Ex-10.1
SETTLEMENT AGREEMENT
This Settlement Agreement (the "Agreement") is entered into as of July 31, 2007
(the "Effective Date"), by and among Synovics Pharmaceuticals, Inc. ("SPI"),
Synovics Laboratories, Inc. ("Synovics Labs" and together with SPI, "Synovics"),
Nostrum Pharmaceuticals, Inc. ("Nostrum"), and Xxxxxx Xxxxx, Ph.D. ("Xx.
Xxxxx").
In resolution of all actual and potential disputes between the parties to this
Agreement through and including the Effective Date, and in consideration of the
representations and mutual promises hereinafter set forth, the following terms
are agreed as of the execution of this Agreement:
1. The parties shall dismiss and discontinue, with prejudice, all pending
actions and proceedings between Synovics and Nostrum, including, without
limitation, the federal district court actions pending in the Southern
District of New York (06 Civ. 13286 (JSR); 00 Xxx. 000 (XXX)) and the
District of New Jersey (07-1010 (FSH-PS) and the arbitration before the
American Arbitration Association (AAA Case No. 13-133-Y-02706-06 02) (the
"AAA Arbitration"). Upon execution of this Agreement, Synovics shall enter
into a separate agreement with Xxxx Xxxxx ("Anand") providing for a
settlement and release of all claims between them. Synovics and Nostrum
shall each bear one-half of the arbitrators' fees and the other awarded or
billed costs of pre-hearing conferences in the AAA Arbitration. Stipulations
providing for such dismissals, fully executed by counsel for the parties to
such actions and proceedings, shall be delivered at the Closing (the
"Closing") which will take place at the offices of Xxxxxxx X. Xxxxx, Xx.,
Esq., New York, New York on August 1, 2007, commencing at 11:00 a.m. or at
such other place and time as the parties may mutually determine.
2. (a) All pre-settlement agreements between Synovics (or its subsidiaries) and
Nostrum (or Xx. Xxxxx) shall be terminated including, without limitation,
the Technology License Agreement and any amendments thereto ("TLA") and the
ANDA Ownership Transfer and Product License Agreement relating to Metformin
(the "Metformin Agreement"). To the extent held by Synovics or their
subsidiaries, the ownership and other rights with respect to all products
under the TLA and the Metformin Agreement (and all formulations, processes
and other technology, approvals, applications, and records related to the
development and commercialization of the products) shall be, and are hereby
transferred, assigned and returned to Nostrum, free and clear of all claims
by Synovics or their subsidiaries and Nostrum shall have the right hereafter
to develop, manufacture and otherwise commercialize the products. Synovics
shall be free to explore and enter into any financial arrangements without
regard to any restrictions or limitations under the TLA (including its
amendments) or otherwise. Notwithstanding the provisions of this paragraph
to the contrary, the indemnification and confidentiality provisions
contained in the TLA and the Metformin Agreement and the provisions of the
Stock Purchase Agreements
between Synovics and Nostrum (the "Stock Purchase Agreements") shall remain
in full force and effect in accordance with their terms and conditions
except to the extent that they have been amended or limited by the
provisions of this Agreement.
(b) Synovics shall promptly return to Nostrum, in "as is" condition,
Nostrum's fluid air mill and all tooling, punches, dies and API that
Synovics or its subsidiaries have in their possession, custody or control
which they originally received from Nostrum. Nostrum shall pay or reimburse
Synovics for their reasonable out of pocket expenses incurred in returning
such equipment and other property to Nostrum.
(c) In substantially the same words as used in this paragraph, Synovics
shall deliver to Nostrum at the Closing (i) a xxxx of sale for the
Abbreviated New Drug Application with respect to Metformin Extended Release
500mg tablets (the "Metformin Product") No. 076756 and all supplements and
amendments thereto as of the date of Closing (the "ANDA"), any other
regulatory approvals issued to or for the benefit of Synovics by any other
regulatory authority, including licenses and permits, if any, related to
the Metformin Product and Synovics' correspondence file with the Food and
Drug Administration ("FDA") relating to the ANDA, executed by Synovics
Labs; (ii) an assignment agreement for the assignment of the right, to the
extent held by Synovics, to make, have made, use, import, offer for sale,
market and sell the Metformin Product, executed by Synovics Labs; and (iii)
a letter from Synovics Labs addressed to FDA informing FDA that the
registration for the Metformin Product has been transferred from Synovics
to Nostrum. After Closing, Synovics shall file the information required of
a former owner of such registration, and Nostrum shall file the information
required of a new owner, each at Nostrum's expense. Synovics and Nostrum
further agree to cooperate with each other in order to effectuate the
foregoing transfer of such registration.
3. Synovics shall not seek the return from Nostrum of any of the US$2.0 million
or more paid under the TLA or the Metformin Agreement, and Nostrum shall not
seek reimbursement from Synovics for any invoices it has paid under any
agreements with Synovics (or its subsidiaries). In addition, Nostrum shall
be responsible for any outstanding invoices or claims by Enem Nostrum
Remedies Pvt. Ltd. ("Enem") or any Nostrum affiliate excluding NexGen
(although Synovics does not acknowledge any responsibility of payment to
NexGen, and Nostrum disclaims affiliation with NexGen) as well as any legal
bills from the Xxxxxx Xxxxx law firm insofar as those bills relate to work
performed under the TLA, the Metformin Agreement or to any Nostrum products.
4. The parties mutually release and discharge any and all prior, existing or
potential claims, contracts, judgments, rights, rights of action or causes
of action arising from or relating to any transactions or occurrences
through the date of this Agreement which Synovics and Nostrum and their
respective officers, directors,
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employees, agents, parents, subsidiaries and affiliates (excluding NexGen;
SEE [paragraph] 3, SUPRA) may have against one another provided, however,
that these provisions do not release, terminate or discharge: (a) any rights
or obligations arising under the provisions of this Agreement, the escrow
agreement referred to below, the Stock Purchase Agreements as may be amended
to the extent necessary to accommodate the terms of said escrow agreement,
and any related agreements necessary to effectuate this settlement; (b) any
indemnity obligations arising under contract, by law, statute or common law
based on claims asserted by third parties other than third party claims
referenced in paragraph 3 and (c) the confidentiality obligations set forth
in the TLA and the Metformin Agreement in accordance with their terms and
conditions. In addition, Nostrum and Xxxxx shall retain all of their rights
of subrogation in respect of any undischarged obligations under their Bank
of India ("BOI") guarantees. At the Closing, Synovics shall deliver to
Nostrum releases from Synovics' Xxxx and AndaPharm subsidiaries, Xxxxxx X.
Xxxx, Ph.D. and Xxxxxx Xxxxxxx in substantially the same form as Synovics'
release contained in this paragraph 4, and Nostrum shall deliver to Synovics
releases from Enem, Nostrum Laboratories Inc. and Anand in substantially the
same form as Nostrum's release contained in this paragraph 4.
5. (a) As part of the settlement provided for hereunder, Nostrum shall deliver
at the Closing its certificates for 10,771,000 shares of Synovics common
stock ("Common Stock") to Beigelman, Xxxxxxx & Associates, P.C. as escrow
agent (the "Escrow Agent") pursuant to that certain Escrow Agreement ("the
Escrow Agreement") between and among Escrow Agent, Synovics and Nostrum
dated as of the Effective Date. Synovics shall promptly (i) reregister, upon
the Escrow Agent's request, 10,000 of such shares into the name of Xxxxx X.
Xxxxx ("Xxxxx Shares"), 100,000 of such shares into the name of Xxxxxx X.
Xxxxxx ("Xxxxxx Shares") and 10,661,000 of such shares into the name of
Nostrum (the "Nostrum Shares"), and (ii) deliver the certificates for the
Xxxxx and Xxxxxx Shares to Xxxxxxx X. Xxxxx, Xx., Esq., 000 Xxxx 00xx
Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000, for transmittal to such
registered owners, and the certificate for the Nostrum Shares to the Escrow
Agent, 000 Xxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000.
(b) The Nostrum Shares, together with all dividends, distributions, products
and proceeds thereof (except dividends and distributions payable in cash
which are to be paid to Nostrum), shall be held in escrow by the Escrow
Agent pursuant to the Escrow Agreement for a period (the "Escrow Period") of
up to nine (9) months from the Effective Date, to be determined in
accordance with the provisions of this paragraph 5(b) and paragraphs 6
and 7. (To the extent that the Nostrum Shares are held in escrow pursuant to
the Escrow Agreement, such shares, and all dividends, distributions,
products and proceeds thereof (except dividends and distributions payable in
cash), are hereinafter referred to as the "Escrowed Shares"). The Escrow
Period shall end earlier than nine (9) months from the Effective Date in
the event that the guarantees of Xx. Xxxxx and Nostrum to BOI are
extinguished through refinancing of through any other arrangement during
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such period. Upon this event, all Escrowed Shares immediately shall be
transferred by the Escrow Agent to Synovics free and clear of all claims by
Nostrum, or Xx. Xxxxx, or their affiliates.
6. At all times from July 31, 2007 until the end of the Escrow Period, Synovics
shall be free to obtain any financing, including but not limited to
refinancing of existing debt, without any restrictions, limitations or
interference from Nostrum, Xx. Xxxxx or their agents. During the Escrow
Period, Synovics shall be obligated to use its reasonable best efforts to
obtain from BOI a full release and discharge of the unconditional guarantees
that Nostrum and Xx. Xxxxx delivered to BOI in connection with the Xxxx
financing in May 2006. If and to the extent that BOI permanently
releases and discharges Nostrum and Xx. Xxxxx during the Escrow Period from
their obligations to pay BOI all or a specified amount of the underlying
obligations under the BOI credit facility, the Escrow Agent shall be
instructed by Synovics to deliver a proportionate amount of the Escrowed
Shares to Synovics or its designee, free and clear of all claims by Nostrum
or Xx. Xxxxx or their affiliates. During the Escrow Period, the Escrowed
Shares shall not be voted, exchanged or sold by either party (and neither
Nostrum nor Xx. Xxxxx shall call for a shareholder meeting or seek to do so
at any time after July 31, 2007 until the expiration of the Escrow Period.)
Notwithstanding any provision of this paragraph or the Escrow Agreement to
the contrary, during the Escrow Period, Nostrum may vote any remaining
Escrowed Shares regarding a proposed sale of substantially all of Synovics'
assets, or a proposed merger, consolidation or other significant proposed
corporate reorganization or capital reclassification in connection with
which the Nostrum and Xxxxx guarantees to BOI are not released and
discharged, but only to the extent that any of the foregoing events are
presented by the Synovics Board of Directors to its shareholders. In
addition, notwithstanding any provision of this paragraph or the Escrow
Agreement to the contrary, during the Escrow Period, any remaining Escrowed
Shares shall be exchangeable or transferable in connection with corporate
reorganizations and other transactions effecting all of the stockholders in
the same manner as any other shares of Synovics' Common Stock.
7. Upon the expiration of nine (9) months from the Effective Date any remaining
Escrowed Shares shall forthwith be transferred to Nostrum or its designee,
free and clear of all claims by Synovics, BOI or the Escrow Agent. In the
event that a default with BOI is not cured within sixty (60) days, upon
instruction by Nostrum any remaining Escrowed Shares shall forthwith be
transferred to Nostrum or its designee, free and clear of all claims by
Synovics or the Escrow Agent; provided, however, that during the Escrow
Period Nostrum and Xx. Xxxxx shall make their reasonable best efforts, upon
written request of Synovics (and at Synovics' reasonable expense), to
cooperate with Synovics (but without incurring any financial, legal or
credit obligation on the part of Nostrum or Xx. Xxxxx) in extinguishing
their unconditional guarantees to BOI under the Synovics' credit facility
with BOI and in curing any defaults under Synovics' credit facility with
BOI. Except for Bank of India and any other institution with which Nostrum
or
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Xx. Xxxxx maintains a bona fide credit or financial relationship (and only
to the extent any such contact relates to such bona fide credit or financial
relationship), Nostrum and Xx. Xxxxx (and their agents) shall have no
unauthorized contact with any of Synovics' existing or potential lenders or
financiers (identified to them in writing by Synovics prior to any such
contact) for any purpose relating to Synovics or its subsidiaries.
Furthermore, the parties agree that either party may be entitled to
immediate injunctive relief in the event that the other party breaches any
of the provisions of this paragraph.
8. In the event at any time during the Escrow Period Synovics issues additional
shares of its Common Stock or securities convertible, exchangeable, or
excercisable into shares of its Common Stock or other rights to acquire
shares of its Common Stock which would cause the Escrowed Shares to
represent less than 32% of the outstanding shares of Synovics' Common Stock
on a fully diluted basis, then if the Escrowed Shares are released to
Nostrum, Synovics will issue to Nostrum at the time of such release
additional shares of its Common Stock (the "Additional Shares") without
consideration by Nostrum such that the Escrowed shares together with the
Additional Shares will represent on a fully diluted basis 32% of the
outstanding shares of Synovics' Common Stock; provided, however, if the
shares of Synovics' Common Stock to be released to Nostrum upon expiration
of the Escrow Period represent less than all of the Escrowed Shares the
number of Additional Shares to be issued to Nostrum shall be a pro rata
portion of the Additional Shares equal to the total number of Additional
Shares multiplied by a fraction, the numerator of which is the number of
Escrowed Shares released to Nostrum and the denominator of which is the
total number of Escrowed Shares. The parties hereby acknowledge and agree
that Nostrum shall not by reason of its acquisition of Additional Shares
hereunder constitute an "Acquisition Person" within the meaning of that
certain Rights Agreement between Synovics and Continental Stock Transfer &
Trust Company dated as of September 8, 2006.
9. This Agreement will constitute the legal binding and enforceable
obligations of the parties hereto; provided, however, the parties
acknowledge and agree that the agreements specified herein will be
incorporated in definitive documentation; provided, further, however, that
this Agreement will constitute the legally binding and enforceable
obligations of the parties hereto notwithstanding any failure of the parties
hereto to execute and deliver definitive documentation. The parties and
their affiliates and agents agree to work to complete the transactions above
in an expeditious manner.
10. This Agreement shall be governed by and construed and enforced in accordance
with the law excluding the conflict of laws rules of the State of New York.
11. Any disputes between the parties arising out of this Agreement or the Escrow
Agreement shall be brought in any state or federal court located in New
York, New York.
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12. This Agreement may be executed in any number of counterparts and exchanged
via facsimile.
The parties have executed and delivered this Agreement as of the date first
hereinabove written.
SYNOVICS PHARMACEUTICALS, INC.
By: /s/ Xxxxxx Xxxx Date: July 31, 2007
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Name: Xxxxxx Xxxxxx Xxxx
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Title: CEO
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SYNOVICS LABORATORIES, INC.
By: /s/ Xxxxxx Xxxx Date: July 31, 2007
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Name: Xxxxxx Xxxxxx Xxxx
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Title: President
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NOSTRUM PHARMACEUTICALS, INC.
By: /s/ Xxxxxx Xxxxx Date: July 31, 2007
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Name: Xxxxxx Xxxxx
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Title: President
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/s/ Xxxxxx Xxxxx
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XXXXXX XXXXX, Ph.D. Date: July 31, 2007
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