Engagements

PharmEng International Inc., PharmEng Technology Inc. and Keata Pharma, Inc.

Proposal Proceedings

On April 14, 2009, PharmEng International Inc. (“PII”) and two of its subsidiaries PharmEng Technology Inc. (“PTI”) and Keata Pharma, Inc. (“Keata”) (collectively “PharmEng” or the “Companies”) each filed a Notice of Intention to Make a Proposal (“NOI”) pursuant to Section 50.4 of the Bankruptcy and Insolvency Act (“BIA”). A. Farber & Partners Inc. (“Farber”) was appointed Trustee in the Proposal of the Companies.

PII’s day-to-day operations will continue uninterrupted throughout the NOI process while PII undertakes to restructure and implement a plan of reorganization. The objective of filing the NOIs is to regain financial footing. Of paramount importance is to retain its customers throughout the process by providing no disruption to service levels.

On May 13, 2009, by Order of the Honourable Justice Wilton-Siegel, PharmEng was granted a 45 day extension of the time to file its Proposal to June 28, 2009. On June 26, 2009, PharmEng filed a proposal with the Proposal Trustee.

At the July 17, 2009 meeting of creditors, the creditors approved a three month adjournment of the meeting to allow various realization options to be pursued further, to allow for determination of secured creditor claims and to allow for the debtors to further explore options for contributions from secured creditors or third parties.

At the October 23, 2009 reconvened meeting of creditors, the Trustee received approval from the creditors for a further three-month adjournment of the meeting to allow time to pursue and complete realization options.

The second reconvened meeting was held January 29, 2010. The creditors of PII approved a further three- month adjournment of the meeting to allow time to pursue and complete realization options. The creditors of Keata (now re-named to 2052940 Ontario Inc.) and PTI refused both Proposals because there were no funds to support a Proposal for either company. Therefore, 2052940 Ontario Inc. and PharmEng Technology Inc. were deemed bankrupt on January 29, 2010.

The minutes of each of the meetings for each entity are set out below.

On July 22, 2009, an Order was granted by the Honourable Madam Justice Spies approving an Asset Purchase Agreement in respect of Canadian assets and property relating to the Consulting Business.

Interim Receivership

By way of a Motion returnable on May 5, 2009, Labki Finance Inc. (“Labki”), a secured creditor of the Companies) obtained an Order appointing Farber as Interim Receiver of all of the Companies’ current and future assets, undertaking and properties of every nature and kind whatsoever, and wherever situate including all proceeds thereof with authority limited to the provisions of the Order. For greater certainty, the Interim Receiver was appointed for the limited purpose of conducting a sale and marketing process (“Sales Process”). Further details on the Sales Process are set out below. The Interim Receiver was not take possession or control of the property of the Companies nor was the Interim Receiver to manage or operate the business and undertaking of the Companies.

An Order was granted on June 2, 2009 approving the extension of the Sales Process timetable and in particular extending the outside dates for receiving offers from June 3, 2009 to no later than 5:00 pm EDT on June 17, 2009. Please refer to the Order dated June 2, 2009 below for the revised Sales Process timetable. A Superior bid was received for the sale of the Consulting Business on this date and this offer has been accepted and approved by the Court.

The deadline for the sale of the Arnprior and Sydney Facilities was further extended to 5:00 p.m. EDT, June 24, 2009.

None of the offers for the Arnprior Facility and Sydney Facility were acceptable to the Interim Receiver. PharmEng in consultation with the Interim Receiver and the senior lender has developed a plan to affect an orderly production schedule at the Arnprior Facility based upon binding purchase orders from customers, while at the same time further attempts are made to locate a purchaser or purchasers of the Arnprior and Sydney Facilities and other assets of PharmEng.

By way of a Motion returnable November 4, 2009 2186827 Ontario Inc. (“218”) (a secured creditor of the Companies) obtained an Order authorizing and instructing 1) the Interim Receiver to pay the proceeds of the sale of the Canadian consulting assets of $330,000 to 218, 2) Keata Pharma, Inc. to pay an amount of $294,947.30 to 218 in consideration of its liabilities, and 3) upon 218’s receipt of $500,000.00 of proceeds in connection the sale of PharmEng USA Inc. (not a party to these proceedings), for 218 to discharge its security. The aggregate amount of these payments is $1,124,947.30, representing the debt owing to 218 which has been paid.

On November 16, 2009, Labki filed a motion requesting an order to expand the powers of the Interim Receiver to include the powers to sell the assets and property of Keata, and to collect Keata’s accounts receivable. In addition, Labki requested an order for the approval of the sale of certain assets and property related to Keata’s Arnprior facility to Pillar5 Pharma Inc. (“Pillar5”). This motion was returnable November 30, 2009.

On November 23, 2009, BHC Interim Funding II, L.P. (“BHC”), a secured creditor of PharmEng, filed a motion requesting, inter alia, that the Interim Receiver (1) disclose the terms of the Pillar5 offer to BHC; and (2) conduct a sale of the Arnprior facility by way of an auction between Pillar5 and BHC. This motion was also returnable November 30, 2009.

On November 30, 2009, the motion filed by BHC was withdrawn, and the motions filed by Labki were approved for the sale of the Arnprior Facility owned by Keata. The first order (the “November 30 Order”) expanded the powers of the Interim Receiver to include the powers to sell the assets and property of Keata, and to collect Keata’s accounts receivable and take control of it cash. In addition, an Approval and Vesting Order (the “Arnprior Sale Order”) was granted for the sale of the property, plant and equipment and inventory (but not the cash and accounts receivable) of the Arnprior Facility to Pillar5. Concurrent with this sale transaction, Keata Pharma, Inc. had a name change and became 2052940 Ontario Inc.

On December 29, 2009, a Court Order was granted approving, among other matters, an interim distribution of $7 million to Labki, which has since been paid, as well as the activities and fees of the Interim Receiver Farber and its independent legal counsel. The motion materials, including the Interim Receiver’s Seventh Report, and the December 29, 2009 Order are attached below.

On February 19, 2010, Labki filed a motion to approve the sale of the Sydney Facility. This motion is returnable February 24, 2010 and is posted below under “Motion Materials”.

On February 24, 2010, the Court granted an Order approving the sale of the Sydney Facility. The transaction ultimately closed in April 2010, the purchaser being Stirling Pharma Inc.

January 20, 2010 Motion – Proceeds for Eligible Employees

As mentioned above, the Court approved the sale of the Arnprior Business to Pillar5 on November 30, 2009 and the transaction was closed effective that same date. There is now a January 20, 2010 Court Order to deal with certain employees terminated and not rehired by Pillar5, regarding potential funds that will be set aside in trust and paid out to former employees employed at the Arnprior Facility by Pfizer Inc., (“Pfizer”) which owned the Arnprior Facility prior to its sale to Keata in late 2007.

Pursuant to a Purchase and Sale Agreement dated December 17, 2007 Keata purchased the Arnprior Facility from Pfizer (hereinafter the “Pfizer Sale Agreement”). That agreement provided for contribution to termination benefits, in the event former Pfizer employees were terminated from Keata within two years after the closing of the Pfizer Sale Agreement.

As part of the transaction with Pillar5, all of the remaining Keata employees were terminated. Although Pillar5 offered employment to 95 of those employees there were 21 former Pfizer employees that were not offered employment by Pillar5. In addition, there were 12 former Pfizer employees terminated in October 2009. As a result of the insolvency of Keata, Keata is not in a position to make termination and severance payments. Pfizer would have been responsible for payment of the “Remaining Pool Monies” to Keata under section 7.4(A) of the Pfizer Sale Agreement. It is now proposed that Pfizer shall pay the Remaining Pool Monies into trust, to be held by the Interim Receiver, for distribution to the Eligible Employees (as defined in the motion materials) in accordance with a distribution schedule established by an order of the Court. Notice of this motion by Keata was provided to each Eligible Employee by way of a letter sent to them at their last known email address and by regular mail sent to their last known home address. The form of letter sent to each employee includes the amount he or she will receive from the proposed distribution. A complete copy of the motion materials is posted below as “January 20, 2010 Order – Proceeds for Eligible Employees”, and all Eligible Employees have been directed to the relevant link on this website for access to those materials.

For further information of Eligible Employees, the payout of Remaining Pool Monies was approved by the Court on February 10, 2010. A copy of the Order is attached below under “Pfizer Proceeds for Eligible Employees”.Specifically, the Order provides for the following:

“THIS COURT ORDERS that Farber is hereby authorized and directed to distribute the Remaining Pool Monies to the Eligible Employees in accordance with the distribution scheme attached as Exhibit “C” to the Carkner Affidavit, net of deduction of 2% for administration costs, provided that prior to issuing a payment to an Eligible Employee, such Eligible Employee shall have delivered to Farber an executed copy of the letter attached as Exhibit “D” to the Carkner Affidavit.”

Effective March 15, 2010, Farber had received 32 out of 33 releases via the former HR management of Keata. If you believe you are an Eligible Employee but have not provided a release, please contact us or the former HR management of Keata.

The Remaining Pool Monies were received by Farber from Pfizer the week ended March 14, 2010. These funds were paid to the 32 Eligible Employees who had signed releases on March 16, 2010.

General

Queries about PharmEng may be directed to Robert Gallop at (416) 496-3711 or by email to rgallop@farberfinancial.com.

The purpose of this website is to provide documents to any interested persons regarding the Proposals of the Companies. The documents listed below are in .pdf format and can be viewed and/or downloaded.

Notice of Intention to Make a Proposal

Proposal Documentation

Bankruptcy Documentation

Minutes of Creditors’ Meeting

Motion Materials

  • Motion Record (Labki) returnable November 30, 2009

Orders

Reports

Pfizer Proceeds for Eligible Employees

  • Motion Record (re Eligible Employees) returnable January 20, 2010