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PAR BUYS OUT THREE QUAD SENIOR MANAGERS, CLEANS SLATE

Executive Summary

PAR BUYS OUT THREE QUAD SENIOR MANAGERS, CLEANS SLATE of lingering ownership issues and permits Par's new management to deal with the unfolding regulatory questions related to the generic drug scandal. Under an agreement in principle announced April 12, Par will purchase 40% of the equity in its Quad subsidiary from three managers. The company noted that "Quad's senior management, who are currently on leaves of absence from their duties, would resign upon consummation of the transaction." The deal is pending "the finalization and execution of definitive agreements and approval of the transaction by Par's and Quad's Boards of Directors," an April 12 press release says. The 40% stake in Quad is equally divided between the firm's three top execs: Senior VP-Secretary Raja Feroz, Senior VP-treasurer Dulal Chatterji, and Exec VP Asrar Burney. The three execs had previously purchased the 10% stake in the firm owned by Quad's former President and CEO Dilip Shah, who sold his interest in the company before tendering his resignation. In September, Shah was sentenced to two years probation, 60 days of work release and one year of community service, and fined $250,000 for paying $32,000 in illegal gratuities to FDA generic drug reviewers ("The Pink Sheet" Sept. 18, 1989, p. 2). Burney had served as Quad's acting president while Shah took a leave of absence prior to his resignation. Other problems have arisen at Quad. Par recently reported that 15 injectable drug entities manufactured by the subsidiary did "not conform fully to the terms of their approved ANDAs." Quad recalled 93 lots of 22 drug products in late March ("The Pink Sheet," April 2, T&G-14). In early 1985, Par acquired 80% of the injectables manufacturer, then called BetaMed. The remaining 20% was purchased in the latter part of 1986. In total, Par paid $2 mil. for BetaMed. Difficulties over ownership rights apparently developed over continued equity participation by the BetaMed execs. An August 1986 prospectus on the Par/BetaMed merger notes, that after the merger, "four key employees of BetaMed will receive an equity interest in the surviving corporation." Subsequent to a complaint filed by the four execs, Par transferred 40% of its interest in Quad to the four subsidiary employees in December 1988, Par's 1988 annual report says. In December 1987, the execs sought a declaration that Par had breeched the agreement, and asked for a judgment for damages allegedly caused by Par's failure to transfer the stock in November 1986. The parties reached a settlement, which involved placing certain restrictions on the shares of Quad.
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