EXECUTION COPY
FINANCIAL ADVISORY AGREEMENT (this "AGREEMENT"), dated as of
July 1, 2006 (the "EFFECTIVE DATE") by and between Elite
Pharmaceuticals, Inc. (the "COMPANY") and Indigo Ventures LLC
(the "ADVISOR").
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Whereas, the Company has requested that the Advisor provide certain
consulting services to the Company and the Advisor agrees to provide such
services for the consideration set forth below.
In consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. ENGAGEMENT OF ADVISOR. The Company hereby engages the Advisor on a
non-exclusive basis for the term of this Agreement, and the Advisor hereby
agrees to advise, consult with, and assist the Company in various matters as
requested (and only to the extent requested) by the Company which may include,
without limitation (i) a review of the Company's business, operations and
financial condition, including advising on capitalization structures; (ii)
advice relating to general capital raising matters; (iii) recommendations
relating to specific business operations, strategic transactions and joint
ventures; (v) advice regarding future financings involving debt or equity
securities of the Company or any affiliate of the Company; and (v) assistance
with interaction between the Company and its current and future investors
(collectively, the "CONSULTING SERVICES"). The Advisor agrees that any requests
for information from the Company during the term of this Agreement shall be
directed solely to the chief executive officer of the Company and not to any
other employee or officer of the Company. For purposes of Section 6, the
immediately preceding sentence shall be deemed a material term of this
Agreement.
2. COMPENSATION; EXPENSES. (a) As compensation for the Consulting Services
to be performed by the Advisor during the term of this Agreement, the Company
shall pay to the Advisor (i) a one-time cash signing bonus of Forty Five
Thousand Dollars (US$45,000) within five (5) business days of the Effective Date
and (ii) a cash fee of Fifteen Thousand Dollars (US$15,000) per full calendar
month (the "CONSULTING FEE"), payable in arrears, during each full calendar
month during the term of this Agreement.
(b) In addition to the Consulting Fee, the Company will pay or
reimburse the Advisor for all reasonable out-of-pocket costs and expenses
directly incurred by the Advisor in performing its obligations under this
Agreement, which costs and expenses shall include, but not be limited to, travel
expenses incurred in performing the Consulting Services requested by the
Company, including due diligence, costs of supplies, copying and mailing and all
other expenses reasonably incurred by the Advisor. In seeking reimbursement for
expenses, the Advisor shall provide to the Company a written statement or
statements detailing expenses for which reimbursement is sought and, upon
request by the Company, shall provide copies of invoices and other documentation
supporting such expenses. Reimbursable expenses shall be payable by the Company
within thirty (30) days of receipt by the Company. Notwithstanding anything
contained herein, the maximum expense reimbursement by the Company under this
Agreement shall be Two Hundred Fifty Dollars (US$250) per calendar month,
without the prior written consent of the Company.
3. ADVISOR WARRANT. On the Effective Date, the Advisor shall purchase a
common stock purchase warrant in substantially the form attached hereto as
EXHIBIT A (the "ADVISOR WARRANT") to acquire up to 600,000 shares of common
stock, par value $0.01 per share, of the Company (the "COMMON STOCK") for an
aggregate purchase price of One Hundred Fifty Thousand Dollars ($150,000). Such
purchase price may be paid by Advisor, at its option, through the issuance of a
promissory note in the form attached hereto as EXHIBIT B (the "NOTE"). The
Advisor Warrant (i) shall vest as follows: 50,000 Warrant Shares shall
vest quarterly beginning on the three (3) month anniversary of the Effective
Date, (ii) shall expire on the fifth anniversary of the Effective Date, (iii)
shall terminate, to the extent unvested, as of the date of termination of this
Agreement, (iv) shall fully vest upon a Change of Control (as defined below) and
(v) shall have an exercise price of US$3.00 per share of the Common Stock. The
shares of Common Stock issuable upon exercise of the Advisor Warrant shall be
subject to an agreement whereby (i) the holders of such shares shall provide an
irrevocable proxy in favor of the then-current chief executive officer of the
Company to vote such shares in any vote put to the shareholders of the Company
and (ii) transfer of such shares shall be subject to the prior written consent
of the Company; provided, that the Company's consent shall not be required in
the event that the Warrant Shares are registered, or the Warrant Shares are sold
by Advisor under Rule 144. The term "CHANGE OF CONTROL" shall mean the earliest
to occur of the following events: (i) securities of the Company representing 50%
or more of the combined voting power of the Company's then outstanding voting
securities are acquired by a person or entity, or group of related persons or
entities that were not shareholders as of the Effective Date, in a single
transaction, (ii) a merger or consolidation is consummated in which the Company
is a constituent corporation, which results in less than 50% of the outstanding
voting securities of the surviving or resulting entity being owned by the then
existing stockholders of the Company or (iii) the sale, transfer, exclusive
license or other disposition by the Company of substantially all of its assets
to a person or an entity which is not a wholly-owned subsidiary of the Company
and not a shareholder of the Company as of the Effective Date.
4. BUSINESS PRACTICE. The Company recognizes that the Advisor is in the
business of advising and consulting with other businesses, some of which
businesses may be in competition with the Company. The Advisor hereby agrees to
provide the Company with at least twenty (20) days' prior written notice of the
engagement of the Advisor or any of its affiliates to provide any advice,
consultation or other services (including assistance in raising financing) to
other business or individual that may be in competition, or is likely in the
future to compete with the Company. The Advisor shall not be required to devote
its full time and resources to performing services on behalf of the Company
under this Agreement, PROVIDED, that the Advisor shall be required to expend
such time and resources as are reasonably required to perform the Consulting
Services and advise and assist the Company as provided for herein.
5. INDEMNIFICATION; CONFIDENTIALITY. (a) The Company agrees to indemnify
and hold harmless the Advisor and its affiliates, agents, and advisors, and
their respective directors, officers, employees, agents and controlling persons
(each such person is hereinafter referred to as an "INDEMNIFIED PARTY"), from
and against any and all losses, claims, damages, liabilities and expenses
whatsoever, joint or several, to which any such Indemnified Party may become
subject under any applicable federal or state law of the United States of
America or otherwise, caused by, relating to or arising out of the engagement
evidenced hereby Notwithstanding the foregoing, the Company shall not be liable
to any Indemnified Party under the foregoing indemnification provision to the
extent that any loss, claim, damage, liability or expense results directly from
the willful or intentional misconduct or gross negligence of any Indemnified
Party.
(b) Neither the Advisor nor any member, shareholder, partner, employee,
affiliate or agent of the Advisor, will disclose any Confidential Information
(as defined below) of the Company to any person, firm, corporation, limited
liability company, partnership or other entity for any reason or purpose
whatsoever, nor will the Advisor (or any member, shareholder, partner, employee,
affiliate or agent of the Advisor) make use of any such Confidential Information
for its own purposes or for the benefit of any person, firm, corporation,
limited liability company, partnership or other entity except the Company.
"CONFIDENTIAL INFORMATION" means all information which is or becomes known to
the Advisor and relates to the business, operations or activities or the
Company, including without limitation, any intellectual property, proprietary
information, research and development activities, new or prospective products or
services, chemical compounds, and/or molecules, formulations, application filed,
or to be filed, with the Food and Drug Administration, books and records,
financial data, customer lists, marketing techniques,
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suppliers, purchases, potential licensing transactions, potential business
combinations and/or partnerships, distribution channels, services, procedures,
pricing information and private processes as they may exist from time to time;
PROVIDED, that the term "CONFIDENTIAL INFORMATION" will not include information
that is or becomes generally available to the public (other than as a result of
a disclosure in violation of this Agreement by the Advisor or by a person who
received such information from the Advisor in violation of this Agreement). Upon
the end of the term or the termination of this Agreement, the Advisor will
immediately return or destroy (and provide evidence of such destruction), as the
Company may direct, all documentation in any medium that contains, refers to, or
relates to the Confidential Information (as defined above), and will retain no
copies thereof.
6. TERM OF AGREEMENT; TERMINATION; EFFECTS OF TERMINATION. (a) This
Agreement shall begin on the Effective Date hereof and shall continue through
the third anniversary date, PROVIDED, that either party can terminate this
Agreement, for any reason or no reason, at any time upon 30 days' written notice
(a "TERMINATION NOTICE" and such 30 day period, the "TERMINATION NOTICE
PERIOD"). Upon termination of this Agreement, neither party shall have any
further rights or obligations to the other, except that (i) the Company shall be
obligated to pay any unpaid fees referred to in section 2(a) hereof that accrued
during the period prior to termination of this Agreement, (ii) the Company shall
be obligated to reimburse expenses under section 2(b) incurred by the Advisor
during the period prior to termination of this Agreement, and (iii) the Advisor
and the Company shall continue to be bound by the provisions of Section 5
hereof. If the Agreement is terminated prior to the third anniversary date of
the Effective Date, the portion of the Advisor Warrant that had not yet vested,
in accordance with the terms of the Advisor Warrant, shall terminate as of the
date of the date of termination of this Agreement.
7. RELATIONSHIP OF PARTIES. The parties agree that their relationship
under this Agreement is an advisory relationship only, and nothing herein shall
cause the Advisor to be partners, agents or fiduciaries of, or joint venturers
with, the Company or with each other.
8. NOTICES. All notices required or permitted herein must be in writing
and shall be deemed to have been duly given the first business day following the
date of service if served personally, on the first business day following the
date of actual receipt if delivered by telecopier, telex or other similar
communication to the party or parties to whom notice is to be given, or on the
third business day after mailing if mailed to the party or parties to whom
notice is to be given by registered or certified mail, return receipt requested,
postage prepaid, to the Advisor and to the Company at the addresses set forth
below, or to such other addresses as either party hereto may designate to the
other by notice from time to time for this purpose.
Advisor: Indigo Ventures LLC
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Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Company: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇
Chief Executive Officer
Elite Pharmaceuticals, Inc.
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Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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With a copy to: Reitler ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇ LLC
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Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
9. PARTIES. This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and assigns.
10. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York without giving effect to
conflicts of laws.
11. ENTIRE AGREEMENT. This Agreement contains the entire understanding
between the parties hereto with respect to the subject matter hereof and may not
be modified or amended except by a writing duly signed by the party against whom
enforcement of the modification or amendment is sought.
12. SEVERABILITY. If any provision of this Agreement shall be held to be
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provision of this Agreement.
13. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original agreement, but all of which together shall
constitute one and the same instrument. Execution and delivery of this Agreement
by facsimile transmission (including the delivery of documents in Adobe PDF
format) shall constitute execution and delivery of this Agreement for all
purposes, with the same force and effect as execution and delivery of an
original manually signed copy hereof.
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IN WITNESS WHEREOF, the parties have hereto executed this Agreement as
of the 12th day of July, 2006.
INDIGO VENTURES LLC
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Managing Member
ELITE PHARMACEUTICALS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇▇, CEO
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EXHIBIT A
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE FEDERAL OR APPLICABLE STATE SECURITIES LAWS AND
INSTEAD ARE BEING ISSUED PURSUANT TO EXEMPTIONS CONTAINED IN SAID LAWS. THIS
WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF MAY NOT BE
TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT TO SUCH WARRANTS
AND THE SHARES OF COMMON STOCK UNDERLYING SUCH WARRANTS SHALL BE EFFECTIVE UNDER
THE SECURITIES ACT OF 1933, AS AMENDED OR (2) THE ISSUER OF THE SECURITIES
REPRESENTED HEREBY SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO IT THAT NO VIOLATION OF SUCH ACT OR SIMILAR STATE LAWS WILL BE
INVOLVED IN SUCH TRANSFER.
COMMON STOCK PURCHASE WARRANT
To Purchase Shares of $0.01 Par Value Common Stock ("Common Stock") of
ELITE PHARMACEUTICALS, INC
No. [W-__ ] 600,000 Shares
THIS CERTIFIES that, for $150,000, Indigo Ventures, LLC (the
"Purchaser" or "Holder") is entitled, upon the terms and subject to the
conditions hereinafter set forth, at any time on or after the date hereof and on
or prior to 8:00 p.m. New York City Time on the date that is five (5) years
after the date hereof (the "Termination Date"), but not thereafter, to subscribe
for and purchase from Elite Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), 600,000 shares of Common Stock (the "Warrant Shares") at an Exercise
Price equal to $3.00 per share (as adjusted from time to time pursuant to the
terms hereof, the "Exercise Price"). The Exercise Price and the number of shares
for which the Warrant is exercisable shall be subject to adjustment as provided
herein. This Warrant is being issued in connection with the Financial Advisory
Agreement (the "Advisory Agreement") dated July __, 2006 (the "Effective Date"),
entered into between the Company and Purchaser. Capitalized terms used herein
and not otherwise defined shall have the meaning ascribed thereto in the
Advisory Agreement.
1. TITLE OF WARRANT. Prior to the expiration hereof and subject to
compliance with applicable laws, this Warrant and all rights hereunder
are transferable, in whole or in part, at the office or agency of the
Company by the Holder hereof in person or by duly authorized attorney,
upon surrender of this Warrant together with (a) the Assignment Form
annexed hereto properly endorsed, and (b) any other documentation
reasonably necessary to satisfy the Company that such transfer is in
compliance with all applicable securities laws. The term "Holder" shall
refer to the Purchaser or any subsequent transferee of this Warrant.
2. AUTHORIZATION OF SHARES; VESTING. (a) The Company covenants that all
shares of Common Stock which may be issued upon the exercise of rights
represented by this Warrant will, upon exercise of the rights
represented by this Warrant and payment of the Exercise Price as set
forth herein will be duly authorized, validly issued, fully paid and
nonassessable and free from all taxes, liens and charges (other than
liens created by the Holder) in respect of the issue thereof (other
than taxes in respect of any transfer occurring contemporaneously with
such issue or otherwise specified herein).
(b) Holder's right to acquire 600,000 Warrant Shares shall vest as
follows: 50,000 Warrant Shares shall vest quarterly beginning on the
three (3) month anniversary of the Effective Date and ending on the
three (3) year anniversary of the Effective Date; provided that the
unvested Warrant Shares shall terminate upon termination of the
Advisory Agreement; provided, further that this Warrant shall fully
vest upon a Change of Control (as defined in 2(c) below) that occurs
prior to the termination of the Advisory Agreement.
(c) The term "Change of Control" shall mean the earliest to occur of
the following events: (i) securities of the Company representing 50% or
more of the combined voting power of the Company's then outstanding
voting securities are acquired by a person or entity, or group of
related persons or entities that were not shareholders as of the
Effective Date, in a single transaction, (ii) a merger or consolidation
is consummated in which the Company is a constituent corporation, which
results in less than 50% of the outstanding voting securities of the
surviving or resulting entity being owned by the then existing
stockholders of the Company or (iii) the sale, transfer, exclusive
license or other disposition by the Company of substantially all of its
assets to a person or an entity which is not a wholly-owned subsidiary
of the Company and not a shareholder of the Company as of the Effective
Date.
3. EXERCISE OF WARRANT.
(a) (i) The Holder may exercise this Warrant, in whole or in part,
at any time and from time to time, by delivering to the offices of the
Company or any transfer agent for the Common Stock this Warrant,
together with a Notice of Exercise in the form annexed hereto
specifying the number of Warrant Shares with respect to which this
Warrant is being exercised, together with payment in cash to the
Company of the Exercise Price therefore; provided that the Holder may
not exercise the Warrant, in whole or in part, for a period of one (1)
year from any vesting date; provided, that such restriction shall
expire immediately upon a Change of Control and Holder shall be
entitled to exercise this Warrant in whole or in part.
(ii) Additionally, the Holder may exercise this Warrant by the
exchange of this Warrant in whole or in part (with the Cashless
Exercise subscription form in the form annexed hereto duly executed) (a
"Cashless Exercise") at the address of the Company set forth herein.
Such presentation and exchange shall be deemed a waiver of the Holder's
obligation to pay the Exercise Price or, in the case of a partial
exercise of this Warrant, of the portion of the Exercise Price that
would otherwise be payable in connection with such partial exercise.
Upon presentment of this Warrant in connection with a Cashless
Exercise, the number of Warrant Shares subject to this Warrant shall be
reduced by the number of Warrant Shares specified on the Cashless
Exercise subscription form, and in exchange for such reduction the
Holder shall receive the number of Warrant Shares, as the case may be,
specified on the Cashless Exercise subscription form (up to the total
number of Warrant Shares which are subject to this Warrant) multiplied
by a fraction, the numerator of which shall be the excess of the then
current market price per share of the Common Stock over the Exercise
Price per share, and the denominator of which shall be the then current
market price per share of Common Stock. For purposes of any computation
under this Section 3(a), the then current market price shall be the
average of the closing prices for the five trading days immediately
prior to the execution and delivery of the Cashless Exercise
subscription form by Holder.
In the event that the Warrant is not exercised in full, the number of
Warrant Shares shall be reduced by the number of such Warrant Shares
for which this Warrant is exercised, and the Company, if requested by
Holder and at the Company's expense, shall within five (5) Trading Days
(as defined below) issue and deliver to the Holder a new Warrant of
like tenor in the name of the Holder or as the Holder (upon payment by
Holder of any applicable transfer taxes) may request, reflecting such
adjusted Warrant Shares.
Certificates for shares of Common Stock purchased hereunder shall be
delivered to the Holder hereof within five (5) Trading Days after the
date on which this Warrant shall have been exercised as aforesaid. The
Holder may withdraw its Notice of Exercise at any time if the Company
fails to timely deliver the relevant certificates to the Holder as
provided in this Agreement. A Notice of Exercise shall be deemed sent
on the date received by the Company if received before 5:00 p.m. New
York Time on such date, or the day following such date if received
after 5:00 p.m. New York Time; provided that the Company is only
obligated to deliver Warrant Shares against delivery of the Exercise
Price from the holder hereof and surrender of this Warrant (or
appropriate affidavit and/or indemnity in lieu thereof).
In lieu of delivering physical certificates representing the Warrant
Shares issuable upon conversion of this Warrant, provided the Company's
transfer agent is participating in the Depository Trust Company ("DTC")
Fast Automated Securities Transfer ("FAST") program, upon request of
the Holder, the Company shall use commercially reasonable efforts to
cause its transfer agent to electronically transmit the Warrant Shares
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issuable upon exercise to the Holder, by crediting the account of the
Holder's prime broker with DTC through its Deposit Withdrawal Agent
Commission ("DWAC") system. The time periods for delivery described
above shall apply to the electronic transmittals through the DWAC
system. The Company agrees to use commercially reasonable efforts to
coordinate with DTC to accomplish this objective.
(b) The term "Trading Day" means (x) if the Common Stock is not listed on
the New York or American Stock Exchange but sale prices of the Common
Stock are reported on Nasdaq National Market or another automated
quotation system, a day on which trading is reported on the principal
automated quotation system on which sales of the Common Stock are
reported, (y) if the Common Stock is listed on the New York Stock
Exchange or the American Stock Exchange, a day on which there is
trading on such stock exchange, or (z) if the foregoing provisions are
inapplicable, a day on which quotations are reported by National
Quotation Bureau Incorporated.
4. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of
this Warrant. In lieu of issuance of a fractional share upon any
exercise hereunder, the Company, in its sole discretion, will either
round up to nearest whole number of shares or pay the cash value of
that fractional share, which cash value shall be calculated on the
basis of the average closing price of the Common Stock during the five
(5) Trading Days immediately preceding the date of exercise.
5. CHARGES, TAXES AND EXPENSES. Issuance of certificates for shares of
Common Stock upon the exercise of this Warrant shall be made without
charge to the Holder hereof for any issue or transfer tax or other
incidental expense in respect of the issuance of such certificate, all
of which taxes and expenses shall be paid by the Company, and such
certificates shall be issued in the name of the Holder of this Warrant
or in such name or names as may be directed by the Holder of this
Warrant; PROVIDED, HOWEVER, that in the event certificates for shares
of Common Stock are to be issued in a name other than the name of the
Holder of this Warrant, this Warrant when surrendered for exercise
shall be accompanied by the Assignment Form attached hereto duly
executed by the Holder hereof; and PROVIDED FURTHER, that the Company
shall not be required to pay any tax or taxes which may be payable in
respect of any transfer involved in the issuance of any Warrant
certificates or any certificates for the Warrant Shares other than the
issuance of a Warrant Certificate to the Holder in connection with the
Holder's surrender of a Warrant Certificate upon the exercise of all or
less than all of the Warrants evidenced thereby.
6. CLOSING OF BOOKS. Subject to applicable law and the rules of the
principal market on which the Common Stock may from time to time trade,
the Company will at no time close its shareholder books or records in
any manner which interferes with the timely exercise of this Warrant.
7. NO RIGHTS AS SHAREHOLDER UNTIL EXERCISE.
(a) Prior to exercise of all or any portion of this Warrant and as a
condition to the issuance by the Company of any Warrant Shares, the
Holder agrees to provide an irrevocable proxy in favor of the then
current chief executive officer of the Company to vote all such shares
to be issued upon exercise of this Warrant in any vote put to the
shareholders of the Company in the form attached hereto as ANNEX I.
(b) Subject to Section 12 of this Warrant and the provisions of any other
written agreement between the Company and the Purchaser, the Purchaser
shall not be entitled to vote or receive dividends or be deemed the
holder of Warrant Shares or any other securities of the Company that
may at any time be issuable on the exercise hereof for any purpose, nor
shall anything contained herein be construed to confer upon the
Purchaser, as such, any of the rights of a stockholder of the Company
or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action (whether upon any
recapitalization, issuance of stock, reclassification of stock, change
of par value, or change of stock to no par value, consolidation,
merger, conveyance or otherwise) or to receive notice of meetings, or
to receive dividends or subscription rights or otherwise until the
Warrant shall have been exercised as provided herein. However, at the
time of the exercise of this Warrant pursuant to Section 3 hereof, the
Warrant Shares so purchased hereunder shall be deemed to be issued to
such Holder as the record owner of such shares as of the close of
business on the date on which this Warrant shall have been exercised.
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8. SECURITY. This Warrant and the Warrant Shares secure all of the
obligations of the Holder under the promissory note for One Hundred
Fifty Thousand Dollars ($150,000.00) in the form attached as EXHIBIT B
to the Advisory Agreement (the "Note"), including (i) all principal of,
and interest (including, without limitation, any interest which accrues
after the commencement of any case, proceeding or other actions
relating to the bankruptcy, insolvency or reorganization of the Holder
and any other amounts owing) on the Note, (ii) all other amounts
payable by the Holder under Note (including expenses incurred in
connection with the enforcement of the Note) and (iii) any renewals or
extensions of any of the foregoing.
9. ASSIGNMENT AND TRANSFER OF WARRANT.
(a) This Warrant may be assigned by the surrender of this Warrant and the
Assignment Form annexed hereto duly executed at the office of the
Company (or such other office or agency of the Company or its transfer
agent as the Company may designate by notice in writing to the
registered Holder hereof at the address of such Holder appearing on the
books of the Company); provided, further, that this Warrant may not be
resold or otherwise transferred except (i) with the prior written
consent of the Company, (ii) in a transaction registered under the
Securities Act of 1933, as amended (the "Act"), or (ii) in a
transaction pursuant to an exemption, if available, from registration
under the Act and whereby, if reasonably requested by the Company, an
opinion of counsel reasonably satisfactory to the Company is obtained
by the Holder of this Warrant to the effect that the transaction is so
exempt. Subject to Section 9(b) below, the Warrant Shares may not be
resold or otherwise transferred except (i) in a transaction registered
under the Act, or (ii) in a transaction pursuant to the exemption
afforded by Rule 144 of the Act, if available, and whereby, if
reasonably requested by the Company, an opinion of counsel reasonably
satisfactory to the Company is obtained by the Holder of this Warrant
to the effect that the transaction is so exempt.
(b) Neither this Warrant nor the Warrant Shares may be transferred so long
as any principal and/or interest of
the Note remains outstanding.
10. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT; EXCHANGE. The
Company represents warrants and covenants that (a) upon receipt by the
Company of evidence and/or indemnity reasonably satisfactory to it of
the loss, theft, destruction or mutilation of any Warrant or stock
certificate representing the Warrant Shares, and in case of loss, theft
or destruction, of indemnity reasonably satisfactory to it, and (b)
upon surrender and cancellation of such Warrant or stock certificate,
if mutilated, the Company will make and deliver a new Warrant or stock
certificate of like tenor and dated as of such cancellation, in lieu of
this Warrant or stock certificate, without any charge therefor. This
Warrant is exchangeable at any time for an equal aggregate number of
Warrants of different denominations, as requested by the holder
surrendering the same, or in such denominations as may be requested by
the Holder following determination of the Exercise Price. No service
charge will be made for such registration or transfer, exchange or
reissuance.
11. SATURDAYS, SUNDAYS, HOLIDAYS, ETC. If the last or appointed day for the
taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday, then such action
may be taken or such right may be exercised on the next succeeding day
not a legal holiday.
12. EFFECT OF CERTAIN EVENTS. If at any time while this Warrant or any
portion thereof is outstanding and unexpired there shall be a
transaction (by merger or otherwise) in which more than 50% of the
voting power of the Company is disposed of (collectively, a "Sale or
Merger Transaction"), the Holder of this Warrant shall have the right
thereafter to purchase, by exercise of this Warrant and payment of the
aggregate Exercise Price in effect immediately prior to such action,
the kind and amount of shares and other securities and property which
it would have owned or have been entitled to receive after the
happening of such transaction had this Warrant been exercised
immediately prior thereto, subject to further adjustment as provided in
Section 12.
13. ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. In the
event the Company shall issue additional shares of Common Stock
pursuant to a share split or reclassification, concurrently with the
effectiveness of such event, the Exercise Price in effect immediately
prior to such event shall be proportionately decreased with the number
of Warrant Shares purchasable upon exercise of this Warrant immediately
prior to such event and the number of shares underlying the Warrant
shall be proportionately
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increased. In the event the outstanding shares of Common Stock shall be
combined or consolidated, by reclassification, reverse split or
otherwise, into a lesser number of shares of Common Stock, concurrently
with the effectiveness of such event, the Exercise Price in effect
immediately prior to such event shall be proportionately increased and
the number of Warrant Shares purchasable upon exercise of this Warrant
immediately prior to such event shall be proportionately decreased.
14. NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares or number
or kind of securities or other property purchasable upon the exercise
of this Warrant or the Exercise Price is adjusted, the Company shall
promptly mail to the Holder of this Warrant a notice setting forth the
number of Warrant Shares (and other securities or property) purchasable
upon the exercise of this Warrant and the Exercise Price of such
Warrant Shares after such adjustment and setting forth the computation
of such adjustment and a brief statement of the facts requiring such
adjustment.
15. AUTHORIZED SHARES. The Company covenants that during the period the
Warrant is outstanding and exercisable, it will reserve from its
authorized and unissued Common Stock a sufficient number of shares to
provide for the issuance of the Warrant Shares upon the exercise of any
and all purchase rights under this Warrant. The Company further
covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing
stock certificates to execute and issue the necessary certificates for
the Warrant Shares upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as may be
necessary to assure that such Warrant Shares may be issued as provided
herein without violation of any applicable law, regulation, or rule of
any applicable market or exchange.
16. COMPLIANCE WITH SECURITIES LAWS. (a) The Holder hereof acknowledges
that the Warrant Shares acquired upon the exercise of this Warrant, if
not registered (or if no exemption from registration exists), will have
restrictions upon resale imposed by state and federal securities laws.
Each certificate representing the Warrant Shares issued to the Holder
upon exercise (if not registered, for resale or otherwise, or if no
exemption from registration exists) will bear substantially the
following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE FEDERAL OR APPLICABLE STATE SECURITIES LAWS AND
INSTEAD ARE BEING ISSUED PURSUANT TO EXEMPTIONS CONTAINED IN SAID LAWS.
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF MAY NOT BE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH
RESPECT TO SUCH SECURITIES SHALL BE EFFECTIVE UNDER THE SECURITIES ACT
OF 1933, AS AMENDED OR (2) THE ISSUER OF THE SECURITIES REPRESENTED
HEREBY SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO IT THAT NO VIOLATION OF SUCH ACT OR SIMILAR STATE LAWS
WILL BE INVOLVED IN SUCH TRANSFER.
(b) Without limiting the Purchaser's right to transfer, assign or otherwise
convey the Warrant or Warrant Shares in compliance with all applicable
securities laws, the Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant and the Warrant Shares to be issued upon
exercise hereof are being acquired solely for the Purchaser's own
account and not as a nominee for any other party, and that the
Purchaser will not offer, sell or otherwise dispose of this Warrant or
any Warrant Shares to be issued upon exercise hereof except under
circumstances that will not result in a violation of applicable federal
and state securities laws.
17. MISCELLANEOUS.
(a) ISSUE DATE; CHOICE OF LAW; VENUE; JURISDICTION. The provisions of this
Warrant shall be construed and shall be given effect in all respects as
if it had been issued and delivered by the Company on the date hereof.
This Warrant shall be binding upon any successors or assigns of the
Company. This Warrant will be construed and enforced in accordance with
and governed by the laws of the State of New York, except for matters
arising under the Act, without reference to principles of conflicts of
law. Each of the parties consents to the exclusive jurisdiction of the
Federal and State Courts sitting in the County of New York in
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the State of New York in connection with any dispute arising under this
Warrant and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on FORUM non CONVENIENS or
venue, to the bringing of any such proceeding in such jurisdiction.
EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY JURY.
(b) MODIFICATION AND WAIVER. This Warrant and any provisions hereof may be
changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is
sought. Any amendment effected in accordance with this paragraph shall
be binding upon the Purchaser, each future holder of this Warrant and
the Company. No waivers of, or exceptions to, any term, condition or
provision of this Warrant, in any one or more instances, shall be
deemed to be, or construed as, a further or continuing waiver of any
such term, condition or provision.
(c) NOTICES. Any notice or other communication required or permitted to be
given hereunder shall be in writing by facsimile, mail or personal
delivery and shall be effective upon actual receipt of such notice. The
addresses for such communications shall be to the addresses as shown on
the books of the Company or to the Company at the address set forth in
the Advisory Agreement. A party may from time to time change the
address to which notices to it are to be delivered or mailed hereunder
by notice in accordance with the provisions of this Section 17(c).
(d) SEVERABILITY. Whenever possible, each provision of this Warrant shall
be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant is held to be
invalid, illegal or unenforceable in any respect under any applicable
law or rule in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect the validity, legality or
enforceability of any other provision of this Warrant in such
jurisdiction or affect the validity, legality or enforceability of any
provision in any other jurisdiction, but this Warrant shall be
reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained
herein.
(e) SPECIFIC ENFORCEMENT. The Company and the Holder acknowledge and agree
that irreparable damage would occur in the event that any of the
provisions of this Warrant were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to
prevent or cure breaches of the provisions of this Warrant and to
enforce specifically the terms and provisions hereof, this being in
addition to any other remedy to which either of them may be entitled by
law or equity.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officers thereunto duly authorized.
Dated: July __, 2006
ELITE PHARMACEUTICALS, INC.
By:
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chief Executive Officer
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PURCHASE FORM
SUBSCRIPTION (CASH)
The undersigned, ___________________ (the "Holder"), pursuant to the provisions
of the Warrant of ELITE PHARMACEUTICALS, INC. ("the Company") granted to the
Holder (or its assignor) dated _____ (the "Warrant"), hereby agrees to subscribe
for and purchase ____________________ shares of the Common Stock, par value
$0.01 per share, of the Company covered by the Warrant, and makes payment
therefor in full at the price per share provided by the Warrant.
Dated: Signature:
---------------- --------------------------
SUBSCRIPTION (CASHLESS EXERCISE)
The undersigned Holder ___________________, pursuant to the provisions of the
Warrant, hereby elects to exchange its Warrant, in whole or in part, as
appropriate, for ______ shares of Common Stock, stated value $___ per share, of
the Company, pursuant to the cashless exercise provisions of Section 3 of the
Warrant.
Dated: Signature:
---------------- --------------------------
INSTRUCTIONS FOR REGISTRATION OF STOCK:
Name
-------------------------------------------------
(please type or print in block letters)
Address
----------------------------------------------
Address
----------------------------------------------
FORM OF ASSIGNMENT OR PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _________________________ (the "Holder) hereby sells, assigns
and transfers unto
Name
------------------------------------------------------------------------
(please typewrite or print in block letters)
Address
---------------------------------------------------------------------
the right to purchase Common Stock, as appropriate, to the extent of _________
shares as to which such right is exercisable pursuant to this Warrant of ELITE
PHARMACEUTICALS, INC. ("the Company") dated _____ granted to the Holder (or its
assignor), and does hereby irrevocably constitute and appoint
_____________________, attorney, to transfer same on the books of the Company
with full power of substitution in the premises.
NOTE: THE SIGNATURE TO THIS ASSIGNMENT FORM MUST CORRESPOND WITH THE NAME AS IT
APPEARS ON THE FACE OF THE WARRANT, WITHOUT ALTERATION OR ENLARGEMENT OR ANY
CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A BANK OR TRUST COMPANY. OFFICERS
OF CORPORATIONS AND THOSE ACTING IN A FIDUCIARY OR OTHER REPRESENTATIVE CAPACITY
SHOULD FILE PROPER EVIDENCE OF AUTHORITY TO ASSIGN THE FOREGOING WARRANT.
ANNEX I
IRREVOCABLE PROXY
ELITE PHARMACEUTICALS, INC.
From and after the date hereof, the undersigned, as record holder of the _______
shares of common stock, par value $0.01 per share of Elite Pharmaceuticals,
Inc., a Delaware corporation (the "COMPANY"), hereby irrevocably (to the fullest
extent permitted by law) authorizes, empowers, appoints and constitutes
________, the Company's current chief executive officer, as the undersigned's
proxy to (1) attend the any meeting of the stockholders of the Company (and any
adjournments thereof) (each a "STOCKHOLDER MEETING"), and (2) to vote (or
abstain from voting) the Shares (as defined below) of the Company, on any matter
submitted at any time at any Stockholder Meeting or via written consent to the
stockholders of the Company in their capacity as such and not pursuant to rights
granted by contract, in each case with the same effect as if the undersigned
were personally present at the Stockholder Meeting or voting such securities or
personally acting on any matters submitted to the stockholders of the Company
for approval or consent at any Stockholder Meeting. Upon the execution hereof,
all prior proxies given by the undersigned with respect to any of the Shares are
hereby revoked, and the undersigned agrees that during the term hereof no
subsequent proxies will be given with respect to any of the Shares.
This proxy is irrevocable, is coupled with an interest, and in all of the Shares
held of record or by the undersigned.
For the purposes of this proxy, "SHARES" means ________ shares of Common Stock
held of record by the undersigned, and all voting equity securities of the
Company issued upon conversion or exchange of, or in respect of, the foregoing
securities held of record by the undersigned and all voting securities of the
Company issued to the undersigned in the future.
This proxy shall exist for so long as the undersigned owns any Shares.
If any provision of this proxy or any part of any such provision is held under
any circumstances to be invalid or unenforceable in any jurisdiction, then (a)
such provision or part thereof shall, with respect to such circumstances and in
such jurisdiction, be deemed amended to conform to applicable laws so as to be
valid and enforceable to the fullest possible extent, (b) the invalidity or
unenforceability of such provision or part thereof under such circumstances and
in such jurisdiction shall not affect the validity or enforceability of such
provision or part thereof under any other circumstances or in any other
jurisdiction, and (c) the invalidity or enforceability of such provision or part
thereof shall not affect the validity or enforceability of any other provision
of this proxy. Each provision of this proxy is separable from every other
provision of this proxy, and each part of each provision of this proxy is
separable from every other part of such provision.
This proxy shall be governed by the laws of the State of Delaware, without
giving effect to its choice or conflicts of laws provisions.
This proxy shall be filed with the Secretary of the Company.
THIS PROXY SHALL BE SIGNED EXACTLY AS THE STOCKHOLDER'S NAME APPEARS ON HIS, HER
OR ITS STOCK CERTIFICATE(S). JOINT STOCKHOLDERS MUST EACH SIGN THIS PROXY. IF
SIGNED BY AN ATTORNEY IN FACT, THE POWER OF ATTORNEY MUST BE ATTACHED.
Dated as of INDIVIDUAL:
---------
----------------------------------------
Name:
ADDRESS:
----------------------------------------
----------------------------------------
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EXHIBIT B
THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE SECURITIES OR STATE "BLUE
SKY" LAWS. THIS NOTE MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR LAWS.
PROMISSORY NOTE
$150,000.00 New York, New York
("Original Principal Amount") July __, 2006
FOR VALUE RECEIVED, the adequacy of which is hereby
acknowledged, the undersigned, Indigo Ventures LLC (the "Maker"), hereby
promises to pay to ELITE PHARMACEUTICALS, INC. (the "Payee"), whose address is
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, the principal sum of ONE HUNDRED
AND FIFTY THOUSAND DOLLARS ($150,000.00), together with interest, commencing one
hundred eighty (180) days from the date hereof, at a rate of 5.06% per annum
compounded annually. This Note shall be due and payable on the earlier of (i)
June 1, 2011 and (ii) the date that the Maker (or any of its assignees) first
exercises all or a part of the Warrant (as defined below), whether by cash or
cashless exercise (the "Maturity Date"). Interest on this Note shall accrue as
provided for above until, and be payable (together with the Original Principal
Amount hereof), on the Maturity Date.
Payments due hereunder shall be paid in lawful money of the
United States of America (or by wire transfer or certified check payable in such
money) at Payee's address (as given above) or at such other place as Payee or
any other holder of this Note may from time to time have designated by prior
written notice to Maker.
1. PREPAYMENT. The Maker may at any time prepay in whole or in
part the principal amount of this Note, together with any accrued but unpaid
interest on the prepaid principal amount, without penalty or premium.
2. ALLOCATION. All payments made hereunder (whether in
prepayment or otherwise) shall first be applied against any interest then due
hereunder and shall then be applied against principal.
3. SECURITY. All amounts due under this Note shall be secured
by Maker's warrant for 600,000 shares of Payee's common stock (the "Warrant")
and the shares of Common Stock, par value $0.01 per share of the Payee, issuable
upon exercise of the Warrant (the "Warrant Shares"). Following any Event of
Default and foreclosure, Payee shall have an absolute right to dispose of the
Warrant in any manner it chooses (including cancellation of the Warrant and if
the Warrant has been previously exercised, in whole or in part, then Payee shall
have the absolute right to dispose of the Warrant Shares in any manner it
chooses) in order to satisfy Maker's obligation hereunder.
4. RECOURSE. As provided in Section 3 above, one hundred per
cent (100%) of the Original Principal Amount and any interest payable on this
Note shall be secured by the Warrant. In addition, ten per cent (10%), and only
ten per cent (10%), of the Original Principal Amount shall be full recourse to
the Maker. Ninety per cent (90%) of the principal amount of this Note and all
interest hereon shall be non-recourse to the Maker and Payee's sole recourse for
payment of such principal and interest shall be to the Warrant.
5. ADJUSTMENTS. In the event that the Financial Advisory
Agreement by and between Elite Pharmaceuticals, Inc. and Indigo Ventures LLC
dated as of July __, 2006 (the "Advisory Agreement") is terminated pursuant to
the terms of such Advisory Agreement, the total outstanding amount on the Note
shall be reduced to an amount equal to the outstanding principal and interest on
the Note multiplied by a fraction, the numerator of which is the number of
vested Warrant Shares as of the date that the Advisory Agreement is terminated
and the denominator of which is 600,000.
3
6. EVENT OF DEFAULT. It shall be a Default if Maker shall fail
to pay the principal or interest due under this Note on the Maturity Date, and
such failure to pay principal or interest shall be an Event of Default if not
cured within twenty (20) days of receipt of a written Notice of Default from
Payee. No other event, action or circumstance shall be an Event of Default
hereunder.
If an Event of Default should occur, Payee, at its option, may
declare the outstanding principal balance of and all accrued but unpaid interest
on this Note to be immediately due and payable without presentment, demand,
protest, or notice of any kind, all of which are hereby expressly waived.
7. NOTICES. All notices, requests, demands or other
communications required or permitted hereunder shall be in writing, addressed to
the appropriate party as follows:
(i) IF TO MAKER, to:
Indigo Ventures LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telephone (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile (▇▇▇) ▇▇▇-▇▇▇▇
(ii) IF TO PAYEE, TO:
▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇
Chief Executive Officer
Elite Pharmaceuticals, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Telephone:
Facsimile
or to such other address as may have been designated in prior notice. Notices
may be sent by (a) nationally recognized overnight courier, or (b) registered or
certified mail, postage prepaid, return receipt requested; and shall be deemed
given (i) in the case of overnight courier, the next business day after the day
sent, and (ii) in the case of mailing, three (3) business days after being
mailed by registered or certified mail, and otherwise notices shall be deemed to
have been given when received.
8. ASSIGNMENT. Any attempt by Maker to assign its rights or
delegate its duties under this Note without the prior written consent of Payee
will be void.
9. BINDING EFFECT. The terms and provisions of this Note shall
be binding upon Maker and its successors and permitted assigns, and shall inure
to the benefit of Payee.
10. GOVERNING LAW. This Note shall be governed by and
construed in accordance with the laws of the State of New York, without regard
for the conflicts of laws principles thereof.
11. HEADINGS. The section headings contained in this Note are
intended solely for convenience of reference and do not themselves constitute a
part of this Note.
12. SEVERABILITY. If any provision of this Note or the
application thereof to any person or circumstance should, for any reason and to
any extent, be invalid or unenforceable, the remainder of this Note and the
application of such provision to other persons or circumstances shall not be
affected thereby, but rather shall be enforced to the greatest extent permitted
by law.
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IN WITNESS WHEREOF, Maker has executed this Note as of the date first
above written.
INDIGO VENTURES LLC
By:
---------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Managing Member
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