Exhibit 10.3
July 30, 2008
PRIVATE & CONFIDENTIAL
----------------------
▇▇▇▇▇▇▇ ▇▇▇▇
Chairman & Chief Executive Officer
Elite Pharmaceutical, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear ▇▇. ▇▇▇▇:
This letter will serve as the engagement agreement ("AGREEMENT") between
Elite Pharmaceuticals, Inc. (the "COMPANY"), ▇▇▇▇ Capital Partners, LLC and
Boenning & Scattergood, Inc. (the "PLACEMENT AGENTS") and amends and replaces
the letter agreement dated as of April 24, 2008 among the Company and the
Placement Agents. The Company agrees to engage the Placement Agents to act as
its co-lead placement agents for a financing in the form of a private financing
(a "PRIVATE PLACEMENT") of up to approximately $5 million through a privately
negotiated sale of common stock or convertible preferred stock (in either case,
the "SHARES") of the Company.
1. SERVICES OF THE PLACEMENT AGENTS
--------------------------------
The Placement Agents are prepared to commence work immediately, including
beginning their due diligence activities and assisting the Company in preparing
and providing its publicly filed documents or other reasonably requested
materials ("OFFERING MATERIALS") for prospective purchasers in the Private
Placement. The Placement Agents will also advise the Company in structuring the
Private Placement. The Placement Agents will further: (a) identify and contact
suitable investors; (b) respond to questions, coordinate requests for
information and meetings with the Company and solicit commitments from
investors, and (c) otherwise assist in closing the Private Placement.
It is understood, that the decision to proceed with, and the final terms
of, the Private Placement will depend on the satisfactory results of the
Placement Agents' due diligence investigation (including review of legal and
accounting issues), the Company's business prospects, prevailing securities
market conditions at the time of the Private Placement and final approval by the
Placement Agents' respective Commitment Committees. It is understood that
execution of this Agreement does not assure the successful completion of the
Private Placement.
The Placement Agents agree that the Company shall be notified, in writing
or by email, of each potential investor contacted by the Placement Agents.
2. THE COMPANY'S ACTIONS AND RESPONSIBILITIES
------------------------------------------
In connection with Placement Agents' activities:
(a) The Company will comply with all applicable securities and other
laws in connection with the Private Placement including, without limitation,
making all appropriate filings with applicable federal and state securities
commissions or authorities, if so required,
Elite Pharmaceuticals, Inc.
July ___, 2008
Page 2 of 10
(b) The Company authorizes the Placement Agents to transmit the
Offering Materials to prospective purchasers in the Private Placement, as may be
identified to the Company, and represents and warrants that the information that
it provides to be included in the Offering Materials, at all times through the
closing, will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading. The Company shall not transmit the Offering Materials
to any prospective purchasers without first advising the Placement Agents, other
than as may be provided through any co-placement agent.
(c) The Company represents and warrants that: (i) the representations
and warranties contained in each purchase agreement with investors (the
"PURCHASE AGREEMENT") will be true and correct in all respects on the date such
Purchase Agreement is entered into and as of the closing date of the sale of the
Shares to which such Purchase Agreement relates, and (ii) the Placement Agents
shall be entitled to rely on such representations and warranties as if they were
made directly to the Placement Agents. The Placement Agents shall also be
entitled to rely upon any opinions of counsel delivered to any purchaser in the
Private Placement, including, without limitation, any opinions relating to the
registration statement.
(d) The Company shall establish an escrow account (the "ESCROW
ACCOUNT") with a suitable financial institution agreeable to the Company and the
Placement Agents (the "ESCROW AGENT"), and shall enter into an escrow agreement
(the "ESCROW AGREEMENT") with the Escrow Agent. Upon the closing of the Private
Placement (or each such closing if there shall be more than one), the Escrow
Agent shall deliver to the Company, by wire transfer of immediately available
funds, the funds deposited in the Escrow Account in payment for the securities,
less (x) the amounts payable to the Escrow Agent pursuant to the terms of the
Escrow Agreement, and (y) the amounts payable to the Placement Agents pursuant
to Section 3 hereof.
(e) The Company will not authorize any other person to act on its
behalf as investment banker with respect to a Private Placement for a period of
90 days, commencing on the date of this letter, other than such additional
co-placement agents as to which the Company shall have provided notice to the
Placement Agents, subject to the consent of the Placement Agents, which consent
shall not be unreasonably withheld, conditioned or delayed; PROVIDED that any
such co-placement agent has entered into a Co-Placement Agent Agreement with the
Placement Agents, a form of which has been provided to the Company. Nonetheless,
the Placement Agents reserve the right to involve other Financial Industry
Regulatory Authority. Inc. ("FINRA") member Broker Dealers in good standing in
the Private Placement, subject to the approval of the Company, which shall not
be unreasonably withheld.
3. FEES & EXPENSES
---------------
(a) As compensation for the services to be provided by the Placement
Agents hereunder, the Company agrees to pay to the Placement Agents a cash fee
equal to 6.5% of the gross proceeds of the Private Placement payable at the
closing of the Private Placement. In addition, the Placement Agents shall
receive at the closing of the Private Placement a five-year non-callable warrant
to purchase that number of shares of the Company's common stock equal to 4.0% of
the number of shares of the Company's common stock sold in the Private Placement
(on an as-converted basis if shares of the Company's preferred stock are sold in
the Private Placement) to investors contacted by the Placement Agents with the
approval of the Company at a price per share equal to the greater of (i) 110% of
the conversion price per share of the common stock sold in the Private Placement
(or in the case of convertible preferred stock, 110% of the price at which the
convertible preferred stock may be converted into common stock, as of the date
of the closing of the Private Placement), and (ii) the market price per
Elite Pharmaceuticals, Inc.
July ___, 2008
Page 3 of 10
share of the Company's common stock on the initial closing date. If the Private
Placement is consummated by means of more than one closing, the Placement Agents
shall be entitled to the fees and warrants provided herein with respect to each
such closing.
(b) In addition to the foregoing fees, and regardless of whether any
Private Placement is consummated, the Company shall reimburse the Placement
Agents for all reasonable out-of-pocket expenses incurred from time to time in
connection with the provision of the services hereunder, including reasonable
fees and expenses of its counsel, travel-related expenses (without regard to
volume- based or similar credits or rebates the Placement Agents may receive
from travel agents, airlines and other vendors on a periodic basis), research,
database and similar information charges paid to third party vendors, and
postage, telecommunication and duplicating expenses. Such fees will be limited
in the aggregate to $30,000 without prior written consent of the Company.
4. TERMS OF ENGAGEMENT
-------------------
The Company or the Placement Agents may terminate the Agreement anytime
after the close of business on August 31. 2008 (the "TERMINATION DATE"), with or
without cause by notifying the other in writing 10 days prior to the Termination
Date. This Agreement shall terminate, without further action by either party
upon the earlier of (i) the date of the closing of the Private Placement, (ii)
provision by either party of written notice and expiration of the 10-day period
described above, and (iii) the Termination Date. Following the Company's
termination of this Agreement, if the Company, on or before the first
anniversary of the date of such termination, sells securities of the Company to
any investors contacted by the Placement Agents in connection with the Private
Placement, the Company will pay to the Placement Agents the fees that would have
been payable to the Placement Agents in accordance with Section 3 above.
Termination of the Agreement shall not affect the Placement Agents' right (a) to
indemnification, contribution or reimbursement of expenses under this Agreement,
or (b) to any amounts owed on or prior to the date of such termination. Without
limiting the foregoing, notwithstanding the expiration of this Agreement, the
provisions of Sections 3 through 8, including, without limitation the obligation
to pay additional cash fees and issue additional warrants upon additional
closings of the Private Placement, shall remain operative in accordance with
their respective terms.
5. INDEMNIFICATION
---------------
The Company agrees to provide indemnification, contribution and
reimbursement to the Placement Agents and certain other parties, including any
co-placement agents in accordance with, and the Company further agrees to be
bound by, the limitations on liability and other provisions set forth in
SCHEDULE A attached hereto, which SCHEDULE A is incorporated herein and made a
part hereof.
6. INFORMATION PROVIDED TO THE PLACEMENT AGENTS
--------------------------------------------
In performing the services described above, the Company agrees to furnish
or cause to be furnished to the Placement Agents such information as the
Placement Agents reasonably believe appropriate to permit the Placement Agents
to provide the services contemplated by this Agreement (all such information so
furnished being the "INFORMATION"). The Company represents and covenants that
all information furnished by the Company or its agents will be complete and
correct in all material respects and that during the term of this Agreement, the
Company will advise Placement Agents immediately of the occurrence of any event
or any other change known by the Company or its agents which results in the
Information ceasing to be complete and correct in all material respects. The
Company also represents and
Elite Pharmaceuticals, Inc.
July ___, 2008
Page 4 of 10
warrants that any projections or forecasts that it provides to the Placement
Agents will be prepared in good faith and will be based upon assumptions which
the management of the Company believes, in light of the circumstances in which
they are made, are reasonable. The Company recognizes and confirms that the
Placement Agents (a) will use and rely primarily on the Information and on
information available from generally recognized public sources in performing the
services contemplated hereby without having independently verified any of the
same, except to the extent that any such information is inconsistent with the
Information, (b) does not assume responsibility for the accuracy or completeness
of the Information and such other information, and (c) will not make any
appraisal of any of the assets or liabilities of the Company.
7. CONFIDENTIALITY
---------------
(a) Each Placement Agent agrees to maintain the confidentiality of all
confidential information provided to it by the Company regarding the Company and
shall not disclose any such confidential information to any person other than
employees and agents of the Placement Agents without the prior written consent
of the Company. The obligations regarding confidential information received
hereunder shall not apply to any such information which: (i) is or becomes part
of the public domain, prior to or after the time of disclosure of such
information, or is or becomes publicly available without breach hereof by the
Placement Agents; (ii) is lawfully acquired by the Placement Agents from a
source not under obligation to the Company regarding disclosure of such
information; (iii) is disclosed to any third party by or with the permission of
the Company without confidentiality restrictions; (iv) is developed by or on
behalf of the Placement Agents without reference to or reliance upon
confidential information hereunder; or (v) was in the Placement Agents'
possession before receipt from the Company without being bound by a
confidentiality agreement or otherwise prohibited from transmitting the
information by a confidential, legal or fiduciary obligation with respect to
such information.
(b) If either Placement Agent is required by judicial or administrative
process to disclose any information that it has agreed not to disclose pursuant
to Section 7(a), then the recipient of such information shall promptly notify
the other in order to afford the other a reasonable time to oppose such process.
The Placement Agents will not oppose any action by the disclosing party to seek
a protective order or other remedy.
8. COVENANTS, REPRESENTATIONS, AND WARRANTIES
------------------------------------------
(a) Each Placement Agent is a duly registered broker-dealer pursuant to
the Securities Exchange Act of 1934, as amended (the "ACT"), and the rules and
regulations promulgated thereunder, and a member of good standing of the FINRA.
(b) The Placement Agents agree that the Placement Agents will maintain
the registrations, qualifications and memberships referred to in paragraph 8(a)
in good standing and in full force and effect throughout the term of this
Agreement.
(c) The Placement Agents undertake to comply, with respect to the
offering of Shares, with all applicable laws, including without limitation, all
applicable provisions of the Act, the Investment Company Act of 1940 and the
rules and regulations thereunder, and the applicable rules of FINRA, and the
Placement Agents will indemnify and hold the Company harmless against any
liabilities (including costs of investigation and defense) to which the
Placement Agents become subject in respect of breach by the Placement Agents of
this Section 8.
Elite Pharmaceuticals, Inc.
July ___, 2008
Page 5 of 10
(d) During the term of this Agreement, the Placement Agents (i) shall
not engage in any form of general solicitation or general advertising which is
prohibited by Regulation D promulgated under the Act in connection with the
Private Placement, (ii) shall not solicit prospective purchasers of Shares in
the Private Placement unless the Placement Agents reasonably believe that such
purchaser is an "accredited investor" as defined in Rule 501 Regulation D
promulgated under the Act, and (iii) shall cooperate fully with the Company and
its counsel with respect to compliance with all applicable federal, state and
foreign securities and "blue sky" laws applicable to the Private Placement.
9. MISCELLANEOUS
-------------
(a) This Agreement and all controversies arising from or related to
performance under this Agreement shall be governed by the internal laws of the
State of New York without regard to its rules concerning conflicts of laws. To
the full extent lawful, each of the parties to this Agreement hereby consents
irrevocably to personal jurisdiction, service and venue (a) in connection with
any claim arising out of this Agreement, the courts of the State of New York
located in New York County, New York, and the federal courts in the Southern
District of New York, and (b) solely for the purpose of allowing any person to
enforce its reimbursement, indemnification or contribution rights hereunder, in
any court in which any action is brought in respect of which any such right is
asserted.
(b) This Agreement may not be amended or otherwise modified except by a
writing signed by each of the parties to this Agreement. No party may assign
this Agreement without the prior written consent of the other parties. This
Agreement embodies the entire agreement and understanding among the parties and
supersedes any prior agreements and understandings relating to its subject
matter, including the prior letter agreement between the Company and Boenning &
Scattergood, Inc. (which upon execution of this Agreement shall terminate in its
entirety) and any prior agreement between Boenning & Scattergood, Inc. and
▇▇▇▇▇▇▇▇▇▇▇ & Co., Inc. If any provision of this Agreement shall be determined
to be invalid or unenforceable in any respect, such determination shall not
affect such provision in any other respect or any other provision of this
Agreement, which shall remain in full force and effect. This Agreement is made
solely for the benefit of the Company and the Placement Agents (and, to the
extent provided in SCHEDULE A, the Indemnified Parties) and their respective
successors and assigns, heirs and personal representatives, and no other person
shall have or acquire any rights under or by virtue of this Agreement.
(c) Upon the consummation of the Private Placement, the Placement
Agents may, at their own expense, place announcements in financial and other
newspapers and periodicals describing its services in connection therewith. The
content of such notice and the use of the Company's logos, trademarks or other
identifying marks shall be subject to the Company's prior written approval,
which shall not be unreasonably withheld, conditioned or delayed.
(d) This Agreement may be executed in counterparts, each of which shall
be deemed an original but all of which shall constitute one and the same
instrument. Either party's execution and delivery of this Agreement may be
evidenced by either physical delivery or facsimile communication of such
executed Agreement or executed counterpart to the other party.
(e) The Board and the Company understand and acknowledge that Placement
Agents and their affiliates (collectively, the "PLACEMENT AGENTS GROUP") engage
in providing investment banking, securities trading, financing, and financial
advisory services and other commercial and investment banking products and
services to a wide range of institutions and individuals. In the ordinary course
of business, the Placement Agents Group and certain of its employees, as well as
investment funds
Elite Pharmaceuticals, Inc.
July ___, 2008
Page 6 of 10
in which they may have financial interests, may acquire, hold or sell, long or
short positions, or trade or otherwise effect Private Placements, in debt,
equity, and other securities and financial instruments (including bank loans and
other obligations) of, or investments in, a party that may be involved in the
matters contemplated by this Agreement. With respect to any such securities,
financial instruments and/or investments, all rights in respect of such
securities, financial instruments and investments, including any voting rights,
will be exercised by the holder of the rights, in its sole discretion. In
addition, the Placement Agents Group may currently, and may in the future, have
financial advisory or other investment banking relationships with parties other
than the Company, including parties that may have interests with respect to the
Company, a Private Placement or other parties involved in a Private Placement,
from which conflicting interests or duties may arise. Although the Placement
Agents Group in the course of such other activities and relationships may
acquire information about the Company, a Private Placement or such other
parties, the Placement Agents Group shall have no obligation to, and may not be
contractually permitted to, disclose such information, or the fact that the
Placement Agents Group is in possession of such information, to the Company or
to use such information on the Company's behalf.
(f) The parties understand that the Placement Agents are being engaged
hereunder as an independent contractor to provide the services described above
solely to the Company, and that the Placement Agents are not acting as a
fiduciary of the Company, the security holders or creditors of the Company or
any other persons in connection with this engagement.
(g) The Placement Agents shall not be prevented from engaging in future
transactions involving companies in a similar industry to the Company provided
that no confidential information of the Company is used in connection with such
engagement.
Elite Pharmaceuticals, Inc.
July ___, 2008
Page 7 of 10
Please indicate your acceptance of the foregoing by executing and returning
the enclosed copy of this letter
▇▇▇▇ CAPITAL PARTNERS, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------
▇▇▇▇▇ ▇. ▇▇▇▇
Managing Director
BOENNING & SCATTERGOOD, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
----------------------------
▇▇▇▇▇ ▇▇▇▇▇
Managing Director
Accepted by:
ELITE PHARMACEUTICALS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
---------------------------- --------------------
▇▇▇▇▇▇▇ ▇▇▇▇ Date
Chairman & Chief Executive Officer
SCHEDULE A
This Schedule is attached to, and constitutes a material part of, that
certain agreement dated July ___, 2008, between the Company, Boenning &
Scattergood, Inc. and ▇▇▇▇ Capital Partners, LLC (the "AGREEMENT"). Unless
otherwise noted, all capitalized terms used herein shall have the meaning set
forth in the Agreement.
As a material part of the consideration for the agreement of the Placement
Agents to furnish their services under the Agreement, the Company agrees to
indemnify and hold harmless the Placement Agents and their affiliates, and their
respective past, present and future directors, officers, employees, agents and
controlling persons within the meaning of either Section 15 of the Securities
Act of 1933, as amended, or Section 20 of the Securities Exchange Act of 1934,
as amended (collectively, the "INDEMNIFIED PARTIES"), to the fullest extent
lawful and not in violation of public policy, from and against any and all
losses, claims, damages or liabilities (or actions in respect thereof) arising
out of or related to the Agreement, any actions taken or omitted to be taken by
an Indemnified Party (including acts or omissions constituting ordinary
negligence) in connection with the Agreement, or any Private Placement or
proposed Private Placement. In addition, the Company agrees to reimburse each
Indemnified Party for any reasonable legal or other expenses incurred by each of
them in respect thereof at the time such expenses are incurred; PROVIDED,
HOWEVER, the Company shall not be liable under the foregoing indemnity and
reimbursement agreement for any loss, claim, damage or liability which is
finally judicially determined by a court of competent jurisdiction to have
resulted from the willful misconduct or gross negligence of any Indemnified
Party.
If for any reason the foregoing indemnification is unavailable to any
Indemnified Party or insufficient to fully indemnify any such party or to hold
it harmless, the Company shall contribute to the amount paid or payable by the
Indemnified Party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative benefits
received (or anticipated to be received) by the Company, on the one hand, and
the Placement Agents, on the other hand, in connection with the actual or
potential Private Placement and the services rendered by the Placement Agents,
but also the relative fault of the Company, on the one hand, and the Placement
Agents, on the other hand, in connection therewith, as well as any other
relevant equitable considerations. In no event shall the aggregate contribution
of the Indemnified Parties to all such losses, claims, damages, liabilities or
expenses exceed the amount of fees actually received by the Indemnified Parties
pursuant to the Agreement. The parties further agree that the relative benefits
to the Company on the one hand and the Indemnified Parties on the other with
respect to any Private Placement contemplated by the Agreement shall be deemed
in the same proportion as (i) the total value the Private Placement bears to
(ii) the fees paid to the Placement Agents with respect to the Private
Placement.
The Placement Agents shall provide the Company with prompt written notice
of the commencement of any action or proceeding with respect to which
indemnification will be sought hereunder, provided that the failure to provide
such notice will not relieve the Company from any liability hereunder except to
the extent the Company is materially prejudiced thereby. The Company shall be
entitled to assume the defense of any such action or proceeding with counsel
reasonably satisfactory to the Indemnified Parties. Upon assumption by the
Company of the defense of any such action or proceeding, the Indemnified Party
shall have the right to participate in such action or proceeding and to retain
its own counsel but the Company shall not be liable for any legal expenses of
other counsel subsequently incurred by such Indemnified Party in connection with
the defense thereof unless (i) the Company has agreed to pay such fees and
expenses, (ii) the Company shall have failed to employ counsel reasonably
satisfactory to the
Indemnified Parties in a timely manner, or (iii) the Indemnified Party shall
have been advised by counsel that there are actual or potential conflicting
interests between the Company and the Indemnified Parties, including situations
in which there are one or more legal defenses available to the Indemnified Party
that are different from or additional to those available to the Company,
PROVIDED, HOWEVER, that the Company shall not, in connection with any one such
action or proceeding or separate but substantially similar actions or
proceedings arising out of the same general allegations, be liable for the fees
and expenses of more than one separate firm of attorneys per relevant
jurisdiction (plus local counsel) at any time for all Indemnified Parties.
Each party agrees that it shall not effect any settlement or release from
liability in connection with any matter for which an Indemnified Party would be
entitled to indemnification from the Company, unless such settlement or release
contains a release of the indemnified Parties reasonably satisfactory in form
and substance to the other party. The Company shall not be required to indemnify
any Indemnified Party for any amount paid or payable by such party in the
settlement or compromise of any claim or action without the Company's prior
written consent.
The Company further agrees that neither the Placement Agents nor any other
Indemnified Party shall have any liability, regardless of the legal theory,
advanced, to the Company related to or arising out of the Placement Agents
engagement, except for any liability for losses, claims, damages, liabilities or
expenses incurred by the Company which are finally judicially determined to have
resulted from the bad faith, willful misconduct or gross negligence of any
Indemnified Party. The indemnity, reimbursement, contribution and other
obligations and agreements of the Company set forth herein shall apply to any
modifications of the Agreement, shall be in addition to any liability which the
Company may otherwise have, and shall be binding upon and inure to the benefit
of any successors, assigns, heirs and personal representatives of the Company
and each Indemnified Party. The foregoing provisions shall survive the
consummation of any Private Placement and any termination of the relationship
established by the Agreement.
