WARRANT EXERCISE AGREEMENT
THIS AGREEMENT, dated as of December 14, 2005 (this "AGREEMENT") is
entered into by and between the Elite Pharmaceuticals, Inc., a Delaware
corporation (the "COMPANY") and the holder (the "WARRANT HOLDER") of that
certain "LTW" warrant (the "LT WARRANT") and that certain "STW" warrant (the "ST
WARRANT"; and together with the LT Warrant the "INITIAL WARRANTS"), each issued
by the Company to the Warrant Holder pursuant to Subscription Agreements, dated
as of October 6, 2004, October 12, 2004 or October 26, 2004, each for the
purchase of up to such number of shares of the common stock, $0.01 par value per
share, of the Company (the "COMMON STOCK") as is set forth beside the Warrant
Holder's name on SCHEDULE 1 attached hereto (the "WARRANT SHARES").
WHEREAS, the Company is entering into a series of agreements on or
within thirty days of the date hereof in a form substantially identical to this
Agreement with other holders of warrants to purchase shares of the Company's
Common Stock (the "OTHER HOLDERS");
WHEREAS, the Company desires to induce the Warrant Holder to exercise,
by payment of cash, the LT Warrant and/or the ST Warrant with respect to the
shares of Common Stock purchasable thereunder;
WHEREAS, in consideration for such in cash exercise, the Company shall
issue to the Warrant Holder a new warrant substantially in the form attached
hereto as EXHIBIT A (the "REPLACEMENT WARRANT") to purchase additional shares of
Common Stock (the "REPLACEMENT WARRANT SHARES") as set forth herein;
WHEREAS, as further consideration for such exercise by payment of cash,
the Company is granting to the Warrant Holder certain registration rights with
respect to the Replacement Warrant Shares pursuant to a Registration Rights
Agreement by and among the Company and each Other Holder, which shall be
substantially in the form attached hereto as EXHIBIT B.
NOW, THEREFORE, in consideration of the mutual premises and of the
respective covenants contained in this Agreement and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged,
intending to be legally bound hereby, the parties hereto agree as follows:
1. INDUCEMENT TO EXERCISE. The Company hereby agrees upon acceptance by
the Company to issue to the Warrant Holder a Replacement Warrant exercisable for
that number Replacement Warrant Shares as is equal to thirty percent (30%) the
aggregate number of LT Warrant Shares and ST Warrant Shares purchased by payment
of cash by the Warrant Holder, if any, upon exercise of the LT Warrant and/or
the ST Warrant, each during the period beginning on the date hereof and
continuing until 5:30 p.m. EST on December 14, 2005 (the "EXERCISE PERIOD"). The
Company shall deliver the Replacement Warrant, if applicable, dated as of the
Closing Date (as defined below), to the Warrant Holder at the address provided
on the signature page hereto not more than ten (10) business days after the
expiration of the Exercise Period (the "CLOSING DATE").
2. DELIVERIES. The parties shall make the following deliveries:
(a) On or prior to the expiration of the Exercise Period, the
Warrant Holder shall deliver to the Company (i) an executed signature page of
this Agreement, (ii) the executed Warrant Exercise Notice(s) reflecting the
exercise of LT Warrant and/or the ST Warrant by payment of cash, (iii) the
aggregate exercise price for the Warrant Shares, by check payable to the Company
or wire transfer of immediately available funds to the Company's account in
accordance with the wire instructions attached hereto as EXHIBIT C; and (iv) the
LT Warrant and/or the ST Warrant for cancellation or, to the extent not fully
exercised or expired, reissuance; and
(b) The Company shall deliver or cause to be delivered to each
Investor (i) any deliveries required to be made by the Company upon proper
exercise of the Initial Warrants (as set forth therein), including, without
limitation, a certificate representing the shares of Common Stock for which any
Initial Warrant has been exercised and (ii) within ten (10) business days after
the expiration of the Exercise Period, a Replacement Warrant in accordance with
the terms and conditions hereof.
3. REPRESENTATIONS OF THE COMPANY. The Company represents and warrants
to the Warrant Holder as follows:
(a) ORGANIZATION. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of Delaware,
with the requisite power and authority to own and use its properties and assets
and to carry on its business as currently conducted.
(b) AUTHORITY. The Company has the corporate power and
authority to enter into and perform this Agreement, and all corporate action
necessary to authorize the execution, delivery and performance of this Agreement
by the Company and the consummation of the transactions contemplated hereby by
the Company has been duly and validly taken. This Agreement has been duly and
validly executed and delivered by the Company. This Agreement constitutes a
valid and binding agreement of the Company, enforceable against the Company in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting the rights of creditors and to
general principles of equity.
(c) ISSUANCE OF SECURITIES. The Replacement Warrant is duly
authorized and, when issued in accordance with this Agreement, will be duly and
validly issued. The Company has reserved from its duly authorized capital stock
a sufficient number of shares of Common Stock for issuance upon exercise of the
Replacement Warrant.
4. REPRESENTATIONS OF THE WARRANT HOLDER. The Warrant Holder represents
and warrants to the Company as follows:
(a) ORGANIZATION. If the Warrant Holder is not a natural
person, the Warrant Holder is an entity duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, with the
requisite power and authority to own and use its properties and assets and to
carry on its business as currently conducted.
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(b) AUTHORITY. The Warrant Holder has the requisite power and
authority to enter into and perform this Agreement, and all action necessary to
authorize the execution, delivery and performance of this Agreement by the
Warrant Holder and the consummation of the transactions contemplated hereby by
the Warrant Holder has been duly and validly taken. This Agreement has been duly
and validly executed and delivered by the Warrant Holder. This Agreement
constitutes a valid and binding agreement of the Warrant Holder, enforceable
against the Warrant Holder in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting the
rights of creditors and to general principles of equity.
(c) OWN ACCOUNT. The Warrant Holder understands that the
Replacement Warrant and the Replacement Warrant Shares (together, the
"SECURITIES") are "restricted securities" and have not been registered under the
Securities Act or any applicable state securities law and is acquiring the
Securities as principal for its own account and not with a view to distributing
or reselling such Securities or any part thereof, has no present intention of
distributing any of such Securities and has no arrangement or understanding with
any other persons regarding the distribution of such Securities (this
representation and warranty not limiting the Warrant Holder's right to sell the
Securities pursuant to a registration statement or otherwise in compliance with
applicable federal and state securities laws). The Warrant Holder does not have
any agreement or understanding, directly or indirectly, with any person or
entity to distribute any of the Securities.
(d) WARRANT HOLDER STATUS. At the time the Warrant Holder was
offered the Securities, it was, and at the date hereof it is, and on each date
on which it exercises the Replacement Warrant it will be either: (i) an
"accredited investor" as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or
(a)(8) under the Securities Act or (ii) a "qualified institutional buyer" as
defined in Rule 144A(a) under the Securities Act.
(e) EXPERIENCE OF THE WARRANT HOLDER. The Warrant Holder,
either alone or together with its representatives, has such knowledge,
sophistication and experience in business and financial matters so as to be
capable of evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such investment. The
Warrant Holder acknowledges and agrees that in making the decision to invest in
the Securities, the Warrant Holder has relied on his, her or its own examination
of the Company and the terms of the offering, including the merits, risks and
tax and other considerations involved. The Warrant Holder is able to bear the
economic risk of an investment in the Securities and, at the present time, is
able to afford a complete loss of such investment.
(f) GENERAL SOLICITATION. The Warrant Holder is not purchasing
the Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement.
(g) TITLE. The Warrant Holder has good and marketable title to
the LT Warrant, free and clear of any liens, claims, encumbrances, charges or
restrictions of any kind, other than those that may be imposed by securities
laws generally.
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5. MISCELLANEOUS.
(a) ASSIGNMENT. This Agreement and the rights and obligations
evidenced hereby shall inure to the benefit of and be binding upon the
successors of the Company and the successors of the Warrant Holder.
(b) HEADINGS. The headings used in this Agreement are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Agreement.
(c) GOVERNING LAW. This Agreement shall be construed in
accordance with, and governed by, the laws of the State of New York (without
giving effect to its conflict of laws principles).
(d) CONSENT TO JURISDICTION AND SERVICE OF PROCESS. Each of
the parties hereby irrevocably and unconditionally submits to the jurisdiction
of the courts of the State of New York and of the Federal courts sitting in the
State of New York in any action or proceeding directly or indirectly arising out
of or relating to this Agreement or the transactions contemplated hereby or
thereby (whether based in contract, tort, equity or any other theory). Each of
the parties agrees that all actions or proceedings arising out of or relating to
this agreement must be litigated exclusively in any such State or, to the extent
permitted by law, Federal court that sits in the County of New York, and
accordingly, each party irrevocably waives any objection which it may now or
hereafter have to the laying of the venue of any such action or proceeding in
any such court. Each party further irrevocably consents to service of process in
the manner provided for notices in Section 5(f). Nothing in this Agreement will
affect the right of any party to this Agreement to serve process in any other
manner permitted by law.
(e) WAIVER OF JURY TRIAL. Each party waives any right it may
have to a trial by jury in any action or proceeding directly or indirectly
arising out of or relating to this Agreement or the transactions contemplated
hereby or thereby (whether based on contract, tort, equity or any other theory).
Each of the parties (i) certifies that no representative, agent or attorney of
any other party has represented, expressly or otherwise, that such other party
would not, in the event of litigation, seek to enforce the foregoing waiver and
(ii) acknowledges that it and the other parties hereto have been induced to
enter into this agreement by, among other things, the mutual waivers and
certifications in this Section 5(e).
(f) NOTICES. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (a) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto prior to 5:30
p.m., EST, on a business day, (b) the next business day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a business day or later than 5:30 p.m., EST, on any business day, (c) the
second business day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service, or (d) upon actual receipt by the party to
whom such notice is required to be given. The address for such notices and
communications shall be as follows:
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If to the Company:
Elite Pharmaceuticals, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Reitler ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇ LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Warrant Holder, at the address specified on
the signature page hereto.
(g) AMENDMENT. This Agreement may be modified or amended or
the provisions hereof waived with the written consent of the Company and the
Warrant Holder.
(h) SEVERABILITY. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Agreement.
(SIGNATURE PAGE FOLLOWS)
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IN WITNESS WHEREOF, the parties hereto have executed or have caused
this Agreement to be duly executed by their respective authorized officers as of
the date first above written.
ELITE PHARMACEUTICALS, INC.
By:
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇
Title: Chief Executive Officer
WARRANT HOLDER:
By:
---------------------------------
Name:
Title:
Address:
6
SCHEDULE 1
SCHEDULE OF WARRANT HOLDERS
ELITE PHARMACEUTICALS, INC.
Analysis of Series A Financing
COMMON COMMON WARRANT TOTAL $ TO $ TO
SHARES SHARES SHARES ST LT SHARES EXERCISE EXERCISE
INVESTOR INVESTMENT BASIS OWNED BASIS WARRANTS WARRANT REGISTERED ST WARRANTS LT WARRANTS
------------------------------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ Fund II, LP $69,999 $1.23 56,910 $1.54 28,455 28,455 113,820 $43,749.55 $43,749.56
▇▇▇▇▇▇ Fund Offshore, LDC $50,000 $1.23 40,650 $1.54 20,325 20,325 81,300 $31,249.69 $31,249.69
▇▇▇▇▇▇ Fund Offshore, Ltd. $500,007 $1.23 406,510 $1.54 203,255 203,255 813,020 $312,504.56 $312,504.56
▇▇▇▇▇▇ Fund, LP $379,996 $1.23 308,940 $1.54 154,470 154,470 617,880 $237,497.63 $237,497.63
------------------------------ ----------- -----------
Total $625,001.44 $625,001.44
▇▇▇▇▇▇▇, ▇▇▇▇▇ $250,000 $1.23 203,252 $1.54 101,625 101,625 406,502 $156,248.44 $156,248.44
Wheaten HealthCare
Partners, LP $250,000 $1.23 203,252 $1.54 101,625 101,625 406,502 $156,248.44 $156,248.44
Valor Capital Management, LP $750,000 $1.23 609,756 $1.54 304,880 304,880 1,219,516 $468,753.00 $468,753.00
SAV HealthCo Partners $1,000,000 $1.23 813,008 $1.54 406,505 406,505 1,626,018 $625,001.44 $625,001.44
------------------------------
Bushido Capital $250,000 $1.23 203,252 $1.54 101,625 101,625 406,502 $156,248.44 $156,248.44
n/a
------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ $25,000 $1.23 20,325 $1.54 10,163 10,163 40,650 $15,624.84 $15,624.84
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ $25,000 $1.23 20,325 $1.54 10,163 10,163 40,650 $15,624.84 $15,624.84
▇▇▇▇▇▇ ▇▇▇▇ $246,000 $1.23 200,000 $1.54 100,000 100,000 400,000 $153,750.00 $153,750.00
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ $20,000 $1.23 16,260 $1.54 8,130 8,130 32,520 $12,499.88 $12,499.88
▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ $25,000 $1.23 20,325 $1.54 10,165 10,165 40,655 $15,628.69 $15,628.69
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ $123,000 $1.23 100,000 $1.54 50,000 50,000 200,000 $76,875.00 $76,875.00
------------------------------ ---------
Trade Winds $86,715 $1.23 70,500 $1.54 35,250 35,250 141,000 $54,196.88
(35,250) n/a
------------------------------ ---------
Little Wing $413,280 $1.23 336,000 $1.54 168,000 168,000 672,000 $258,300.00
(168,000) n/a
------------------------------ ---------
▇▇▇▇ ▇▇▇▇▇▇ $12,300 $1.23 10,000 $1.54 5,000 5,000 20,000 $7,687.50 $7,687.50
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ $12,300 $1.23 10,000 $1.54 5,000 5,000 20,000 $7,687.50 $7,687.50
Periscope Partners LP $150,000 $1.23 121,951 $1.54 60,975 60,975 243,901 $93,749.06 $93,749,06
------------------------------ ---------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ $24,600 $1.23 20,000 $1.54 10,000 10,000 40,000 $15,375.00
(10,000)
------------------------------ ---------
▇▇▇▇ ▇▇▇▇▇▇ & Co. $1,122,000 $1.40 801,429 $1.75 400,715 400,715 1,602,859 $701,251,25 $701,251,25
RC---- $150,000 $1.40 107,143 $1.75 53,570 53,570 214,283 $93,747.50 $93,747.50
▇▇▇ ▇▇▇▇ $100,000 $1.40 71,429 $1.75 35,715 35,715 142,859 $62,501.25 $62,501.25
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇'▇▇▇▇▇▇ $66,000 $1.40 47,143 $1.75 23,570 23,570 94,283 $41,247.50 $41,247.50
▇▇▇▇▇▇▇ Revocable Trust $100,000 $1.40 71,429 $1.75 35,715 35,715 142,859 $62,501.25 $62,501.25
▇▇▇▇ ▇. ▇▇▇▇▇ Revocable Trust $132,000 $1.40 94,286 $1.75 47,145 47,145 188,576 $82,503,75 $82,503,75
------------------------------ ---------
Sunrise Capital $266,803 $1.47 181,498 $1.84 90,750 90,750 362,998
7
EXHIBIT A
FORM OF REPLACEMENT WARRANT
(SEE ATTACHED)
8
EXHIBIT B
FORM OF REGISTRATION RIGHTS AGREEMENT
(SEE ATTACHED)
9
EXHIBIT C
WIRE INSTRUCTIONS
Bank Name: BANK OF AMERICA
Bank Address: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇ & ▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Account Title: ELITE PHARMACEUTICALS, INC.
PRIVATE PLACEMENT ACCOUNT NO.: 9420365795
BANK ROUTING NUMBER: ▇▇▇▇▇▇▇▇▇
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