EXHIBIT 10.2
STOCK PURCHASE AGREEMENT
among
DEERFIELD PRIVATE DESIGN INTERNATIONAL FUND, L.P.,
DEERFIELD SPECIAL SITUATIONS FUND, L.P.,
DEERFIELD SPECIAL SITUATIONS INTERNATIONAL LIMITED,
DEERFIELD PRIVATE DESIGN FUND, L.P.,
DEERFIELD MANAGEMENT, L.P.,
LEX PHARMACEUTICALS, INC.
and
MIDDLEBROOK PHARMACEUTICALS, INC.
Dated as of November 7, 2007

 

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TABLE OF CONTENTS

         
ARTICLE I
       
 
       
DEFINITIONS AND CONSTRUCTION
       
 
       
1.1 Definitions
    1  
1.2 Construction
    1  
 
       
ARTICLE II
       
 
       
PURCHASE, TERMS OF PAYMENT AND CLOSING
       
 
       
2.1 Purchase and Sale
    2  
2.2 Consideration for Stock Purchase Right
    2  
2.3 Consideration for Stock Purchase
    3  
2.4 Term and Extension
    4  
2.5 Termination
    5  
2.6 Closing
    5  
2.7 Closing Obligations
    5  
2.8 Required Stock Purchase Upon Change in Control
    6  
2.9 Required Stock Purchase of Kef
    6  
 
       
ARTICLE III
       
 
       
REPRESENTATIONS RELATING TO THE CORPORATION
       
 
       
ARTICLE IV
       
 
       
REPRESENTATIONS RELATING TO THE STOCKHOLDERS
       
 
       
4.1 Organization
    9  
4.2 Authority; Enforceability
    9  
4.3 No Violation; Enforceability
    9  
4.4 No Proceedings
    10  
4.5 Financial Condition
    10  
4.6 Consents and Approvals; No Violation
    10  
4.7 Capital Stock
    10  
4.8 Brokers, Etc
    10  
4.9 No Other Representations or Warranties
    10  
 
       
ARTICLE V
       
 
       
REPRESENTATIONS RELATING TO THE BUYER
       
 
       
5.1 Organization
    11  

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5.2 Authority; Enforceability
    11  
5.3 Consents and Approvals; No Violation
    11  
5.4 Compliance With Laws
    12  
5.5 Litigation
    12  
5.6 Investment Interest
    12  
5.7 Brokers
    12  
5.8 No Other Representations
    12  
 
       
ARTICLE VI
       
 
       
COVENANTS
       
 
       
6.1 Tax
    12  
6.2 Operations During Purchase Period
    13  
6.3 Preservation of Shares
    15  
6.4 Further Assurances
    15     ARTICLE VII

CLOSING CONDITIONS        
7.1 Mutual Condition
    15  
7.2 Buyer’s Conditions
    15  
7.3 Stockholders’ Conditions
    16  
 
       
ARTICLE VIII
       
 
       
INDEMNIFICATION
       
 
       
8.1 Survival
    17  
8.2 Indemnification by the Stockholders
    17  
8.3 Indemnification by Buyer
    17  
8.4 Procedure for Indemnification – Third-Party Claims
    17  
8.5 Limitation on Damages
    18  
8.6 Tax Treatment of Indemnity
    19  
 
       
ARTICLE IX
       
 
       
GENERAL PROVISIONS
       
 
       
9.1 No Joint Venture
    19  
9.2 Expenses
    19  
9.3 Amendment and Modification
    19  
9.4 Waiver of Compliance; Consents
    19  
9.5 Stockholder Representative
    20  
9.6 Notices
    20  
9.7 Publicity
    21  
9.8 Assignment; No Third-Party Rights
    21  

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9.9 Governing Law
    21  
9.10 Access to Records
    21  
9.11 Severability
    22  
9.12 Construction
    22  
9.13 Counterparts
    22  
9.14 Entire Agreement
    22  

APPENDICES

     
Appendix 1
  Stockholders
Appendix 2
  Definitions
 
   
ANNEXES
   
 
   
Annex A
  Buyer’s Knowledge
Annex B
  Stockholders’ Knowledge

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STOCK PURCHASE AGREEMENT
     This STOCK PURCHASE AGREEMENT (this “Agreement”), dated as of November 7,
2007, is between MiddleBrook Pharmaceuticals Inc., a Delaware corporation (the
“Buyer”), the Persons set forth on Appendix 1 (each a “Stockholder” and
together, the “Stockholders”), Deerfield Management, L.P., a Delaware limited
partnership (the “Stockholder Representative”) and Lex Pharmaceuticals, Inc., a
Delaware corporation (the “Corporation”).
Background Statement
     The Stockholders own all of the issued and outstanding capital stock of the
Corporation. Concurrently with the execution of this Agreement, the Parties are
executing an Asset Purchase Agreement (the “Lex Asset Purchase Agreement”)
whereby the Corporation agrees to purchase, and Buyer agrees to sell, certain
assets of Buyer. As inducement for Buyer to enter into the Lex Asset Purchase
Agreement, the Parties have agreed to enter into this Agreement granting the
Buyer the option to purchase all of the issued and outstanding capital stock of
the Corporation, consisting of 10,000 shares of common stock with a par value of
$0.001 per share (the “Shares”), for the consideration and on the terms and
conditions set forth herein. Furthermore, concurrently with the execution of
this Agreement, the Buyer, the Stockholders and Kef Pharmaceuticals, Inc., a
Delaware corporation (all of the issued and outstanding capital stock of which
is owned by the Stockholders) (“Kef”) are entering into a Stock Purchase
Agreement (the “Kef Stock Purchase Agreement”) pursuant to which Buyer shall
have the right to purchase all of the capital stock of Kef, as such agreement
may be extended, amended or supplemented.
Statement of Agreement
     The parties agree as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
     1.1 Definitions. Capitalized terms used in this Agreement have the meanings
given to them in Appendix 2 to this Agreement.
     1.2 Construction.
     (a) The article and section headings contained in this Agreement are solely
for the purpose of reference and convenience, are not part of the agreement of
the parties and shall not in any way limit, modify or otherwise affect the
meaning or interpretation of this Agreement.
     (b) References to “Sections” or “Articles” refer to corresponding sections
or articles of this Agreement unless otherwise specified.
     (c) Unless the context requires otherwise, the words “include,” “including”
and variations thereof mean including without limitation; and the words
“hereof,” “hereby,” “herein,”

 

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“hereunder” and similar terms refer to this Agreement as a whole and not any
particular section or article in which such words appear.
     (d) Unless the context requires otherwise, words in the singular include
the plural, words in the plural include the singular, and words indicating
gender shall be applicable to all genders.
     (e) If a term is defined as one part of speech (such as a noun), it shall
have a corresponding meaning when used as another part of speech (such as a
verb).
     (f) Any reference to any law, statute or regulation shall be to such law,
statute or regulation as in effect on the date hereof.
     (g) Currency amounts referred to herein are in United States Dollars.
     (h) References to a number of days mean calendar days unless Business Days
are specified. Except as otherwise specified, whenever any action must be taken
on or by a day that is not a Business Day, then such action may be validly taken
on or by the next day that is a Business Day.
     (i) All accounting terms used herein and not expressly defined herein shall
have the meanings given to them under GAAP.
     (j) The parties acknowledge that the parties and their attorneys have
reviewed this Agreement and have had the opportunity to negotiate fully all of
its provisions, and that any rule of construction to the effect that any
ambiguities are to be resolved against the drafting party, or any similar rule
operating against the drafter of an agreement, shall not be applicable to the
construction or interpretation of this Agreement.
ARTICLE II
PURCHASE, TERMS OF PAYMENT AND CLOSING
     2.1 Purchase and Sale. On the terms and subject to the conditions of this
Agreement, the Stockholders hereby grant to Buyer an option (the “Stock Purchase
Right”) which, when exercised, shall obligate the Stockholders to sell and
deliver to the Buyer, and the Buyer to purchase and accept from the
Stockholders, all of the Shares, in exchange for payment of the Purchase Price
(the “Stock Purchase”).
     2.2 Consideration for Stock Purchase Right. In consideration of the grant
by the Stockholders to Buyer of the Stock Purchase Right, the Buyer shall
immediately upon the execution of this Agreement (i) deliver to the Stockholder
Representative upon the execution of this Agreement (A) the Warrants
substantially in the form of Exhibit A (the “Warrants”)(it being understood that
Seventy Percent (70%) of all warrants delivered pursuant to this Agreement and
the Kef Stock Purchase Agreement, collectively, shall be delivered to the
Stockholders in respect of the Stock Purchase Right granted hereunder, and the
remainder shall be delivered in respect of the Kef Stock Purchase Agreement,
such that on the date hereof Warrants for the purchase of

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Two Million One Hundred Thousand (2,100,000) shares of common stock of Buyer (as
may be adjusted pursuant to the terms and condition of such Warrant) are being
delivered to the Stockholders pursuant to this Agreement, and warrants for the
purchase of Nine Hundred Thousand (900,000) shares of common stock of Buyer (as
may be adjusted pursuant to the terms and conditions of such warrant) are being
delivered to the Stockholders pursuant to the Kef Stock Purchase Agreement) and
(B) the Registration Rights Agreement substantially in the form of Exhibit B
(“Registration Rights”) and (ii) pay to the Stockholder Representative Three
Hundred and Fifty Thousand Dollars ($350,000) by wire transfer of immediately
available funds to the following account:

     
Bank Name:
  CITIBANK NA
ABA/Routing#:
  021000089
Account #:
  34828068
Account Name:
  Deerfield Management Co. LP
Ref:
  Series C

     2.3 Consideration for Stock Purchase.
     (a) In the event the Buyer exercises the Stock Purchase Right, the
aggregate consideration to be paid by the Buyer to the Stockholders for the
Shares shall be equal to the Stock Purchase Base Price plus (i) if the IND is
owned by the Corporation as of the Closing Date, an amount equal to (A) Eight
Million Four Hundred Thousand Dollars ($8,400,000), plus (B) the amount of Cash
held by the Corporation on the Closing Date, minus (C) the amount of accrued,
unpaid Taxes owed by the Corporation, minus (D) all accrued payment obligations
then owed under Contracts, other than the Related Agreements, entered into by
the Corporation, and minus (E) the amount of any Stock Purchase Period Extension
Payments made by Buyer, or (ii) if the IND is not owned by the Corporation as of
the Closing Date, an amount equal to (v) Six Million Three Hundred Thousand
Dollars ($6,300,000), plus (w) the amount of Cash held by the Corporation on the
Closing Date, minus (x) the amount of accrued, unpaid Taxes owed by the
Corporation, minus (y) all accrued payment obligations then owed under
Contracts, other than the Related Agreements, entered into by the Corporation,
and minus (z) the amount of any Stock Purchase Period Extension Payments made by
Buyer (as applicable under clause (i) or (ii), the “Purchase Price”). The
Stockholder Representative shall provide written notice (the “Adjustment
Notice”) of the amount of any adjustments made pursuant to clauses (B), (C) and
(D) or clauses (w), (x) and (y), as appropriate, no later than five (5) Business
Days prior to the Closing Date. At Closing, the Buyer shall pay the Purchase
Price to the Stockholders by wire transfer of immediately available funds to an
account or accounts designated in writing by the Stockholder Representative at
least two (2) Business Days prior to the Closing Date. The Purchase Price shall
be allocated among the Stockholders pro rata in accordance with the number of
the Shares held by each Stockholder.
     (b) The Buyer shall be entitled to deduct and withhold from the
consideration otherwise payable to any Person pursuant to this Agreement such
amounts as it is required to deduct and withhold with respect to the making of
such payment under any provision of U.S. federal, state or local tax Law. If the
Buyer so deducts and withholds amounts, such amounts shall be treated for all
purposes of this Agreement as having been paid to the Stockholder in

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respect of which the Buyer made such deduction and withholding. The Parties
shall reasonably cooperate to minimize such withholding amounts.
     2.4 Term and Extension. The Buyer shall have the authority to exercise the
Stock Purchase Right solely according to the following timetable:
     (a) The Stock Purchase Right shall terminate at 5:00 p.m. on June 30, 2008
(the “Initial Termination Time”); provided, that Buyer shall have the option to
extend the Stock Purchase Right beyond the Initial Termination Time to 5:00 p.m.
on December 31, 2008 (the “First Extended Termination Time”), by delivering to
the Corporation prior to the Initial Termination Time a written notice of
extension and a Stock Purchase Period Extension Payment in an amount equal to
(i) One Million Two Hundred Sixty Thousand ($1,260,000) if the IND is owned by
the Corporation at the time of such payment or (ii) Nine Hundred Fifty Thousand
Dollars ($950,000) if the IND is not owned by the Corporation at the time of
such payment.
     (b) In the event that Buyer exercises its option to extend the Stock
Purchase Right, as set forth in Section 2.4(a), the Stock Purchase Right shall
terminate on the First Extended Termination Time; provided, that Buyer shall
have the option to further extend the Stock Purchase Right beyond the First
Extended Termination Time to 5:00 p.m. on September 30, 2009 (the “Second
Extended Termination Time”), by delivering to the Corporation prior to the First
Extended Termination Time, a written notice of extension along with a Stock
Purchase Period Extension Payment in an amount equal to (i) Four Million Two
Hundred Thousand Dollars ($4,200,000) if the IND is owned by the Corporation at
the time of such payment or (ii) Three Million One Hundred Fifty Thousand
Dollars ($3,150,000) if the IND is not owned by the Corporation at the time of
such payment.
     (c) In the event that Buyer exercises its option to extend the Stock
Purchase Right, as set forth in Sections 2.4(a) and 2.4(b), the Stock Purchase
Right shall terminate on the Second Extended Termination Time; provided, that
Buyer shall have the option to further extend the Stock Purchase Right beyond
the Second Extended Termination Time to 5:00 p.m. on November 1, 2012 (the
“Third Extended Termination Time”), by delivering to the Corporation prior to
the Second Extended Termination Time, a written notice of extension along with a
Stock Purchase Period Extension Payment in an amount equal to (i) Two Million
Nine Hundred Forty Thousand Dollars ($2,940,000) if the IND is owned by the
Corporation at the time of such payment or (ii) Two Million Two Hundred Thousand
Dollars ($2,200,000) if the IND is not owned by the Corporation at the time of
such payment.
     (d) Notwithstanding Sections 2.4(a)-(c), no Stock Purchase Period Extension
Payment shall extend the Stock Purchase Right unless an extension payment is
simultaneously made pursuant to Section 2.4(a) and Section 2.4(b), as
applicable, of the Kef Stock Purchase Agreement.
     (e) At any time prior to the expiration of the Stock Purchase Period, the
Buyer may exercise the Stock Purchase Right by delivery to the Stockholder
Representative of a written notice (the “Stock Purchase Notice”) substantially
in the form of Exhibit C. The Stock Purchase Notice shall constitute a binding
obligation of the Buyer to purchase, and the Stockholders to sell, all of the
Shares pursuant to the terms and conditions of this Agreement. The Stock

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Purchase Notice may be delivered on any Business Day during the Stock Purchase
Period and shall specify a Closing Date for the Stock Purchase, which shall be a
Business Day not earlier than ten (10), nor later than thirty (30), days after
the date of the Stock Purchase Notice (the “Target Closing Date”).
     2.5 Termination. Notwithstanding the term of the Stock Purchase Right,
including any extension of the Stock Purchase Right pursuant to
Sections 2.4(a)-(c), the Stock Purchase Right shall terminate immediately and in
its entirety if:
     (a) The Registration License terminates; or
     (b) The Patent Sublicense between Kef and Buyer, having previously been
executed, terminates;
     2.6 Closing. The closing of the Stock Purchase (the “Closing”) shall take
place at the offices of Robinson, Bradshaw & Hinson, P.A., in Charlotte, North
Carolina, commencing at 10:00 a.m., local time, on a Business Day within the
Stock Purchase Period, or on such other date or at such other time or place as
the Buyer and the Stockholder Representative shall agree. The Closing shall be
effective as of 5:00 p.m. on the Closing Date (the “Effective Time”), and all
actions scheduled in this Agreement for the Closing Date shall be deemed to
occur simultaneously at the Effective Time, except as otherwise contemplated
hereby or as expressly agreed in writing by the parties.
     2.7 Closing Obligations. At the Closing:
     (a) The Stockholders shall deliver to the Buyer:
     (i) To the extent the Shares are certificated, certificates representing
the Shares, duly endorsed in blank (or accompanied by duly executed stock powers
in blank), and to the extent the Shares are not certificated, duly executed
instruments of assignment in form and substance reasonably satisfactory to the
Buyer, in each case in proper form for transfer free and clear of all
Encumbrances;
     (ii) each document required to be delivered by the Stockholders and the
Stockholder Representative to the Buyer under Section 7.2.
     (iii) a certification issued by the Corporation substantially in the form
of Exhibit D attached hereto pursuant to Treasury Regulation Section 1.1445-2(c)
certifying that the Corporation is not and has not been a United States real
property holding corporation (as defined in Section 897(c)(2) of the Code)
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
     (b) The Buyer shall deliver to the Stockholders:
     (i) the Purchase Price by wire transfer of immediately available funds to
an account or accounts specified by the Stockholder Representative in writing to
the Buyer not later than two (2) Business Days prior to the Closing Date;

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     (ii) each document required to be delivered by the Buyer to the
Stockholders under Section 7.3.
     2.8 Required Stock Purchase Upon Change in Control. If at any time prior to
the expiration or termination of the Stock Purchase Right, Buyer enters into an
agreement that would, upon consummation, result in a Change in Control of Buyer,
or if a Change in Control of Buyer occurs, Buyer shall give written notice of
such event to the Stockholder Representative, including the date of the
anticipated or actual Change in Control. Upon a Change in Control of Buyer at
any time during the Stock Purchase Period, Buyer shall be required to exercise
its Stock Purchase Right and shall consummate the Stock Purchase (i) if
practicable, simultaneously with the Change in Control, or (ii) if (i) is not
practicable, as soon as possible thereafter, in all cases subject to the
Conditions set forth in Sections 7.1, 7.2, and 7.3.
     2.9 Required Stock Purchase of Kef. Notwithstanding any provision in
Section 2.1, the right of the Buyer to exercise the Stock Purchase Right shall
be subject to the condition precedent that the Buyer shall have purchased,
pursuant to the Kef Stock Purchase Agreement, all of the capital stock of Kef
and shall have paid and delivered all of the consideration to be paid and
delivered by the Buyer pursuant to the Kef Stock Purchase Agreement.
ARTICLE III
REPRESENTATIONS RELATING TO THE CORPORATION
     The Stockholders and the Corporation jointly and severally represent to the
Buyer that:
     3.1 The Corporation is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. The Corporation has
the requisite corporate power and authority to own, lease and use the properties
and assets that it owns, leases and uses and to conduct its business as
presently conducted.
     3.2 The authorized, issued and outstanding capital stock of the Corporation
consists only of the Shares. All of the Shares have been duly authorized and
validly issued and are fully paid and nonassessable and free of preemptive and
similar rights. All of the Shares are owned by the Stockholders as set forth in
Appendix 1. Except as set forth above, there are no outstanding (i) shares of
capital stock, debt securities or other voting securities of the Corporation;
(ii) securities of the Corporation which are or may become convertible into or
exchangeable for shares of capital stock, debt securities or voting securities
or ownership interests in the Corporation; (iii) subscriptions, calls,
contracts, commitments, understandings, restrictions, arrangements, rights,
warrants, options, or other rights that grant or may grant the right to acquire
from the Corporation, or obligations of the Corporation to issue any capital
stock, debt securities, voting securities or other ownership interests in, or
any securities convertible into or exchangeable or exercisable for any capital
stock, voting securities, debt securities or ownership interests in, the
Corporation, or obligations of the Corporation to grant, extend or enter into
any such agreement or commitment; or (iv) obligations of the Corporation to
repurchase, redeem or otherwise acquire any outstanding securities of the
Corporation, or to vote or to dispose of any shares of the capital stock of the
Corporation. There is no capital stock of the Corporation reserved for issuance
for any purpose. All of the outstanding equity securities of the Corporation

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have been offered and issued in compliance with all applicable federal and state
securities laws, including “blue sky” laws.
     3.3 There are no agreements, arrangements, proxies or understandings that
restrict or otherwise affect the transfer of any of the Shares except as set
forth in this Agreement.
     3.4 The Corporation has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement, and the
execution and delivery of this Agreement and the performance of all of its
obligations hereunder have been duly authorized by the Corporation and the
Stockholders. This Agreement has been duly executed and delivered by the
Corporation and constitutes the legal, valid and binding obligation of the
Corporation, enforceable against the Corporation in accordance with its terms,
except as enforceability may be limited or affected by applicable bankruptcy,
insolvency, moratorium, reorganization or other laws of general application
relating to or affecting creditors’ rights generally.
     3.5 The signing, delivery and performance of this Agreement by the
Corporation is not prohibited or limited by, and will not result in the breach
of or a default under, any provision of the certificate of incorporation, bylaws
or other formation documents of the Corporation, or of any material agreement or
instrument binding on the Corporation, or of any applicable law, Order, writ,
injunction or decree of any Governmental Authority, except for such prohibition,
limitation or default as would not prevent consummation by the Corporation of
the transactions contemplated hereby. The execution, delivery and performance of
this Agreement by the Corporation, and the Corporation’s compliance with the
terms and provisions hereof, do not and will not conflict with or result in a
breach of any of the terms and provisions of or constitute a default, with or
without the passage of time and the giving of notice, under any Contract or
other instrument or obligation binding or affecting the Corporation or the
Corporation’s property, including the Purchased Assets.
     3.6 There is no action, suit, litigation, Proceeding, claim, governmental
investigation or administrative action pending or, to the Stockholders’
Knowledge, threatened, directly or indirectly involving the Corporation or the
transactions contemplated hereby or the Corporation’s ability to perform its
obligations hereunder. The Corporation is not a party or subject to or in
default under any judgment, Order, injunction or decree of any Governmental
Authority or arbitration tribunal applicable to the Corporation or its property.
     3.7 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 any of its assets or properties, nor, to the Stockholders’
Knowledge, is any such Proceeding threatened. Neither the Stockholders nor the
Corporation contemplates, nor has the Corporation or any Stockholder taken any
action in contemplation of, the institution of any such insolvency Proceedings.
     3.8 No broker, investment banker, agent, finder or other intermediary
acting on behalf of the Corporation or under the authority of the Corporation is
or will be entitled to any broker’s or finder’s fee or any other commission or
similar fee directly or indirectly in connection with any of the transactions
contemplated hereby.

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     3.9 The Corporation’s assets, other than Cash, consist solely of the
Purchased Assets. The Corporation has no Liabilities or obligations of any
nature, whether or not accrued, absolute, contingent, unliquidated or otherwise,
whether due or to become due and whether or not required to be closed, other
than those Liabilities and obligations created by this Agreement and the Related
Agreements. The Corporation does not own any interest in any other corporation,
partnership, association, joint venture or other entity and, thus, has no
subsidiaries.
     3.10 There are no Encumbrances upon any of the Shares other than those
created by this Agreement.
     3.11 None of the Shares has been issued in violation of any Legal
Requirement, the certificate of incorporation or bylaws of the Corporation, or
any Contract to which the Corporation may be subject, bound or a party or in
violation of any preemptive, subscription or similar rights.
     3.12 Except as set forth on Schedule 3.12, from the date of the
Corporation’s incorporation, except as contemplated by this Agreement, there has
not been any:
     (a) change in the Corporation’s authorized or issued capital stock;
     (b) disposition by the Corporation of any of the Purchased Assets; or
     (c) agreement, whether oral or written, by the Corporation to do any of the
foregoing.
     3.13 The Corporation is in compliance with all applicable Legal
Requirements, except (i) Legal Requirements constituting obligations of the
Buyer that have been assumed by the Corporation or (ii) Legal Requirements to be
performed or satisfied by the Buyer pursuant to the Related Agreements.
     3.14 The Corporation has not received any written notice from any
Governmental Authority regarding any violation of, or failure to comply with,
any Legal Requirement.
     3.15 The Corporation was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement and the Related Agreements. The
Corporation has not owned, operated or conducted and, other than its acquisition
of the Purchased Assets pursuant to the Lex Asset Purchase Agreement, will not
own, operate or conduct any assets, businesses or activities other than in
connection with its organization, the negotiation and execution of this
Agreement and the Related Agreements and the consummation of the transactions
contemplated hereby and thereby.
     3.16 No Governmental Authorization is required by the Corporation in
connection with the execution or delivery by the Corporation of this Agreement
or the performance by the Corporation of the Corporation’s obligations under
this Agreement, except for any Governmental Authorizations that result from the
specific legal or regulatory status of the Buyer or as a result of any other
facts that specifically relate to the business or activities in which the Buyer
is engaged. Neither the execution and delivery of this Agreement by the
Corporation nor the performance of the Corporation’s obligations hereunder or
thereunder shall (with or without notice or lapse of time) (i) result in the
creation of any Encumbrance upon the Shares or (ii)

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conflict with or violate any Legal Requirement applicable to the Corporation,
except for any Legal Requirements that result from the specific legal or
regulatory status of the Buyer or as a result of any other facts that
specifically relate to the business or activities in which the Buyer is engaged.
     3.17 The Board of Directors of the Corporation and the Stockholders have
approved this Agreement and the transactions contemplated hereby.
     3.18 EXCEPT AS EXPRESSLY SET FORTH IN THIS ARTICLE III AND IN ARTICLE IV,
NEITHER THE STOCKHOLDERS NOR THE CORPORATION MAKES, AND NO PARTY SHALL BE
ENTITLED TO RELY UPON, ANY REPRESENTATION OR WARRANTY AS TO ANY FACT OR MATTER
ABOUT THE CORPORATION.
ARTICLE IV
REPRESENTATIONS RELATING TO THE STOCKHOLDERS
     Each Stockholder represents to the Buyer, solely with respect to itself,
that:
     4.1 Organization. Such Stockholder is a limited partnership, corporation or
limited company, as applicable, and is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization. Such
Stockholder has all requisite power and authority to own, lease and operate its
properties and assets that it owns, leases and uses and to conduct its business
as presently conducted.
     4.2 Authority; Enforceability. Such Stockholder has the requisite legal
power and authority to (i) execute and deliver this Agreement and each
certificate, document and agreement to be executed by such Stockholder in
connection herewith (collectively, the “Stockholder Documents”) and (ii) perform
its obligations hereunder and thereunder, and such execution, delivery and
performance have been duly and validly authorized by such Stockholder. This
Agreement has been duly and validly executed and delivered by such Stockholder
and constitutes, and upon execution and delivery by such Stockholder of each
Stockholder Document to which such Stockholder is a party, each such Stockholder
Document will constitute, a legal, valid and binding obligation of such
Stockholder, enforceable against the Stockholder in accordance with its terms,
except as the enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other laws relating to or
limiting creditors’ rights generally or by general principles of equity.
     4.3 No Violation; Enforceability. The signing, delivery and performance of
this Agreement by such Stockholder is not prohibited or limited by, and will not
result in the breach of or a default under, any provision of the limited
partnership agreement or other formation documents of such Stockholder, or of
any material agreement or instrument binding on such Stockholder, or of any
applicable law, Order, writ, injunction or decree of any Governmental Authority,
except for such prohibition, limitation or default as would not prevent
consummation by such Stockholder of the transactions contemplated hereby. The
execution, delivery and performance of this Agreement by such Stockholder and
such Stockholder’s compliance with the

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terms and provisions hereof, do not and will not conflict with or result in a
breach of any of the terms and provisions of or constitute a default, with or
without the passage of time and the giving of notice, under any Contract or
other instrument or obligation binding or affecting such Stockholder or such
Stockholder’s property.
     4.4 No Proceedings. There is no action, suit, litigation, Proceeding,
claim, governmental investigation or administrative action pending or, to the
Stockholders’ Knowledge, threatened, directly or indirectly involving such
Stockholder or the transactions contemplated hereby or such Stockholder’s
ability to perform its obligations hereunder. Such Stockholder is not a party or
subject to or in default under any judgment, Order, injunction or decree of any
Governmental Authority or arbitration tribunal applicable to such Stockholder or
its property.
     4.5 Financial Condition. 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 such Stockholder or any of its assets or properties,
nor, to the Stockholders’ Knowledge, is any such Proceeding threatened. Such
Stockholder does not contemplate, and has not taken any action in contemplation
of, the institution of any such insolvency Proceedings.
     4.6 Consents and Approvals; No Violation.
     (a) No Governmental Authorization is required by such Stockholder in
connection with the execution or delivery by such Stockholder of this Agreement
or the Stockholder Documents to which such Stockholder is a party, or the
performance by such Stockholder of the Stockholder’s obligations under this
Agreement or the Stockholder Documents to which such Stockholder is a party,
except for any Governmental Authorizations (i) that are not material or
(ii) that result from the specific legal or regulatory status of the Buyer or as
a result of any other facts that specifically relate to the business or
activities in which the Buyer is engaged.
     (b) Neither the execution and delivery of this Agreement and the
Stockholder Documents by such Stockholder nor the performance of such
Stockholder’s obligations hereunder or thereunder shall (with or without notice
or lapse of time) conflict with or violate any Legal Requirement applicable to
such Stockholder, except for any Legal Requirements (i) that are not material or
(ii) that result from the specific legal or regulatory status of the Buyer or as
a result of any other facts that specifically relate to the business or
activities in which the Buyer is engaged.
     4.7 Capital Stock. Such Stockholder is the record and beneficial owner of
the number of Shares listed next to its name on Appendix 1, free and clear of
any Encumbrances or adverse claims (other than restrictions under applicable
Legal Requirements).
     4.8 Brokers, Etc. No broker, investment banker, agent, finder or other
intermediary acting on behalf of such Stockholder or under the authority of such
Stockholder is or will be entitled to any broker’s or finder’s fee or any other
commission or similar fee directly or indirectly in connection with any of the
transactions contemplated hereby.
     4.9 No Other Representations or Warranties. EXCEPT AS EXPRESSLY SET FORTH
IN ARTICLE III AND THIS ARTICLE IV, NEITHER THE STOCKHOLDERS NOR THE CORPORATION
MAKES, AND NO PARTY SHALL BE ENTITLED TO RELY

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UPON, ANY REPRESENTATION OR WARRANTY AS TO ANY FACT OR MATTER ABOUT THE
STOCKHOLDERS.
ARTICLE V
REPRESENTATIONS RELATING TO THE BUYER
     The Buyer represents to the Stockholders and the Stockholder
Representative:
     5.1 Organization. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the state of its organization.
The Buyer has the requisite corporate power and authority to own, lease and use
the properties and assets that it owns, leases and uses and to conduct its
business as presently conducted.
     5.2 Authority; Enforceability. The Buyer has the requisite legal power and
authority to (i) execute and deliver this Agreement and each certificate,
document and agreement to be executed by the Buyer in connection herewith
(collectively, the “Buyer Documents”) and (ii) perform its obligations hereunder
and thereunder. The execution and delivery of this Agreement and the Buyer
Documents and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary corporate action
on the part of the Buyer, and no other Proceedings on the part of the Buyer are
necessary to authorize this Agreement or any of the Buyer Documents or to
consummate the transactions contemplated hereby or thereby. This Agreement has
been duly and validly executed and delivered by the Buyer and constitutes, and
upon execution and delivery by the Buyer of each Buyer Document, each Buyer
Document will constitute, a legal, valid and binding obligation of the Buyer,
enforceable against it in accordance with its terms, except as the enforcement
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or other laws relating to or limiting creditors’ rights
generally or by general principles of equity.
     5.3 Consents and Approvals; No Violation.
     (a) No Governmental Authorization is required by the Buyer in connection
with the execution or delivery by the Buyer of this Agreement or the Buyer
Documents, or the performance of the Buyer’s obligations under this Agreement or
the Buyer Documents.
     (b) Neither the execution and delivery of this Agreement and the Buyer
Documents by the Buyer nor the performance of the Buyer’s obligations hereunder
or thereunder shall (with or without notice or lapse of time): (i) conflict with
or violate any provision of the articles or certificate of incorporation or
bylaws of the Buyer or any resolution adopted by the board of directors or
stockholders of the Buyer, (ii) conflict with or breach any of the terms or
provisions of, or give any Person a right to declare a default or exercise any
remedy under, any Contract binding on the Buyer or (iii) conflict with or
violate any Legal Requirement applicable to the Buyer, but excluding from the
foregoing clauses (ii) and (iii) conflicts, breaches, defaults, remedies and
violations that would not be reasonably likely, either individually or in the
aggregate, to adversely affect the Buyer’s ability to consummate the
transactions contemplated by this Agreement.

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     5.4 Compliance With Laws. Except as set forth on Schedule 5.4, the Buyer is
in compliance with all Legal Requirements applicable to the Buyer, except where
any such non-compliance would not reasonably be expected to adversely affect the
Buyer’s ability to consummate the transactions contemplated by this Agreement.
Except as set forth on Schedule 5.4, the Buyer has not received, at any time
since October ___, 2007, any written notice from any Governmental Authority
regarding any violation of, or failure to comply with, any Legal Requirement,
except with respect to any violations or failures to comply that would not
adversely affect the Buyer’s ability to consummate the transactions contemplated
by this Agreement.
     5.5 Litigation. Except as set forth on Schedule 5.5, there are no
Proceedings that are pending against or, to the Buyer’s Knowledge, threatened
against the Buyer that would adversely affect its ability to consummate the
transactions contemplated by this Agreement. The Buyer is not subject to any
Order that could affect the enforceability of this Agreement against the Buyer
or that would adversely affect the Buyer’s ability to consummate the
transactions contemplated by this Agreement.
     5.6 Investment Interest. The Buyer is an “accredited investor” within the
meaning of Regulation D promulgated under the Securities Act and is acquiring
the Shares for its own account for investment purposes only and not with a view
to, or for sale or resale in connection with, any distribution within the
meaning of Section 2(11) of the Securities Act. The Buyer understands that the
Shares are characterized as “restricted securities” under the federal securities
laws inasmuch as they are being acquired from the Stockholders in a transaction
not involving a public offering and that under such laws and applicable
regulations such securities may be resold without registration under the
Securities Act only in certain limited circumstances.
     5.7 Brokers. No broker, investment banker, agent, finder or other
intermediary acting on behalf of Buyer or under the authority of Buyer is or
will be entitled to any broker’s or finder’s fee or any other commission or
similar fee directly or indirectly in connection with any of the transactions
contemplated hereby.
     5.8 No Other Representations. EXCEPT AS EXPRESSLY SET FORTH IN THIS ARTICLE
V, THE BUYER DOES NOT MAKE, AND NO PARTY SHALL BE ENTITLED TO RELY UPON, ANY
REPRESENTATION AS TO ANY FACT OR MATTER ABOUT THE BUYER.
ARTICLE VI
COVENANTS
     6.1 Tax.
     (a) From the date that the Stock Purchase Right is exercised to the Closing
Date, the Corporation will not:
          (1) make any new Tax election except as described in Section 6.1(b)(4)
below;

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          (2) consent to any claim or assessment relating to any material taxes
or any waiver of the statute of limitations for any such claim or assessment;
          (3) settle or compromise any Tax Liability or refund;
          (4) change or adopt a Tax accounting method or file any amended Tax
Return without the Buyer’s prior written consent (which consent may not be
unreasonably withheld, conditioned or delayed); or
          (5) amend, refile or otherwise modify any Tax election or Tax Return.
     (b) From the date the Stock Purchase Right is exercised to the Closing
Date, the Corporation will:
          (1) accrue a Liability in its books and records and financial
statements in accordance with GAAP for Taxes payable by the Corporation for the
period ending with the Closing Date;
          (2) promptly notify the Buyer of any Tax Proceeding initiated against
the Corporation where an adverse determination could result in a material Tax
Liability or materially and adversely affect the Tax attributes of the
Corporation;
          (3) provide the Buyer with copies of any income Tax Return that the
Corporation is required to file or elects to file prior to the Effective Time;
or
          (4) For purposes of apportioning a Tax to any Straddle Period, the
parties hereto shall treat the Closing Date as the last day of such Straddle
Period (i.e., the parties shall “close the books” on such date) and shall elect
to do so if permitted by applicable law.
     (c) From the date hereof to the Closing Date, the Corporation will timely
file all Tax Returns required to be filed by it during such period and will pay
when due all Taxes due and payable by the Corporation during such period.
     6.2 Operations During Purchase Period. From the date of this Agreement
through the expiration or termination of the Stock Purchase Right, the
Corporation shall, and the Stockholders and Stockholder Representative shall
cause the Corporation to, preserve its business organization intact. Without
limiting the foregoing, the Corporation shall not, and the Stockholders and
Stockholder Representative shall not cause the Corporation to, do any of the
following without the prior written consent of the Buyer:
     (a) amend its Certificate of Incorporation, By-laws or other similar
organizational and operational documents;
     (b) redeem or otherwise acquire any shares of its capital stock, equity
securities or other equity interests or issue any capital stock or any option,
warrant or right relating thereto or any securities convertible into or
exchangeable for any shares of capital stock, equity securities or other equity
interests;

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     (c) incur or assume any Liabilities for borrowed money or obligations for
borrowed money;
     (d) permit, allow or suffer any of its assets to be subject to any
Encumbrance other than any Encumbrance created by the activities of Buyer under
any of the Related Agreements;
     (e) cancel any material indebtedness or waive any claims or rights of
substantial value;
     (f) sell, transfer or lease any of the Purchased Assets except pursuant to
the Related Agreements;
     (g) make any material change in any method of accounting or accounting
practice or policy other than those required by GAAP;
     (h) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof;
     (i) acquire or agree to acquire any assets or incur or agree to incur any
Liabilities other than (A) pursuant to the Related Agreements or (B) Liabilities
under Contracts for services related to the ongoing management of the Purchased
Assets; provided, however, that any such Contract is entered into only to the
extent that the Corporation has made a good faith determination that the Stock
Purchase Right will not be exercised;
     (j) sell, lease or otherwise dispose of, or agree to sell, lease or
otherwise dispose of, any of its assets (excluding sales of inventory in the
ordinary course of business consistent with past practices) other than pursuant
to the Related Agreements;
     (k) enter into, amend, revise, renew or terminate any Contract other than
(A) the Related Agreements or (B) Contracts for services related to the ongoing
management of the Purchased Assets; provided, however, that any such Contract is
entered into only to the extent that the Corporation has made a good faith
determination that the Stock Purchase Right will not be exercised;
     (l) make any commitments for capital expenditures;
     (m) fail to use its best efforts to preserve its present business
organization intact;
     (n) initiate or settle any litigation;
     (o) otherwise own, operate or conduct any assets, businesses or activities
other than in connection with its organization, the negotiation and execution of
this Agreement and the Related Agreements and the consummation of the
transactions contemplated hereby and thereby; or
     (p) agree to any of the foregoing.

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     6.3 Preservation of Shares. No Shareholder shall (a) sell, lease or
otherwise dispose of any Shares or (b) permit, allow or suffer any Shares to be
subject to any Encumbrance, in each case until the expiration or termination of
the Stock Purchase Right.
     6.4 Further Assurances. Upon the terms and subject to the conditions of
this Agreement, each Party shall use commercially reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable under applicable Legal Requirements to consummate
and make effective the transactions contemplated by this Agreement and the
Related Agreements as promptly as practicable, including, without limitation,
the prompt preparation and filing of all forms, registrations and notices
required to be filed to consummate the transactions contemplated by this
Agreement and the Related Agreements and the taking of such commercially
reasonable actions as are necessary to obtain any requisite consents, Orders,
exemptions or waivers by any Governmental Authority or any other Person. Each
Party shall promptly consult with the other Party with respect to, provide the
other Party any necessary information with respect to and provide the other
Party (or its counsel) copies of, all filings made by such Party with any
Governmental Authority or any other Person or any other information supplied by
such Party to a Governmental Authority or any other Person in connection with
this Agreement and the Related Agreements and the transactions contemplated by
this Agreement and the Related Agreements. From time to time after the Closing,
without additional consideration, each Party will execute and deliver such
further instruments and take such other action as may be necessary or reasonably
requested by each other Party to make effective the transactions contemplated by
this Agreement and to provide each other Party with the benefits of this
Agreement.
ARTICLE VII
CLOSING CONDITIONS
     7.1 Mutual Condition. The obligation of the Parties to consummate the
transactions contemplated by this Agreement shall be subject to the satisfaction
(or waiver, if permissible under applicable Legal Requirements) of the following
conditions:
     (a) No Legal Requirement, temporary restraining Order, preliminary
injunction or permanent injunction, judgment or ruling enacted, promulgated,
issued, entered, amended or enforced by any Governmental Authority shall be in
effect enjoining, restraining, preventing or prohibiting the consummation of the
transactions contemplated by this Agreement.
     (b) The Buyer shall have delivered to the Stockholder Representative the
Stock Purchase Notice.
     7.2 Buyer’s Conditions. The obligation of the Buyer to consummate the
transactions contemplated by this Agreement shall be subject to the satisfaction
(or waiver, if permissible under applicable Legal Requirements) of the following
conditions:
     (a) Each of the representations and warranties of the Corporation and each
Stockholder set forth in this Agreement, disregarding all qualifications and
exceptions contained therein relating to materiality or Material Adverse Effect,
shall be true and correct in all respects,

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in each case as of (i) the date of this Agreement; (ii) the Closing Date as
though made on and as of the Closing Date; and (iii) in the case of Section 3.13
only, the date of the Stock Purchase Notice, as though made on and as of the
date of the Stock Purchase Notice, except where the failure or failures to be
true and correct would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
     (b) The Corporation and each Stockholder shall have performed in all
material respects all obligations and complied with all covenants required to be
performed by it under this Agreement at or prior to the Closing.
     (c) The Stockholder Representative shall have delivered to the Buyer a
certificate certifying the matters set forth in Sections 7.2(a) and (b).
     (d) The Stockholders shall have delivered the items required to be
delivered pursuant to Section 2.7.
     (e) Since the date of the Stock Purchase Notice, there shall not have
occurred any event or existed any circumstances that has had or that could
reasonably be expected to have a Material Adverse Effect.
     (f) Other than the Shares, all equity securities and options, rights,
warrants and other rights, claims upon or interests in or to the equity of the
Corporation shall have been terminated or canceled prior to or in connection
with the Closing, with no Liability to the Buyer therefor.
     7.3 Stockholders’ Conditions. The obligation of the Corporation and the
Stockholders to consummate the transactions contemplated by this Agreement shall
be subject to the satisfaction (or waiver, if permissible under applicable Legal
Requirements) of the following conditions:
     (a) Each of the representations and warranties of the Buyer set forth in
this Agreement, disregarding all qualifications and exceptions contained therein
relating to materiality or Material Adverse Effect, shall be true and correct in
all respects, in each case as of the date of this Agreement and as of the
Closing Date as though made on and as of the Closing Date, except where the
failure or failures to be true and correct would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
     (b) The Buyer shall have performed in all material respects all obligations
and complied with all covenants required to be performed by it under this
Agreement at or prior to the Closing.
     (c) The Buyer shall have delivered to the Stockholders a certificate
certifying the matters set forth in Sections 7.3(a) and (b) executed by a duly
authorized officer of the Buyer.

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ARTICLE VIII
INDEMNIFICATION
     8.1 Survival. All representations, warranties, covenants and agreements
made by Seller and Buyer in this Agreement and the documents to be executed in
connection with this Agreement shall survive the Closing.
     8.2 Indemnification by the Stockholders. Subject to the limitations set
forth in this Article VIII, after the Closing the Stockholders shall indemnify
and hold harmless the Buyer from, and shall pay to the Buyer, any and all
Damages arising, directly or indirectly, from or in connection with:
     (a) the breach of any of the representations, warranties, covenants or
agreements of any Shareholder or the Corporation contained in this Agreement or
the Related Agreements;
     (b) any Liability of the Corporation arising prior to the Closing Date
other than (i) obligations arising solely from the Corporation’s ownership of
the Purchased Assets, (ii) Liabilities that have been reflected in the
computation of the Purchase Price, and (iii) Liabilities caused by the acts or
omissions of Buyer, but only to the extent such Liabilities are caused by the
acts or omissions of Buyer;
     (c) the violation by the Corporation or any Stockholder of any Legal
Requirement, or any gross negligence or willful misconduct of the Corporation or
any Stockholder, or the performance by the Corporation or any Stockholder of its
obligations under this Agreement or any of the Related Agreements; and
     (d) any Liability of the Corporation under Contracts, other than the
Related Agreements, entered into by the Corporation that is not included as an
adjustment to the Purchase Price pursuant to Section 2.3(a).
     8.3 Indemnification by Buyer. Subject to the limitations set forth in this
Article VIII, after the Closing the Buyer shall indemnify and hold harmless the
Stockholders for, and shall pay to the Stockholders, any and all Damages
arising, directly or indirectly, from or in connection with:
     (a) the breach of any of the representations, warranties, covenants or
agreements of the Buyer contained in this Agreement or the Related Agreements;
and
     (b) the violation by the Buyer of any Legal Requirement, or any gross
negligence or willful misconduct of the Buyer, or the performance by the Buyer
of its obligations under this Agreement or any of the Related Agreements.
     8.4 Procedure for Indemnification – Third-Party Claims.
     (a) If any Person shall claim indemnification hereunder arising from any
claim or demand of a third party, the party seeking indemnification (the
“Indemnified Party”) shall notify the party from whom indemnification is sought
(the “Indemnifying Party”) in writing of the basis

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for such claim or demand and such notice shall set forth the nature of the claim
or demand in reasonable detail. The failure of the Indemnified Party to so
notify the Indemnifying Party shall not relieve the Indemnifying Party of any
indemnification obligation hereunder except to the extent that the defense of
such claim or demand is prejudiced by the failure to give such notice.
     (b) If any Proceeding is brought by a third party against an Indemnified
Party and the Indemnified Party gives notice to the Indemnifying Party pursuant
to Section 8.4(a), the Indemnifying Party may assume the settlement or defense
of such Proceeding. The Indemnified Party shall, in its sole discretion, have
the right to employ separate counsel (who may be selected by the Indemnified
Party in its sole discretion) in any such Proceeding and to participate in the
defense thereof, and the fees and expenses of such counsel shall be paid by such
Indemnified Party. If the Indemnified Party assumes the defense of such
Proceeding because of the failure of the Indemnifying Party to conduct such
defense in good faith, the fees and expenses of such counsel shall be paid by
the Indemnifying Party. The Indemnified Party shall cooperate fully with the
Indemnifying Party and its counsel in the defense or settlement of such
Proceeding. If the Indemnifying Party assumes the defense of a Proceeding, no
compromise or settlement of such claims may be effected by the Indemnifying
Party without the Indemnified Party’s consent unless (i) there is no finding or
admission of any violation of Legal Requirements or the rights of any Person by
the Indemnified Party and no Material Adverse Effect on the Indemnified Party
with respect to any other claims that may be made against it, and (ii) the sole
relief provided is monetary damages that are paid in full by the Indemnifying
Party.
     (c) If (i) notice is given to the Indemnifying Party of the commencement of
any third-party Proceeding and the Indemnifying Party does not, within ten
(10) days after the Indemnified Party’s notice is given, give notice to the
Indemnified Party of its election to assume the defense of such Proceeding, or
(ii) having assumed the defense of such Proceeding, the Indemnifying Party fails
to conduct such defense in good faith, then the Indemnified Party shall (upon
notice to the Indemnifying Party) have the right to undertake the defense,
compromise or settlement of such claim; provided that no compromise or
settlement of such claim may be affected by the Indemnified Party without the
Indemnifying Party’s consent, if (A) the Indemnifying Party will be liable for
any amounts to be paid to compromise or settle the claim, (B) there is a finding
or admission of any violation by the Indemnifying Party of any Legal Requirement
or the rights of any Person, or (C) the compromise or settlement would have a
Material Adverse Effect on the Indemnifying Party with respect to any other
claims that may be made against it. The Indemnifying Party shall reimburse the
Indemnified Party for the costs and expenses of defending against the
third-party claim (including reasonable attorneys’ fees and expenses) and the
Indemnifying Party shall remain responsible for any Damages arising from or
related to such third-party claim to the extent provided in this Article VIII.
The Indemnifying Party may elect to participate in such Proceedings,
negotiations or defense at any time at its own expense.
     8.5 Limitation on Damages.
     (a) Notwithstanding anything set forth herein to the contrary, all Damages
recoverable by an Indemnified Party shall be net of any proceeds such
Indemnified Party recovers, or is entitled to recover, under any applicable
insurance coverage and any amounts such Indemnified Party recovers, or is
entitled to recover, from third parties, except to the extent such recoveries
have or are reasonably expected to result in future or retroactive premium

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increases (any such net recovered amount, an “Insurance Recovery”). Accordingly,
the amount that an Indemnifying Party is required to pay to any Indemnified
Party will be reduced by any Insurance Recovery; provided, however, that any
Damages described in Section 8.2 or 8.3 that are incurred by an Indemnified
Party shall be paid or, in the case of amounts that may be insured, advanced,
promptly by the Indemnifying Party and shall not be delayed pending any
determination as to the availability of any Insurance Recovery. If an
Indemnified Party receives a payment required to be made under this Article VIII
from an Indemnifying Party in respect of any Losses and subsequently receives
any Insurance Recovery, then the Indemnified Party shall promptly pay such
Insurance Recovery to the Indemnifying Party.
     (b) Upon any payment of Damages to an Indemnified Party, the Indemnifying
Party shall be subrogated to all rights of the Indemnified Party with respect to
the Damages to which such indemnification relates to the extent of the amount of
such payment.
     (c) The Indemnified Party shall have no right to recover consequential,
punitive or multiplied damages except to the extent the Indemnified Party is
liable to a third party for such damages.
     8.6 Tax Treatment of Indemnity. Notwithstanding anything to the contrary in
Article VIII, any Tax or other amount for which indemnification is provided
under this Agreement shall be treated as an adjustment to the Purchase Price.
ARTICLE IX
GENERAL PROVISIONS
     9.1 No Joint Venture. The relationship between the Parties is that of
independent contractors. The Parties are not joint venturers, partners,
principal and agent, master and servant, employer or employee, and have no
relationship other than as independent contracting parties. No Party shall have
the power to bind or obligate any other in any manner.
     9.2 Expenses. Each Party shall pay all costs and expenses incurred by such
Party in connection with this Agreement and the transactions contemplated
hereby, including in each case all fees and expenses of investment bankers,
finders, brokers, agents, representatives, consultants, counsel and accountants.
     9.3 Amendment and Modification. This Agreement may be amended, modified or
supplemented only by an agreement in writing signed by the Party against whom
such amendment, modification or supplement is sought to be enforced.
     9.4 Waiver of Compliance; Consents. The rights and remedies of the Parties
are cumulative and not alternative and may be exercised concurrently or
separately. No failure or delay by any Party in exercising any right, power or
privilege under this Agreement shall operate as a waiver of such right, power or
privilege, and no single or partial exercise of any such right, power or
privilege shall preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege. To the maximum
extent permitted by applicable law, (i) no claim or right arising out of this
Agreement can be discharged by one

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Party, in whole or in part, by a waiver or renunciation of the claim or right
unless in writing signed by the other Party; (ii) no waiver that may be given by
a Party shall be applicable except in the specific instance for which it is
given; and (iii) no notice to or demand on one Party shall be deemed to be a
waiver of any obligation of such Party or of the right of the Party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement. Any consent required or permitted by this Agreement is binding
only if in writing.
     9.5 Stockholder Representative. Each Stockholder hereby irrevocably
appoints and authorizes the Stockholder Representative to act as its
representative and attorney-in-fact with full authority, in the Stockholder
Representative’s sole discretion, to (i) negotiate, defend, pursue, settle and
pay any indemnification claims, (ii) execute and deliver, as Stockholder
Representative and as attorney-in-fact for each Stockholder, and to take all
actions required of the Stockholders under, this Agreement and any other
agreement or document required to be executed by the Stockholders in connection
with the transactions contemplated by this Agreement and (iii) take any other
action that may be necessary or desirable on behalf of the Stockholders in
connection with this Agreement or any other agreement or document required to be
delivered in connection herewith or in connection with the transactions
contemplated by this Agreement. The appointment of the Stockholder
Representative by each Stockholder as its attorney-in-fact hereunder is coupled
with an interest and irrevocable. Subject to the limitations set forth in this
Section 9.5, the Stockholder Representative shall act as the representative of
the Stockholders with respect to any such act or decision to be taken or made
hereunder, and the Buyer shall be entitled conclusively to rely upon any
representation of the Stockholder Representative with respect to any act,
decision, consent or approval of the Stockholders. Notice sent to the
Stockholder Representative pursuant to Section 9.6 shall have the same force and
effect as if delivered to each of the Stockholders. The Stockholders shall be
responsible for all costs and expenses incurred by the Stockholder
Representative in connection with his duties contemplated by this Agreement.
Neither the Buyer nor the Corporation shall be held liable or accountable for
any act or omission of the Stockholder Representative.
     9.6 Notices. All notices, consents, waivers and other communications
hereunder shall be in writing and shall be (i) delivered by hand, (ii) sent by
facsimile transmission, or (iii) sent certified mail or by a nationally
recognized overnight delivery service, charges prepaid, to the address set forth
below (or such other address for a Party as shall be specified by like notice):
     If to the Stockholders or Stockholder Representative, to:

     
 
  Deerfield Management L.P.
 
  780 3rd Avenue, 37th Floor
 
  New York, New York 10017
 
  Attention: James E. Flynn
 
  Facsimile:
 
   
Copy to:
  Robinson, Bradshaw & Hinson, P.A.
 
  101 North Tryon Street, Suite 1900
 
  Charlotte, North Carolina 28246
 
  Attention: David J. Clark
 
  Facsimile: (704) 373-3990

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If to Buyer, to:
  MiddleBrook Pharmaceuticals, Inc.
 
  20425 Seneca Meadows Parkway
 
  Germantown, Maryland 20876
 
  Attention: Edward M. Rudnic, Ph.D.
 
  Facsimile: (301) 944-6700
 
   
Copy to:
  Dewey & LeBoeuf LLP
 
  1301 Avenue of the Americas
 
  New York, New York 10019
 
  Attn: Frederick W. Kanner, Esq.
 
  Facsimile: (212) 259-6333

Each such notice or other communication shall be deemed to have been duly given
and to be effective (x) if delivered by hand, immediately upon delivery if
delivered on a Business Day during normal business hours and, if otherwise, on
the next Business Day; (y) if sent by facsimile transmission, immediately upon
confirmation that such transmission has been successfully transmitted on a
Business Day before or during normal business hours and, if otherwise, on the
Business Day following such confirmation; or (z) if sent by a nationally
recognized overnight delivery service, on the day of delivery by such service
or, if not a Business Day, on the first Business Day after delivery. Notices and
other communications sent via facsimile must be followed by notice delivered by
hand or by overnight delivery service as set forth herein within five
(5) Business Days.
     9.7 Publicity. Neither Party shall issue any press release or any other
form of public disclosure regarding the existence of this Agreement or the terms
hereof, or use the name of the other Party hereto in any press release or other
public disclosure without the prior written consent of the other Party, except
(i) for those disclosures and notifications contemplated by this Agreement and
(ii) as required by any Legal Requirement and solely to the extent necessary to
satisfy such Legal Requirement.
     9.8 Assignment; No Third-Party Rights. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the Parties
hereto and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto without the prior written consent of each other
Party; provided, however, that the Stockholders may transfer any number of
Shares to any other Stockholder without prior written consent. This Agreement
and its provisions are for the sole benefit of the Parties to this Agreement and
their successors and permitted assigns and shall not give any other Person any
legal or equitable right, remedy or claim.
     9.9 Governing Law. The execution, interpretation and performance of this
Agreement, and any disputes with respect to the transactions contemplated by
this Agreement, including any fraud claims, shall be governed by the internal
laws and judicial decisions of the State of New York, without regard to
principles of conflicts of laws.
     9.10 Access to Records. Each Party shall provide the other Party with
access to all relevant documents and other information pertaining to the
Purchased Assets that are needed by

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such other Party for the purposes of preparing Tax Returns or responding to an
audit by any Governmental Authority or for any other reasonable purpose.
     9.11 Severability. If any provision contained in this Agreement shall for
any reason be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein, unless the
invalidity of any such provision substantially deprives any Party of the
practical benefits intended to be conferred by this Agreement. Notwithstanding
the foregoing, any provision of this Agreement held invalid, illegal or
unenforceable only in part or degree shall remain in full force and effect to
the extent not held invalid or unenforceable, and the determination that any
provision of this Agreement is invalid, illegal or unenforceable as applied to
particular circumstances shall not affect the application of such provision to
circumstances other than those as to which it is held invalid, illegal or
unenforceable.
     9.12 Construction. Each Party acknowledges that it and its attorneys have
been given an equal opportunity to negotiate the terms and conditions of this
Agreement and that any rule of construction to the effect that ambiguities are
to be resolved against the drafting Party or any similar rule operating against
the drafter of an agreement shall not be applicable to the construction or
interpretation of this Agreement.
     9.13 Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. This Agreement may be executed on
signature pages exchanged by facsimile, in which event each Party shall promptly
deliver to the others such number of original executed copies as the other Party
may reasonably request.
     9.14 Entire Agreement. This Agreement, including the Related Agreements,
Appendices, Schedules, Annexes and Exhibits, constitutes the entire agreement
and understanding of the Parties hereto in respect of the subject matter hereof.
The Related Agreements, Appendices, Schedules, Annexes and Exhibits hereto are
an integral part of this Agreement and are incorporated by reference herein.
This Agreement supersedes all prior agreements, understandings, promises,
representations and statements between the Parties and their representatives
with respect to the transactions contemplated by this Agreement.
[The remainder of this page is left blank intentionally.]

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     IN WITNESS WHEREOF, the Parties have executed this Stock Purchase Agreement
as of the date first written above.

            The Buyer:

MIDDLEBROOK PHARMACEUTICALS, INC.
      By:   /s/ Edward M. Rudnic         Name:   Edward M. Rudnic, Ph.D.       
Title:   President and Chief Executive Officer    

            The Corporation:

LEX PHARMACEUTICALS, INC.
      By:   /s/ Peter W. Steelman         Name:   Peter W. Steelman       
Title:   President     

            The Stockholder Representative:

DEERFIELD MANAGEMENT L.P.
      By:   /s/ James Flynn         Name:   James Flynn        Title:   General
Partner     

Signature Page to Stock Purchase Agreement

 

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            The Stockholders:

DEERFIELD PRIVATE DESIGN INTERNATIONAL FUND, L.P.
      By:   /s/ James Flynn         Name:   James Flynn        Title:   General
Partner     

            DEERFIELD SPECIAL SITUATIONS FUND, L.P.
      By:   /s/ James Flynn         Name:   James Flynn        Title:   General
Partner     

            DEERFIELD SPECIAL SITUATIONS INTERNATIONAL LIMITED
      By:   /s/ James Flynn         Name:   James Flynn        Title:   General
Partner     

            DEERFIELD PRIVATE DESIGN FUND, L.P.
      By:   /s/ James Flynn         Name:   James Flynn        Title:   General
Partner     

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APPENDIX 2
Definitions
     “Adjustment Notice” has the meaning set forth in Section 2.3(a).
     “Affiliate” means with respect to any Person, each of the Persons that
directly or indirectly, through one or more intermediaries, owns or controls, is
controlled by or is under common control with, such Person. For the purpose of
this Agreement, “control” means the possession, directly or indirectly, of the
power to direct or cause the direction of management and policies, whether
through the ownership of voting securities, by contract or otherwise.
     “Agreement” means this Stock Purchase Agreement, as it may hereafter be
amended in accordance with its terms.
     “Assumed Liability” has the meaning given such term in the Lex Asset
Purchase Agreement.
     “Business Day” means a day other than a Saturday, Sunday or day on which
banks in the City of New York are authorized or required to be closed.
     “Buyer” has the meaning set forth in the introductory paragraph of this
Agreement.
     “Buyer Documents” has the meaning set forth in Section 5.2.
     “Buyer’s Knowledge” means the actual knowledge of the Persons set forth on
Annex A.
     “Cash” means unrestricted funds in bank accounts and financial instruments
of high liquidity and safety.
     “Change in Control” means, a transaction or series of transactions
(excluding any transactions solely among Affiliates of a Person) resulting in
(i) a change in the ownership or control of 50% or more of its voting
securities, (ii) a direct or indirect change in the power to elect 50% or more
of the members of the Board of Directors or similar governing body of a Person,
(iii) the sale, lease or other disposition of all or substantially all of its
assets, (iv) a merger, consolidation or reorganization with or into another
entity after which Affiliates of the original entity do not have “control” (as
defined in the definition of “Affiliate”) of the surviving entity, or (v) any
transfer, assignment, sale, lease, license or other disposition of any interests
or rights in the Licensed Patents, except to the extent such interests or rights
relate to the Products, as defined in the Lex Asset Purchase Agreement.
     “Closing” has the meaning set forth in Section 2.6.
     “Closing Date” means the date the Closing actually takes place.
     “Code” means the Internal Revenue Code of 1986, as amended.

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     “Contract” means any note, bond, mortgage, indenture, contract, agreement,
guaranty, lien, pledge, permit, license, lease, purchase order, sales order,
arrangement or other commitment, obligation or understanding, written or oral,
to which a Person is a party or by which a Person or its assets or properties
are bound.
     “Corporation” has the meaning set forth in the introductory paragraph of
this Agreement.
     “Effective Time” has the meaning set forth in Section 2.6.
     “Encumbrance” means any security interest, mortgage, lien, pledge, charging
order, warrant, option, conversion right, purchase right or other encumbrance of
any sort.
     “First Extended Termination Time” has the meaning set forth in
Section 2.4(a).
     “GAAP” means generally accepted accounting principles as recognized by the
American Institute of Certified Public Accountants, applied on a basis
consistent with the basis on which the Financial Statements were prepared.
     “Governmental Authority” means any nation or government, any state or other
political subdivision thereof, any municipal, local, city or county government,
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
     “Governmental Authorization” means any approval, consent, license, permit,
waiver or other authorization issued, granted or given by or under the authority
of any Governmental Authority.
     “IND” has the meaning set forth in the Lex Asset Purchase Agreement.
     “Indemnified Party” has the meaning set forth in Section 8.4(a).
     “Indemnifying Party” has the meaning set forth in Section 8.4(a).
     “Initial Termination Time” has the meaning set forth in Section 2.4(a).
     “Insurance Recovery” has the meaning set forth in Section 8.5.
     “Kef” has the meaning set forth in the Background Statement.
     “Kef Asset Purchase Agreement” means the certain Asset Purchase Agreement,
dated as of the date hereof, between Kef and Buyer.
     “Kef Stock Purchase Agreement” has the meaning set forth in the Background
Statement.
     “Law” means any foreign, federal, national, supranational, state,
provincial, local or similar statute, law, ordinance, regulation, rule, code,
Order, requirement or rule of law (including common law), as amended and in
effect from time to time.

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     “Legal Requirement” means any federal, state, local or foreign statute,
law, treaty, rule, regulation, Order, decree, writ, injunction or determination
of any arbitrator, court or Governmental Authority and, with respect to any
Person, includes all such Legal Requirements applicable or binding upon such
Person, its business or the ownership or use of any of its assets.
     “Lex Asset Purchase Agreement” has the meaning set forth in the Background
Statement.
     “Liabilities” means any and all debts, liabilities and obligations or any
sort, whether accrued or fixed, absolute or contingent, matured or unmatured,
determined or determinable, including those arising under any Legal Requirement
or Contract or otherwise.
     “Licensed Patents” has the meaning given such term in Section Error!
Reference source not found. of the Kef Asset Purchase Agreement.
     “Material Adverse Effect” means (i) a material adverse effect on the
condition (financial or otherwise), results of operations, business, properties
or Liabilities of a Person, and (ii) with respect to the Part 2 Assets, a
material adverse effect on the value of such assets; provided, however, that
none of the following shall be deemed to constitute, and none of the following
shall be taken into account in determining whether there has occurred, a
Material Adverse Effect: (a) any adverse effect, change or circumstance arising
from or relating to (i) general business or economic conditions, including any
such conditions as they relate to the Corporation or the Purchased Assets,
(ii) national or international political or social conditions, including the
engagement by the United States in hostilities, whether or not pursuant to the
declaration of a national emergency or war, or the occurrence of any military or
terrorist attack upon the United States, or any of its territories, possessions,
or diplomatic or consular offices or upon any military installation, equipment
or personnel of the United States, (iii) financial, banking, or securities
markets (including any disruption thereof and any decline in the price of any
security or any market index), (iv) changes in generally accepted accounting
principles, (v) changes in any Legal Requirements, (vi) the negotiation,
execution, delivery, public announcement or the pendency of this Agreement, the
Related Agreements or the transactions contemplated hereunder or thereunder,
(vii) the loss of the services of any employee by reason of resignation,
retirement, death or permanent disability, (viii) the taking of any action
required by this Agreement or the Related Agreements in connection with the
transactions contemplated hereunder or thereunder, or (viii) the financial
performance or results of operations of such Person or any indicators or
measures thereof and (b) any adverse effect, change, circumstance or effect on
the Purchased Assets or the business of such Person that is cured by such Person
before the earlier of (i) the Closing Date and (ii) the expiration of the Stock
Purchase Period.
     “Order” means any binding order, judgment, ruling, subpoena or verdict
rendered by any Governmental Authority or by any arbitrator.
     “Party” means the Buyer, any Stockholder or the Stockholder Representative,
and “Parties” means all such Persons.
     “Patent Sublicense” means the Patent Sublicense Agreement, if any, executed
pursuant to Section 3.4(e)(iii) of the Kef Asset Purchase Agreement.

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     “Permitted Encumbrances” means (i) all Encumbrances approved in writing by
the Buyer; (ii) mechanics’, materialmen’s, carriers’, workmen’s, warehousemen’s,
repairmen’s, landlords’ liens or other like Encumbrances arising or incurred in
the ordinary course of business for amounts which are not material and not yet
due and payable; (iii) Encumbrances for Taxes and other governmental charges
that are not due and payable or delinquent or which are being contested in good
faith through appropriate Proceedings and (iv) Encumbrances arising under sales
Contracts and equipment leases with third parties entered into in the ordinary
course of business in respect of amounts still owing.
     “Person” means any corporation, association, joint venture, partnership,
limited liability company, organization, business, individual, trust,
Governmental Authority or other legal entity.
     “Proceeding” means any action, arbitration, audit, hearing, investigation,
litigation or suit (whether civil, criminal or administrative) commenced,
conducted, or heard by or before any Governmental Authority or arbitrator.
     “Purchase Price” has the meaning set forth in Section 0.
     “Purchased Assets” has the meaning given such term in the Lex Asset
Purchase Agreement.
     “Registration License” means the Registration and Trademark License
Agreement, dated as of the date hereof, between the Buyer and the Corporation,
as it may be extended, amended or supplemented.
     “Registration Rights” has the meaning set forth in Section 2.2.
     “Related Agreement(s)” means each and all of the agreements set forth in
Exhibits to this Agreement as well as the Lex Asset Purchase Agreement, the Kef
Asset Purchase Agreement and the Kef Stock Purchase Agreement and all of the
agreements set forth in Exhibits thereto.
     “Second Extended Termination Time” has the meaning set forth in
Section 2.4(b).
     “Securities Act” means the Securities Act of 1933, as amended.
     “Shares” has the meaning set forth in the Background Statement.
     “Stock Purchase” has the meaning set forth in Section 2.1.
     “Stock Purchase Base Price” means the product of Two Million Dollars
($2,000,000) and the Years Since Execution.
     “Stock Purchase Notice” has the meaning set forth in Section 2.4(c).

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     “Stock Purchase Period” means the period beginning as of the date of this
Agreement and ending upon the earlier of (i) the exercise of the Stock Purchase
Right or (ii) at the Initial Termination Time, unless extended pursuant to
Section 2.4(a) or 2.4(b), or earlier if terminated pursuant to Section 2.5.
     “Stock Purchase Period Extension Payment” means any and all payments made
pursuant to Section 2.4(a), 2.4(b) and 2.4(c) in connection with an extension of
the Stock Purchase Period.
     “Stock Purchase Right” has the meaning set forth in Section 2.1.
     “Stockholder” and “Stockholders” have the meaning set forth in the
introductory paragraph of this Agreement.
     “Stockholder Documents” has the meaning set forth in Section 4.2.
     “Stockholder Representative” has the meaning set forth in the introductory
paragraph of this Agreement, as supplemented by Section 9.5.
     “Stockholders’ Knowledge” means the actual knowledge of the Persons set
forth on Annex B.
     “Straddle Period” means any Taxable Period that begins on or before, and
ends after, the Closing Date.
     “Taxable Period” shall mean any taxable year or any other period that is
treated as a taxable year (or other period, or portion thereof, in the case of a
Tax imposed with respect to such other period; e.g., a quarter) with respect to
which any Tax may be imposed under any applicable statute, rule, or regulation.
     “Taxes” means any and all federal, provincial, state, local and foreign
taxes, assessments and other governmental charges, duties, impositions, levies
and Liabilities, including, without limitation, taxes based upon or measured by
gross receipts, income profits, sales, use and occupation, and value added,
goods and services, ad valorem, transfer, gains, franchise, withholding,
payroll, recapture, employment, excise, unemployment, insurance, social
security, business license, occupation, business organization, stamp,
environmental and property taxes, together with all any interest, penalties and
additions imposed with respect to such amounts. For purposes of this Agreement,
“Taxes” also includes any obligations under any agreements or arrangements with
any person with respect to the Liability for, or sharing of, Taxes (including,
without limitation, pursuant to Treas. Reg § 1.1502-6 or comparable provisions
of state, local or foreign Tax law) and including, without limitation, any
Liability for Taxes as a transferee or successor, by contract or otherwise.
     “Tax Return” means any return, statement, declaration, report, estimate,
notice, form, schedule or other document (including estimated Tax returns and
reports, withholding Tax returns and reports, any schedule or attachment,
information returns and reports and any amendment to any of the foregoing)
relating to taxes.

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     “Third Extended Termination Time” has the meaning set forth in
Section 2.4(c).
     “Warrants” has the meaning set forth in Section 2.2.
     “Years Since Execution” means the number of years, expressed as a whole
number, rounding up, between the date hereof and the date of the exercise of the
Stock Purchase Right.

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