EXHIBIT 10.5
SHAREHOLDER AGREEMENT
This Agreement ("Agreement") made as of the 10th day of February, Nineteen
Hundred Ninety-five by and among XXXXXX XXXXXXX, having an address at 000 Xxxx
Xxxx, Xxxxxxxxxxx, Xxx Xxxxxx 00000 (hereinafter sometimes referred to as "RP"),
and T. XXXXX XXXXXXXX having an address at 00 Xxxxxxx Xxx, Xxxxxx, Xxx Xxxx
00000 (hereinafter sometimes referred to as "TCC"), T. XXXXXX XXXXXXXX having an
address at 000 Xxxxxx Xxxx, Xxxxxx, Xxx Xxxx 00000 (hereinafter sometimes
referred to as "TNC"); XXXX XX having an address at 000 Xxxxxxxx Xxxxx Xxxx,
Xxxxxx, Xxx Xxxx 00000 (hereinafter sometimes referred to as "ML"); XXXXXX XXXX
having an address at 00 Xxx Xxx Xxxx, Xxxxxxx, Xxxxx 000000 (hereinafter
sometimes referred to as "JC"), TCC, TNC, ML and JC are hereinafter sometimes
collectively referred to as "Xxxxxxxx Group". In this Agreement, RP and the
Xxxxxxxx Group are sometimes collectively referred to as Stockholders or
Shareholders or Parties or individually as Shareholder, Stockholder or Party.
WITNESSETH
WHEREAS, the Xxxxxxxx Group has special expertise, relationships and
contacts within the research and medical communities of China which have
resulted in the signing of a Strategic Alliance Agreement (Appendix A) and
Exclusive Licensing Agreement (Appendix B) with the Institute of Nutrition &
Food Hygiene; and
WHEREAS, RP has skills, expertise and know how to identify, develop, market
and promote healthcare products; and
WHEREAS, the Parties are desirous of combining their resources to acquire,
research, develop and market innovative products from natural herbs for
treatment and prevention of disease and maintenance of health and well being;
and
WHEREAS, the Parties may also engage in other business activities
including, but not limited to, contract manufacturing and importation of
products into China; and
NOW THEREFORE, in consideration of the sum of One ($1.00) Dollar and other
good and valuable considerations, the Parties agree as follows:
ARTICLE I: INCORPORATION
1.1 To form a Corporation in the State of Delaware called PacificHealth
Laboratories, Inc. or a similar named entity (hereinafter referred to as the
"Corporation").
1.2 The Corporation shall initially have four (4) directors.
1.3 The Corporation will be located initially at 0000 Xxxxx 0 Xxxxx,
Xxxxxxxxxx, Xxx Xxxxxx 00000.
ARTICLE II: STOCK
2.1 The Corporation shall be authorized to issue Ten Million (10,000,000)
shares with a par value of one mil (.001) per share.
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2.2 Shares in the amount of Two million five hundred thousand (2,500,000)
shall be issued as follows:
Xxxxxx Xxxxxxx 1,250,000 shares
T. Xxxxx Xxxxxxxx 359,750 shares
Xxxxxx Xxxx 329,750 shares
Xxxx Xx 230,750 shares
T. Xxxxxx Xxxxxxxx 329,750 shares
2.3 The above shares should be paid for and issued within thirty (30) days
after the Corporation has been formed.
ARTICLE III: BOARD OF DIRECTORS
3.1 The Board of Directors shall consist initially of four (4) individuals,
two (2) to be nominated by RP and two (2) to be nominated by the Xxxxxxxx Group.
3.2 A Board of Directors incentive plan will be created for the initial
directors subject to subsequent Agreements which may be entered into by the
Corporation.
ARTICLE IV: ORGANIZATION
4.1 RP will be appointed to the position of Chairman and Chief Executive
Officer (CEO) and enter into an employment agreement with the Corporation. The
employment agreement shall include base salary, bonus and stock options, the
terms of which shall be approved by the Board of Directors of the Corporation.
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4.2 The Parties shall mutually agree upon a Secretary for the Corporation.
ARTICLE V: INITIAL FUNDING
5.1 The Xxxxxxxx Group has elected not to put up their pro rata share of
the monies needed to initially fund the Corporation; therefore, RP has agreed to
advance the sum of up to Twenty-Five Thousand ($25,000) as a loan to the
Corporation.
5.2 Such loan shall bear interest at the prime rate as set from
time-to-time by Chase Manhattan Bank of North America and at the option of RP
shall be convertible to stock of the Corporation at a price equal to Eighty
Percent (80%) of the per share paid by the Additional Funding Lenders as
specified in Paragraph 5.3.
5.3 Parties agree to seek out an Additional Funding Loan in the amount of
Two Hundred and Twenty-Five Thousand ($225,000). Such Additional Funding Loan
shall bear interest at the prime rate as set from time-to time by Chase
Manhattan Bank of North America and at the option of the Bridge Funding Lender
shall be convertible to stock of the Corporation at a per share price to be
mutually agreed upon.
5.4 RP and the Xxxxxxxx Group shall have the right, but not the obligation,
to participate in the Bridge Funding Loan. If RP and the Xxxxxxxx Group elect to
participate in the Additional Funding Loan, such loan shall bear interest at the
prime rate as set from time-to-time by Chase Manhattan Bank of North America and
at the option of RP and/or the Xxxxxxxx Group be convertible
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into stock of the Corporation at a per share price equal to Eighty percent (80%)
of the per share price paid by the Bridge Funding Lenders as specified in
Paragraph 5.3.
ARTICLE VI: TRANSFERABILITY OF STOCK
6.1 Any Shareholder shall have the right to transfer up to 30% (thirty
percent) of his shares without the consent of all Shareholders as long as such
transfers are made in accordance with the terms and conditions as provided in
this Agreement.
ARTICLE VII: SALE OF STOCK
7.1 If a Stockholder (the "Selling Stockholder) desires to sell, transfer
except as provided in Article VI. or otherwise as permitted, dispose of his
Stock and has a bona fide offer in writing (the "Offer"), from a third Party
(the "Offeror") to purchase his Stock, the Selling Stockholder must first offer
such stock to the Other Stockholders at the purchase price and under the terms
specified in the offer.
(a) the Selling Stockholder shall promptly give written notice to the
Corporation and to the Other Stockholder(s), which notice shall include a true
and correct copy of the Offer.
(b) The Other Stockholders may purchase the Stock pursuant to subparagraph
5(c) in proportion to their current share holdings if both desire to purchase or
in total if only one other Shareholder remains or is desirous of purchasing the
stock.
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(c) The Other Stockholders may elect to purchase the Selling Stockholder's
Stock by giving written notice to the other Parties hereto no later than thirty
(30) days after the receipt of notice of the Offer from the Selling Stockholder.
The purchase price and all the terms and conditions shall be as set forth in the
Offer except that the payment terms shall be as set forth in Paragraph 6 hereof
and except that the down payment shall not be less than that provided in
Paragraph 6.
(d) If the Other Stockholders elect to purchase the Selling Stockholder's
Stock, the closing of the purchase and sale shall be held in accordance with the
terms and conditions of the Offer, except for the payment terms and except that
the closing shall take place at a location mutually agreed to by the Parties. If
the Other Stockholders do not elect to purchase the Selling Stockholder's Stock
or, having elected to purchase, fail to close the transaction in accordance with
the Offer as modified herein, the Selling Stockholder shall have the right to
sell his Stock to the Offeror, but only to such person, and only upon the terms
and conditions set forth in the Offer, provided that in no event shall the
closing of such sale take place no more than 120 days after the expiration of
the thirty (30) day period provided in subparagraph 3(c) above.
7.2 Any person or entity acquiring Stock pursuant to this paragraph, as a
condition of such acquisition, shall agree to be bound by all the terms of this
Agreement.
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7.3 The Other Stockholders shall have the right to designate another
individual or entity to purchase the Selling Stockholder's Stock, which
designation, to be effective, must be made at the same time as the election by
the Other Stockholder of whether or not to purchase the Selling Stockholder's
Stock.
7.4 In the event of an attempted Transfer by any Stockholder not in
accordance with the terms of this Agreement, such attempted Transfer shall be
null and void as if the same were never made or done.
ARTICLE VIII: LIMITATION ON CORPORATE REORGANIZATION
8.1 In the event of any purchase of Stock pursuant to this Agreement, the
Remaining Shareholder shall not transfer any substantial portion of the assets
of the Corporation (substantial portion shall mean greater than 20% of the
assets of the Corporation), or increase his compensation or the compensation of
any related party by more than the greater of 5% per annum or the percentage
increase in the Cost of Living Index for Northeast Urban dwellers, or to enter
into any business directly competing with the then business of the Corporation
without posting adequate security for the remaining payments due on the purchase
of the Stock or the written approval by the selling Stockholder.
ARTICLE IX: STEPS REQUIRED
9.1 In any case in which the Corporation elect or is required to purchase
any shares of Stock hereunder, the Parties
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hereto agree, if necessary, to take in a reasonably prudent business manner
whatever lawful steps are required or permitted so that the Corporation can
consummate such purchase, and, if required, create surplus sufficient for the
purchase of such Stock.
ARTICLE X: RIGHT OF SET-OFF
10.1 In the event that a purchase occurs hereunder, the remaining
Shareholder shall have the right to cause the Corporation to purchase some or
all of the Stock of the Other Shareholder and to set-off any amounts due from
such departing Shareholder to a Corporation under any provision of this
Agreement from any amounts due to the departing Shareholder from any party under
this Agreement.
ARTICLE XI: SECURITIES LAWS
11.1 The Stockholders acknowledge that the capital stock of the Corporation
acquired by them has not been registered under the Securities Act of 1933
(hereinafter referred to as the "Act") or any state securities law (the "State
Acts"). The Stockholders severally represent ad warrant that they have acquired
their shares of capital stock of the Corporation without a view to the offer,
offer for sale, or sale in connection with, the distribution of such shares of
capital stock, and, subject to the terms of this Agreement, that they will hold
such shares of capital stock indefinitely unless subsequently registered under
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the Act and the State Acts or unless exception from such registration is
available and an opinion of counsel for the Corporation, in form and substance
satisfactory to the Corporation, is obtained to that effect. The provisions of
this Agreement are in all respects subject to the restrictions of the Act and
the State Acts and regulations thereunder.
11.2 Each Stockholder realizes that the Corporation does not file, and does
not in the foreseeable future contemplate filing, periodic reports in accordance
with the provisions of Sections 13 of 15(d) of the Securities and Exchange Act
of 1934, and also understands that the Corporation has not agreed to register
any of its securities for distribution in accordance with the provisions of the
Act or to take any actions respecting the obtaining of an exemption from
registration for such securities or any transaction with respect thereto.
ARTICLE XII: AMENDMENTS
12.1 This Agreement may not be altered or amended, except by written
agreement among the Parties, and shall terminate upon the written consent of all
the Parties or with respect to the Corporation upon its dissolution.
ARTICLE XII: ENTIRE AGREEMENT
13.1 This Agreement is the complete, sole and exclusive expression of all
of the agreements, understandings,
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representations, conditions, warranties and covenants made between the parties
hereto, and supersedes any prior agreements.
ARTICLE XIV: FAILURE TO PERFORM
14.2 The failure of either party at any time to require performance by the
other party of any provision hereof shall not affect in any way the full right
to require such performance at any time thereafter. Nor shall the waiver by
either party of a breach of any provision hereof be taken or held to be a waiver
of the provision itself.
ARTICLE XV: GOVERNING LAW
15.1 This Agreement shall be construed in accordance with the laws of the
State of New Jersey.
ARTICLE XVI: BENEFITS & BURDENS
16.1 This Agreement and all of its provisions shall be binding upon the
legal representatives, heirs, distributees, successors and permitted assigns of
the parties.
ARTICLE XVII: UNENFORCEABILITY
17.1 The invalidity, unenforceability or impossibility of any particular
provision of this Agreement shall not affect any other provision hereof, and the
Agreement shall be construed in all respects as if such invalid unenforceable or
impossible provision were omitted.
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ARTICLE XVIII: BREACH
18.1 Should either party commit any substantial breach of any provision of
this Agreement, the Agreement may be terminated by the other party giving notice
to the party committing such breach on ninety (90) days notice specifying the
breach complained of, provided however that such notice shall not be effective
if within ninety (90) days the defaulting party substantially corrects the
breach.
ARTICLE XIX: ARBITRATION
19.1 Any dispute or controversy arising out of or relating to this
Agreement, any document or instrument delivered pursuant to, in connection with,
or simultaneously with this Agreement, or any breach of this Agreement or any
such document or instrument shall be settled by arbitration to be held in the
County of Monmouth in the State of New Jersey in accordance with the rules then
in effect of the American Arbitration Association or any successor thereto.
19.2 The arbitrator may grant injunction or other relief in such dispute or
controversy and may determine which Party shall be responsible for attorneys'
fees, costs and other expenses of such arbitration. The decision of the
arbitrator shall be final, conclusive and binding on the parties to the
arbitration. Judgment may be entered on the arbitrator's decision in any court
having jurisdiction and the parties irrevocably consent to the jurisdiction of
the New Jersey courts for this purpose. Unless
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determined by the arbitrator, each Party shall pay its pro rata share of the
costs and expenses of such arbitration and each Party shall separately pay his
own attorneys' fees and expenses.
ARTICLE XX: NON-COMPETE
20.1 While this Agreement is in force, no Party shall engage in any
activity that is competitive to the business of the Corporation, directly own
more than Five percent (5%) of shares in a public company that is competitive to
the Corporation or is directly or indirectly involved in the management of any
company competitive to the Corporation subject to the exclusion that ownership,
participation or management by T. Xxxxx Xxxxxxxx; T. Xxxxxx Xxxxxxxx; and Xxxxxx
Xxxx in (1) bioassays and other technologies or products resulting from a
Prospective Survey planned by the Xxxxxxxx Group in China, (2) activities
related to the parenteral personal care products under feature agreements with
NuSkin International, and (3) the business of Paracelsian, Inc. is permitted.
ARTICLE XXI: INDEMNIFICATION
21.1 TNC and TCC shall indemnify and hold RP and PacificHealth
Laboratories, Inc., harmless against any and all lawsuits, claims, demands,
liabilities, damage or expense including reasonable attorneys fees which may be
made against or suffered or incurred by RP or PacificHealth Laboratories, Inc.,
its employees, officers, successors and assigns as a result of
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any negligence or breach of any written contract or agreement, between TNC, TCC
and/or Pacific Liaison and Paracelsian, Inc. prior to the execution of this
Agreement.
ARTICLE XXII: NOTICE
22.1 Any notice, request, demand, payments or other communication required
or permitted hereunder shall be deemed to be properly given when deposited in
the United States Mail, Certified, Return Receipt Requested, Postage Pre-paid
and Addressed:
a. In the case of the Xxxxxxxx Group to
T. Xxxxx Xxxxxxxx, Ph.D.
00 Xxxxxxx Xxx
Xxxxxx, Xxx Xxxx 00000
or to such other person or address as the
Xxxxxxxx Group may furnish to the Corporation.
b. In the case of RP to
Xxxxxx Xxxxxxx, Ph.D.
000 Xxxx Xxxx
Xxxxxxxxxxx, Xxx Xxxxxx 00000
or to such other person or address as PR may furnish to the
Corporation.
ARTICLE XXIII: CAPTIONS
23.1 The captions in this Agreement are for convenience only and shall not
be considered a part of or affect the construction or interpretation of any
provision of this Agreement.
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ARTICLE XXIV: ENTIRE AGREEMENT
24.1 This Agreement, as the attachments hereto and the references herein,
constitute the entire agreement among the Parties pertaining to the subject
matter hereof and supersede all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the Parties and there are no
warranties, representations or other agreements among the Parties in connection
with the subject matter hereof except as specifically set forth or referred to
herein.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
WITNESS:
4/18/95 /s/ Xxxxxx Xxxxxxx
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XXXXXX XXXXXXX, Ph.D.
4/18/95 /s/ T. Xxxxx Xxxxxxxx
------------------------------ ------------------------------
T. XXXXX XXXXXXXX, Ph.D.
4/26/95 /s/ Xxxxxx Xxxx
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XXXXXX XXXX, M.D.
4/19/95 /s/ Xxxx Xx
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XXXX XX, M.D.
4/19/95 /s/ T. Xxxxxx Xxxxxxxx
------------------------------ ------------------------------
T. XXXXXX XXXXXXXX
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AMENDMENT TO SHAREHOLDERS AGREEMENT
-----------------------------------
This Amendment made as of the 3rd day of May, Nineteen Hundred Ninety-five
by and among XXXXXX XXXXXXX, having an address at 000 Xxxx Xxxx, Xxxxxxxxxxx,
Xxx Xxxxxx 00000 (hereinafter sometimes referred to as "RP"), and T. XXXXX
XXXXXXXX having an address at 00 Xxxxxxx Xxx, Xxxxxx, Xxx Xxxx 00000
(hereinafter sometimes referred to as "TCC"), T. XXXXXX XXXXXXXX having an
address at 000 Xxxxxx Xxxx, Xxxxxx, Xxx Xxxx 00000 (hereinafter sometimes
referred to as "TNC"); XXXX XX having an address at 000 Xxxxxxxx Xxxxx Xxxx,
Xxxxxx, Xxx Xxxx 00000 (hereinafter sometimes referred to as "ML"); XXXXXX XXXX
having an address at 00 Xxx Xxx Xxxx, Xxxxxxx, Xxxxx 000000 (hereinafter
sometimes referred to as "JC"), TCC, TNC, ML and JC are hereinafter sometimes
collectively referred to as "Xxxxxxxx Group". In this Agreement, RP and the
Xxxxxxxx Group are sometimes collectively referred to as Stockholders or
Shareholders or Parties or individually as Shareholder, Stockholder or Party.
WITNESSETH
WHEREAS, the Parties are desirous of amending the Agreement made between
them as of the 10th day of February, 1995.
NOW, THEREFORE, in consideration of the sum of One ($1.00) Dollar and other
good and valuable considerations, the Parties agree as follows:
1. Article II, Section, 2.2 is hereby amended to read follows:
"2.2 Shares in the amount of Three million (3,000,000) shall be issued
as follows:
Xxxxxx Xxxxxxx 1,500,000 shares
T. Xxxxx Xxxxxxxx 431,700 shares
Xxxxxx Xxxx 395,700 shares
Xxxx Xx 276,900 shares
T. Xxxxxx Xxxxxxxx 395,700 shares
1. Article II, Section, 2.3 is hereby amended to read as follows:
"2.3 The above shares shall be paid for and issued within thirty (30)
days after the initial meeting of the Board of Directors following the
resignation of the Sole Director."
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
WITNESS:
May 9, 1995 /s/Xxxxxx Xxxxxxx
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XXXXXX XXXXXXX, Ph.D.
May 9, 1995 /s/T. Xxxxx Xxxxxxxx
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T. XXXXX XXXXXXXX, Ph.D.
May 10, 1995 /s/Xxxxxx Xxxx
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XXXXXX XXXX, M.D.
May 9, 1995 /s/Xxxx Xx
----------------- ----------------------------
XXXX XX, M.D.
May 9, 1995 /s/T. Xxxxxx Xxxxxxxx
---------------- ----------------------------
T. XXXXXX XXXXXXXX
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