Exhibit 10.56
Stock Purchase and Shareholders Agreement - Page 1
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STOCK PURCHASE AND SHAREHOLDERS AGREEMENT
This STOCK PURCHASE AND SHAREHOLDERS AGREEMENT (the "AGREEMENT") is dated
as of October 22, 2003 and is by and among NORTEC DEVELOPMENT ASSOCIATES, INC.
(the "CORPORATION"), a New Jersey corporation with an office at 100 Spear Road,
Ramsey, New Jersey 07446 and NORTEC HOLDING LLC ("HOLDING"), a Delaware limited
liability Corporation with an office at 100 Spear Road, Ramsey, New Jersey
07446, on the one hand, and PAR PHARMACEUTICAL, INC. ("PAR"), a Delaware
corporation with an office at 300 Tice Boulevard, Woodcliff Lake, New Jersey
07677, on the other hand.
ARTICLE 1: BACKGROUND
1(a) The Corporation is in the business of developing pharmaceutical
products, including products utilizing the proprietary so-called "CPS
Technology". As of the date of this Agreement and in conjunction with this
Agreement, the Corporation and Par are entering into a Product Development and
Patent License Agreement pursuant to which (among other things) the Corporation
will develop pharmaceutical products for Par.
1(b) Holding is currently the sole shareholder of the Corporation. Par is
interested in subscribing for a total of one-half of the shares of a new class
of capital stock to be authorized and issued by the Corporation whose holders
will be entitled to certain profits derived from the Corporation's activities
under the Product Development and Patent License Agreement. Par is also
interested thereafter in purchasing from Holding all of the remaining issued and
outstanding shares of capital stock of the Corporation.
1(c) The Corporation, Par and Holding have agreed to enter into this
Agreement to set forth their agreement regarding Par's subscribing for those
newly-issued shares of capital stock and Par's eventual purchase of all of the
Corporation's remaining shares of capital stock from Holding. In addition, Par
and Holding have agreed to certain arrangements regarding the management of the
Corporation, to certain restrictions on the transfer of shares of capital stock
of the Corporation, and to certain covenants and obligations following Par's
purchase of all of the Corporations shares. In consideration of the mutual
agreements set forth in this Agreement, the Corporation, Par and Holding hereby
agree to the provisions of this Agreement.
ARTICLE 2: DEFINITIONS
The following terms shall have the following meanings when used in this
Agreement.
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2(a)"AFFILIATE" with respect to any party means any person, entity or
organization which either directly or indirectly controls, is controlled by, or
is under common control with that party. For these purposes, the term "control"
by a person, entity or organization means possession by that person, entity or
organization of the power to direct, or cause the direction of, such other
applicable entity or organization.
2(b)"KNOWLEDGE "shall mean the actual knowledge (not knowledge that is
imputed, implied or otherwise deemed known, including without limitation as a
matter of public records) of the respective party, in each case without any
inquiry or investigation.
2(c) "MAJOR DECISION" is defined in Section 9(c) below.
2(d) "MATERIAL ADVERSE EFFECT" means an event or condition which both (A)
has a material adverse effect on the operations, assets, or financial condition
of Holding, taken as a whole, but without taking into account any effect
resulting from changes in conditions (including economic conditions, or Federal,
state or local governmental actions, legislation or regulations) that are
applicable to the economy or the industry in which Holding is engaged on a
national, regional, state or local basis or any changes in technology affecting
Holding's business and (B) results in a new liability (or an increase in an
existing liability) of Nortec in an amount at least equal to US$100,000.
2(e) "NORTEC'S CORE BUSINESS" means the business of the Corporation arising
out of, or relating to, the activities of the Corporation undertaken pursuant to
the Product Development Agreement or either of the Two Existing Agreements.
2(f) "PATENT LICENSE AGREEMENT" means the Amended and Restated Patent
License Agreement, dated as of the date of this Agreement, between the
Corporation and CPS Orocel LLC.
2(g) "PRODUCT DEVELOPMENT AGREEMENT" means the Product Development and
Patent License Agreement, dated as of the date of this Agreement, between the
Corporation and Par.
2(h) "PLEDGE" means any pledge, hypothecation or any other manner of
encumbrance or the entry into any agreement or the creation of any arrangement
that might result in any of the foregoing.
2(i) "SERIES A SHARES" is defined in Section 3(b)(1) below.
2(j) "SERIES B SHARES" is defined in Section 3(b)(1) below.
2(k) "SHARES" means collectively the Series A Shares and the Series B
Shares.
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2(l) "TRANSFER" means any sale, assignment, conveyance, donation, transfer,
any other manner of disposition, or the entry into any agreement or the creation
of any arrangement that might result in any of the foregoing.
2(m)"TWO EXISTING AGREEMENTS" means collectively (1) the Patent and Know
How License Agreement, dated as of May 24, 2002, between Par and the Corporation
relating to the development, manufacture and sale of a ******** *******
********** product and (2) the Patent and Know How License Agreement, dated as
of June 14, 2002, between Par and the Corporation relating to the development,
manufacture and sale of a ********* ******* *********** product.
ARTICLE 3: THE CORPORATION'S SHARES
3(a) As of the date of this Agreement, the total number of shares of
capital stock which the Corporation is authorized to issue is 150,000 shares of
Series A Common Stock and 50,000 shares of Series B Common Stock. As of the date
of this Agreement, 90,000 shares of the Corporation's Series A Common Stock have
been issued and all of these shares are owned by Holding, and there are no other
issued and outstanding shares of Series A Common Stock or Series B Common Stock.
Par hereby acknowledges that it has reviewed a copy of the Certificate of
Incorporation of the Corporation, in effect as of the date of this Agreement,
setting forth the preferences, voting powers, qualifications, and special or
relative rights or privileges of the Series A Common Stock and Series B Common
Stock.
3(b) Within fifteen business days after the execution and delivery of this
Agreement, Holding shall cause the Certificate of Incorporation of the
Corporation to be amended so that it will be in the form of the Restated
Certificate of Incorporation which is attached to this Agreement as Exhibit A.
Among other things, that Restated Certificate of Incorporation will effect the
following changes:
(1) The number of shares of capital stock which the Corporation will be
authorized to issue will be 150,000 shares of shares of Series A Common Stock
and 50,000 shares of Series B Common Stock. The relative rights and obligations
of the holders of the Series A Common Stock and the holders of the Series B
Common Stock shall be as set forth in the attached Exhibit A. The shares of
Series A Common Stock and the shares of the Series B Common Stock, after making
the changes in the Corporation's Certificate of Incorporation as described in
this Article 3, are referred to respectively as the "SERIES A SHARES" and the
"SERIES B SHARES".
(2) The holders of the Series A Shares will have the sole right to
receive (as dividends, distributions, liquidating distributions, or otherwise)
all Series A Profits (as that term is defined below). Upon the request of the
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holder of Series A Shares, the Corporation hereby agrees to promptly distribute
to the holder of Series A Shares the proportionate share of such
Series A Profits to which such holder is entitled under this Agreement in such
reasonable fashion as such holder may request.
(3) The holders of the Series B Shares will have the sole right to
receive (as dividends, distributions, liquidating distributions, or otherwise)
all Series B Profits (as that term is defined below). Upon the request of a
holder of Series B Shares, the Corporation hereby agrees to promptly distribute
to such holder of Series B Shares, the proportionate share of such Series B
Profits to which such holder is entitled under this Agreement in such reasonable
fashion as such holder may request.
(4) The voting rights of the holders of the Series A Shares shall be
identical (on a share-for-share basis) with the voting rights of the holders of
the Series B Shares. In other words, each Series A Share and each Series B share
shall entitle the holder of each such share to cast one vote at all meetings of
the shareholders and all written consents in lieu of shareholder meetings.
(5) Except as otherwise described in this Article 3, all other rights of
the holders of the Series A Shares shall be identical (on a share-for-share
basis) with all other rights of the holders of the Series B Shares.
(6) The 90,000 shares of the Corporation's Series A Common Stock which
are owned by Holding on the date of this Agreement shall be converted into 100
Series A Shares and 10,000 Series B Shares all of which shall be owned by
Holding.
3(c)For the purposes of this Article 3, the following terms shall have the
following meanings:
(1) "SERIES A PROFITS" means the net profits earned by the Corporation
arising out of all of the Corporation's activities, INCLUDING the activities
conducted under the Two Existing Agreements, but EXCLUDING all of the
Corporation's activities conducted under the Product Development Agreement, and
after taking into account (deducting) all of the Corporation's expenses other
than those specifically described in Section 3(c)(2). Such net profits shall be
determined in accordance with generally accepted accounting principles
consistently applied and shall be calculated by the Corporation's regularly
engaged independent certified public accountants, which calculation shall be
conclusive, absent manifest error. Without limiting the foregoing, such net
profits shall reflect the effect of all expenses attributable to the
Corporation's activities conducted under the Two Existing License Agreements,
including any royalties and other payments due to CPS Orocel LLC and any
payments due to Glatt Air Techniques, Inc. and any corporate income taxes
attributable to those activities.
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(2) "SERIES B PROFITS" means all revenue earned by the Corporation
arising solely out of the Corporation's activities conducted under the Product
Development Agreement and after taking into account (deducting) royalties due to
CPS Orocel LLC in the amount of sixty percent (60%) of the royalties received by
the Corporation under the Product Development Agreement.
ARTICLE 4: SUBSCRIPTION FOR SERIES B SHARES
4(a) SUBSCRIPTION FOR NEW SHARES. Subject to and in reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement,
Par shall purchase from the Corporation, and the Corporation shall issue and
sell to Par, a total of 10,000 Series B Shares, as provided in this Article 4.
The purchase and sale shall take place at a series of four closings (the "SERIES
B CLOSINGS") at such prices and on such dates as described in sections 4 (b),
(c), (d), and (e) below, and at such places and times as may be mutually agreed
upon by the parties.
4(b) FIRST SERIES B CLOSING. The Corporation shall issue and sell to
Par, and Par shall purchase from the Corporation, one thousand four hundred
twenty-eight (1,428) shares of Series B Shares on October 16, 2005, so that,
after the issuance of such shares, Par will own (approximately) 12.5% of all of
the Series B Shares which are issued and outstanding at that time. The total
purchase (subscription) price for those 1,428 Series B Shares shall be one
million United States Dollars (US$1,000,000.00).
4(c) SECOND SERIES B CLOSING. The Corporation shall issue and sell to
Par, and Par shall purchase from the Corporation, one thousand nine hundred five
(1,905) shares of Series B Shares on April 16, 2006, so that, after the issuance
of such shares, Par will own a total of 3,333 Series B Shares, representing
(approximately) 25% of all of the Series B Shares which are issued and
outstanding at that time. The total purchase (subscription) price for those
1,905 Series B Shares shall be one million United States Dollars
(US$1,000,000.00).
4(d) THIRD SERIES B CLOSING. The Corporation shall issue and sell to
Par, and Par shall purchase from the Corporation, two thousand six hundred
sixty-seven (2,667) shares of Series B Shares on October 16, 2006, so that,
after the issuance of such shares, Par will own a total of 6,000 Series B
Shares, representing 37.5% of all of the Series B Shares which are issued and
outstanding at that time. The total purchase (subscription) price for those
2,667 Series B Shares shall be one million United States Dollars
(US$1,000,000.00).
4(e) FOURTH SERIES B CLOSING. The Corporation shall issue and sell to
Par, and Par shall purchase from the Corporation, four thousand (4,000) shares
of Series B Shares on April 16,
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2007, so that, after the issuance of such shares, Par will own a total of 10,000
Series B Shares, representing 50% of all of the Series B Shares which are issued
and outstanding at that time.
The total purchase (subscription) price for those 4,000 Series B Shares shall be
one million United States Dollars (US$1,000,000.00).
4(f) At each Series B Closing, the Corporation will issue and deliver
certificates evidencing the Series B Shares to be sold at such Closing to Par
against payment of the full purchase price therefore by wire transfer of
immediately available funds to an account designated by the Corporation.
4(g) The Corporation shall at all times reserve for issuance to Par the
number of authorized but unissued Series B Shares that the Corporation has
agreed to issue to Par pursuant to this Article 4.
4(h) The Corporation and Holding shall at all times (until the termination
of this Agreement pursuant to Article 8 below) and from time to time provide to
Par all information that is reasonably requested by Par relating to Nortec and
the business of Nortec, including without limitation all such information
relating to Nortec's assets, liabilities and financial condition. The providing
of that information by the Corporation and/or Holding shall not constitute a
representation or warranty as to the accuracy or completeness of any of that
information, and neither the Corporation nor Holding is making, or will be
deemed to be making, any representation or warranty concerning any of that
information, except as may be specifically provided in Article 11 below.
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ARTICLE 5: PURCHASE OF HOLDING'S SHARES
Subject to and in reliance upon the representations, warranties, covenants,
terms and conditions of this Agreement Par shall purchase from Holding, and
Holding shall transfer and sell to Par on October 16, 2007 all of the Series A
Shares and all of the Series B Shares which Holding owns at that time, which
shall constitute all of the issued and outstanding shares of capital stock of
the Corporation as of such date, other than shares of capital stock of the
Corporation owned by Par. The purchase price for all of those shares shall be
eleven million United States Dollars (US$11,000,000.00). The closing (the "FINAL
CLOSING") for the purchase of such Shares shall take place on October 16, 2007,
or on such other date within ten business days either before or after October
16, 2007 as may be mutually agreed by Par and Holding and at such place and time
as may be mutually agreed upon by Par and Holding. At the Final Closing, Holding
shall deliver to Par the original stock certificates representing all of those
shares, along with a duly executed stock power effective to transfer such shares
to Par, and Par shall pay the purchase price for those shares by the wire
transfer of immediately available funds to an account designated by Holding. At
the Final Closing, Holding shall deliver or cause to be delivered to Par the
original books and records of the Corporation, including the minute book, stock
transfer ledger and corporate seal, and resignations of all of the officers and
directors of the Corporation, other than any officers and directors who are
nominees of, or were elected at the request of, Par.
ARTICLE 6: SPECIAL CONDITIONS TO THE SUBSCRIPTION FOR AND PURCHASE OF SHARES
6(a) Under Section 3.2 of each of the Two Existing Agreements, Par is
required to pay certain royalties to the Corporation based on sales of the
products that are developed by the Corporation under the Two Existing Agreements
(referred to here as the "PAR-1 ROYALTIES"). The Corporation hereby represents
and warrants that the Corporation is then required, pursuant to the Patent
License Agreement , to pay to CPS Orocel LLC royalties (referred to here as the
"CPS-1 ROYALTIES") equal to **% of the Par-1 Royalties. Notwithstanding the
purchase by Par of all of the Series A Shares and Series B Shares owned by
Holding, as of and following the Final Closing Par shall thereafter on a going
forward basis for such period of time that such applicable Par-1 Royalties are
due and payable under each of the Two Existing Agreements, continue to pay all
of the Par-1 Royalties as provided in the Two Existing Agreements except that
(1) Par shall pay **% of the Par-1 Royalties directly to CPS Orocel LLC ("CPS
OROCEL") (rather than to the Corporation), (2) Par shall pay **% of the Par-1
Royalties directly to Holding (rather than to the Corporation), (3) the
Corporation shall not have any obligation to pay the CPS-1 Royalties to CPS
Orocel as long as Par is making those payments of the Par-1 Royalties to CPS
Orocel, and (4) Par shall assume all of the Corporation's obligations under the
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Patent License Agreement to the extent those obligations relate to those
products developed under the Two Existing Agreements.
6(b) Under Section 5(c) of the Product Development Agreement, Par is
required to pay certain royalties to the Corporation based on sales of the
products that are initiated for development by the Corporation under the Product
Development Agreement prior to October 16, 2007 (referred to here as the "PAR-2
ROYALTIES"). The Corporation hereby represents and warrants that the Corporation
is then required, pursuant to the Patent License Agreement to pay to CPS Orocel
LLC royalties (referred to here as the "CPS-2 ROYALTIES") equal to **% of the
Par-2 Royalties. As a result of the purchase by Par of all of the Series A
Shares and Series B Shares owned by Holding, as of and following the Final
Closing Par shall thereafter on a going forward basis for the period of time
that such applicable Par-2 Royalties are due and payable under the Product
Development Agreement, continue to pay all of the Par-2 Royalties as provided in
the Product Development Agreement except that (1) Par shall pay **% of the Par-2
Royalties directly to CPS Orocel (rather than to the Corporation), (2) Par shall
pay **% of the Par-2 Royalties directly to Holding (rather than to the
Corporation), (3) the Corporation shall not have any obligation to pay the CPS-2
Royalties to CPS Orocel as long as Par is making those payments of the Par-2
Royalties to CPS Orocel, and (4) Par shall assume all of the Corporation's
obligations under the Patent License Agreement to the extent those obligations
relate to those products that are initiated for development under the Product
Development Agreement prior to October 16, 2007.
6(c) To the extent that additional New Products are initiated for
development after October 16, 2007, (1) Par shall pay to CPS Orocel royalties on
Par's Net Sales (as defined in the Product Development Agreement), at the same
times and otherwise pursuant to the same mechanism set forth in Section 5(c) of
the Product Development Agreement, except that the amount of such royalties
shall be in an amount equal to ****** percent (**%) of one-half of the royalty
rates set forth in Section 5(c) of the Product Development Agreement, (2) the
Corporation shall not have any obligation to pay royalties to CPS Orocel with
respect to those products, as long as Par is making those royalty payments
directly to CPS Orocel, (3) Par shall assume all of the Corporation's
obligations under the Patent License Agreement to the extent those obligations
relate to those products that are initiated for development under the Product
Development Agreement after October 16, 2007, (4) Par shall pay royalties to Ken
Olsen personally in the amount of ****** percent (**%) of one-half of the
royalty rates set forth in Section 5(c) of the Product Development Agreement,
and (5) the Corporation shall not have any further obligation to pay salary or
any other employee benefits to Ken Olsen. Such royalty payments to CPS Orocel
and Ken Olsen shall be made for a period of fifteen years from the date of final
FDA approval to market such New Products in the Territory.
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6(d) The Corporation and Holdings hereby represent, warrant and covenant
that following the Final Closing all obligations of the Corporation to Kenneth
W. Olsen shall be terminated with the exception of the obligation to pay such
royalties to Kenneth W. Olsen as provided under Section 6(c) above. Following
the Final Closing the Corporation and Par shall have no further obligations to
Kenneth W. Olsen.
6(e) The Corporation and Holdings hereby represent, warrant and covenant
that pursuant to the Patent License Agreement and following the Final Closing,
and assuming the obligation by Par of the Corporation's obligations under the
Patent License Agreement as contemplated by Sections 6(a), (b) and (c) above,
Par shall have a perpetual, irrevocable (assuming compliance by Par with the
terms and conditions of the Patent License Agreement), right to make, have made,
use, sell, offer for sale, and import products under the CPS Patent Rights and
the Know-How as provided in the Patent License Agreement.
6(f) For the avoidance of doubt, in the event that Par exercises the Rights
Termination as provided in Section 8 of the Product Development Agreement, then
the provisions of this Article 6 shall not apply.
ARTICLE 7: CONDITIONS TO THE PARTIES' OBLIGATION TO PURCHASE
AND SELL SHARES UNDER ARTICLES 4 AND 5
The obligation of Par to purchase and pay for the Shares to be purchased by
it at each closing described under Articles 4 and 5 (each a "Closing") above is
subject to the fulfillment to Par's satisfaction of each of the following
conditions as of each Closing date:
7(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of the Corporation and/or of Holding, as applicable, set forth in
this Agreement shall be true and correct on the date of each Closing.
7(b) PERFORMANCE. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by the Corporation and/or
Holding, as applicable, at or prior to each Closing shall have been performed or
complied with.
7(c) DOCUMENTATION AT CLOSING. Par shall have received prior to or at each
Closing all of the following documents or instruments, or evidence of completion
thereof, each in form and substance satisfactory to Par and their counsel:
(i) A copy of the Certificate of Incorporation of the Corporation,
certified by the secretary of state of the State of Delaware as of a date not
more than seven (7) business days prior to each Closing date, a copy of the
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resolutions of the Board of Directors evidencing the authorization for the
Restated Certificate of Incorporation attached to this Agreement as Exhibit A,
the approval of this Agreement and the issuance of the Shares and the other
matters contemplated hereby, a copy of the resolutions of the stockholders of
the Corporation evidencing the authorization for the Restated Certificate of
Incorporation attached to this Agreement as Exhibit A, and a copy of the Bylaws
of the Corporation, all of which shall have been certified by the Secretary of
the Corporation to be true, complete and correct in every particular and all
resolutions shall not be amended and shall be in full force and effect.
Alternatively, at each individual Closing, the Corporation may deliver to Par a
certificate, executed by an officer of the Corporation, stating in effect that
all of such documents that are required to be delivered to Par at that Closing
pursuant to this Section 7(i) are the same as the documents that were previously
delivered to Par pursuant to a previous Closing and that such documents are
still in force and effect.
(ii) Certificates of the Secretary of the Corporation and of Holding
certifying the names of the officers of the Corporation and Holding authorized
to sign this Agreement, the certificates for the applicable Shares, and the
other documents, instruments or certificates required to be delivered pursuant
to this Agreement by the Corporation and Holding or any of their officers,
together with the true signatures of such officers. Alternatively, at each
individual Closing, the Corporation and Holding may deliver to Par a
certificate, executed by an officer of the Corporation and of Holding, stating
in effect that all of such documents that are required to be delivered to Par at
that Closing pursuant to this Section 7(ii) are the same as the documents that
were previously delivered to Par pursuant to a previous Closing and that such
documents are still in force and effect.
(iii) Certificates of the Presidents of the Corporation and Holding
stating that to their Knowledge the representations and warranties of the
Corporation and Holding set forth in Article 11 below are true and correct as of
the date of the applicable Closing and that to their Knowledge all conditions
set forth in this Agreement required to be performed or complied with by it
prior to or at that Closing have been performed or complied with by it as of
that Closing.
(iv) The Restated Certificate of Incorporation of the Corporation in
the form attached to this Agreement as Exhibit A shall have been filed with the
Delaware Secretary of State.
(v) A Certificate of Good Standing for the Corporation certified by
the Secretary of the State of Delaware as of a date not more than seven (7)
business days prior to each Closing date. Certificates of good standing with
respect to the Corporation, certified by the respective state officer of the
states (if any) in which the conduct of the Corporation's business requires it
to be licensed or qualified to transact business as a foreign corporation and in
good standing, in each case as of a date not more than seven (7) business days
prior to each Closing date.
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7(e) QUALIFICATIONS. As of each Closing, all authorizations, approvals or
permits of or filings with, any governmental authority, including state
securities or "Blue Sky" offices, that are required by law in connection with
the lawful sale and issuance of the Shares shall have been duly obtained by the
Corporation and shall be effective as of each Closing, except for any notice
that may be required subsequent to each Closing under applicable state and/or
federal securities laws (which, if required, shall be filed on a timely basis).
7(f) CONSENTS, WAIVERS, ETC. Prior to each Closing, Nortec shall have
obtained all consents or waivers, if any, necessary to execute and deliver this
Agreement and issue the Shares, and to carry out the transactions contemplated
by this Agreement, and all such consents and waivers shall be in full force and
effect. All corporate and other action and governmental filings necessary to
effectuate the terms of this Agreement, the Shares and other agreements and
instruments executed and delivered by Nortec in connection herewith shall have
been made or taken, except for any post-sale filing that may be required under
federal or state securities laws.
The obligations of each of the Corporation and Holding to issue and sell
the Shares to be issued or sold by it at each closing described under Articles 4
and 5 (each a "Closing") above is subject to the fulfillment to the
Corporation's and Holding's satisfaction of each of the following conditions as
of each Closing date:
A. REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of Par set forth in Article 12 of this Agreement shall be true and
correct on the date of each Closing.
B. PERFORMANCE. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by Par at or prior to each
Closing shall have been performed or complied with.
C. DOCUMENTATION AT CLOSING. The Corporation and Holding shall have
received prior to or at each Closing all of the following documents or
instruments, or evidence of completion thereof, each in form and substance
satisfactory to the Corporation and Holding and their counsel:
(i) A copy of the resolutions of the Board of Directors of Par
evidencing the authorization for the execution, delivery and
performance of this Agreement and the purchase of the Shares
and the other matters contemplated by this Agreement,
certified by the Secretary or Assistant Secretary of Par to be
true, complete and correct in every particular and all
resolutions shall not be amended and shall be in full force
and effect. Alternatively, at each individual Closing, Par may
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deliver to the Corporation and Holding a certificate, executed by an officer of
the Corporation, stating in effect that all of such documents that are required
to be delivered at that Closing by Par pursuant to this Section 7C(i) are the
same as the documents that were previously delivered by Par pursuant to a
previous Closing.
(ii) A certificate of the Secretary or Assistant Secretary of Par
certifying the names of the officers of Par authorized to sign this Agreement
and the other documents, instruments or certificates required to be delivered
pursuant to this Agreement by Par or any of their officers, together with the
true signatures of such officers. Alternatively, at each individual Closing, Par
may deliver to the Corporation and Holding a certificate, executed by an officer
of Par, stating in effect that all of such documents that are required to be
delivered at that Closing by Par pursuant to this Section 7C(ii) are the same as
the documents that were previously delivered to Par pursuant to a previous
Closing.
(iii) A certificate of a duly authorized officer of Par stating that
to his or her actual knowledge the representations and warranties of Par set
forth in Article 12 below are true and correct as of the date of the applicable
Closing and that to his or her actual knowledge all conditions set forth in this
Article 7 required to be performed or complied with by Par prior to or at that
Closing have been performed or complied with by Par as of that Closing.
(iv) At the first Series B Closing and at the Final Closing, a
Certificate of Good Standing for Par certified by the Secretary of the State of
Delaware as of a date not more than seven (7) business days prior to the Closing
date.
D. CONSENTS, WAIVERS, ETC. Prior to each Closing, Par shall have
obtained all consents or waivers, if any, necessary to execute and deliver this
Agreement and purchase the Shares, and to carry out the transactions
contemplated by this Agreement, and all such consents and waivers shall be in
full force and effect. All corporate and other action and governmental filings
necessary to effectuate the terms of this Agreement by Par, the purchase of the
Shares and the other agreements and instruments executed and delivered by Par in
connection herewith shall have been made or taken, except for any post-sale
filing that may be required under federal or state securities laws.
ARTICLE 8: TERMINATION
8(a) RIGHTS TERMINATION. Pursuant to Section 8 of the Product Development
Agreement, Par has the right, in its discretion, to terminate its right to have
the Corporation develop "New Products" under the Product Development Agreement.
Such a termination by Par, which must be exercised not later than October 15,
2005, is referred to in the Product Development Agreement as the "RIGHTS
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TERMINATION". If Par exercises that Rights Termination under the Product
Development Agreement, then effective as of the date that Par exercises the
Rights Termination, all of the rights and obligations of the Corporation, Par
and Holding under this Agreement shall automatically, and without any further
action, be terminated, without any further liability or obligation on the part
of any party. Without limiting the foregoing, this means that if Par exercises
that Rights Termination under the Product Development Agreement, then effective
as of the date that Par exercises that Rights Termination, (a) the Corporation
shall not issue and sell, and Par shall not purchase, any Series B Shares as
contemplated by Article 4 above, (b) Holding shall not sell, and Par shall not
purchase, any shares of any series of capital stock of the Corporation, (c) the
restrictions on the Transfer or Pledge of Shares set forth in Article 10 below
shall no longer be in effect, and (d) Par shall no longer have any rights under
Article 9 below.
8(b) TERMINATION FOR BREACH. In the event of any breach of the
Corporation's or Holding's representations, warranties and/or covenants under
this Agreement, which breach is not cured within thirty days after written
notice of such default from Par, Par's SOLE remedy shall be to exercise the
"DEFAULT TERMINATION" under this Section 8(b). If Par does not exercise the
Default Termination with respect to any Series B Closing, then Par will be
deemed to have waived any such breach that is actually known by Par as of the
date of that Series B Closing. If Par does not exercise the Default Termination
with respect to the Final Closing, then Par will be deemed to have waived any
such breach actually known by Par as of the date of the Final Closing. If Par
does exercise the Default Termination, then the following consequences shall
occur:
(A) Par, the Corporation and Glatt Air Techniques, Inc. shall
continue to develop New Products (as that term is defined in the Product
Development Agreement) and manufacture CPS pellets for New Products, but only to
the extent that those New Products are under development prior to the Default
Termination, all in accordance with the Product Development Agreement.
Notwithstanding the foregoing, Par shall not have any obligation to pay any
further amounts due to the Corporation under the Product Development Agreement,
except that (i) Par shall continue to pay to the Corporation all Royalties with
respect to those New Products in accordance with Section 5 of the Product
Development Agreement, and (ii) Par shall remain obligated to pay any amounts
that have accrued under the Product Development Agreement prior to the date of
the Default Termination.
(B) The Corporation shall have the right to retain (without any
offset or claim by Par) all amounts paid by Par to the Corporation prior to the
Default Termination, including without limitation all amounts paid under Article
4 of this Agreement and all amounts paid under Sections 5(a) and (b) of the
Product Development Agreement.
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(C) The Corporation shall not have any further obligation to
develop any New Products (as that term is defined in the Product Development
Agreement) or manufacture CPS pellets for any New Products, except for any New
Products that are under development prior to the Default Termination. If at any
time after the Default Termination Par wants the Corporation to conduct
development, manufacturing or other work on additional New Products, Par and the
Corporation may negotiate the terms and conditions of such new work at that
time, although neither Par nor the Corporation shall have any obligation to
negotiate or to enter into any agreement for such new work, and in any case the
terms and conditions of the Product Development Agreement shall not apply to any
such work.
(D) Par shall transfer (assign) to the Corporation, at no cost to
Par or the Corporation, all right, title and interest in all Series B Shares
which are then owned by Par. If for any reason the Corporation is not legally
permitted to acquire those shares, then Par shall transfer (assign) those Series
B Shares to Holding at no cost to Par or Holding.
(E) Par, the Corporation and Holding shall not have any further
rights, obligations or liabilities under this Agreement, except for the rights,
obligations and liabilities under this Section 8(b)(2) and Articles 13 through
16, inclusive, below. Without limiting the foregoing, none of the parties shall
have any liability under this Agreement to any of the other parties as a result
of the breach that was the basis for the Default Termination.
ARTICLE 9: MANAGEMENT
9(a) Except as provided in Section 8(a) above, commencing on October 16,
2005, Holding and Par shall vote their respective Shares so that the Corporation
shall have a board of directors consisting of three directors, two of whom shall
be designated by Holding, and one of whom shall be designated by Par. Holding
and Par may, at any time, either with or without cause, remove and replace the
director(s) appointed by that shareholder. The identity of the director(s)
appointed by each of Holding and Par is subject to the reasonable approval of
the other. Initially, the two directors appointed by Holding shall be Kenneth W.
Olsen and Reiner Nowak, and the director appointed by Par shall be Scott
Tarriff.
9(b) All decisions by the board of directors of the Corporation shall
require the approval of a majority of all of the directors (in other words, two
of the three directors), except that any decision that constitutes a "Major
Decision" (as defined below) shall require the approval of all three directors.
9(c) The term "MAJOR DECISION" means any decision relating to any of the
following matters:
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(1) the Corporation entering into any new business relationship other
than with Par, including without limitation the Corporation
entering into any new pharmaceutical development or manufacturing
contracts with any other person or entity;
(2) any determination that the Corporation needs additional funds
invested by its shareholders, either (i) as loans or (ii) as
additional equity contributions (without involving the issuance
of additional shares of any class of stock of the Corporation);
(3) the formation of any subsidiaries of the Corporation;
(4) except as provided in Section 9(e) below, the terms of any
contracts or arrangements with Kenneth W. Olsen, Glatt Air
Techniques, Inc., CPS Orocel LLC, Par or any of their respective
Affiliates, and any amendment to, waiver of or termination of any
such contracts or arrangements;
(5) any merger or consolidation of the Corporation with any other
corporation or other entity;
(6) the dissolution of the Corporation or the sale, liquidation,
lease or pledge of all or substantially all of the assets of the
Corporation;
(7) any amendment to the Corporation's Certificate of Incorporation
or By-Laws, except as provided in Section 2 above;
(8) the selection of the Corporation's independent certified public
accountants; and
(9) except as provided in Section 4 above, the issuance of any shares
of any class of the Corporation's capital stock to any person or
entity, or the issuance of any options, warrants or other
securities that may be exercised or converted into any such
shares or are entitled to any voting or consent rights with
respect to the Corporation.
9(d) In addition, between the date of this Agreement and October 16, 2005,
the Corporation shall not, and Holding shall not permit the Corporation to take
any of the actions described in Sections 9(c)(1), (2)(i), (3), (4),(5), (6), (7)
or (9) above.
9(e) Par and Holding hereby approve the Product Development Agreement, the
Two Existing Agreements.
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9(f) The Bylaws of the Corporation may be amended to reflect the provisions
set forth in this Section 9. In any event, if there is any conflict between the
provisions of the Corporation's By-Laws and the provisions of this Agreement,
the provisions of this Agreement shall control.
ARTICLE 10: RESTRICTIONS ON TRANSFER OF SHARES
10(a) Holding shall not Transfer or Pledge any of its Shares without the
prior written consent of Par. In addition, the Transfer or Pledge of any
membership (ownership) interests in Holding or the issuance any new membership
(ownership) interests in Holding, shall constitute a material breach of this
Agreement if that Transfer or Pledge or issuance would result in ***** and *****
collectively owning either (1) less than 100% of the voting membership interests
in Holding or (2) less than 90% of all membership interests (both voting and
non-voting) in Holding.
10(b) Par shall not Transfer or Pledge any of its Shares without the prior
unanimous approval of the board of directors of the Corporation, which approval
shall not be unreasonably withheld or delayed.
10(c) Holding and Par hereby understand and acknowledge that the
restrictions against the Transfer of Shares set forth in this Agreement are very
stringent. Holding and Par agree that such restrictions are essential to the
protection of each of them and that they would not have entered into this
Agreement or agreed to any of the transactions contemplated by this Agreement
unless those restrictions were agreed to by Holding and Par.
10(d) Any attempted or purported Transfer or Pledge of any Shares which
does not comply with the provisions of this Agreement shall be void and
unenforceable, and neither the Corporation nor Holding or Par shall be required
in any way to recognize that Transfer or Pledge.
10(e) The certificates for all Shares of the Corporation which are now
owned or hereafter acquired by either Holding or Par, including any replacement
or additional certificates for Shares, shall have the following restrictive
legend endorsed directly on those certificates:
The sale, transfer, pledge or other disposition or hypothecation of the
shares represented by this certificate are substantially restricted and may
be made only in accordance with the provisions of the Stock Purchase and
Shareholders Agreement among the Corporation and the shareholders of the
Corporation. Any purported sale, transfer, pledge or other disposition or
hypothecation of the securities represented by this certificate without
complying with those restrictions shall be null and void and of no effect.
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A copy of that Stock Purchase and Shareholders Agreement is on file at the
principal office of the Corporation.
ARTICLE 11: REPRESENTATIONS OF THE CORPORATION AND HOLDING
In connection with the issuance and sale to Par of the Series B
Shares pursuant to Article 4 above and the sale of Holding's Shares to Par
pursuant to Article 5 above, each of the Corporation and Holding hereby
represent and warrant the following to Par:
11(a) The Series B Shares, when they are issued and sold to Par
pursuant to Article 4 above, will be duly authorized and issued to Par and, on
the payment of the amounts described in Article 4 above, will be fully paid and
non-assessable.
11(b) Holding is, as of the date of this Agreement, and will be, as of
the date of each Closing contemplated by Section 4(a) above, the sole owner of
all of the issued and outstanding Shares except to the extent of Par's ownership
of Shares, free and clear of any security interest, lien or other encumbrance,
other than the restrictive legend which appears on the certificate(s) for the
Shares. Those Shares have been duly issued to Holding and are fully paid and
non-assessable.
11(c) As of the date of this Agreement, the 90,000 shares of the
Corporation's Series A Common Stock owned by Holding constitute all of the
issued and outstanding shares of all classes of capital stock of the
Corporation. There are no options, warrants, rights or other agreements
pertaining to, or other securities exercisable or convertible into, any shares
of any class of capital stock of the Corporation.
11(d) The Corporation is a duly organized and validly existing
corporation in good standing under the laws of the State of Delaware and has all
requisite corporate power and authority for the ownership and operation of its
properties and for the carrying on of its business as now conducted and as now
proposed to be conducted. The Corporation is duly licensed or qualified and in
good standing as a foreign corporation authorized to do business in all
jurisdictions wherein the character of the property owned or leased, or the
nature of the activities conducted, by it makes such licensing or qualification
necessary. The officer signing this Agreement on behalf of the Corporation has
been duly authorized to execute and deliver this Agreement on behalf of the
Corporation.
11(e) Holding has been duly organized and is validly existing as a
limited liability company under the laws of the State of Delaware. The manager
signing this Agreement on behalf of Holding has been duly authorized to execute
and deliver this Agreement on behalf of Holding.
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11(f) Neither the execution or delivery of this Agreement, nor the
consummation of the transactions contemplated by this Agreement, nor the
compliance with or performance of the terms and conditions of this Agreement by
either the Corporation or Holding is prohibited by, limited by, conflicts with
or will result in the breach or violation of or a default under the terms,
conditions or provisions of (1) any mortgage, security agreement, indenture,
evidence of indebtedness, loan or financing agreement or other agreement or
instrument to which either the Corporation or Holding is a party or by which
either of their respective properties or assets may be bound, (2) to the
Knowledge of the Corporation and Holding, any provision of law, any order of any
court or administrative agency or any rule or regulation applicable to the
Corporation or Holding or their respective businesses, properties or assets or
(3) any provision of the Certificate of Incorporation, By-laws, Operating
Agreement or other organizational document of either the Corporation or Holding.
11(g) The Corporation does not (i) own of record or beneficially,
directly or indirectly, (A) any shares of capital stock or securities
convertible into capital stock of any other corporation or (B) any participating
interest in any partnership, joint venture or other non-corporate business
enterprise, or (C) any assets comprising the business or obligations of any
other corporation, partnership, joint venture or other non-corporate business
enterprise or (ii) control, directly or indirectly, any other entity.
11(h) Each of Holding and the Corporation has all necessary corporate
or company power as applicable and has taken all corporate or company action, as
applicable, required to duly and validly authorize the execution, delivery and
performance of this Agreement and all other agreements and instruments required
by this Agreement to be executed and delivered by Holding and/or the Corporation
(collectively, the "TRANSACTION DOCUMENTS"). The Transaction Documents, when
executed and delivered by Holding and the Corporation, are or will be legal,
valid and binding obligations of the Corporation and Holding, enforceable in
accordance with their respective terms against each of the Corporation and
Holding, as the case may be, assuming the truth, correctness and completeness of
the representations set forth in Section 12(e) below. The issuance, sale and
delivery of the Shares in accordance with Article 4 of this Agreement, has been
duly authorized by all necessary corporate action on the part of the
Corporation, subject only to the execution and filing with the Delaware
Secretary of State of the Restated Certificate of Incorporation of the
Corporation in the form attached to this Agreement as Exhibit A. The Shares,
when issued, sold and delivered in accordance with the terms of this Agreement,
including the payment by Par of the amounts required to be paid pursuant to
Article 4 above, will be duly and validly issued, fully paid, non-assessable and
are not, and will not be, subject to preemptive rights or other preferential
rights held by any present or future stockholders of the Corporation, will not
be, as a result of any action or inaction by the Corporation or Holding, subject
to any lien, security interest or other encumbrance (other than the restrictive
legend required by Section 10(e) above and restrictions imposed by any
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applicable securities laws), and will not conflict with any provision of any
agreement or instrument to which the Corporation is a party or by which it or
its property or assets are bound.
11(i) Except for the filing of any notice subsequent to a Closing
hereunder that may be required under applicable state and/or federal securities
laws (which, if required, shall be filed on a timely basis), and assuming the
truth and accuracy of the representations and warranties of Par set forth in
Article 12 below, no authorization, consent, approval, license, exemption of or
filing or registration with any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or, to the Knowledge of the
Corporation, foreign, in effect as of the date of this Agreement is necessary
for the execution, delivery or performance by either the Corporation or Holding
of the Transaction Documents, for the offer, issue, sale and delivery of the
Shares or for the performance by either the Corporation or Holding of either of
their respective obligations under the Transaction Documents.
11(j) (A) As of the date of this Agreement, there is no litigation or
governmental proceeding or investigation pending or, to the Corporation's or
Holding's Knowledge, threatened against the Corporation or Holding, nor are
there any disputes or conflicts to which either the Corporation or Holding is a
party which could properly result in any such litigation, proceeding or
investigation. To the Corporation's and Holding's Knowledge, there is no
litigation or governmental proceeding or investigation pending or threatened
against any officer, key employee or holder of more than 5% of the capital stock
of the Corporation relating to such person's performance of duties for the
Corporation or Holding or relating to such person's stock ownership in the
Corporation or otherwise relating to the business of the Corporation. Neither
the Corporation nor Holding is in default with respect to any order, writ,
injunction, decree, ruling or decision of any court, commission, board or other
governmental agency to which the Corporation or Holding is a party to by which
it is bound. To the Corporation's or Holding's Knowledge, none of the officers,
key employees or holders of more than 5% of the capital stock of the Corporation
is in default with respect to any order, writ, injunction, decree, ruling or
decision of any court, commission, board or other governmental agency relating
to the business of the Corporation or the ownership of any shares of stock of
the Corporation. The foregoing sentences include, without limiting their
generality, actions pending or, to the Knowledge of the Corporation or Holding,
threatened involving the prior employment of any of the Corporation's officers
or employees or their use in connection with the Corporation's business of any
information or techniques allegedly proprietary to any of their former
employers.
(B) As of the date of each Series B Closing and as of the date of
the Final Closing, there is no litigation or governmental proceeding or
investigation pending or, to the Corporation's or Holding's Knowledge,
threatened against the Corporation or Holding, nor are there any disputes or
conflicts to which either the Corporation or Holding is a party which could
properly result in any such litigation, proceeding or investigation, in each
such case to the extent that such litigation, proceeding or investigation both
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(1) either (i) does not involve Nortec's Core Business or (ii) involves Nortec's
Core Business and arises out of a breach of the Product Development Agreement by
Nortec, and (2) would likely result in a Material Adverse Effect. As of the date
of each Series B Closing and as of the date of the Final Closing, neither the
Corporation or Holding is in default with respect to any order, writ,
injunction, decree, ruling or decision of any court, commission, board or other
governmental agency to which the Corporation or Holding is a party or by which
it is bound, in each case to the extent that such default both (1) either (i)
does not involve Nortec's Core Business or (ii) involves Nortec's Core Business
and arises out of a breach of the Product Development Agreement by Nortec, and
(2) would likely result in a Material Adverse Effect.
11(k) As of the date of this Agreement, except for the Corporation's
employment agreement with Kenneth W. Olsen and the assistance provided to the
Corporation by Glatt Air Techniques, Inc., the Corporation is not a party to or
obligated in connection with its business with respect to (i) outstanding
contracts with employees, agents, consultants, advisers, sales representatives,
distributors, sales agents or dealers or (ii) collective bargaining agreements
or contracts with any labor union or other representative of employees or any
employee benefits provided for by any such agreement. As of the date of each
Series B Closing and as of the date of the Final Closing, the Corporation is not
a party to or obligated in connection with its business with respect to (i)
outstanding contracts with employees, agents, consultants, advisers, sales
representatives, distributors, sales agents or dealers or (ii) collective
bargaining agreements or contracts with any labor union or other representative
of employees or any employee benefits provided for by any such agreement, in
each case to the extent that any such contracts or agreements do not involve
Nortec's Core Business.
11(l) As of the date of this Agreement, to the Knowledge of the
Corporation, no officer or employee of the Corporation is in violation of any
term of any employment contract, patent disclosure agreement, proprietary
information agreement, noncompetition agreement, or any other contract or
agreement or any restrictive covenant relating to the right of any such officer
or employee to be employed by the Corporation because of the nature of the
business conducted or to be conducted by the Corporation or relating to the use
of trade secrets or proprietary information of others, and the continued
employment of the Corporation's officers and key employees does not subject the
Corporation or Par to any liability to third parties as a result of the
existence or terms of any such contracts or agreements. As of the date of each
Series B Closing and as of the date of the Final Closing, to the Knowledge of
the Corporation, no officer or employee of the Corporation is in violation of
any term of any employment contract, patent disclosure agreement, proprietary
information agreement, noncompetition agreement, or any other contract or
agreement or any restrictive covenant relating to the right of any such officer
or employee to be employed by the Corporation because of the nature of the
business conducted or to be conducted by the Corporation or relating to the use
of trade secrets or proprietary information of others, and the continued
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employment of the Corporation's officers and key employees does not subject the
Corporation or Par to any liability to third parties as a result of the
existence or terms of any such contracts or agreements, in each case to the
extent that any such contract or agreement does not involve Nortec's Core
Business.
11(m) As of the date of this Agreement, the Corporation does not have
any employees, other than Kenneth W. Olsen. As of the date of each Series B
Closing and as of the date of the Final Closing, the Corporation does not have
any employees in Nortec's Core Business, except for Kenneth W. Olsen and any
other employees authorized by the Corporation's Board of Directors, and the
Corporation does not have any employees who are engaged in employment activity
other than activity that involves Nortec's Core Business.
11(n) (A) As of the date of this Agreement, to the Knowledge of the
Corporation, the Corporation is in compliance with the terms and provisions of
this Agreement and of its certificate of incorporation and bylaws, and with all
mortgages, indentures, leases, agreements and other instruments, if any, by
which it is bound or to which it or any of its respective properties or assets
are subject, except for any such non-compliance that does not have a Material
Adverse Effect. As of the date of this Agreement, to the Knowledge of the
Corporation, the Corporation is in compliance with all judgments, decrees,
governmental orders, statutes, rules or regulations by which it is bound or to
which any of its properties or assets are subject. As of the date of this
Agreement, to the Knowledge of the Corporation, neither the execution and
delivery of this Agreement by the Corporation nor the issuance of the Series B
Shares pursuant to Article 4 above, nor the consummation by the Corporation of
the transaction contemplated by this Agreement or the performance by the
Corporation of any of its obligations hereunder, has constituted or resulted in
or will constitute or result in a default or violation of any term or provision
of any of the foregoing documents, instruments, judgments, agreements, decrees,
orders, statutes, rules and regulations, except to the extent that any such
default or violation does not have a Material Adverse Effect.
(B) As of the date of each Series B Closing and as of the date of
the Final Closing, to the Knowledge of the Corporation, the Corporation is in
compliance with the terms and provisions of this Agreement and of its
certificate of incorporation and bylaws, except for any such non-compliance that
does not have a Material Adverse Effect. As of the date of each Series B Closing
and as of the date of the Final Closing, to the Knowledge of the Corporation,
the Corporation is in compliance with all mortgages, indentures, leases,
agreements and other instruments, if any, by which it is bound or to which it or
any of its respective properties or assets are subject, in each such case to the
extent that any such non-compliance does not have a Material Adverse Effect. As
of the date of each Series B Closing and as of the date of the Final Closing, to
the Knowledge of the Corporation, the Corporation is in compliance with all
judgments, decrees, governmental orders, statutes, rules or regulations by which
it is bound or to which any of its properties or assets are subject, in each
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such case to the extent that any such non-compliance does not have a Material
Adverse Effect. As of the date of each Series B Closing and as of the date of
the Final Closing, to the Knowledge of the Corporation, neither the execution
and delivery of this Agreement by the Corporation or the issuance of the Series
B Shares pursuant to Article 4 above, nor the consummation by the Corporation of
the transaction contemplated by this Agreement or the performance by the
Corporation of any of its obligations hereunder, has constituted or resulted in
or will constitute or result in a default or violation of any term or provision
of any of the foregoing documents, instruments, judgments, agreements, decrees,
orders, statutes, rules and regulations, in each such case to the extent that
any such default or violation does not have a Material Adverse Effect.
(C) Solely for the purpose of applying this Section 11(n) and
Section 11(dd) below, for the purposes of determining whether the Corporation is
in compliance with, or is in breach of, the Product Development Agreement or the
Two Existing Agreements, such non-compliance or breach shall be deemed to have
occurred only if (1) there has been a breach of any of those Agreements by the
Corporation, (2) Par has provided written notice of that breach to the
Corporation, and (3) that breach has not been cured within 30 days after the
Corporation's receipt of that notice, except for any such breach which by its
nature cannot be cured within 30 days, in which event such non-compliance or
breach shall be deemed to have occurred only if the Corporation fails promptly
to commence and diligently pursue such cure. Solely for the purposes of this
Section 11(n) and Section 11(dd) below, the 30-day period referred to in the
first sentence of Section 8(b) above shall not apply to any breach of this
Agreement resulting from any breach of the representations or warranties set
forth in this Section 11(n) or Section 11(dd) below that arises out of any
non-compliance or breach by the Corporation with the Product Development
Agreement or the Two Existing Agreements.
11(o) Financial Information. The unaudited financial statements of the
Corporation as of and for the period ended June 30, 2003, a copy of which are
attached hereto as Schedule 11(o), present fairly the financial position of the
Corporation as of the date thereof and the results of operations for the period
covered thereby (subject to immaterial year-end audit adjustments) and have been
prepared in accordance with generally accepted accounting principles
consistently applied, except for the absence of footnotes not customarily
included in such statements (the "FINANCIAL STATEMENTS"). As of the date of this
Agreement, the Corporation does not have any liability, commitments or
obligations contingent or otherwise, which are not reflected in the aforesaid
financial statements or in the notes thereto, except to the extent that any such
omission would not have a Material Adverse Effect. Since the date of the
Financial Statements and up to the date of this Agreement, there has been no
change in the business, assets or condition, financial or otherwise, operations
or prospects of the Corporation, except to the extent that any such change does
not have a Material Adverse Effect. Since the date of the Financial Statements,
the Corporation has not entered into any material transaction other than in the
course of Nortec's Core Business or redeemed or repurchased any of its capital
stock.
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11(p) No insolvency proceeding of any character, including, without
limitation, bankruptcy, receivership, reorganization, composition or arrangement
with creditors, voluntary or involuntary, has been commenced by or against the
Corporation or Holding or any of their assets or properties, nor, to the
Knowledge of the Corporation or Holding , is any such proceeding threatened. The
Corporation has not taken any action in contemplation of the institution of any
such insolvency proceedings.
11(q) ERISA. Since January 1, 2000, the Corporation has not had, and
does not have, any employees or any employee benefits plans, other than Kenneth
W. Olsen and his salary and reasonable employee benefits.
11(r) Except for (1) the Patent License Agreement, (2) this Agreement,
(3) the Product Development Agreement, (4) the Product Development Subcontract
between the Corporation and Glatt Air Techniques, Inc., (5) the Corporation's
employment arrangement with Kenneth W. Olsen, and (6) the Two Existing
Agreements, there are no loans, leases, royalty agreements or other continuing
transactions between the Corporation and (a) any officer, employee or director
of the Corporation, or (b) any Person owning 5% or more of any class of capital
stock of the Corporation, or (c) any member of the immediate family of such
officer, employee, director or stockholder, or (d) any corporation or other
entity controlled by such officer, employee, director or stockholder or a member
of the immediate family of such officer, employee, director or stockholder.
11(s) The Corporation has not assumed, guaranteed, endorsed or
otherwise become directly or contingently liable on (including, without
limitation, liability by way of agreement, contingent or otherwise, to purchase,
to provide funds for payment, to supply funds to or otherwise invest in the
debtor or otherwise to assure the creditor against loss), any indebtedness of
any other person or entity, other than as contemplated by this Agreement, the
Product Development Agreement and the Two Existing Agreements.
11(t) The Corporation has not made any loan or advance to any person or
entity, nor is it committed to make any such loan or advance.
11(u) Securities Act of 1933. Assuming the truth and accuracy of Par's
representations and warranties set forth in Article 12 below, the Corporation
has complied and will comply with all applicable federal and state securities
laws in connection with the offer, issuance and sale of the Shares. While this
Agreement is in effect, neither the Corporation nor anyone acting on its behalf
has or will sell, offer to sell or solicit offers to buy Shares, or solicit
offers with respect thereto from, or enter into any preliminary conversations or
negotiations relating thereto with, any person or entity other than as
contemplated by this Agreement.
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11(v) No Person has or will have, as a result of the transactions
contemplated by this Agreement, any right, interest or valid claim against or
upon the Corporation for any commission, fee or other compensation as a finder
or broker because of any act or omission by the Corporation or any of its
agents.
11(w) As of the date of this Agreement, the Corporation has a total
authorized capitalization consisting of (i) one hundred and fifty thousand
(150,000) shares of Series A Common Stock, no par value per share, of which
ninety thousand (90,000) shares are issued and outstanding on the date hereof,
all of which are held of record and beneficially by Holding; and (ii) fifty
thousand (50,000) shares of Series B Common Stock, no par value per share, none
of which shares are issued and outstanding on the date hereof, without giving
effect to the transactions contemplated hereby. As of the date of this
Agreement, all the outstanding shares of capital stock of the Corporation have
been duly authorized, and are validly issued, fully paid and non-assessable. No
preemptive, conversion or other rights, options, warrants, subscriptions or
purchase rights of any nature to acquire from the Corporation shares of capital
stock or other securities are authorized, issued or outstanding, nor is the
Corporation obligated in any other manner to issue shares of its capital stock
or other securities except as contemplated by this Agreement. There are no
restrictions on the transfer of shares of capital stock of the Corporation other
than those imposed by relevant federal and state securities laws and as
otherwise contemplated by this Agreement. Other than as contemplated by this
Agreement, there are no agreements, understandings, trusts or other
collaborative arrangements or understandings concerning the voting of the
capital stock of the Corporation, except that Kenneth W. Olsen and Reiner Nowak
are, as of the date of this Agreement, (either legally or beneficially) the sole
members of Holding, and any material vote by Holding (in its capacity as a
shareholder of the Corporation) in connection with the capital stock of the
Corporation requires the consent of both Mr. Olsen and Mr. Nowak. The
Corporation will comply with all applicable federal and state securities laws in
connection with the offer and sale of the Corporation's capital stock as
contemplated by this Agreement.
11(x) No person or entity has demand or other rights to cause the
Corporation to file any registration statement under the Securities Act relating
to any securities of the Corporation or any right to participate in any such
registration statement.
11(y) As of the date of this Agreement, the Corporation has delivered to
Par a true, correct and complete list of all insurance carried by the
Corporation covering the Corporation's properties and business.
11(z) Title to Assets; Patents.
(i) As of the date of this Agreement, the Corporation has no fixed assets,
real property or leases. The Corporation has good title to all assets and
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properties that are owned by the Corporation, free of any mortgages, pledges,
charges, liens, security interests or other encumbrances of any kind, except
where any failure of any of the foregoing would not have a Material Adverse
Effect.
(ii) As of the date of this Agreement, except pursuant to the Patent License
Agreement and the Corporation's ownership of United States patent number
5,084,278, the Corporation does not own any patents, patent applications,
trademarks, trademark applications, service marks, service mark applications,
trade names and registered copyrights, and applications for such that are in the
process of being prepared, owned by or registered in the name of the
Corporation, or of which the Corporation is a licensor or licensee or in which
the Corporation has any right. To the Corporation's Knowledge, as of the date of
this Agreement there is no adverse claim, pending or threatened, that would
interfere with the Corporation's right to use the rights it has under the Patent
License Agreement. As of the date of this Agreement, no claim is pending or, to
the Corporation's or Holding's Knowledge, threatened to the effect that any such
intellectual property licensed by the Corporation, or which the Corporation
otherwise has the right to use, is invalid or unenforceable by the Corporation,
and the Corporation does not have any Knowledge that any such patents or
intellectual property rights of the Corporation may be invalid. Except as set
forth in the Patent License Agreement, as of the date of this Agreement the
Corporation has no obligation to compensate any person or entity for the use of
any such patents or rights and the Corporation has not granted any person or
entity (except Par) any license or other rights to use in any manner any of the
patents or rights of the Corporation, whether requiring the payment of royalties
or not. As of the date of this Agreement, the Corporation has not entered into
any agreement to indemnify any other person or entity against any charge of
infringement of any patent, trademark, trade name, service mark or copyright.
11(aa) As of the date of this Agreement the Corporation is not a party
to any material contract or agreement, whether written or oral, other than: (i)
the Product Development Agreement and the Two Existing Agreements with Par, (ii)
the Patent License Agreement, (iii) the employment agreement with Kenneth W.
Olen, and (iv) the Product Development Subcontract with Glatt Air Techniques,
Inc. Prior to the Final Closing any and all obligations of the Corporation to
Glatt Air Techniques, Kenneth W. Olsen and Holding shall be terminated.
11(bb) Since its date of incorporation and through the date of this
Agreement, the Corporation has not been, a "United States real property holding
corporation," as defined in Section 897(c)(2) of the Internal Revenue Code of
1986 (the "Code"), and in Section 1.8972(b) of the Treasury Regulations issued
thereunder. As of the date of this Agreement, the Corporation has no current
plans or intentions which would cause the Corporation to become a "United States
real property holding corporation," and the Corporation has filed with the IRS
all statements, if any, with its United States income tax returns which are
required under Section 1.8972(h) of the Treasury Regulations.
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11(cc) The Corporation has filed all tax returns, federal, state, county
and local, domestic and, to the Corporation's Knowledge, foreign, required to be
filed by it, and the Corporation has paid all taxes shown to be due by such
returns as well as, to the Corporation's Knowledge, all other taxes, assessments
and governmental charges which have become due or payable, including without
limitation all taxes which the Corporation is obligated to withhold from amounts
owing to employees, creditors and third parties, except where any failure to
file any such tax return or pay any such tax would not have a Material Adverse
Effect. The Corporation has established adequate reserves for all taxes accrued
but not yet payable to the extent required by generally accepted accounting
principles, except where the failure to establish such reserves would not have a
Material Adverse Effect. All material tax elections of any type which the
Corporation has made as of the date of this Agreement are identified in the
financial statements referred to in Section 11(o) above, except where the
failure to identify such an election would not have a Material Adverse Effect.
The Corporation has not received any deficiency assessment with respect to or,
proposed adjustment of the Corporation's federal, state, county or local taxes,
domestic and foreign, and, to the Knowledge of the Corporation and of Holding,
no such assessment or adjustment is threatened, except for any such assessment
or adjustment that would not have a Material Adverse Effect. The Corporation has
not received any notice of any tax lien (other than for current taxes not yet
due and payable), whether imposed by any federal, state, county or local taxing
authority, domestic or foreign, outstanding against the assets, properties or
business of the Corporation and, to the Knowledge of the Corporation, no such
notice is anticipated. To the Knowledge of the Corporation, any of its present
or former stockholders has ever filed an election pursuant to Section 1362 of
the Internal Revenue Code of 1986 (the "Code"), that the Corporation be taxed as
an S corporation.
11(dd) Subject to Section 11(n)(C) above, the Corporation has not
received any notice of default under any agreement or contract now in effect to
which the Corporation is a party or by which it or its property is bound and, to
the Knowledge of the Corporation, neither the Corporation nor any other party to
any such agreement or contract is in default under any such agreement or
contract, except where any such default would not have a Material Adverse
Effect. As of the date of this Agreement, the Corporation has not made any
determination that it will not fully perform all its respective material
obligations under each such contract or other agreement, and the Corporation and
Holding do not have any Knowledge of any material breach or anticipated breach
by the other party to any such contract or agreement. The Corporation is in
material compliance with all of the terms and provisions of its certificate of
incorporation and bylaws, except where any such non-compliance would not have a
Material Adverse Effect.
EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE CORPORATION AND HOLDING ARE
NOT MAKING, AND PAR IS NOT RELYING ON, ANY OTHER REPRESENTATIONS (EITHER EXPRESS
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OR IMPLIED) IN CONNECTION WITH THE ISSUANCE OR SALE OF ANY SHARES OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
12. PAR'S REPRESENTATIONS. In connection with the purchase of shares of
the Corporation's stock by Par pursuant to Sections 3 and 4(a) above, Par hereby
represents and warrants the following to the Corporation and Par:
(a) Par has been duly organized and is validly existing in good standing
as a corporation under the laws of the State of Delaware. The officer signing
this Agreement on behalf of Par has the authority to execute and deliver this
Agreement on behalf of Par.
(b) Par has duly executed and delivered this Agreement, and this
Agreement is a legal, valid and binding obligation of Par, enforceable against
Par in accordance with its terms.
(c) Neither the execution or delivery of this Agreement by Par, nor the
consummation of the transactions contemplated by this Agreement, nor the
compliance with or performance of the terms and conditions of this Agreement by
Par is prevented by, limited by, conflicts with or will result in the breach or
violation of or a default under the terms, conditions or provisions of (1) any
mortgage, security agreement, indenture, evidence of indebtedness, loan or
financing agreement, certificate of incorporation, by-laws or other agreement or
instrument to which Par is a party or by which it is bound or (2) any provision
of law, any order of any court or administrative agency or any rule or
regulation applicable to Par or its business.
(d) Par is purchasing the Shares under both Sections 3 and 4(a) above for
its own account solely for investment with no intention of reselling or
distributing any of the Shares. Par will not resell or distribute any of those
Shares in violation of any Federal or state securities laws. Par understands
that there is no public market for those Shares and that the transferability of
those Shares is highly restricted. Par has not made any offer to purchase any
securities other than its private offer to purchase the Shares under Sections 3
and 4 above, except for any such offer that is completely unrelated to, and is
not integrated with, the transactions contemplated by this Agreement. Par has
not participated in any discussions with, or reached any agreements or
understandings (either written or oral) with any other party, including without
limitation any broker, placement agent, co-investor, joint venturer or other
group of investors, relating to the transactions contemplated by this Agreement.
(e) Par has all necessary corporate or company power as applicable and
has taken all corporate action required to duly and validly authorize the
execution, delivery and performance of this Agreement and all other agreements
and instruments required by this Agreement to be executed and delivered by Par
(collectively, the "PAR TRANSACTION DOCUMENTS"). The Par Transaction Documents,
when executed and delivered by Par, are or will be legal, valid and binding
obligations of Par, enforceable in accordance with their respective terms
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against Par, assuming the truth, correctness and completeness of the
representations set forth in Section 11(h) above. The purchase by Par of the
Shares in accordance with Article 4 of this Agreement has been duly authorized
by all necessary corporate action on the part of Par.
(f) No authorization, consent, approval, license, exemption of or filing
or registration with any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or, to the Knowledge of Par,
foreign, in effect as of the date of this Agreement is necessary for the
execution, delivery or performance by Par of the Par Transaction Documents, for
the offer and purchase by Par of the Shares or for the performance by Par of its
obligations under the Par Transaction Documents.
(g) As of the date of this Agreement, there is no litigation or
governmental proceeding or investigation pending or, to Par's Knowledge,
threatened against Par, nor are there any disputes or conflicts to which Par is
a party which could properly result in any such litigation, proceeding or
investigation, where any such litigation, proceeding or investigation could
reasonably adversely affect Par's rights or ability to consummate the
transactions contemplated by this Agreement. Par is not in default with respect
to any order, writ, injunction, decree, ruling or decision of any court,
commission, board or other governmental agency where any such default could
reasonably adversely affect Par's rights or ability to consummate the
transactions contemplated by this Agreement.
(h) As of the date of this Agreement, to the actual knowledge of Par's
senior officers, Par is in compliance with the terms and provisions of this
Agreement and all mortgages, indentures, leases, agreements and other
instruments, if any, by which it is bound or to which it or any of its
respective properties or assets are subject where any such non-compliance could
reasonably adversely affect Par's rights or ability to consummate the
transactions contemplated by this Agreement. As of the date of this Agreement,
to the actual knowledge of Par's senior officers, Par is in compliance with all
judgments, decrees, governmental orders, statutes, rules or regulations by which
it is bound or to which any of its properties or assets are subject, where any
such non-compliance could reasonably adversely affect Par's rights or ability to
consummate the transactions contemplated by this Agreement.
(i) No insolvency proceeding of any character, including, without
limitation, bankruptcy, receivership, reorganization, composition or arrangement
with creditors, voluntary or involuntary, has been commenced by or against Par
or any of its assets or properties, nor, to the Knowledge of Par, is any such
proceeding threatened. Par has not taken any action in contemplation of the
institution of any such insolvency proceedings.
(j) No Person has or will have, as a result of the transactions
contemplated by this Agreement, any right, interest or valid claim against or
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upon the Corporation or Holding for any commission, fee or other compensation as
a finder or broker because of any act or omission by Par or any of its agents.
(k) As of the date of this Agreement, Par has not received any notice of
default under any agreement or contract now in effect to which Par is a party or
by which it or its property is bound and, to the Knowledge of Par, neither Par
nor any other party to any such agreement or contract is in default under any
such agreement or contract, where any such default could reasonably adversely
affect Par's rights or ability to consummate the transactions contemplated by
this Agreement.
(l) Par has made an independent investigation of the Corporation and the
business of the Corporation. Par has received whatever information it deems
necessary in order to decide whether to enter into this Agreement and to invest
in the Corporation. Par has availed itself of the opportunity to obtain any
additional information it believes necessary to verify the accuracy or
completeness of the information furnished to it and has determined that it
desires no further information. Par has not relied on any representations or
warranties from any person with respect purchasing the Corporation's shares as
contemplated by this Agreement, except for the representations set forth in this
Agreement.
(m) Par understands that (1) the acquisition or offering of shares of
stock in the Corporation has not been registered, considered or approved by any
governmental or other entity in any jurisdiction, (2) there is no public market
for any of those shares, (3) the transferability of those shares is highly
restricted as provided in this Agreement, (4) there is no right to redeem any of
those shares, and (5) the Corporation is not under any obligation to purchase or
repurchase any of those shares at any time.
(n) Par is purchasing the shares of stock in the Corporation pursuant to
this Agreement only for investment for its own account (and not for the account
of any other Person) and not with a view towards the transfer, resale or further
distribution of those shares. Par shall abide by all restrictions with respect
to any transfer of those shares that are contained in this Agreement and in all
applicable laws. Par shall not under any circumstances make any public offering
or sale of any of those shares.
(o) Par's investment advisers have such knowledge and experience in
financial and business matters that it is capable of utilizing the information
made available to it, evaluating the risks of an investment in the Corporation,
and making an informed investment decision.
13. CONFIDENTIALITY; PUBLICITY. (a) The Corporation, Par and Holding
shall hold in confidence, and shall cause their respective Affiliates to hold in
confidence, all confidential and other proprietary information of the other
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party disclosed to the receiving party and relating to this Agreement, except
for information (1) which is or becomes public knowledge (through no fault of
the receiving party), (2) which is made available to the receiving party by an
independent third party, (3) which is already in the receiving party's
possession at the time of receipt from the disclosing party (and such prior
possession can be properly demonstrated), or (4) which is required by law or
regulation to be disclosed (and only to the extent of such disclosure).
Additionally, each party may provide such information to governmental agencies
to the extent legally required by such agencies and such information shall not
be further disclosable unless made public as a result of such disclosure to such
agencies as required by law.
(b) The Corporation, Par and Holding shall not publicize or disclose the
existence or terms of or the termination of this Agreement, except (1) as
required by law (including with respect to Par, disclosures required to comply
with securities laws and regulations), or (2) if consented to in writing in
advance of disclosure by an authorized representative of the other party. In
addition, no party to this Agreement shall release information to the press or
the public pertaining to this Agreement or its performance without first
agreeing with the other parties with respect to the content of such disclosure.
The Parties agree to make a mutually acceptable press release within 120 days
after the execution of this Agreement.
14. ARBITRATION. Any and all claims, disputes, controversies, and other
matters arising out of or relating to this Agreement, including but not limited
to the formation (including any claim as to fraud in the inducement), breach,
performance, interpretation, or termination of this Agreement, shall be resolved
by binding arbitration in accordance with the commercial Arbitration Rules of
the American Arbitration Association which are then in effect. Three arbitrators
shall conduct the arbitration in the English language in the State of New York.
The arbitrators must be knowledgeable or experienced in matters involving
corporate law and the pharmaceutical industry. Each party (together with its
Affiliates, if any) will, within 20 days of the date on which arbitration is
requested, select one arbitrator and advise the opposite party of the name of
that arbitrator, and those two arbitrators will select a third arbitrator. If
the two arbitrators selected by the parties are unable to agree on a third
arbitrator within forty (40) days of the date on which arbitration is requested,
the third arbitrator will be appointed by the American Arbitration Association.
The decision of any two of the three arbitrators will be the decision of the
arbitrators. The costs of arbitration, including reasonable attorney's fees,
shall be borne as assessed by the Arbitrators. Notwithstanding anything to the
contrary contained in this Section 14, the terms and provisions of this Section
14 shall not preclude any party from seeking, or a court of competent
jurisdiction from granting, a temporary restraining order, temporary injunction
or other equitable relief for any breach of any restrictive covenant or
confidentiality covenant in this Agreement. The arbitrators' decision shall be
reduced to writing and shall be binding on the parties. Judgment on the award(s)
rendered by the arbitrators may be entered in any court having applicable
jurisdiction, and execution of that award may be had in any court of competent
jurisdiction or application may be made to such court for a judicial acceptance
of the award and an order of enforcement. In that arbitration, all evidentiary
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privileges under state and Federal law, including attorney-client and
work-product privileges, shall be preserved and protected to the same extent
that such privileges would be protected in a United States District Court
proceeding applying the internal law of the State of New York (without reference
to the law of conflicts of any jurisdiction other than New York General
Obligations Law 5-1401). Any failure of either party to abide by the
arbitrators' decision shall permit the other party to terminate this Agreement
in whole or in part.
15. NOTICES. Any notice to be given to a party under or in connection
with this Agreement shall be in writing and shall be delivered by confirmed
facsimile Express Mail or next day FEDEX to the party at the following address
set forth for such party:
TO THE CORPORATION:
Nortec Development Associates, Inc.
100 Spear Road
Ramsey, NJ 07446
Attention: Kenneth W. Olsen, President
Telephone: (201) 934-9600
Fax: 201-327-3354
With a copy to:
Todd M. Brinberg, Esq.
Nadborny & Brinberg LLP
420 Lexington Avenue, Suite 2300
New York, New York 10170
Telephone: 212-922-9080
Fax: 212-656-1660
TO PAR:
Par Pharmaceutical, Inc.
300 Tice Boulevard
Woodcliff Lake, NJ 07677
Attention: Dennis O'Connor, CFO
Telephone: (201) 802-4146
Fax: 201-391-5364
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TO HOLDING:
Nortec Holding LLC
100 Spear Road
Ramsey, NJ 07446
Attention: Kenneth W. Olsen, President
Telephone: (201) 934-9600
Fax: 201-327-3354
With copies to:
Mr. Reiner Novak
Glatt Air Techniques, Inc.
20 Spear Road
Ramsey, NJ 07446
Telephone: (201) 825-8700
Fax: 201-934-6967
And:
Todd M. Brinberg, Esq.
Nadborny & Brinberg LLP
420 Lexington Avenue, Suite 2300
New York, New York 10170
Telephone: 212-922-9080
Fax: 212-656-1660
or to such other address as to which the party has given notice thereof. Such
notices shall be deemed given on receipt.
16. MISCELLANEOUS. (a) This Agreement shall not be amended or waived
except by a written agreement signed by all of the Corporation, Par and Holding
setting forth that specific amendment or waiver.
(b) This Agreement and the rights and obligations under this Agreement
shall be governed by and construed in accordance with the substantive laws of
the State of New York, without regard to the application of any choice of law
principles other than New York General Obligations Law 5-1401.
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(c) This Agreement together with the Product Development Agreement
contains the entire agreement among the Corporation, Par and Holding with
respect to subject matter of this Agreement and supersedes all other agreements
and understandings with respect to its subject matter.
(d) This Agreement does not constitute a partnership or joint venture
between Par and Holding and it merely sets forth certain arrangements between
them (1) in their capacities as shareholders of the Corporation with respect to
the management of the Corporation and (2) with respect to the transfer or other
disposition of their respective Shares.
(e) The invalidity or unenforceability of any portion of this Agreement
shall not affect any of the remaining portions of this Agreement.
(f) This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original and all of which together shall constitute one
and the same Agreement.
[* * * BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK * * *]
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IN WITNESS WHEREOF, the Corporation, Par and Holding have executed and
delivered this Agreement on the date first written above.
PAR PHARMACEUTICAL, INC. NORTEC DEVELOPMENT
ASSOCIATES, INC.
By:/s/ Scott Tarriff /s/ Ken Olsen
- ----------------------------- -----------------------------
Name: Scott Tarriff Name: Ken Olsen
Title: President and CEI Title: President
NORTEC HOLDING LLC
By:/s/ Ken Olsen
- -----------------------------
Name: Ken Olsen
Title: President
AGREEMENT BY CPS OROCEL LLC AND KENNETH W. OLSEN
CPS Orocel LLC and Kenneth W. Olsen hereby agree to the provisions of
Sections 6 and 9(a) above.
CPS OROCEL LLC
By:/s/ Reiner Nowak /s/ Kenneth W. Olsen
- ----------------------------- -----------------------------
Name: Reiner Nowak Kenneth W. Olsen
Title: President
Attachments
- -----------
Exhibit A - Restated Certificate of Incorporation
Schedule 11(o) - Current Unaudited Financial Statements
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