million and $3.5 million, respectively. Future minimum lease commitments at June 30, 2001, for leases with initial or remaining terms of more than one year, including amounts due to related parties, are summarized by fiscal year as follows (in thousands):

2002	$	3,682
2003		3,455
2004		2,372
2005		1,468
2006		1,321
Thereafter		3,754
	$	16,052

F-27

MEDSOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

13.    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):

	Initial Accrual		Incurred through December 30, 2001		Balance at December 30, 2001
Impairment of goodwill and other intangibles	$	3.6	$	3.6	$	—
Impairment of property, plant and equipment		1.9		1.9		—
Employee termination benefits		3.8		0.2		3.6
Other direct costs		2.2		—		2.2
	$	11.5	$	5.7	$	5.8

Certain of the Company’s manufacturing facilities operate with excess capacity. Based on the evaluation of the unique and common characteristics of the various facilities, management determined that it could achieve overall cost savings by closing three of the facilities, thus improving capacity utilization and efficiency of the remaining facilities. Criteria in this evaluation included: current capacity utilization; uniqueness of manufacturing capabilities; current operating costs; difficulty and cost associated with relocation and revalidation of key processes and equipment; and customer supply requirements. Facilities at Danbury, Connecticut, Pittsfield, Massachusetts, and East Longmeadow, Massachusetts will be closed or sold with production absorbed into existing facilities in Pennsylvania, Minnesota, New Hampshire, and Mexico. The Company expects that one of the facilities will be closed or sold by July 1, 2002, and the other two facilities will be completely exited not later than February 2003.

Because management expects that it will not retain all of the customers served by these three facilities, a portion of the customer base intangible asset ($0.6 million) was written off as well as the entire remaining acquired workforce intangible for each facility ($0.5 million). In addition, because management believes the residual goodwill recorded at each acquisition was significantly related to the local operations, it concluded that goodwill was impaired by the closure of the facilities and wrote off the related goodwill ($2.6 million). Other recorded charges related to the restructuring include employee termination benefits expected to be paid based on the Company’s announced termination benefits policy ($2.6 million), costs of plant and equipment not expected to be recovered ($1.9 million), and other exit costs ($2.2 million), including costs related to lease terminations, facilities restoration, equipment dismantlement and disposal, legal costs, and other costs. Costs related to realignment of leadership positions in the corporate support organization also were accrued at June 30, 2001 ($1.2 million).

Employee termination benefits consist of payments to employees based on the Company’s severance policy of two weeks pay for each year of credited service with a minimum of six weeks payment and outplacement consultation services. The $2.6 million accrual for employee termination benefits was based on approximately 225 individuals estimated to be affected, actual credited service, and actual compensation. The $1.2 million accrual for corporate management severance benefits included salary continuation, outplacement consultation services and legal cost for seven individuals employed by the Company’s corporate headquarters operations whose positions will be eliminated as a result of the Company-wide restructuring. The charge for other direct costs which aggregated $2.2 million was comprised of estimated costs for (1) lease terminations, real estate taxes and property insurance of $0.6 million, (2) plant shut down costs and restoration of facilities to pre-lease conditions of $0.6 million, (3) dismantlement and disposal of obsolete equipment of $0.3 million, (4) legal costs of $0.3 million and (5) other related shut down costs of $0.4 million.

F-28

The expected payment of all accrued costs as of December 31, 2001 is as follows:

	Quarters Ending
	March 31, 2002		June 31, 2002		September 29, 2002		December 29, 2002		March 30, 2003		Total
	(In Millions)
Employee termination benefits	$	0.5	$	0.8	$	1.0	$	0.6	$	0.7	$	3.6
Other direct cost		0.2		0.6		0.5		0.6		0.3		2.2
Total	$	0.7	$	1.4	$	1.5	$	1.2	$	1.0	$	5.8

The facilities restructuring project is expected to be fully completed by not later than February 2003. Remaining key project dates include:

· Commence transfer of processes and equipment (start mid-March 2002); and

· Commence product and process validations (start mid-March 2002).

The Company anticipates material improvements in operating results upon completion of the facilities restructuring. Benefits will be realized through elimination of costs for excess manufacturing capacity, productivity generated by increased volume in existing facilities, improved supply chain efficiencies through larger order and fewer suppliers, reduced overhead and support costs, and lower average assembly costs. Management anticipates that savings will start to be realized on a limited basis during the fiscal quarter ending September 29, 2002 with fully realized savings of approximately $3 million to $4 million (unaudited) on an annual basis upon completion of the project.

14.    Subsequent Events (Unaudited)

On January 4, 2002, the Company acquired HV Technologies, Inc. (HV Technologies), a company that manufactures polyimide and composite micro-tubing used in interventional and minimally invasive catheters, delivery systems and instruments. The Company paid cash of $5.6 million and issued 4,000 shares of its 6% Series F preferred stock, par value $.01 per share (Series F preferred stock), and 824,822 shares of its Common Stock. The Series F preferred shares were valued at $3.6 million, a discount from the face value because of a first year below market dividend rate, and the common shares were valued at $14.0 million or $17 per share. The total purchase price was approximately $23.3 million, including repayment of existing debt and transaction costs.

To finance the acquisition, the Company issued 6,000 shares of its 6% Series E preferred stock (the Series E preferred stock) and warrants to purchase an aggregate of 200,000 shares of its Common Stock (the total number of shares issuable upon exercise of the warrants will increase on each of the first five anniversaries of the date of issuance of the Series E Preferred Stock by an aggregate of 45,000 shares per year for each year that the Series E preferred stock remains outstanding and, as a result, if the Series E Preferred Stock remains outstanding for five or more years, the warrants will be exercisable for an aggregate of up to 425,000 shares).

The Series E preferred stock and the Series F preferred stock accrue dividends at $60 per year during the first year from issuance, payable at the discretion of the Board of Directors, and at the rate of $160 per year on a retroactive basis after the first anniversary of issuance. The Company may, at any time, redeem the Series E preferred stock and the Series F preferred stock at a price equal to $1,000 per share plus accrued and unpaid dividends.

At the same time that the Company issued the Series E preferred stock, the Company obtained the consent of the holders of its $20.0 million of Senior Subordinated Promissory Notes (Notes) to complete the acquisition of HV Technologies and changed some of the covenants to which the Company is subject under an agreement between the Company and those holders, affiliates. At the same time, the Company agreed to increase by $1.0 million the amount payable by the Company upon redemption of the Notes.

F-29

Upon consummation of the Company’s initial public offering (IPO), (i) all shares of the Series A, Series B, Series C, Series D and Series Z preferred stock will convert into the Company’s common stock; (ii) the Company intends to enter into a new $85.0 million senior credit facility and repay all of its obligations under the existing Credit Agreement and under the Notes; and (iii) the MSAs will be terminated. The Company expects to make a one-time payment of an aggregate of $2.8 million to terminate the MSAs. The Company intends to redeem the Series E preferred stock prior to December 31, 2002 and will redeem the Series F preferred stock within 45 days after consummation of the IPO.

F-30

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors

ACT Medical, Inc.

We have audited the accompanying balance sheet of ACT Medical, Inc. (the Company) as of December 29, 2000, and the related statements of operations, stockholders’ equity, and cash flows for the period January 1, 2000 to December 29, 2000. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ACT Medical, Inc. as of December 29, 2000, and the results of its operations and its cash flows for the period January 1, 2000 to December 29, 2000 in conformity with accounting principles generally accepted in the United States of America.

/s/    Grant Thornton LLP

Boston, Massachusetts

February 9, 2001

F-31

ACT MEDICAL, INC.

BALANCE SHEET

December 29, 2000

Assets
Current assets:
Cash and cash equivalents	$	1,305,841
Accounts receivable, net of allowance for doubtful accounts of $294,774		3,009,324
Inventory		622,497
Prepaid expenses		200,063
Prepaid taxes		320,500
Deferred tax asset		345,904
Total current assets		5,804,129
Fixed assets, at cost:
Machinery and equipment		1,776,040
Office equipment		837,999
		2,614,039
Less accumulated depreciation		1,530,956
Net fixed assets		1,083,083
Other assets:
Goodwill, net of accumulated amortization of $192,733		1,541,868
Investment		129,430
Total other assets		1,671,298
Total assets	$	8,558,510
Liabilities and stockholders’ equity
Current liabilities:
Redeemable common stock, no par value; 300,000 shares issued and outstanding	$	2,160,000
Accounts payable		664,833
Accrued payroll and related expenses		1,173,410
Accrued profit sharing		204,924
Accrued expenses		126,027
Deferred income		1,661,300
Other current liabilities		25,886
Total current liabilities		6,016,380
Long-term liabilities		97,073
Stockholders’ equity:
Common stock, no par value; 6,000,000 shares authorized; 3,404,000 shares issued		746,178
Retained earnings		1,702,985
		2,449,163
Less cost of treasury stock, 15,625 shares		4,106
Total stockholders’ equity		2,445,057
Total liabilities and stockholders’ equity	$	8,558,510

The accompanying notes are an integral part of the financial statements.

F-32

ACT MEDICAL, INC.

STATEMENT OF OPERATIONS

For the Period January 1, 2000 to December 29, 2000

Net sales	$	24,944,933
Cost of goods sold		19,272,720
Gross profit		5,672,213
Operating expenses:
Research and development		463,218
Selling, general, and administrative		5,501,789
		5,965,007
Gain on sale of development stage product		500,000
Income from operations		207,206
Other income (expense):
Interest income		127,051
Interest expense		(1,252,920	)
		(1,125,869	)
Loss before income taxes		(918,663	)
Income taxes		91,200
Net loss	$	(1,009,863	)

The accompanying notes are an integral part of the financial statements.

F-33

ACT MEDICAL, INC.

STATEMENT OF STOCKHOLDERS’ EQUITY

For the Period January 1, 2000 to December 29, 2000

	Common Stock			Retained Earnings			Treasury Stock			Total
	Shares	Amount
Balance at December 31, 1999	3,368,750	$	667,578	$	2,712,848		$	(4,106	)	$	3,376,320
Exercise of stock options	35,250		78,600		—			—			78,600
Net loss	—		—		(1,009,863	)		—			(1,009,863	)
Balance at December 29, 2000	3,404,000	$	746,178	$	1,702,985		$	(4,106	)	$	2,445,057

The accompanying notes are an integral part of the financial statements.

F-34

ACT MEDICAL, INC.

STATEMENT OF CASH FLOWS

For the Period January 1, 2000 to December 29, 2000

Cash flows from operating activities
Net loss	$	(1,009,863	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation		359,613
Amortization		115,640
Non-cash interest cost associated with accretion of redeemable common stock		1,092,400
Deferred taxes		(168,904	)
Gain on sale of development stage product		(500,000	)
Changes in assets and liabilities, excluding effects of acquisition:
(Increase) decrease in assets:
Accounts receivable		(563,355	)
Inventory		487,009
Prepaid expenses		(51,723	)
Prepaid taxes		(320,500	)
Other		(6,471	)
Increase (decrease) in liabilities:
Accounts payable		(358,909	)
Accrued payroll and related expenses		280,796
Accrued profit sharing		(67,117	)
Accrued expenses		(271,725	)
Accrued taxes		(11,500	)
Deferred income		1,033,644
Net cash provided by operating activities		39,035
Cash flows from investing activities
Purchase of fixed assets		(646,144	)
Proceeds from sale of development stage product		500,000
Net cash used in investing activities		(146,144	)
Cash flows from financing activities
Exercise of stock options		78,600
Payments on long-term debt		(714,200	)
Payments on demand notes due to stockholders		(1,529,000	)
Net cash used in financing activities		(2,164,600	)
Net decrease in cash and cash equivalents		(2,271,709	)
Cash and cash equivalents at beginning of year		3,577,550
Cash and cash equivalents at end of year	$	1,305,841
Supplemental Information
Cash paid for interest	$	181,693
Cash paid for income taxes	$	569,079

The accompanying notes are an integral part of the financial statements.

F-35

ACT MEDICAL, INC.

NOTES TO FINANCIAL STATEMENTS

December 29, 2000

Note A—Summary of Significant Accounting Policies

ACT Medical, Inc. (the Company) is a Massachusetts corporation engaged in contract design and manufacturing of medical devices. The Company conducts business with customers throughout the United States. For the period January 1, 2000 to December 29, 2000, approximately 58% and 42% of the Company’s net sales were generated from manufacturing and engineering activities, respectively.

At the close of business on December 29, 2000, the Company merged with MedSource Technologies, Newton, Inc. (MedSource), in which MedSource acquired all of the outstanding common shares of the Company. These financial statements include all activity through the close of business on December 29, 2000 prior to the consummation of this transaction.

A summary of significant accounting policies consistently applied in the presentation of the accompanying financial statements follows:

Financial Statement Presentation

The financial statements of the Company have been prepared on the accrual basis of accounting.

In 1999, the Company acquired 100% of the outstanding capital stock of Danforth Biomedical, Inc. (“Danforth”), located in Santa Clara, California. In March 2000 this subsidiary was officially merged into the Company. All intercompany transactions have been eliminated.

Revenue Recognition

The Company recognizes revenue from product sales at the time of shipment. Engineering contracts are based on time and materials and, as such, revenue is recognized as costs are incurred. Deferred income represents customer prepayments on engineering contracts.

Allowances for Doubtful Accounts

A summary of the activity in the allowance for doubtful accounts for the period January 1, 2000 to December 29, 2000 is as follows:

Balance at beginning of year	$	229,252
Provision		300,000
Charge-offs		(234,478	)
Balance at end of year	$	294,774

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of accounts receivable, which is somewhat mitigated due to the Company’s diversity of customers. However, approximately 38% of the Company’s sales in 2000 were made to one major customer. Accounts receivable from this customer amounted to approximately $1,058,000 as of December 29, 2000. The Company

F-36

ACT MEDICAL, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

establishes an allowance for doubtful accounts based on factors surrounding the credit risk of specific customers, historical trends and other information.

Cash and Cash Equivalents

The Company considers all short-term investments with a maturity at the date of purchase of three months or less to be cash equivalents. Included in cash and cash equivalents are money market accounts totaling approximately $1,263,000 at December 29, 2000.

Inventory

Inventory is valued at the lower of cost or market on the first-in, first-out (FIFO) method.

Fixed Assets

Fixed assets are stated at cost. Expenditures for maintenance, repairs, and renewals are charged to expense as incurred. Depreciation expense is computed under straight line and accelerated methods to allocate the cost over its estimated useful life. The estimated useful lives of fixed assets are three to seven years.

Goodwill

The Company has classified as goodwill the cost in excess of fair value of the net assets of a company acquired in 1999 in a purchase transaction. Goodwill is being amortized on a straight-line basis over fifteen years. Amortization charged to operations amounted to $115,640 in 2000. On an annual basis, the Company reviews the recoverability of goodwill by evaluating certain factors such as the occurrence of a significant adverse event or change in the environment in which the business operates or the expected future cash flows.

Investment

The Company owns a 10% non-voting interest in Seedling Enterprise, LLC (Seedling). The Company has recorded this investment in Seedling on a cost basis. A shareholder of Seedling is also an officer of the Company. In exchange for the investment the Company is providing certain office space of its facilities along with additional office related services. The investment and liability to provide services were recorded at the present value of the fair value of lease space and services to be provided. The liability is relieved as the above described services are utilized.

Gain on Sale of Development Stage Product

In April 2000, the Company sold their development stage product, Flex Needle, to one of their customers for cash in the amount of $500,000.

Income Taxes

Deferred tax assets and liabilities are determined based on the differences between the financial statement and tax basis of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse. Deferred taxes results from changes in deferred tax assets and liabilities.

Stock-Based Compensation

The Company has elected to follow Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25), and related interpretations in accounting for its employee stock options. Under APB 25, compensation expense only occurs if options are granted to employees at prices lower than the fair market value of the company’s stock. The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (Statement No. 123).

F-37

ACT MEDICAL, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

Fair Value of Financial Instruments

As of December 29, 2000, the carrying amounts for accounts receivable and accounts payable approximate their fair value due to the short-term maturity of these instruments. As of December 29, 2000, the carrying amount of redeemable common stock approximates its fair value as it equals the maximum redemption price as stated in the Stock Restriction and Put Agreement. (see Note I).

Use of Estimates

The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Note B—Inventory

Inventory consists of the following at December 29, 2000:

Raw materials	$	476,751
Work-in-process		103,900
Finished goods		41,846
	$	622,497

Note C—Income Taxes

The components of income tax expense are as follows at December 29, 2000:

Current:
Federal	$	237,446
State		22,658
Total current expense		260,104
Deferred:
Federal		(133,074	)
State		(35,830	)
Total deferred expense (benefit)		(168,904	)
Total income tax expense	$	91,200

Temporary differences between the financial statement carrying amounts and tax basis of assets and liabilities that give rise to the net deferred tax asset are as follows at December 29, 2000:

Deferred tax assets:
Inventory	$	76,730
Allowance for doubtful accounts		118,064
Recall adjustments		200,500
Total deferred tax asset		395,294
Deferred tax liabilities:
Fixed assets		49,390
Total deferred tax liability		49,390
Net deferred tax asset	$	345,904

F-38

ACT MEDICAL, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

Tax at federal statutory rate	$	(312,345	)
State taxes		(9,816	)
Interest cost associated with accretion of redeemable common stock		371,416
Non-deductible goodwill amortization		37,367
Non-deductible meals and entertainment		4,578
Tax at effective rate	$	91,200

Note D—Line of Credit

The Company had available a revolving line of credit with a private banking institution allowing for borrowings up to $1,000,000 at the bank’s prime rate. The Company had no outstanding balance under this arrangement at December 29, 2000.

Note E—Long-Term Debt

In conjunction with a business acquisition in 1999, the Company entered into a loan agreement with a private banking institution. The loan bore interest at LIBOR plus 2.5% with quarterly principal payments of $28,600 and final payment of $228,000 due March 31, 2004. This debt was paid off during the current period.

Note F—Demand Notes Due to Stockholders

Three officers/stockholders of the Company loaned the Company $1,529,000. These notes, were due on demand and bore interest 6.5% per annum. These notes were paid off during the current period.

Note G—Commitments and Contingencies

Lease Commitments

The Company conducts its operations in leased facilities in Newton, Massachusetts and Santa Clara, California. These leases are classified as operating leases and expire in 2005, with certain renewal options at expiration.

Future minimum lease payments are as follows:

Year Ending
2001	$	925,500
2002		938,000
2003		952,000
2004		968,000
2005		129,000
	$	3,912,500

Rent expense was approximately $880,000 for the period January 1, 2000 to December 29, 2000.

F-39

ACT MEDICAL, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

Contingencies

In February, 2001 the Company was notified by its major customer of a recall relating to a product manufactured by the Company. The Company recorded the known effects of the recall as of December 29, 2000. A pre-tax summary of the impact of this event is as follows:

Net reduction in sales	$	500,000
Inventory write-off		225,000
Reduction in income (loss) from operations	$	725,000

During the period January 1, 2000 to December 29, 2000, the Company recorded sales of approximately $1,000,000 for the product that was recalled in February of 2001. In negotiations between the Company and this customer, it was agreed that the customer would reimburse the Company roughly for its cost of the product, which was $500,000. By the time this was negotiated, the customer had remitted to ACT the entire $1,000,000 relating to these sales; therefore, it was agreed that the remaining $500,000 be retained by ACT as a deposit for future purchases. This $500,000 deposit is recorded in deferred income.

The Company believes there is a reasonable possibility that other claims could be made in connection with this matter. As a result of the uncertainty related to these other potential claims, an estimate cannot be made as to the amount of possible loss.

Note H—Retirement Plan

The Company maintains a qualified profit sharing and 401(k) plan (the Plan) which covers substantially all full-time employees of the Company. Employees of the Company are eligible to participate in the Plan upon attaining age 21. The Plan allows participants to contribute between 2% and 15% of their compensation. Participant contributions vest immediately. The Company contributes an amount equal to 25% of the participants’ contribution up to a maximum of 1.5% of their compensation. The Company’s 2000 contributions to the Plan were approximately $105,000.

Company contributions to the profit sharing portion of the Plan are discretionary and are determined by the Board of Directors of the Company. In no event will the Company’s contribution exceed Internal Revenue Code limitations. The Company’s 2000 contributions to the plan were approximately $231,000.

Note I—Redeemable Common Stock

In connection with the 1999 acquisition of Danforth, the Company issued 400,000 shares of its common stock to shareholders of Danforth and entered into a Stock Restriction and Put Agreement (the “Agreement’’). Of the shares issued, a maximum of 300,000 shares may be redeemed by the holders at certain dates and prices. Pursuant to this agreement, 300,000 shares may be redeemed by the holders of the stock upon a change in control of the Company. As a result, these shares may be redeemed on the date of the merger of the Company with Medsource as described in Note L.

The Company has recorded the value of these shares as redeemable common stock. The value of these shares at December 31, 1999 was $1,067,600. During 2000, the Company recorded accretion of $1,092,400, which is included in interest expense, to adjust the value to be equal to the change in control redemption value as stipulated in the agreement.

Note J—Equity Transactions

At the June, 2000 shareholder’s meeting, it was voted that the Company would split its shares 2.5:1. This vote increased the authorized shares from 2,000,000 to 5,000,000 and the outstanding shares from 1,347,500 to

F-40

ACT MEDICAL, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

3,368,750 as of June 22, 2000. The stated par value of each share was adjusted proportionally to reflect this stock split. All share and per share amounts in these financial statements, including options, have been given retroactive effect to reflect the stock split as if it had occurred at the beginning of the period.

At the same June, 2000 shareholder’s meeting, it was voted that the Company would increase the number of authorized shares from 5,000,000 to 6,000,000.

All shares of common stock of the Company held by employees and consultants have certain restrictions. The Company has the right to repurchase the shares from the employee or consultant in the event employment or the consulting arrangement is terminated.

Note K—Stock Option Plan

The Company has two incentive stock option plans which permit the issuance of options to selected employees at a price determined by the Board of Directors to be not less than fair market value at the date of grant. The Company has authorized a total of 1,125,000 options to be granted under the plans. The options become exercisable, subject to continued employment, over a four year period and have a term of ten years.

The Company applies APB 25 and related interpretations in accounting for its stock option plan. Had compensation costs for the Company’s stock option plan been determined based on the fair value of such awards at the grant date, consistent with the methods of Statement No. 123, the Company’s total net loss would have been as follows:

	2000
Net loss:
As reported	$	(1,009,863	)
Pro forma		(1,101,131	)
Weighted-average fair value of options granted during the year	$	1.52

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model assuming a risk-free interest rate of 5.85%–6.39%, an expected life of ten years and a volatility and dividend rate of 0%. For purposes of pro forma disclosure, the estimated fair value of the options are amortized to expense over the options’ vesting period.

The following summarizes the transactions of the Company’s stock option plan:

	Shares Under Option		Exercise Price
Outstanding at December 31, 1999	637,000			$1.60-$20.00
Granted in 2000	335,625		$	2.40-$  3.20
Forfeited in 2000	(46,875	)	$	1.60-$  2.40
Exercised in 2000	(35,250	)	$	1.60-$  2.40
Outstanding at December 29, 2000	890,500			$1.60-$20.00

F-41

ACT MEDICAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following summarizes information about stock options exercisable and outstanding:

Exercise Price	Number of Shares Exercisable at December 29, 2000	Number of Shares Outstanding at December 29, 2000	Weighted Average Remaining Contractual Life
$1.60	84,000	231,875	8.1
$2.40	74,800	330,750	9.3
$3.20	3,075	15,375	9.7
$4.00	25,000	62,500	7.7
$8.00	25,000	62,500	7.7
$12.00	25,000	62,500	7.7
$16.00	25,000	62,500	7.7
$20.00	25,000	62,500	7.7
	286,875	890,500

Note L—Subsequent Event

After the close of business on December 29, 2000, pursuant to a merger agreement, all of the company’s outstanding shares of common stock and redeemable common stock were acquired by MedSource in exchange for 33,423 shares of MedSource Series D 6% Cumulative Preferred Stock, par value $.01 per share (preferred stock) and cash payments of approximately $1.0 million to shareholders electing to receive cash instead of stock. Pursuant to the Merger Agreement, an escrow account containing 12,675 of the shares indicated above was created for the purpose of applying, if necessary, amounts relating to indemnified claims, as defined. The escrow account will exist for two years. Dividend payments are made upon action of the Board. Upon the occurrence of a qualified initial public offering, each outstanding share of Preferred Stock shall be automatically converted into a number of shares of common stock as determined by the Merger Agreement.

In addition, at the date of merger certain outstanding options to purchase the Company’s common stock, whether vested or unvested, were deemed to constitute an option to acquire, on substantially the same terms and conditions as were applicable under the Company’s 1998 Omnibus Stock Plan, shares of MedSource preferred stock. Certain other options that had an exercise price above the per share deal price were forfeited and replaced with options for MedSource common stock.

F-42

REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholders and Board of Directors

Kelco Industries, Inc.

We have audited the accompanying balance sheet of Kelco Industries, Inc. as of March 30, 1999, and the related statements of income, changes in stockholders’ equity, and cash flows for the period from May 1, 1998 through March 30, 1999. These financial statements are the responsibility of the company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Kelco Industries, Inc. as of March 30, 1999, and the results of their operations and their cash flows for the period from May 1, 1998 through March 30, 1999, in conformity with generally accepted accounting principles.

As discussed in Note 8 to the financial statements, at March 30, 1999, the company changed its method of accounting for inventory overruns and supplies to more appropriately match costs and expenses.

/s/    Bertram, Vallez, Kaplan & Talbot, Ltd.

Brooklyn Park, Minnesota

August 31, 1999

F-43

KELCO INDUSTRIES, INC.

BALANCE SHEET

March 30, 1999

Assets
Current assets:
Cash (Note 1)	$	3,918,464
Marketable securities (Notes 1 and 3)		2,865,000
Accounts receivable (less allowance for doubtful accounts of $61,172) (Notes 1 and 3)		1,709,298
Sales tax refund receivable		266,129
Inventory (Notes 1, 3, and 8)
Raw materials		1,615,690
Work-in-process		1,313,935
Finished goods		240,000
Prepaid expenses		27,983
Other current assets		12,826
Total current assets		11,969,325
Property and equipment (Notes 1 and 3)		13,006,783
Less accumulated depreciation		7,880,288
		5,126,495
Other assets:
Tax deposit (Note 1)		1,416,210
Split dollar life insurance receivable		450,181
		1,866,391
Total assets	$	18,962,211
Liabilities and Stockholders’ equity
Current liabilities:
Accounts payable	$	622,020
Accrued liabilities:
Profit sharing contribution (Note 4)		1,140,267
Real estate taxes		24,018
Wages and vacation		437,067
Bonus		514,503
Commissions		7,516
Other current liabilities		1,764
Total current liabilities		2,747,155
Stockholders’ equity:
Class A—voting common stock, $.01 par value:
Authorized—100,000 shares; Issued and outstanding—4,476 shares		45
Class B—nonvoting common stock, $.01 par value:
Authorized—900,000 shares; Issued and outstanding—101,994 shares		1,020
Capital paid in excess of par value		399,895
Retained earnings		15,814,096
		16,215,056
Total liabilities and stockholders’ equity	$	18,962,211

The accompanying notes are an integral part of these statements.

F-44

KELCO INDUSTRIES, INC.

STATEMENT OF INCOME

For the Period From May 1, 1998 through March 30, 1999

Sales (Note 6)	$	22,877,031
Cost of sales		12,923,250
Gross margin		9,953,781
Selling, general, and administrative expenses		2,899,461
Income from operations		7,054,320
Other income (expense):
Interest income		183,697
Interest expense		(165	)
Rent income		5,557
		189,089
Net income before cumulative effect of accounting change		7,243,409
Cumulative effect of accounting change in inventories (Note 8)		431,078
Net income	$	7,674,487

The accompanying notes are an integral part of these statements.

F-45

KELCO INDUSTRIES, INC.

STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Period From May 1, 1998 through March 30, 1999

	Class A Common Stock			Class B Common Stock			Additional Paid-In Capital		Retained Earnings			Total Stockholders’ Equity
	Shares Issued and Outstanding	Amount		Shares Issued and Outstanding	Amount
Balance at April 30, 1998	4,476	$	45	101,994	$	1,020	$	399,895	$	10,827,882		$	11,228,842
Distributions	—		—	—		—		—		(2,688,273	)		(2,688,273	)
Net income for the period from May 1, 1998 through March 30, 1999	—		—	—		—		—		7,674,487			7,674,487
Balance at March 30, 1999	4,476	$	45	101,994	$	1,020	$	399,895	$	15,814,096		$	16,215,056

The accompanying notes are an integral part of these statements.

F-46

KELCO INDUSTRIES, INC.

STATEMENT OF CASH FLOWS

For the Period From May 1, 1998

through March 30, 1999

Operating activities
Net income	$	7,674,487
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		1,149,050
Loss on sale of property and equipment		7,995
Changes in operating assets and liabilities that increase or (decrease) cash:
Accounts receivable		84,677
Sales tax refund receivable		(116,511	)
Inventory		(837,306	)
Prepaid expenses		77,757
Other current assets		(4,364	)
Accounts payable		183,777
Accrued liabilities		307,779
Net cash provided by operating activities		8,527,341
Investing activities
Fiscal year required payment		(73,185	)
Purchase of marketable securities		(550,000	)
Payments for split dollar life insurance		(87,292	)
Proceeds from sale of equipment		7,400
Purchase of property and equipment		(2,350,140	)
Net cash used in investing activities		(3,053,217	)
Financing activities
Distributions paid		(2,688,273	)
Net cash used in financing activities		(2,688,273	)
Net increase in cash		2,785,851
Cash at beginning of period		1,132,613
Cash at end of period	$	3,918,464

The accompanying notes are an integral part of these statements.

F-47

KELCO INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS

March 30, 1999

1.    Summary of Significant Accounting Policies

Nature of Business

Kelco Industries, Inc. (the Company) is a manufacturer of precision metal parts sold to customers primarily in the Minneapolis/St. Paul area. The Company also has sales throughout the United States and Europe. The Company extends unsecured credit to its customers.

On March 30, 1999, selected assets of the Company were sold to MedSource Technologies, Inc. (MedSource). MedSource acquired the trade receivables, inventories, prepaid expenses, other current assets and the property and equipment and assumed all current liabilities of the Company as well as the Company name. These financial statements have not been adjusted to reflect changes resulting from the sale of the above assets and liabilities. Subsequent to the sale, the Company changed its name to Oclek, Inc. and was liquidated.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. In addition, they affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates and assumptions.

Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.

Cash Concentration

The Company maintains cash balances at two financial institutions located in Minneapolis. Accounts are insured by the Federal Deposit Insurance Corporation up to $100,000. At March 30, 1999, the Company’s uninsured cash balance (before outstanding items) was $4,016,511.

Marketable Securities

The Company considers its investments in marketable securities to be “trading securities”. Therefore, marketable securities are recorded at fair market value, and unrealized gains and losses are currently recognized.

Inventory

Inventory is valued at the lower of cost (first-in, first-out method) or market. Work-in-process inventory includes production costs. Finished goods represents production overruns that are used in future orders and are carried at an amount that approximates cost (See Note 8).

Property and Equipment

Property and equipment is recorded at cost and depreciated on the straight-line and declining-balance methods over the estimated useful lives of the assets.

F-48

KELCO INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

Income Taxes

The Company, with the consent of its stockholders, has elected under the Internal Revenue Code to be an S Corporation. In lieu of corporate income taxes, the stockholders of an S corporation are taxed on their proportionate share of the company’s taxable income. Therefore, no provision or liability for income taxes has been included in these financial statements. The Company has deposited a required payment with the Internal Revenue Service to maintain their fiscal year of April 30th.

Advertising

Advertising costs are charged to operations when incurred. Total advertising expense was $52,863 for the period from May 1, 1998 through March 30, 1999.

2.    Property and Equipment

Property and equipment is comprised of the following as of March 30, 1999:

	Cost		Accumulated Depreciation		Book Value
Machinery and equipment	$	11,009,391	$	7,336,335	$	3,673,056
Vehicles		209,690		68,585		141,105
Furniture and fixtures		514,152		348,734		165,418
Leasehold improvements		1,212,389		107,764		1,104,625
Land improvements		61,161		18,870		42,291
	$	13,006,783	$	7,880,288	$	5,126,495

3.    Available Credit Facility

The Company has available credit with Norwest Bank, National Association, on a $1,000,000 line of credit (secured by accounts receivable, inventory, property and equipment and general intangibles and is personally guaranteed by the majority stockholder) with interest payable monthly at the bank’s base rate of interest minus 0.25%. The base rate of interest at March 30, 1999 was 7.5%. As part of the credit facility, the Company is required to maintain a ratio of total liabilities to tangible net worth of less than 1.0 to 1.0 as well as achieve a positive net income each fiscal year. The Company is in compliance with these covenants at March 30, 1999. There were no borrowings on the credit facility at March 30, 1999. The credit facility was terminated at March 30, 1999.

4.    Profit Sharing Plan

The Company maintains a non-contributory profit sharing plan for all employees who are not covered by a collective bargaining agreement and who provided a year of service (1,000 hours). The plan allows the Company to contribute up to fifteen percent of the participants annual compensation, which includes bonuses, overtime and commissions, if any, subject to Internal Revenue Service limitations. Contributions are determined annually by the board of directors, and are currently funded. The contributions to the plan for the period from May 1, 1998 to March 30, 1999 was $1,140,267.

F-49

KELCO INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

5.    Related-Party Transactions and Building Lease Agreements

The Company leased its office and production space on an informal month-to-month basis at $30,089 per month plus real estate taxes, from Paul Kelly, the 88.3% stockholder of Kelco Industries, Inc. Rent expense for the period from May 1, 1998 to March 30, 1999 was $429,109.

The Company leased additional office space on an informal month-to-month basis at $1,763 per month plus real estate taxes from a partnership owned by the stockholders of Kelco Industries, Inc. Rent expense for the period from May 1, 1998 to March 30, 1999 was $32,842.

Commencing with the sale of selected assets to MedSource on March 30, 1999, a formal lease for all office and production space was negotiated. The leases will terminate on February 28, 2009 with three options to extend the leases for five year intervals. The leases call for, among other items, combined monthly base rent payments as follows:

Years 1–3	$	32,589
Years 4–6	$	36,200
Years 7–10	$	40,244

6.    Major Customers

The Company had one major customer providing approximately 47% of the Company’s revenue for the period from May 1, 1998 to March 30, 1999.

At March 30, 1999, that customer comprised $568,965 of the accounts receivable balance.

7.    Lease Commitments

The Company is leasing various vehicles under operating-type leases. The agreements call for, among other items, future minimum lease payments as follows for the periods ending March 30,

2000	$	69,378
2001		47,799
2002		12,229
	$	129,406

8.    Cumulative Effect of a Change in Accounting Principle

To more appropriately match costs and expenses, the Company changed its method of accounting for production overruns and supplies used in the machining process. Previously, production overruns were charged to cost of sales as incurred and supplies were expensed when purchased. Under the new method, supplies will be recorded as inventory and charged to operations when used. Production overruns will be carried at cost until sold or otherwise used. The cumulative effect of this accounting change for production supplies and overruns at March 30, 1999 was to increase net income by $431,078.

F-50

To the Board of Directors and Stockholders of

W. N. Rushwood, Inc., d.b.a.

Hayden Precision Industries

(A Subchapter S Corporation)

Orchard Park, New York

We have audited the accompanying balance sheets of W. N. Rushwood, Inc., d.b.a. Hayden Precision Industries as of December 31, 1998 and March 30, 1999, and the related statements of income and retained earnings, and cash flow for the year ended December 31, 1998 and for the three-month period ended March 30, 1999. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of W. N. Rushwood, Inc., d.b.a. Hayden Precision Industries at December 31, 1998 and March 30, 1999 (prior to sale of assets and liabilities), and the results of its operations and its cash flows for the year ended December 31, 1998 and for the three-month period ended March 30, 1999, in conformity with general accepted accounting principles.

/s/    James F. Yochum

West Seneca, New York

June 30, 1999

F-51

W. N. RUSHWOOD, INC., DBA

HAYDEN PRECISION INDUSTRIES

Balance Sheets

	December 31, 1998		March 30 , 1999
Assets
Current assets:
Cash	$	86,061	$	165,219
Accounts receivable		857,372		776,432
Inventory		1,926,050		1,854,929
Total current assets		2,869,483		2,796,580
Property and equipment, less accumulated depreciation		4,522,287		5,071,119
Other assets—deposits and prepayments		285,414		6,978
	$	7,677,184	$	7,874,677
Liabilities
Current liabilities:
Trade accounts payable	$	368,663	$	450,657
Due on equipment purchases		149,520		—
Accrued payroll, bonuses, and taxes		248,260		257,197
Accrued shareholder distribution—taxes		300,000		—
Accrued franchise tax payable		11,062		—
Short-term debt—fleet line of credit		500,000		1,000,000
Current maturities of long-term debt		629,297		—
Total current liabilities		2,206,802		1,707,854
Long-term debt, less current maturities:
Bank		2,174,220		2,744,476
Shareholder		1,000,000		1,000,000
Total long-term debt		3,174,220		3,744,476
Total liabilities		5,381,022		5,452,330
Stockholders’ equity:
Capital stock, no par—shares authorized 200; issued and outstanding 100 in 1998 and 1999		50,000		50,000
Retained earnings		2,246,162		2,372,347
Total stockholder’s equity		2,296,162		2,422,347
	$	7,677,184	$	7,874,677

See accompanying notes and accountant’s report.

F-52

W. N. RUSHWOOD, INC., DBA

HAYDEN PRECISION INDUSTRIES

Statements of Income and Retained Earnings

	Year Ended December 31, 1998			Three-Month Period Ended March 30, 1999
Sales	$	9,777,414		$	2,226,920
Cost of sales		6,681,514			1,721,383
Gross profit		3,095,900			505,537
General and administrative expenses		1,072,023			194,599
Income from operations		2,023,877			310,938
Other income (expenses)—net, including interest expense of $106,497		(241,018	)		(99,753	)
Net income		1,782,859			211,185
Distribution of Sub-S earnings		(528,000	)		(85,000	)
Retained earnings—beginning		991,303			2,246,162
Retained earnings—ending	$	2,246,162		$	2,372,347

See accompanying notes and accountant’s report.

F-53

W. N. RUSHWOOD, INC., DBA

HAYDEN PRECISION INDUSTRIES

Statements of Cash Flows

	Year Ended December 31, 1998			Three-Month Period Ended March 30, 1999
Operating activities
Net income	$	1,782,859		$	211,185
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		794,491			213,684
Changes in assets and liabilities:
Accounts receivable		(156,162	)		80,940
Inventory		(1,233,265	)		71,121
Prepaid expenses		—			(6,978	)
Trade accounts payable		174,972			81,994
Accrued expenses		115,095			(2,125	)
Net cash provided by operating activities		1,477,990			649,821
Investing activities
Deposits and prepayments		(285,414	)		—
Capital expenditures		(3,168,314	)		(626,622	)
Net cash used in investing activities		(3,453,728	)		(626,622	)
Financing activities
Net borrowings—short term (equip and LOC)		509,520			500,000
Net borrowings—long term		1,610,854			(59,041	)
Distribution of Sub-S earnings		(228,000	)		(385,000	)
Net cash provided by financing activities		1,892,374			55,959
(Decrease) increase in cash		(83,364	)		79,158
Cash—beginning of year		169,425			86,061
Cash—end of year	$	86,061		$	165,219

See accompanying notes and accountant’s report.

F-54

W. N. RUSHWOOD, INC., DBA

HAYDEN PRECISION INDUSTRIES

NOTES TO FINANCIAL STATEMENTS

March 30, 1999

Note 1—Summary of Significant Accounting Policies

Nature of Business

Hayden Precision Industries (the Company) manufactures precision parts for the medical and aerospace industries.

Inventory

Inventory is valued at the lower of cost or market. Cost is determined by including in inventory the estimated labor and overhead absorbed by each job.

Property, Equipment, and Depreciation

Property and equipment are stated at cost. Depreciation is computed over the estimated useful lives of the assets.

Taxes on Income

The absence of a provision for income taxes is due to the election of the corporation and consent by its stockholders to include the taxable income or loss of the corporation in the stockholder’s individual tax return. As a result, no federal income tax is imposed on the corporation. State income taxes are provided for as required by state law.

Note 2—Inventory

Inventory consists of the following:

	December 31, 1998		March 30, 1999
Raw materials	$	934,050	$	666,313
Work in progress		688,568		604,885
Finished goods		303,432		583,731
	$	1,926,050	$	1,854,929

F-55

W. N. RUSHWOOD, INC., DBA

HAYDEN PRECISION INDUSTRIES

NOTES TO FINANCIAL STATEMENTS—(Continued)

Note 3—Property and Equipment

Major classes of property and equipment consist of the following:

	December 31, 1998			March 30, 1999
Machinery, equipment, and tools	$	7,790,993		$	8,509,961
Computer system		478,523			514,160
Furniture and fixtures		23,177			31,191
Leasehold improvements		28,200			28,200
		8,320,893			9,083,512
Less accumulated depreciation		(3,798,606	)		(4,012,393	)
Net property and equipment	$	4,522,287		$	5,071,119

Note 4—Long-Term Debt

Long-term debt consists of the following:

	December 31, 1998			March 30, 1999
Fleet Bank
Term loan payable—bank maturing $7,691.67 monthly through May 1, 2000 plus interest at 9.42%	$	130,767		$	107,692
Term loan payable—bank maturing $11,416.67 monthly through May 1, 2001 plus interest at .75% above prime or LIBOR + 2.75%		331,083			296,833
Term loan payable—bank maturing $8,333.33 monthly through May 1, 2002 plus interest at .75% above prime or LIBOR + 2.75%		341,667			316,667
Equipment line of credit. This loan will be converted to a term loan on 4/1/99		2,000,000			2,000,000
Shareholder Loans
Note dated December 15, 1996 payable to Nancy Heywood. Monthly interest is payable at 7% until August 2000. Principal and interest (7%) payments of $6,233.20 begin September 15, 2000 with the note maturing in August 2010		536,842			536,842
Note dated December 15, 1996 payable to William H. Heywood. Monthly interest is payable at 7% until August 2000. Principal and interest (7%) payments of $5,377.66 begin September 15, 2000 with the note maturing in August 2010		463,158			463,158
Accrued interest on above		—			23,284
		3,803,517			3,744,476
Less current maturities		(629,297	)		—
Total long-term debt	$	3,174,220		$	3,744,476

The loan obligations to banks were secured by the Company equipment, accounts receivable, and inventory. William H. and Nancy Heywood (51% owners of the Company) and William B. Heywood (27% owners of the Company) had also signed for the loans. All loans were satisfied in April 1999.

F-56

W. N. RUSHWOOD, INC., DBA

HAYDEN PRECISION INDUSTRIES

NOTES TO FINANCIAL STATEMENTS—(Continued)

Note 5—Leases

The Company leases the land and building from William and Nancy Heywood who own 51% of the capital stock. The 1998 lease called for monthly payments of $16,500 through October 1998 and $35,000 thereafter.

The Company leases a building on 3886 California Road, Orchard Park from Windom Development Company. The 1998 and 1999 leases call for monthly payments of $2,885.

Note 6—Major Customers

For the year ended December 31, 1998, three customers generated sales in excess of 10% of the Company’s sales. Sales to these three customers totaled $7,528,600 or 77% of sales of total revenue.

Note 7—Distributions of Sub S Earnings to Shareholders

During 1998, the Company distributed Sub S earnings of $228,000 and accrued a distribution of $300,000 to be paid in 1999. During 1999, the Company distributed Sub S earnings of $385,000. This included distribution of $300,000 to be paid in 1999.

Note 8—Sale of Company Assets and Liabilities

On March 30, 1999, the Company assets were sold and all obligations of the Company were satisfied.

F-57

REPORT OF INDEPENDENT AUDITORS

Board of Directors

MedSource Technologies, Inc.

We have audited the accompanying balance sheets of National Wire & Stamping, Inc. as of December 31, 1998 and March 30, 1999 and the related statements of operations, changes in stockholders’ equity and cash flows for the year ended December 31, 1998 and the three-month period ended March 30, 1999. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of National Wire & Stamping, Inc. at December 31, 1998 and March 30, 1999, and the results of its operations and its cash flows for the year ended December 31, 1998 and the three-month period ended March 30, 1999, in conformity with accounting principles generally accepted in the United States.

/s/    Ernst & Young LLP

Minneapolis, Minnesota

April 14, 2000

F-58

NATIONAL WIRE & STAMPING, INC.

BALANCE SHEETS

	December 31, 1998		March 30, 1999
Assets
Current assets:
Cash	$	319,662	$	236,575
Marketable securities		599,964		—
Accounts receivable		966,776		620,244
Due from stockholder		2,194		165,463
Inventories		555,585		697,699
Prepaid expenses and other current assets		31,748		25,857
Income taxes recoverable		115,452		349,722
Current deferred tax assets		57,057		60,235
Total current assets		2,648,438		2,155,795
Property and equipment, net		998,818		818,092
Other assets:
Cash surrender value—life insurance		446,886		268,617
Deferred tax assets		253,193		—
Miscellaneous		25,375		7,918
Total other assets		725,454		276,535
Total assets	$	4,372,710	$	3,250,422
Liabilities and stockholders’ equity
Current liabilities:
Trade accounts payable	$	371,242	$	330,728
Current maturities of long-term debt		10,377		—
Accrued compensation		167,878		220,667
Other accrued expenses		68,549		35,460
Total current liabilities		618,046		586,855
Long-term debt, less current maturities		106,844		—
Deferred compensation		890,709		—
Total liabilities		1,615,599		586,855
Stockholders’ equity:
Common stock, $0.86 par value:
Authorized shares—200,000; Issued and outstanding shares—64,250		55,480		55,480
Paid-in capital		8,770		8,770
Retained earnings		2,650,622		2,599,317
Accumulated other comprehensive income		42,239		—
Total stockholders’ equity		2,757,111		2,663,567
Total liabilities and stockholders’ equity	$	4,372,710	$	3,250,422

See accompanying notes.

F-59

NATIONAL WIRE & STAMPING, INC.

STATEMENTS OF OPERATIONS

	Year Ended December 31, 1998			Three Months Ended March 30, 1999
Net sales	$	8,618,755		$	1,636,420
Cost of sales		5,000,713			967,648
Gross profit		3,618,042			668,772
Operating expenses:
Selling, general and administrative		2,917,944			770,214
Research and development		139,105			30,179
		3,057,049			800,393
Other operating income		105,566			47,258
Operating income (loss)		666,559			(84,363	)
Other income (expense):
Investment income		37,472			81,713
Interest expense		(17,165	)		(3,562	)
Income (loss) before taxes		686,866			(6,212	)
Income taxes		264,325			45,093
Net income (loss)	$	422,541		$	(51,305	)

See accompanying notes.

F-60

NATIONAL WIRE & STAMPING, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

	Common Stock			Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Totals
	Shares	Amount
Balance at December 27, 1997	64,250	$	55,480	$	8,770	$	2,228,081		$	(1,974	)	$	2,290,357
Unrealized gain on marketable securities available for sale, net of tax	—		—		—		—			44,213			44,213
Net income for year	—		—		—		422,541			—			422,541
Balance at December 31, 1998	64,250		55,480		8,770		2,650,622			42,239			2,757,111
Unrealized loss on marketable securities available for sale, net of tax	—		—		—		—			(42,239	)		(42,239	)
Net loss for period	—		—		—		(51,305	)		—			(51,305	)
Balance at March 30, 1999	64,250	$	55,480	$	8,770	$	2,599,317		$	—		$	2,663,567

See accompanying notes.

F-61

NATIONAL WIRE & STAMPING, INC.

STATEMENTS OF CASH FLOWS

	Year Ended December 31, 1998			Three Months Ended March 30, 1999
Operating activities
Net income (loss)	$	422,541		$	(51,305	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation		260,334			65,493
Gain on sale of property and equipment		(94,807	)		(46,038	)
Deferred income taxes		(24,573	)		277,021
Changes in operating assets and liabilities:
Accounts receivable		153,103			346,532
Due from stockholder		—			(163,269	)
Inventories		118,792			(142,114	)
Prepaid expenses and other current assets		(19,698	)		5,891
Other assets		20,989			(7,543	)
Accounts payable		173,553			(40,514	)
Accrued income taxes		(193,517	)		(234,270	)
Accrued compensation		(154,229	)		52,789
Other accrued expenses		(28,754	)		(33,089	)
Deferred compensation		108,868			(890,709	)
Net cash provided by (used in) operating activities		742,602			(861,125	)
Investing activities
(Increase) decrease in marketable securities, net		(150,487	)		530,719
Purchases of property and equipment		(421,977	)		(91,160	)
(Increase) decrease in cash surrender value—life insurance		(85,907	)		178,269
Proceeds from sale of property and equipment		177,150			277,431
Net cash (used in) provided by investing activities		(481,221	)		895,259
Financing activities
Principal payments on long-term debt		(9,505	)		(117,221	)
Net cash used in financing activities		(9,505	)		(117,221	)
Net increase (decrease) in cash		251,876			(83,087	)
Cash at beginning of period		67,786			319,662
Cash at end of period	$	319,662		$	236,575
Supplemental disclosures:
Interest paid	$	28,688		$	3,562
Income taxes paid	$	482,415		$	—

Noncash investing activity:

In accordance with FAS 115, the investment in marketable securities has been adjusted to fair market value, net of taxes, with an offset to accumulated other comprehensive income in the amounts of $44,213 and $(42,239), respectively, for the periods noted above.

See accompanying notes.

F-62

NATIONAL WIRE & STAMPING, INC.

NOTES TO FINANCIAL STATEMENTS

March 30, 1999

1.    Nature of Operations

National Wire & Stamping, Inc. (the Company) was organized as a Colorado corporation and is principally engaged in the manufacturing of wire products, precision metal forming, surgical instruments, gaskets and assembly production for customers throughout the United States. The Company grants credit to customers throughout the nation.

2.    Summary of Significant Accounting Policies

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all short-term debt securities purchased with a maturity of three months or less to be cash equivalents.

Fiscal Year

For 1998, the Company’s fiscal year ended on December 31 and was a period of 53 weeks.

Inventories

Inventories, consisting of material, labor and overhead, are valued at the lower of cost, determined by the first-in, first-out method or market.

Property and Equipment

Property and equipment are stated at cost. Company policy provides for capitalization of all major expenditures for improvement and for current charges to income for repair and maintenance. Depreciation and amortization are provided over the following estimated lives:

Building	31.5 years
Leasehold improvements	5 to 31.5 years
Machinery and equipment	7 years
Motor vehicles	5 years
Furniture and fixtures	5 to 7 years

Depreciation and amortization are provided on straight-line and accelerated methods for financial statements and tax purposes.

Income Taxes

Income tax expense is based on pre-tax financial accounting income and includes deferred taxes for the effects of temporary differences between financial and tax accounting. The temporary difference is principally the result of accruing for the present value of deferred compensation arrangements and vacation.

Research and Development

Research and development costs are expensed as incurred.

F-63

NATIONAL WIRE & STAMPING, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

Advertising

The Company expenses non-direct response advertising as costs are incurred. The Company incurred $98,925 for the year ended December 31, 1998 and $54,496 for the three-month period ended March 30, 1999.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Revenue Recognition

Revenue from sales of products are recorded upon shipment.

3.    Sale to MedSource Technologies, Inc.

At the close of business on March 30, 1999, the stockholders of the Company sold all of their shares to MedSource Technologies, Inc. Prior to the sale, the Company sold its ownership interest in land and building to one of its stockholders, sold an automobile to the same stockholder, had the same stockholder assume (or pay off) any debt associated with the land and building and automobile, liquidated its marketable securities, cashed in certain life insurance policies and settled any deferred compensation obligations. The net balance due from the one stockholder who had acquired the land and building and automobile was collected in conjunction with payments from MedSource Technologies, Inc. to acquire the Company’s stock.

4.    Concentrations of Credit Risk

Concentrations of credit risk with respect to trade receivables are limited due to the wide variety of customers and markets into which the Company’s products are sold. As a result, at March 30, 1999, the Company does not consider itself to have any significant concentrations of credit risk.

The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents.

F-64

NATIONAL WIRE & STAMPING, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

5.    Marketable Securities

Marketable equity securities have been categorized as available for sale and, as a result, are stated at fair value based on quoted market prices. Unrealized holding gains and losses, net of taxes, are included as a component of stockholders’ equity until realized. Realized gains and losses are computed as the difference between amortized cost and selling price. All marketable securities were liquidated in conjunction with the sale of the Company (see Note 3), and the proceeds were used to pay deferred compensation. Investment income includes a loss of $11,660 on sale of investments for the year ended December 31, 1998 and a gain of $81,713 on the sale of investment for the three-month period ended March 30, 1999. The tables below show information on the marketable securities as of December 31, 1998:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 1998
Available for sale:
Common stocks	$	250,301	$	74,189	$	—		$	324,490
Mutual fund		29,990		—		(11,946	)		18,044
Colorado Municipal Bonds		250,428		7,002		—			257,430
Total	$	530,719	$	81,191	$	(11,946	)	$	599,964

6.    Inventories

Inventories consist of the following:

	December 31, 1998		March 30, 1999
Raw materials	$	127,856	$	115,171
Work in process		123,558		193,652
Finished goods		304,171		388,876
	$	555,585	$	697,699

7.    Property and Equipment

Property and equipment consist of the following:

	December 31, 1998			March 30, 1999
Land	$	12,275		$	—
Building		265,440			—
Machinery and equipment		2,473,829			2,495,743
Office furniture		317,386			318,955
Autos		64,685			47,628
Leasehold improvements		206,090			258,938
		3,339,705			3,121,264
Accumulated depreciation		(2,340,887	)		(2,303,172	)
	$	998,818		$	818,092

F-65

NATIONAL WIRE & STAMPING, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

8.    Long-Term Debt

Balances were as follows:

	December 31, 1998			March 30, 1999
Note payable to bank collateralized by a vehicle. Monthly payments of $778, including interest at 8%	$	21,101		$	—
11.5% mortgage note payable in monthly installments of $1,113.75 including principal and interest, collateralized by land and building		96,120			—
		117,221			—
Less current maturities		(10,377	)		—
	$	106,844		$	—

All debt was paid in full in conjunction with the transactions related to the sale of the Company to MedSource Technologies, Inc. (see Note 3).

9.    Line of Credit

At March 30, 1999, the Company has a revolving line of credit from a bank in the amount of $600,000. The arrangement provides for advances on the line to the extent of 80% of accounts receivable plus 50% of raw materials and finished goods and 30% of work in process. The loan carries an interest rate at prime. There are no amounts outstanding on the line at March 30, 1999. The loan covenants require that the Company maintain a minimum net worth of $1,350,000.

10.    Deferred Compensation Plan

During 1991, the Company implemented a deferred compensation plan for its officers and selected key employees. The plan provided for deferred bonuses based on the attainment of certain gross revenues. The plan provided for making annual payments over a ten-year period which began in 1995. The plan also provided for payments upon death or retirement. The principal cost of such plan was accrued over the period of active employment from the contract date. The expense charged to operations for such obligations amounted to $288,308 for the year ended December 31, 1998 and $191,346 for the three-month period ended March 30, 1999. Included in this plan, the Company provided a benefit consisting of annual payments of $15,000 beginning July 1, 1992 and scheduled to continue through 2017 for a past key employee. All deferred compensation obligations were settled as of March 30, 1999.

11.    Retirement Plans

The Company’s non-contributory profit sharing plan covers substantially all employees of the Company. Contributions are made at the discretion of the Board of Directors. No contribution was made for the year ended December 31, 1998 or for the three-month period ended March 30, 1999.

The Company implemented a 401(k) plan effective September 1, 1991. The plan provides that employees may make contributions to the plan up to a maximum of 20% of gross wages. The Company will make matching contributions to a maximum of 5% gross pay. Contributions were $35,510 for the year ended December 31, 1998 and $10,229 for the three-month period ended March 30, 1999.

F-66

NATIONAL WIRE & STAMPING, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

12.    Leased Properties

The Company leases land and building from an entity owned by the President and former principal shareholder of the Company. The Company entered into a 14-year lease on March 30, 1999. The lease provides for the payment of taxes, insurance and maintenance by the Company. Rent charged to operations was $104,340 for the year ended December 31, 1998 and $38,993 for the three-month period ended March 30, 1999.

Future minimum payments, by year and in the aggregate, under the noncancelable operating leases with initial or remaining terms of one year or more, consisted of the following at March 30, 1999:

	Operating Leases
1999-2013	$	180,000 per year

13.    Income Taxes

The provision for income taxes consists of the following:

	Year Ended December 31, 1998			Three Months Ended March 30, 1999
Current:
Federal income tax (benefit)	$	263,918		$	(228,945	)
State income tax (benefit)		24,980			(2,983	)
		288,898			(231,928	)
Deferred expense (benefit)		(24,573	)		277,021
	$	264,325		$	45,093

The types of temporary differences between the tax bases of assets and liabilities and their financial reporting amounts that give rise to the deferred tax asset and their approximate tax effect are as follows:

	December 31, 1998			March 30, 1999
Future taxable income (deductions):
Increase in marketable securities	$	27,006		$	—
Depreciation		3,274			3,414
Accrued vacation pay		(57,057	)		(56,691	)
Deferred compensation payable		(278,927	)		—
Capital losses on sale of investments		(4,546	)		—
Other		—			(6,958	)
Net deferred tax asset	$	(310,250	)	$	(60,235	)

14.    Major Customers

The largest customer in the year ended December 31, 1998 accounted for 30% of sales, and its next two largest accounted for 15% and 13% of sales, respectively. The largest customer in the three months ended March 30, 1999 accounted for 31% of sales, and the next largest accounted for 11%.

F-67

REPORT OF INDEPENDENT AUDITORS

Board of Directors

MedSource Technologies, Inc.

We have audited the accompanying balance sheet of The MicroSpring Company, Inc., as of March 30, 1999 and the related statements of operations, stockholders’ equity and cash flows for the three-month period then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The MicroSpring Company, Inc. at March 30, 1999, and the results of its operations and its cash flows for the three-month period then ended, in conformity with accounting principles generally accepted in the United States.

/s/    Ernst & Young LLP

Minneapolis, Minnesota

October 27, 1999

F-68

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of

The MicroSpring Company, Inc.:

In our opinion, the accompanying balance sheet and the related statements of operations, stockholders’ equity and cash flows present fairly, in all material respects, the financial position of The MicroSpring Company, Inc. (the “Company”) at December 31, 1998, and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with generally accepted auditing standards, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above.

As discussed in Note 13, effective March 30, 1999, substantially all of the net assets of the Company were sold to MedSource Technologies, Inc.

/s/    PricewaterhouseCoopers LLP

Boston, Massachusetts

April 2, 1999

F-69

THE MICROSPRING COMPANY, INC.

BALANCE SHEETS

	December 31, 1998			March 30, 1999
Assets
Current assets:
Cash and cash equivalents	$	137,533		$	298,680
Accounts receivable, trade (net of allowance for bad debts of $20,400 in 1998 and 1999)		494,082			404,116
Inventories		898,038			1,024,339
Receivable from stockholders		126,785			201,850
Current portion of notes receivable from stockholders		2,814			—
Prepaid expenses and other current assets		51,735			55,870
Total current assets		1,710,987			1,984,855
Property and equipment, net		1,985,022			1,909,935
Notes receivable from stockholders, long-term		288,331			—
Total assets	$	3,984,340		$	3,894,790
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	180,686		$	305,758
Accrued compensation		148,159			211,928
Accrued liabilities		141,669			77,449
Accrued state taxes payable		99,893			63,000
Deferred revenue		112,500			160,606
Total current liabilities		682,907			818,741
Deferred revenue		61,651			—
Convertible notes payable to stockholders		250,000			—
Stockholders’ equity:
Common stock, par value $.01 per share, 9,000,000 shares authorized, 6,677,661 issued and 6,656,221 outstanding at December 31, 1998, 8,341,342 issued and 8,319,902 outstanding at March 30, 1999		66,777			83,413
Paid-in capital		904,048			1,750,734
Retained earnings		2,164,309			1,242,116
Treasury stock, at par, 21,440 shares		(214	)		(214	)
Unearned compensation		(145,138	)		—
Total stockholders’ equity		2,989,782			3,076,049
Total liabilities and stockholders’ equity	$	3,984,340		$	3,894,790

See accompanying notes.

F-70

THE MICROSPRING COMPANY, INC.

STATEMENTS OF OPERATIONS

	Year Ended December 31, 1998			Three Months Ended March 30, 1999
Net sales	$	10,176,175		$	1,791,597
Cost of sales		7,280,290			1,397,990
Gross profit		2,895,885			393,607
Operating expenses:
Sales and marketing		422,591			115,180
Research and development		1,841,172			464,121
General and administrative		1,078,889			734,151
Total operating expenses		3,342,652			1,313,452
Operating loss		(446,767	)		(919,845	)
Interest income		22,460			5,490
Interest expense		(54,433	)		(4,838	)
Loss before state taxes		(478,740	)		(919,193	)
State taxes		7,500			3,000
Net loss	$	(486,240	)	$	(922,193	)

See accompanying notes.

F-71

THE MICROSPRING COMPANY, INC.

STATEMENT OF STOCKHOLDERS’ EQUITY

	Common Stock			Paid-in Capital			Retained Earnings			Treasury Stock			Unearned Compensation			Total Stockholders’ Equity
	Shares	Amount
Balance at December 31, 1997	6,466,650	$	64,881	$	761,536		$	2,692,171		$	(214	)	$	(141,355	)	$	3,377,019
Stock options exercised	40,000		400		—			—			—			—			400
Issuance of stock	122,445		1,224		59,998			—			—			—			61,222
Common stock issued in lieu of cash payment of interest on convertible notes	27,126		272		22,679			—			—			—			22,951
Stock options granted	—		—		59,835			—			—			(59,835	)		—
Amortization of unearned compensation	—		—		—			—			—			56,052			56,052
Dividend distributions	—		—		—			(41,622	)		—			—			(41,622	)
Net loss	—		—		—			(486,240	)		—			—			(486,240	)
Balance at December 31, 1998	6,656,221		66,777		904,048			2,164,309			(214	)		(145,138	)		2,989,782
Stock options granted	—		—		696,102			—			—			(696,102	)		—
Stock options exercised	1,239,229		12,392		—			—			—			—			12,392
Stock options forfeited	—		—		(99,843	)		—			—			99,843			—
Common stock issued upon conversion of convertible notes	416,666		4,166		245,834			—			—			—			250,000
Common stock issued in lieu of cash payment of interest on convertible notes	7,786		78		4,593			—			—			—			4,671
Amortization of unearned compensation	—		—		—			—			—			741,397			741,397
Net loss	—		—		—			(922,193	)		—			—			(922,193	)
Balance at March 30, 1999	8,319,902	$	83,413	$	1,750,734		$	1,242,116		$	(214	)	$	—		$	3,076,049

See accompanying notes.

F-72

THE MICROSPRING COMPANY, INC.

STATEMENTS OF CASH FLOWS

	Year Ended December 31, 1998			Three Months Ended March 30, 1999
Operating activities
Net loss	$	(486,240	)	$	(922,193	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation		512,309			112,079
Interest expense		20,884			4,671
Amortization of unearned compensation		56,052			741,397
Changes in operating assets and liabilities:
Accounts receivable, trade		523,102			89,966
Inventories		175,306			(126,301	)
Notes and other receivables from stockholders		1,088,098			216,080
Prepaid expenses and other current assets		26,159			(4,135	)
Accounts payable		(884,804	)		125,072
Accrued compensation		25,327			63,769
Accrued liabilities		35,067			(64,220	)
Accrued state taxes payable		73,854			(36,893	)
Deferred revenue		(6,849	)		(13,545	)
Net cash provided by operating activities		1,158,265			185,747
Investing activities
Acquisition of property and equipment		(192,907	)		(36,992	)
Net cash used in investing activities		(192,907	)		(36,992	)
Financing activities
Advances under credit agreement		5,179,882			200,000
Repayments under credit agreement		(6,172,579	)		(200,000	)
Issuance of stock		400			12,392
Net cash (used in) provided by financing activities		(992,297	)		12,392
Net (decrease) increase in cash		(26,939	)		161,147
Cash at beginning of period		164,472			137,533
Cash at end of period	$	137,533		$	298,680
Supplemental disclosures:
Interest paid	$	31,906		$	167
Taxes paid	$	5,843		$	—

See accompanying notes.

F-73

THE MICROSPRING COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS

March 30, 1999

1.    Nature of Business

The MicroSpring Company, Inc. (the “Company”) was incorporated on December 10, 1984. The Company develops, manufactures and distributes medical components and devices which service the cardiology market in the United States and Europe. The Company’s products are sold to major medical device manufacturers directly or through distributors.

The Company is subject to a number of risks similar to other companies in the industry, including rapid technological change, uncertainty of market acceptance of products, uncertainty of regulatory approval, competition from substitute products and larger companies, compliance with government regulations, protection of proprietary technology, dependence on third-party manufacturers, distributors and key suppliers, product liability and dependence on key individuals.

The Company attempts to limit its concentration of credit risk by securing financially secure customers. Management believes a loss of certain significant clients would have a material adverse effect on the Company’s business, financial condition and results of operations. During 1998, two customers accounted for approximately $6,619,000 or 65% of total sales. One customer accounted for $4,583,000 or 45% and the other for $2,036,000 or 20% of sales, respectively. During the three-month period ended March 30, 1999, two customers accounted for approximately $824,000 or 46% of total sales. One customer accounted for $573,000 or 32% and the other for $251,000 or 14% of sales, respectively.

2.    Summary of Significant Accounting Policies

Cash and Cash Equivalents

The Company considers all short-term investments purchased with an original maturity of three months or less at the date of acquisition to be cash equivalents.

Inventories

Inventories are valued using standard costs which approximate the lower of cost or market, using the first-in, first-out (FIFO) method.

Revenue Recognition

Sales and related cost of sales are recognized upon shipment of products.

Property and Equipment

Property and equipment are stated at cost. Company policy provides for capitalization of all major expenditures for improvements and for current charges to income for repair and maintenance. Depreciation has been calculated using the straight-line method over the estimated economic lives of related assets which are as follows:

Machinery and equipment	5 to 10 years
Furniture and fixtures	5 years
Computer equipment	3 years
Leasehold improvements	Remaining life of lease

F-74

THE MICROSPRING COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

Upon retirement or disposal, the cost of the asset disposed of and the related accumulated depreciation are removed from the accounts and any gain or loss is reflected in income.

Research and Development Costs

Research and development costs are expensed as incurred.

Deferred Revenue

Deferred revenue represents customer deposits and advance payments.

Income Taxes

The Company has elected under S Corporation rules of the Internal Revenue Code not to be taxed as a corporation. Under this election, the Company passes through to its shareholders as individual taxpayers each item of income, loss, deduction or credit. Accordingly, no federal income tax provisions have been recorded. The Company incurs corporate and composite income taxes in Massachusetts which are included in the provision for state taxes. Temporary differences between income for financial reporting and tax reporting purposes are immaterial.

Stock Option Plans

The Company continues to follow Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25), and related interpretations in accounting for its employee stock options. Financial Accounting Standards Board Statement No. 123, Accounting for Stock-Based Compensation (SFAS 123), requires the Company to disclose the pro forma net income or loss if the Company recognized compensation expense for options granted using a fair value method of accounting.

Pro forma information regarding net income has been determined to have no material impact on the net income of the Company for the year ended December 31, 1998 and for the three-month period ended March 30, 1999.

Management’s Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

3.    Inventories

Inventories consist of the following:

	December 31, 1998		March 30, 1999
Raw materials	$	215,609	$	162,523
Work in progress		362,351		469,173
Finished goods		320,078		392,643
	$	898,038	$	1,024,339

F-75

THE MICROSPRING COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

4.    Receivables from Stockholders

During 1997, the Company made distributions to stockholders in anticipation of those stockholders’ own individual tax liabilities which were subsequently determined to be excess payments. Accordingly, the stockholders signed notes to repay $1,076,354 of these monies to the Company. During 1998, the stockholders paid $910,761 in cash to the Company. In 1998, $41,622 of the original notes were forgiven as the stockholders were determined to have had a higher tax liability than previously estimated and this reduction in notes receivable was therefore included as a dividend distribution to those stockholders in the statement of stockholders’ equity. During the three-month period ended March 30, 1999, the balance of the receivables was received. The receivables from stockholders at March 30, 1999 includes the balances of the notes (see Note 5).

5.    Notes Receivable from Stockholders

In 1996, the Company and a stockholder of the Company entered into a ten-year promissory note in exchange for the Company loaning the stockholder $150,000. During 1997, the amount of the note was increased to $422,048. Interest on the note accrues at 7.01% and is payable weekly. The principal is receivable in two components: $400,000 due in November 2007 and $22,048 due in weekly payments over the life of the note. The note balance outstanding was $167,185 and $241,145 at March 30, 1999 and December 31, 1998, respectively.

In 1997, the Company and another stockholder of the Company entered into a ten-year promissory note due in March 2007 in exchange for the Company loaning the stockholder $50,000. The promissory note accrues interest at 7.01% and interest on the note is payable annually. The note balance outstanding was $34,665 and $50,000 at March 30, 1999 and December 31, 1998, respectively.

The total balances of the notes of $201,850 was classified as receivables from stockholders at March 30, 1999. Payments of balances were received on March 31, 1999 (see Note 13).

6.    Property and Equipment

Property and equipment consist of the following:

	December 31, 1998			March 30, 1999
Machinery and equipment	$	2,178,057		$	2,194,331
Furniture and fixtures		214,442			214,442
Computer equipment and software		278,414			290,047
Leasehold improvements		617,141			619,982
Construction in progress		97,822			104,066
		3,385,876			3,422,868
Less accumulated depreciation and amortization		(1,400,854	)		(1,512,933	)
Net property and equipment	$	1,985,022		$	1,909,935

7.    Revolving Credit Agreement

During 1997, the Company entered into a revolving credit agreement with a bank to borrow up to $2,500,000 due September 1999. The agreement required the Company to maintain a minimum level of tangible net worth, current ratio and other financial measures. Interest is payable monthly at prime minus 0.5% and a quarterly commitment fee equal to 0.375% of the average unused commitment during the preceding quarter.

F-76

THE MICROSPRING COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

On May 8, 1998, the Company signed an amended and restated loan agreement with the bank. The amended agreement decreases the credit limit from $2,500,000 to $1,600,000 and changed the borrowing base to an asset-based formula consisting of 80% of qualified accounts receivable, up to $200,000 against eligible equipment, and the lesser of $250,000 or up to 50% of the cost or market of eligible inventory. Interest is payable monthly at prime plus 0.25% per annum and the note was changed to a demand note. All financial covenants were eliminated in the amended agreement.

At March 30, 1999, the Company had no outstanding borrowings.

8.    Convertible Notes Payable to Stockholders

During 1997, two stockholders of the Company loaned an aggregate of $250,000 to the Company with an interest rate at the prime rate based upon the Wall Street Journal. In early 1998, the notes were converted into collateralized notes due January 2000 with interest payable quarterly at the prime rate in cash or common stock. The notes were also convertible into common stock at a conversion price of $0.60 per share.

In March 1999, the note holders converted the balance of the notes into common stock and received 416,666 shares.

9.    Lease Commitments

The Company leases office space under noncancelable operating leases that expire through July 31, 2001. The future minimum rental payments under these leases are as follows:

Year ending March 30:
2000	$	282,000
2001		268,000
2002		90,000
Total minimum future rental payments	$	640,000

Rent expense for leased facilities for the three months ended March 30, 1999 was $65,570 and for the year ended December 31, 1998 was $249,430.

10.    Stockholders’ Equity

Capital Stock

At December 31, 1998 and March 30, 1999, the authorized capital stock of the Company consisted of 9,000,000 shares of common stock. There were 606,292 shares of common stock reserved for issuance to key employees and consultants at December 31, 1998 and none at March 30, 1999.

Stock Option Plans

The Company established a new stock option plan (the “Plan”) in 1997, into which the previous plan was combined. The Plan allows for the granting of shares of common stock as either “non-qualified options” or “incentive stock options” within the meaning of Section 422A of the Internal Revenue Code. Options are granted at a price set by the Board of Directors, but in the case of an incentive stock option, shall not be less than the fair

F-77

THE MICROSPRING COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

market value of the shares of stock on the date the option is granted. The vesting period of an option is at the discretion of the Board. Options expire ten years after the grant date.

Stock option activity for the year ended December 31, 1998 and for the three-month period ended March 30, 1999 was as follows:

Option Summary	Number of Shares		Option Price Per Share
Options outstanding at December 31, 1997	492,916		$	0.01
Granted	101,416			0.01
Exercised	(40,000	)		0.01
Forfeited	(6,250	)		0.01
Options outstanding at December 31, 1998	548,082			0.01
Granted	869,211			0.01
Exercised	(1,239,229	)		0.01
Forfeited	(178,064	)		0.01
Options outstanding at March 30, 1999	—		$	—

11.    Employee Savings Plan

The Company has a noncontributory Employee Savings Plan (the “Plan”), which is administered in accordance with the provisions of Section 401k of the Internal Revenue Code. The Plan is a voluntary program in which employees who meet certain requirements elect to reduce their annual salary by up to the lesser of $10,000 or 15% and have this amount contributed to the Plan on their behalf. The Company matches 25% up to the first 6% of annual salary up to a maximum of $61,000. The Company’s contribution expense was $27,679 for the year ended 1998 and $5,917 for the three-month period ended March 30, 1999.

12.    Supplemental Cash Flow Information

	Year Ended December 31, 1998		Three Months Ended March 30, 1999
Noncash transactions:
Conversion of interest expense and accrued interest to common stock	$	22,951	$	4,671
Dividend distributions		41,622		—
Satisfaction of short-term liability by issuing common stock		61,222		—
Conversion of notes payable to common stock		—		250,000

13.    Subsequent Events

As of the close of business on March 30, 1999, the stockholders of MicroSpring sold substantially all of the net assets of the Company to MedSource Technologies, Inc. Immediately prior to the sale, payments were received on the receivable from stockholders and notes receivable from stockholders, 458,018 of the stock options outstanding at December 31, 1998 were fully vested and exercised, an additional 781,211 of options that were granted in February and March 1999 became fully vested and were exercised, the convertible notes payable were converted to common stock, and the bank credit agreement was paid down in full and canceled. On March 31, 1999, the balances due on the notes receivable from stockholders were received in cash.

F-78

REPORT OF INDEPENDENT AUDITORS

Board of Directors

Portlyn Corporation

We have audited the accompanying balance sheets of Portlyn Corporation as of December 31, 1998 and March 30, 1999 and the related statements of operations, changes in stockholders’ equity and cash flows for the year ended December 31, 1998 and the three-month period ended March 30, 1999. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Portlyn Corporation at December 31, 1998 and March 30, 1999, and the results of its operations and its cash flows for the year ended December 31, 1998 and the three-month period ended March 30, 1999, in conformity with accounting principles generally accepted in the United States.

/s/    Ernst & Young LLP

Minneapolis, Minnesota

July 25, 2000

F-79

PORTLYN CORPORATION

BALANCE SHEETS

	December 31, 1998		March 30, 1999
Assets
Current assets:
Cash	$	132,168	$	187,731
Accounts receivable		608,513		433,242
Inventories		631,697		734,959
Prepaid expenses		38,742		26,426
Total current assets		1,411,120		1,382,358
Property and equipment, net		448,402		408,715
Other assets		26,082		26,676
Total assets	$	1,885,604	$	1,817,749
Liabilities and stockholders’ equity
Current liabilities:
Line of credit	$	350,000	$	285,000
Notes payable to officer		576,275		576,275
Obligations under capital leases		30,229		30,926
Accounts payable		112,696		177,831
Accrued compensation		108,107		129,429
Accrued liabilities		48,180		29,053
Total current liabilities		1,225,487		1,228,514
Obligations under capital leases, less current portion		82,386		74,783
Total liabilities		1,307,873		1,303,297
Stockholders’ equity:
Common stock, no par value:
Authorized shares—300; Issued and outstanding shares—262		16,910		16,910
Retained earnings		560,821		497,542
Total stockholders’ equity		577,731		514,452
Total liabilities and stockholders’ equity	$	1,885,604	$	1,817,749

See accompanying notes.

F-80

PORTLYN CORPORATION

STATEMENTS OF OPERATIONS

	Year Ended December 31, 1998			Three Months Ended March 30, 1999
Net sales	$	5,772,765		$	1,179,926
Cost of sales		3,200,066			706,797
Gross profit		2,572,699			473,129
Operating expenses		2,571,587			522,410
Operating income (loss)		1,112			(49,281	)
Other income (expense):
Interest income		9,284			1,686
Interest expense		(75,226	)		(15,684	)
Other		(8,443	)		—
Net (loss)	$	(73,273	)	$	(63,279	)

See accompanying notes.

F-81

PORTLYN CORPORATION

STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

	Common Stock			Retained Earnings			Total
	Shares	Amount
Balance at December 31, 1997	262	$	16,910	$	634,094		$	651,004
Net loss	—		—		(73,273	)		(73,273	)
Balance at December 31, 1998	262		16,910		560,821			577,731
Net loss	—		—		(63,279	)		(63,279	)
Balance at March 30, 1999	262	$	16,910	$	497,542		$	514,452

See accompanying notes.

F-82

PORTLYN CORPORATION

STATEMENTS OF CASH FLOWS

	Year Ended December 31, 1998			Three Months Ended March 30, 1999
Operating activities
Net loss	$	(73,273	)	$	(63,279	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation		105,813			40,937
Changes in operating assets and liabilities:
Accounts receivable		577,995			175,271
Inventories		259,985			(103,262	)
Prepaid expenses		(9,079	)		12,316
Other assets		(20,557	)		(594	)
Accounts payable		(3,177	)		65,135
Accrued compensation		46,504			21,322
Accrued liabilities		705			(19,127	)
Net cash provided by operating activities		884,916			128,719
Investing activities
Purchases of property and equipment		(50,378	)		(1,250	)
Net cash used in investing activities		(50,378	)		(1,250	)
Financing activities
Line of credit (net)		50,000			(65,000	)
Note payable—officers (net)		(818,658	)		—
Payments on obligations under capital leases		(26,581	)		(6,906	)
Net cash used in financing activities		(795,239	)		(71,906	)
Net increase in cash		39,299			55,563
Cash at beginning of period		92,869			132,168
Cash at end of period	$	132,168		$	187,731

See accompanying notes.

F-83

PORTLYN CORPORATION

NOTES TO FINANCIAL STATEMENTS

March 30, 1999

1.    Nature of Business

Portlyn Corporation is engaged in the design, manufacture and marketing of medical devices and instruments on a national and international basis, through distributors as well as directly to end users.

2.    Summary of Significant Accounting Policies

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all short-term debt instruments purchased with a maturity of three months or less to be cash equivalents.

Inventories

Inventories of raw materials and work-in-process are carried at the lower of cost or market on the first-in, first-out method.

Revenue Recognition

Sales and related cost of sales are recognized upon shipment of products.

Property and Equipment

Property and equipment are stated at cost. Company policy provides for capitalization of all major expenditures for improvements and for current changes to income for repair and maintenance. Depreciation is computed using accelerated methods based on the following estimated useful lives:

Transportation and equipment	5 years
Machinery and equipment	5-7 years
Office equipment	5-7 years
Improvements	15-39 years

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Income Taxes

The Company has elected to be taxed under the provisions of Subchapter S of the Internal Revenue Code for the fiscal year beginning January 1, 1989. Under those provisions, the Company does not pay federal corporate income taxes on its taxable income. Instead, the shareholders are liable for individual federal income taxes on their respective shares of the Company’s taxable income.

F-84

PORTLYN CORPORATION

NOTES TO FINANCIAL STATEMENTS—(Continued)

3.    Property and Equipment

Property and equipment consist of the following:

	December 31, 1998			March 30, 1999
Land	$	28,800		$	28,800
Building and improvements		438,291			438,291
Machinery and equipment		771,394			771,394
Office equipment		262,194			263,444
Transportation equipment		17,629			17,629
Leasehold improvements		65,000			65,000
		1,583,308			1,584,558
Accumulated depreciation		(1,134,906	)		(1,175,843	)
	$	448,402		$	408,715

4.    Line of Credit

The Company has a $750,000 working line of credit with a variable interest rate equal to the prime rate plus one-half percent, as set by BankBoston adjusted monthly. This loan is secured by all machinery and equipment, (excluding vehicles), furniture and fixtures, now owned and hereafter acquired and the proceeds thereof, all inventory now owned and hereafter acquired and the proceeds thereof, and all accounts receivable, customer lists, general intangibles, and the contract rights arising therefrom and the proceeds thereof, now owned and hereafter acquired, and the right to use of the business trade name as indicated in the security agreement dated September 22, 1997. The Company had outstanding borrowings of $350,000 and $285,000 at December 31, 1998 and March 30, 1999, respectively.

5.    Note Payable to Officer

The note payable to officer is an unsecured demand loan bearing interest at the rate of 5%. No payments were made after October 29, 1998 due to terms being negotiated in the transaction with MedSource Technologies (see Note 9).

6.    Obligations Under Capital Leases

The Company has entered into three- and five-year leases for certain equipment and software with lease terms through November 1999, January 2001, January 2002 and July 2002. These obligations have been recorded in the accompanying financial statements at the present value of the future minimum lease payments, discounted at interest rates of 16.3%, 14.1%, 16.7% and 12.5%. The total capitalized cost of $156,556 less accumulated depreciation of $80,200 is included in property and equipment at March 30, 1999.

F-85

PORTLYN CORPORATION

NOTES TO FINANCIAL STATEMENTS—(Continued)

Future minimum lease payments under these capital leases and the net present value of the future minimum lease payments as of March 30, 1999 are as follow:

Period ending December 31:
1999	$	32,289
2000		42,194
2001		35,788
2002		18,900
Total future minimum lease payments		129,171
Less amount representing interest		(23,462	)
Present value of future minimum lease payments		105,709
Less current portion		(30,926	)
	$	74,783

7.    Lease Commitments

The Company is (or was) a party to various leases for manufacturing space, office space, equipment and vehicles. The following is a schedule of minimum future rental expenses on leases in effect as of March 30, 1999, including the lease on the new building which began in July 2000:

Period ending December 31:
1999	$	21,664
2000		181,503
2001		396,006
2002		396,006
2003		396,006
Thereafter		5,035,357

Total rent expenses charged to operations were $75,775 for the year ended December 31, 1998 and $19,435 for the three-month period ended March 30, 1999.

8.    Retirement Plan

As of January 1995, the Company implemented a 401(k) Salary Deferral Plan whereby eligible employees—those who have attained the age of 21 and have been employed by the Company for at least one year—may elect to defer from 1% to 15% of their salary. The Company elected to make a discretionary match of 50% of up to 6% of each employee’s deferral and the amount charged to operations was $34,860 for the year ended December 31, 1998 and $11,297 for the three-month period ended March 30, 1999.

9.    Subsequent Event

As of the close of business on March 30, 1999, the stockholders of Portlyn Corporation sold substantially all of the assets of the Company to MedSource Technologies, Inc. MedSource Technologies, Inc. also assumed all liabilities on the balance sheet except for the $576,275 balance of notes payable to officer and $150,000 of the balance borrowed on the line of credit. The entire balance of the borrowings outstanding on the line of credit was paid in full in the acquisition transaction but the $150,000 (balance in excess of $135,000) was offset against the proceeds received by the stockholders.

F-86

REPORT OF INDEPENDENT AUDITORS

Board of Directors

Texcel, Inc.

We have audited the accompanying balance sheets of Texcel, Inc. as of December 31, 1998 and March 30, 1999, and the related statements of operations, changes in stockholders’ equity, and cash flows for the year ended December 31, 1998 and the three-month period ended March 30, 1999. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Texcel, Inc. at December 31, 1998 and March 30, 1999, and the results of its operations and its cash flows for the year ended December 31, 1998, and the three-month period ended March 30, 1999, in conformity with accounting principles generally accepted in the United States.

/s/    Ernst & Young LLP

Minneapolis, Minnesota

June 13, 2000

F-87

TEXCEL, INC.

BALANCE SHEETS

	December 31, 1998		March 30, 1999
Assets
Current assets:
Cash	$	1,247	$	189,943
Accounts receivable, net		1,325,135		1,211,068
Loan receivable from related party		48,941		—
Inventories		233,529		149,233
Recoverable income taxes		3,923		6,384
Prepaid expenses		27,106		21,723
Total current assets		1,639,881		1,578,351
Property and equipment, net		1,572,239		1,715,304
Deposits		66,156		69,653
Total assets	$	3,278,276	$	3,363,308
Liabilities and stockholders’ equity
Current liabilities:
Line of credit	$	128,695	$	440,000
Note payable—officer		103,789		—
Notes payable, current portion		70,356		127,499
Obligations under capital leases, current portion		23,989		24,778
Accounts payable		457,691		487,284
Accrued compensation		27,588		45,020
Dividends payable		—		189,942
Accrued liabilities		6,141		14,181
Total current liabilities		818,249		1,328,704
Notes payable, less current portion		386,391		711,660
Obligations under capital leases, less current portion		64,515		58,017
Total liabilities		1,269,155		2,098,381
Stockholders’ equity:
Common stock, Class A		7,500		7,500
Common stock, Class B		67,500		67,500
Retained earnings		1,934,121		1,189,927
Total stockholders’ equity		2,009,121		1,264,927
Total liabilities and stockholders’ equity	$	3,278,276	$	3,363,308

See accompanying notes.

F-88

TEXCEL, INC.

STATEMENTS OF OPERATIONS

	Year Ended December 31, 1998			Three Months Ended March 30, 1999
Net sales	$	6,184,002		$	2,044,662
Cost of sales		3,888,727			1,103,881
Gross profit		2,295,275			940,781
Operating expenses:
Selling		208,836			61,114
Research and development		27,544			55,378
General and administrative		715,699			153,777
		952,079			270,269
Operating income		1,343,196			670,512
Other income (expense):
Interest expense		(75,138	)		(14,751	)
Interest income		8,219			4,029
Other		(833	)		—
Income before taxes		1,275,444			659,790
Taxes		15,774			14,042
Net income	$	1,259,670		$	645,748

See accompanying notes.

F-89

TEXCEL, INC.

STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

	Class A Common Stock				Class B Common Stock			Retained Earnings			Total Stockholders’ Equity
	Shares	Amount			Shares	Amount
Balance at December 31, 1997	1,000	$	75,000		—	$	—	$	674,451		$	749,451
Issuance of Class B common stock	—		(67,500	)	9,000		67,500		—			—
Net income	—		—		—		—		1,259,670			1,259,670
Balance at December 31, 1998	1,000		7,500		9,000		67,500		1,934,121			2,009,121
Dividends	—		—		—		—		(1,389,942	)		(1,389,942	)
Net income	—		—		—		—		645,748			645,748
Balance at March 30, 1999	1,000	$	7,500		9,000	$	67,500	$	1,189,927		$	1,264,927

See accompanying notes.

F-90

TEXCEL, INC.

STATEMENTS OF CASH FLOWS

	Year Ended December 31, 1998			Three Months Ended March 30, 1999
Operating activities
Net income	$	1,259,670		$	645,748
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		213,601			69,803
Changes in operating assets and liabilities:
Accounts receivable		(420,424	)		114,067
Loan receivable		16,585			—
Inventories		(67,238	)		84,296
Recoverable income taxes		(3,923	)		(2,461	)
Prepaid expenses		(7,021	)		5,383
Accounts payable		32,716			29,593
Accrued compensation		10,483			17,432
Accrued liabilities		(216,392	)		8,040
Net cash provided by operating activities		818,057			971,901
Investing activities
Acquisition of property and equipment		(695,299	)		(212,868	)
Deposits		(50,237	)		(3,497	)
Net cash used in investing activities		(745,536	)		(216,365	)
Financing activities
Line of credit (net)		88,695			311,305
Note payable to officer (net)		(164,379	)		(54,848	)
Proceeds from notes payable		—			400,000
Payments on notes payable		(70,355	)		(17,588	)
Payments on obligations under capital leases		(30,096	)		(5,709	)
Payment of dividends		—			(1,200,000)
Net cash used in financing activities		(176,135	)		(566,840	)
Net (decrease) increase in cash		(103,614	)		188,696
Cash at beginning of period		104,861			1,247
Cash at end of period	$	1,247		$	189,943

See accompanying notes.

F-91

TEXCEL, INC.

NOTES TO FINANCIAL STATEMENTS

March 30, 1999

1.    Nature of Business

The Company provides laser-based manufacturing services from its facility in East Longmeadow, Massachusetts. These services include globe-box hermetic sealing (primarily in the biomedical market) as well as laser marking and fiber-based low power laser welding. The Company’s services are sold on a made-to-order job basis. In March 1997, the Company achieved and has continued to maintain ISO9002 certification.

2.    Summary of Significant Accounting Policies

Inventories

Inventories are valued at the lower of cost or market value. Cost is determined by specific identification of raw material job costs and standard costing of labor and overhead for work in process.

Revenue Recognition

Sales and related cost of sales are recognized upon shipment of products.

Property and Equipment

Property and equipment are stated at cost. Company policy provides for capitalization of all major expenditures for improvements and for current charges to income for repair and maintenance.

Depreciation

Depreciation, including amortization of assets recorded under capital leases, is computed by using the straight-line method for financial reporting purposes and accelerated cost recovery method for federal and state income tax purposes over the estimated economic lives of related assets which are as follows:

Machinery and equipment	4 to 7 years
Tools and fixtures	5 to 7 years
Furniture and equipment	5 to 7 years
Automotive equipment	5 years
Leasehold improvements	Remaining life of lease

Income Taxes

Effective January 1, 1998, the Company qualified as an S corporation. In anticipation of this acceptance, all remaining deferred tax assets were written off and included in the current tax expense for the year ended December 31, 1997. For the year ended December 31, 1998 and the three-month period ended March 30, 1999, the tax expense represents state taxes only.

Management’s Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

F-92

TEXCEL, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

3.    Property and Equipment

Property and equipment are summarized by major classifications as follows:

	December 31, 1998			March 30, 1999
Machinery and equipment	$	1,906,934		$	2,019,522
Tools and fixtures		87,044			90,075
Furniture and equipment		300,735			333,183
Automotive equipment		22,085			22,085
Leasehold improvements		58,164			110,739
		2,374,962			2,575,604
Less accumulated depreciation and amortization		(925,325	)		(991,643	)
		1,449,637			1,583,961
Construction in process		122,602			131,343
	$	1,572,239		$	1,715,304

In 1994, the Company was acquired in a transaction qualifying as a purchase under APB 16. Fixed assets were accordingly written down from cost by $566,270 to properly record the stock purchase price less than book value at that time. This amount has been allocated across the various fixed asset classifications and is being amortized by an adjustment to book depreciation over a period of seven years.

4.    Line of Credit

The Company has a line of credit agreement dated June 1996 with a bank providing $250,000 of funds due on demand and bearing interest at the prime rate. The line is secured by a first priority security interest in all business assets.

On March 25, 1999, the Company obtained an additional $500,000 credit line with the same bank. This extended line is due on demand and bears interest at a rate of 7.75%.

The balances outstanding of $440,000 at March 30, 1999 were paid in full in conjunction with the sale of the Company’s stock to MedSource Technologies (see Note 12).

F-93

TEXCEL, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

5.    Long-Term Debt

Long-term notes payable consists of the following:

	December 31, 1998			March 30, 1999
Note payable to Springfield Institute for Savings (SIS) dated March 12, 1999 in the original amount of $400,000 with a fixed interest rate of 8.20% due in 84 equal monthly principal payments plus interest. Due March 12, 2006, secured by substantially all assets of the Company	$	—		$	400,000
Note payable to SIS dated June 26, 1996 in the original amount of $500,000 with a fixed interest rate at 9.00%. Note bears interest only until December 26, 1996; thereafter, 114 equal monthly principal installments plus interest. Due July 26, 2006, secured by substantially all assets of the Company		394,737			381,580
Note payable to SIS dated June 6, 1996 in the original amount of $88,596 with a fixed interest rate at 9.10% due June 6, 2002, secured by laser marking equipment		62,010			57,579
		456,747			839,159
Less current maturities		(70,356	)		(127,499	)
	$	386,391		$	711,660

The notes payable were paid in full in conjunction with the sale of the Company to MedSource Technologies, Inc. (see Note 12).

6.    Leases

Operating Lease

The Company leases its manufacturing facility under a 20-year operating lease expiring June 19, 2017. Future minimum lease payments under this operating lease are $154,000 per year.

Capital Leases

The Company leases various equipment and software under capital leases. Future payments under the capital leases are as follows:

Year ending March 30:
2000	$	33,794
2001		32,494
2002		20,078
2003		11,873
2004		4,947
		103,186
Less amount representing interest		(20,391	)
		82,795
Less current portion		(24,778	)
Long-term capital lease obligations	$	58,017

F-94

TEXCEL, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

7.    Income Taxes

The provision for income taxes consists of the following:

	Year Ended December 31, 1998		Three Months Ended March 30, 1999
Current taxes	$	15,774	$	14,042

The Company has historically conformed to the requirements of the Financial Accounting Standards Board and has recorded deferred tax assets and liabilities as appropriate. With the election of S corporation status effective January 1, 1998, no deferred tax assets or liabilities are recognized.

8.    Stockholders’ Equity

On February 3, 1998, the number of issued shares of common stock was increased from 1,000 to 10,000 shares, and 1,000 shares of Class A Common stock and 9,000 shares of Class B Common stock were issued to replace the existing shares outstanding. The total authorized shares include 1,500 Class A and 15,000 Class B. Dividend and liquidation rights of both stock classes are identical. Class B shareholders are not entitled to voting rights by virtue of their ownership. Stock transfer restrictions are such that first the Corporation, and then the remaining shareholders shall have the right of first refusal on such proposed transfer.

The Company declared dividends totaling $1,389,942 during the three-month period ended March 30, 1999, of which $1,200,000 was paid by March 30, 1999.

9.    Related Party Transactions

Balances to/from related parties are as follows:

	December 31, 1998		March 30, 1999
Loan receivable—BMD Real Estate, LLC	$	48,941	$	—
Note payable to officer		103,789		—

Interest expense is charged on the note payable to officer at the Applicable Federal Rate, as published by the Treasury Department. Interest related to this note was $10,931 for the year ended December 31, 1998 and $1,373 for the three-month period ended March 30, 1999.

On June 19, 1997, the Company moved to a newly constructed 17,400-square-foot facility, which it leases from a related party, BMD Real Estate, LLC. The note receivable from BMD arose from various construction period expenses paid for by Texcel, Inc. At March 30, 1999, the balance of the loan receivable from BMD Real Estate, LLC was assumed by the officer/shareholder of the Company in partial payment of the note payable balance. The remaining note payable balance was paid in cash.

10.    Other

A material part of the Company’s business is dependent upon a few customers, the loss of any one of whom would have a materially adverse effect on the Company. One customer accounted for 42% and 73% of the Company’s revenues for the year ended December 31, 1998 and for the three-month period ended March 30,

F-95

TEXCEL, INC.

NOTES TO FINANCIAL STATEMENTS—(Continued)

1999, respectively. Another customer accounted for 20% of the Company’s revenues for the years ended December 31, 1998.

11.    Defined Contribution Plan

The Company sponsors a 401(k) retirement plan. All employees are eligible subject to minimum age and service requirements. The Company makes a matching contribution equal to 25% of the first 4% of compensation contributed by an employee. Employer contributions are vested over a three-year schedule. The Company contributed $6,432 to the plan for the year ended December 31, 1998 and $1,880 for the three-month period ended March 30, 1999

12.    Subsequent Event

As of the close of business on March 30, 1999, the stockholders of Texcel, Inc. sold all of their shares to MedSource Technologies, Inc. In conjunction with the sale of stock to MedSource, MedSource paid off the balances outstanding on the line of credit (see Note 4) and notes payable (see Note 5).

F-96

The inside back cover page includes the following text: "MedSource Technologies provides components, subassemblies and finished medical devices for the following markets:". The inside back cover page also includes four pictures representing products we manufacture for each of our four target markets and the following lists of sample products in each of these markets: Surgical Instrumentation: Electrosurgical Instruments, Bi-Polar and Monopolar Devices, Ultrasonic Surgical Instruments, Rigid/Flexible Forceps, Closure Devices, Endoscopic Instruments, and Laparoscopic Instruments; Electro-Medical Implants: Pacemakers/Defibrillators, Neurostimulators, Ventricular Assist Devices, Total Artificial Heart (TAH), Drug Delivery Systems, and Hearing Assist Devices; Orthopedics: Reconstructive Implants (Hip and Knee), Procedure Specific Instrumentation, Spinal Fixation Devices, Arthroscopy Instruments, Maxillofacial Implants, and Dental Implants; and Interventional Devices: Cardiology Catheters and Guidewires, Radiology Catheters and Guidewires, Neuroradiology Catheters and Guidewires, Balloon Forming, and PICC.

The page also includes the following text; "MedSource Technologies provides components, subassemblies and finished medical devices for the following markets:".

PART II

INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 13.    Other Expenses of Issuance and Distribution.

The following table sets forth the expenses, other than underwriting discounts and commissions, in connection with the issuance and distribution of the securities being registered hereby. All such expenses will be borne by the registrant.

Securities and Exchange Commission registration fee	$	32,982
NASD filing fee		14,300
Nasdaq listing fees		95,000
Legal fees and expenses		*
Accounting fees and expenses		*
Transfer agent fees		*
Printing and engraving expenses		*
Miscellaneous		*
Total	$

* To be supplied by amendment.

Item 14.    Indemnification of Directors, Officers, Employees and Agents.

Section 145 of the General Corporation Law of Delaware provides that directors, officers, employees or agents of Delaware corporations are entitled, under certain circumstances, to be indemnified against expenses (including attorneys’ fees) and other liabilities actually and reasonably incurred by them in connection with any suit brought against them in their capacity as a director, officer, employee or agent, if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal action or proceeding, if they had no reasonable cause to believe their conduct was unlawful. Section 145 also provides that directors, officers, employees and agents may also be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by them in connection with a derivative suit bought against them in their capacity as a director, officer, employee or agent, as the case may be, if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification may be made without court approval if such person was adjudged liable to the corporation.

Article 6 of the registrant’s certificate of incorporation (Exhibit 3.1) provides that the registrant shall indemnify any and all persons whom it shall have power to indemnify to the fullest extent permitted by the General Corporation Law of Delaware.

Article V of the registrant’s amended and restated bylaws (Exhibit 3.2) provides that any person who was or is made a party or is threatened to be made a party to or is involved in any pending, threatened, or completed civil, criminal, or administrative action, suit, or proceeding and any appeal therein and any inquiry or investigation in connection therewith or which could lead thereto to the fullest extent permitted by the laws of the state of Delaware, as the same exist or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the registrant to provide broader indemnification rights than said laws permitted prior to such amendment).

II-1

Section 8  of the Underwriting Agreement (Exhibit 1.1) provides for indemnification by the underwriters of directors, officers and controlling persons of the registrant for certain liabilities, including certain liabilities under the Securities Act of 1933, under certain circumstances.

The registrant maintains a directors and officers liability insurance policy with             . The policy insures the directors and officers of the registrant against loss arising from certain claims made against such directors or officers by reason of certain wrongful acts. The policy provides combined limit of liability of $           per policy year for both directors’ and officers’ liability coverage at an annual premium of $           .

Item 15.    Recent Sales of Unregistered Securities.

The following is a description of the sale of unregistered securities for the last three years (all share and per share amounts of common stock have been adjusted to reflect a 10-for-1 common stock split effected on January 17, 2000):

(a) In connection with the formation of the registrant in March 1999, the registrant issued for cash an aggregate of 4,023,000 shares of common stock to 12 accredited investors, resulting in aggregate gross proceeds to the registrant of $2.0 million. The registrant issued these securities in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933 as transactions not involving a public offering and Rule 506 thereunder.

(b) On March 30, 1999, the registrant paid cash and issued an aggregate of 425,000 shares of common stock to one accredited investor and an aggregate of 37,440 shares of Series A preferred stock to 12 accredited investors in connection with the acquisition by the registrant of the businesses of Hayden Precision Industries, Inc., Kelco Industries, Inc., The MicroSpring Company, Inc., National Wire & Stamping, Inc., Portlyn Corp. and Texcel, Inc. The registrant received assets valued at approximately $107.3 million in the aggregate in connection with the acquisition of these businesses. Each share of Series A preferred stock is presently convertible into 50 shares of the registrant’s common stock. The registrant issued these securities in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933 as transactions not involving a public offering and Rule 506 thereunder.

(c) On March 30, 1999, the registrant issued for cash an aggregate of 300,000 shares of Series B preferred stock to two accredited investors, resulting in aggregate gross proceeds to the registrant $22.0 million. Each share of Series B preferred stock is presently convertible into 10 shares of its common stock. The registrant issued these securities in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933 as transactions not involving a public offering and Rule 506 thereunder.

(d) On March 30, 1999, MedSource Technologies, LLC, a wholly-owned subsidiary of the registrant, issued for cash an aggregate of $20.0 million of its senior subordinated notes and the registrant issued for cash an aggregate of 65,000 shares of its Series Z preferred stock to two accredited investors, resulting in aggregate gross proceeds to the registrant and its subsidiary of $20.0 million. Each share of Series Z preferred stock is convertible into 10 shares of its common stock. The registrant and its subsidiary issued these securities in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933 as transactions not involving a public offering and Rule 506 thereunder.

(e) On March 30, 1999, the registrant issued for cash an aggregate of 930 shares of Series A preferred stock to four of its employees, resulting in aggregate gross proceeds to the registrant $0.9 million. The registrant issued these securities in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933 as transactions not involving a public offering and Rule 506 thereunder.

(f) On May 14, 1999, the registrant issued for cash an aggregate of 32,728 shares of Series B preferred stock to one accredited investor, resulting in aggregate gross proceeds to the registrant $2.4 million. The registrant issued these securities in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933 as transactions not involving a public offering and Rule 506 thereunder.

II-2

(g) On January 11, 2000, the registrant paid cash and issued an aggregate of 50,000 shares of common stock to one accredited investor in connection with the acquisition by the registrant of the business of Tenax Corporation. The registrant received assets valued at approximately $8.8 million in connection with the acquisition of this business. The registrant issued these securities in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933 as transactions not involving a public offering and Rule 506 thereunder.

(h) On February 1, 2000, the registrant paid cash and issued an aggregate of 236,950 shares of common stock to two accredited investors in connection with the acquisition by the registrant of the business of Apex Engineering, Inc. The registrant received assets valued at approximately $4.1 million in connection with the acquisition of this business. The registrant issued these securities in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933 as transactions not involving a public offering and Rule 506 thereunder.

(i) On May 1, 2000, the registrant paid cash and issued an aggregate of 500,000 shares of common stock to two accredited investors in connection with the acquisition by the registrant of the business of Thermat Precision Technology, Inc. The registrant received assets valued at approximately $8.5 million in connection with the acquisition of this business. The registrant issued these securities in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933 as transactions not involving a public offering and Rule 506 thereunder.

(j) On June 20, 2000, the registrant issued an aggregate of 500 shares of common stock to a consultant in exchange for services previously rendered. The registrant issued these securities in reliance on the exemption from registration provided by Rule 701 as transactions pursuant to compensatory benefit plans or contracts relating to compensation.

(k) On October 25, 2000, the registrant issued an aggregate of 40,000 shares of Series C preferred stock to eight accredited investors, resulting in aggregate gross proceeds to the registrant $40.0 million. In the transaction, the registrant paid to a placement agent a cash fee of $2.1 million and issued the placement agent the warrant referred to in item (o) below. Each share of Series C preferred stock converts in the manner described in the second paragraph after the table under the caption “Summary—The Offering” on page of the prospectus included as part of this registration statement. The registrant issued these securities in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933 as transactions not involving a public offering and Rule 506 thereunder.

(l) On December 29, 2000, in connection with the acquisition by the registrant of the business of ACT Medical, Inc., the registrant paid cash and issued an aggregate of 33,423  shares of Series D preferred stock to 25 persons to whom the registrant provided the information called for by Rule 502(b) under the Securities Act of 1933. The registrant received assets valued at approximately $33.7 million in connection with the acquisition of this business. Each share of Series D preferred stock is presently convertible into 50 shares of the registrant’s common stock. The registrant issued these securities in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933 as transactions not involving a public offering and Rule 506 thereunder.

(m) On December 29, 2000, the registrant granted rollover options to purchase an aggregate of 6,920 shares of its Series D preferred stock to certain individuals who became employees of the registrant following its acquisition of ACT Medical at exercise prices ranging from $169.70 to $1,000.00 per share. The registrant granted each of these options pursuant to the ACT Medical stock plan, which was assumed by the registrant in connection with the acquisition of Act Medical. The registrant received no proceeds from these issuances. The registrant issued these securities in reliance on the exemption from registration provided by Rule 701 as transactions pursuant to compensatory benefit plans or contracts relating to compensation.

(n) On February 27, 2001, the registrant issued a warrant to purchase an aggregate of 525 shares of Series C preferred stock to one accredited investor for services previously rendered as a placement agent (referred to in item (k) above). The registrant issued these securities in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933 as transactions not involving a public offering and Rule 506 thereunder.

II-3

(o) On June 22, 2001, the registrant issued an aggregate of 300 shares of Series C preferred stock to one accredited investor, resulting in aggregate gross proceeds to the registrant $0.3 million. The registrant issued these securities in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933 as transactions not involving a public offering and Rule 506 thereunder.

(p) On December 31, 2001, the registrant issued for cash an aggregate of 6,000 Series E preferred stock and warrants to purchase an aggregate of 200,000 shares of common stock to 29 accredited investors, resulting in aggregate gross proceeds to the registrant of $6.0 million. The registrant used the proceeds of the issuance to finance the acquisition of HV Technologies. The registrant issued these securities in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933 as transactions not involving a public offering and Rule 506 thereunder.

(q) On January 4, 2002, the registrant paid cash and issued an aggregate of 824,222 shares of common stock and 4,000 shares of Series F preferred stock to 18 persons to whom the registrant provided the information called for by Rule 502(b) under the Securities Act of 1933 in connection with the acquisition by the registrant of the business of HV Technologies, Inc. The registrant received assets valued at approximately $24.3 million in connection with the acquisition of this business. The registrant issued these securities in reliance on the exemption provided by Section 4(2) of the Securities Act of 1933 as transactions not involving a public offering and Rule 506 thereunder.

(r) Since March 30, 1999, the registrant has granted options to purchase an aggregate of 3,705,050 shares of its common stock to its employees and directors at exercise prices ranging from $12 to $20 per share. The registrant granted each of these options pursuant to its 1999 stock plan. The registrant received no proceeds from these issuances. The registrant issued these securities in reliance on the exemption from registration provided by Rule 701 as transactions pursuant to compensatory benefit plans or contracts relating to compensation.

(s) Since August 21, 2000, the registrant has issued 20,708 shares of common stock upon exercise of options granted under its 1999 stock plan for total proceeds of approximately $288,992. The registrant issued these securities in reliance on the exemption from registration provided by Rule 701 as transactions pursuant to compensatory benefit plans or contracts relating to compensation.

Item 16.    Exhibits and Financial Statement Schedules.

(a) Exhibits

	Exhibit Number	Description
*	1.1	Form of Underwriting Agreement
	2.1	Agreement and Plan of Merger dated as of December 8, 2000 among the registrant, ACT Acquisition Corp., ACT Medical, Inc., The Tolkoff Family Limited Partnership and M.  Joshua Tolkoff
*	3.1	Form of registrant’s restated certificate of incorporation
*	3.2	Form of registrant’s amended and restated bylaws
*	4.1	Credit Agreement among the registrant, MedSource Technologies, LLC, the domestic subsidiaries of the registrant from time to time party thereto, the lenders party thereto, First Union National Bank, as administrative agent, and First Union Securities, Inc., as lead arranger.
*	5.1	Opinion of Jenkens & Gilchrist Parker Chapin LLP as to the legality of the securities being offered
+	10.1	Registration Rights Agreement dated as of March 30, 1999 among the registrant, William J. Kidd, Carla G. Kidd, Edward R. Mandell, as Trustee under the Catherine M. Kidd Trust, Edward R. Mandell, as Trustee under the Cara E. Kidd Trust, Edward R. Mandell, as Trustee under the Thomas C. Kidd Trust, Clarice E. Webb, John P. Neafsey, Richard J. Effress, Andrew D. Lipman, Adam D. Lehrhoff, John C. Hertig, William Altieri, Portlyn Corporation, Kelco Industries, Inc., The MicroSpring Company, Inc., Laurence S. Derose Trust, BMD Irrevocable Trust of 1998, Jeffrey L. Derose Irrevocable Trust, Kevin L. Derose Irrevocable Trust, W.N. Rushwood, Inc. d/b/a Hayden Precision Industries, Peter J. Neidecker, Peter J. Neidecker Limited Partnership, Peter C. Neidecker Irrevocable Trust, Sally N. Morris and Sylvia N. Coors

II-4

	Exhibit Number	Description
+	10.2	Registration Rights Agreement dated as of March 30, 1999 among the registrant, William J. Kidd, Carla G. Kidd, Edward R. Mandell, as Trustee under the Catherine M. Kidd Trust, Edward R. Mandell, as Trustee under the Cara E. Kidd Trust, Edward R. Mandell, as Trustee under the Thomas C. Kidd Trust, Clarice E. Webb, John P. Neafsey, Richard J. Effress, Andrew D. Lipman, Adam D. Lehrhoff, John C. Hertig, William Altieri, J.H. Whitney Mezzanine Fund, L.P., Whitney Strategic Partners, III, L.P., J.H. Whitney III, L.P. and German American Capital Corporation
+	10.3	Registration Rights Agreement dated as of May 14, 1999 between the registrant and IndoSuez MST Partners
+	10.2	Registration Rights Agreement dated as of March 30, 1999 among the registrant, William J. Kidd, Carla G. Kidd, Edward R. Mandell, as Trustee under the Catherine M. Kidd Trust, Edward R. Mandell, as Trustee under the Cara E. Kidd Trust, Edward R. Mandell, as Trustee under the Thomas C. Kidd Trust, Clarice E. Webb, John P. Neafsey, Richard J. Effress, Andrew D. Lipman, Adam D. Lehrhoff, John C. Hertig, William Altieri, J.H. Whitney Mezzanine Fund, L.P., Whitney Strategic Partners, III, L.P., J.H. Whitney III, L.P. and German American Capital Corporation
+	10.4	Registration Rights Agreement dated as of May 15, 2000 among the registrant, Karl F. Hens and Thomas J. Roche
+	10.5	Registration Rights Agreement dated as of January 31, 2000 among the registrant, Donald R. Rochelo and Donna L. Rochelo
+	10.6	Registration Rights Agreement dated as of October 25, 2000 among the registrant, The 1818 Fund III, L.P., William J. Kidd, Carla G. Kidd, Edward R. Mandell, as trustee under the William J. Kidd Grantor Trust, Richard J. Effress, Andrew D. Lipman, John W. Galiardo and Manire Limited Partnership
+	10.7	Registration Rights Agreement dated as of December 29, 2000 among the registrant and each of the former stockholders of ACT Medical, Inc.
+	10.8	Registration Rights Agreement dated as of February 27, 2001 between the registrant and Thomas Weisel Partners LLC
+	10.9	Registration Rights Agreement dated as of December 31, 2001 among the registrant and each of the investors in its Series E Preferred Stock
+	10.10	Registration Rights Agreement dated as of January 4, 2002 among the registrant and each of the former stockholders of HV Technologies, Inc.
	10.11	Form of 1999 Stock Plan of the registrant (as amended and restated through December 14, 2001)
*	10.12	Form of option contract between the registrant and its officers
+	10.13	Form of option contract between the registrant and its directors
+	10.14	Omnibus Stock Plan of ACT Medical, Inc. (as amended and restated through April 4, 2000)
+	10.15	2001 Employee Stock Purchase Plan of the registrant
	10.16	Employment agreement dated as of August 8, 2000 between the registrant and Richard J. Effress.
	10.17	Employment agreement dated as of April 1, 1999 between the registrant and James Drill
	10.18	Employment agreement between the registrant and William Ellerkamp.
	10.19	Employment agreement dated as of April 1, 1999 between the registrant and Ralph Polumbo
	10.20	Employment agreement between the registrant and Joseph J. Caffarelli
	10.21	Employment agreement between the registrant and Rick McWhorter
*	10.22	Severance Agreement dated as of February     , 2002 between the registrant and Richard  J. Effress
*	10.23	Severance Agreement dated as of February     , 2002 between the registrant and Joseph  J. Caffarelli
*	10.24	Severance Agreement dated as of February     , 2002 between the registrant and Dan Croteau
*	10.25	Severance Agreement dated as of February     , 2002 between the registrant and Jim Drill
*	10.26	Severance Agreement dated as of February     , 2002 between the registrant and William Ellerkamp
*	10.27	Severance Agreement dated as of February     , 2002 between the registrant and Rick McWhorter
*	10.28	Severance Agreement dated as of February     , 2002 between the registrant and Karl Hens
*	10.29	Severance Agreement dated as of February     , 2002 between the registrant and Ralph Polumbo
*	10.30	Severance Agreement dated as of February     , 2002 between the registrant and Rich Snider
	10.31	Business Conduct Policy and form of acknowledgement for the registrant’s employees
	10.32	Form of Confidentiality Agreement for the registrant’s employees

II-5

	Exhibit Number	Description
	10.33	Form of Disclosure Policy and acknowledgement for the registrant’s employees
*	10.34	Office/Tech Lease dated March 30, 1999 between Paul D. Kelly and Kelco Acquisition LLC in respect of the premises located at 6400-6420 Zane Avenue North, Brooklyn Park, Minnesota
*	10.35	Office/Tech Lease dated March 30, 1999 between Paul D. Kelly and Kelco Acquisition LLC in respect of the premises located at 6320 Zane Avenue North, Brooklyn Park, Minnesota
	21.1	List of Subsidiaries
	23.1	Consent of Ernst & Young LLP
	23.2	Consent of Bertram, Vallez, Kaplan & Talbot, Ltd.
	23.3	Consent of James F. Yochum, CPA
	23.4	Consent of PricewaterhouseCoopers LLP
	23.5	Consent of Grant Thornton, LLP
*	23.6	Consent of Jenkens & Gilchrist Parker Chapin LLP (included in their opinion filed as Exhibit 5.1)
+	24.1	Power of Attorney

* To be filed by amendment.

+ Previously filed.

(b)    Financial Statement Schedules

Schedule II — Valuation and Qualifying Accounts — MedSource Technologies, Inc.

Schedule II — Valuation and Qualifying Accounts — Kelco Industries, Inc.

Schedule II — Valuation and Qualifying Accounts — The MicroSpring Company, Inc.

Schedule II — Valuation and Qualifying Accounts — Texcel, Inc.

All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and are therefore omitted.

Item 17.    Undertakings.

The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the Underwriting Agreement certificates in such denominations and registered in such names as requested by the underwriters to permit prompt delivery to each purchaser.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

II-6

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis, State of Minnesota, on the 20th day of February, 2002.

MEDSOURCE TECHNOLOGIES, INC.

By:                     /s/    Richard J. Effress

Richard J. Effress

Chairman

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated.

Signatures	Title	Date
/s/    Richard J. Effress Richard J. Effress	Chairman of the Board of Directors and Chief Executive Officer (Principal Executive Officer)	February 20, 2002
/s/    Joseph J. Caffarelli Joseph J. Caffarelli	Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	February 20, 2002
* Joseph Ciffolillo	Director	February 20, 2002
* John Galiardo	Director	February 20, 2002
* Wayne Kelly	Director	February 20, 2002
* William J. Kidd	Director	February 20, 2002
* T. Michael Long	Director	February 20, 2002
* Ross Manire	Director	February 20, 2002
Carl Sloane	Director

*By:                 /s/    Joseph J. Caffarelli

Joseph J. Caffarelli

Attorney-in-fact

II-7

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

MEDSOURCE TECHNOLOGIES, INC. AND SUBSIDIARIES

(In 000’s)

COL. A	COL. B		COL. C				COL. D			COL. E
			Additions
Description	Balance at Beginning of Period		Charged to Costs and Expenses		Charged to Other Accounts—Describe		Deductions—Describe			Balance at End of Period
Allowance for doubtful accounts:
Three-months ended July 3, 1999	$	0	$	58	$	191				$	249
Year ended July 1, 2000		249		75		116	$	(13	)		427
Year ended June 30, 2001		427		101		295		(227	)		596

Charged to Other Accounts represents allowances from acquired companies.

Deductions were for write-offs against the allowance.

S-1

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

KELCO INDUSTRIES, INC.

(In 000’s)

COL. A	COL. B		COL. C			COL. D			COL. E
			Additions
Description	Balance at Beginning of Period		Charged to Costs and Expenses		Charged to Other Accounts—Describe	Deductions—Describe			Balance at End of Period
Allowance for doubtful accounts:
Period ended March 30, 1999	$	0	$	63		$	(2	)	$	61

Deductions were for write-offs against the allowance.

S-2

Report of Independent Accounts on

Financial Statement Schedule

To the Board of Directors and Stockholders of

The MicroSpring Company, Inc.

Our audit of the financial statements of The MicroSpring Company, Inc. referred to in our report dated April 2, 1999 appearing in the Registration Statement on Form S-1 of MedSource Technologies, Inc. also included an audit of the financial statement schedule listed in Item 16(b) of this Registration Statement. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related financial statements.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

April 2, 1999

S-3

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

THE MICROSPRING COMPANY, INC.

(In 000’s)

COL. A	COL. B		COL. C			COL. D			COL. E
			Additions
Description	Balance at Beginning of Period		Charged to Costs and Expenses		Charged to Other Accounts—Describe	Deductions—Describe			Balance at End of Period
Allowance for doubtful accounts:
Year ended December 31, 1998	$	27				$	(7	)	$	20
Three-months ended March 30, 1999		20								20
Allowance for sales returns:
Year ended December 31, 1998		136	$	164						300
Three-months ended March 30, 1999	$	300				$	(250	)	$	50

Deductions were for write-offs against the allowances.

S-4

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

TEXCEL, INC.

(In 000’s)

COL. A	COL. B		COL. C			COL. D			COL. E
			Additions
Description	Balance at Beginning of Period		Charged to Costs and Expenses		Charged to Other Accounts—Describe	Deductions—Describe			Balance at End of Period
Allowance for doubtful accounts:
Year ended December 31, 1998	$	41	$	43		$	(24	)	$	60
Three-months ended March 30, 1999	$	60							$	60

Deductions were for write-offs against the allowance.

S-5

EXHIBIT INDEX

	Exhibit Number	Description
*	1.1	Form of Underwriting Agreement
	2.1	Agreement and Plan of Merger dated as of December 8, 2000 among the registrant, ACT Acquisition Corp., ACT Medical, Inc., The Tolkoff Family Limited Partnership and M.  Joshua Tolkoff
*	3.1	Form of registrant’s restated certificate of incorporation
*	3.2	Form of registrant’s amended and restated bylaws
*	4.1	Credit Agreement among the registrant, MedSource Technologies, LLC, the domestic subsidiaries of the registrant from time to time party thereto, the lenders party thereto, First Union National Bank, as administrative agent, and First Union Securities, Inc., as lead arranger.
*	5.1	Opinion of Jenkens & Gilchrist Parker Chapin LLP as to the legality of the securities being offered
+	10.1	Registration Rights Agreement dated as of March 30, 1999 among the registrant, William J. Kidd, Carla G. Kidd, Edward R. Mandell, as Trustee under the Catherine M. Kidd Trust, Edward R. Mandell, as Trustee under the Cara E. Kidd Trust, Edward R. Mandell, as Trustee under the Thomas C. Kidd Trust, Clarice E. Webb, John P. Neafsey, Richard J. Effress, Andrew D. Lipman, Adam D. Lehrhoff, John C. Hertig, William Altieri, Portlyn Corporation, Kelco Industries, Inc., The MicroSpring Company, Inc., Laurence S. Derose Trust, BMD Irrevocable Trust of 1998, Jeffrey L. Derose Irrevocable Trust, Kevin L. Derose Irrevocable Trust, W.N. Rushwood, Inc. d/b/a Hayden Precision Industries, Peter J. Neidecker, Peter J. Neidecker Limited Partnership, Peter C. Neidecker Irrevocable Trust, Sally N. Morris and Sylvia N. Coors
+	10.2	Registration Rights Agreement dated as of March 30, 1999 among the registrant, William J. Kidd, Carla G. Kidd, Edward R. Mandell, as Trustee under the Catherine M. Kidd Trust, Edward R. Mandell, as Trustee under the Cara E. Kidd Trust, Edward R. Mandell, as Trustee under the Thomas C. Kidd Trust, Clarice E. Webb, John P. Neafsey, Richard J. Effress, Andrew D. Lipman, Adam D. Lehrhoff, John C. Hertig, William Altieri, J.H. Whitney Mezzanine Fund, L.P., Whitney Strategic Partners, III, L.P., J.H. Whitney III, L.P. and German American Capital Corporation
+	10.3	Registration Rights Agreement dated as of May 14, 1999 between the registrant and IndoSuez MST Partners
+	10.2	Registration Rights Agreement dated as of March 30, 1999 among the registrant, William J. Kidd, Carla G. Kidd, Edward R. Mandell, as Trustee under the Catherine M. Kidd Trust, Edward R. Mandell, as Trustee under the Cara E. Kidd Trust, Edward R. Mandell, as Trustee under the Thomas C. Kidd Trust, Clarice E. Webb, John P. Neafsey, Richard J. Effress, Andrew D. Lipman, Adam D. Lehrhoff, John C. Hertig, William Altieri, J.H. Whitney Mezzanine Fund, L.P., Whitney Strategic Partners, III, L.P., J.H. Whitney III, L.P. and German American Capital Corporation
+	10.4	Registration Rights Agreement dated as of May 15, 2000 among the registrant, Karl F. Hens and Thomas J. Roche
+	10.5	Registration Rights Agreement dated as of January 31, 2000 among the registrant, Donald R. Rochelo and Donna L. Rochelo
+	10.6	Registration Rights Agreement dated as of October 25, 2000 among the registrant, The 1818 Fund III, L.P., William J. Kidd, Carla G. Kidd, Edward R. Mandell, as trustee under the William J. Kidd Grantor Trust, Richard J. Effress, Andrew D. Lipman, John W. Galiardo and Manire Limited Partnership
+	10.7	Registration Rights Agreement dated as of December 29, 2000 among the registrant and each of the former stockholders of ACT Medical, Inc.
+	10.8	Registration Rights Agreement dated as of February 27, 2001 between the registrant and Thomas Weisel Partners LLC
+	10.9	Registration Rights Agreement dated as of December 31, 2001 among the registrant and each of the investors in its Series E Preferred Stock
+	10.10	Registration Rights Agreement dated as of January 4, 2002 among the registrant and each of the former stockholders of HV Technologies, Inc.
	10.11	Form of 1999 Stock Plan of the registrant (as amended and restated through December 14, 2001)
	10.12	Form of option contract between the registrant and its officers
+	10.13	Form of option contract between the registrant and its directors
+	10.14	Omnibus Stock Plan of ACT Medical, Inc. (as amended and restated through April 4, 2000)

	Exhibit Number	Description
+	10.15	2001 Employee Stock Purchase Plan of the registrant
	10.16	Employment agreement dated as of August 8, 2000 between the registrant and Richard J. Effress.
	10.17	Employment agreement dated as of April 1, 1999 between the registrant and James Drill
	10.18	Employment agreement between the registrant and William Ellerkamp.

	10.19	Employment agreement dated as of April 1, 1999 between the registrant and Ralph Polumbo
	10.20	Employment agreement between the registrant and Joseph J. Caffarelli
	10.21	Employment agreement between the registrant and Rick McWhorter
*	10.22	Severance Agreement dated as of February     , 2002 between the registrant and Richard  J. Effress
*	10.23	Severance Agreement dated as of February     , 2002 between the registrant and Joseph  J. Caffarelli
*	10.24	Severance Agreement dated as of February     , 2002 between the registrant and Dan Croteau
*	10.25	Severance Agreement dated as of February     , 2002 between the registrant and Jim Drill
*	10.26	Severance Agreement dated as of February     , 2002 between the registrant and William Ellerkamp
*	10.27	Severance Agreement dated as of February     , 2002 between the registrant and Rick McWhorter
*	10.28	Severance Agreement dated as of February     , 2002 between the registrant and Karl Hens
*	10.29	Severance Agreement dated as of February     , 2002 between the registrant and Ralph Polumbo
*	10.30	Severance Agreement dated as of February     , 2002 between the registrant and Rich Snider
	10.31	Business Conduct Policy and form of acknowledgement for the registrant’s employees
	10.32	Form of Confidentiality Agreement for the registrant’s employees
	10.33	Form of Disclosure Policy and acknowledgement for the registrant’s employees
*	10.34	Office/Tech Lease dated March 30, 1999 between Paul D. Kelly and Kelco Acquisition LLC in respect of the premises located at 6400-6420 Zane Avenue North, Brooklyn Park, Minnesota
*	10.35	Office/Tech Lease dated March 30, 1999 between Paul D. Kelly and Kelco Acquisition LLC in respect of the premises located at 6320 Zane Avenue North, Brooklyn Park, Minnesota
	21.1	List of Subsidiaries
	23.1	Consent of Ernst & Young LLP
	23.2	Consent of Bertram, Vallez, Kaplan & Talbot, Ltd.
	23.3	Consent of James F. Yochum, CPA
	23.4	Consent of PricewaterhouseCoopers LLP
	23.5	Consent of Grant Thornton, LLP
*	23.6	Consent of Jenkens & Gilchrist Parker Chapin LLP (included in their opinion filed as Exhibit 5.1)
+	24.1	Power of Attorney

* To be filed by amendment.

+ Previously filed.

EX-2.1

                                                                    Exhibit 2.1
                                                                   -------------









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                          AGREEMENT AND PLAN OF MERGER

                                  by and among

                              ACT Acquisition Corp.
                                 (the "Buyer"),

                                       and

                              its ultimate parent,
                          MedSource Technologies, Inc.,
                                  ("MedSource")

                               ACT Medical, Inc.,
                                 (the "Company")

                                       and

          The Tolkoff Family Limited Partnership and M. Joshua Tolkoff
                            (the "Principal Parties")

                                December 8, 2000

================================================================================



                                TABLE OF CONTENTS

                                                                          
1.   The Merger ............................................................   1
     1.1      The Merger                                                       1
     1.2      Effect of the Merger .........................................   1
     1.3      Consummation of the Merger ...................................   1
     1.4      Charter; By-laws Directors and Officers ......................   1
     1.5      The Closing ..................................................   1
     1.6      Further Assurances ...........................................   2
     1.7      Tax Consequences .............................................   2

2.   Conversion of Shares ..................................................   2
     2.1      Conversion of Shares .........................................   2
     2.2      Cancellation and Retirement of Company Shares ................   2
     2.3      Treatment of Stock Options ...................................   2
     2.4      Surrender and Exchange of Company Shares .....................   2
     2.5      No Further Ownership Rights in Company Common Stock ..........   3
     2.6      Closing of Stock Transfer Book ...............................   3
     2.7      Majority Stockholders Approval and Waiver ....................   3
     2.8      Fractional Shares ............................................   3
     2.9      Lost Certificates ............................................   3
     2.10     Transfer Taxes ...............................................   3
     2.11     Put Shares ...................................................   3

3.   Dissenting Shares .....................................................   4
     3.1      Dissenting Shares ............................................   4

4.   Representations and Warranties of the Company .........................   4
     4.1      Organization .................................................   4
     4.2      Capitalization; Subsidiaries .................................   4
     4.3      Authorization; Validity of Agreement .........................   5
     4.4      No Violations; Consents and Approvals ........................   5
     4.5      Financial Statements .........................................   5
     4.6      No Material Adverse Change ...................................   5
     4.7      No Undisclosed Liabilities ...................................   6
     4.8      Litigation; Compliance with Law; Licenses and Permits ........   6
     4.9      Employee Benefit Plans; ERISA ................................   6
     4.10     Real Property ................................................   7
     4.11     Intellectual Property Rights; Computer Software ..............   8
     4.12     Tangible Personal Property ...................................  10
     4.13     Material Contracts ...........................................  10
     4.14     Taxes ........................................................  11
     4.15     Affiliated Party Transactions ................................  13
     4.16     Environmental Matters ........................................  13
     4.17     No Brokers ...................................................  14
     4.18     Receivables ..................................................  14
     4.19     Inventories ..................................................  14
     4.20     Product Claims ...............................................  15
     4.21     Warranties and Returns .......................................  15
     4.22     Assets Utilized in the Business ..............................  15
     4.23     Insurance ....................................................  15
     4.24     Delivery of Documents; Corporate Records .....................  15
     4.25     Customers, Suppliers and Distributors ........................  15
     4.26     Labor Matters ................................................  15
     4.27     Bank Accounts ................................................  16
     4.28     Directors, Officers and Certain Employees ....................  16
     4.29     No Misstatements or Omissions of the Company .................  16
     4.30     Other Representations ........................................  16

5.   Representations and Warranties of the Principal Parties ...............  16





                                                                                                        
      5.1      Ownership; Authorization; Validity of Agreement ...........................................  16
      5.2      No Violations; Consents and Approvals .....................................................  16
      5.3      Other Representations .....................................................................  16

6.    Representations and Warranties of the Buyer and MedSource ..........................................  17
      6.1      Organization of the Buyer Group ...........................................................  17
      6.2      Capital Structure .........................................................................  17
      6.3      Subsidiaries ..............................................................................  17
      6.4      Authorization; Validity of Agreement ......................................................  17
      6.5      No Violations, Consents and Approvals .....................................................  18
      6.6      Valid Issuance of MedSource Shares, Etc. ..................................................  18
      6.7      Financial Statements ......................................................................  18
      6.8      No Material Adverse Change ................................................................  18
      6.9      No Undisclosed Liabilities ................................................................  18
      6.10     Litigation ................................................................................  19
      6.11     Compliance with Law; Licenses and Permits .................................................  19
      6.12     No Brokers ................................................................................  19
      6.13     Delivery of Documents; Corporate Records ..................................................  19
      6.14     Compliance with Securities Laws ...........................................................  19
      6.15     No Misstatements or Omissions .............................................................  19
      6.16     Other Representations .....................................................................  19

7.    Covenants and Other Agreements of the Parties ......................................................  20
      7.1      Tax Returns; Taxes ........................................................................  20
      7.2      Non-Disclosure of Confidential Information ................................................  20
      7.3      No Solicitation of Employees, Suppliers or Customers ......................................  20
      7.4      Non-Competition ...........................................................................  21
      7.5      Other Actions .............................................................................  21
      7.6      Required Consents .........................................................................  21
      7.7      Stockholders' Agreement and Registration Rights Agreement .................................  21
      7.8      Employment Agreement ......................................................................  21
      7.9      Stock Options .............................................................................  21
      7.10     Put Agreements ............................................................................  22
      7.11     Normal Course of Business .................................................................  22
      7.12     Actions Prior to Closing ..................................................................  22
      7.13     Preparation of Proxy Statement/Offering Memorandum; Stockholders Meeting ..................  23
      7.14     Access to Information .....................................................................  23
      7.15     No Solicitation ...........................................................................  23
      7.16     Blue Sky Laws .............................................................................  24
      7.17     Directors' and Officers' Insurance ........................................................  24
      7.18     Notices of Breach .........................................................................  24

8.    Closing Conditions .................................................................................  24
      8.1      Deliveries of the Company .................................................................  24
      8.2      Deliveries of the Buyer Group .............................................................  25
      8.3      Conditions Precedent to Obligations of the Company ........................................  25
      8.4      Conditions Precedent to Obligations of the Buyer and MedSource ............................  25

9.    Termination; Right to Proceed ......................................................................  26
      9.1      Termination ...............................................................................  26
      9.2      Right to Proceed ..........................................................................  27

10.   Indemnification ....................................................................................  27
      10.1     Survival of Representations and Warranties of the Company or the Principal Parties ........  27
      10.2     Survival of Representations and Warranties of the Buyer Group .............................  27
      10.3     Indemnification by the Stockholders and the Principal Parties .............................  27
      10.4     Indemnification by the Buyer Group ........................................................  28
      10.5     Indemnification Procedures ................................................................  28
      10.6     Limitations on Indemnification by the Stockholders ........................................  29
      10.7     Limitations on Indemnification by the Buyer Group .........................................  29
      10.8     Other Indemnification Provisions ..........................................................  29



                                       ii



                                                                          
11.  Miscellaneous .......................................................... 29
     11.1     Stockholders' Representative .................................. 29
     11.2     Transaction Fees and Expenses ................................. 30
     11.3     Notices ....................................................... 30
     11.4     Amendment ..................................................... 31
     11.5     Waiver ........................................................ 31
     11.6     Governing Law ................................................. 31
     11.7     Jurisdiction .................................................. 31
     11.8     Remedies ...................................................... 31
     11.9     Severability .................................................. 31
     11.10    Further Assurances ............................................ 31
     11.11    Assignment .................................................... 31
     11.12    No Third Party Beneficiaries .................................. 32
     11.13    Entire Agreement .............................................. 32
     11.14    Headings ...................................................... 32
     11.15    Counterparts; Facsimile Signatures ............................ 32
     11.16    Publicity and Disclosure ...................................... 32



                                      iii



SCHEDULES
- ---------

Schedule I          List of Majority Stockholders
Schedule 4.2(a)     Capitalization
Schedule 4.2(b)     Subsidiaries
Schedule 4.4(b)     Consents and Approvals
Schedule 4.6        Material Adverse Change
Schedule 4.7        Undisclosed Liabilities
Schedule 4.8(a)     Legal Proceedings
Schedule 4.8(c)     Material Violations of Law
Schedule 4.8(d)     Applicability and Validity of License and Consents
Schedule 4.9(a)     Employee Benefit Plans
Schedule 4.10(b)    Leases
Schedule 4.10(c)    Service Contracts
Schedule 4.11(a)    Specific Intellectual Property
Schedule 4.11(b)    Intellectual Property
Schedule 4.12(b)    Fixed Assets Ledger
Schedule 4.13       Material Contracts
Schedule 4.14(a)    Taxes
Schedule 4.14(b)    Tax Returns
Schedule 4.14(c)    Jurisdictions - Tax Proceedings
Schedule 4.15       Affiliated Party Transactions
Schedule 4.16       Environmental Matters
Schedule 4.18       Receivables
Schedule 4.19       Inventories
Schedule 4.20       Service and Product Liability Claims
Schedule 4.21       Warranties and Returns Policies; Product Failures or Defects
Schedule 4.23       Insurance
Schedule 4.25       Customers, Suppliers and Distributors
Schedule 4.26       Labor Matters
Schedule 4.27       Bank Accounts
Schedule 4.28       Directors, Officers, Certain Employees
Schedule 5.1        List of Company Shares Owned by Tolkoff Partnership
Schedule 6.2(c)     Capital Structure of MedSource
Schedule 6.3        List of Subsidiaries
Schedule 6.5        No Violations, Consents and Approvals
Schedule 6.9        Undisclosed Liabilities
Schedule 6.11       Compliance with Laws; Licenses and Permits
Schedule 7.3        List of Tolkoff Entities
Schedule 7.11       Normal Course of Business
Schedule 7.12       Actions Prior to Closing
Schedule 7.12(b)    Debt

                                       iv



EXHIBITS
- --------

Exhibit 2.1(a)             Form of Certificate of Designation
Exhibit 2.1(b)             Form of Escrow Agreement
Exhibit 2.7                Form of Irrevocable Proxy and Voting Agreement
Exhibit 7.7(a)             Form of Stockholders' Agreement
Exhibit 7.7(b)             Form of Registration Rights Agreement
Exhibit 8.1(b)             Form of Legal Opinion of Seller's Counsel
Exhibit 8.2(b)             Form Legal Opinion of Buyer's Counsel

                                       v



                          AGREEMENT AND PLAN OF MERGER

     This Agreement and Plan of Merger (this "Agreement") is made as of December
8, 2000 by and among ACT Acquisition Corp., a Delaware corporation (the
"Buyer"), its ultimate parent, MedSource Technologies, Inc., a Delaware
corporation ("MedSource"), ACT Medical, Inc., a Massachusetts corporation (the
"Company" and together with the Buyer, the "Constituent Corporations"), The
Tolkoff Family Limited Partnership, a Massachusetts limited partnership (the
"Tolkoff Partnership"), and M. Joshua Tolkoff, an individual ("Tolkoff" and
together with the Tolkoff Partnership, the "Principal Parties"). The Buyer and
MedSource are hereinafter referred to collectively as the "Buyer Group."

     WHEREAS, upon the terms and subject to the conditions of this Agreement,
the Company, Buyer and MedSource deem it advisable and in the best interests of
their respective corporations that the Company be merged with and into the Buyer
(the "Merger") in accordance with this Agreement and the applicable provisions
of the Massachusetts Business Corporation Law (the "MBCL") and the Delaware
General Corporation Law (the "DGCL");

     WHEREAS, MedSource Technologies, LLC, the sole stockholder of the Buyer,
has adopted this Agreement in accordance with Section 252(c) of the DGCL;

     WHEREAS, approval of the Merger and this Agreement requires a vote for
adoption of this Agreement by the holders of at least two-thirds of the shares
of common stock, no par value per share, of the Company (the "Company Common
Stock") at a meeting at which a quorum is present, in the manner in accordance
with the MBCL (the "Stockholder Vote"); and

     WHEREAS, as a condition and inducement to the Buyer Group's willingness to
enter into this Agreement, each of the Tolkoff Partnership and those other
stockholders identified on Schedule I (collectively, the "Majority
Stockholders") are entering into an irrevocable proxy and voting agreement as of
the date hereof substantially in the form attached hereto as Exhibit 2.7.

     NOW, THEREFORE, in consideration of the premises, the mutual covenants and
agreements of the parties set forth herein, and of other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
each of the parties, the parties do hereby represent, warrant and agree as
follows:

1.   The Merger.

     1.1 The Merger. Upon the terms and subject to the conditions set forth in
         ----------
this Agreement and in accordance with the MBCL and DGCL, at the Effective Time
the Company will be merged with and into the Buyer, the separate existence of
the Company shall cease, and the Buyer shall continue as the surviving
corporation in the Merger (the "Surviving Corporation").

     1.2 Effect of the Merger. The Merger shall have the effects set forth in
         --------------------
Section 259 of the DGCL. Without limiting the generality of the foregoing, and
subject thereto, upon the Effective Time, all the assets, properties, rights,
privileges, powers and franchises of the Constituent Corporations shall vest in
the Surviving Corporation and all debts, liabilities and duties of the
Constituent Corporations shall become the debts, liabilities and duties of the
Surviving Corporation.

     1.3 Consummation of the Merger. The Merger shall become effective upon the
         --------------------------
filing with the Secretary of the Commonwealth of The Commonwealth of
Massachusetts and the Secretary of State of the State of Delaware of properly
executed articles or certificate of merger (the "Articles of Merger") on the
Closing Date (as hereinafter defined). The Merger shall be effective when the
Articles of Merger have been duly filed or such subsequent time as the
Constituent Corporations shall agree and as shall be specified in the Articles
of Merger. The date and time when the Merger is effective is referred to as the
"Effective Time."

     1.4 Charter; By-laws Directors and Officers. The Certificate of
         ---------------------------------------
Incorporation of the Surviving Corporation from and after the Effective Time
shall be the Certificate of Incorporation of the Buyer immediately prior to the
Effective Time unless amended pursuant to the Articles of Merger and thereafter
amended in accordance with the provisions thereof and as provided by applicable
law, except that the name in the Certificate of Incorporation of the Buyer shall
be amended to read "The name of the corporation is MedSource Technologies,
Newton Inc." The Bylaws of the Surviving Corporation from and after the
Effective Time shall be the Bylaws of the Buyer as in effect immediately prior
to the Effective Time. The initial directors and officers of the Surviving
Corporation on and after the Effective Time shall be the directors and officers,
respectively, of the Buyer immediately prior to the Effective Time, in each case
until the earlier of their death, resignation or removal or until their
respective successors are duly elected and qualified.

     1.5 The Closing. The consummation of the Merger and the other transactions
         -----------
contemplated by this Agreement (the "Closing") shall take place at the offices
of the Buyer Group's counsel in Minneapolis, Minnesota on the first business day
after the satisfaction or waiver of the conditions (excluding conditions that,
by their nature, cannot be satisfied until the Closing



Date (as defined below)) set forth in Article 8 hereof, unless this Agreement
has been terminated pursuant to its terms or unless another date and time is
agreed to in writing by the parties hereto. The date on which the Closing occurs
is referred to as the "Closing Date."

     1.6  Further Assurances. On and after the Effective Time, each of the
          ------------------
parties to this Agreement shall from time to time, at the request of any of the
other parties, promptly execute such instruments and take such other actions as
the requesting party may reasonably request to vest, perform or confirm, of
record or otherwise, in the Surviving Corporation, its respective rights, title
or interest in, to or under any of the rights, privileges, powers, franchises,
properties or assets of the Company, or otherwise to evidence or implement the
transactions contemplated by this Agreement so long as such actions are
consistent with this Agreement.

     1.7  Tax Consequences. It is intended that the Merger shall constitute a
          ----------------
reorganization described in Section 368(a)(1)(A) and 368(a)(2)(D) of the
Internal Revenue Code of 1986, as amended (the "Code"), and that this Agreement
shall constitute a "plan of reorganization" for the purposes of Section 368 of
the Code. The parties shall treat the transactions contemplated hereby
consistently with such intention.

2.   Conversion of Shares.

     2.1  Conversion of Shares.
          --------------------

          (a) Except as contemplated by Sections 2.2, 2.11 and 3.1 hereof, by
virtue of the Merger and without any action on the part of the holders of any
shares of Company Common Stock, at the Effective Time, each issued and
outstanding share of Company Common Stock (the "Company Shares"), as shown on
Schedule 4.2(a), shall be converted into the right to receive .00943 (the
- ---------------
"Exchange Ratio") validly issued, fully paid and nonassessable shares of
MedSource Series D 6% Cumulative Convertible Preferred Stock, par value $.01 per
share (the "MedSource Shares"), with such rights and preferences as set forth in
the Certificate of Designation of MedSource, substantially in the form attached
hereto as Exhibit 2.1(a). As a result of the Merger and without any action on
          --------------
the part of the holders of the Company Shares, an aggregate of 12,675 MedSource
Shares issued at the closing hereunder shall be paid into and held in escrow in
accordance with the terms of the escrow agreement substantially in the form
attached hereto as Exhibit 2.1(b) (the "Escrow Agreement"), subject to the
                   --------------
adjustment to such escrow amount as provided in Sections 7.1(b) and 7.12(b) and,
if determinable prior to the Effective Time, Section 11.2 hereof.

          (b) At the Effective Time, each issued and outstanding share of common
stock of the Buyer shall remain outstanding as one share of common stock of the
Surviving Corporation and shall not be converted into any other securities or
cash in the Merger. The certificate for such shares of common stock of the Buyer
shall not be surrendered or in any way modified by reason of the Merger. No
capital stock of the Buyer will be issued in the Merger.

     2.2  Cancellation and Retirement of Company Shares. As a result of the
          ---------------------------------------------
Merger and without any action on the part of the holders thereof, at the
Effective Time, all of the Company Shares shall cease to be outstanding and
shall be canceled and retired and shall cease to exist, and each holder of a
certificate which immediately prior to the Effective Time represented any such
Company Shares (such certificate or other evidence of ownership, a
"Certificate") shall thereafter cease to have any rights with respect to such
Company Shares, except the right to receive the applicable MedSource Shares to
be issued in consideration therefor upon surrender of such Certificate in
accordance with Section 2.4 hereof, subject to Sections 2.11 and 3.1 hereof. Any
shares of capital stock held in the treasury of the Company immediately prior to
the Effective Time shall automatically be canceled and extinguished without any
conversion thereof and no payment shall be made with respect thereto.

     2.3  Treatment of Stock Options. At the Effective Time, all outstanding
          --------------------------
options to purchase Company Common Stock (the "Company Stock Options") will
become options to purchase MedSource Shares in accordance with Section 7.9
hereof.

     2.4  Surrender and Exchange of Company Shares.
          ----------------------------------------

          (a) On the Closing Date, MedSource or the Surviving Corporation shall
deliver to each holder of Company Shares at the Effective Time a letter of
transmittal for use in connection with the exchange of Company Shares for
MedSource Shares. Each holder of Company Shares upon surrender to MedSource of
all Certificates representing the Company Shares, together with a properly
completed letter of transmittal covering such Company Shares and, if not already
received by MedSource, executed copies of the Stockholders' Agreement (as
defined in Section 7.7 hereof) and the Registration Rights Agreement (as defined
in Section 7.7 hereof), shall be entitled upon such surrender and delivery of
the Certificates representing the Company Shares and such executed agreements to
receive in exchange therefor, without cost to them, the applicable MedSource
Shares, and the Certificate or Certificates so surrendered in exchange for such
consideration shall forthwith be canceled by MedSource.

                                       2



          (b) At the Effective Time, MedSource shall deliver to the escrow
agent, in the name of the escrow agent, a certificate representing 12,675
MedSource Shares (the "Escrowed Shares") pursuant to the Escrow Agreement and
for the purposes of Article 10 and Sections 7.1(b), 7.12(b) and 11.2 hereof.
Each holder of shares of Company Common Stock entitled to receive MedSource
Shares in the Merger pursuant to the terms of this Agreement will contribute
MedSource Shares to the escrow on a pro rata basis equal to the total of the
Escrowed Shares multiplied by a fraction the numerator of which is the number of
MedSource Shares such holder is entitled to receive in the Merger in accordance
with Section 2.1(a) hereof and the denominator of which is the total number of
MedSource Shares all holders of Company Common Stock are entitled to receive in
accordance with Section 2.1(a) hereof (excluding therefrom MedSource Shares
otherwise issuable in respect of Dissenting Shares (as defined in Section 3.1
hereof)). Upon the surrender for cancellation of the certificates representing
the Company Shares pursuant to Section 2.4(a) above, MedSource shall deliver to
the holders of Company Shares Certificates representing the applicable MedSource
Shares, each registered in the name of the individuals as set forth in the
letter of transmittal.

          (c) No dividends or other distributions with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Company Common Stock that such holder would be entitled
to receive upon surrender of such Certificate until such holder shall surrender
such Certificate and make the other required deliveries in accordance with
Section 2.4(a) hereof. Subject to the effect of applicable laws, following
surrender of any such Certificate, there shall be paid to the record holder
thereof without interest, at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time and
a payment date subsequent to such surrender payable with respect to such shares
of Company Common Stock.

          (d) Promptly after the Effective Time but in no event more than five
(5) business days thereafter, MedSource shall issue to each holder of an
outstanding Company Stock Option a notice describing the assumption, in
accordance with Section 7.9 hereof, of such Company Stock Option by MedSource.

     2.5  No Further Ownership Rights in Company Common Stock. All MedSource
          ---------------------------------------------------
Shares issued upon conversion of the Company Shares in accordance with the terms
of Article I and this Article II hereof shall be deemed to have been issued or
paid in full satisfaction of all rights pertaining to the Company Shares.

     2.6  Closing of Stock Transfer Book. On and after the date of this
          ------------------------------
Agreement the stock transfer books of the Company shall be closed and there
shall be no transfers on the stock transfer books of the Company of shares of
capital stock of the Company that were issued and outstanding immediately prior
to the date hereof. In the event that, after the Effective Time, certificates
for Company Shares are presented to MedSource or the Surviving Corporation, they
shall be canceled and exchanged for the applicable MedSource Shares, subject to
applicable law in the case of Dissenting Shares (as defined in Section 3.1
hereof).

     2.7  Majority Stockholders Approval and Waiver. The Majority Stockholders
          -----------------------------------------
agree to vote for adoption of this Agreement in accordance with Massachusetts
law pursuant to the irrevocable proxy and voting agreement, substantially in the
form attached hereto as Exhibit 2.7, which has been delivered on the date hereof
                        -----------
to the Buyer Group.

     2.8  Fractional Shares. MedSource Shares representing fractional shares
          -----------------
shall be issued upon the surrender for exchange of Certificates and such
fractional share interests shall entitle the owner thereof to vote and to have
all rights of a stockholder of MedSource or a holder of MedSource Shares.

     2.9  Lost Certificates. In the event any certificates representing Company
          -----------------
Shares shall have been lost, stolen or destroyed, MedSource shall issue such
shares of MedSource Shares and any dividends or other distributions with respect
to MedSource Shares to which such holder is entitled in exchange for such lost,
stolen or destroyed Certificates, upon the making of an affidavit of that fact
by the holder thereof and the delivery of such bond as MedSource may reasonably
require.

     2.10 Transfer Taxes. No transfer taxes shall be payable by any stockholder
          --------------
of the Company in respect of the issuance of the MedSource Shares under Section
2.1 hereof, except that if any MedSource Shares are to be issued in a name other
than that in which the Certificate surrendered has been registered, it shall be
a condition of such issuance that the stockholder of the Company requesting such
issuance shall pay to MedSource any transfer taxes payable by reason thereof, or
of any prior transfer of such surrendered Certificate, or establish to the
satisfaction of MedSource that such taxes have been paid or are not payable.

     2.11 Put Shares. Notwithstanding the provisions of this Article 2 to the
          ----------
contrary, but subject to the provisions of Section 7.10 hereof and the condition
set forth in Section 8.4(k) hereof, Company Shares (other than those as to
which, pursuant to Section 7.10 hereof, either or both of the Principal Parties
has assumed the Company's obligations pursuant to the Put Agreements (as defined
in Section 8.1(m) hereof) and purchased such Company Shares or acquired directly
such Company Shares from the holders of the Put (as defined in the Put
Agreement) (the "Tolkoff Assumed Shares")) that are outstanding immediately
prior to the Effective Time and which are held by stockholders who shall have
exercised their Puts, in

                                       3



accordance with the terms of such Put Agreements, shall not be converted into or
be exchangeable for the right to receive the MedSource Shares with respect to
each such Company Share. The holders of such Company Shares, other than the
Tolkoff Assumed Shares, shall be entitled to receive payment of the price of
such Put provided for in the Put Agreement of such Company Shares held by them
in accordance with the provisions of such Put Agreements with funds provided by
MedSource or Buyer. The Company shall give MedSource prompt notice of any
exercise of any such Put. The Tolkoff Assumed Shares shall be converted into
MedSource Shares as provided for in Section 2.1(a) hereof.

3.   Dissenting Shares.

     3.1 Dissenting Shares.
         -----------------

         (a) Notwithstanding any provision of this Agreement to the contrary,
Company Shares that are outstanding immediately prior to the Effective Time and
which are held by stockholders who shall have not voted in favor of the Merger
or consented thereto in writing and who shall have demanded properly in writing
appraisal for such Company Shares in accordance with Section 85 of the MBCL
(collectively, the "Dissenting Shares") shall not be converted into or be
exchangeable for the right to receive the MedSource Shares with respect to each
such Company Share. Such stockholders shall be entitled to receive payment of
the appraised value of such Company Shares held by them in accordance with the
provisions of such Section 85 of the MBCL, except that all Dissenting Shares
held by stockholders who shall have failed to perfect or who effectively shall
have withdrawn or lost their rights to appraisal of such Company Shares under
Section 85 of the MBCL shall thereupon be deemed to have been converted into and
to have become exchangeable for, as of the Effective Time, the right to receive
MedSource Shares with respect to each such Company Share without any interest
thereon.

         (b) The Company shall give MedSource (i) prompt notice of any demands
for appraisal received by the Company, withdrawals of such demands, and any
other instruments served pursuant to Section 85 of the MBCL and received by the
Company and (ii) the opportunity to direct all negotiations and proceedings with
respect to demands for appraisal under the MBCL. The Company shall not, except
with the prior written consent of MedSource, make any payment with respect to
any demands for appraisal or offer to settle or settle any such demands.

4.   Representations and Warranties of the Company.

     As a material inducement to the Buyer Group to enter into this Agreement
and consummate the transactions contemplated hereby, the Company hereby makes to
the Buyer Group the representations and warranties as follows, except as
otherwise may be set forth in a Schedule attached hereto:

     4.1 Organization. The Company is a corporation duly organized, validly
         ------------
existing and in good standing under the laws of Massachusetts and has the
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business in the manner and in the places it is now being
conducted or proposed to be conducted. The Company is duly qualified or licensed
to do business as a foreign corporation and is in good standing in California
and in each other jurisdiction in which the nature of the business conducted by
it makes such qualification or licensing necessary. The Company has delivered to
the Buyer Group true, correct and complete copies of the Company's Articles of
Organization and By-laws, as currently in effect, and no amendments thereto are
pending. The Company is not in violation of any term of its Articles of
Organization or By-laws.

     4.2 Capitalization; Subsidiaries.
         ----------------------------

         (a) The authorized capital stock of the Company consists of 6,000,000
shares of Company Common Stock, of which 3,675,875 shares are issued and
outstanding, and 1,000,125 shares of Company Common Stock were reserved for
future issuance pursuant to outstanding stock options and reserved for future
grant under the Company's 1998 Omnibus Stock Plan and that certain Stock Option
Agreement, dated as of September 18, 1998, by and between the Company and Stuart
A. Randle (the "Randle Stock Option Agreement"). Schedule 4.2(a) contains the
                                                 ---------------
name of each stockholder of the Company and the number of Company Shares owned
by each stockholder, all as reflected on the records of the Company. All of the
Company Shares are duly authorized, validly issued, fully paid and
nonassessable. Except as set forth on Schedule 4.2(a), there are no (i) options,
                                      ---------------
warrants, calls, preemptive rights, subscriptions or other rights, convertible
securities, agreements or commitments of any character obligating now or in the
future, the Company or the holders of Company Shares to issue, transfer or sell
any shares of capital stock, options, warrants, calls or other equity interest
of any kind whatsoever in the Company or securities convertible into or
exchangeable for such shares or equity interests, (ii) contractual obligations
of the Company to repurchase, redeem or otherwise acquire any capital stock or
equity interest of the Company or (iii) voting trusts, proxies or similar
agreements to which the Company or any of the holders of Company Shares is a
party with respect to the voting of the capital stock of the Company. None of
the Company's capital stock has been issued in violation of any federal or state
law.

                                       4



         (b) Except as set forth on Schedule 4.2(b), the Company has no
                                    ---------------
subsidiaries and does not own any outstanding shares of capital stock or have
any direct or indirect interest in or control over any corporation, partnership,
joint venture, trust, corporation, limited liability company or other entity.

     4.3 Authorization; Validity of Agreement. The Company has the requisite
         ------------------------------------
corporate power and authority to execute, deliver and perform this Agreement and
each of the Exhibits hereto and the other agreements and certificates required
to be executed and delivered by the Company pursuant to this Agreement,
including, but not limited to, the Escrow Agreement (collectively, with this
Agreement, the "Transaction Documents"), to which the Company is a party, and to
assume and perform its obligations hereunder and thereunder, and to consummate
the transactions contemplated hereby and thereby. This Agreement has been duly
executed, authorized and delivered by the Company and is a valid and binding
obligation of the Company, enforceable against it in accordance with its terms.
The Transaction Documents to which the Company is a party, when executed and
delivered by the Company, shall have been duly executed, authorized and
delivered by the Company and shall be a valid and binding obligation of the
Company, enforceable against it in accordance with their respective terms.

     4.4 No Violations; Consents and Approvals.
         -------------------------------------

         (a) The execution, delivery and performance of each of this Agreement
and the other Transaction Documents by the Company do not, and the consummation
by it of the transactions contemplated hereby and thereby will not: (i) violate
any provision of its Articles of Organization or By-laws, (ii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) an event of default (or give rise to any right of termination,
amendment, cancellation or acceleration) (collectively, a "Default") under any
of the terms, conditions or provisions of any material note, bond, mortgage,
indenture, guarantee, other evidence of indebtedness, license, lease, option,
contract, agreement or other instrument (collectively, a "Contract") to which
the Company is a party or by which any of its properties or assets may be bound
or otherwise subject, except for such items referred to as Required Consents (as
defined in Section 4.4(b) hereof) set forth on Schedule 4.4(b), (iii) violate
                                               ---------------
any Law (as defined in Section 4.8(b) hereof) applicable to the Company or any
of its properties or assets or (iv) except as set forth in Schedule 4.4(b), give
                                                           ---------------
rise to a "put" right.

         (b) No filing or registration with, notification to, or authorization,
consent or approval of, any legislative or executive agency or department or
other regulatory service, authority or agency, or any court, arbitration panel
or other tribunal or judicial authority of any foreign, provincial, United
States federal, state, county, municipal or other local jurisdiction, political
entity, body, organization, subdivision or branch (a "Governmental Entity") or
Person, is required in connection with the execution, delivery and performance
of this Agreement or any of the other Transaction Documents by the Company or
the consummation by the Company of the transactions contemplated hereby and
thereby, except for (i) such consents, approvals, orders, authorizations,
notifications, notices, estoppel certificates, releases, registrations,
ratifications, declarations, filings, waivers, exemptions or variances
(individually, a "Consent" and collectively, "Consents") with respect to any
License (as defined in Section 4.8(c) hereof) or Law, including without
limitation post-Closing filings with the U.S. Patent and Trademark Office, which
are required to assign patents and/or trademarks from the Company to the Buyer
as set forth on Schedule 4.11(a); (ii) the Hart-Scott Rodino Antitrust
                ----------------
Improvements Act of 1976, as amended (the "HSR Act"); or (iii) post-Closing
filings pursuant to federal or state securities laws in connection with the
purchase of the MedSource Shares, (iv) the Articles of Merger with the
Massachusetts Secretary of the Commonwealth and the Delaware Secretary of the
State or (v) otherwise as are set forth on Schedule 4.4(b) hereof (the "Required
                                           ---------------
Consents").

     4.5 Financial Statements.
         --------------------

         (a) The Company has delivered to the Buyer the unaudited balance sheet
of the Company as of October 27, 2000 (the "Latest Balance Sheet"), together
with the related statements of income for the ten-month period ended October 27,
2000, and the balance sheets of the Company as of December 31, 1999, 1998 and
1997, together with the related statements of income (including the related
notes) for the three prior fiscal years then ended (collectively, the "Financial
Statements").

         (b) The Financial Statements, other than the October 27, 2000 Financial
Statements, have been audited by Grant Thornton LLP for fiscal 1998 and 1999 and
Alexander, Aronson, Finning & Co., P.C. for fiscal 1997, and the reports of
these firms have been delivered to the Buyer. The Financial Statements have been
derived from, and agree with, the books and records of the Company and fairly
present in all material respects the financial position of the Company as of the
respective dates thereof and the results of operations of the Company for the
respective periods set forth therein. The Financial Statements (including the
notes thereto) have been prepared in accordance with United States generally
accepted accounting principles, consistently applied ("GAAP"), as of the dates
and for the periods involved, subject, in the case of the Latest Balance Sheet
and the related statements of operations for the interim period, to the absence
of footnote disclosure and the normal fiscal year-end adjustments in the
ordinary course (none of which, individually or in the aggregate, will be
material to the business or the operations of the Company).

                                       5



     4.6 No Material Adverse Change. Except as set forth in Schedule 4.6, since
            -----------------------                         ------------
the date of the Latest Balance Sheet, no event, condition or circumstance has
occurred that would be reasonably likely to have a material adverse effect on
the condition (financial or otherwise), business, properties or results of
operations of the Company (as modified hereafter, a "Company Material Adverse
Effect"), other than events, conditions or circumstances primarily attributable
to (i) general economic conditions or world events or (ii) general industry-wide
changes in the business market in which the Company does business (including
legal and regulatory changes).

     4.7 No Undisclosed Liabilities.
         --------------------------

         (a) Except as set forth on Schedule 4.7, the Company does not have, and
                                    ------------
as of the Closing Date will not have, any liabilities (whether accrued,
contingent, known, or otherwise) other than those that (i) are set forth or
adequately reserved against on the Latest Balance Sheet or (ii) were incurred
since the date of the Latest Balance Sheet in the ordinary course of business,
none of which, individually or in the aggregate, would be reasonably likely to
have a Company Material Adverse Effect.

         (b) The accounts payable of the Company set forth in the Latest Balance
Sheet or arising subsequent thereto are the result of bona fide transactions in
the ordinary course of business.

     4.8 Litigation; Compliance with Law; Licenses and Permits.
         -----------------------------------------------------

         (a) Except as set forth on Schedule 4.8(a), there is no claim, suit,
                                    ---------------
action, investigation or proceeding (collectively, a "Proceeding") pending, nor
is there, to the knowledge of the Company, any Proceeding threatened, that
involves or affects the Company or any Affiliate of the Company, by or before
any Governmental Entity, court, arbitration panel or any other Person. The
Company has no reason to believe that any such Proceeding may be brought or
threatened against the Company.

         (b) No claim for indemnification under the agreement and plan of
merger, dated as of May 5, 1999, among the Company, DBI Acquisition Corporation,
Danforth Biomedical, Inc. ("Danforth") and the stockholders of Danforth (the
"Danforth Merger Agreement") has been made by Danforth or its stockholders
against the Company. There does not exist any basis for any indemnification
claim or other claim for damages by Danforth or its stockholders related to or
arising from the Danforth Merger Agreement or the Danforth merger with the
Company, and the Company has no reason to believe that any such claim may be
brought or threatened against the Company.

         (c) The Company has complied with all applicable criminal, civil or
common laws, statutes, ordinances, orders, codes, rules, regulations, written
policies, writs, judgments, decrees, injunctions, or agreements of any
Governmental Entity to which it or its property is subject (collectively,
"Laws"). Since January 1, 1997, the Company has received no written notice of
any material violation of any Law except as set forth on Schedule 4.8(c).
                                                         ---------------

         (d) The Company has every material license, permit, certification,
qualification or franchise issued by any Governmental Entity (each, a
"License"), and every Consent by or on behalf of any Person that is not a party
to this Agreement, required for it to conduct its business as presently
conducted. All such Licenses and Consents are in full force and effect and the
Company is operating in compliance therewith. The Company has not received
written notice of any pending cancellation or suspension of any thereof nor, to
the knowledge of the Company, is any cancellation or suspension thereof
threatened, except where the failure to have such License or Consent would not
have a Company Material Adverse Effect. The applicability and validity of each
such License and Consent will not be adversely affected by the consummation of
the transactions contemplated by this Agreement, except as set forth on Schedule
                                                                        --------
4.8(d).
- ------
     4.9 Employee Benefit Plans; ERISA.
         -----------------------------

         (a) Schedule 4.9(a) lists each "employee benefit plan" (as defined in
             ---------------
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), and all other material employee benefit (including, without
limitation, any non-qualified plans), bonus, deferred compensation, incentive,
stock option (or other equity-based), severance, change-in control, medical
insurance and fringe benefit plans maintained for the benefit of, or contributed
to by the Company or any trade or business, whether or not incorporated (an
"ERISA Affiliate"), that would be deemed a "single employer" within the meaning
of Section 4001 of ERISA or Section 414 of the Internal Revenue Code of 1986, as
amended (the "Code"), for the benefit of any employee or former employee of the
Company (collectively, the "Plans"). The Company has heretofore delivered to the
Buyer Group, true, correct and complete copies of each of the Plans, including
all amendments to date, and, if applicable, the summary plan description for
each Plan, any insurance contract, trust agreement or other funding arrangement
related to any Plan, any actuarial valuation for a Plan, the most recent IRS
determination letter for the Plan (if applicable), the annual report on Form
5500 Series (including all attachments and schedules) for the three most recent
Plan years for each Plan

                                       6



required to file such forms, and a list showing all former employees or
dependents of employees or former employees currently on COBRA or similar
continuation coverage under any Plan.

         (b) Each of the Plans is in material compliance with the applicable
provisions of ERISA, the Code and any other applicable law or regulation, and
has been administered in accordance with ERISA, the terms of the Plan and, where
applicable, the Code. Each of the Plans intended to be "qualified" within the
meaning of Code Sections 401(a), 403(a) or 501(c)(9) has received a timely
determination letter or approval letter from the Internal Revenue Service that
it is so qualified and has, in fact, been continuously qualified under the
applicable section of the Code since the effective date of such Plan. The
Company does not know of any facts, circumstances or omissions that would
materially adversely affect such qualification. None of the Plans is subject to
Title IV of ERISA. No "reportable event," as such term is defined in Section
4043(c) of ERISA, has occurred with respect to any Plan. There are no pending
or, to the knowledge of the Company, threatened claims (other than routine
claims for benefits), actions, suits or proceedings by, on behalf of or against
any of the Plans or any trusts related thereto.

         (c) No plan provides benefits including, without limitation, death or
medical benefits (whether or not insured), with respect to any employees or
former employees of the Company beyond their retirement or other termination of
service (other than (i) coverage mandated by applicable law, (ii) death benefits
or retirement benefits under any "employee pension benefit plan," as that term
is defined in Section 3(2) of ERISA, or (iii) benefits the full cost of which is
borne by the current or former employee (or his or her beneficiary)).

         (d) With respect to each Plan, neither the Company nor any ERISA
Affiliate has engaged in a "prohibited transaction" (as such term is defined in
Section 4975 or Section 406 of ERISA) that would subject the Company, or the
Buyer Group, directly or indirectly, to any taxes, penalties or other
liabilities resulting from prohibited transactions under Code Section 4975 or
Sections 409 or 502(i) of ERISA.

         (e) The Company has complied with the notice and continuation of
coverage requirements of Code Section 4980B and the regulations thereunder with
respect to each Plan that is, or was during any taxable year of the Company for
which the statute of limitations on the assessment of federal income taxes
remains open, by consent or otherwise, a group health plan within the meaning of
Section 4980B(g) of ERISA.

         (f) No Plan has incurred an "Accumulated Funding Deficiency" (as
defined in Section 302(a) of ERISA or Code Section 412(a)), whether or not
waived.

         (g) Neither the Company nor any ERISA Affiliate has incurred or would
incur a "withdrawal" or "partial withdrawal," as defined in Sections 4203 and
4205 of ERISA, from any Plan that has resulted or would result in a withdrawal
liability of the Company or any ERISA Affiliate under such Plan.

         (h) On and after the Closing Date, neither the Company nor the Buyer
Group will have any liability related to any plan, program or arrangement
maintained or contributed to by any ERISA Affiliate which is not a Plan, but
which would be a Plan if it were maintained by the Company for its employees.

    4.10 Real Property.
         -------------

         (a) The Company does not own any real property.

         (b) Schedule 4.10(b) contains a true, correct and complete list of all
             ----------------
the leases, subleases, licenses and other written agreements (and the Company
has no knowledge of any unwritten agreements) under which the Company uses or
occupies or has the right to use or occupy, now or in the future, any real
property (such land, buildings and other improvements being herein called
collectively, the "Real Property." The Company has heretofore delivered to the
Buyer Group true and correct copies of all leases, occupancy agreements and/or
licenses for the Real Property (collectively, the "Leases"). Each Lease is
legal, valid, binding, enforceable, in full force and effect against the
Company, and to the knowledge of the Company, each of the other parties thereto,
all rent and other sums and charges to the extent due and payable thereunder are
current, no written notice of default or termination under any Lease has been
received or given, no termination event or condition or default which has
remained uncured beyond applicable cure periods exists on the part of the
Company or, to its knowledge, any other party under any Lease, and no event has
occurred and no condition exists which, with the giving of notice or the lapse
of time or both, would constitute such a Default or termination event or
condition. The Company has a good, clear, marketable, valid and enforceable
leasehold interest in the Real Property subject to no Liens which interfere with
the operation of the Company's business. No Affiliate (as defined in Section
4.15 hereof) of the Company is the owner of, or has any ownership, economic or
similar interest in, any Lease or other agreement concerning the Real Property
except as set forth in Schedule 4.10(b). Except as set forth in Schedule
                       ----------------                         --------
4.10(b), none of the Leases have been amended, modified, extended, surrendered,
- -------
terminated or

                                       7



assigned as of the date hereof. Except as set forth in Schedule 4.10(b), the
                                                       ----------------
Company maintains actual and exclusive possession of the Real Property.

         (c) Except as set forth in Schedule 4.10(b), there are no Leases or
                                    ----------------
other written agreements (and the Company has no knowledge of any unwritten
agreements) granting to any Person other than the Company any right to the
possession, use or occupancy of the Real Property and no Person has any rights
to acquire, lease, sublease or otherwise occupy the Real Property or any part
thereof or to otherwise obtain any interest therein, and there are no
outstanding options, rights of first refusal or rights of reverter relating to
the Real Property or any interests therein. All of the lands, buildings,
structures and other improvements used by the Company in the conduct of its
business are included in the Real Property and the Real Property are all the
real property utilized or employed by the Company to conduct its business. There
has been no service, material or other work provided or supplied to the Company
relating to its obligations under the Leases that has not been paid in full on
or before the date such amounts are due and payable, except as set forth in
Schedule 4.10(c). All brokerage commissions, finders fees and all similar
- ----------------
charges or fees arising out of or relating to any of the Leases have been paid
in full.

         (d) To the knowledge of the Company, there is no pending, proposed,
contemplated or anticipated (i) annexation, condemnation, eminent domain or
similar proceeding affecting, or that may affect, all or any portion of the Real
Property actually leased by the Company, (ii) imposition of any special or other
assessments against the Real Property for public betterments or otherwise for
which the Company would be responsible for payment under terms of its Leases,
(iii) special assessments affecting the Real Property or any portion thereof
that are or would be payable by the Company, or (iv) change in any applicable
Law relating to the use, occupation or operation of the Real Property.

         (e) The Company has heretofore delivered to the Buyer Group a true and
correct copy of a Memorandum of Agreement made and entered into as of June 2,
1999 by and between the Company and Mo-Mex Corporation (the "Mexican MOA"). In
performance of the Mexican MOA, Mo-Mex Corporation has contracted with a Mexican
corporation or corporations to furnish facilities, labor and manufacturing
services in Navojoa, Sonora, Mexico (the "Mexican Facility"). The Mexican MOA is
legal, valid, binding, enforceable, in force and effect against the Company, and
to the knowledge of the Company, against each of the other parties thereto, all
payments to the extent due and payable thereunder are current, no written notice
of default or termination under the Mexican MOA has been received or given, no
termination event or condition or default which has remained uncured beyond
applicable cure periods exists on the part of the Company or, to its knowledge,
any other party under the Mexican MOA, and no event has occurred and no
condition exists which, with the giving of notice or lapse of time or both,
would constitute such a default or termination event or condition. The Mexican
MOA has not been amended, modified, extended, surrendered, terminated or
assigned as of the date hereof.

         (f) Copies of the current utility bills to the extent payable by the
Company for the Real Property have been delivered to the Buyer Group by the
Company.

    4.11 Intellectual Property Rights; Computer Software.
         -----------------------------------------------

         (a) For the purpose of this Section 4.11, the following terms shall
have the meanings attributed thereto:

             (i)   "Intellectual Property" means all Patents, Copyrights, Trade
         Secrets, Know-How, Trademarks, whether common law, statutory or
         otherwise, domestic and foreign and all registrations and registration
         applications for any such rights, and all Internal Software Systems,
         domain names and uniform resource locators (URLs).

             (ii)  "Patent" means all classes or types of patents, design
         patents, utility patents, including, without limitation, originals,
         divisions, continuations, continuations-in-part, extensions,
         reexaminations, or reissues, patent applications and invention
         disclosures for these classes or types of patent rights (whether or not
         patentable and whether or not reduced to practice) in all countries of
         the world except to the extent intentionally abandoned by the Company,
         including, without limitation, those listed on Schedule 4.11(a).
                                                                 -------

             (iii) "Trademark" means service marks, trademarks, trade names,
         brands, product and service names, logos and other distinctive
         identifications used in commerce, whether in connection with products
         or services, together with all goodwill related to any of the
         foregoing, including without limitation those listed on Schedule
                                                                 --------
         4.11(a).
         -------

             (iv)  "Copyright" means all original works of authorship fixed in
         any tangible medium of expression under the copyright laws of the
         United States and all other countries for the full term thereof (and
         including all rights accruing by virtue of bilateral or international
         copyright treaties and conventions), including, but not limited to, all
         renewals, extensions, reversions or restorations of copyrights now or
         hereafter provided for by law

                                       8



         and all rights to make applications for copyright registrations and
         recordations, regardless of the medium of fixation or means of
         expression, including without limitation those listed on Schedule
                                                                  --------
         4.11(a).
         -------

                 (v)    "Internal Software Systems" means the computer
         software, computer firmware, computer hardware (whether general or
         special purpose), and other similar or related items of automated,
         computerized, and/or software systems that are used or relied on by the
         Company for its internal operations.

                 (vi)   "Know-How" means all factual knowledge and information
         that is not capable of precise, separate description but which, in an
         accumulated form, after being acquired as a result of trial and error,
         gives to the one acquiring it the ability to produce and market
         something which one otherwise would not have known how to produce and
         market with the same accuracy or precision necessary for commercial
         success, including without limitation all formulae, algorithms,
         processes, procedures, writings, data, protocols, techniques,
         proposals, designs, ideas, concepts, strategic, research and
         development information and related documentation, business and other
         plans, research, inventions and invention disclosure (whether
         patentable or unpatentable), and all records of the foregoing, test,
         engineering and technical data, proprietary information and
         methodologies, communications and associated peripheral devices and
         resources; computer software, programs and code, both object and
         source, in whatever form and media, databases, specifications and other
         information processing tangible and intangible items.

                  (vii) "Trade Secrets" means any information that generally
         facilitates the production, manufacturing or sale of products,
         increases revenues, or provides an advantage over the competition and
         is not generally known.

                 (viii) "Licensed Intellectual Property" shall mean
         Intellectual Property which the Company uses or has the right to use
         pursuant to Third Party Licenses.

                 (ix)   "Non-Owned Intellectual Property" shall mean (i)
         Licensed Intellectual Property and (ii) Intellectual Property which is
         publicly available for use without restriction or obligation of any
         kind to any other person or entity or which was developed by the
         Company for or on behalf of a client of the Company.

                 (x)    "Owned Intellectual Property" shall mean Intellectual
         Property (i) created or developed by employees of the Company in their
         capacity as such other than for or on behalf of clients or customers of
         the Company for which such client or customer has retained exclusive
         rights to the Intellectual Property or (ii) to which the Company has
         acquired, by purchase, assignment or other transfer the unconditional,
         unrestricted, exclusive right to control or prevent any and all use of
         such Intellectual Property by others without the consent or approval of
         or payment to, any other person.

                 (xi)   "Third Party Licenses" shall mean all licenses,
         agreements, obligations or other commitments under which a person has
         granted the Company a right to use any Intellectual Property in
         connection with the Company's business but retains one or more rights
         to use such Intellectual Property, including without limitation those
         Third Party Licenses listed and described on Schedule 4.11(a), other
                                                      ----------------
         than license agreements included in shrink-wrapped software packages
         for software readily and generally commercially available to Buyer.

         (b)     Except as specifically set forth in detail on Schedule 4.11(b):
                                                               ----------------

                 (i)    The Company owns all legally enforceable right, title
         and interest to all Owned Intellectual Property free and clear of all
         liens, claims, encumbrances and other restrictions without an
         obligation to pay any royalties, license fees or other amounts to any
         other person or entity.

                 (ii)   The Company has taken commercially reasonable actions
         with each individual and entity, including each employee, agent,
         consultant and contractor, who in their capacity as such has
         contributed to or participated in the conception, creation and
         development of the Intellectual Property (other than Non-Owned
         Intellectual Property) on behalf of the Company so that each such
         individual or entity either (A) has been a genuine employee or has been
         party to a duly executed "work-for-hire" agreement with the Company, in
         accordance with applicable law, or (B) has executed valid written
         assignment in favor of the Company as assignee that has conveyed to the
         Company all right, title and interest in and to all tangible and
         intangible property arising from such individual's or entity's work
         throughout the world, in perpetuity, in each case of (A) or (B) waiving
         any claim any such individual or entity may have with respect to such
         tangible or intangible property.

                                       9



                 (iii) To the knowledge of the Company, there is no unauthorized
             use, disclosure, infringement or misappropriation by any third
             party (including any employee or former employee of the Company) of
             any Intellectual Property of the Company or of any right of any
             third party in Intellectual Property licensed by or through the
             Company. Except as set forth on Schedule 4.11(b), the Company has
                                             ----------------
             no agreement to indemnify any individual or entity against any
             charge of infringement of any Intellectual Property, other than
             indemnification provisions normal and usual for the Company's
             industry contained in purchase orders or license agreements arising
             in the ordinary course of business. The Company has not received
             (nor does the Company have any knowledge of) any written notice,
             claim or allegation from any person or entity questioning the right
             of the Company to unconditionally use, possess, transfer, convey or
             otherwise dispose of any Intellectual Property (other than the
             Licensed Intellectual Property) or questioning the right of the
             Company to use any Licensed Intellectual Property. There is no
             interference, opposition, cancellation, reexamination or other
             contest, proceeding, action, suit, hearing, charge, complaint,
             demand, written notice, claim, dispute nor any claim of
             infringement, misappropriation or other violation by the Company of
             any Intellectual Property or other proprietary rights of any other
             individual or entity pending or, to the knowledge of the Company,
             threatened against the Company.

                 (iv)  To the knowledge of the Company, the Company's use of the
             Owned Intellectual Property in its business as presently conducted,
             has not violated, interfered with or infringed upon the rights of
             any other individual or entity nor does such use by the Company
             constitute a breach of any agreement or obligations, by which the
             Company may be bound, or to the knowledge of the Company,
             constitute a material violation of any laws, regulations,
             ordinances, codes or statutes in any jurisdiction. To the knowledge
             of the Company, the Company's use of the Intellectual Property does
             not violate, interfere with or infringe upon the rights of any
             other individual or entity nor does such use by the Company
             constitute a breach of any agreement, obligation, promise or
             commitment by which the Company is bound or constitute a material
             violation of any laws, regulations, ordinances, codes or statutes
             in any jurisdiction.

                 (v)   Except for the agreements listed and described on
             Schedule 4.11(b), no licenses or other rights have been granted by
             ----------------
             the Company, and the Company has no obligation to grant any
             licenses or other rights, with respect to any Intellectual
             Property. No written claims have been made by or against the
             Company for any violation or infringement by others of any rights
             with respect to any Intellectual Property. To the best knowledge of
             the Company, there are no such claims which the Company may have
             the right (or a reasonable basis) to make or assert.

                 (vi)  The Company has all rights in Intellectual Property
             necessary to conduct its business as it is currently conducted by
             the Company and such rights will not be adversely affected as a
             result of or in connection with the execution and delivery of this
             Agreement, the Closing or the consummation of any of the
             transactions contemplated hereby. With respect to Third Party
             Licenses, (A) the Company is not (and to the knowledge of the
             Company, no other party to any such Third Party Licenses is) in
             breach or default with respect thereto, and no event has occurred
             which with notice or lapse of time would constitute a breach or
             default or permit termination, modification or acceleration
             thereunder and (B) the Company has not (and to the knowledge of the
             Company, no party to any such Third Party License has) repudiated
             any provision thereof.

                 (vii) All statements and representations made by the Company in
             any pending Intellectual Property applications, filings or
             registrations were true in all material respects as of the time
             they were made. No registered copyright, registered or unregistered
             trademark or service mark, or patent used in the business (other
             than in circumstances where the Company has intentionally allowed
             registered copyright, registered or unregistered trademark or
             service mark, or patent not material to the business to lapse,
             expire, become abandoned or be canceled) has lapsed, expired or
             been abandoned or canceled, or is subject to any injunction,
             judgment, order, decree, ruling or charge or is subject to any
             pending or (to the knowledge of the Company) threatened
             oppositions, cancellations, interferences or other proceedings
             before the United State Patent and Trademark Office, the Trademark
             Trials and Appeals Board, the United States Copyright Office or in
             any other registration authority in any country.

      4.12   Tangible Personal Property.
             --------------------------

             (a) The Company has good, marketable and valid title to all
tangible personal property used in its business or located on its premises free
and clear of all Liens.

             (b) All material items of machinery, equipment, tooling and other
tangible personal property owned or leased by the Company and used in the
conduct of its business (other than items of inventory) are listed in the
detailed fixed assets ledger of the Company attached hereto as Schedule 4.12(b)
                                                               ----------------
(collectively, the "Personal Property"). All of the items of machinery and
equipment included within the Personal Property are fully operational and
operating in the ordinary course of the

                                       10



Company's business, as applicable, are in good operating condition and in a good
state of maintenance and repair, ordinary wear and tear excepted, and are
adequate for use in the conduct of the Company's business as currently
conducted.

     4.13 Material Contracts.
          ------------------

          (a) Schedule 4.13 sets forth a true, complete and correct list of
              -------------
every Contract that: (i) except for purchase orders issued by the Company in the
ordinary course of business, provides for aggregate future payments by the
Company or to the Company of more than $50,000 and which is not cancelable upon
sixty (60) days notice without any liability, penalty or premium (excluding
purchase orders and invoices arising in the ordinary course of business); (ii)
was entered into by the Company with an officer, director, significant employee
of the Company or with any Persons controlled by or affiliated with any of them;
(iii) is a collective bargaining or similar agreement; (iv) guarantees or
indemnifies or otherwise causes the Company to be liable or otherwise
responsible for the obligations or liabilities of another or provides for a
charitable contribution by the Company; (v) involves an agreement with any bank,
finance company or similar organization; (vi) restricts the Company from
engaging in any business or activity anywhere in the world; (vii) is an
employment agreement, consulting agreement, independent sales representative
agreement or similar arrangement with any employee, consultant or agent of the
Company; (viii) is a lease of real property; or (ix) is otherwise material to
the rights, properties, assets, business or operations of the Company (the
foregoing, collectively, "Material Contracts"). The Company has heretofore
provided true, complete and correct copies of all Material Contracts to the
Buyer.

          (b) Each of the Material Contracts is legal, valid, binding,
enforceable, in full force and effect and there is not now and, to the knowledge
of the Company, there has not been claimed or alleged by any Person with respect
to any Material Contract, any existing Default, or event that with notice or
lapse of time or both would constitute a Default or event of Default, on the
part of the Company, or to the knowledge of the Company, on the part of any
other party thereto and, except as set forth on Schedule 4.4(b), no Consent
                                                ---------------
from, or notice to, any Governmental Entity or other Person is required in order
to maintain in full force and effect any of the Material Contracts, other than
such Consents that have been obtained and are unconditional and in full force
and effect, and such notices that have been duly given and copies of such
Consents have been delivered to the Buyer Group.

     4.14 Taxes.
          -----

          (a) Except as set forth in Schedule 4.14(a):
                                     ----------------

              (i)   the Company has or will have prior to the Closing Date (A)
          duly and timely filed or caused to be filed with Tax Authorities each
          Tax Return that is required to be filed by or on behalf of the Company
          or that includes or relates to the Company, its income, sales, assets
          or business, to the extent that such Tax Returns are due on or before
          the Closing Date which Tax Returns are true, correct and complete, (B)
          duly and timely paid in full, or caused to be paid in full, all Taxes
          relating to the Company and its income, sales, assets or business for
          all periods ended on or prior to the Closing Date, whether disputed or
          not, regardless of whether any such Taxes are disclosed on any Tax
          Return and (C) has properly accrued on the books and records of the
          Company in accordance with GAAP (subject to year end audit adjustments
          and footnote disclosure) a provision for the payment of all Taxes due
          or claimed to be due or for which the Company otherwise is or may be
          liable;

              (ii)  the Company has not requested an extension of time
          within which to file any Tax Return in respect of any Tax period which
          Tax Return has not since been filed;

              (iii) the Company has complied in all respects with all
          applicable laws relating to the payment, collection or withholding of
          any Tax, and the remittance thereof to any and all Tax Authorities,
          including, but not limited to, Code Section 3402;

              (iv)  there is no lien for Taxes upon any asset or property
          of the Company (except for any statutory lien for any Tax not yet
          due);

              (v)   the Company does not have, and is not expected to have,
          any liability in respect of any Tax as a transferee or successor of
          any Person (including, but not limited to, any liability arising under
          Treas. Reg. (S) 1.1502-6), and the Company is not, and never has been,
          a party to any Tax allocation, Tax indemnification or Tax sharing
          contract or agreement;

              (vi)  all Taxes imposed with respect to the Company's income,
          sales, assets or business, or for which the Company is liable and
          which are due and payable, have been paid;

                                       11



             (vii)   any assessment, deficiency or adjustment related to or in
       connection with any Tax for which the Company is liable or with respect
       to the Company's income, sales, assets or business that is or was
       required to be reported to any Tax Authority has been so reported, and
       any additional Taxes owed with respect thereto have been paid;

             (viii)  there are no pending, proposed or, to the knowledge of the
       Company, threatened Tax Proceedings with respect to any Tax, the payment,
       collection or withholding of any Tax or any Tax Return filed by or on
       behalf of the Company;

             (ix)    there are no presently outstanding waivers or extensions or
       requests for waivers or extensions of the time within which unpaid Tax
       may be assessed or asserted;

             (x)     there is no outstanding subpoena or request for information
       or documents from any Tax Authority with respect to any Tax for which the
       Company is or may be liable or with respect to the Company's income,
       sales, assets or business;

             (xi)    the Company is not a party to any agreement with any Tax
       Authority (including, but not limited to, any closing agreement within
       the meaning of Code Section 7121 or any analogous provision of applicable
       law or any agreement relating to transfer or intercompany pricing) and
       has not requested or received a private letter or other ruling from any
       Tax Authority relating to any Tax for which the Company is or may be
       liable or with respect to the Company's income, sales, assets or
       business;

             (xii)   the Company is not a party to any contract, agreement or
       other arrangement that could result, alone or in conjunction with any
       other contract, agreement or other arrangement, in the payment of any
       amount that would not be deductible by reason of Code Section 280G or 404
       or any similar provision of applicable law;

             (xiii)  the Company is not a "consenting corporation" within the
       meaning of Code Section 341(f) or any similar provision of applicable law
       and has not agreed to have Code Section 341(f)(2) apply to any
       disposition of a subsection (f) asset (as such term is defined in Code
       Section 341(f)(4)) owned by the Company;

             (xiv)   the Company does not have any "tax-exempt use property"
       within the meaning of Code Section 168(g) or Code Section 168(h) or any
       similar provision of applicable law with respect to the Company, its
       income, sales, assets or business;

             (xv)    none of the assets of the Company is required to be treated
       as being owned by any other person pursuant to any provision of
       applicable law, including, but not limited to, the "safe harbor" leasing
       provisions of Code Section 168(f)(8) as in effect prior to the repeal of
       those "safe harbor" leasing provisions;

             (xvi)   the Company is not, nor has it been, a "United States real
       property holding corporation" within the meaning of Code Section
       897(c)(2) at any time during the applicable period referred to in Code
       Section 897(c)(1)(A)(ii);

             (xvii)  no election under Code Section 338 or any similar provision
       of applicable law has been made or required to be made by or with respect
       to the Company (or a subsidiary, if any, of the Company);

             (xviii) the Company (i) has not adjusted, changed, or received any
       request, demand, or proposal from a Tax Authority to adjust or change any
       accounting method, (ii) is not required to include in income any
       adjustment pursuant to Code Section 481 (a) (or any similar provision of
       applicable law) by reason of a change in accounting method, and (iii) has
       neither deferred any income to a period after the Closing Date that has
       economically accrued or is otherwise attributable to a period prior to
       the Closing Date nor accelerated any deductions into a period ending on
       or before the Closing Date that will or may economically accrue after the
       Closing Date;

             (xix)   there is no power of attorney in effect relating to any Tax
       for which the Company is or may be liable or with respect to the
       Company's income, sales, assets or business;

             (xx)    no jurisdiction where the Company does not file a Tax
       Return has made or, to the knowledge of the Company, threatened to make a
       claim that the Company is required to file a Tax Return for such
       jurisdiction; and

                                       12



             (xxi) Schedule 4.14(a) sets forth a list of all elections
       currently in effect (or made within the five most recent Tax periods
       ending on or prior to the Closing Date) with respect to any Tax or Tax
       Return.

       (b)   Schedule 4.14(b) sets forth a list of all jurisdictions (foreign
             ----------------
and domestic) in which any Tax Returns have been filed by or on behalf of the
Company, or with respect to the Company's income, assets or business since
December 31, 1996.

       (c)   Schedule 4.14(c) sets forth a list of all jurisdictions (foreign
             ----------------
and domestic) in which any income, franchise or other Tax Returns filed on
behalf of the Company have been the subject of Tax Proceedings.

       (d)   The Company has provided to the Buyer Group: (i) a copy of
all Tax Returns filed since December 31, 1997, and (ii) all audit reports,
closing agreements, letter rulings, or technical advice memoranda relating to
any Taxes for which the Company is or may be liable with respect to the
Company's income, sales, assets or business.

       (e)   For purposes of this Agreement,

             (i)   "Tax" means any net income, gross income, profits, gross
       receipts, excise, real or personal property, sales, ad valorem,
       withholding, social security, retirement, excise, employment,
       unemployment, minimum, estimated, severance, stamp, property, occupation,
       environmental, windfall profits, use, service, net worth, payroll,
       franchise, license, gains, customs, transfer, recording or other tax,
       duty, fee, assessment or charge of any kind whatsoever, imposed by any
       Tax Authority, including any liability therefor as a transferee
       (including without limitation under Code Section 6901 or any similar
       provision of applicable law), as a result of Treas. Reg. (S)1.1502-6 or
       any similar provision of applicable law, or as a result of any tax
       sharing or similar agreement, together with any interest, penalties or
       additions to tax relating thereto.

             (ii)  "Tax Authority" means any branch, office, department,
       agency, instrumentality, court, tribunal, officer, employee, designee,
       representative, or other Person that is acting for, on behalf or as a
       part of any foreign or domestic government (or any political subdivision
       thereof) that is engaged in or has any power, duty, responsibility or
       obligation relating to the legislation, promulgation, interpretation,
       enforcement, regulation, monitoring, supervision or collection of or any
       other activity relating to any Tax or Tax Return.

             (iii) "Tax Proceeding" means any audit, examination,
       review, reassessment, litigation or other administrative or judicial
       proceeding relating to (i) any Tax for which the Company is (or is
       asserted to be) or may be liable, (ii) the collection, payment or
       withholding of any Tax, or (iii) any Tax Return filed by or on behalf of
       the Company.

             (iv)  "Tax Return" means any return, election, declaration,
       report, schedule, information return, document, information, opinion,
       statement, or any amendment to any of the foregoing (including without
       limitation any consolidated, combined or unitary return) submitted or
       required to be submitted to any Tax Authority in connection with the
       determination, assessment or collection of any Tax or the administration
       of any laws, regulations or any administrative requirements relating to
       any Tax.

             (v)   "Treas. Reg." means any temporary, proposed or final
       regulation promulgated under the Code.

     4.15    Affiliated Party Transactions. Except for obligations arising under
             -----------------------------
this Agreement or as set forth on Schedule 4.15, as of the Closing Date neither
                                  -------------
the Company nor any of its officers, directors or other management employee, or
any of their respective spouses or immediate family (collectively, the
"Affiliates"), will have, directly or indirectly, on an individual or joint
basis any obligation to or cause of action or claim against the Company.

     4.16    Environmental Matters.
             ---------------------

             (a)     The Company is in compliance with, and its business has
been conducted in material compliance with, all Environmental Laws (as defined
below).

             (b)     No Site (as defined below) is a treatment, storage or
disposal facility, as defined in and regulated under the Resource Conservation
and Recovery Act, 42 U.S.C.ss.6901 et seq., is on or is proposed for listing on
the National Priorities List pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C.(S)9601 et seq., or on any
similar state list of sites requiring investigation or cleanup.

                                       13



             (c)     The Company has not received any written notice (and the
Company has no knowledge of any unwritten notice) that remains pending or
outstanding with respect to the Company's business or any Site from any
Governmental Entity or Person alleging that the Company is not in compliance
with any Environmental Law.

             (d)     There has been no reportable Release (as defined below) of
a Hazardous Substance (as defined below) by the Company at, from, in, to, on or
under any Site and, to the knowledge of the Company, no Hazardous Substances are
present in, on, about or migrating to or from any Site that give rise to an
Environmental Claim (as defined below) against the Company.

             (e)     To the knowledge of the Company, there are no pending or
outstanding corrective actions against the Company requested, required or being
conducted by any Governmental Entity for the investigation, remediation or
cleanup of any Site, and there have been no such corrective actions, whether
still pending or otherwise.

             (f)     The Company has all Environmental Permits (as defined
below) necessary for the conduct of its business. A list of such Environmental
Permits is set forth on Schedule 4.16. The Company has delivered copies of all
                        -------------
such Environmental Permits to the Buyer Group.

             (g)     There are no pending, or to the knowledge of the Company,
threatened, Environmental Claims (as defined below) against the Company, and the
Company is not aware of any facts or circumstances that are likely to result in
an Environmental Claim against the Company.

             (h)     Neither the Company, any entity previously owned by the
Company, nor any predecessor of the Company, has transported or arranged for the
treatment, storage, handling, disposal, or transportation of any Hazardous
Substance to any off-Site location that could result in an Environmental Claim.

             (i)     Except as set forth on Schedule 4.16, there are no (i)
                                            -------------
underground storage tanks, active or abandoned, (ii) polychlorinated biphenyl
containing equipment, (iii) asbestos containing material, or (iv) recognized
environmental condition or historic recognized environmental condition (as
defined by ASTM E1527-00) for which the Company would have liability applicable
to a Site.

             (j)     All relevant environmental investigations, studies,
audits, tests, reviews or other analyses (which have been reduced to writing)
that are in the possession of the Company with respect to any Site or any
transportation, handling or disposal of any Hazardous Substance on behalf of the
Company have been delivered to the Buyer Group prior to execution of this
Agreement. The Company makes no representations or warranties with regard to the
accuracy or completeness of documents prepared by outside consultants. A list of
such reports is set forth in Schedule 4.16.
                             -------------

             (k)     As used herein, (i) "Environment" means all air, surface
water, groundwater, or land, including land surface or subsurface; (ii)
"Environmental Claim" means any written notice to the Company by a person or
entity alleging potential liability (including, without limitation, potential
liability of the Company for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries
or penalties) arising out of, based on or resulting from (A) the presence, or
release into the environment, of any Hazardous Substance at any location whether
or not owned by the Company or (B) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law; (iii) "Environmental
Law" means any and all Laws applicable to the Company and the Site relating to
the protection of health and the Environment, worker health and safety, and/or
governing the handling, use, generation, treatment, storage, transportation,
disposal, manufacture, distribution, formulation, packaging, labeling, or
Release of Hazardous Substances, whether now existing or subsequently amended or
enacted, and the state analogies thereto, all as amended or superseded from time
to time; and any common law doctrine, including, but not limited to, negligence,
nuisance, trespass, personal injury, or property damage related to or arising
out of the presence, Release, or exposure to a Hazardous Substance; (iv)
"Environmental Permit" means any Licenses or Consents required by any
Governmental Entity under or in connection with any Environmental Law; (v)
"Hazardous Substance" means petroleum, petroleum hydrocarbons or petroleum
products, petroleum by-products, radioactive materials, asbestos or
asbestos-containing materials, gasoline, diesel fuel, pesticides, radon, urea
formaldehyde, lead or lead-containing materials, polychlorinated biphenyls; and
any other chemicals, materials, substances or wastes which are now included in
the definition of "hazardous substances," "hazardous materials," "hazardous
wastes," "extremely hazardous wastes, " "restricted hazardous wastes," "toxic
substances," "toxic pollutants," "pollutants," "regulated substances, or
"contaminants" or words of similar import, under any Environmental Law; (vi)
"Release" means any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping, or disposing of a Hazardous
Substance into the Environment; and (vii) "Site" means any of the real
properties currently owned, leased, used or operated by the Company (including,
without limitation, the Mexican Facility), any predecessors of the Company or
any entities previously owned by the Company, including all soil, subsoil,
surface waters and groundwater thereat.

                                       14



             4.17    No Brokers. Except for Orchard Partners, Inc., the Company
                     ----------
has not employed, or otherwise engaged, any financial advisor, broker or finder
or incurred any liability for any brokerage or investment banking fees,
commissions, finders' fees or other similar fees in connection with the
transactions contemplated by this Agreement.

             4.18    Receivables. All accounts receivable of the Company have
                     -----------
arisen, and as of the Closing Date will have arisen, from bona fide transactions
in the ordinary course of the Company's business consistent with past practice
and established in the ordinary course of such Company's business consistent
with past practice. Except as set forth on Schedule 4.18, each of the accounts
                                           -------------
receivable of the Company either has been or to the knowledge of the Company
will be collected in full, without any set-off or counterclaim, within ninety
(90) days after the day on which it first becomes due and payable.

             4.19    Inventories. As reflected on the Financial Statements, the
                     -----------
inventories of the Company's business have been valued at the lower of cost (on
the first-in, first-out method) or market in accordance with GAAP, consistently
applied, and the value of obsolete materials and materials of below standard
quality has been written down in accordance with GAAP, consistently applied.
Inventory in the Balance Sheet net of reserves is fairly stated. The Company is
not under any liability or obligation with respect to the return of inventory or
merchandise in the possession of wholesalers, distributors, retailers or other
customers. Except as set forth in Schedule 4.19, all inventory items are located
                                  -------------
on the Real Property. Since the date of the Latest Balance Sheet, no inventory
items have been sold or disposed of except in the ordinary course of business.

             4.20    Product Claims. No product liability claim is pending, or
                     --------------
to the knowledge of the Company, threatened, against the Company or against any
other party with respect to the products of the Company's business. Schedule
                                                                    --------
4.20 lists all product liability claims seeking damages in excess of $10,000
- ----
asserted against the Company (or in respect of which the Company has received
notice) with respect to the products of the Company's business or the Company
during the last five (5) years. Known claims not listed on Schedule 4.20 do not
                                                           -------------
aggregate more than $15,000.

             4.21    Warranties and Returns. Schedule 4.21 sets forth a summary
                     ----------------------  -------------
of the practices and policies followed by the Company with respect to warranties
and returns of any products manufactured or sold by it, whether such practices
are oral or in writing or are deemed to be legally enforceable. Except as set
forth on Schedule 4.21, there is not presently, nor has there been since
         -------------
December 31, 1997, any failure or defect in any product sold by the Company that
has required a general recall or replacement campaign or similar action with
respect to such product or a reformulation or change of such product.

             4.22    Assets Utilized in the Business. The assets, properties and
                     -------------------------------
rights owned, leased or licensed by the Company and used in connection with the
Company's business and that will be owned, leased or licensed by the Company as
of the Closing Date, and all the agreements to which the Company is a party
relating to the Company's business, constitute all of the properties, assets and
agreements required to be utilized and employed by the Company in connection
with the operation and conduct by the Company of its business as presently
conducted.

             4.23    Insurance. Schedule 4.23 contains a complete and correct
                     ---------  -------------
list of all policies of insurance of any kind or nature covering the Company,
including policies of life, fire, theft, casualty, product liability, workmen's
compensation, business interruption, employee fidelity and other casualty and
liability insurance. All such policies (i) are with insurance companies that to
the knowledge of the Company are financially sound and reputable and are in full
force and effect, (ii) are sufficient for compliance with all Material Contracts
of law and of all applicable material agreements, and (iii) are legal, valid,
binding, and enforceable policies. All premiums with respect to such insurance
policies to the extent due and payable are currently paid in accordance with
their terms. Complete and correct copies of such policies have been furnished to
the Buyer Group. All such insurance policies or comparable coverage shall be
continued in full force and effect on identical terms through the Closing Date.
Since December 31, 1997, the Company has not been denied any insurance coverage
which it has requested.

             4.24    Delivery of Documents; Corporate Records. The Company has
                     ----------------------------------------
heretofore delivered to the Buyer Group true, correct and complete copies of all
documents, instruments, agreements and records referred to in this Article 4 or
in the Schedules to this Agreement and copies of the minute and stock record
books of the Company. The minute and stock record books of the Company contain
true, correct and complete copies of the records of all meetings and consents in
lieu of a meeting of the Board of Directors (and all committees thereof) and the
stockholders of the Company since the date of its incorporation.

             4.25    Customers, Suppliers and Distributors. Schedule 4.25 sets
                     -------------------------------------  -------------
forth (i) the ten customers of the Company with the highest dollar volume of
purchases from the Company during the twelve month period ended on October 31,
2000 indicating the approximate total sales to each of those customers, and (ii)
the ten largest suppliers and the ten largest distributors of the Company during
such period. Except as set forth on Schedule 4.25, there has not been any
                                    -------------
adverse change in the business relationship of the Company with any such
customer, supplier or distributor outside of the ordinary course of business of
the Company as conducted heretofore, and the Company is not aware of any
threatened loss of any such customer, supplier or distributor outside the
ordinary course of business of the Company as conducted heretofore.

                                       15



             4.26    Labor Matters. The Company is not delinquent in payments to
                     -------------
any of its employees for any wages, salaries, commissions, bonuses, vacation,
holiday or sick pay, or other direct compensation for any services performed for
them to the date hereof or amounts required to be reimbursed to such persons
other than travel and related expenses incurred in the ordinary course of
business. Except as set forth on Schedule 4.9(a), the Company will not by reason
                                 ---------------
of the transactions contemplated hereby or anything done prior to the date
hereof be liable to any of said employees for so-called "severance pay" or any
other payments whether upon termination of employment of any employee or
otherwise. The Company does not have any policy, standard practice or plan of
paying severance pay or any form of severance compensation in connection the
termination of employment. The Company is in material compliance with all
applicable laws and regulations respecting labor, employment, fair employment
practices, work place safety and health, terms and conditions of employment, and
wages and hours. There are no charges of employment discrimination or unfair
labor practices against the Company, or to the knowledge of the Company,
threatened against the Company. There are no labor strikes, slow-downs or
stoppages or other labor troubles pending or, to the knowledge of the Company,
threatened with respect to the employees of the Company, no union has been
recognized with respect to the representation of any employee of the Company, no
representation questions exist, there is no collective bargaining agreement
binding on the Company and except as set forth in Schedule 4.26, there is no
                                                  -------------
agreement which restricts the Company from relocating or closing any or all of
its businesses or operations, there are no grievances asserted that would be
reasonably likely to have a Company Material Adverse Effect. The Company has not
experienced any work stoppage during the last five (5) years.

             4.27    Bank Accounts. Schedule 4.27 sets forth the names and
                     -------------  -------------
locations of all banks, depositories and other financial institutions in which
the Company has an account or safe deposit box and the names of all persons
authorized to draw thereon or to have access thereto.

             4.28    Directors, Officers and Certain Employees. Schedule 4.28
                     -----------------------------------------
sets forth a complete and correct list of the names and title for each director
and officer and each other employee of the Company who is a party to an
employment agreement with the Company. The Company is not aware of any employee
in the Company's senior management who intends to terminate his or her
employment relationship with the Company, either as a result of the transactions
contemplated hereby or otherwise. The Company has delivered to the Buyer Group a
true, correct and complete list of the current salary and bonus for each
employee of the Company.

                     4.29  No Misstatements or Omissions of the Company. The
                           --------------------------------------------
information with respect to the Company contained in the Proxy
Statement/Offering Memorandum (as defined in Section 7.13 hereof) will not at
the time it is mailed to the stockholders of the Company, at the time of the
Stockholders Meeting (as defined in Section 7.13 hereof), and at the Effective
Time contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.

                     4.30  Other Representations. The foregoing constitutes the
                           ---------------------
sole representations and warranties made by the Company under this Agreement and
in connection with the transactions contemplated hereby. The Company does not
make and hereby disclaims any other representations and warranties.

5.           Representations and Warranties of the Principal Parties.

             As a material inducement to the Buyer Group to enter into this
Agreement and consummate the transactions contemplated hereby, each of the
Principal Parties, jointly and severally, represents and warrants to the Buyer
Group as follows.

             5.1     Ownership; Authorization; Validity of Agreement.
                     -----------------------------------------------

                     (a)  Each of the Company Shares listed on Schedule 5.1 are
                                                               ------------
owned of record and beneficially by the Tolkoff Partnership as shown on such
Schedule, free and clear of all Liens.

                     (b)  Each of the Principal Parties has the requisite
capacity, power or authority, as the case may be, to execute, deliver and
perform this Agreement and each of the other agreements, instruments, documents
and certificates to be executed and delivered by the Principal Parties pursuant
to this Agreement (collectively, with this Agreement, the "Principal Parties
Transaction Documents"), to which the Principal Party is a party, and to assume
and perform his or its obligations hereunder and thereunder, and to consummate
the transactions contemplated hereby and thereby. Each of this Agreement and the
other Principal Party Transaction Documents has been duly executed, authorized
and delivered by each of the Principal Parties and is a valid and binding
obligation of each such Principal Party, enforceable against it in accordance
with their respective terms.

             5.2     No Violations; Consents and Approvals.
                     -------------------------------------

                                       16



             (a)     The execution, delivery and performance of each of this
Agreement and the other Principal Party Transaction Documents by each of the
Principal Parties do not, and the consummation by him or it of the transactions
contemplated hereby and thereby will not: (i) violate any provision of its
agreement of limited partnership in the case of the Tolkoff Partnership; (ii)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
amendment, cancellation or acceleration) under any of the terms, conditions or
provisions of any Contract to which any of the Principal Parties is a party or
by which any of his or its properties or assets may be bound or otherwise
subject; or (iii) violate any Law applicable to the Principal Party or any of
his or its properties or assets.

             (b)     No filing or registration with, notification to, or
authorization, consent or approval of, any Governmental Entity or Person, is
required in connection with the execution, delivery and performance of this
Agreement or any of the other Principal Party Transaction Documents by the
Principal Parties or the consummation by the Principal Parties of the
transactions contemplated hereby and thereby, except for filings that may be
required to be made by the Tolkoff Partnership under the HSR Act.

      5.3    Other Representations. The foregoing constitutes the sole
             ---------------------
representations and warranties made by the Principal Parties under this
Agreement and in connection with the transactions contemplated hereby. The
Principal Parties do not make and hereby disclaim any other representations and
warranties.

6.    Representations and Warranties of the Buyer and MedSource.

      As a material inducement to the Company to enter into this Agreement and
consummate the transactions contemplated hereby, each of the Buyer and
MedSource, jointly and severally, represents and warrants to the Company as
follows, except as otherwise may be set forth in a Schedule attached hereto:

      6.1    Organization of the Buyer Group. MedSource and Buyer are
             -------------------------------
corporations duly organized, validly existing and in good standing under the
laws of the State of Delaware and have the requisite corporate power and
authority to own, lease and operate their respective properties and to carry on
their respective businesses in the manner and in the places as now being
conducted or proposed to be conducted. Each of the Buyer and MedSource is duly
qualified or licensed to do business as a foreign corporation and is in good
standing in each jurisdiction in which the nature of its business conducted by
it makes such qualification or licensing necessary. The Buyer Group has
delivered to the Company true, correct and complete copies of the Certificate of
Incorporation and Bylaws of each of MedSource and the Buyer, as currently in
effect, and no amendments thereto are pending. Neither MedSource nor the Buyer
is in violation of any term of its Certificate of Incorporation and its Bylaws.

      6.2    Capital Structure.
             -----------------

             (a)     The authorized capital stock of MedSource without giving
effect to the transactions contemplated hereby, consists of:

                     (i)    1,000,000 shares of preferred stock, par value $.0l
             per share (the "Preferred Stock"), of which 100,000 shares have
             been designated as Series A (the "Series A Preferred Stock"),
             400,000 shares have been designated as 6% Series B Cumulative
             Convertible Redeemable Preferred Stock (the "Series B Preferred
             Stock"), 52,029 shares have been designated as 6% Cumulative
             Convertible Redeemable Preferred Stock, Series C (the "Series C
             Preferred Stock"), prior to the Effective Time 43,000 shares will
             have been designated Series D 6% Cumulative Convertible Preferred
             Stock, 65,000 shares have been designated as Series Z Convertible
             Nominal Value Redeemable Preferred Stock (the "Series Z Preferred
             Stock"); 382,971 shares of Preferred Stock remain undesignated; and

                     (ii)   40,000,000 shares of MedSource Common Stock.

             (b)     As of the date hereof, there were outstanding 5,255,008
shares of MedSource Common Stock, 38,370 shares of Series A Preferred Stock,
332,728 shares of Series B Preferred Stock, 40,000 shares of Series C Preferred
Stock, and 65,000 shares of Series Z Preferred Stock. Also at the date hereof,
10,401,437 shares of MedSource Common Stock were reserved for issuance pursuant
to outstanding options, warrants and convertible securities.

             (c)     All outstanding shares of capital stock of MedSource are,
and all shares that may be issued pursuant to securities or rights disclosed on
Schedule 6.2(c) will, when issued, be duly authorized, validly issued, fully
- ---------------
paid and nonassessable and not subject to preemptive rights, except as may be
disclosed on Schedule 6.2(c). Except as set forth in this Section 6.2 or in
             ---------------
Schedule 6.2(c), there are no (i) options, warrants, calls, preemptive rights,
- ---------------
subscriptions or other rights, convertible securities, agreements or commitments
of any character obligating now or in the future, MedSource or the holders of
MedSource Shares to issue, transfer or sell any shares of capital stock,
options, warrants, calls or other equity interest of any kind whatsoever in
MedSource or securities convertible into or exchangeable for such shares or
equity interests, (ii) contractual

                                       17



obligations of MedSource to repurchase, redeem or otherwise acquire any capital
stock or equity interest of MedSource or (iii) voting trusts, proxies or similar
agreements to which MedSource or any of the holders of MedSource Shares is a
party with respect to the voting of the capital stock of MedSource.

         6.3   Subsidiaries. A complete and current list of all of the
               ------------
subsidiaries of MedSource are set forth in Schedule 6.3. All of the outstanding
                                           ------------
shares of capital stock of each subsidiary are duly authorized, validly issued,
fully paid and nonassessable. Except as set forth in Schedule 6.3, the Company
                                                     ------------
does not own nor has any direct or indirect interest in or control over any
corporation, partnership, joint venture or other entity of any kind. The term
"control" shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise. As
used in this Article 6, the term MedSource shall include any and all
subsidiaries set forth on Schedule 6.3.
                          ------------

         6.4   Authorization; Validity of Agreement. Each of the Buyer and
               ------------------------------------
MedSource has the requisite corporate power and authority to execute, deliver
and perform this Agreement and each of the Exhibits hereto and the other
agreements and certificates required to be executed and delivered by the Buyer
or MedSource pursuant to this Agreement, including without limitation, the
Escrow Agreement, the Stockholders' Agreement (as defined in Section 7.7 hereof)
and the Registration Rights Agreement (as defined in Section 7.7 hereof) and the
Employment Agreement (as defined in Section 7.8) (collectively, the "Buyer
Acquisition Agreements") to which either the Buyer and/or MedSource is a party
and to consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance by each of the Buyer and MedSource of this
Agreement and the other Buyer Acquisition Agreements and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by the Board of Directors of each of MedSource and the Buyer and,
where necessary, the shareholders (in their capacity as such) of MedSource and
the Buyer, and no other corporate proceedings on the part of the Buyer and
MedSource are necessary to authorize the execution, delivery and performance of
this Agreement and the other Buyer Acquisition Agreements by the Buyer and
MedSource, as the case may be. This Agreement has been duly executed, authorized
and delivered by each of the Buyer and MedSource and is a valid and binding
obligation of each of the Buyer and MedSource, respectively, enforceable against
such party in accordance with its terms. Each Buyer Acquisition Agreement, when
duly executed and delivered by the Buyer and MedSource, as the case maybe, shall
be a valid and binding obligation of Buyer and MedSource, as the case may be,
enforceable against such party in accordance with its terms.

         6.5   No Violations, Consents and Approvals.
               -------------------------------------

               (a)  Except as set forth in Schedule 6.5, the execution, delivery
                                           ------------
and performance of this Agreement and the Buyer Acquisition Agreements by each
of the Buyer or MedSource, as the case may be, do not, and the consummation by
each of the Buyer and MedSource of the transactions contemplated hereby and
thereby will not, (i) violate any provision of the Certificate of Incorporation
or Bylaws of MedSource and the Buyer, (ii) result in a Default under any of the
terms, conditions or provisions of any Contract to which the Buyer or MedSource
is a party or by which the Buyer or MedSource or any of their respective
properties or assets may be bound or otherwise subject, or (iii) assuming the
accuracy of the representations and warranties in the Investment Letters (as
defined in Section 8.4(h) hereof) and the filings set forth in Section 6.5(b)
below, violate any Law applicable to the Buyer or MedSource or any of their
respective properties or assets.

               (b)  Except as set forth on Schedule 6.5, assuming the accuracy
                                           ------------
of the representations and warranties in the Investment Letters (as defined in
Section 8.4(h) hereof), no filing or registration with, notification to, or
authorization, consent or approval of, any Governmental Entity or Person is
required in connection with the execution, delivery and performance of this
Agreement or the Buyer Acquisition Agreements by each of the Buyer and
MedSource, as the case may be, or the consummation by the Buyer or MedSource of
the transactions contemplated hereby and thereby, except filing and expiration
of the applicable waiting period under the HSR Act, filing of a Form D under the
Securities Act of 1933, as amended, filings under applicable state securities
laws, filing of the Certificate of Designation with the Delaware Secretary of
State, and filing of the Articles of Merger with the Massachusetts Secretary of
The Commonwealth and the Delaware Secretary of the State (together with the
matters set forth in Schedule 6.5, the "Buyer Group Required Consents").
                     ------------

         6.6   Valid Issuance of MedSource Shares, Etc. Each of the MedSource
               ---------------------------------------
Shares to be issued in connection with the transactions contemplated hereby
pursuant to the terms of Section 2.1(a) hereof will, and each of the shares of
MedSource Common Stock to be issued on conversion of the MedSource Shares as
contemplated by the Certificate of Designation hereof will upon such issuance,
be duly authorized, validly issued, fully paid and non-assessable.

         6.7   Financial Statements.
               --------------------

               (a)  MedSource has delivered to the Company the audited
consolidated balance sheets of MedSource as of July 1, 2000 (the "Audited
Balance Sheet"), together with the related consolidated statements of operations
for the period ended on July 1, 2000, and the unaudited consolidated balance
sheets of MedSource as of September 30, 2000 (the "September 30, 2000 Balance
Sheet"), together with the related consolidated statements of operations for the
period ended September 30, 2000 (collectively, the "MedSource Financial
Statements").

                                       18



               (b)  The Audited Balance Sheet has been audited by Ernst&Young
LLP and the reports of that firm have been delivered to the Company. That firm
is and has been MedSource's only independent auditors for the period covered by
the Audited Balance Sheet. The MedSource Financial Statements have been derived
from, and agree with, the books and records of MedSource and fairly present in
all material respects the financial position of MedSource as of the respective
dates thereof and the results of operations of MedSource for the respective
periods set forth therein. The MedSource Financial Statements (including the
notes thereto) have been prepared in accordance with GAAP as of the dates and
for the periods involved, subject, in the case of the September 30, 2000 Balance
Sheet and the related statements of operations for the interim period, to the
absence of footnote disclosure and the normal fiscal year-end adjustments in the
ordinary course (none of which, individually or in the aggregate, will be
material to the business or operations of MedSource).

         6.8   No Material Adverse Change. Since September 30, 2000, no event,
               --------------------------
condition or circumstance has occurred that would be reasonably likely to have a
material adverse effect on the condition (financial or otherwise), business,
properties or results of operations of MedSource (as modified hereafter, a
"MedSource Material Adverse Effect"), other than events, conditions or
circumstances primarily attributable to (i) general economic conditions or world
events or (ii) general industry-wide changes in the business market in which
MedSource does business (including legal and regulatory changes).

         6.9   No Undisclosed Liabilities. Except as set forth on Schedule 6.9,
               --------------------------                         ------------
MedSource does not have, and as of the Closing Date will not have, any
liabilities (whether accrued, contingent, known, or otherwise) other than those
that (i) are set forth or adequately reserved against on the September 30, 2000
Balance Sheet, (ii) were incurred since the date of the September 30, 2000
Balance Sheet in the ordinary course of business, (iii) individually or in the
aggregate, would not be reasonably likely to have a MedSource Material Adverse
Effect or (iv) are under Contracts to which MedSource is a party.

         6.10  Litigation. There is no Proceeding pending nor, to the knowledge
               ----------
of the Buyer or MedSource, is there any investigation or Proceeding threatened,
that involves or affects the Buyer or MedSource, by or before any Governmental
Entity or any other Person that if adversely determined would be reasonably
likely to have a MedSource Material Adverse Effect. Neither the Buyer or
MedSource has any reason to believe that any such Proceeding may be brought or
threatened against the Buyer Group.

         6.11  Compliance with Law; Licenses and Permits.
               -----------------------------------------

               (a)  The Buyer and MedSource have complied with all applicable
Laws, except where the failure to so comply would be reasonably likely to have a
MedSource Material Adverse Effect. Since May 31, 1999, neither the Buyer nor
MedSource has received any notice of any material violation of any Law, except
for such notices relating to violations that would not be reasonably likely to
have a MedSource Material Adverse Effect. Since May, 1999, neither the Buyer nor
MedSource has not received any written notice of any material violation of any
Law except as set forth on Schedule 6.11.
                           -------------

               (b)  (i) The Buyer and MedSource have every License, and every
Consent by or on behalf of any Person that is not a party to this Agreement,
required for it to conduct its business as presently conducted; and (ii) all
such Licenses and Consents are in full force and effect and MedSource is
operating in material compliance therewith. Neither the Buyer nor MedSource has
received written notice of any pending cancellation or suspension of any thereof
nor is any cancellation or suspension thereof threatened, except where the
failure of any such statement in items (i) or (ii) of this Section 6.11(b) to be
true relates to a fact or circumstance that would not be reasonably likely to
have a MedSource Material Adverse Effect. Except as set forth on Schedule 6.5,
                                                                 ------------
the applicability and validity of each such License and Consent will not be
adversely affected by the consummation of the transactions contemplated by this
Agreement, except where any inapplicability or invalidity would not be
reasonably likely to have a MedSource Material Adverse Effect.

         6.12  No Brokers. Neither the Buyer nor MedSource has employed, or
               ----------
otherwise engaged, any financial advisor, broker or finder or incurred any
liability for any brokerage or investment banking fees, commissions, finders'
fees or other similar fees in connection with the transactions contemplated by
this Agreement, except under existing management services agreements between
MedSource and Kidd & Company, LLC and Whitney Mezzanine Management Company, LLC,
respectively.

         6.13  Delivery of Documents; Corporate Records. The Buyer or MedSource
               ----------------------------------------
has heretofore delivered to the Company true, correct and complete copies of all
documents, instruments, agreements and records referred to in this Article 6 or
in the Schedules to this Agreement and copies of the minute and stock record
books of the Buyer or MedSource. The minute and stock record books of the Buyer
or MedSource contain true, correct and complete copies of the records of all
meetings and consents in lieu of a meeting of the Board of Directors (and all
committees thereof) and the stockholders of the Buyer or MedSource since the
date of their respective incorporations.

         6.14  Compliance with Securities Laws. No outstanding share of
               -------------------------------
MedSource capital stock has been, and no shares of MedSource capital stock or
other equity securities to be issued as contemplated by this Agreement will be,
issued or sold by

                                       19



MedSource in violation of the registration requirements of the federal and
applicable state securities laws, provided in regard to securities to be issued
as contemplated by this Agreement, that the representations and warranties
contained in the Investment Letters (as defined in Section 8.4(h)) are accurate
and correct.

         6.15  No Misstatements or Omissions. The information with respect to
               -----------------------------
the Buyer Group contained in the Proxy Statement/Offering Memorandum (as defined
in Section 7.13 hereof) will not at the time it is mailed to the stockholders of
the Company, at the time of the Stockholders Meeting (as defined in Section 7.13
hereof), and at the Effective Time contain any untrue statement of material fact
or omit to state any material fact necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading

         6.16  Other Representations. The foregoing constitutes the sole
               ---------------------
representations and warranties made by the Buyer or MedSource under this
Agreement and in connection with the transactions contemplated hereby. The Buyer
and MedSource do not make and hereby disclaim any other representations and
warranties.

7.       Covenants and Other Agreements of the Parties.

         7.1   Tax Returns; Taxes.
               ------------------

               (a)  The Company acknowledges that on and after the Closing
Date the Surviving Corporation shall be an indirect wholly-owned subsidiary of
MedSource as a result of the Merger and, accordingly, any Tax Return referred to
in Section 4.14 hereof that was not required to be filed prior to the Closing
Date shall be filed, or caused to be filed, by MedSource after the Closing Date.
Any Tax Return under this Section 7.1(a) shall be prepared on a basis consistent
with past practice.

               (b)  After the Closing Date, MedSource shall preserve all
information, records or other documents relating to any Tax until the date that
is six (6) months after the expiration of the statute of limitations applicable
to the Tax. In addition, the Buyer Group and the Stockholder Representative
shall cooperate with each other upon request in connection with all matters
relating to the preparation of any Tax Returns and in connection with any Tax
Proceeding. Any investigation, review, comment or discussion by the Buyer Group
related to or in connection with the payment of Taxes, the preparation of Tax
Returns or drafts of Tax Returns, the filing of Tax Returns, any Tax Proceeding
or any provision of this Section 7.1 shall not affect the indemnity provisions
of Article 10 or limit the scope of such provisions (including but not limited
to Section 10.1) in any way, or affect any other representations, warranties or
obligations of the Company. Each party shall bear its own costs and expenses in
complying with the provisions of this Section 7.1(b); provided, however, that
any such reasonable costs, fees and expenses incurred by the Stockholder
Representative, which are approved in advance by MedSource (such approval not to
be unreasonably withheld), shall be reimbursed by MedSource and, thereafter,
shall be charged against the MedSource Shares held pursuant to the Escrow
Agreement such that the number of MedSource Shares with the value (as determined
pursuant to the Escrow Agreement) of such costs, fees and expenses shall be
released from the escrow fund held pursuant to the Escrow Agreement and returned
to MedSource.

         7.2   Non-Disclosure of Confidential Information.
               ------------------------------------------

               (a)  All information, data and material furnished to the
Company or the Principal Parties by the Buyer Group prior to the date of this
Agreement or hereafter furnished to the Company or the Principal Parties by the
Buyer Group is confidential. Except for disclosures which may be necessary to
satisfy conditions to or enforce provisions of this Agreement, the Company and
the Principal Parties agree that the Company or the Principal Parties will not,
and no agent representing the Company and the Principal Parties to which such
information, data or material may be furnished will disclose or otherwise make
available, at any time, any such information, data or material to any other
Person whomsoever who does not have a confidential relationship with the Company
or the Principal Party; that the Company and the Principal Parties will protect
such information, data and material with a high degree of care to prevent the
disclosure thereof, and that if, for any reason, the transactions contemplated
by this Agreement are not consummated, all information, data and material
concerning the Buyer Group obtained by the Company and the Principal Parties and
its or his respective representatives, and all copies thereof, will be delivered
promptly to the Buyer Group.

               (b)  All information, data and material furnished to the Buyer
Group by the Company or the Principal Parties prior to the date of this
Agreement or hereafter furnished to the Buyer Group by the Company is
confidential. Except for disclosures which may be necessary to satisfy
conditions to or enforce provisions of this Agreement, the Buyer Group agrees
that the Buyer Group will not, and no agent representing the Buyer Group to
which such information, data and material may be furnished will, disclose or
otherwise make available, at any time, any such information, data or material to
any other person whomsoever who does not have a confidential relationship with
the Buyer Group; that the Buyer Group and the Company and the Principal Parties
will protect such information, data and material with a high degree of care to
prevent the disclosure thereof, and that if, for any reason, the transactions
contemplated by this Agreement are not consummated, all information, data and

                                       20



material concerning the Company obtained by the Buyer Group and its
representatives, and all copies thereof, will be delivered promptly to the
Company.

         7.3   No Solicitation of Employees, Suppliers or Customers. Neither
               ----------------------------------------------------
Tolkoff nor the Tolkoff Partnership shall, and neither Tolkoff nor the Tolkoff
Partnership shall permit any Affiliate of either of them to, from and after the
Closing Date, and for a period of two years thereafter, directly or indirectly,
for himself, itself or on behalf of any other Person, employ, engage or retain
any Person who is an employee of MedSource or any of its subsidiaries as of the
Effective Time or contact any supplier, customer or employee of MedSource or any
of its subsidiaries for the purpose of soliciting or diverting any such
supplier, customer or employee from MedSource or any of its subsidiaries.
Notwithstanding the foregoing, it shall not be deemed a violation hereof if,
without the knowledge of Tolkoff, either Seedling Enterprises, LLC ("Seedling")
or any of the entities listed on Schedule 7.3 contacts any customer, supplier or
                                 ------------
employee of MedSource or any of its subsidiaries who is a customer or supplier
of MedSource or any of its subsidiaries at the Effective Time in a general
solicitation, including without limitation, through trade shows, advertisements,
mailings and the like not specifically directed at soliciting or diverting a
particular customer, supplier or employee from MedSource or any of its
subsidiaries.

         7.4   Non-Competition.
               ---------------

               (a)  Until the third anniversary of the Closing Date, neither
Tolkoff nor the Tolkoff Partnership or their respective Affiliates shall,
anywhere in North America or Europe, directly or indirectly, alone or in
association with any other Person, firm, corporation or other business
organization, unless consented to in writing by MedSource, (A) acquire or own in
any manner, any interest in any Person that is engaged in the business of the
Company as it was conducted immediately prior to the Closing Date or competes in
any way with the business of the Company as it was conducted immediately prior
to the Closing Date, (B) engage in the business of the Company as it was
conducted immediately prior to the Closing Date or compete in any way with the
business of the Company as it was conducted immediately prior to the Closing
Date, (C) be employed in any capacity by, serve as an employee of, or consultant
or advisor to, or otherwise participate in the management or operation of, any
Person that is engaged in the business of the Company as it was conducted
immediately prior to the Closing Date or competes with the business of the
Company as it was conducted immediately prior to the Closing Date in any way;
provided, however, that notwithstanding the foregoing, (i) Tolkoff, the Tolkoff
Partnership and their Affiliates (collectively and not individually) may own up
to five percent (5%) of the voting securities of any publicly-traded company;
(ii) Tolkoff's ownership of certain membership interests in, manager
participation in and employment by Seedling shall not be deemed a violation of
this Section 7.4(a); and (iii) Tolkoff may continue to serve on the board of
directors of (or, if a limited liability company, in a manager or member role
similar to that exercised by a board of directors) or act as an advisor to those
entities listed on Schedule 7.3, and neither Seedling nor those entities listed
                   ------------
on Schedule 7.3 hereof shall be subject to this Section 7.4(a) as a result of
   ------------
Tolkoff's service.

               (b)  The parties hereto intend that the covenant contained in
Section 7.4(a) shall be construed as a series of separate covenants, one for
each state or country specified. Except for geographic coverage, each such
separate covenant shall be deemed identical in terms to the covenant contained
in Section 7.4(a) above. If, in any judicial proceeding, a court shall refuse to
enforce any of the separate covenants deemed included in Section 7.4(a) hereof,
such covenant shall be deemed reduced in scope or, if necessary, eliminated from
these provisions for the purpose of those proceedings to the extent necessary to
permit the remaining separate covenants to be enforce.

               (c)  The Principal Parties acknowledge that the provisions of
this Section 7.4, and the period of time, geographic area and scope and type of
restrictions on his or its activities set forth herein, are reasonable and
necessary for the protection of the Buyer Group and are an essential inducement
to the Buyer Group's entering into this Agreement and the Buyer Acquisition
Agreements and consummating the transactions contemplated hereby and thereby.

         7.5   Other Actions. Each of the parties hereto shall use all
               -------------
reasonable efforts to (i) take, or cause to be taken, all actions, (ii) do, or
cause to be done, all things, and (iii) execute and deliver all such documents,
instruments and other papers, as in each case may be necessary, proper or
advisable under applicable Laws, or reasonably required in order to carry out
the terms and provisions of this Agreement and to consummate and make effective
the transactions contemplated hereby.

         7.6   Required Consents.
               -----------------

               (a)  The Company shall use its best efforts to obtain all
Required Consents, as set forth on Schedule 4.4(b) attached hereto. The Required
                                   ---------------
Consents shall be obtained and provided to the Buyer prior to, or if approved in
writing by the Buyer, as soon as practicable after, the Closing Date. The
Company shall promptly provide the Buyer with (i) copies of all filings made
with any Governmental Entity or other Person or any other information supplied
in connection with this Agreement and the transactions contemplated hereby and
(ii) all Consents obtained from any party to any Contract or any Lease and any
Approval with respect to the Real Property.

                                       21



               (b)  The Buyer Group shall use its best efforts to obtain all
Buyer Group Required Consents, as set forth on Schedule 6.5 attached hereto. The
                                               ------------
Buyer shall promptly provide the Company with all Buyer Group Required Consents
obtained from any party to any Contract.

         7.7   Stockholders' Agreement and Registration Rights Agreement. At the
               ---------------------------------------------------------
Closing, each stockholder of the Company shall enter into a stockholders'
agreement with MedSource (the "Stockholders' Agreement") and a registration
rights agreement (the "Registration Rights Agreement") each substantially in the
form attached hereto as Exhibit 7.7(a) and Exhibit 7.7(b), respectively.
                        --------------     --------------

         7.8   Employment Agreement.  At the Closing, Stuart A. Randle shall
               --------------------
enter into an Employment Agreement with the Surviving Corporation (the
"Employment Agreement") on substantially the terms agreed to on the date hereof.

         7.9   Stock Options.
               -------------

               (a)  At the Effective Time, each outstanding Company Stock
Option, whether vested or unvested, shall be deemed to constitute an option to
acquire, on substantially the same terms and conditions as were applicable under
the Company 1998 Omnibus Stock Plan and under the agreement relating thereto,
that number of shares of MedSource Shares equal to the product of the number of
shares of Company Common Stock that were issuable upon exercise of such option
immediately prior to the Effective Time multiplied by the Exchange Ratio, and
the per share exercise price for the MedSource Shares issuable upon exercise of
such replaced Company Stock Option will be equal to the quotient determined by
dividing the exercise price per share of Company Common Stock at which such
option was exercisable immediately before the Effective Time by the Exchange
Ratio, rounded to the nearest whole cent. MedSource will use best efforts to
have the Company Stock Options so modified in accordance with this Section 7.9
qualify following the Effective Time as "incentive stock options" as defined in
Section 422 of the Code to the extent such options qualified as incentive stock
options immediately before the Effective Time.

               (b)  MedSource shall take all corporate action necessary to
reserve for issuance a sufficient number of MedSource Shares and MedSource
Common Stock for delivery under the Company Stock Options assumed in accordance
with this Section 7.9.

               (c)  As of the Effective Time, MedSource shall create a
non-qualified stock option pool for the employees of the Surviving Corporation
identified jointly by MedSource and the Company to purchase up to a maximum of
350,000 shares of MedSource Common Stock. Each such option grant shall be
pursuant to the 1999 Stock Plan of MedSource and shall be evidenced by a written
stock option agreement stating the terms and conditions thereof.

         7.10  Put Agreements. MedSource and the Company shall jointly use their
               --------------
best efforts to obtain a termination of the Put Agreements (as defined in
Section 8.1(m) hereof) to the extent that the Puts (as defined in the Put
Agreements) provided for under the Put Agreements have not been fully exercised
prior to the Effective Time; provided, however, that, notwithstanding the
foregoing, a maximum aggregate, unless otherwise consented to by MedSource, of
$1,100,000 may be paid by the Company at the Effective Time with funds provided
by MedSource or the Buyer to the parties to the Put Agreements in connection
with the partial exercise of the Puts provided for therein in accordance with
their terms; provided, further, that either or both of the Principal Parties
shall either (i) assume, at no cost to the Company, the Company's obligations
under the Put Agreements to the extent that the holders of a Put have exercised
such Put for a purchase price in excess of the $1,100,000 up to the maximum
aggregate amount payable pursuant to the terms of such Put Agreements in
exchange for the Company Shares so Put by such holders pursuant to the terms of
the Put Agreements or (ii) acquire directly the Company Shares held by such
holders of a Put, in either case, the Company Shares so acquired by either or
both of the Principal Parties shall be converted into MedSource Shares as
provided in Section 2.1(a) hereof; provided, further, that, unless otherwise
consented to by MedSource, no additional consideration shall be paid by
MedSource or the Company to the parties to the Put Agreement in connection with
such termination.

         7.11  Normal Course of Business. Except as set forth on Schedule 7.11,
               -------------------------                         -------------
from the date hereof until the Closing, the Company will: (i) maintain the
general character of its business and proper business and accounting records;
(ii) maintain its tangible properties in good repair and condition, ordinary
wear and tear excepted; (iii) maintain all presently existing insurance coverage
under which it is a beneficiary; (iv) use its best efforts to preserve its
business organization intact, to keep the services of its present principal
employees and to preserve its good will and preserve its relationship with
suppliers, manufacturers, vendors, dealers, distributors, customers and others
having business relationships with it; (v) pay its trade payables in a manner
consistent with past business practice and pay its indebtedness when such
indebtedness becomes due under the terms thereof; and (vi) in all other respects
conduct its business, including incurring new indebtedness, in the ordinary
course of business consistent with past practice.

         7.12  Actions Prior to Closing.
               ------------------------

                                       22



               (a)  Except as set forth on Schedule 7.12, from the date hereof
                                           -------------
until the Closing, the Company will not (without the prior consent of the
Buyer): (i) amend or otherwise modify its Articles of Organization, By-laws, or
any Contract listed in Schedule 4.13 hereto; (ii) make any changes affecting its
                       -------------
banking or safe deposit arrangements; merge or consolidate with, or sell all or
substantially all of its assets to, any other person or corporation; acquire any
other business; (iii) enter into any other transaction other than in the
ordinary course of business; (iv) declare or pay any dividends in respect of any
of its outstanding shares of capital stock; (v) repurchase, redeem or otherwise
acquire any shares of its capital stock; (vi) issue or authorize or propose the
issuance or sale of any shares of its capital stock of any class or any
securities convertible into or exercisable for, or any rights, warrants, calls
or options to acquire, any such shares, or enter into any commitment,
arrangement, undertaking or agreement with respect to any of the foregoing,
other than the issuance of Company Common Stock upon the exercise of outstanding
stock options in accordance with their present terms; (vii) enter into or amend
any employment, or severance or similar arrangement with any officer or increase
the salary of any director, officer or employee of the Company or make any
increase in any employee benefits; (viii) make any cash distributions to any
holder of Company Shares other than (x) employment compensation to the such
holders in annualized amounts not to exceed the amounts described for the year
ended December 31, 2000 as provided to MedSource in writing prior to the date
hereof or (y) the repayment of all debt due to stockholders and institutions;
and (viii) enter into any commitment to do any of the foregoing.

               (b)  On or before the Closing Date, the Company shall repay all
of the debt due to stockholders of the Company and institutions pursuant to
promissory notes, revolving credit facilities, term loans and notes, lines of
credits or other similar arrangements outstanding as of the Closing Date as set
forth on Schedule 7.12(b) (the "Debt"), which Schedule sets forth the amount
         ----------------
outstanding on such debt as of the date hereof. Such repayment will be made from
the Company's cash on hand, provided, however, that any cash received by the
Company as a result of exercises of outstanding Company Stock Options after the
date hereof shall not be used to repay such Debt (the "Available Cash"). Two (2)
days prior to the Closing, the Company shall deliver to the Buyer Group payoff
letters from each such stockholder and institution and a reconciliation
statement setting forth the dates the Debt was repaid by the Company and the
amount of cash used by the Company to repay such Debt, as well as the amount of
any shortfall owed on the Debt (determined by subtracting the amount of
Available Cash from the amount outstanding on the Debt on such date) (the
"Shortfall"). Any Shortfall shall be paid by MedSource or Buyer at Closing and
that number of MedSource Shares shall be deducted from the escrow amount to be
contributed as set forth in Section 2.1(a) hereof as are equal to the amount of
the Shortfall divided by $1,000.

         7.13  Preparation of Proxy Statement/Offering Memorandum; Stockholders
               ----------------------------------------------------------------
               Meeting.
               -------

               (a)  As promptly as reasonably practicable following the date
hereof, the Company and the Buyer Group shall cooperate in preparing acceptable
materials which shall constitute the proxy statement relating to the matters to
be submitted to the Company's stockholders at the Company's meeting of
stockholders (the "Stockholders Meeting") and offering memorandum of MedSource
relating to the offering of MedSource Shares (such proxy statement/offering
memorandum, and any amendments or supplements thereto, the "Proxy
Statement/Offering Memorandum"). The Company and the Buyer Group shall provide
the other party with a reasonable opportunity to review and comment on any draft
of the Proxy Statement/Offering Memorandum prior to delivery of the Proxy
Statement/Offering Memorandum to the stockholders of the Company. The Company
will use reasonable best efforts to cause the Proxy Statement/Offering
Memorandum to be mailed to the Company's stockholders as promptly as practicable
after acceptance of such by the Buyer Group. If at any time prior to the
Effective Time any information relating to the Company, the Buyer Group or any
of its respective affiliates, officers, or directors, should be discovered by
one of the parties hereto, which information should be set forth in an amendment
or supplement to the Proxy Statement/Offering Memorandum so that it would not
include any misstatement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, such party shall promptly notify the other
party and, to the extent required by law, rules or regulations, an appropriate
amendment or supplement describing such information shall be promptly
disseminated to the stockholders of the Company.

               (b)  The Company shall duly take all lawful action to call, give
notice of, convene and hold a Stockholders Meeting on December 29, 2000, or such
other date determined in accordance with the mutual agreement of the Company and
the Buyer Group, for the purpose of obtaining the stockholder approval of the
Merger and shall take all lawful action to solicit the Stockholder Vote,
regardless of whether or not the Board of Directors of the Company recommends
adoption of this Agreement and the transactions contemplated hereby by the
stockholders of the Company.

         7.14  Access to Information.
               ---------------------

               (a)  Upon reasonable notice, the Company shall afford to the
officers, employees, accountants, counsel, financial advisors and other
representatives of the Buyer Group reasonable access during normal business
hours, during the period prior to the Effective Time, to all its properties,
books, contracts, commitments, records, officers and employees and, during such
period, the Company shall furnish promptly to the Buyer Group all other
information concerning it and its business, properties and personnel as the
Buyer Group may reasonably request. The Buyer Group will hold any such
information

                                       23



obtained pursuant to this Section 7.14(a) in confidence in accordance with, and
shall otherwise be subject to, the provisions of Section 7.2 hereof.

          (b) Upon reasonable notice and to the extent required under Rule 502
of Regulation D, MedSource shall afford to the officers, employees, accountants,
counsel, financial advisors and other representatives of the Company reasonable
access during normal business hours, during the period prior to the Effective
Time, to all its properties, books, contracts, commitments, records, officers
and employees and, during such period, MedSource shall furnish promptly to the
Company all other information concerning it and its business, properties and
personnel as the Company may reasonably request. The Buyer Group will hold any
such information obtained pursuant to this Section 7.14(b) in confidence in
accordance with, and shall otherwise be subject to, the provisions of Section
7.2 hereof.

     7.15 No Solicitation. Until such time, if any, as this Agreement is
          ---------------
terminated pursuant to Article 9, the Company will not, and will cause its
Affiliates and representatives not to, directly or indirectly solicit, initiate,
or encourage any inquiries or proposals from any Person (other than Buyer or
MedSource) relating to any transaction involving the sale of the business or
assets of the Company, or any of the capital stock of the Company, or any
merger, consolidation, business combination, or similar transaction involving
the Company. The Company shall notify MedSource in writing within 24 hours after
such inquiry or proposal and such notice shall indicate in reasonable detail the
terms and conditions of such inquiry or proposal.

     7.16 Blue Sky Laws. Subject to the accuracy of the representations in the
          -------------
Investment Letters (as defined in Section 8.4(h)), MedSource shall take such
steps as may be necessary to comply with the securities and blue sky laws of all
jurisdictions which are applicable to the issuance of the MedSource Shares
pursuant hereto. The Company shall use its reasonable best efforts to assist
MedSource as may be necessary to comply with the securities and blue sky laws of
all jurisdictions which are applicable in connection with the issuance of
MedSource Shares pursuant hereto.

     7.17 Directors' and Officers' Insurance. The Company shall use its best
          ----------------------------------
efforts to purchase, immediately following the execution of this Agreement, tail
directors' and officers' liability insurance policy coverage with the Company's
existing carrier for the Company's directors and executive officers for a period
of two (2) years following the Effective Time, the premium for which shall not
exceed $30,000 in the aggregate, which will provide the directors and executive
officers with coverage on substantially similar terms as currently provided by
the Company to such directors and executive officers.

     7.18 Notices of Breach. The Company shall give prompt notice to MedSource,
          -----------------
and MedSource or Buyer shall give prompt notice to the Company, of (i) any
representation or warranty made by it contained in this Agreement which has
after the date hereof become untrue or inaccurate in any material respect, or
(ii) the failure after the date hereof by it to comply with or satisfy in any
material respect any covenant, condition, or agreement to be complied with or
satisfied by it under this Agreement; provided, however, that such notification
shall be given prior to the Closing and shall not excuse or otherwise affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.

8.   Closing Conditions.

     8.1 Deliveries of the Company. At the Closing, the Company shall deliver
         -------------------------
         the following items to the Buyer Group:

         (a) The Required Consents;

         (b) The opinion of Choate, Hall & Stewart, counsel to the Company,
substantially in the form attached hereto as Exhibit 8.1(b);
                                             --------------

         (c) A tax and lien search of the Company showing no items not disclosed
in the schedules to this Agreement;

         (d) The Employment Agreement duly executed by Stuart A. Randle;

         (e) The Stockholders' Agreement duly executed by the holders of not
less than two-thirds of the Company Shares;

         (f) The Registration Rights Agreement duly executed by the holders of
not less than two-thirds of the Company Shares;

         (g) The Escrow Agreement duly executed by the Company and the
Stockholders' Representative;

                                       24



          (h) A certificate duly executed by the President of the Company,
attesting, with respect to the Company, the resolutions duly and validly adopted
by the Board of Directors of the Company evidencing the authorization of its
execution and delivery of this Agreement and the other Transaction Documents to
which the Company is a party and the consummation of the transactions
contemplated hereby and thereby, as to its Articles of Organization and By-laws,
and as to the incumbency of each of its corporate officers;

          (i) A certificate with respect to the Company from the Secretary of
The Commonwealth of Massachusetts attesting as to its valid existence as of a
date recent to the Closing Date;

          (j) Approval of the Merger and this Agreement by the stockholders of
the Company;

          (k) All of the documentation required by Section 7.12(b) hereof;

          (l) A joint instruction of the Company and the Stockholders (as
defined in the Danforth Escrow Agreement) pursuant to the Escrow Agreement,
dated as of May 5, 1999, among the Company, DBI Acquisition Corp., and the other
parties identified therein (the "Danforth Escrow Agreement") relating to the
substitution of the Company Common Stock held thereunder for MedSource Shares;
and

          (m) Termination of the Stock Restriction and Put Agreements with each
of 1995 Matani Marital Trust, dated October 17, 1995, 1995 Kraus Marital Trust,
dated September 18, 1995, and Michael Horzewski (collectively, the "Put
Agreements") to the extent that the Puts provided in such agreements have not
been, subject to the provisions of Section 7.10 hereof, fully exercised prior to
the Effective Time.

     8.2  Deliveries of the Buyer Group. At the Closing, Buyer shall and
          -----------------------------
MedSource shall cause the Buyer to deliver the following items to the Company:

          (a) A certificate of the Secretaries of MedSource and the Buyer
certifying the resolutions duly and validly adopted by MedSource and the Buyer
and to the extent required, the stockholders of the Buyer, evidencing the
authorization of its and the Buyer's execution and delivery of this Agreement
and the other Buyer Acquisition Agreements to which the members of the Buyer
Group are parties and the consummation of the transactions contemplated hereby
and thereby, as to their respective Certificate of Incorporation and By-laws,
and the names and signatures of the officers of MedSource and the Buyer
authorized to sign this agreement and the other Buyer Acquisition Agreements to
be delivered hereunder;

          (b) The opinion of Faegre & Benson LLP, counsel to the Buyer Group,
substantially in the form attached hereto as Exhibit 8.2(b);
                                             --------------
          (c) The Employment Agreement duly executed by an officer of the
Surviving Corporation;

          (d) The Stockholders' Agreement duly executed by MedSource;

          (e) The Registration Rights Agreement duly executed by MedSource;

          (f) The Escrow Agreement duly executed by MedSource and the Buyer;

          (g) The Certificate of Designation certified by the Secretary of the
State of the State of Delaware;

          (h) Certificates with respect to the Buyer and MedSource from the
Secretary of the State of Delaware, in each case attesting as to their
respective valid existence as of a date recent to the Closing Date.

     8.3  Conditions Precedent to Obligations of the Company. The obligations of
          --------------------------------------------------
the Company to effect the closing of the transactions contemplated by this
Agreement is subject to the satisfaction at or before the Closing of the
following conditions, any one or more of which may be waived by the Company:

          (a) Representations and Warranties of Buyer Group Correct. The
              -----------------------------------------------------
representations and warranties contained in Article 6 hereof shall be true and
correct in all material respects (except that where any statement in a
representation or warranty expressly includes a Company Material Adverse Effect,
"material" or other materiality qualifier, such representation and warranty
shall be true and correct in all respects) as of the Closing as though such
representations and warranties had been made on and as of the Closing.

                                       25



          (b) Compliance with Covenants. The Buyer and MedSource shall have
              -------------------------
performed and observed, or caused to be performed and observed in all material
respects, all covenants and agreements hereof to be performed or observed by
them at or before the Closing.

          (c) Delivery of Certificates. The Company shall have received a
              ------------------------
certificate, dated as of the Closing Date, signed by the President or a Vice
President of the Buyer and MedSource, as to the matters set forth in Sections
8.3(a) and 8.3(b) hereof.

          (d) Option Grants. The Board of Directors of MedSource shall have
              -------------
approved the option grants to the Company's employees contemplated in Section
2.3 hereof.

          (e) Stockholder Approval. The Company shall have obtained the
              --------------------
necessary Stockholder Vote at the Stockholders Meeting.

          (f) Delivery of Closing Documents. The Buyer Group shall have executed
              -----------------------------
and delivered to the Company those items set forth in Section 8.2 hereof.

     8.4  Conditions Precedent to Obligations of the Buyer and MedSource. The
          --------------------------------------------------------------
obligations of the Buyer and MedSource to effect the closing of the transactions
contemplated by this Agreement is subject to the satisfaction at or before the
Closing of the following conditions, any one or more of which may be waived by
the Buyer and MedSource:

          (a) Representations and Warranties of the Company and the Principal
              ---------------------------------------------------------------
Parties Correct. The representations and warranties contained in Articles 4 and
- ---------------
5 hereof shall be true and correct in all material respects (except that where
any statement in a representation or warranty expressly includes a MedSource
Material Adverse Effect, "material" or other materiality qualifier, such
representation and warranty shall be true and correct in all respects) as of the
Closing as though such representations and warranties had been made on and as of
the Closing.

          (b) Compliance with Covenants. The Company and the Principal Parties
              -------------------------
shall have performed and observed, or caused to be performed or observed in all
material respects, all covenants and agreements hereof to be performed or
observed by the Company or the Principal Parties at or before the Closing.

          (c) Delivery of Certificates. The Buyer shall have received
              ------------------------
certificates, dated as of the Closing Date, signed by the President or a Vice
President of the Company and each of the Principal Parties, as to the matters
set forth in Sections 8.4(a) and 8.4(b) hereof.

          (d) Delivery of Closing Documents. The Company shall have executed and
              -----------------------------
delivered to the Buyer those items set forth in Section 8.1 hereof.

          (e) Resignations. All officers and directors of the Company shall have
              ------------
tendered to the Buyer such written resignations as requested by the Buyer,
effective as of the Closing.

          (f) Stockholder Approval. The Company shall have obtained the
              --------------------
necessary Stockholder Vote at the Stockholders Meeting.

          (g) Dissenting Stockholders. The period within which any of the
              -----------------------
stockholders of the Company can exercise appraisal rights under Section 85 of
the MBCL shall have expired and holders of no more than 1% of the Company Shares
shall have exercised such appraisal rights.

          (h) Investment Letters. Each of the stockholders of the Company shall
              ------------------
have delivered to the Buyer Group an investment and acknowledgement letter (each
an "Investment Letter"). Each such stockholder who is not an accredited investor
shall have demonstrated to the Buyer Group's reasonable satisfaction that he,
she or it alone, or together with a duly qualified purchaser representative, has
such knowledge or experience in financial or business matters that he, she or it
is capable of evaluating the merits and risks of the investment in MedSource
Shares or shall have duly appointed a purchaser representative (as defined in
Rule 501 of the Securities Act of 1933, as amended) with such financial and
business acumen.

          (i) Required Consents. The Buyer Group shall have obtained all Buyer
              -----------------
Buyer Group Required Consents.

          (j) Due Diligence. The Buyer Group shall be reasonably satisfied with
              -------------
its discussions with Boston Scientific Corporation and Heartport, Inc. as to the
reputation of the Company and the Company's relationship with such customers.

                                       26



          (k) Put Agreements. Each of the Put Agreements shall have been
              --------------
terminated in form reasonably satisfactory to MedSource to the extent that the
Put provided for in such Put Agreement has not been exercised in full, and no
more than a maximum aggregate of $1,100,000 shall have been paid by MedSource or
the Company to the parties to the Put Agreements in connection with any exercise
of such Put prior to the Effective Time as contemplated by Section 7.10 hereof.

9.   Termination; Right to Proceed.

     9.1  Termination. This Agreement may be terminated:
          -----------

          (a) by mutual consent of all of the parties hereto at any time prior
to the Closing;

          (b) by any of the parties hereto at any time prior to the Closing, i
the Merger shall not have been consummated by February 16, 2001, unless such
failure of consummation shall be due to the breach by the party seeking to
terminate of the covenants and agreements hereof to be performed by such party;

          (c) by any of the parties hereto at any time prior to the Closing, if
any court or governmental authority of competent jurisdiction shall have issued
an order, decree or ruling permanently restraining, enjoining or otherwise
prohibiting the consummation of the transactions contemplated by this Agreement,
and such order, decree or ruling shall have become final and nonappealable;

          (d) by any of the parties hereto if the approval of the stockholders
of the Company contemplated by this Agreement and as required by MBCL shall not
have been obtained by reason of failure to obtain the required vote at a duly
held meeting of the stockholders or of adjournment thereof at which a vote was
taken;

          (e) By the Buyer, if the Company or the Principal Parties shall have
materially breached or failed to perform any of their representations,
warranties, covenants or other agreements contained in this Agreement, such that
the conditions set forth in Section 8.3(a) or (b) hereof are not capable of
being satisfied on or before February 16, 2001; or

          (f) By the Company, if MedSource or the Buyer shall have materially
breached or failed to perform any of their representations, warranties,
covenants, or other agreements contained in this Agreement, such that the
conditions set forth in Section 8.4(a) or (b) hereof are not capable of being
satisfied on or before February 16, 2001.

     Upon termination of this Agreement, all obligations of the parties shall
terminate, including without limitation the Buyer Group's obligation pursuant to
Section 11.2 hereof, except those under Sections 7.2 and Article 10 hereof;
provided, however, that no such termination shall relieve Company of any
liability to the Buyer or MedSource, or the Buyer or MedSource of any liability
to the Company, by reason of any breach of or default under this Agreement.

     9.2  Right to Proceed. Anything in this Agreement to the contrary
          ----------------
notwithstanding, if any of the conditions specified in Sections 8.1 and 8.4
hereof have not been satisfied, Buyer shall have the right to proceed with the
transactions contemplated hereby without waiving any of its rights hereunder,
and if any of the conditions specified in Sections 8.2 and 8.3 hereof have not
been satisfied, the Company shall have the right to proceed with the
transactions contemplated hereby without waiving any of their rights hereunder.

10.  Indemnification.

     10.1  Survival of Representations and Warranties of the Company or the
           ----------------------------------------------------------------
Principal Parties. Notwithstanding any right of the Buyer or MedSource to fully
- -----------------
investigate the affairs of the Company and the Principal Parties and
notwithstanding any knowledge of facts determined or determinable by the Buyer
or MedSource pursuant to such investigation or right of investigation, the Buyer
and MedSource have the right to rely fully upon the representations and
warranties of the Company and the Principal Parties and the covenants contained
in this Agreement or in any other Company Transaction Document or Principal
Parties Transaction Document. All such representations and warranties shall
survive the execution and delivery of this Agreement and the Closing hereunder
and shall thereafter continue in full force and effect until the second
anniversary of the Closing Date, except for liability with respect to which
written notice, specifying in reasonable detail the basis for which a claim is
asserted, shall have been given on or prior to such date to the party against
which such claim is asserted pursuant to Section 10.5 hereof. The foregoing
notwithstanding, the representations and warranties contained in Sections 4.2,
4.3 and 5.1 hereof or with respect to fraud or deliberate or willful breach by
the Company or the Principal Parties shall survive in perpetuity and, in the
case of Sections 4.8(b), 4.9, 4.14, and 4.16, until the expiration of the
statute of limitations applicable to any liability relating thereto which such
liability shall remain an obligation of the party against whom such claim is
asserted.

     10.2  Survival of Representations and Warranties of the Buyer Group.
           --------------------------------------------------------------
Notwithstanding any right of the Company to fully investigate the affairs of the
Buyer and MedSource and notwithstanding any knowledge of facts determined or

                                       27



determinable by the Buyer or MedSource pursuant to such investigation or right
of investigation, the Company has the right to rely fully upon the
representations and warranties and covenants of the Buyer and MedSource
contained in this Agreement or in any other Buyer Acquisition Agreement. All
such representations and warranties shall survive the execution and delivery of
this Agreement and the Closing hereunder and shall thereafter continue in full
force and effect until the second anniversary of the Closing Date, except for
liability with respect to which written notice, specifying in reasonable detail
the basis for which a claim is asserted, shall have been given on or prior to
such date to the party against which such claim is asserted pursuant to Section
10.5, which such liability shall remain an obligation of the party against whom
such claim is asserted. The foregoing notwithstanding, the representations and
warranties contained in Sections 6.2 and 6.4 hereof or with respect to fraud or
deliberate or willful breach by the Buyer Group shall survive in perpetuity.

     10.3 Indemnification by the Stockholders and the Principal Parties.
          -------------------------------------------------------------

          (a) Subject to the provisions of Section 10.6 hereof, the stockholders
of the Company shall jointly and severally indemnify and defend the Buyer and
MedSource and each of their respective officers, directors, employees,
stockholders, agents, advisors or representatives (each, a "Buyer Indemnitee")
against, and hold each Buyer Indemnitee harmless from, any loss, liability,
obligation, deficiency, damage, Tax or expense including, without limitation,
interest, penalties, reasonable attorneys' fees and disbursements (collectively,
"Damages"), that any Buyer Indemnitee suffers or incurs, as such Damages are
incurred, based upon, arising out of, relating to or in connection with any of
the following (whether or not in connection with any third party claim):

              (i)  Any breach of any representation or warranty made by the
          Company contained in Article 4 of this Agreement or in respect of any
          claim made based upon facts that would constitute any such breach; or

              (ii) The Company's failure to perform or to comply with any
          covenant required to be performed or complied with by the Company
          contained in this Agreement.

          (b) The Principal Parties shall jointly and severally indemnify and
defend each Buyer Indemnitee against, and hold each Buyer Indemnitee harmless
from, any Damages, that any Buyer Indemnitee suffers or incurs, as such Damages
are incurred, based upon, arising out of, relating to or in connection with any
of the following (whether or not in connection with any third party claim):

              (i)  Any breach of any representation or warranty made by the
          Principal Parties contained in Article 5 of this Agreement or in
          respect of any claim made based upon facts that would constitute any
          such breach; or

              (ii) The Principal Party's failure to perform or to comply with
          any covenant required to be performed or complied with by the
          Principal Party contained in this Agreement.

     10.4 Indemnification by the Buyer Group. The Buyer and MedSource shall
          ----------------------------------
indemnify and defend the stockholders of the Company and their agents, advisors
or representatives (each, a "Stockholder Indemnitee") against, and hold each
Stockholder Indemnitee harmless from, any Damages that the Stockholder
Indemnitee suffers or incurs, as such Damages are incurred, arising from,
related to or in connection with any of the following:

          (a) Any breach of any representation or warranty made by the Buyer or
MedSource contained in Article 6 of this Agreement or in respect of any claim
made based upon facts alleged that would constitute any such breach; or

          (b) The Buyer's or MedSource's failure to perform or to comply with
any covenant required to be performed or complied with by the Buyer or MedSource
contained in this Agreement.

     10.5 Indemnification Procedures.
          --------------------------

          (a) Promptly after notice to an indemnified party of any claim or the
commencement of any Proceeding, including any Proceeding by a third party,
involving any Damages referred to in Sections 10.3 or 10.4 hereof, such
indemnified party shall, if a claim for indemnification in respect thereof is to
be made against an indemnifying party pursuant to this Article 10, give written
notice to the latter of the commencement of such claim or Proceeding, setting
forth in reasonable detail the nature thereof and the basis upon which such
party seeks indemnification hereunder; provided, however, that the failure of
any indemnified party to give such notice shall not relieve the indemnifying
party of its obligations under such section, except to the extent that the
indemnifying party is actually prejudiced by the failure to give such notice.

          (b) In the case of any such Proceeding by a third party against an
indemnified party, the indemnifying party may, upon at least 10 days notice as
provided above, assume the defense thereof, with counsel reasonably satisfactory
to

                                       28



the indemnified party, and, after notice from the indemnifying party to the
indemnified party of its assumption of the defense thereof, the indemnifying
party shall not be liable to such indemnified party for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof (but the indemnified party shall have the right, but not the
obligation, to participate at its own cost and expense in such defense by
counsel of its own choice) or for any amounts paid or foregone by the
indemnified party as a result of the settlement or compromise thereof (without
the written consent of the indemnifying party). Anything in this Section 10.5(b)
notwithstanding, if both the indemnifying party and the indemnified party are
named as parties or subject to such Proceeding and either such party determines
with advice of counsel that there may be one or more legal defenses available to
it that are different from or additional to those available to the other party
or that a material conflict of interest between such parties may exist in
respect of such Proceeding, then the indemnifying party may decline to assume
the defense on behalf of the indemnified party or the indemnified party may
retain the defense on its own behalf, and, in either such case, after notice to
such effect is duly given hereunder to the other party, the indemnifying party
shall be relieved of its obligation to assume the defense on behalf of the
indemnified party, but shall be required to pay any legal or other expenses
including, without limitation, reasonable attorneys' fees and disbursements,
incurred by the indemnified party in such defense.

          (c) If the indemnifying party assumes the defense of any such
Proceeding, the indemnified party shall cooperate fully with the indemnifying
party and shall appear and give testimony, produce documents and other tangible
evidence, allow the indemnifying party access to the books and records of the
indemnified party and otherwise assist the indemnifying party in conducting such
defense. No indemnifying party shall, without the consent of the indemnified
party, consent to entry of any judgment or enter into any settlement or
compromise which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect of such claim or Proceeding. Provided that proper notice is
duly given, if the indemnifying party shall fail promptly and diligently to
assume the defense thereof, then the indemnified party may respond to, contest
and defend against such Proceeding (but the indemnifying party shall have the
right to participate at its own cost and expense in such defense by counsel of
its own choice) and may make in good faith any compromise or settlement with
respect thereto, and recover from the indemnifying party the entire cost and
expense thereof including, without limitation, reasonable attorneys' fees and
disbursements and all amounts paid or foregone as a result of such Proceeding,
or the settlement or compromise thereof.

          (d) For purposes of this Article 10, the value of the MedSource Shares
held pursuant to the Escrow Agreement shall be determined as set forth in
Section 3 of the Escrow Agreement.

     10.6 Limitations on Indemnification by the Stockholders.
          --------------------------------------------------

          (a) The stockholders of the Company shall have joint and several
indemnification obligations for any Damages that any Buyer Indemnitee suffers or
incurs based upon, arising out of, relating to or in connection with any matters
listed in Section 10.3(a)(i): (i) if and only to the extent that the aggregate
of all Damages suffered or incurred by the Buyer Indemnitees pursuant to Section
10.3(a)(i) exceeds $475,000, provided that this subsection (i) shall not apply
to breaches of the representations and warranties contained in Sections 4.2,
4.3, 4.8(b), 4.9 and 4.14 hereof; and (ii) only to the extent of the value of
the escrow fund under the Escrow Agreement, which escrow fund, except as
otherwise set forth in Section 10.6(b) below, shall be the sole source of
indemnification for all Buyer Indemnitees against the stockholders of the
Company.

          (b) Notwithstanding the provision of Section 10.6(a) above, if the
escrow fund under the Escrow Agreement has been terminated in accordance with
its terms or the escrow fund under the Escrow Agreement has been exhausted, the
stockholders of the Company shall be jointly and severally liable to indemnify
any Buyer Indemnitee for any Damages that such Buyer Indemnitee suffers or
incurs based upon, arising out of, relating to or in connection with breaches of
the representations and warranties contained in Sections 4.2, 4.3, 4.8(b), 4.9,
4.14 and 4.16 hereof ; provided, however, that the (i) maximum indemnification
liability of all stockholders of the Company under this clause (b) shall be
limited to such stockholder's pro rata portion of $25,500,000 and (ii) no
particular stockholder shall have any liability to any Buyer Indemnitee for an
amount in excess of the value of 63.75% of the MedSource Shares allocable to
such stockholder as a result of the Merger. A stockholder's pro rata portion
shall be based on the number of MedSource Shares contributed by such stockholder
to the escrow fund divided by the total number of Escrowed Shares.

     10.7 Limitations on Indemnification by the Buyer Group.
          -------------------------------------------------

          (a) The Buyer and MedSource shall have joint and several
indemnification obligations for any Damages that any Stockholder Indemnitee
suffers or incurs based upon, arising out of, relating to or in connection with
any matters listed in Section 10.4(a) if and only to the extent that the
aggregate of all Damages suffered or incurred by all Stockholder Indemnitees
pursuant to Section 10.4(a) exceeds $475,000, provided that this Section 10.7(a)
shall not apply to breaches of representations and warranties contained in
Sections 6.2 and 6.4 hereof.

                                       29



          (b) Anything herein to the contrary notwithstanding, neither the Buyer
nor MedSource shall be liable for any Damages that any Stockholder Indemnitee
suffers or incurs based upon, arising out of, relating to or in connection with
any matters listed in Section 10.4 hereof (other than breaches of the
representations and warranties contained in Sections 6.2 and 6.4 hereof) for and
to the extent that the aggregate amount of such Damages exceeds $12,675,000. In
the case of Damages that result from breaches of representations or warranties
set forth in Sections 6.2 and 6.4 hereof, the Buyer and MedSource shall have no
liability for such breaches for and to the extent that the aggregate amount of
such Damages exceeds $25,500,000.

     10.8 Other Indemnification Provisions. Notwithstanding anything in this
          --------------------------------
Agreement to the contrary, it is hereby understood that for purposes of Sections
10.3(a)(i) and 10.4(a) hereof, in the event of a breach of, or inaccuracy in,
any representation or warranty, in determining the amount of Damages resulting
therefrom, all "Company Material Adverse Effect," "MedSource Material Adverse
Effect," material or other materiality exceptions and qualifications and
knowledge exceptions set forth in any representation and warranty contained in
Articles 4 and 6 of this Agreement shall be disregarded.

11.  Miscellaneous.

     11.1 Stockholders' Representative. Stuart A. Randle, who for purposes of
          ----------------------------
this Agreement shall be the representative of the stockholders of the Company
(the "Stockholders Representative"), shall, for and on behalf of himself and
each of the stockholders for which he is acting, have all powers necessary to
administer this Agreement including, without limitation the power to modify,
amend or waive provisions of this Agreement and any other Transaction Document
including without limitation the Escrow Agreement, authorize delivery of stock,
cash and other property from the escrow funds in satisfaction of any
indemnification claims by the Buyer Group, object to such deliveries, agree to,
negotiate, enter into settlements and compromises of, and demand dispute
resolution, comply with orders of courts and awards of arbitrators with respect
to such claims, give consents or instructions, or give or receive notices or
contest any claim for indemnification by the Buyer Group. Any notice, direction
or act to be received or given by the Company or any stockholder shall be deemed
properly received or given if received or given by the Stockholders'
Representative.

     11.2 Transaction Fees and Expenses. All costs, fees and expenses incurred
          -----------------------------
by the Company in connection with this Agreement and the transactions
contemplated hereby shall be borne by the Company and upon consummation of the
Merger such costs, fees and expenses shall be borne by the Surviving
Corporation; provided, however, that any such costs, fees and expenses in excess
of $150,000 shall be charged against the MedSource Shares held pursuant to the
Escrow Agreement such that the number of MedSource Shares with the value of such
excess shall be released from the escrow fund held pursuant to the Escrow
Agreement and returned to MedSource. All costs, fees and expenses incurred by
the Buyer Group in connection with this Agreement and the transactions
contemplated hereby shall be borne by the Buyer Group. Subject to Section 7.10
hereof, the costs, fees and expenses incurred by the Company in connection with
this Agreement and the transactions contemplated hereby that have not been paid
prior to the Effective Time shall be paid at the Closing by the Surviving
Corporation to the extent that such costs, fees and expenses have been presented
to the Company for payment on or prior to such Closing.

     11.3 Notices. Any notice, demand, request or other communication which is
          -------
required, called for or contemplated to be given or made hereunder to or upon
any party hereto shall be deemed to have been duly given or made for all
purposes if (a) in writing and sent by (i) messenger or a recognized national
overnight courier service for next day delivery with receipt therefor, or (ii)
certified or registered mail, postage paid, return receipt requested, or (b)
sent by facsimile transmission with a written copy thereof sent on the same day
by postage paid first-class mail, or (c) by personal delivery to such party at
the following address:

          if to the Buyer Group, to:

          MedSource Technologies, Inc.
          110 Cheshire Lane, Suite 100
          Minneapolis, Minnesota 55305
          Attention: Richard J. Effress
          Facsimile No.: (612) 807-1235

          with a copy to:

          Faegre & Benson LLP
          2200 Wells Fargo Center
          90 South Seventh Street
          Minneapolis, MN 55402-3901
          Attn: David B. Miller
          Facsimile No.: (612) 336-3026


                                       30



                  if to the Company, to:

                  ACT Medical, Inc.
                  150 California Street
                  Newton, MA 02458
                  Attn: Stuart A. Randle
                  Facsimile No.: (617) 454-6012

                  if to the stockholders of the Company, to the Stockholder
                  Representative

                  in each case, with a copy to:

                  Choate, Hall & Stewart
                  Exchange Place, 53 State Street
                  Boston, MA 02109
                  Attn: Roslyn G. Daum, Esq.
                  Facsimile No: (617) 248-4000

or such other address as either party hereto may at any time, or from time to
time, direct by written notice given to the other party in accordance with this
Section. The date of giving or making of any such notice or demand shall be, in
the case of clause (a)(i), the date of the receipt, in the case of clause
(a)(ii), five (5) business days after such notice or demand is sent, and, in the
case of clause (b), the business day next following the date such notice or
demand is sent.

         11.4  Amendment. Except as otherwise provided herein, no amendment of
               ---------
this Agreement shall be valid or effective unless in writing and signed by or on
behalf of the party against whom the same is sought to be enforced.

         11.5  Waiver. No course of dealing of any party hereto, no omission,
               ------
failure or delay on the part of any party hereto in asserting or exercising any
right hereunder, and no partial or single exercise of any right hereunder by any
party hereto shall constitute or operate as a waiver of any such right or any
other right hereunder. No waiver of any provision hereof shall be effective
unless in writing and signed by or on behalf of the party to be charged
therewith. No waiver of any provision hereof shall be deemed or construed as a
continuing waiver, as a waiver in respect of any other or subsequent breach or
default of such provision, or as a waiver of any other provision hereof unless
expressly so stated in writing and signed by or on behalf of the party to be
charged therewith.

         11.6  Governing Law. This Agreement shall be governed by, and
               -------------
interpreted and enforced in accordance with, the laws of The Commonwealth of
Massachusetts.

         11.7  Jurisdiction. Each of the parties hereto hereby irrevocably
               ------------
consents and submits to the jurisdictions of the United States District Courts
of The Commonwealth of Massachusetts in connection with any Proceeding arising
out of or relating to this Agreement or the transactions contemplated hereby,
waives any objection to venue in such Districts (unless such court lacks
jurisdiction with respect to such Proceeding, in which case, each of the parties
hereto irrevocably consents to the jurisdiction of the courts of The
Commonwealth of Massachusetts in connection with such Proceeding and waives any
objection to venue in The Commonwealth of Massachusetts, and agrees that service
of any summons, complaint, notice or other process relating to such Proceeding
may be effected in the manner provided by clause (a) of Section 11.3.

         11.8  Remedies. In the event of any actual or prospective breach or
               --------
default by any party hereto, the other parties shall be entitled to equitable
relief, including remedies in the nature of injunction and specific performance.
All remedies hereunder are cumulative and not exclusive. Nothing contained
herein and no election of any particular remedy shall be deemed to prohibit or
limit any party from pursuing, or be deemed a waiver of the right to pursue, any
other remedy or relief available now or hereafter existing at law or in equity
(whether by statute or otherwise) for such actual or prospective breach or
default, including the recovery of damages.

         11.9  Severability. The provisions hereof are severable and if any
               ------------
provision of this Agreement shall be determined to be legally invalid,
inoperative or unenforceable in any respect by a court of competent
jurisdiction, then the remaining provisions hereof shall not be affected, but
shall, subject to the discretion of such court, remain in full force and effect,
and any such invalid, inoperative or unenforceable provision shall be deemed,
without any further action on the part of the parties hereto, amended and
limited to the extent necessary to render such provision valid, operative and
enforceable.

         11.10 Further Assurances. Each party hereto covenants and agrees
               ------------------
promptly to execute, deliver, file or record such agreements, instruments,
certificates and other documents and to perform such other and further acts as
the other party hereto

                                       31



may reasonably request or as may otherwise be necessary or proper to consummate
and perfect the transactions contemplated hereby.

         11.11    Assignment.
                  ----------

                  (a) This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto, their heirs and
their respective successors and permitted assignees. Except for the permitted
assignees, neither party shall have the right to assign any rights or delegate
any duties hereunder without the consent of the other party. Permitted assignees
of the rights hereunder of the Buyer or MedSource shall include any Person
controlling, controlled by or under common control of the Buyer or MedSource.

                  (b) Notwithstanding the foregoing, the Buyer Group (including
each subsequent assignee of the Buyer Group) shall have the right to assign any
or all of its rights and obligations hereunder to any other Person who acquires
all or substantially all of the assets and business of the Buyer Group (or a
subsequent assignee of the Buyer Group); provided that the assignor shall not be
released from any of its obligations hereunder by reason of any such assignment.

                  (c) Notwithstanding any provision of this Agreement to the
contrary, each of the Principal Parties hereby acknowledges and agrees that all
of the covenants, representations, warranties and indemnities of the Principal
Parties under this Agreement, and under any other agreement or instrument
contemplated hereby to which any Principal Party is a party may be collaterally
assigned to any and all lenders to the Buyer Group or any of their Affiliates,
any and all of whom may enforce their rights and remedies in connection with any
such collateral assignment or realization thereon to the extent provided in the
applicable security agreements and other debt instruments or at law or in
equity.

         11.12    No Third Party Beneficiaries. Nothing contained in this
                  ----------------------------
Agreement, whether express or implied, is intended, or shall be deemed, to
create or confer any right, interest or remedy for the benefit of any Person
other than as otherwise provided in this Agreement.

         11.13    Entire Agreement. This Agreement (including all the Schedules
                  ----------------
and Exhibits hereto), together with the Exhibits, Schedules, certificates and
other documentation referred to herein or required to be delivered pursuant to
the terms hereof, contains the terms of the entire agreement among the parties
with respect to the subject matter hereof and supersedes any and all prior
agreements, commitments, representations, warranties, understandings,
discussions, negotiations or arrangements of any nature relating thereto.

         11.14    Headings. The headings contained in this Agreement are
                  --------
included for convenience and reference purposes only and shall be given no
effect in the construction or interpretation of this Agreement.

         11.15    Counterparts; Facsimile Signatures.  This Agreement may be
                  ----------------------------------
executed in any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. This Agreement may be executed by facsimile.

         11.16    Publicity and Disclosure. No press release or other public
                  ------------------------
disclosure, either written or oral, of the transactions contemplated by this
Agreement, shall be made by a party to this Agreement without the prior written
consent of Buyer and MedSource.

                [Remainder of this page left blank intentionally]

                                       32



                                        ACT ACQUISITION CORP.


                                        By: /s/
                                           -------------------------------------
                                                 Name: Richard J. Effress
                                                 Title: Chief Executive Officer

                                        MEDSOURCE TECHNOLOGIES, INC.


                                        By: /s/
                                           -------------------------------------
                                                 Name: Richard J. Effress
                                                 Title: Chairman

                                        ACT MEDICAL, INC.


                                        By: /s/
                                           -------------------------------------
                                                 Name:
                                                 President

                                        By: /s/
                                           -------------------------------------
                                                 Name:
                                                 Treasurer

                                        THE TOLKOFF FAMILY LIMITED PARTNERSHIP


                                        By: /s/
                                           -------------------------------------
                                                 Name: M. Joshua Tolkoff
                                                 Title: General Partner

                                         /s/
                                        ----------------------------------------
                                        M. Joshua Tolkoff


                                       33



                                   Schedule I
                          List of Majority Stockholders
                      (other than the Tolkoff Partnership)

Jacob Jacobsen
Stuart A. Randle

                                       34

EX-10.11

                                                                   Exhibit 10.11
                                                                   -------------

                                 1999 STOCK PLAN
                                       of
                          MEDSOURCE TECHNOLOGIES, INC.
               (As Amended and Restated Through December 14, 2001)

           1. Purposes of the Plan. This stock plan (the "Plan") is intended to
              --------------------
provide an incentive to employees (including directors and officers who are
employees) and to consultants and directors who are not employees of MedSource
Technologies, Inc., a Delaware corporation (the "Company"), or any of its
Subsidiaries (as defined in paragraph 18), and to offer an additional inducement
in obtaining the services of such persons. The Plan provides for the grant of
"nonqualified stock options," which do not qualify as "incentive stock options"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), and shares of stock of the Company that may be subject to
contingencies or restrictions (collectively with the options, "Awards").

           2. Stock Subject to the Plan. Subject to the provisions of paragraph
              -------------------------
11, the aggregate number of shares of Common Stock (as defined in paragraph 18)
that may be granted under the Plan shall not exceed 4,430,000. Such shares of
Common Stock may, in the discretion of the Board of Directors of the Company
(the "Board of Directors"), consist either in whole or in part of authorized but
unissued shares of Common Stock or shares of Common Stock held in the treasury
of the Company. Subject to the provisions of paragraph 12, any shares of Common
Stock subject to an option that for any reason expires, is cancelled or is
terminated unexercised or that ceases for any reason to be exercisable or a
restricted stock Award that for any reason is forfeited, shall again become
available for the granting of Awards under the Plan. The Company shall at all
times during the term of the Plan reserve and keep available such number of
shares of Common Stock as will be sufficient to satisfy the requirements of the
Plan.

           3. Administration of the Plan. The Plan shall be administered by the
              --------------------------
Board of Directors or a committee (the "Committee") of the Board of Directors.
Those administrating the Plan are referred to herein as the "Administrators." At
any time, and for so long as, the Common Stock is registered pursuant to section
12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Administrators shall not include any person that would prevent an Award from
being exempt from Section 16(b) of the Exchange Act pursuant to Rule 16b-3
thereunder. Except as otherwise provided by the Board of Directors, the bylaws
of the Company or applicable law, a majority of the members of the Committee
shall constitute a quorum, and the acts of a majority of the members present at
any meeting at which a quorum is present, and any acts approved in writing by
all members without a meeting, shall be the acts of the Committee.

           Subject to the express provisions of the Plan, the Administrators
shall have the authority, in their sole discretion, to determine: who shall be
granted Awards; the type of Award to be granted, the times when an Award shall
be granted; the number of shares of Common Stock to be subject to each Award;
the term of each option; the date each option shall vest or become



exercisable; whether an option shall vest or be exercisable in whole, in part or
in installments and, if in installments, the number of shares of Common Stock to
be subject to each installment; whether the installments shall be cumulative,
the date each installment shall become exercisable and the term of each
installment; whether shares of Common Stock may be issued upon the exercise of
an option as partly paid and, if so, the dates when future installments of the
price shall become due and the amounts of such installments; the exercise price
of an option and the price, if any, to be paid for a stock Award; the form of
payment of the exercise price; the restrictions, if any, imposed with respect to
a stock Award and whether and under what conditions to waive any such
restriction; whether to restrict the sale or other disposition of the shares of
Common Stock acquired upon the exercise of an option and, if so, whether and
under what conditions to waive any such restriction; whether and under what
conditions to subject all or a portion of the grant or exercise of an option,
the vesting of a stock Award or the shares acquired pursuant to the exercise of
an option to the fulfillment of certain restrictions or contingencies as
specified in the contract referred to in paragraph 10 hereof (the "Contract"),
including without limitation, restrictions or contingencies relating to entering
into a covenant not to compete with the Company, any of its Subsidiaries or a
Parent (as defined in paragraph 18), to financial objectives for the Company,
any of its Subsidiaries or a Parent, a division of any of the foregoing, a
product line or other category, and/or to the period of continued employment of
the Award holder with the Company, any of its Subsidiaries or a Parent, and to
maintain the confidentiality of information provided to, or learned by, the
Award holder, and to determine whether such restrictions or contingencies have
been met; whether to accelerate the date on which an option may vest or be
exercised or to waive any restriction or limitation with respect to any Award;
whether an Award holder is Disabled (as defined in paragraph 18); the amount, if
any, necessary to satisfy the obligation of the Company, a Subsidiary or Parent
to withhold taxes or other amounts with respect to the grant; the Fair Market
Value (as defined in paragraph 18) of a share of Common Stock; to construe the
respective Contracts and the Plan; with the consent of the Award holder, to
cancel or modify an Award, provided, that the modified provision is permitted to
                           --------
be included in an Award granted under the Plan on the date of the modification,
to prescribe, amend and rescind rules and regulations relating to the Plan; and
to make all other determinations necessary or advisable for administering the
Plan. Any controversy or claim arising out of or relating to the Plan, any Award
granted under the Plan or any Contract shall be determined unilaterally by the
Administrators in their sole discretion. The determinations of the
Administrators on the matters referred to in this paragraph 3 shall be
conclusive and binding on the parties. No member or former member of the
Administrators shall be liable for any action, failure to act or determination
made in good faith with respect to the Plan or Contract or Award hereunder.

           4.Eligibility. The Administrators may from time to time, in their
             -----------
sole discretion, consistent with the purposes of the Plan, grant Awards to (a)
employees (including officers and directors who are employees) of the Company or
any of its Subsidiaries, (b) consultants to the Company or any of its
Subsidiaries and (c) non-employee directors of the Company. Such Awards granted
shall cover such number of shares of Common Stock as the Administrators may
determine, in their sole discretion, as set forth in the applicable Contract;
provided, however, if, on the date of grant, the Common Stock or any other class
- --------  -------
of common

                                      -2-



equity securities of the Company is required to be registered pursuant to
section 12 of the Exchange Act, the maximum number of shares subject to options
that may be granted to any employee during any calendar year under the Plan (the
"162(m) Maximum") shall be 1,000,000 shares.

           5.  Options.
               -------

           (a) Grant. The Administrators may from time to time, in their sole
               -----
discretion, consistent with the purposes of the Plan, grant options to persons
eligible for such grant pursuant to paragraph 4.

           (b) Exercise Price. The exercise price of the shares of Common Stock
               --------------
under each option shall be determined by the Administrators, in their sole
discretion, as set forth in the applicable Contract.

           (c) Term. The term of each option granted pursuant to the Plan shall
               ----
be such term as is established by the Administrators, in their sole discretion,
as set forth in the applicable Contract. Options shall be subject to earlier
termination as hereinafter provided.

           (d) Exercise. An option (or any part or installment thereof), to the
               --------
extent then vested and exercisable, shall be exercised (to the extent the holder
elects) by giving written notice to the Company at its principal office stating
which option is being exercised, specifying the number of shares of Common Stock
as to which such option is being exercised and accompanied by payment in full of
the aggregate exercise price therefor (or the amount due on exercise if the
applicable Contract permits installment payments) (a) in cash or by certified
check or (b) if the applicable Contract permits, with previously acquired shares
of Common Stock that are fully paid, vested, transferrable and have been held
for the requisite period to avoid a charge to the Company's earnings for
financial accounting purposes and that have an aggregate Fair Market Value on
the date of exercise equal to the aggregate exercise price of all options being
exercised, or with any combination of cash, certified check or shares of Common
Stock having such value. The Company shall not be required to issue any shares
of Common Stock pursuant to any such option until all required payments,
including any required withholding, have been made.

           A person entitled to receive Common Stock upon the exercise of an
option shall not have the rights of a stockholder with respect to such shares of
Common Stock until the date of issuance of a stock certificate for such shares
or in the case of uncertificated shares, an entry is made on the books of the
Company's transfer agent representing such shares; provided, however, that until
                                                   --------  -------
such stock certificate is issued or book entry is made, any optionee using
previously acquired shares of Common Stock in payment of an option exercise
price shall continue to have the rights of a stockholder with respect to such
previously acquired shares.

           6. Restricted Stock. The Administrators, in their sole discretion,
              ----------------
may from time to time, consistent with the purposes of the Plan,
grant shares of Common Stock to persons

                                      -3-



eligible for such grant pursuant to paragraph 4. The grant may require the Award
holder to pay such price per share therefor, if any, as the Administrators may
determine, in their sole discretion. Such shares may be subject to such
contingencies and restrictions as the Administrators may determine, as set forth
in the Contract. Upon the issuance of the stock certificate for a stock Award,
or in the case of uncertificated shares, the entry on the books of the Company's
transfer agent representing such shares, notwithstanding any contingencies or
restrictions to which the shares are subject, the Award holder shall be
considered to be the record owner of the shares, and subject to the
contingencies and restrictions set forth in the Award, shall have all rights of
a shareholder of record with respect to such shares, including the right to vote
and to receive distributions. Upon the occurrence of any such contingency or
restriction, the Award holder may be required to forfeit all or a portion of
such shares back to the Company. The shares shall vest in the Award holder when
all of the restrictions and contingencies lapse. Until such time, the
Administrators may require that such shares be held by the Company, together
with a stock power duly endorsed in blank by the Award holder.

           7. Termination of Relationship. Except as may otherwise be expressly
              ---------------------------
provided in the applicable Contract, an optionee whose relationship with the
Company as a director, or with the Company or any of its Subsidiaries or a
Parent as an employee or a consultant, has terminated for any reason (other than
as a result of the death or Disability of the optionee) may exercise his
options, to the extent exercisable on the date of such termination, at any time
within three months after the date of termination, but not thereafter and in no
event after the date the option would otherwise have expired; provided, however,
                                                              --------  -------
that if such relationship is terminated either (a) for Cause (as defined in
paragraph 18), or (b) without the consent of the Company, such option shall
terminate immediately.

           For the purposes of the Plan, an employment relationship shall be
deemed to exist between an individual and the Company, any of its Subsidiaries
or a Parent if, at the time of the determination, the individual would be
treated as an employee of such entity for purposes of Section 422(a) of the Code
assuming such section applied. As a result, an individual on military, sick
leave or other bona fide leave of absence shall continue to be considered an
employee for purposes of the Plan during such leave if the period of the leave
does not exceed 90 days, or, if longer, so long as the individual's right to
reemployment with the Company, any of its Subsidiaries or a Parent is guaranteed
either by statute or by contract. If the period of leave exceeds 90 days and the
individual's right to reemployment is not guaranteed by statute or by contract,
the employment relationship shall be deemed to have terminated on the 91st day
of such leave.

           Except as may otherwise be expressly provided in the Contract, upon
the termination of the relationship of a holder of a stock Award as a director
of the Company, or as an employee of, or consultant to, the Company, or any of
its Subsidiaries or a Parent, for any reason (including his death or
Disability), such stock Award shall cease any further vesting and the unvested
portion of such Award as of the date of such termination shall be forfeited to
the Company for no consideration.

                                      -4-



           Except as may otherwise be expressly provided in the applicable
Contract, Awards granted under the Plan to a director, employee or consultant
shall not be affected by any change in the status of the Award holder so long as
such Award holder continues to be a director of the Company, or an employee of,
or a consultant to, the Company or any of its Subsidiaries or a Parent
(regardless of having changed from one to the other or having been transferred
from one entity to another).

           Nothing in the Plan or in any option granted under the Plan shall
confer on any Award holder any right to continue in the employ of, or as a
consultant to, the Company, any of its Subsidiaries or a Parent, or as a
director of the Company, or interfere in any way with any right of the Company,
any of its Subsidiaries or a Parent to terminate the Award holder's relationship
at any time for any reason whatsoever without liability to the Company, any of
its Subsidiaries or a Parent.

           8. Death or Disability of an Optionee. Except as may otherwise be
              ----------------------------------
expressly provided in the applicable Contract, if an optionee dies (a) while he
is a director of the Company, or an employee of, or consultant to, the Company,
any of its Subsidiaries or a Parent, (b) within three months after the
termination of such relationship (unless such termination was for Cause or
without the consent of the Company) or (c) within one year following the
termination of such relationship by reason of his Disability, the options that
were granted to him as a director, employee or consultant may be exercised, to
the extent exercisable on the date of his death, by the personal representative
of his estate at any time within one year after death, but not thereafter and in
no event after the date the option would otherwise have expired.

           Except as may otherwise be expressly provided in the applicable
Contract, any optionee whose relationship as a director of the Company, or an
employee of, or consultant to, the Company, its Parent and Subsidiaries has
terminated by reason of such optionee's Disability may exercise the options that
were granted to him as a director, employee or consultant, to the extent
exercisable upon the effective date of such termination, at any time within one
year after such date (except as provided in clause (c) of the preceding
paragraph), but not thereafter and in no event after the date the option would
otherwise have expired.

           9. Compliance with Securities Laws. Notwithstanding anything herein
              -------------------------------
to the contrary, the Administrators may require, in their sole discretion, as a
condition to the receipt of any Award or the exercise of any option that either
(a) a Registration Statement under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of Common Stock to be issued upon
such receipt or exercise shall be effective and current at the time of exercise,
or (b) there is an exemption from registration under the Securities Act for the
issuance of the shares of Common Stock upon such receipt or exercise. Nothing
herein shall be construed as requiring the Company to register shares subject to
any Award under the Securities Act or to keep any Registration Statement
effective or current.

           The Administrators may require, in their sole discretion, as a
condition to the receipt of an Award or the exercise of any option that the
Award holder execute and deliver to

                                      -5-



the Company his representations and warranties, in form, substance and scope
satisfactory to the Administrators, which the Administrators determine are
necessary or convenient to facilitate the perfection of an exemption from the
registration requirements of the Securities Act, applicable state securities
laws or other legal requirement, including without limitation that (a) the
shares of Common Stock to be issued upon the receipt of the Award or the
exercise of the option are being acquired by the Award holder for his own
account, for investment only and not with a view to the resale or distribution
thereof, and (b) any subsequent resale or distribution of shares of Common Stock
by such Award holder will be made only pursuant to (i) a Registration Statement
under the Securities Act which is effective and current with respect to the
shares of Common Stock being sold, or (ii) a specific exemption from the
registration requirements of the Securities Act, but in claiming such exemption,
the Award holder shall, prior to any offer of sale or sale of such shares of
Common Stock, provide the Company with a favorable written opinion of counsel
satisfactory to the Company, in form, substance and scope satisfactory to the
Company, as to the applicability of such exemption to the proposed sale or
distribution.

           In addition, if at any time the Administrators shall determine, in
their sole discretion, that the listing or qualification of the shares of Common
Stock subject to any Award on any securities exchange, Nasdaq or under any
applicable law or self-regulating agency rule, or the consent or approval of any
governmental agency or regulatory body, is necessary or desirable as a condition
to, or in connection with, the granting of an Award or the issuing of shares of
Common Stock upon exercise of an option, such Award may not be granted and such
option may not be exercised in whole or in part unless such listing,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Administrators.

           10. Contracts. Each Award shall be evidenced by an appropriate
               ---------
Contract which shall be duly executed by the Company and the Award holder, and
shall contain such terms, provisions and conditions not inconsistent herewith as
may be determined by the Administrators. The terms of each Award and Contract
need not be identical.

           11. Adjustments Upon Changes in Common Stock.
               ----------------------------------------

           (a) Notwithstanding any other provision of the Plan, in the event of
a stock dividend, stock split, combination, recapitalization, merger or
consolidation in which the Company is the surviving corporation, spin-off,
split-up, combination or exchange of shares or the like which results in a
change in the number or kind of shares of Common Stock which is outstanding
immediately prior to such event, the aggregate number and kind of shares subject
to the Plan, the aggregate number and kind of shares subject to each outstanding
option and the exercise price thereof, and the 162(m) Maximum shall be
appropriately adjusted by the Board of Directors to convert the unexercised
portion of the option into an option to acquire such number and kind of shares
or other consideration that the optionee would have been entitled to receive if
he had owned the shares underlying such portion of the option prior to such
event, and to apportion the remaining aggregate exercise price of the option
among such consideration to be received upon exercise. In making such
adjustments, the Board of Directors may provide for the elimination of
fractional shares which might otherwise be subject to options without payment

                                      -6-



therefor. The determination of the Board of Directors with respect to any matter
under this subparagraph (a) shall be conclusive and binding on all parties
thereto.

           (b) Notwithstanding any other provision of the Plan, in the event of
(i) the liquidation or dissolution of the Company, or (ii) a transaction (or
series of related transactions), other than the initial public offering of
Common Stock, that is approved by a majority of those who were members of the
Board of Directors prior to the first of such transaction or series (including,
without limitation, a merger, consolidation, sale of stock by the Company or its
stockholders, tender offer or sale of assets) and in which either (A) the voting
power (in the election of directors generally) of the Company's voting
securities outstanding immediately prior to such transaction(s) cease to
represent at least 50% of the combined voting power (in the election of
directors generally) of the Company or such surviving entity outstanding
immediately after such transaction(s), (B) all or substantially all of the
Company's assets are sold to an unaffiliated third party, or (C) the
registration of the Common Stock under the Exchange Act is terminated (if such
registration was in effect immediately prior to such transaction(s)), then,
unless otherwise provided in the applicable Contract or other provision is made
therefor in such transaction, (x) the Company (or its designee) may, at its
option purchase, and the holder shall sell, the vested portion of each option,
for an amount equal to the excess, if any, of the aggregate amount that would
have been received in the transaction by the optionee with respect to the shares
of Common Stock subject to the vested portion of such option, determined as if
he had exercised such vested portion immediately prior to the transaction, over
the aggregate exercise price therefor, which excess may be paid in cash or the
property to be received by owners of Common Stock in the transaction, and (y)
the unvested portion of each Award shall be cancelled without further action
and, in the case of a stock Award, the Company shall return to the Award holder
an amount equal to the lesser of (1) the consideration that would have been
received in the transaction by the Award holder with respect to such unvested
shares determined as if the such unvested portion had vested immediately prior
to the transaction or (2) the consideration, if any, paid by the Award holder to
the Company for such unvested shares.

           12. Amendments and Termination of the Plan. The Plan was adopted by
               --------------------------------------
the Board of Directors on March 4, 1999. The Board of Directors, without further
approval of the Company's stockholders, may at any time suspend or terminate the
Plan, in whole or in part, or amend it from time to time in such respects as it
may deem advisable, including, without limitation, to comply with the provisions
of Rule 16b-3, Section 162(m) of the Code or any change in applicable law,
regulations, rulings or interpretations of administrative agencies; provided,
                                                                    --------
however, that no amendment shall be effective without the requisite prior or
- -------
subsequent stockholder approval which would (a) except as contemplated in
paragraph 11, increase the maximum number of shares of Common Stock for which
Awards may be granted under the Plan or the 162(m) Maximum, (b) change the
eligibility requirements to receive Awards hereunder or (c) make any other
change for which applicable law requires stockholder approval. No termination,
suspension or amendment of the Plan shall, without the consent of the Award
holder, adversely affect his rights under any Award granted under the Plan. The
power of the Administrators to construe and administer any Award granted under
the Plan prior to the

                                      -7-



termination or suspension of the Plan nevertheless shall continue after such
termination or during such suspension.

           13. Transferability. Except as may otherwise be expressly provided in
               ---------------
the Contract, no option granted under the Plan shall be transferable and options
may be exercised (a) during the lifetime of the optionee, only by the optionee
and (b) after the death of the optionee, only by the personal representative of
his estate. Except as may otherwise be expressly provided in the Contract, a
stock Award, to the extent not vested, shall not be transferable. Except to the
extent provided above, Awards may not be assigned, transferred, pledged,
hypothecated or disposed of in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment or similar process,
and any such attempted assignment, transfer, pledge, hypothecation or
disposition shall be null and void ab initio and of no force or effect.
                                   -- ------

           14. Withholding Taxes. The Company, a Subsidiary or Parent may
               -----------------
withhold (a) cash, (b) shares of Common Stock to be issued under a stock Award
or upon exercise of an option having an aggregate Fair Market Value on the
relevant date, or (c) any combination thereof, in an amount equal to the amount
which the Administrators determine is necessary to satisfy the obligation of the
Company, a Subsidiary or Parent to withhold Federal, state and local income
taxes or other amounts incurred by reason of the grant, vesting, exercise or
disposition of an Award, or the disposition of the underlying shares of Common
Stock. Alternatively, the Company may require the holder to pay to the Company
such amount, in cash, promptly upon demand.

           15. Legends; Payment of Expenses. The Company may endorse such legend
               ----------------------------
or legends upon the certificates for shares of Common Stock issued under a stock
Award or upon exercise of an option under the Plan and may issue such "stop
transfer" instructions to its transfer agent in respect of such shares as it
determines, in its discretion, to be necessary or appropriate to (a) prevent a
violation of, or to perfect an exemption from, the registration requirements of
the Securities Act or any applicable state securities laws, or (b) implement the
provisions of the Plan or any agreement between the Company and the Award holder
with respect to such shares of Common Stock.

           The Company shall pay all issuance taxes with respect to the issuance
of shares of Common Stock under a stock Award or upon the exercise of an option
granted under the Plan, as well as all fees and expenses incurred by the Company
in connection with such issuance.

           16. Use of Proceeds. The cash proceeds received upon the exercise of
               ---------------
an option or grant of a stock Award under the Plan shall be added to the general
funds of the Company and used for such corporate purposes as the Board of
Directors may determine.


           17. Substitutions and Assumptions of Options of Certain Constituent
               ---------------------------------------------------------------
Corporations. Anything in this Plan to the contrary notwithstanding, the Board
- ------------
of Directors may, without further approval by the stockholders, substitute new
Awards for prior options or

                                      -8-



restricted stock of a Constituent Corporation (as defined in paragraph 18) or
assume the prior options of such Constituent Corporation.

           18. Definitions. For purposes of the Plan, the following terms shall
               -----------
be defined as set forth below:

           (a) "Cause" shall mean (i) in the case of an employee or consultant,
if there is a written employment or consulting agreement between the Award
holder and the Company, any of its Subsidiaries or a Parent which defines
termination of such relationship for cause, cause as defined in such agreement,
(ii) if there is no such agreement, cause as defined in the Contract, or (iii)
in the absence of both of the foregoing, (A) the commission of fraud or
embezzlement on the part of the Award holder, (B) the conviction of such Award
holder of, or the pleading by such Award holder of guilty or no contest to, (x)
any felony or (y) any crime involving moral turpitude, or (C) a material failure
by such Award holder to discharge his duties, responsibilities and obligations
to the Company, any of its Subsidiaries or a Parent that is not promptly cured
after notice thereof from the Company.

           (b) "Common Stock" shall mean the common stock, par value $.01 per
share, of the Company, or such other class of stock of the Company into which
such stock is converted in a transaction or series of transactions described in
paragraph 11(a).

           (c) "Constituent Corporation" shall mean any corporation which
engages with the Company, any of its Subsidiaries or a Parent in a transaction
described in Section 424(a) of the Code, or any Parent or any Subsidiary of such
corporation.

           (d) "Disability" shall mean a permanent and total disability within
the meaning of Section 22(e)(3) of the Code.

           (e) "Fair Market Value" of a share of Common Stock on any day shall
mean (i) if the principal market for the Common Stock is a national securities
exchange, the average of the highest and lowest sales prices per share of Common
Stock on such day as reported by such exchange or on a composite tape reflecting
transactions on such exchange, (ii) if the principal market for the Common Stock
is not a national securities exchange and the Common Stock is quoted on The
Nasdaq Stock Market ("Nasdaq"), and (A) if actual sales price information is
available with respect to the Common Stock, the average of the highest and
lowest sales prices per share of Common Stock on such day on Nasdaq, or (B) if
such information is not available, the average of the highest bid and lowest
asked prices per share of Common Stock on such day on Nasdaq, or (iii) if the
principal market for the Common Stock is not a national securities exchange and
the Common Stock is not quoted on Nasdaq, the average of the highest bid and
lowest asked prices per share of Common Stock on such day as reported on the OTC
Bulletin Board Service or by National Quotation Bureau, Incorporated or a
comparable service; provided, however, that if clauses (i), (ii) and (iii) of
                    --------  -------
this paragraph are all inapplicable, or if no trades have been made or no quotes
are available for such day, the fair market value of the Common Stock

                                      -9-



shall be determined by the Board of Directors by any method consistent with
applicable regulations adopted by the Treasury Department relating to stock
options.

           (f) "Parent" shall mean a "parent corporation" within the meaning of
Section 424(e) of the Code.

           (g) "Subsidiary" shall mean a "subsidiary corporation" within the
meaning of Section 424(f) of the Code, or an unincorporated entity (including
without limitation a limited liability company) in which the Company owns
directly or indirectly through other Subsidiaries at least 50% of the capital or
profits interests in the entity.

           19. Governing Law; Construction. The Plan, the Awards and Contracts
               ---------------------------
hereunder and all related matters shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without regard to conflict
of law provisions that would defer to the substantive laws of another
jurisdiction.

           Neither the Plan nor any Contract shall be construed or interpreted
with any presumption against the Company by reason of the Company causing the
Plan or Contract to be drafted. Whenever from the context it appears
appropriate, any term stated in either the singular or plural shall include the
singular and plural, and any term stated in the masculine, feminine or neuter
gender shall include the masculine, feminine and neuter.

           20. Partial Invalidity. The invalidity, illegality or
               ------------------
unenforceability of any provision in the Plan, any Award or Contract shall not
affect the validity, legality or enforceability of any other provision, all of
which shall be valid, legal and enforceable to the fullest extent permitted by
applicable law.

                                      -10-

EX-10.12

                                                                   Exhibit 10.12
                                                                   -------------

                                 1999 STOCK PLAN
                       NON-QUALIFIED STOCK OPTION CONTRACT
                       -----------------------------------



                               _________________

         The parties to this Non-Qualified Stock Option Contract are MedSource
Technologies, Inc., a Delaware corporation (the "Company"), and ___________ (the
"Optionee"). Each capitalized term used but not defined herein shall have the
meaning assigned to it in the Company's 1999 Stock Plan (the "Plan").

         The parties agree as follows:

         1. The Company, in accordance with the allotment made by the
Administrators and subject to the terms and conditions of the Plan, hereby
grants to the Optionee an option to purchase an aggregate of _____ shares of
Common Stock at an exercise price of $_____ per share, such exercise price being
at least equal to the fair market value of such shares of Common Stock on the
date hereof.

         2. (a) The term of this option shall be 10 years from the date hereof,
subject to earlier termination as provided in this Contract and the Plan. This
option shall vest as to 25% of the total number of shares of Common Stock
subject hereto on the first anniversary of the date hereof and as to an
additional 25% of such total number of shares on each of the next three
anniversaries of the date hereof.

                (b) If the Optionee's termination of employment with the Company
or any of its Subsidiaries or a Parent occurs by reason of the Optionee's death
or Disability (i) less than six months before the first anniversary of the date
hereof, then this option shall vest as to one-half of the total number of shares
of Common Stock (rounded up to the nearest whole share) that would otherwise
have vested on the first anniversary of the date hereof if the Optionee had
continued to be employed by the Company, any of its Subsidiaries or a Parent,
(ii) less than six months before the second anniversary of the date hereof,
then, in addition to the number of shares of Common Stock as to which this
option is then otherwise vested, this option shall vest as to one-half of the
total number of shares of Common Stock (rounded up to the nearest whole share)
that would otherwise have vested on the second anniversary of the date hereof if
the Optionee had continued to be employed by the Company, any of its
Subsidiaries or a Parent, (iii) less than six months before the third
anniversary of the date hereof, then, in addition to the number of shares of
Common Stock as to which this option is then otherwise vested, this option shall
vest as to one-half of the total number of shares of Common Stock (rounded up to
the nearest whole share) that would otherwise have vested on the third
anniversary of the date hereof if the Optionee had continued to be employed by
the Company, any of its Subsidiaries or a Parent or (iv) less than six



months before the fourth anniversary of the date hereof, then, in addition to
the number of shares of Common Stock as to which this option is
then otherwise vested, this option shall vest as to one-half of the total number
of shares of Common Stock (rounded up to the nearest whole share) that would
otherwise have vested on the fourth anniversary of the date hereof if the
Optionee had continued to be employed by the Company, any of its Subsidiaries or
a Parent.

            (c)   Immediately prior to the consummation of a Transaction (as
defined herein) in which the holders of shares of Common Stock would receive as
consideration in exchange for their shares of Common Stock, either (x)
securities of an unaffiliated entity that are listed on the New York Stock
Exchange, Inc., the American Stock Exchange LLC or The NASDAQ Stock Market's
National Market that represent more than 50% of the total consideration to be
received by the holders of shares of Common Stock in such Transaction (as
determined by the Administrators) or (y) cash that represents more than 50% of
the total consideration to be received by the holders of shares of Common Stock
in such Transaction (as determined by the Administrators), then this option
shall vest (if less than one-half of the shares of Common Stock subject hereto
are not already vested) as to the excess, if any, of that number of shares of
Common Stock equal to one-half of the total number of shares of Common Stock
subject hereto over the total number of shares of Common Stock already vested at
that time. If, following any Transaction (whether or not the stockholders of the
Company receive cash as set forth above), the Company, any Subsidiary or a
Parent terminates the Optionee's employment without Cause, then this option
shall vest as of the date of termination of employment as to that number of
shares of Common Stock equal to the lesser of (i) one-half of the total number
of shares of Common Stock subject hereto and (ii) the total number of unvested
shares of Common Stock as of the date of termination.

            (d)   The right to purchase shares of Common Stock under this option
shall be cumulative, so that if the full number of shares purchasable in a
period shall not be purchased, the balance may be purchased at any time or from
time to time thereafter, but not after the expiration of the term of this option
as herein provided and as provided in the Plan.

     3. This option shall be exercised by giving written notice to the Company
at its then principal office, currently 110 Cheshire Lane, Suite 100,
Minneapolis, Minnesota 55305, Attention: Chief Financial Officer, stating that
the Optionee is exercising the option hereunder, specifying the number of shares
being purchased and accompanied by payment in full of the aggregate purchase
price therefore (a) in cash or by certified check, (b) with the consent of the
Company, with previously acquired shares of Common Stock that are fully paid,
vested, transferrable and have been held by the Optionee for the requisite
period to avoid a charge to the Company's earnings for financial accounting
purposes, or (c) with the consent of the Company, with a combination of the
foregoing.

     4. The Company (or a Parent or a Subsidiary) may withhold cash and/or
shares of Common Stock to be issued to the Optionee in the amount that the
Company determines is necessary to satisfy its obligation to withhold taxes or
other amounts incurred by reason of the grant, exercise or disposition of this
option or the disposition of the underlying shares of

                                      -2-



Common Stock. Alternatively, the Company may require the Optionee to pay the
Company such amount and the Optionee agrees to pay such amount to the Company in
cash, promptly upon demand.

     5. (a) The Optionee represents and warrants that any and all shares of
Common Stock purchased by the Optionee pursuant to the exercise of this option
will be acquired for the Optionee's own account and not with a view to, or for
resale in connection with, any distribution or public offering thereof within
the meaning of the Securities Act and such shares may not be disposed of except
in compliance with all federal and state securities laws. Notwithstanding any
other provisions of this agreement to the contrary, the Company shall not be
required to sell or issue any shares of Common Stock pursuant to this option if
the sale or issuance of such shares would constitute a violation of any
provision of any law or regulation of any governmental authority, including
without limitation any federal or state securities laws or regulations. The
Company may require that the Optionee deliver at the time of each exercise of
the option and as a condition to exercise of the option, a further written
representation that the shares of Common Stock being acquired upon exercise
shall be acquired by the Optionee solely for investment and will not be sold or
transferred without registration or an exemption from registration under the
Securities Act and applicable state securities laws and regulations, including
compliance with all requirements for such exemption. The Company may also
require that the Optionee deliver other written representations that will permit
the Company to comply with federal and applicable state securities laws in
connection with the issuance of the shares, including representations as to the
knowledge and experience in financial and business matters of the Optionee and
the Optionee's ability to bear the economic risk of the Optionee's investment.
The Company may require that the Optionee obtain a "purchaser representative" as
that term is defined in applicable federal and state securities laws, prior to
the sale or issuance of such shares.

     The Optionee shall have no right to require the Company, and the Company
shall have no obligation, to register the issuance or sale of any security
acquired pursuant to the exercise of the Option granted by this agreement under
the Securities Act or under any other law or regulation.

            (b) The Optionee acknowledges and agrees that in any event or
series of events set forth in Section 11(b) of the Plan (a "Transaction"),
unless other provision is made therefor in such Transaction, (x) the Company (or
its designee) shall have the right (but not the obligation) to purchase all
options that are vested prior to the closing of such Transaction for an amount
equal to the excess, if any, of the aggregate amount that would have been
received in such Transaction by the Optionee with respect to the shares of
Common Stock subject to the vested portion of this option, determined as if the
Optionee had exercised such vested portion immediately prior to such
Transaction, over the aggregate exercise price therefor, which excess may be
paid in cash or the property to be received by owners of Common Stock in such
Transaction and (y) the rights of the Optionee with respect to the unvested
portion of this option shall be cancelled. Prior to a Transaction, the Company
may, in its discretion, notify the Optionee of such proposed purchase by sending
to the Optionee written notice of such proposed Transaction. The notice may set
forth a date by which the Company shall close such purchase and shall contain
such other information as the Company, in its discretion, believes is necessary

                                      -3-


to close such purchase at or prior to consummation of such Transaction.

     6. (a) Upon any termination of the Optionee's employment with the Company
or any of its Subsidiaries or a Parent by reason of the Optionee's death or
Disability or by such employer without Cause, then the Optionee may exercise the
option to the extent vested (whether or not otherwise exercisable) during the
period beginning on the effective date of such termination and ending 90 days
after such date.

            (b) The right to purchase shares under this option shall terminate
immediately upon the termination of the Optionee's employment with the Company,
any of its Subsidiaries or a Parent for any reason not previously specified in
this paragraph 6 (including, without limitation, (i) for Cause or (ii) without
the consent of the Company), but the option granted hereunder shall not be
affected by a change in status of the Optionee so long as the Optionee continues
to be an employee of the Company, any of its Subsidiaries or a Parent
(regardless of having changed from one to the other or having been transferred
from one entity to the other).

     7. (a) The Optionee acknowledges the time and expense incurred by the
Company and its Subsidiaries (collectively, the "Companies") in connection with
developing proprietary and confidential information in connection with their
respective businesses and operations. The Optionee agrees that he will not
divulge, communicate or use to the detriment of 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 respective businesses including, without limitation, financial condition,
operations or prospects, business strategies, operating plans, acquisition
strategies, 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) For so long as the Optionee is an employee of any of the
Companies and for a period of one year thereafter, the Optionee 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 preceding
12-month period shall have been 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) For so long as the Optionee is an employee of any of the
Companies and for a period of one year thereafter, the Optionee 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 the same as, similar to or
competitive with, the business of the Companies as then conducted in the United
States; provided, however, that, notwithstanding the foregoing, the
        --------  -------

                                      -4-



Optionee may own up to 3% of the voting securities of any publicly-traded
company.

            (d) The Optionee acknowledges and agrees that the agreements in this
paragraph 7 are reasonable and necessary for the protection of the Companies and
are an essential inducement to the Company's entering into this agreement
whereby the Optionee is receiving substantial benefits. Accordingly, the
Optionee shall be bound by the provisions 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.

            (e) The Optionee acknowledges and agrees that the services to be
rendered by the Optionee to the Companies are of a unique nature and that it
would be difficult or impossible to replace such services and that by reason
thereof the Optionee agrees and consents that if he violates the provisions of
this paragraph 7, the Company, in addition to any other rights and remedies
available under this agreement or otherwise, shall be entitled to an injunction
to be issued or specific enforcement to be required (without the necessity of
any bond) restricting the Optionee from committing or continuing any such
violation.

     8. The Optionee hereby represents and warrants to the Company that, unless
a registration statement under the Securities Act with respect to the shares of
Common Stock to be received upon an exercise of this option is effective and
current at the time of exercise of this option, the shares of Common Stock to be
issued upon the exercise of this option will be acquired by the Optionee for the
Optionee's own account, for investment only and not with a view to the resale or
distribution thereof. In any event, the Optionee shall notify the Company of any
proposed resale of the shares of Common Stock issued to him upon exercise of
this option. Any subsequent resale or distribution of shares of Common Stock by
the Optionee shall be made only pursuant to (a) a registration statement under
the Securities Act which is effective and current with respect to the sale of
shares of Common Stock being sold, or (b) a specific exemption from the
registration requirements of the Securities Act, but in claiming such exemption,
the Optionee shall, prior to any offer of sale or sale of such shares of Common
Stock, provide the Company (unless waived by the Company) with a favorable
written opinion of counsel satisfactory to the Company, in form, substance and
scope satisfactory to the Company, as to the applicability of such exemption to
the proposed sale or distribution. Such representations and warranties shall
also be deemed to be made by the Optionee upon each exercise of this option.
Nothing herein shall be construed as requiring the Company to register the
shares subject to this option under the Securities Act or to keep any
registration statement effective or current.

     9. Notwithstanding anything herein to the contrary, if at any time the
Administrators determine, in their sole discretion, that the listing or
qualification of the shares of Common Stock subject to this option on any
securities exchange, NASDAQ or under any applicable law, or the consent or
approval, or filing with, of any governmental agency or regulatory body, is
necessary

                                       -5-


or desirable as a condition to, or in connection with, the granting of an option
or the issue of shares of Common Stock hereunder, this option may not be
exercised in whole or in part unless such filing, listing, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Administrators.

         10. The Company may endorse such legend or legends upon the
certificates for shares of Common Stock issued upon exercise of this option and
may issue such "stop transfer" instructions to its transfer agent in respect of
such shares as it determines, in its discretion, to be necessary or appropriate
to (a) prevent a violation of, or to perfect an exemption from, the registration
requirements of the Securities Act or any applicable state securities law, or
(b) implement the provisions of the Plan or this Contract or any other agreement
between the Company and the Optionee with respect to such shares of Common
Stock.

         11. Nothing in the Plan or herein shall confer upon the Optionee any
right to continue as a director of the Company or in the employ, or as a
consultant to, of the Company, any Parent or any of its Subsidiaries, or
interfere in any way with any right of the Company, any Parent or its
Subsidiaries to terminate any such relationship at any time for any reason
whatsoever without liability to the Company, any Parent or any of its
Subsidiaries.

         12. Prior to or simultaneously with the grant of this option, the
Optionee has executed the Stockholders Agreement in the form annexed hereto as
Exhibit A. The Optionee hereby agrees to execute any "lock-up" or similar
agreement that an underwriter of any public offering of the Company's securities
might request to restrict the transfer by the Optionee of shares of Common Stock
owned or which may become owned by the Optionee for a period of time not to
exceed 30 days prior to, nor 270 days following, the effective date of such
public offering. The Optionee agrees to maintain the confidentiality of any
information provided to him or learned by him by reason of, as result of, or in
connection with, holding an option or owing shares in the Company.

         13. The Company and the Optionee are subject to and bound by all of the
terms and conditions of the Plan, a copy of which is attached hereto and made a
part hereof. In the event of a conflict between the terms of this Contract and
the terms of the Plan, the terms of the Plan shall govern.

         14. The Optionee represents and agrees that he will comply with all
applicable laws relating to the Plan and the grant and exercise of this option
and the disposition of the shares of Common Stock acquired upon exercise of the
option, including without limitation, federal and state securities and "blue
sky" laws.

         15. This option is not transferable by the Optionee and may be
exercised (a) during the lifetime of the Optionee, only by the Optionee and (b)
after the death of the Optionee, only by the personal representative of the
Optionee's estate.

         16. This Contract shall be binding upon and inure to the benefit of any
successor or assign of the Company and to the personal representative of the
Optionee's estate.

                                       -6-



         17. This Contract shall be governed by, and construed and enforced in
accordance with, the laws of the State of Delaware, without regard to the
conflict of law that would defer to the substantive laws of another
jurisdiction.

         18. The invalidity, illegality or unenforceability of any term or
provision herein shall not affect the validity, legality or enforceability of
any other term or provision, all of which shall be valid, legal and enforceable
to the fullest extent permitted by applicable law. This Contract shall not be
construed or interpreted with any presumption against the Company by reason of
the Company causing this Contract to be drafted.

         19. This Contract (together with the Plan) constitutes the entire
agreement and understanding between the parties with respect to the subject
matter hereof and supersedes any prior and/or contemporaneous agreements or
understandings with respect thereto (whether written or oral), all of which are
merged herein. This Contract may not be amended or modified except by an
instrument in writing signed by the parties hereto, and no term or provision
hereof may be waived by any party except by an instrument in writing signed by
such party. Notwithstanding the foregoing, the Optionee agrees that the Company
may amend the Plan and the options granted to the Optionee under the Plan,
subject to the limitations contained in the Plan.

                      [The next page is the signature page]

                                      -7-



         The parties have executed and delivered this Non-Qualified Stock Option
Contract as of the date first written above.

                                            MEDSOURCE TECHNOLOGIES, INC.


                                            By:____________________________
                                                  Name: Richard J. Effress
                                                  Title: Chairman of the Board


                                            _______________________________
                                            Name:_________________

                                      -8-

EX-10.16

                                                                   Exhibit 10.16
                                                                   -------------

               MedSource
                  Technologies




          August 8, 2000





          Mr. Richard Effress

          Dear Rich

          This letter confirms the primary terms of your employment with
          MedSource Technologies.

          Title:             Chairman and CEO

          Commencement:      July 1,

          Office Location:   Your principle place of business will be located in
                             Minneapolis, Minnesota

          Salary:            $250,000 annually to be paid as dictated by the
                             MedSource payroll schedule.

          Bonus:             Bonuses are paid at the discretion of the Board of
                             Directors of MedSource Technologies and are based
                             on the Company achieving annual target performance
                             thresholds. Your annual bonus opportunity will be
                             50% of your base salary ($125,000) at target
                             performance. The bonus is uncapped.

          Stock Options:     You will be eligible to participate in the
                             MedSource non- qualified Stock Option Plan at a
                             level agreed to by the Board of Directors, and at
                             an exercise price to be determined by the Board of
                             Directors at the time of the grant.


          Vacation:          You will be granted three weeks (15 working days)
                             of vacation per year or as specified by Company
                             policy. You will be entitled to take paid holidays
                             as determined each year by the Board of Directors.

          Benefits:          Subject to the terms and conditions of eligibility,
                             you will be entitled to the benefits package
                             provided to all full- time regular employees of
                             MedSource, which will include a 401k plan, medical,
                             life, and disability insurance coverage.

          Confidentiality:   You will be required to enter into a non-compete,
                             non- solicitation, and confidentiality agreement.
                             You may be granted up to one year of your base pay
                             in the event you are terminated without cause in



August 8, 2000
Page 2

                             exchange for entering into a confidentiality,
                             non-compete and non-solicitation agreement. The
                             severance payment may be reduced in the event you
                             become employed after termination and during the
                             period of severance payments.

          Expenses:          You will be entitled to reimbursement for business
                             related out-of-pocket expenses which include:
                             mileage, meals and other appropriate business
                             related expenses.




          The aforementioned outlines the primary terms and conditions of your
          employment as we discussed recently. Your employment is "at-will".



          Sincerely,

          /s/

          Ralph Polumbo

          Vice President Human resources and Business Integration

          MedSource Technologies

EX-10.17

                                                                   Exhibit 10.17
                                                                   -------------

                              EMPLOYMENT AGREEMENT

                                  April 1, 1999
                                  -------------

          The parties to this Agreement are MedSource Technologies, Inc., a
Delaware corporation ("MedSource"), and James Drill (the "Executive").

                                    Recitals
                                    --------

          The Company wishes to employ the Executive, and the Executive
wishes to accept that employment, upon the terms and subject to the conditions
set forth below.

                                    Agreement
                                    ---------

          It is agreed as follows:

          1.  Employment. The Company hereby employs the Executive and the
              ----------
Executive hereby accepts employment by the Company for the period commencing on
the date hereof and ending on the third anniversary of the date hereof, unless
extended or earlier terminated as set forth herein (the "Term").

          2.  Position and Duties. The Executive shall be the Company's Vice
              -------------------
President of Sales and Marketing. The Executive shall perform his duties
pursuant to this section 2, consistent with the directives of the board of
directors, in the best interests of the Company, to the best of the Executive's
ability and in a diligent manner, and the Executive shall devote his full skills
and efforts and his entire business time to the performance of those duties and
to the furtherance of the interests of the Company and its subsidiaries. All of
such duties and responsibilities shall be subject to policies, guidelines and
procedures as may be specified by the board of directors of the Company from
time to time.

          3.  Remuneration.

          (a) The Executive shall receive a base salary at the rate of $87,300
in the first year hereunder and $200,000 per annum thereafter, which shall be
payable in accordance with the Company's customary practice.

          (b) In addition to the Executive's base salary, the Executive shall be
eligible to earn annual bonuses in such amounts as determined in the sole
discretion of the board of directors of the Company. Although this bonus will
vary based on the Executive's performance level relative to the Company's
operating plan, at a performance level equal to the annual operating plan, the
Executive shall be paid a bonus equal to $100,000. In lieu of the foregoing
bonus, in the first fiscal year of the Term, the Company shall pay the Executive
a minimum annual bonus of $150,000, such bonus to be payable in accordance with
the Company's fiscal year bonus plan.



          (c) Under separate agreement, the Executive will receive an option to
purchase 12,000 shares of MedSource's common stock, par value $.01 per share, as
provided therein.

          4.  Benefits; Expenses. During the Term, the Executive (i) shall be
              ------------------
entitled to such health, medical, insurance and fringe benefits as are available
generally to executives of the Company and (ii) shall be reimbursed for all
reasonable and necessary expenses incurred in connection with the business of
the Company and MedSource, upon the submission of appropriate documentation
with respect thereto.

          5.  Continuation, Termination, Death and Disability.
              -----------------------------------------------

          (a) The Term may be extended beyond the initial period set forth in
section 1 hereof as mutually agreed upon by the Company and the Executive. From
and after the end of the Severance Period (as defined in section 5(c)), if any,
for a period that, when combined with the Severance Period, if any, does not
exceed three years (such period is referred to herein as the "Additional Term"),
the Company may, at its option and upon delivery of written notice to the
Executive not less than 30 days before expiration of the Term (or promptly after
termination by the Executive), pay the Executive at an annualized rate of
$200,000 per annum or, if he is employed by an Alternate Employer (as defined in
section 5(c)), the difference, if any, between annualized rate of $200,000 per
annum and the amount that the Executive is paid by such Alternate Employer; and
for so long as the Company continues to pay the Executive such amount, in
accordance with the Company's customary practice, the Executive hereby agrees
that the provisions of sections 6(b) and 6(c) shall apply.

          (b) The Company may terminate this Agreement and the Executive's
employment hereunder at any time 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 section 6 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 under this Agreement after the Executive shall have been notified of
such failure and shall have had a reasonable time to cure the same. In the event
of the termination during the Term by the Company of the Executive's employment
hereunder for Cause, the Executive shall be entitled to receive his base salary
accrued but not paid through the date of termination.

                                      -2-



          (c)  In the event that the Company terminates the Executive's
employment hereunder without Cause, the Company may, in lieu of any and all
other payments or benefits payable to the Executive, pay the Executive at an
annualized rate of $200,000 per annum (payable in accordance with the Company's
customary practice) until the first anniversary of such termination
(the "Severance Period"); provided, however, that if, after the date of such
                          --------  -------
termination (and before the first anniversary thereof), the Executive is
employed by someone other than the Company (an "Alternate Employer") at a salary
that is less than an annualized rate of $200,000, the Company shall, until the
first anniversary of such termination (and for so long as the Executive is
employed by such Alternate Employer), pay the Executive the difference, if any,
between an annualized rate of $200,000 and the amount that the Executive is paid
by such Alternate Employer. For so long as the Company pays the Executive
pursuant to this section 5(c), the Executive hereby agrees that the provisions
of sections 6(b) and 6(c) shall apply.

          (d)  In the event of the death or Permanent Disability
(as defined below) of the Executive during the Term, the Executive's employment
shall terminate as of the date of death or the date of notice from the Company
to the Executive terminating his employment due to his disability and the
Executive's estate or the Executive, as the case may be, shall be entitled to
receive all base salary accrued but not paid through the date of death or
disability, as the case may be. "Permanent Disability" means a physical or
mental impairment which, in the good faith determination of the Company's board
of directors, renders the Executive unable to discharge the essential functions
of the Employee's duties under this agreement.

          6.   Confidentiality; Nonsolicitation; Noncompetition.
               ------------------------------------------------

          (a)  The Executive acknowledges the time and expense incurred by the
Company and its subsidiaries in connection with developing proprietary and
confidential information in connection with their business and operations.
The Executive agrees that he will not 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.

          (a)  During the Term, the Severance Period, if any, and the Additional
Term, if any, 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 preceding 12-month period shall have been 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.

                                      -3-



         (b)  During the Term, the Severance Period, if any, and the Additional
Term, if any, 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 the same as, similar to or competitive with, any business of the
Companies as then conducted in the United States or Europe within 2,000 miles of
any 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.

         (c)  The Executive acknowledges that his employment hereunder and
agreements herein (including the agreements of this section 6) are reasonable
and necessary for the protection of the Companies and are an essential
inducement to the Company's entering into the Asset Purchase Agreement and
related agreements. Accordingly, the Executive shall be bound by the provisions
hereof (including the provisions of this section 6) 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.

         (d)  The Executive acknowledges that the services to be rendered under
the provisions of this Agreement are of a unique nature and that it would be
difficult or impossible to replace such services and that by reason thereof the
Executive agrees and consents that if he violates the provisions of this section
6, the Company, in addition to any other rights and remedies available under
this Agreement or otherwise, 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.

         7.   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.

         8.   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 by 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 8.

                                      -4-



          9.  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:

          (e) If to the Company, to:

                       c/o Kidd & Company, L.L.C.
                       Three Pickwick Plaza
                       Greenwich, Connecticut 06830
                       Attention: Richard J. Effress
                       Telecopier No.:(203) 661-1839

              with a copy to:

                       Parker Chapin Flattau & Klimpl, LLP
                       1211 Avenue of the Americas
                       New York, NY 10036
                       Attention: Edward R. Mandell
                       Telecopier No.:(212) 704-6288

          (f) If to the Executive, to:

                       The address set forth beneath the Executive's signature
                       hereto.

          10. 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 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.

          11. 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.

                                      -5-



         12.  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. There are no promises, representations,
warranties, covenants or undertakings other than those set forth herein.

                                MEDSOURCE TECHNOLOGIES, INC.

                                By: /s/
                                    ___________________________________________
                                  Name:

                                  Title:

                                /s/
                                ________________________________________________
                                James Drill

                                Address:
                                    ____________________________________
                                    ____________________________________
                                    ____________________________________
                                    Telecopier No.:  (___) ___-____

                                      -6-

EX-10.18

                                                                   Exhibit 10.18
                                                                   -------------
           MedSource
              Technologies

           Mr. William Ellerkamp
           68 Wintergreen Lane
           Groton, MA 01450

           Dear Bill,

           It gives me great pleasure to present this Offer of Employment. We
           are impressed with your business skills and your desire to be part of
           building a significant and successful new entity serving the medical
           device industry. The primary terms of your employment with MedSource
           Technologies are specified below:

           Title:                   VP Strategic Initiatives, reporting to CEO

           Commencement:            Your employment will commence on the most
                                    immediate, mutually agreeable date with the
                                    expectation that you will begin full time on
                                    July 1.

           Responsibilities:        As outlined in Exhibit A.

           Office Location:         Initially, you will work out of your home in
                                    Massachusetts, with the expectation you will
                                    regularly travel to Minneapolis. Subsequent
                                    to the responsibility transition outlined in
                                    Exhibit A, and taking into account your
                                    children's schoolyear, your principle place
                                    of business will be located in Minneapolis,
                                    Minnesota.

           Salary:                  $178,750 annually to be paid as dictated by
                                    the MedSource payroll schedule.

           Bonus:                   Bonuses are paid at the discretion of the
                                    Board of Directors of MedSource Technologies
                                    and are based on the Company achieving
                                    annual target performance thresholds. Your
                                    annual bonus opportunity will be 50% of your
                                    base salary ($89,375) at target performance.
                                    The bonus is uncapped. No bonus will be due
                                    to you if you are not employed by MedSource
                                    for any reason at year-end.

          Common Stock:             Subsequent to the  responsibility transition
                                    outlined in Exhibit A, and within twelve
                                    months thereafter, you will be expected to
                                    purchase an aggregate of $100,000 of
                                    MedSource stock.The purchase can be
                                    completed in conjunction with any
                                    institutional or public financing round, or
                                    through early exercise of options (with
                                    company repurchase right on unvested shares)
                                    . It is expected that (a) 50% of the after-
                                    tax proceeds of any bonus paid by MedSource
                                    and/or (b) after-tax proceeds from the sale
                                    of your TFX securities, will be





  Page 2
                                    applied to the purchase of MedSource stock
                                    to the extent $100,000 of MedSource
                                    securities has not been acquired.

         Stock Options:             You will be eligible to participate in the
                                    MedSource non-qualified Stock Option Plan.
                                    You shall receive options, at signing, to
                                    purchase 52,500 shares of the Company's
                                    Common Stock at an exercise price of $16.25
                                    per share with four year vesting. There will
                                    be an opportunity to earn additional options
                                    to purchase 27,500 shares as mutually agreed
                                    upon performance milestones are achieved
                                    within the next 12 months.

         Vacation:                  You will be granted three weeks (15 working
                                    days) of vacation per year or as specified
                                    by Company policy. You will be entitled to
                                    take paid holidays as determined each year
                                    by the Board of Directors.

           Benefits:                Subject to the terms and conditions of
                                    eligibility, you will be entitled to the
                                    benefits package provided to all full-time
                                    senior executive employees of MedSource,
                                    which will include a 401k plan, medical,
                                    life, and disability insurance coverage.

           Confidentiality:         You will be required to enter into a
                                    non-compete and Confidentiality Agreement.
                                    The non-compete will provide six (6) months
                                    severance pay in the event you are
                                    terminated without cause during the term of
                                    the agreement. The non-compete will also
                                    provide the Company with the ability to
                                    extend the non-compete period based on cash
                                    and/or stock consideration.

           Expenses:                You will be entitled to  reimbursement  for
                                    business  related  out-of-pocket  expenses
                                    which  include: mileage, meals and other
                                    appropriate business related expenses.

                                    Relocation expenses will be reimbursed per
                                    company policy or as otherwise approved by
                                    the VP-Human Resources and Business
                                    Integration.

           Bill, the aforementioned outlines the primary terms and conditions of
           your employment as we discussed recently. Your employment is
           "at-will".

           On behalf of those of all of us who have had the pleasure of meeting
           with you, welcome to the team. We are excited at the prospect of your
           joining our management team and helping us to build a world leading
           company in the medical device contract manufacturing market.

           Sincerely,

           /s/

           Rich Effress

           Chairman and CEO

           MedSource Technologies

EX-10.19

                                                                   Exhibit 10.19
                                                                   -------------

                              EMPLOYMENT AGREEMENT

                                  April 1, 1999
                                  -------------

               The parties to this Agreement are MedSource Technologies, Inc., a
Delaware corporation ("MedSource"), and Ralph Polumbo (the "Executive").

                                    Recitals
                                    --------

               The Company wishes to employ the Executive, and the Executive
wishes to accept that employment, upon the terms and subject to the conditions
set forth below.

                                    Agreement
                                    ---------

               It is agreed as follows:

               1.    Employment.  The Company hereby employs the Executive and
                     ----------
the Executive hereby accepts employment by the Company for the period commencing
on the date hereof and ending on the third anniversary of the date hereof,
unless extended or earlier terminated as set forth herein (the "Term").

               2.    Positions and Duties. The Executive shall be the Company's
                     --------------------
Vice President of Human Resources and Business Integration. The Executive shall
perform his duties pursuant to this section 2, consistent with the directives of
the board of directors, in the best interests of the Company, to the best of the
Executive's ability and in a diligent manner, and the Executive shall devote his
full skills and efforts and his entire business time to the performance of those
duties and to the furtherance of the interests of the Company and its
subsidiaries. All of such duties and responsibilities shall be subject to
policies, guidelines and procedures as may be specified by the board of
directors of the Company from time to time.

               3.    Remuneration.

               (a)   The Executive shall receive a base salary at the rate of
$62,300 in the first year hereunder and $175,000 per annum thereafter, which
shall be payable in accordance with the Company's customary practice.

               (b)   In addition to the Executive's base salary, the Executive
shall be eligible to earn annual bonuses in such amounts as determined in the
sole discretion of the board of directors of the Company. Although this bonus
will vary based on the Executive's performance level relative to the Company's
operating plan, at a performance level equal to the annual operating plan, the
Executive shall be paid a bonus equal to $87,500.

               (c)   Under separate agreement, the Executive will receive an
option to purchase 6,000 shares of MedSource's common stock, par value $.01 per
share, as provided therein.



               4.    Benefits; Expenses. During the Term, the Executive (i)
                     ------------------
shall be entitled to such health, medical, insurance and fringe benefits as are
available generally to executives of the Company and (ii) shall be reimbursed
for all reasonable and necessary expenses incurred in connection with the
business of the Company and MedSource, upon the submission of appropriate
documentation with respect thereto.

               5.    Continuation, Termination, Death and Disability.
                     -----------------------------------------------

               (a)   The Term may be extended beyond the initial period set
forth in section 1 hereof as mutually agreed upon by the Company and the
Executive. From and after the end of the Severance Period (as defined in section
5(c)), if any, for a period that, when combined with the Severance Period, if
any, does not exceed three years (such period is referred to herein as the
"Additional Term"), the Company may, at its option and upon delivery of written
notice to the Executive not less than 30 days before expiration of the Term (or
promptly after termination by the Executive), pay the Executive at an annualized
rate of $175,000 per annum or, if he is employed by an Alternate Employer (as
defined in section 5(c)), the difference, if any, between annualized rate of
$175,000 per annum and the amount that the Executive is paid by such Alternate
Employer; and for so long as the Company continues to pay the Executive such
amount, in accordance with the Company's customary practice, the Executive
hereby agrees that the provisions of sections 6(b) and 6(c) shall apply.

               (b)   The Company may terminate this Agreement and the
Executive's employment hereunder at any time 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 section 6 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 under this Agreement after the Executive shall
have been notified of such failure and shall have had a reasonable time to cure
the same. In the event of the termination during the Term by the Company of the
Executive's employment hereunder for Cause, the Executive shall be entitled to
receive his base salary accrued but not paid through the date of termination.

                                       -2-



               (c)   In the event that the Company terminates the Executive's
employment hereunder without Cause, the Company may, in lieu of any and all
other payments or benefits payable to the Executive, pay the Executive at an
annualized rate of $175,000 per annum (payable in accordance with the Company's
customary practice) until the first anniversary of such termination (the
"Severance Period"); provided, however, that if, after the date of such
                     --------  -------
termination (and before the first anniversary thereof), the Executive is
employed by someone other than the Company (an "Alternate Employer") at a salary
that is less than an annualized rate of $175,000 per annum, the Company shall,
until the first anniversary of such termination (and for so long as the
Executive is employed by such Alternate Employer), pay the Executive the
difference, if any, between an annualized rate of $175,000 per annum and the
amount that the Executive is paid by such Alternate Employer. For so long as the
Company pays the Executive pursuant to this section 5(c), the Executive hereby
agrees that the provisions of sections 6(b) and 6(c) shall apply.

               (d)   In the event of the death or Permanent Disability (as
defined below) of the Executive during the Term, the Executive's employment
shall terminate as of the date of death or the date of notice from the Company
to the Executive terminating his employment due to his disability and the
Executive's estate or the Executive, as the case may be, shall be entitled to
receive all base salary accrued but not paid through the date of death or
disability, as the case may be. "Permanent Disability" means a physical or
mental impairment which, in the good faith determination of the Company's board
of directors, renders the Executive unable to discharge the essential functions
of the Employee's duties under this agreement.

               6.    Confidentiality; Nonsolicitation; Noncompetition.
                     ------------------------------------------------

               (a)   The Executive acknowledges the time and expense incurred by
the Company and its subsidiaries in connection with developing proprietary and
confidential information in connection with their business and operations. The
Executive agrees that he will not 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.

               (a)   During the Term, the Severance Period, if any, and the
Additional Term, if any, 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 preceding 12-month period shall
have been 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.

                                       -3-



               (b)   During the Term, the Severance Period, if any, and the
Additional Term, if any, 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 the same as, similar to or competitive with, any business of the
Companies as then conducted in the United States or Europe within 2,000 miles of
any 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.

               (c)   The Executive acknowledges that his employment hereunder
and agreements herein (including the agreements of this section 6) are
reasonable and necessary for the protection of the Companies and are an
essential inducement to the Company's entering into the Asset Purchase Agreement
and related agreements. Accordingly, the Executive shall be bound by the
provisions hereof (including the provisions of this section 6) 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.

               (d)   The Executive acknowledges that the services to be rendered
under the provisions of this Agreement are of a unique nature and that it would
be difficult or impossible to replace such services and that by reason thereof
the Executive agrees and consents that if he violates the provisions of this
section 6, the Company, in addition to any other rights and remedies available
under this Agreement or otherwise, 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.

               7.    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.

               8.    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 by 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 8.

                                       -4-



               9.    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:

               (e)   If to the Company, to:

                             c/o Kidd & Company, L.L.C.
                             Three Pickwick Plaza
                             Greenwich, Connecticut  06830
                             Attention:  Richard J. Effress
                             Telecopier No.:  (203) 661-1839

                     with a copy to:

                             Parker Chapin Flattau & Klimpl, LLP
                             1211 Avenue of the Americas
                             New York, NY  10036
                             Attention:  Edward R. Mandell
                             Telecopier No.:  (212) 704-6288

               (f)   If to the Executive, to:

                             The address set forth beneath the Executive's
signature hereto.

               10.   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 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.

               11.   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.

                                       -5-



               12.   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. There are no promises,
representations, warranties, covenants or undertakings other than those set
forth herein.

                                  MEDSOURCE TECHNOLOGIES, INC.

                                  By: /s/
                                      -------------------------------------
                                      Name:
                                      Title:

                                  /s/
                                  -----------------------------------------
                                  Ralph Polumbo

                                  Address:_________________________________
                                          _________________________________
                                          _________________________________
                                          Telecopier No.:  (___) ___-____

                                          with a copy to:

                                          _________________________________
                                          _________________________________
                                          _________________________________
                                          Attention:____________
                                          Telecopier No.:  (___) ___-____

                                       -6-

EX-10.20

           MedSource
              Technologies

                                                                   Exhinit 10.20
                                                                   -------------

           January 12 , 2001


           Mr. Joseph Caffarelli
           1 Iver Lodge
           Bangers Road South
           Iver Bucks SLO 0AW
           United Kingdom

           Dear Joe,

           It gives me great pleasure to present this Offer of Employment. We
           are impressed with your business skills and your desire to be part of
           building a significant and successful new entity serving the medical
           device industry. The primary terms of your employment with MedSource
           Technologies are specified below:

           Title:                   Senior Vice President & Chief Financial
                                    Officer

           Commencement:            Your employment will commence on a mutually
                                    agreeable date with the expectation that you
                                    will begin full time at the earliest
                                    mutually acceptable time.

           Office Location:         Your principle place of business will be
                                    located in Minneapolis, Minnesota.

           Salary:                  $220,000 annually to be paid on a bi-monthly
                                    basis, or as otherwise dictated by the
                                    MedSource payroll schedule.

           Bonus:                   Bonuses are paid at the discretion of the
                                    Board of Directors of MedSource Technologies
                                    and are based on the Company achieving
                                    annual target performance thresholds. Your
                                    annual bonus opportunity will be 50% of your
                                    base salary ($110,000) at target performance
                                    performance. The bonus is uncapped. You will
                                    be eligible for a bonus payment in the 2001
                                    fiscal year ending June 30, 2001, prorated
                                    to your start date, with a guaranteed
                                    minimum payment of $25,000 for such prorated
                                    period.

           Stock Options:           You will be eligible to participate in the
                                    MedSource non-qualified Stock Option Plan.
                                    You shall receive options to purchase
                                    120,000 shares of the Company's Common Stock
                                    at an exercise price to be determined by the
                                    Board of Directors at the time of the grant.
                                    The exercise price is expected to be $17 per
                                    share, and with acceptance of this position
                                    your options would be granted at the
                                    February 6, 2001 Board Meeting.

           Vacation:                You will be granted four weeks (20 working
                                    days) of vacation per year or as specified
                                    by Company policy. You will be entitled to
                                    take paid holidays as determined each year
                                    by the Board of Directors.




January 12, 2001
Page 2

           Benefits:                Subject to the terms and conditions of
                                    eligibility, you will be entitled to the
                                    benefits package provided to all full-time
                                    regular employees of MedSource, which will
                                    include a 401k plan, medical, life, and
                                    disability insurance coverage.

           Confidentiality:         You will be required to enter into a
                                    non-compete and Confidentiality Agreement.
                                    In consideration for accepting this position
                                    , you will be granted twelve (12) months
                                    severance pay, with such payment reduced by
                                    income you receive during the severance
                                    period from employment in another capacity
                                    (but in no event less than six months of
                                    severance shall be paid), in the event (a)
                                    you are terminated without Cause (defined
                                    below), or (b) following a Change In Control
                                    (defined below) where your duties or
                                    compensation are diminished or your title is
                                    changed, and within 60 days of such Change
                                    In Control change in your duties,
                                    compensation, or title, you chose to leave
                                    the company. "Cause" is hereby defined as
                                    (i) a commission of fraud or embezzlement by
                                    you, or your conviction of or pleading of
                                    guilty or no contest to any felony or crime
                                    involving moral turpitude, (ii) a breach by
                                    you of the Confidentiality Agreement signed
                                    by you, (iii) and/or your material failure
                                    to discharge your duties, responsibilities
                                    and obligations after you have been notified
                                    in writing of such failure and shall have
                                    had a reasonable time to cure the failure.
                                    "Change in Control" is hereby defined as a
                                    transaction or series of transactions
                                    whereby a party that is not currently a
                                    MedSource shareholder controls at least 51%
                                    of the fully-diluted common stock of the
                                    Company.

           Expenses:                You will be entitled to reimbursement for
                                    business related out-of-pocket expenses
                                    which include: mileage, meals and other
                                    appropriate business related expenses.

                                    Relocation expenses will be reimbursed per
                                    company policy or as otherwise approved by
                                    the VP-Human resources and Business
                                    Integration.

           Joe, the aforementioned outlines the primary terms and conditions of
           your employment as we discussed recently. Your employment is
           "at-will".

           On behalf of us of all of those who have had the pleasure of meeting
           with you, welcome to the team. We are excited at the prospect of your
           joining our management team and helping us to build a world leading
           business in the medical device contract manufacturing market.

           Sincerely,

           /s/

           Richard Effress

           Chairman and CEO

           MedSource Technologies

EX-10.21

                                                                   Exhibit 10.21
                                                                   -------------

           MedSource
              Technologies



           January 4 , 2001



           Mr. Rick McWhorter
           3706 Great Hill Road
           Crystal Lake, Illinois  60012
           (815) 356-0278
           Dear Rick,

           It gives me great pleasure to present this Offer of Employment. We
           are impressed with your business skills and your desire to be part of
           building a significant and successful new entity serving the medical
           device industry. The primary terms of your employment with MedSource
           Technologies are specified below:

           Title:                   Senior Vice President, Operations

           Commencement:            Your employment will commence on a mutually
                                    agreeable date. It is anticipated that you
                                    will start at the first mutually agreed date
                                    following the vesting of your options and
                                    annual bonus with your current employer,
                                    with a mid-February start date preferable if
                                    possible.

           Office Location:         Your principle place of business will be
                                    located in Minneapolis, Minnesota, with an
                                    understanding that your immediate relocation
                                    is not required.

           Salary:                  $200,000  annually to be paid on a bi-
                                    monthly  basis, or as otherwise dictated by
                                    the MedSource payroll schedule.

           Bonus:                   Bonuses are paid at the discretion of the
                                    Board of Directors of MedSource Technologies
                                    and are based on the Company achieving
                                    annual target performance thresholds. Your
                                    annual bonus opportunity will be 50% of your
                                    base salary ($100,000) at target
                                    performance. The bonus is uncapped. You will
                                    be eligible for a bonus payment in the 2001
                                    fiscal year ending June 30, 2001, prorated
                                    to your start date.

           Stock Options:           You will be eligible to participate in the
                                    MedSource non-qualified Stock Option  Plan.
                                    You shall receive options to purchase
                                    100,000 shares of the Company's Common Stock
                                    at an exercise price to be determined by the
                                    Board of Directors at the time of the grant.
                                    The exercise price is expected to be $17 per
                                    share, and with acceptance of this position
                                    your options would be granted at the
                                    February 6, 2001 Board Meeting.



January 4, 2001
Page 2


           Vacation:                You will be granted four weeks (20 working
                                    days) of vacation per year or as specified
                                    by Company policy. You will be entitled to
                                    take paid holidays as determined each year
                                    by the Board of Directors.

           Benefits:                Subject to the terms and conditions of
                                    eligibility, you will be entitled to the
                                    benefits package provided to all full-time
                                    regular employees of MedSource, which will
                                    include a 401k plan, medical, life, and
                                    disability insurance coverage.

           Confidentiality:         You will be required to enter into a
                                    non-compete and Confidentiality Agreement.
                                    In consideration for accepting this
                                    position, you will be granted twelve (12)
                                    months severance pay in the event you are
                                    terminated without cause, with such payment
                                    reduced by income you receive during the
                                    severance period from employment in another
                                    capacity.

           Expenses:                You will be entitled to reimbursement for
                                    business  related  out-of-pocket  expenses
                                    which  include: mileage, meals and other
                                    appropriate business related expenses.

                                    Relocation expenses will be reimbursed per
                                    company policy or as otherwise approved by
                                    the VP-Human resources and Business
                                    Integration at the time of your mutually
                                    agreed physical relocation.

           Rick, the aforementioned outlines the primary terms and conditions of
           your employment as we discussed recently. Your employment is
           "at-will".

           On behalf of us of all of those who have had the pleasure of meeting
           with you, welcome to the team. We are excited at the prospect of your
           joining our management team and helping us to build a world leading
           business in the medical device contract manufacturing market.

           Sincerely,

           /s/

           Richard Effress

           Chairman and CEO

           MedSource Technologies

EX-10.31

                                                                   Exhibit 10.31
                                                                   -------------

                         BUSINESS CONDUCT POLICY SUMMARY

         This Policy Statement is intended to provide you with general guidance
with respect to common ethical and legal issues vital to the maintenance of the
business reputation of "MedSource" or the "Company". It does not, and cannot,
cover all situations that may arise. It is designed to alert you to problems you
may face and to let you know when to seek guidance before taking action that may
cause problems for you and/or vendors, customers or fellow MedSource employees
and stockholders.

         Problems usually can be avoided or minimized if advice is obtained at
the outset of business dealings rather than at a later stage when necessary
changes may be more difficult to make. In all cases uncertainties should be
resolved by promptly consulting either the CEO, CFO, VP of Human Resources or
MedSource Legal Counsel.

         Certain matters are explained in detail in this Policy Statement
because of their particular importance to MedSource's business activities. This
Policy Statement, however, is only a guide, and is not limited to these specific
matters. All MedSource employees must comply with all applicable laws and
regulations and behave in an ethical and legal manner in the conduct of
business. Failure to do so is a serious matter and may result in dismissal
and/or legal action by the Company against the employee. Furthermore, such
failure might involve the violation of federal, state and local laws, exposing
the employee, in some cases, to possible criminal sanctions and/or civil
charges.

         As used throughout this Policy Statement, the term "MedSource" or the
"Company" refers to MedSource and its divisions, subsidiaries and affiliated
corporations.

         Our policies reflect our commitment to the principles embodied in the
MedSource Technologies Mission Statement and Values. We endeavor at all times to
respect customer requirements for confidentiality, ethical behavior, and
partnership. We will treat each other with respect and dignity. We will
encourage learning on and off the job. We will obey the laws of host countries.
We will hold ourselves accountable to high standards of reliability and
performance. We will honor our commitments.

         As in any progressive, dynamic organization, our policies may change
from time to time. Consequently, the policies described in this document are
subject to revision, addition, and deletion. Therefore, this Policy is not a
contract between MedSource Technologies, Inc. and any employee.

ALL MANAGERS AND SUPERVISORS ARE RESPONSIBLE FOR THE ENFORCEMENT OF AND
COMPLIANCE WITH THIS POLICY STATEMENT INCLUDING NECESSARY DISTRIBUTION TO ENSURE
EMPLOYEES' KNOWLEDGE AND COMPLIANCE.



           The policies in this manual are categorized under four general
headings:

                 I.    Professional Conduct

                 II.   Employee Practices

                 III.  Community Obligations

                 IV.   Customer Confidentiality

           I. Professional Conduct

              Confidentiality
              ---------------
              MedSource Technologies, as a condition to partnering with
              customers, and as a requisite to our development as the world's
              leading supplier to the industry, must protect proprietary
              information, technology, trade secrets, computer software,
              customer information, general assets, and all other tangible and
              intangible property. All employees have a common interest to
              insure that no one outside the company obtains any intellectual
              property through unauthorized means, and that no employee
              accidentally or intentionally distributes to an unauthorized
              person any of this vital information or property.

              All employees will be required to sign and adhere to the
              conditions of a Confidentiality Agreement as a condition of
              employment.

              Professional Ethics
              -------------------
              Employees shall avoid any activity that may involve a conflict of
              interest. Examples of such activity include outside employment
              that interferes with work performance at MedSource Technologies,
              work for pay with a competitor, significant investment in a
              competitor or supplier, or securing financial gain or other
              benefit from MedSource Technologies' commercial activities, such
              as accepting gifts or benefits from suppliers, customers, or
              others with a commercial interest in our business.

              Professional ethics extend to our obligation to conduct all
              business on behalf of MedSource honestly and with proper regard
              for the proprietary nature of information and property we may
              possess.

                                                                               2



          II. Employee Practices

              Equal Employment Opportunity
              ----------------------------
              It is MedSource Technologies' policy to provide equal opportunity
              to all employees and applicants for employment as a matter of good
              practice, and, as required, in accordance with all applicable
              Equal Employment Opportunity and Affirmative Action laws.

              MedSource Technologies also provides reasonable accommodations to
              those employees with qualified disabilities and, in the U.S., in
              accordance with the Americans with Disabilities Act.

              Educational Opportunity
              -----------------------
              MedSource Technologies encourages employees to take the initiative
              to continuously learn and improve skills. The company provides
              financial assistance to full time employees who choose to continue
              their education. The primary qualification for approval of
              reimbursement is based on the educational potential for developing
              the individual as an employee and/or as a person. The company, in
              its discretion, may determine what courses will be reimbursed, and
              modify or discontinue this benefit at any time.

              Sharing Knowledge
              -----------------
              MedSource Technologies has established an intranet, including a
              bulletin board, as an opportunity for all employees to share best
              practices and assist each other in personal and professional
              development. Opportunities to broadly communicate include the
              obligation to use such facilities for business purposes only, and
              with appropriately high professional and ethical standards. The
              company reserves the right to monitor its communication network to
              insure its efficacy and proper use.

              Participating in the Company's Financial Growth
              -----------------------------------------------
              MedSource Technologies offers employees an opportunity to
              participate in a comprehensive program of benefits designed to
              allow eligible employees an opportunity to develop personal
              financial security during their years of employment, as well as to
              insure against catastrophic losses due to illness or accidents.
              These benefits include but are not limited to a comprehensive
              program of health and related insurances as well as a company
              matching 401k-benefit program.

              Treating Each Other with Respect and Dignity
              --------------------------------------------
              It is a strict MedSource Technologies policy to maintain a working
              environment that is both challenging and rewarding, yet free from
              offensive or degrading remarks or conduct. The standards for
              appropriate behavior have been well defined by Title VII of the
              Civil Rights Act and various state human rights acts.

                                                                               3



              Inappropriate behavior includes threats of violence, or degrading
              or offensive remarks about another employee's race, sex, gender,
              religion, national origin, age, marital status, sexual
              orientation, physical or mental disability, pregnancy, or any
              other protected class. Harassing another employee, meaning
              deliberate and/or unsolicited verbal comments, gestures, or
              physical contact are not appropriate forms of behavior and may
              result in termination of employment. Any such conduct should be
              reported immediately, so that the issue can be promptly resolved.

         III. Community Obligations

              Community Relations
              -------------------
              MedSource Technologies values its integrity and status as a good
              citizen, and intends that all business practices be conducted
              legally and with sound, ethical judgment. MedSource Technologies
              will not offer to pay money or give anything of value to
              government officials, political parties, or candidates, or any
              individual agent directly or indirectly in order to secure a
              business advantage. Employees are invited to volunteer for
              community service activities as a demonstration of MedSource
              Technologies' belief in good corporate citizenship.

              Media Relations
              ---------------
              Communication with the media must be accurate and factual, rather
              than via third party or opinion. MedSource Technologies will
              designate a company spokesperson to manage communication with the
              media. All requests for information must either be forwarded to
              the designated company spokesperson or to a member of the
              MedSource Executive Operating Board.

              Environmental Safety
              --------------------
              Federal, state, and local laws regulate emissions from our
              facilities as well as the physical safety of employees. It is
              MedSource Technologies' intent to provide a hazard free and
              environmentally friendly work place, and adhere to applicable
              laws. These laws and regulations are complex. Contact your
              supervisor immediately if you are faced with what appears to be an
              environmental or health issue.

              Accident, Fire, or Other Significant Environmental Incident
              -----------------------------------------------------------
              Any such incident should be reported immediately to a senior
              officer of the company. In the event an incident attracts media
              attention, employees should refer requests from the media to the
              designated company spokesperson or Executive Operating Board
              member.

                                                                               4



      IV. CUSTOMER CONFIDENTIALITY

          A critical goal for MedSource is to build and maintain credibility
          with existing and potential customers regarding their ability to share
          new product development plans and existing projects with us. Nothing
          is more fundamental to our business than building trust with our
          customers. Confidentiality protocols have been established to maintain
          this credibility and follow during customer facility audits.




                             BUSINESS CONDUCT POLICY



      I.  PROFESSIONAL CONDUCT

          A.  POSSIBLE CONFLICTS OF INTEREST

          Any kind of financial or personal interest which might affect (or
          appear to affect) your judgment in dealing on behalf of MedSource with
          outside firms or individuals must be avoided. A conflict of interest
          arises when an employee's duty to give his or her undivided commercial
          loyalty to MedSource is prejudiced by an actual or potential benefit
          derived from another source. MedSource does not desire to discourage
          or limit freedom to make investments and engage in outside interests,
          as long as these activities do not interfere with the performance of
          your obligations to MedSource as an employee.

          Since not every situation is clear, whenever there is any question
          about a possible conflict of interest, consultthe CEO, CFO, VP of
          Human Resources or MedSource Legal Counsel. In the event a conflict or
          potential conflict is found to exist, the matter will be resolved in a
          manner which considers the interests of the employee and MedSource.

          Although it is not feasible to describe every situation which could
          give rise to a conflict of interest, the following list describes some
          common activities which should be avoided:

          1.   Financial Interests in Suppliers, Customers, Competitors, etc. -
               -------------------------------------------------------------
               Holding a financial interest, directly or indirectly (as an
               owner, employee, stockholder, partner, joint venturer, creditor,
               guarantor or director), in a firm which either renders services
               or supplies materials or equipment to MedSource, or with which
               MedSource competes, or to which MedSource provides services or
               supplies materials or equipment is prohibited. Engaging in such a
               supplier, customer or competitor relationship with MedSource
               yourself is also prohibited.

                                                                               5



          The holding of not more than 1% of the outstanding securities of a
          publicly owned corporation (i.e., one whose stock is registered with
          the Securities and Exchange Commission) in which MedSource has no
          interest will not be deemed a violation of this Policy Statement
          unless there are other factors which may indicate a potential
          conflict. (If you have a question, discuss it with a senior officer of
          the Company).

     2.   Personal Speculation - Speculating or dealing in equipment, supplies,
          --------------------
          materials, or property purchased by MedSource, or speculating or
          dealing for your own account in products sold by MedSource is
          prohibited.

     3.   Solicitation or Acceptance of Gifts or Favorable Considerations -
          ---------------------------------------------------------------
          Accepting cash, commissions or other payments, or borrowing money,
          from suppliers, customers, individuals or firms with which MedSource
          does business or competes is a conflict of interest. Loans are
          permissible from established financial institutions, at normal
          interest rates and terms prevailing at the time of the actual
          borrowing. Also, accepting gifts, favors or entertainment or other
          personal items of more than nominal value from suppliers, customers,
          individuals or firms with which MedSource does business or competes is
          not permissible.

     4.   Confidential or Proprietary Information - Misusing for personal gain
          ---------------------------------------
          information to which you have access by reason of your position, or
          disclosing confidential or proprietary information to competitors, to
          any other person or entity outside MedSource or to others in MedSource
          having no business need to know is prohibited. Confidential
          information includes information on any aspect of the business of
          MedSource or of its customers or suppliers not generally known to the
          public. This includes such information as trade secrets, confidential
          information of a technical, financial or business nature or other
          "inside information".

     5.   Outside Activity - MedSource Technologies employees shall not engage
          ----------------
          in outside employment or activity which would conflict with the
          company's interests or which would reduce the efficiency of the
          employee in performing his or her duties at MedSource.

     6.   Misappropriation of Business Opportunity - Appropriating for your
          ----------------------------------------
          personal benefit or diverting to others a business opportunity in
          which MedSource might reasonably be expected to be interested, without
          first making the opportunity available to MedSource, is prohibited.

     B.     BRIBES, KICKBACKS, CORRUPT PRACTICES, ETC

                                                                               6



Employees must adhere and comply with moral and ethical standards in the conduct
of business and they must avoid both improper acts and the violation of any
governmental law or regulation in the course of performing their work. Certain
specific areas are discussed below, many of which are mandated by specific
federal, state or local laws. You should remember, however, that this Policy
Statement is not limited to compliance with these specifically enumerated laws
and standards.

1. Misuse of Corporate Funds or Assets - MedSource's corporate funds, assets or
   -----------------------------------
   corporate facilities may not be used for any purpose which is improper or
   unlawful under the laws of any jurisdiction, domestic or foreign. For
   example, you and MedSource should:

       a) Not pay or offer to pay anything of value to any foreign political
          party or official thereof or any candidate for foreign political
          office or any officer or employee, or any person acting in an official
          capacity for or on behalf of a foreign government or any department,
          agency or instrumentality thereof, for the purpose of influencing an
          official act or decision of such person or inducing such person to
          exert their influence to affect the acts or decisions of a foreign
          government, in each case to obtain, retain or direct business of any
          person. In countries where local customs call for giving gifts on
          special occasions to customers and others, you may, with appropriate
          prior written approval, offer gifts which are lawful, appropriate in
          nature and nominal in value, provided this cannot be construed as
          seeking special favor. This prohibition, which is mandated by the
          Foreign Corrupt Practices Act of 1977, also includes payments to any
          person where the payor knows or has reason to know that all or a
          portion of the payment will be offered or given, directly or
          indirectly, to persons in the categories described above for the
          aforesaid purposes.

       b) Not pay or offer to pay anything of value in an attempt to influence
          the action of any U.S., state or local government official or
          employee. This prohibition also applies to payments to any person
          where the payor knows or has reason to know that some part of the
          payment will be used as a bribe or otherwise to influence government
          action.

       c) Not pay or offer to pay bribes, kickbacks or other similar payments
          and benefits, directly or indirectly, to any suppliers or customers of
          MedSource or their agents or employees. This includes unusually large
          gifts or entertainment, since such gifts or entertainment may be
          construed as constituting an improper inducement to such persons.

                                                                               7



                      Similarly, you should not accept or receive any payment or
                      other thing of value (except for the nominal gifts and
                      entertainment described in Paragraph 1(a) above) from
                      anyone having a business relation with MedSource (whether
                      intended by the payor to be for MedSource or for your
                      personal benefit), unless the payment is in the nature of
                      a refund to MedSource which is permitted under applicable
                      laws and regulations.

           2. Political Contributions - No corporate reimbursement of political
              -----------------------
              contributions will be, or lawfully can be, made by MedSource, in
              any form, directly or indirectly. MedSource's funds, facilities,
              properties or resources should not be used to support, directly or
              indirectly, any foreign, federal, state or local political party
              or candidate. All political activities must take place on your own
              time, not during working hours, and at your own expense.

 .         3. Integrity of Books, Records, Invoices and Payments and Submissions
              ------------------------------------------------------------------
              to Regulatory Authorities - MedSource's policy requires that all
              -------------------------
              transactions involving corporate funds, whether cash, stock,
              facilities, inventory, other assets, or otherwise, be properly
              recorded on MedSource's books and records in such a manner that
              the true nature of the transaction is evident.

                 a)   No false, artificial, incomplete or misleading entries
                      should be made in any books, accounts or records of
                      MedSource for any reason and no employee should
                      participate in any arrangement that results in the making
                      of such entries. For example, no invoice or purchase order
                      should be issued or approved that does not correctly
                      reflect the actual transaction. A false, artificial,
                      incomplete or misleading accounting entry is one that does
                      not, in reasonable detail, accurately and fairly reflect
                      or describe the underlying transaction or disposition of
                      assets, or is not posted to the proper account.

                 b)   No undisclosed or unrecorded funds or assets of MedSource
                      should be established or set aside for any purpose, nor
                      should any secret or special books and records be
                      maintained for any purpose. Accordingly, all MedSource's
                      bank accounts, funds, properties and assets must be
                      reflected in MedSource's regular books and records and be
                      subject to MedSource's established internal control and
                      audit procedures. All bank accounts and signatories
                      thereon must be authorized by appropriate corporate
                      action.

                 c)   No payment on behalf of MedSource should be approved or
                      made with the intention or understanding that a part or
                      all of such payment is to be used for any purpose other
                      than that described by the document supporting the
                      payment.

                                                                               8



                  d)  You should not enter into any transaction or arrangement,
                      which you know or reasonably should know, would violate
                      any foreign or domestic laws, nor should you assist any
                      third party in violating such laws.

                  e)  All submissions to regulatory authorities should be
                      accurate. You should never make any false, misleading or
                      incomplete statements, or omit to state any relevant facts
                      necessary to ensure that any statements made are not
                      misleading, to any accountant (including MedSource's
                      independent accountants or its internal auditors), in
                      connection with any audit or examination of the financial
                      statements of MedSource or in the preparation of or filing
                      of any document or report required to be filed with any
                      federal, state, local or foreign governmental agency.

           4. Government Reports and Claims - Many federal and state laws have
              -----------------------------
              detailed specification of records that must be maintained and the
              periods of time for which these records must be maintained. All
              such records must be accurate and properly maintained, both to
              satisfy the legal requirements and to enable MedSource to defend
              itself in the event a question is raised by government or private
              parties.

           C.     LAWSUITS AND GOVERNMENT INVESTIGATIONS

           All governmental (federal, state and local) inquiries,
           investigations, or notices and all civil or criminal summonses,
           complaints, subpoenas or other court papers should be forwarded
           immediately to a senior officer of the Company for appropriate
           handling. In no event should the recipient of any inquiry, notice or
           legal paper respond without first referring the matter to a senior
           officer of the Company.

           1. Government Inquiries and Investigations - A senior officer should
              ---------------------------------------
              be notified immediately by telephone and/or facsimile of any
              inquiry (oral or written, formal or informal), request for
              information, subpoena, notice, or complaint of a legal or
              investigatory nature from any agency of the federal government
              (e.g., EPA, SEC, OSHA, EEOC, OFCCP), state government (e.g.,
              Department of Environmental Affairs), or local government (e.g.,
              District Attorney). On-site visits by government officials to
              MedSource's facilities should be reviewed in advance with a senior
              officer, whenever possible, and always reported promptly.

              Government investigations are a fact of business life. The
              government has a wide array of laws to aid it in its activities,
              violations of which carry severe penalties to the individuals
              involved, including laws prohibiting you from aiding in or
              concealing the facts relating to an offense even if you were not
              involved in the original offense. All

                                                                               9



              employees are expected to deal honestly and straightforwardly with
              governmental representatives, but only in consultation with a
              senior officer.

       2.     Complaints, Subpoenas and Other Legal Papers - A senior officer
              --------------------------------------------
              should be notified immediately by telephone or facsimile whenever
              a MedSource facility receives a complaint from an outside lawyer
              or is served with any form of legal process, including civil or
              criminal citations, summonses, complaints, subpoenas, notices of
              deposition, levies and the like.

       3.     Service of Legal Papers - In consultation with a senior officer,
              -----------------------
              each facility should designate one or two suitable individuals
              upon whom all legal papers addressed to the corporation (but not
              legal papers directed to individual employees in their personal
              affairs) should be served. The designated employees should receive
              and acknowledge service of subpoenas and other legal process upon
              the corporation without attempting to avoid the process server.
              The employee receiving service should make a notation on the legal
              papers of the time, date and manner of service and then alert a
              senior officer by telephone and forward the papers to a senior
              officer by facsimile or overnight courier.

              MedSource Technologies, Inc. does not facilitate or become
              involved in its employees' personal legal disputes. Therefore,
              employees should not accept service of any personal legal papers
              directed to individual employees.

       4.     Media Inquiries about Litigation, Investigations or Accidents -
              -------------------------------------------------------------
              When MedSource is involved in a newsworthy litigation or
              investigation, or an accident or environmental incident,
              MedSource's employees may receive inquiries from the media. To
              ensure that accurate factual information is reported, one
              management person shall be selected by the CEO of MedSource as the
              designated spokesperson for MedSource accidents or environmental
              incidents.

              Unauthorized employees should not discuss MedSource with the
              media. All inquiries from the media should be immediately referred
              to the designated spokesperson for handling. In the absence of
              such designation, inquiries should be directed to a member of the
              Executive Operating Board.

       5.     Disclosing Information About Co-Workers - All information about
              ---------------------------------------
              MedSource and its employees is absolutely confidential. If you
              receive any requests for information about current or former
              employees, please refer the inquirer to Human Resources personnel.
              Employees should never disclose any information about MedSource
              personnel, including former employees and applicants, to any third
              party.

                                                                              10



         D. MISUSE OF INSIDE INFORMATION AND TRADING IN SECURITIES

         MedSource's employees may have access to "inside information"-that is,
         non-public information about MedSource or another company. The use of
         any "inside information" for your own financial benefit, or the
         financial benefit of your relatives, friends, brokers, or others is not
         only an ethical concern. It also may be a violation of law and could
         result in criminal sanctions, such as fines and imprisonment and
         substantial civil liability, including treble damages.

         If you have information about MedSource and its affairs which has not
         been released by MedSource to the public, and which a reasonable
         investor might consider important in deciding whether to buy, sell or
         hold securities, then such information is considered "inside
         information" and you are considered an "insider". Insiders are
         prohibited from trading in or recommending MedSource's securities, or
         any other securities the price of which may be affected by the inside
         information. Even after the inside information has been publicly
         disclosed, the insider is prohibited from trading until two full
         business days have elapsed for the information to be absorbed by the
         general public.

         The following are some examples of situations in which you would be
         prohibited from trading in securities under the securities laws and
         this Policy Statement:

         1.   If you know that MedSource is about to make an announcement or has
              reached a not yet announced business decision which could affect
              the price of MedSource's securities, then you should not buy or
              sell MedSource's securities until MedSource makes public
              disclosure and the public has had time to absorb the information.

         2.   If you know that MedSource is about to make an announcement or has
              reached a not yet announced business decision which could affect
              the price of the securities of a supplier or competitor or
              acquirer or target company of MedSource, then you should not buy
              or sell those securities until public disclosure is made and
              sufficient time has passed for the public to absorb the
              information. Examples of this type of information are the placing
              of a major purchase order by MedSource, or the marketing of a new
              product line, or an acquisition.

              In order to prevent others from profiting from inside information,
              which you may have, it is important that you not disclose inside
              information to anyone, except persons within MedSource whose
              positions require them to have that information. You must take
              care not to disclose such information inadvertently; either to
              third parties or to others within MedSource who have no business
              need to know.

                                                                              11



              If you are uncertain as to whether any information, which you
              have, should prevent you from trading in MedSource's stock or any
              other securities, you should consult the CFO or MedSource Legal
              Counsel.

         E. ANTITRUST LAWS

         Antitrust laws are designed to ensure fair competition in the free
         market system, free of unreasonable restraints. Antitrust statutes,
         which exist at federal, state and some international levels, prohibit
         unfair trade practices, monopolization or attempts to monopolize, and
         joint activity in restraint of trade. Compliance with all applicable
         antitrust laws is the policy of MedSource and the responsibility of
         each employee.

         These laws, while explainable in general terms, can become complex when
         applied to specific situations. Whenever contact with competitors is
         involved, or special treatment of particular customers is being
         considered, or if you have any doubt as to whether a certain discussion
         or activity might violate the antitrust laws, you should immediately
         stop and consult a senior officer of the company. Violation of the
         antitrust laws may result in serious consequences, both for MedSource
         and for you individually. Possible consequences include both criminal
         prosecution and substantial civil liability (including treble damages).

         To give you some guidance, the following are brief summaries of
         agreements, arrangements or dealings which are prohibited by the
         antitrust laws cited. The concept of an "agreement" or "understanding"
         under these laws is broadly defined to include oral and written
         agreements, and may even be inferred from a course of conduct or
         circumstantial evidence.

         1.   The Sherman Act - This principal antitrust statute prohibits
              ---------------
              common action by two or more competitors in restraint of trade.
              Prohibited conduct would involve agreements or understandings with
              competitors as to:

              a) pricing policies (including discounts, credit terms, etc.);

              b) production levels;

              c) division or allocation of markets, territories or customers; or

              d) boycotting of third parties - a company that does not have a
                 monopoly in a product has the right to select the customers
                 with whom it does business, but this right must be exercised by
                 the company alone, without consultation with any other party.

                                                                              12



           2. Resale Price Restrictions - Also prohibited are agreements or
              -------------------------
              understandings with customers as to the prices which they will
              charge for their products or the prices which their customers will
              charge for resale.

           3. The Robinson - Patman Act - This prohibits reasonably
              -------------------------
              contemporaneous sales of products of like grade and quality to
              competing customers at different prices, the effect of which
              probably will be to injure competition. Prices set in good faith
              to meet (but not to beat) a bona fide price offered by a
              competitor, or price differences which may be justified in
              appropriate circumstances on the basis of cost savings, are
              permissible.

              The Robinson - Patman Act also prohibits promotional payments,
              services or facilities (such as advertising displays) extended to
              one customer but not made available on proportionally equal terms
              to all competing customers. It is lawful, however, to grant
              promotional assistance to a particular customer if done in good
              faith to meet (but not to beat) a bona fide offer of such
              assistance by a competitor of MedSource.

           4. Tying Arrangements - Any arrangement under which a seller forces
              ------------------
              or induces a customer to take a product it might not otherwise
              wish to buy from the seller as a condition of a license, loan or
              sale of a different product which the buyer does wish to obtain is
              unlawful, if the seller is dominant or has economic leverage with
              respect to the tying license, loan or product, or if a substantial
              amount of sales of the tied product are made.

           5. Trade Relations - Reciprocity - The antitrust laws also prohibit
              -----------------------------
              the use of "trade relations" and reciprocity where it is shown
              that a buyer with substantial purchasing power has purchased
              products from a seller on condition that the seller make purchases
              from the buyer in substantial amounts. This does not mean that
              MedSource cannot purchase products from companies who purchase
              from it. It does prohibit any understanding or agreement to the
              effect that purchases by each party are conditioned upon purchases
              by the other where the above described conditions are present.
              MedSource does not engage in such trade relations or reciprocity
              and it is against MedSource's policy for any employee to engage in
              such practice. Officers and employees with purchasing
              responsibilities should disregard MedSource's sales to any
              supplier as a factor in purchasing decisions.

           6. Barter Sales Arrangements - Barter sales arrangements, that is a
              -------------------------
              sale of product by MedSource in exchange, not for money, but for
              the sale of different products to MedSource may present antitrust
              problems and should not be made without prior legal review and
              guidance from a senior officer.


                                                                              13



         7.   Trade Associations - Trade Associations provide valuable services,
              ------------------
              but employees must be very careful when participating in Trade
              Association activities, meetings or programs because they can
              provide opportunities for prohibited communications among
              customers, competitors and suppliers. You should seek guidance
              from a senior officer if you have any questions about Trade
              Association activities.

         F.       INTERNATIONAL TRANSACTIONS - FOREIGN LAWS

         It is important to note that the U.S. antitrust laws may also apply to
         international transactions, if the transaction will have a substantial
         effect on U.S. imports and/or exports. In addition, several other
         countries, including those in the European Economic Community, impose
         their own antitrust restrictions. MedSource's employees should be
         careful to consider the applicable laws of all relevant jurisdictions.

         Other U.S. statutes may apply to transactions of MedSource's non-U.S.
         companies and to the personnel involved in those transactions. For
         example, the Export Administration Act prohibits complying with foreign
         boycotts or related requests for information from foreign countries in
         some situations.

         Because the Act also requires that boycott-related requests for
         information or action be promptly reported to the proper authorities,
         you should immediately inform a senior officer of any such requests. As
         discussed in Section B.1 above, the Foreign Corrupt Practices Act of
         1977 prohibits the making of certain payments to foreign officials.

                                                                              14



II.      EMPLOYEE PRACTICES

         A.       EQUAL EMPLOYMENT OPPORTUNITY


         1.   Equal Employment Opportunity Policy - It is MedSource's policy to
              -----------------------------------
              provide equal employment opportunity in all areas of employment
              practices and to ensure that there shall be no discrimination
              against any qualified employee or applicant on the grounds of
              race, sex, gender, religion, national origin, age, marital status,
              sexual orientation, physical or mental disability, pregnancy, or
              any other protected class. This policy of equal employment
              opportunity relates to all phases of employment, including, but
              not limited to, recruitment, hiring, compensation, benefits,
              promotion, assignment, transfer, layoffs, training, tuition
              assistance, and social and recreational programs. Managers must
              assure that discriminatory motives are not present in job-related
              decisions.

         2.   Disabled Accommodation - Reasonable accommodation will be made
              ----------------------
              with respect to the special needs of any employees who are
              disabled.

3.            Religion - Reasonable accommodation will be made with respect to
              --------
              any request by an employee not to work at a time prohibited by the
              employee's religious beliefs.

         B.       FREEDOM FROM HARRASSMENT

         It is MedSource's policy that our workplace is for work. It is our goal
         to create a working atmosphere free from conduct which has the purpose
         or effect of unreasonably interfering with an individual employee's
         work performance or creating an intimidating, hostile or offensive
         working environment. In particular, an atmosphere of tension created by
         ethnic or religious remarks or animosity, sexually oriented comments,
         sexual advances, requests for sexual favors or other discriminatory
         conduct is prohibited in our workplace.

         Where any such verbal, non-verbal or physical conduct unreasonably
         interferes with an employee's right to work free of harassment, we urge
         that employee to notify his or her supervisor. If the supervisor is
         involved, then the employee should report the situation to a member of
         the Executive Operating Board, so that MedSource is provided the
         opportunity to investigate and take corrective action. To the extent
         possible, all inquiries will be held in strict confidence but will be
         investigated and dealt with expeditiously. Where investigations confirm
         the allegations, appropriate corrective actions, which may include
         dismissal, will be taken.

                                                                              15



     Discriminatory motives must not be present in job-related decisions and
     ethnic, religious or sexual considerations must not be used as the basis
     for employment decisions affecting applicants or employees.

     MedSource's managers and supervisors are expected to discharge their
     responsibilities in conformity with the laws governing this subject and in
     a manner fully consistent with the objectives and intent of MedSource's
     policy.

     C.      INTERNET CODE OF CONDUCT

     Access to the Internet has been provided to employees for the benefit of
     the organization and its customers. It allows employees to connect to
     information resources around the world. Every staff member has a
     responsibility to maintain and enhance the company's public image, and to
     use the Internet in a productive manner. To ensure that all employees are
     responsible, productive Internet users and are protecting the company's
     public image, and customer confidentiality, the following guidelines have
     been established for using the Internet.

     1.   Acceptable Uses of the Internet - Employees accessing the Internet are
          -------------------------------
          representing the company while using the company's hardware and
          software on company time. Therefore, all communications should be for
          professional reasons. Employees are responsible for seeing that the
          Internet is used in an effective, ethical and lawful manner at all
          times. Internet Relay Chat channels may be used to conduct official
          company business, or to gain technical or analytical advice. Databases
          may be accessed for information as needed. Electronic mail (e-mail)
          may be used for business contacts.

     2.   Unacceptable Use of the Internet - The Internet should not be used for
          --------------------------------
          any personal purposes, including, but not limited to advancement of
          individual views. Solicitation of non-company business, or any use of
          the Internet for personal gain is strictly prohibited. Use of the
          Internet must not disrupt the operation of the company networks of
          other users. It must not interfere with your productivity, or the
          productivity of co-employees.

     3.   Communications - Each employee is solely responsible for the content
          --------------
          of all text, audio or images that they place or send over the
          Internet. Certain types of communications, for example, fraudulent,
          harassing or obscene messages are prohibited. All messages
          communicated on the Internet must have your name attached. No messages
          will be transmitted under an assumed name. Users may not attempt to
          obscure the origin of any message. Information published on the
          Internet should not violate or infringe upon the rights of others. No
          abusive, profane or offensive language may be transmitted through the
          system. Not only will these, or



         3.   similar actions, result in discipline, they may be violations of
              criminal law.  Employees who wish to express personal opinions on
              the Internet must not do so using the company's equipment at any
              time.

         4.   Software - To prevent computer viruses from being transmitted
              --------
              through the system there will be no unauthorized downloading of
              any software. All software downloads will be done by authorized
              MIS personnel.

         5.   Copyright Issues - Copyrighted materials belonging to entities
              ----------------
              other than this company may not be transmitted by staff members on
              the Internet. Users are not permitted to copy, transfer, rename,
              add or delete information or programs belonging to other users
              unless given express permission to do so by the owner. Failure to
              observe copyright or license agreements may result in disciplinary
              action from the company and/or legal action by the copyright
              owner.

         6.   Monitoring - The company intends to monitor the use of the system
              ----------
              to ensure that only appropriate, business related work and
              messages are being performed and transmitted. The company intends
              to monitor the use of the systems in a limited fashion, but will
              do so as needed to maximize utilization of the systems for
              business purposes and according to appropriate protocols that may
              apply in different business units.

         7.   Harassment - Harassment of any kind is prohibited. No messages
              ----------
              with derogatory or inflammatory remarks about an individual or
              group's race, gender, sex, religion, national origin, age, marital
              status, sexual orientation, physical or mental disability,
              pregnancy, or any other protected class will be transmitted.

         8.   Violations - Violations of any guidelines listed above may result
              ----------
              in disciplinary action up to and including termination. If
              necessary, the company will advise appropriate legal officials of
              any illegal violations.

         D.       ELECTRONIC MAIL POLICY

              Electronic Mail Policy - The Company has established a policy with
              ----------------------
              regard to access and disclosure of electronic mail (e-mail)
              messages created, sent or received by company employees using the
              company's electronic mail system.

              The company intends to enforce the policies set forth below, and
              reserves the right to change them at any time as may be required
              under the circumstances.

                                                                              17



              The company maintains an electronic mail system. This system is
              provided by the company to assist in the conduct of business
              within the company.

              The electronic mail system hardware and software are company
              property. Additionally, all messages composed, sent, or received
              on the electronic mail system are and remain the property of the
              company. They are not the private property of any employee.

              Our electronic mail system is intended to be used for the conduct
              of business at the Company. Any personal use of this system must
              be kept to a minimum.

              The electronic mail system may not be used to solicit or
              proselytize for commercial ventures, religious or political
              causes, outside organizations, or other non-job-related
              solicitations.

              The electronic mail system is not to be used to create any
              offensive or disruptive messages. No messages with derogatory or
              inflammatory remarks about an individual or group's race, gender,
              sex, religion, national origin, age, marital status, sexual
              orientation, physical or mental disability, pregnancy, or any
              other protected class may be transmitted.

              The electronic mail system shall not be used to send (upload) or
              receive (download) copyright materials, trade secrets, proprietary
              financial information, or similar materials without prior
              authorization from the Chief Financial Officer, or a designee.

              The company reserves the right to review, audit, intercept, access
              and disclose all messages created, received or sent over the
              electronic mail system for any purpose. The contents of electronic
              mail properly obtained for legitimate business purposes may be
              disclosed within the company without the permission of the
              employee.

              The company reserves the right to conduct monitoring of the
              systems' uses and of e-mail messages and can do so despite the
              assignment to individual employees of passwords for systems
              security. The passwords are designed to provide systems security
              from unauthorized users, not to provide privacy to the individual
              systems user. The confidentiality of any message should not be
              assumed. Even when a message is erased, it is still possible to
              retrieve and read that message.

              The systems' security aspects, such as the message delete function
              for e-mail and your personal password, can be bypassed for
              monitoring purposes. The company's ability to monitor system use
              and any messages at any time is not restricted or neutralized by
              these mechanisms.

                                                                              18



          Misuse of the systems will result in discipline, up to and including
          possible termination of employment in appropriate cases. If necessary
          to support appropriate disciplinary measures, additional information
          about personal uses or monitored personal messages will be recorded
          and provided in confidence to the appropriate Supervisor, Manager, or
          Human Resources personnel.

          Notwithstanding the company's right to retrieve and read any
          electronic mail messages, such messages should be treated as
          confidential by other employees and accessed only by the intended
          recipient. Employees are not authorized to retrieve or read any e-mail
          messages that are not sent to them. Any exception to this policy must
          receive prior approval by the employer.

          Employees shall not use a password, access a file, or retrieve any
          stored information, unless authorized to do so. Employees should not
          attempt to gain access to another employee's messages or files without
          the latter's permission. All computer passwords must be provided to
          Supervisors and the MIS personnel. No password may be used that is
          unknown to the company.

          Any employee who discovers a violation of this policy shall
          immediately notify MIS or Human Resources personnel.

          Any employee who violates this policy or uses the electronic mail
          system for improper purposes shall be subject to discipline, up to and
          including discharge.

                                                                              19



III. COMMUNITY OBLIGATIONS

     A.   ENVIRONMENT, SAFETY, AND HEALTH

     1.   Applicable Laws and Regulations - Federal, state and local
          -------------------------------
          environmental laws regulate the emission into the atmosphere and the
          discharge onto or into the ground or into surface and underground
          waters of a wide variety of substances. The Occupational Safety and
          Health Act (OSHA) regulates the physical safety of employees and
          exposure to conditions in the workplace which could harm employees.
          Other federal and state laws regulate all chemical substances or
          mixtures which may present a risk of injury to health or the
          environment. These laws, and applicable regulations, are complex and
          violation thereof can result in severe penalties. Should you be faced
          with an environmental or health issue, you should contact your
          superior immediately.

          If you learn from any source that material manufactured, processed or
          distributed by MedSource may present a substantial risk of injury to
          health or the environment, you should report this to your superior
          immediately.

     2.   Permits - The Clean Water Act and other federal, state and local laws
          -------
          require that a permit or permits be obtained for certain discharges of
          pollutants into water courses. Similarly, the Solid Waste Law and
          other federal, state and local laws require that a permit or permits
          be obtained for the disposal of "hazardous" substances. The definition
          of "hazardous" is broad and may include substances not generally
          considered to be dangerous. Accordingly, all process ingredients
          should be checked for proper classification and handling. Questions in
          this area should be referred to a senior officer.

     3.   Accident, Fire or Environmental Incident - Media Contacts - Any
          ---------------------------------------------------------
          significant fire, accident or environmental incident should be
          reported immediately to a senior officer of the Company. If the
          incident attracts media attention, one management person shall be
          selected by the CEO of MedSource as spokesperson to communicate with
          the media. In the absence of such designation, a senior officer should
          be contacted. The designated spokesperson should be knowledgeable
          about employee safety, fire protection and waste disposal procedures
          followed at the facility, and should be able to quickly make
          decisions, or get instructions from senior management on how much
          information to provide. All requests from the media for information
          should be referred to this spokesperson.

          Communication with the media should be accurate, factual and sincere.
          Keep all explanations as simple as possible, providing information on
          what the problem is, what caused it and what is being done to correct
          it. Offer only as much information

                                                                              20



          as the media needs to report the story. Confidential information
          should not be revealed.

                                                                              21



IV.  CUSTOMER CONFIDENTIALITY

We treat all aspects of each customer relationship in the strictest of
confidence. MedSource employees will not discuss any aspect of our customer
relationships with outside parties, or even acknowledge that any relationship
exists. MedSource maintains standard confidentiality agreements with customers
and suppliers that are signed by the CEO or CFO.

Internal protocols are established to maintain confidentiality within dedicated
MedSource project teams when appropriate. For example, customer drawings,
proprietary manufacturing processes and MedSource personnel are segregated from
other customer projects as required.

A critical goal for MedSource is to build and maintain credibility with existing
and potential customers regarding their ability to share new product development
plans and existing projects with us. Nothing is more fundamental to our business
than building trust with our customers -- a critical step in this process is
establishing and abiding by our confidentiality policy.

     Confidentiality Protocols For Customer Facility Audits
     ------------------------------------------------------

     Preparation for a site inspection by a customer should include the
following:

     .    All personnel on-site should be notified of the customer visit. They
          should also be briefed on who the customer is, what they do, why they
          are visiting and what it means to MedSource.

     .    All personnel should be reminded that we do NOT under ANY circumstance
          mention customers with whom we do business in the presence of another
          customer.

     .    Any and all documentation including prints, drawings, and customer
          information should be kept in an inconspicuous place during the visit.
          This includes products with customer brand names or product line names
          on the item.

     .    If product being manufactured or a production process is deemed to be
          sensitive in nature, the customer should be kept out of that section
          of the building.

                                                                              22



MedSource
   Technologies

                    ACKNOWLEGEMENT OF BUSINESS CONDUCT POLICY

     I have read and understand MedSource's Statement of Business Conduct
Policy, dated February 15, 2000. I understand that it is only a guide to
possible conflicts of interest and problems of compliance with law and business
ethics, and that I must report all conflicts, violations of law or failures to
adhere to business ethics to MedSource whether or not they are of the type
discussed in this Policy Statement.

     I recognize and understand that the company's Internet access and
electronic mail systems are to be used for conducting the company's business
only. I understand that use of this equipment for private purposes is strictly
prohibited. Further, I agree not to use a password that has not been disclosed
to the company. I agree not to access a file or retrieve any stored
communication other than where authorized unless there has been prior clearance
by an authorized company representative.

     I understand that I am to give immediate notice to MedSource if any
situation should arise involving a possible direct or indirect conflict of
interest, violation of law or unethical action.

     At this time I have no personal interests and, to the best of my knowledge
and belief, no member of my family has any personal interests, which conflict
with the aforesaid Policy Statement and I have not engaged in any activity
prohibited by the Policy Statement, except as set forth in the following page.

Disclosures required under MedSource's policy described above:

________________________________________________________________________________

_______________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________






Signature: ______________________________________         Date:_________________

                                                                              23

EX-10.32

MedSource
   Technologies


                                                                   Exhibit 10.32
                                                                   -------------
                            CONFIDENTIALITY AGREEMENT


I _________________________________ ("EMPLOYEE") accept employment with
MedSource Technologies, Inc. herein collectively referred to as the
("EMPLOYER").

During my employment I may be entrusted with, have access to and become familiar
with the trade secrets and other confidential and/or proprietary information
(hereinafter "confidential information") of the EMPLOYER. I acknowledge that the
EMPLOYER's confidential information has been developed and maintained at great
effort and expense, has been kept and protected as confidential, is of
substantial value to the EMPLOYER, and provides the EMPLOYER with a significant
competitive advantage. In addition, the EMPLOYER's relationships with customers
is predicated on an understanding of total confidentiality, with no tolerance
for disclosure to other than strictly intended parties, and for the sole purpose
of performing duties for the EMPLOYER and on behalf of EMPLOYER's customers.

I understand that the EMPLOYER would not offer me employment, provide me with
specialized training, or entrust me with the EMPLOYER's confidential information
in the absence of this Confidentiality Agreement ("Agreement"). Therefore, in
consideration of my employment, I agree as follows:

     1.   Non-Disclosure: I will hold all of the EMPLOYER's confidential
          --------------
          information in strictest secrecy and confidence, and use it solely for
          the purpose of performing my duties for the EMPLOYER. I will not
          directly or indirectly, take, use or disclose (or enable anyone else
          to take, use or disclose) any of the EMPLOYER's confidential
          information during my employment, or any time thereafter, without the
          EMPLOYER'S prior written permission.

     2.   Employer Property: All files, records, customer lists, customer
          -----------------
          information, supplier information, proposals, specifications,
          manufacturing processes, procedures, know how, mailing lists, pricing
          lists, or other information and documents, and all computer software,
          software applications, files, data bases, and the like relating to the
          business of the EMPLOYER or which contain confidential information,
          whether prepared by me or otherwise coming into my possession, shall
          remain the exclusive property of the EMPLOYER and shall not be removed
          from its premises except as necessary for my job responsibilities and
          in furtherance of the interests of the EMPLOYER. I will promptly
          deliver to the EMPLOYER any such material (including any photocopies,
          extracts or summaries of it) that is in my possession, custody or
          control, upon the termination of my employment for any reason, or upon
          the EMPLOYER's request.

     3.   Non-Solicitation: During my employment and for one year after the
          ----------------
          termination of my employment for any reason, I will not, directly or
          indirectly, either personally or on behalf of any other entity
          (whether as a director, officer, stockholder, owner, partner,
          consultant,



          principal, employee, agent or otherwise), (a) solicit, induce, entice,
          hire, employ or attempt to employ any individual employed by the
          EMPLOYER as of the termination of my employment or during the prior
          year; or (b) take any action which is intended, or would reasonably be
          expected, to adversely affect the EMPLOYER, its business, reputation,
          or its relationship with its customers, prospective customers, or
          suppliers.

     4.   Definitions: For the purposes of this Agreement, the term (a)
          -----------
          "confidential information" shall include all trade secrets,
          proprietary and other information that is disclosed to or acquired by
          me during or in the course of my employment that relates to the
          business of the EMPLOYER and is not generally available to the public,
          or generally known in the medical device industry. Confidential
          information includes, without limitation, customers' identities and
          requirements, customer lists, suppliers' identities and products,
          pricing information, product price discount information, manufacturing
          processes and procedures, new product research, financial information
          not generally available to the public, and other non public
          information. The term also includes any techniques, know how,
          processes or combinations thereof, or compilations of information,
          records and specifications, utilized or owned by the EMPLOYER,
          development, marketing, pricing, business methods, strategies,
          financial or other analyses, policies or business opportunities; and
          (b) "document" shall include files, records, correspondence, memoranda
          whether in written form or on computer, video and audio discs and
          tapes and all other recorded, taped, filmed or graphic material
          however produced or reproduced, and any tangible thing that, in whole
          or part, contains, records, illustrates or conveys information.

     5.   Enforcement: I acknowledge that if I violate this Agreement, the
          -----------
          EMPLOYER could suffer irreparable harm and have no adequate remedy at
          law. I therefore consent to enforcement of this Agreement by means of
          a temporary injunction or other appropriate equitable relief in any
          competent court, which shall be in addition to any other remedies the
          EMPLOYER may have under this Agreement or otherwise. I further agree
          that, in the event the court grants injunctive or other equitable
          relief in favor of the EMPLOYER, I will also be liable for all costs
          incurred in connection therewith, including the EMPLOYER's reasonable
          attorneys' fees.

     6.   Consideration: This Agreement is entered into between EMPLOYER and
          -------------
          EMPLOYEE in connection with the EMPLOYEE's initial and continued
          employment in any capacity by the EMPLOYER.

     7.   Successors and Assigns: This Agreement shall be binding upon and inure
          ----------------------
          to the benefit of the EMPLOYEE and the EMPLOYER and their respective
          successors, assigns, heirs or legal representatives.

     8.   Applicable Law: This Agreement and its enforcement will be governed by
          --------------
          the laws of the state of Minnesota, without regard to its conflicts of
          law principles.




     By my signature below, I acknowledge that I have read and understand this
Agreement and had an opportunity to ask the EMPLOYER any questions about it
prior to signing. I understand, that my signing of this Agreement is a condition
of my employment. I am voluntarily entering this Agreement and I certify that
neither the EMPLOYER, nor its agents, has made any representations concerning
the terms or effects of this Agreement other that those contained herein.

Signature: _____________________________________________________


Date:      _________________________________________________        ____________

__________________

EX-10.33

Medsource
   Technologies




                                                                  Exhibit 10.33
                                                                  -------------

                                DISCLOSURE POLICY

                                  EMPLOYEE COPY

I.       Introduction
         ------------

                 Federal securities laws require that the Company make
              accurate, timely and broad disclosures of material information
              affecting it, both favorable and unfavorable, to its various
              security holders and to potential investors. The obligation to
              disclose material corporate information is in addition to the
              formal scheduled disclosure requirements mandated by the quarterly
              Form 10-Q reports, annual Form 10-K reports and Form 8-K reports.

II.      Purpose
         -------
         To establish a policy to assure the appropriate handling and timely,
         accurate and complete disclosures of material non-public information in
         compliance with federal securities laws, including Regulation Fair
         Disclosure.

III.     Scope
         -----
         This policy applies to all operations of the Company.

         The information about the Company's affairs that are subject to this
         policy generally include, but are not limited to, information
         concerning:

         (a)     its property, business, financial condition and financial
                 forecasts;

         (b)     mergers, acquisitions and dispositions; and

         (c)     major contracts, sales, purchases and changes in status with
                 suppliers or customers, or employee relations issues.

         This listing is not exclusive. Any question regarding the nature of
         information about to be disclosed should be directed to the CEO, CFO,
         or MedSource Legal Counsel.

IV.      Definition - Material Non-Public Information
         ----------   -------------------------------
         Material, non-public information includes any information, not
         previously announced or otherwise released to the public, which a
         reasonable investor would consider important in making a decision to
         buy, hold or sell stock or other securities. Such material information

                                                                               1




         must not be disclosed other than by official representatives of the
         company through accepted disclosure media.

         Common examples of information that will frequently be regarded as
         material are: projections of future earnings or losses; news of a
         pending or proposed merger, acquisition or tender offer; news of a
         significant sale of assets; initiation or expansion of dividend
         policies or the declaration of a stock split or the offering of
         additional securities; changes in management; impending financial or
         liquidity problems; and the gain or loss of substantial business.
         Either positive or negative information may be material.
 V.      Policy
         ------

         A.      Employees, officers and directors must not discuss
                 confidential, non-public information about the Company with
                 anyone outside of the Company, unless:

         (i)     they have proper authorization to do so from the CEO or CFO, or
         (ii)    the outsider receiving the information has agreed, in writing,
                 to keep such information confidential, and the disclosure has
                 been approved by the CEO or CFO. For example, furnishing
                 financial information to the Company's lenders may be required
                 as part of an employee's duties in administering the Company's
                 contractual commitments to the lenders. The information may,
                 nonetheless, constitute material, non-public information that
                 is otherwise not available to security holders.

                 Further, it is prohibited for any employee, officer or director
                 of the Company to actively participate in any Internet chat
                 room or discussion board which is in any way related to the
                 Company or its competitors.

         B.      When dealing with third parties, particularly the investment
                 community (financial analysts, brokers, stockholders and the
                 press), no material non-public information should be divulged
                 or discussed. If material non-public information is disclosed
                               -----------------------------------------------
                 to a third party, it may become necessary to promptly disclose
                 --------------------------------------------------------------
                 the information to the public at large, sometimes to the
                 --------------------------------------------------------
                 detriment of the Company's business, employees and
                 --------------------------------------------------
                 shareholders.
                 ------------

                 In general, and unless already released to the public via a
                 broadly disseminated news announcement, disclosure of the
                 Company's internal estimates or projections of its earnings or
                 of other internal information intended solely for internal use
                 should not be made available to third parties.

                 Only certain designated individuals within the Company shall
                 have authority to:

                 (1)  Review and clear all Company press releases for content,
                      accuracy and legal compliance;

                                                                               2



                 (2)  Communicate (either orally or in writing) with members of
                      the investment community;
                 (3)  Review and approve, in advance, commitments for speeches
                      or interviews with the press on financial matters;

                 To assure consistency and accuracy of the Company's responses,
                 all inquiries or requests that may result in the disclosure of
                 material, non-public information should be referred to the
                 Company's Chairman and CEO, CFO or MedSource Legal Counsel.

C.               After the Company has made a news release, employees are free
                 to circulate the release to other outside audiences and to
                 discuss its contents.  However, such discussions must be
                                        ---------------------------------
                 limited only to the disclosed information.
                 -----------------------------------------

VI.   Responsibility
      --------------
      The issuance of press releases, as well as the determination of whether or
      not to respond to inquiries or rumors, is primarily the responsibility of
      Chairman and CEO. The CEO must be kept advised of all material non-public
      information in order to control the dissemination of such information and
      properly respond to inquiries from investors, the stock exchange, the
      public and the news media.

VII.  Compliance
      ----------
      Supervisors are responsible for the education, monitoring and enforcement
      of this policy within their respective areas.

      I have read and understand MedSource's Disclosure Policy.


Signature:   ________________________________________________


Date:        ________________________________________________

                                                                               3

EX-21.1

                                                                    Exhibit 21.1
                                                                    ------------

                  Subsidiaries of MedSource Technologies, Inc.

                                                                 Jurisdiction of
Subsidiary*                                                       Organization
- -----------                                                       ------------
MedSource Technologies, LLC                                         Delaware
         A.P.X. Acquisition Corp.                                   Delaware
         Brimfield Precision, LLC                                   Delaware
         Hayden Precision Industries, LLC                           Delaware
         Kelco Acquisition LLC                                      Delaware
         MedSource Technologies Newton, Inc.                        Delaware
         MedSource Trenton, Inc.                                    Delaware
         The MicroSpring Company, LLC                               Delaware
         National Wire and Stamping, Inc.                           Colorado
         Portlyn, LLC                                               Delaware
         Tenax, LLC                                                 Delaware
         Texcel, Inc.                                             Massachusetts
         Thermat Acquisition Corp.                                  Delaware

- -----------
*        Subsidiaries of subsidiaries are indicated by indentation.

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions “Selected Consolidated Financial Data” and “Experts” and to the use of our reports dated August 3, 2001 on MedSource Technologies, Inc. and subsidiaries, October 27, 1999 on The MicroSpring Company, Inc., April 14, 2000 on National Wire and Stamping, Inc., June 13, 2000 on Texcel, Inc., and July 25, 2000 on Portlyn Corporation in Amendment No. 1 to the Registration Statement (Form S-1 No. 333-76842) and related Prospectus of MedSource Technologies, Inc. for the registration of its common stock.

Our audits also included the financial statement schedules of MedSource Technologies, Inc., The MicroSpring Company, Inc. and Texcel, Inc. listed in Part II. These schedules are the responsibility of the applicable company’s management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

/s/ Ernst & Young LLP

Minneapolis, Minnesota

February 20, 2002

EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in Amendment No. 1 to this Registration Statement on Form S-1 (No. 333-76842), of our report dated August 31, 1999 relating to the financial statements of Kelco Industries, Inc. which appears in Amendment No. 1 to such Registration Statement of MedSource Technologies, Inc. We also consent to the references to us under the heading “Experts” in Amendment No. 1 to such Registration Statement of MedSource Technologies, Inc.

Our audit also included the financial statement schedule of Kelco Industries, Inc. listed in Part II. This schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion based on our audit. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/ Bertram, Vallez, Kaplan & Talbot, Ltd.

Brooklyn Park, Minnesota

February 20, 2002

EX-23.3

Exhibit 23.3

CONSENT OF INDEPENDENT AUDITOR

I consent to the reference to my firm under the caption “Experts” and to the use of my report dated June 30, 1999 on W. N. Rushwood, Inc., d.b.a. Hayden Precision Industries in Amendment No. 1 to the Registration Statement (Form S-1 No. 333-76842) and related Prospectus of MedSource Technologies, Inc. for the registration of its common stock.

/s/ James E. Yochum, CPA

West Seneca, New York

February 20, 2002

EX-23.4

Exhibit 23.4

CONSENT OF INDEPENDENT AUDITORS

We hereby consent to the use in this Amendment No. 1 to Registration Statement on Form S-1 (No. 333-76842) of our reports dated April 2, 1999 relating to the financial statements and financial statement schedule of The MicroSpring Company, Inc., which appear in such Registration Statement of MedSource Technologies, Inc. We also consent to the references to us under the heading “Experts” in Amendment No. 1 to such Registration Statement.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

February 20, 2002

EX-23.5

Exhibit 23.5

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We have issued our report dated February 9, 2001, accompanying the financial statements of ACT Medical, Inc. contained in Amendment No. 1 to the Registration Statement and Prospectus of MedSource Technologies, Inc. We consent to the use of the aforementioned report in Amendment No. 1 to the Registration Statement and Prospectus, and to the use of our name as it appears under the caption “Experts.”

/s/ Grant Thornton LLP

Boston, Massachusetts

February 20, 2002