Share Escrow Agreement

Exhibit 10.42


SHARE ESCROW AGREEMENT


March 30, 1999
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The parties to this agreement are (i) MedSource Technologies, Inc., a Delaware corporation (the "Company"), (ii) the stockholders of the Company named on Schedule A to this agreement (collectively, the "Stockholders"), (iii) J. H. Whitney III, L.P., a Delaware limited partnership ("J. H. Whitney"), and Whitney Strategic Partners III, L.P., a Delaware limited partnership (together with J. H. Whitney, the "Investors"), and (iv) Parker Chapin Flattau & Klimpl, LLP, a limited liability partnership (the "Escrow Agent").


The Stockholders, the Investors and the Company are entering into a share transfer agreement dated this date (the "Share Transfer Agreement") pursuant to which the Stockholders have agreed to deposit with the Escrow Agent certain shares of the capital stock of the Company to be held and disposed of pursuant to the terms of this agreement.


It is therefore agreed as follows:


1. Deposit of Escrow Shares.


(a) Simultaneously with the execution of this agreement, each of the Stockholders is delivering to the Escrow Agent a certificate or certificates representing the number of shares of the Company's common stock, par value $.01 per share (the "Common Stock"), set forth opposite that Stockholder's name on Schedule A to this agreement, together with duly executed, undated, blank stock transfer powers with respect thereto (together with all dividends, payments, earnings, proceeds or other distributions (collectively, "Proceeds") in respect thereof or in respect of such Proceeds, the "Escrow Shares"), and the Escrow Agent hereby acknowledges receipt thereof. The Escrow Agent shall hold in accordance with the terms of this agreement the Escrow Shares and shall not release the Escrow Shares except in accordance with this agreement. The Stockholders shall have the right to vote or give consents with respect to the Escrow Shares on all matters at all times prior to delivery of any such Escrow Shares to the Investors pursuant to this agreement.


(b) The Escrow Agent shall receive any funds paid as dividends or otherwise in respect of the Escrow Shares and shall deposit such funds in an interest bearing money market account in a New York City commercial bank or shall otherwise invest such funds as jointly directed by a majority in interest of the Investors and a majority in interest of the Stockholders.


2. Release of Escrow Shares.


(a) If at any time the Escrow Agent receives a written statement purporting to be signed by a majority in interest of the Investors (an "Investor Delivery Statement") and stating:


(i) that, in accordance with the Share Transfer Agreement, the
Investors are entitled to a number/amount of Escrow Shares (and/or any
amount of funds held in connection with the Escrow Shares); and


(ii) the aggregate number/amount of Escrow Shares to which the
Investors are entitled;


then the Escrow Agent shall forthwith deliver a copy of the Investor Delivery Statement to the Stockholders. If, within 15 days after delivery of the Investor Delivery Statement to the Stockholders, the Escrow Agent receives a written objection to the Investor Delivery Statement purporting to be signed by Stockholders owning at least 50% of the Escrow Shares, then the provisions of section 4 shall apply. If the Escrow Agent does not receive such a written objection within that 15-day period, then the Escrow Agent shall promptly deliver the stock certificates representing the Escrow Shares and shall make arrangements for the Company to prepare stock certificates registered in the respective names of the Investors and the Stockholders, as applicable, in accordance with section 3, for the aggregate number of Escrow Shares specified in the Investor Delivery Statement and, after receipt from the Company, shall promptly (i) transfer to the Investors the number/amount of Escrow Shares, including, without limitation, the funds, specified in the Investor Delivery Statement and shall deliver to the Investors the certificates registered in the names of the Investors, as set forth above in this section 2(a) and (ii) transfer to the Stockholders the balance, if any, of such Escrow Shares, including, without limitation, any funds, and deliver to the Stockholders the certificates, if any, registered in the names of the Stockholders, as set forth above in this section 2(a).


(b) If at any time the Escrow Agent receives a written statement purporting to be signed by Stockholders owning at least 50% of the Escrow Shares (a "Stockholder Delivery Statement") and stating that, in accordance with the Share Transfer Agreement (whether pursuant to section 1 or section 2 of the Share Transfer Agreement), the Stockholders are entitled to any or all of the Escrow Shares (and any funds held in connection herewith), then the Escrow Agent shall forthwith deliver a copy of the Stockholder Delivery Statement to the Investors. If, within 15 days after delivery of the Stockholder Delivery Statement to the Investors, the Escrow Agent receives a written objection to the Stockholder Delivery Statement purporting to be signed by the Threshold Investors, then the provisions of section 4 shall apply. If the Escrow Agent does not receive such a written objection within that 15-day period, then the Escrow Agent shall promptly transfer the Escrow Shares and such funds to the Stockholders and deliver each stock certificate registered in the name of a Stockholder (and/or the funds) to such


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Stockholder. The parties acknowledge that the Stockholders may be entitled to deliver a Stockholder Delivery Statement pursuant to either section 1 or section 2 of the Share Transfer Agreement.


3. Proportional Delivery of Shares. In each case where shares are required to be delivered to the Investors or Stockholders pursuant to this agreement, such shares shall be delivered (i) if to the Investors, in the percentages set forth on Schedule A opposite each Investor's respective name thereon, as such Schedule may be modified from time to time by notice to the Stockholders and the Escrow Agent from the a majority in interest of the Investors, and (ii) if to the Stockholders, in the percentages set forth on Schedule B opposite each Stockholder's respective name thereon. Upon delivery to the Company of certificates representing such shares, the Company shall (i) cooperate with the Escrow Agent to reissue certificates in accordance with the foregoing, (ii) reissue certificates with respect to any remaining shares in the names of the original owners, and (iii) deliver all such certificates to the Escrow Agent. In the event any delivery of Escrow Shares shall include shares, cash and/or other assets (collectively the "Assets"), each Investor and/or Stockholder entitled to such Escrow Shares (the "Subject Shares"), shall receive Assets in all such categories, and the proportion that each category of the Assets to be delivered to each such Investor and/or Stockholder bears to all the Assets to be delivered to such Investor and/or Stockholder shall equal the proportion that such category of Assets to be delivered to each other Investor and/or Stockholder entitled to receive Subject Shares bears to all the Assets to be delivered to such other Investor and/or Stockholder.


4. Conflicting Demands.


(a) If conflicting or adverse claims or demands are made or notices are served upon the Escrow Agent with respect to the escrow provided for herein, the Escrow Agents shall be entitled to refuse to comply with any such claim or demand and to withhold and stop all further performance of this escrow so long as such disagreement shall continue. In so doing, the Escrow Agent shall not be liable for damages, losses, expenses or interest to any party hereto or any other person for its failure to comply with such conflicting or adverse demands. The Escrow Agent shall be entitled to continue to so refrain and refuse to so act until (a) the rights of the adverse claimants have been finally adjudicated in a court assuming and having jurisdiction and venue over the parties and/or the documents, instruments or funds involved herein or affected hereby or (b) the Escrow Agent shall have received an executed copy of a dispositive settlement agreement to which the parties hereto and all other adverse claimants, if any, are parties and signatories. The Escrow Agent may seek the advice of legal counsel in any dispute or question as to the construction of any of the provisions of this agreement or its duties hereunder, and it shall incur no liability and shall be fully protected in respect of any action taken, omitted or suffered by it in good faith in accordance with the opinion of such counsel. In making calculations of any amounts pursuant to this agreement, the


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Escrow Agent shall be entitled to retain the services of such accountants as it reasonably deems appropriate.


(b) If any controversy arises between one or more of the parties hereto, the Escrow Agent shall not be required to resolve such controversy and need not make any delivery of the Escrow Shares or any portion thereof but may deposit the same with a court of competent jurisdiction in New York, New York and, if it so commences and deposits the Escrow Shares, the Escrow Agent shall be relieved and discharged from any further duties and obligations under this agreement, or may retain the same without liability to anyone until the rights of the parties to the dispute shall have finally been determined by mutual agreement, or by final order, decree or judgment of a court of competent jurisdiction, and the time for appeal has expired without an appeal having been perfected, but the Escrow Agent shall be under no duty whatsoever to institute or defend any such proceedings.


5. Term. The term of this agreement shall commence on the date of this agreement and shall terminate on the date on which the all the Escrow Shares have been delivered in accordance with this agreement.


6. Limitations Upon Liability of the Escrow Agent. The Escrow Agent has been induced to accept its duties under this agreement by the following terms and conditions:


(a) Except for its own willful misconduct and, except with respect to claims based upon willful misconduct that are successfully asserted against the Escrow Agent, the Escrow Agent and its designees, partners, officers, directors, stockholders, employees and other agents and representatives and successors (collectively, the "Protected Parties") shall not be liable with respect to, and the Stockholders and the Investors jointly and severally shall indemnify the Protected Parties and hold them harmless from and against, any and all claims, liabilities, losses, damages, costs, reasonable attorneys' fees and other expenses arising out of or in connection with this agreement including but not limited to any such matter relating to the taking of any action in accordance with the terms and provisions of this agreement, for any mistake or error in judgment, for compliance with any applicable law or any attachment, order or other directive of any court or other authority (irrespective of any conflicting term or provision of this agreement), or for any act or omission of any other person engaged by the Escrow Agent in connection with this agreement; and each party hereto hereby waives any and all claims and actions whatsoever against the Protected Parties arising out of or related directly or indirectly to any and all of the foregoing acts, omissions and circumstances. Furthermore, the Protect ...