SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "AGREEMENT") is dated as of April
24, 2007, among Elite Pharmaceuticals, Inc., a Delaware corporation (the
"COMPANY"), and each purchaser identified on the signature pages hereto (each,
including its successors and assigns, a "PURCHASER" and collectively the
"PURCHASERS").
WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
"SECURITIES ACT") and Rule 506 promulgated thereunder, the Company desires to
issue and sell to each Purchaser, and each Purchaser, severally and not jointly,
desires to purchase from the Company, securities of the Company as more fully
described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agree
as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. In addition to the terms defined elsewhere in this
Agreement: (a) capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Certificate of Designation (as defined
herein), and (b) the following terms have the meanings indicated in this Section
1.1:
"ACTION" shall have the meaning ascribed to such term in Section
3.1(j).
"ACTUAL MINIMUM" means, as of any date, the maximum aggregate number
of shares of Common Stock then issued or potentially issuable in the
future pursuant to the Transaction Documents, including any Underlying
Shares issuable upon exercise or conversion in full of all Warrants and
shares of Series C Preferred Stock, ignoring any conversion or exercise
limits set forth therein, and assuming that any previously unconverted
shares of Series C Preferred Stock are held until the fifth anniversary of
the Closing Date and all dividends are paid in shares of Common Stock
until such fifth anniversary.
"AFFILIATE" means any Person that, directly or indirectly through
one or more intermediaries, controls or is controlled by or is under
common control with a Person, as such terms are used in and construed
under Rule 144 under the Securities Act. With respect to a Purchaser, any
investment fund or managed account that is managed on a discretionary
basis by the same investment manager as such Purchaser will be deemed to
be an Affiliate of such Purchaser.
"BUSINESS DAY" means any day except Saturday, Sunday, any day which
shall be a federal legal holiday in the United States or any day on which
banking institutions in the State of New York are authorized or required
by law or other governmental action to
close.
"CERTIFICATE OF DESIGNATION" means the Certificate of Designation of
the Series C Preferred Stock to be filed prior to the Closing by the
Company with the Secretary of State of Delaware, in the form of EXHIBIT A
attached hereto.
"CLOSING" means the closing or closings of the purchase and sale of
the Securities pursuant to Section 2.1.
"CLOSING DATE" means the Trading Day when all of the Transaction
Documents have been executed and delivered by the applicable parties
thereto, and all conditions precedent to (i) the Purchasers' obligations
to pay the Subscription Amount and (ii) the Company's obligations to
deliver the Securities have been satisfied or waived.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock of the Company, par value
US$.01 per share, and any other class of securities into which such
securities may hereafter be reclassified or changed into.
"COMMON STOCK EQUIVALENTS" means any securities of the Company or
the Subsidiaries which would entitle the holder thereof to acquire at any
time Common Stock, including, without limitation, any debt, preferred
stock, rights, options, warrants or other instrument that is at any time
convertible into or exercisable or exchangeable for, or otherwise entitles
the holder thereof to receive, Common Stock.
"COMPANY COUNSEL" means Reitler, Brown, & Xxxxxxxxxx LLC with
offices located at 000 Xxxxx Xxxxxx, Xxx Xxxx, XX 00000.
"CONVERSION PRICE" shall have the meaning ascribed to such term in
the Certificate of Designation.
"DISCLOSURE SCHEDULES" shall have the meaning ascribed to such term
in Section 3.1.
"DISCUSSION TIME" shall have the meaning ascribed to such term in
Section 3.2 (f).
"EFFECTIVE DATE" means the date that the initial Registration
Statement filed by the Company pursuant to the Registration Rights
Agreement is first declared effective by the Commission.
"EVALUATION DATE" shall have the meaning ascribed to such term in
Section 3.1(r).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
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"EXEMPT ISSUANCE" means the issuance of (a) shares of Common Stock
or options to employees, consultants, officers or directors of the Company
pursuant to any stock or option plan duly adopted by a majority of the
non-employee members of the Board of Directors of the Company or a
majority of the members of a committee of non-employee directors
established for such purpose, (b) securities upon the exercise or exchange
of or conversion of any Securities issued hereunder and/or other
securities exercisable or exchangeable for or convertible into shares of
Common Stock issued and outstanding on the date of this Agreement,
provided that such securities have not been amended since the date of this
Agreement to increase the number of such securities or to decrease the
exercise, exchange or conversion price of any such securities, (c)
securities issued pursuant to acquisitions or strategic transactions
approved by a majority of the disinterested directors, provided any such
issuance shall only be to a Person which is, itself or through its
subsidiaries, an operating company in, or an individual that operates, a
business synergistic with the business of the Company and in which the
Company receives benefits in addition to the investment of funds, but
shall not include a transaction in which the Company is issuing securities
primarily for the purpose of raising capital or to an entity whose primary
business is investing in securities, (d) up to a maximum of 1,500,000
shares of Common Stock or Common Stock Equivalents in any rolling 12 month
period issued to consultants, vendors, financial institutions or lessors
in connection with services (including the provision of Permitted
Indebtedness (as defined in the Certificate of Designations)) provided by
such Persons referred to in this clause (d), but shall not include a
transaction in which the Company is issuing securities primarily for the
purpose of raising capital or to an entity whose primary business is
investing in securities, and provided that none of such shares may be
registered for sale or resale by any of such holders; (e) securities
issued as a dividend or distribution any of the Securities pursuant to the
terms of the Transaction Documents and (f) securities issued in connection
with any stock split, stock dividend or recapitalization of the Common
Stock.
"GAAP" shall have the meaning ascribed to such term in Section
3.1(h).
"INDEBTEDNESS" shall have the meaning ascribed to such term in
Section 3.1(aa).
"INITIAL CONVERSION PRICE" means US$2.32.
"INTELLECTUAL PROPERTY RIGHTS" shall have the meaning ascribed to
such term in Section 3.1(o).
"LIENS" means a lien, charge, security interest, encumbrance, right
of first refusal, preemptive right or other restriction.
"MATERIAL ADVERSE EFFECT" shall have the meaning assigned to such
term in Section 3.1(b).
"MATERIAL PERMITS" shall have the meaning ascribed to such term in
Section 3.1(m).
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"PERSON" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
"SERIES C PREFERRED STOCK" means the up to 20,000 shares of the
Company's 8% Series C Convertible Preferred Stock issued hereunder having
the rights, preferences and privileges set forth in the Certificate of
Designation, in the form of EXHIBIT A hereto.
"PRE-NOTICE" shall have the meaning ascribed to such term in Section
4.8(b).
"PROCEEDING" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated the date hereof, among the Company and the Purchasers, in
the form of EXHIBIT B attached hereto.
"REGISTRATION STATEMENT" means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering
the resale of the Underlying Shares by each Purchaser as provided for in
the Registration Rights Agreement.
"REQUIRED APPROVALS" shall have the meaning ascribed to such term in
Section 3.1(e).
"RULE 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"SEC REPORTS" shall have the meaning ascribed to such term in
Section 3.1(h).
"SECURITIES" means the Series C Preferred Stock, the Warrants, the
Warrant Shares and the Underlying Shares.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"SERIES B PREFERRED STOCK" means the outstanding shares of Series B
Preferred Stock, par value $0.01 per share, of the Company.
"SERIES B CONSENT" means the written consent of the requisite
holders of Series B Preferred Stock to the transactions contemplated in
the Transaction Documents.
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"SHAREHOLDER APPROVAL" means such approval as may be required by the
applicable rules and regulations of the American Stock Exchange (or any
successor entity) from the shareholders of the Company with respect to the
transactions contemplated by the Transaction Documents, including the
issuance of all of the Underlying Shares in excess of 19.99% of the issued
and outstanding Common Stock on the Closing Date.
"SHORT SALES" shall include all "short sales" as defined in Rule 200
of Regulation SHO under the Exchange Act.
"STATED VALUE" means US$1,000 per share of Series C Preferred Stock.
"SUBSCRIPTION AMOUNT" shall mean, as to each Purchaser, the
aggregate amount to be paid for the Series C Preferred Stock purchased
hereunder as specified below such Purchaser's name on the signature page
of this Agreement and next to the heading "Subscription Amount", in United
States Dollars and in immediately available funds.
"SUBSEQUENT FINANCING" shall have the meaning ascribed to such term
in Section 4.8(a).
"SUBSEQUENT FINANCING NOTICE" shall have the meaning ascribed to
such term in Section 4.8(b).
"SUBSIDIARY" means any entity in which the Company holds greater
than 50% of voting securities, each of which is set forth on SCHEDULE
3.1(A).
"TRADING DAY" means a day on which the Common Stock is traded on a
Trading Market.
"TRADING MARKET" means the following markets or exchanges on which
the Common Stock is listed or quoted for trading on the date in question:
the Nasdaq Capital Market, the American Stock Exchange, the New York Stock
Exchange or the Nasdaq National Market.
"TRANSACTION DOCUMENTS" means this Agreement, the Certificate of
Designation, the Warrants and the Registration Rights Agreement.
"UNDERLYING SHARES" means the shares of Common Stock issued and
issuable upon conversion of the Series C Preferred Stock, upon exercise of
the Warrants and issued and issuable in lieu of the cash payment of
dividends on the Series C Preferred Stock in accordance with the terms of
the Certificate of Designation.
"VWAP" means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then listed or
quoted on a Trading Market, the daily volume weighted average price of the
Common Stock for such date (or
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the nearest preceding date) on the Trading Market on which the Common
Stock is then listed or quoted for trading as reported by Bloomberg
Financial L.P. (based on a Trading Day from 9:30 a.m. (New York City time)
to 4:02 p.m. (New York City time); (b) if the OTC Bulletin Board is not a
Trading Market, the volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on the OTC Bulletin Board; (c)
if the Common Stock is not then quoted for trading on the OTC Bulletin
Board and if prices for the Common Stock are then reported in the "Pink
Sheets" published by Pink Sheets, LLC (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid
price per share of the Common Stock so reported; or (d) in all other
cases, the fair market value of a share of Common Stock as determined by
an independent appraiser selected in good faith by the Holder and
reasonably acceptable to the Company.
"WARRANTS" means collectively the Common Stock purchase warrants, in
the form of EXHIBIT C delivered to the Purchasers at the Closing in
accordance with Section 2.2(a)(iii) hereof, which Warrants shall be
exercisable immediately and have a term of exercise equal to 5 years.
"WARRANT SHARES" means the shares of Common Stock issuable upon
exercise of the Warrants.
ARTICLE II
PURCHASE AND SALE
2.1 CLOSING. On the Closing Date, upon the terms and subject to the
conditions set forth herein, substantially concurrent with the execution and
delivery of this Agreement by the parties hereto, the Company agrees to sell,
and each Purchaser agrees to purchase in the aggregate, severally and not
jointly, up to US$20,000,000 of shares of Series C Preferred Stock with an
aggregated Stated Value equal to such Purchaser's Subscription Amount and
Warrants as determined by pursuant to Section 2.2(a). The aggregate number of
shares of Series C Preferred Stock sold hereunder shall be up to 20,000. Each
Purchaser shall deliver to American Stock Transfer and Trust Company ("ASTTC")
as escrow agent, via wire transfer or a certified check of immediately available
funds equal to their Subscription Amount and the Company shall deliver to each
Purchaser their respective shares of Series C Preferred Stock and Warrants as
determined pursuant to Section 2.2(a) and the other items set forth in Section
2.2 issuable at the Closing. Upon satisfaction of the conditions set forth in
Sections 2.2 and 2.3, the Closing shall occur at the offices of the Company
Counsel, or such other location as the parties shall mutually agree.
2.2 DELIVERIES.
(a) On the Closing Date, the Company shall deliver or cause to be
delivered to each Purchaser the following:
(i) this Agreement duly executed by the Company;
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(ii) a certificate evidencing a number of shares of Series C
Preferred Stock equal to such Purchaser's Subscription Amount
divided by the Stated Value, registered in the name of such
Purchaser;
(iii) a Warrant registered in the name of such Purchaser to
purchase up to a number of shares of Common Stock equal to 30% of
such Purchaser's Subscription Amount divided by the Initial
Conversion Price, with an exercise price equal to US$3.00 per share,
subject to adjustment therein;
(iv) the Registration Rights Agreement duly executed by the
Company;
(v) a certificate, duly executed by its Chief Executive
Officer, certifying as to the satisfaction of the conditions set
forth in Section 2.3(b);
(vi) a certificate executed by its Secretary having attached
thereto (i) the Company's Certificate of Incorporation, certified by
the Secretary of State of the State of Delaware, as in effect at the
Closing Date, (ii) the Company's By-Laws as in effect at the Closing
Date, (iii) resolutions approved by the Board of Directors of the
Company authorizing the transactions contemplated hereby, and (iv)
good standing certificates with respect to the Company from the
Secretary of State of the State of Delaware.
(b) On the Closing Date, each Purchaser shall deliver or cause to be
delivered to the Company the following:
(i) this Agreement duly executed by such Purchaser;
(ii) such Purchaser's Subscription Amount by wire transfer to
the ASTTC escrow account as specified in writing by ASTTC; and
(iii) the Registration Rights Agreement duly executed by such
Purchaser.
2.3 CLOSING CONDITIONS.
(a) The obligations of the Company hereunder in connection with the
Closing are subject to the following conditions being met:
(i) the accuracy in all material respects when made and on the
Closing Date of the representations and warranties of the Purchasers
contained herein, other than representation and warranties that are
qualified by "Material Adverse Affect" or "materiality" which shall
be true and correct in all respects;
(ii) all obligations, covenants and agreements of the
Purchasers required to be performed at or prior to the Closing Date
shall have been performed;
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(iii) the delivery by the Purchasers of the items set forth in
Section 2.2(b) of this Agreement; and
(iv) the delivery by the requisite holders of the Series B
Preferred Stock of the Series B Consent.
(b) The respective obligations of the Purchasers hereunder in
connection with the Closing are subject to the following conditions being
met:
(i) the accuracy in all material respects on the Closing Date
of the representations and warranties of the Company contained
herein, other than representation and warranties that are qualified
by "Material Adverse Affect" or "materiality" which shall be true
and correct in all respects;
(ii) all obligations, covenants and agreements of the Company
required to be performed at or prior to the Closing Date shall have
been performed;
(iii) the delivery by the Company of the items set forth in
Section 2.2(a) of this Agreement;
(iv) there shall have been no Material Adverse Effect with
respect to the Company since the date hereof;
(v) the Company shall have obtained all requisite governmental
approval, if any, required to consummate the transactions
contemplated herein; and
(vi) from the date hereof to the Closing Date, trading in the
Common Stock shall not have been suspended by the Commission or the
Company's principal Trading Market (except for any suspension of
trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to the Closing), and, at any
time prior to the Closing Date, trading in securities generally as
reported by Bloomberg Financial Markets shall not have been
suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by such service,
or on any Trading Market, nor shall a banking moratorium have been
declared either by the United States or New York State authorities
nor shall there have occurred any material outbreak or escalation of
hostilities or other national or international calamity of such
magnitude in its effect on, or any material adverse change in, any
financial market which, in each case, in the reasonable judgment of
each Purchaser, makes it impracticable or inadvisable to purchase
the Series C Preferred Stock at the Closing.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth in
the disclosure schedules delivered to the Purchasers concurrently herewith (the
"DISCLOSURE SCHEDULES"), which Disclosure Schedules shall be deemed a part
hereof and to qualify any representation or warranty otherwise made herein to
the extent of such disclosure, the Company hereby makes the representations and
warranties set forth below to each Purchaser:
(a) SUBSIDIARIES. All of the direct and indirect Subsidiaries of the
Company are set forth on SCHEDULE 3.1(A). The Company owns, directly or
indirectly, all of the capital stock or other equity interests of each
Subsidiary free and clear of any Liens, and all the issued and outstanding
shares of capital stock of each Subsidiary are validly issued and are
fully paid, non-assessable and free of preemptive and similar rights to
subscribe for or purchase securities. If the Company has no subsidiaries,
then all other references in the Transaction Documents to the Subsidiaries
or any of them will be disregarded.
(b) ORGANIZATION AND QUALIFICATION. The Company and each of the
Subsidiaries is an entity duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the jurisdiction
of its incorporation or organization (as applicable), with the requisite
power and authority to own and use its properties and assets and to carry
on its business as currently conducted. Neither the Company nor any
Subsidiary is in violation or default of any of the provisions of its
respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. Each of the Company and the
Subsidiaries is duly qualified to conduct business and is in good standing
as a foreign corporation or other entity in each jurisdiction in which the
nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in
good standing, as the case may be, could not have or reasonably be
expected to result in (i) a material adverse effect on the legality,
validity or enforceability of any Transaction Document, (ii) a material
adverse effect on the results of operations, assets, business, prospects
or condition (financial or otherwise) of the Company and the Subsidiaries,
taken as a whole, or (iii) a material adverse effect on the Company's
ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a
"MATERIAL ADVERSE EFFECT") and no Proceeding has been instituted in any
such jurisdiction revoking, limiting or curtailing or seeking to revoke,
limit or curtail such power and authority or qualification.
(c) AUTHORIZATION; ENFORCEMENT. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and
otherwise to carry out its obligations hereunder and thereunder. The
execution and delivery of each of the Transaction Documents by the Company
and the consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary action on the part of
the Company and no further action is required by the Company, its board of
directors or its stockholders in connection therewith other than in
connection with the Required Approvals. Each Transaction Document has been
(or upon delivery will have been) duly executed by the Company and, when
delivered in accordance with the terms hereof and thereof, will constitute
the valid and binding obligation of the Company enforceable
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against the Company in accordance with its terms except (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or
other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.
(d) NO CONFLICTS. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company
of the other transactions contemplated hereby and thereby do not and will
not: (i) conflict with or violate any provision of the Company's or any
Subsidiary's certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) conflict with, or constitute
a default (or an event that with notice or lapse of time or both would
become a default) under, result in the creation of any Lien upon any of
the properties or assets of the Company or any Subsidiary, or give to
others any rights of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time or both) of, any agreement, credit
facility, debt or other instrument (evidencing a Company or Subsidiary
debt or otherwise) or other understanding to which the Company or any
Subsidiary is a party or by which any property or asset of the Company or
any Subsidiary is bound or affected, or (iii) subject to the Required
Approvals, conflict with or result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of
any court or governmental authority to which the Company or a Subsidiary
is subject (including federal and state securities laws and regulations),
or by which any property or asset of the Company or a Subsidiary is bound
or affected; except in the case of each of clauses (ii) and (iii), such as
could not have or reasonably be expected to result in a Material Adverse
Effect.
(e) FILINGS, CONSENTS AND APPROVALS. The Company is not required to
obtain any consent, waiver, authorization or order of, give any notice to,
or make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in connection
with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the Series B Consent, (ii) the
filings required pursuant to Section 4.6, (iii) the filing with the
Commission of the Registration Statement, (iv) the notice and/or
application(s) to each applicable Trading Market for the issuance and sale
of the Securities and the listing of the Underlying Shares for trading
thereon in the time and manner required thereby, (v) the filing of Form D
with the Commission and such filings as are required to be made under
applicable state securities laws, and (vi) Shareholder Approval
(collectively, the "REQUIRED APPROVALS").
(f) ISSUANCE OF THE SECURITIES. The Securities are duly authorized
and, when issued and paid for in accordance with the applicable
Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Company other
than restrictions on transfer provided for in the Transaction Documents.
The Underlying Shares, when issued in accordance with the terms of the
Transaction Documents, will be validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Company. The
Company has reserved from its duly
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authorized capital stock a number of shares of Common Stock for issuance
of the Underlying Shares at least equal to the Actual Minimum on the date
hereof.
(g) CAPITALIZATION. The capitalization of the Company is as set
forth on SCHEDULE 3.1(G). Except as set forth in SCHEDULE 3.1(G), the
Company has not issued any capital stock since its most recently filed
periodic report under the Exchange Act, other than pursuant to the
exercise of employee stock options under the Company's stock option plans,
the issuance of shares of Common Stock to employees pursuant to the
Company's employee stock purchase plan and pursuant to the conversion or
exercise of Common Stock Equivalents outstanding as of the date of the
most recently filed periodic report under the Exchange Act. Except as a
result of the purchase and sale of the Securities or as set forth on
SCHEDULE 3.1(G), there are no outstanding options, warrants, script rights
to subscribe to, calls or commitments of any character whatsoever relating
to, or securities, rights or obligations convertible into or exercisable
or exchangeable for, or giving any Person any right to subscribe for or
acquire, any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary is
or may become bound to issue additional shares of Common Stock or Common
Stock Equivalents. Except as set forth in SCHEDULE 3.1(G), the issuance
and sale of the Securities will not obligate the Company to issue shares
of Common Stock or other securities to any Person (other than the
Purchasers) and will not result in a right of any holder of Company
securities to adjust the exercise, conversion, exchange or reset price
under any of such securities. All of the outstanding shares of capital
stock of the Company are validly issued, fully paid and nonassessable,
have been issued in compliance with all federal and state securities laws,
and none of such outstanding shares was issued in violation of any
preemptive rights or similar rights to subscribe for or purchase
securities. No further approval or authorization of any stockholder, the
Board of Directors of the Company or others is required for the issuance
and sale of the Securities. Except as set forth in SCHEDULE 3.1(G), there
are no stockholders agreements, voting agreements or other similar
agreements with respect to the Company's capital stock to which the
Company is a party or, to the knowledge of the Company, between or among
any of the Company's stockholders.
(h) SEC REPORTS; FINANCIAL STATEMENTS. The Company has filed all
reports, schedules, forms, statements and other documents required to be
filed by it under the Securities Act and the Exchange Act, including
pursuant to Section 13(a) or 15(d) thereof, for the two years preceding
the date hereof (or such shorter period as the Company was required by law
or regulation to file such material) (the foregoing materials, including
the exhibits thereto and documents incorporated by reference therein,
being collectively referred to herein as the "SEC REPORTS") on a timely
basis or has received a valid extension of such time of filing and has
filed any such SEC Reports prior to the expiration of any such extension.
As of their respective dates, the SEC Reports complied in all material
respects with the requirements of the Securities Act and the Exchange Act
and the rules and regulations of the Commission promulgated thereunder, as
applicable, and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein,
in the light of the circumstances under
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which they were made, not misleading. The financial statements of the
Company included in the SEC Reports comply in all material respects with
applicable accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis
during the periods involved ("GAAP"), except as may be otherwise specified
in such financial statements or the notes thereto and except that
unaudited financial statements may not contain all footnotes required by
GAAP, and fairly present in all material respects the financial position
of the Company and its consolidated subsidiaries as of and for the dates
thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
(i) MATERIAL CHANGES; UNDISCLOSED EVENTS, LIABILITIES OR
DEVELOPMENTS. Since the date of the latest audited financial statements
included within the SEC Reports, except as specifically disclosed in a
subsequent SEC Report or as set forth in SCHEDULE 3.1(I) there has been no
event, occurrence or development that has had or that could reasonably be
expected to result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than (A) trade
payables and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be
reflected in the Company's financial statements pursuant to GAAP or
disclosed in filings made with the Commission, (iii) the Company has not
altered its method of accounting, (iv) the Company has not declared or
made any dividend or distribution of cash or other property to its
stockholders or purchased, redeemed or made any agreements to purchase or
redeem any shares of its capital stock and (v) the Company has not issued
any equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock option plans.
(j) LITIGATION. There is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company, any Subsidiary or
any of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority (federal,
state, county, local or foreign) (collectively, an "ACTION") which (i)
adversely affects or challenges the legality, validity or enforceability
of any of the Transaction Documents or the Securities or (ii) could, if
there were an unfavorable decision, have or reasonably be expected to
result in a Material Adverse Effect. Neither the Company nor any
Subsidiary, nor any director or officer thereof, is or has been the
subject of any Action involving a claim of violation of or liability under
federal or state securities laws or a claim of breach of fiduciary duty.
There has not been, and to the knowledge of the Company, there is not
pending or contemplated, any investigation by the Commission involving the
Company or any current or former director or officer of the Company. The
Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Securities Act.
12
(k) LABOR RELATIONS. No labor dispute exists or, to the knowledge of
the Company, is imminent with respect to any of the employees of the
Company which could reasonably be expected to result in a Material Adverse
Effect. None of the Company's or its Subsidiaries' employees is a member
of a union that relates to such employee's relationship with the Company,
and neither the Company or any of its Subsidiaries is a party to a
collective bargaining agreement, and the Company and its Subsidiaries
believe that their relationships with their employees are good. No
executive officer, to the knowledge of the Company, is, or is now expected
to be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any
restrictive covenant, and the continued employment of each such executive
officer does not subject the Company or any of its Subsidiaries to any
liability with respect to any of the foregoing matters. The Company and
its Subsidiaries are in compliance with all U.S. federal, state, local and
foreign laws and regulations relating to employment and employment
practices, terms and conditions of employment and wages and hours, except
where the failure to be in compliance could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(l) COMPLIANCE. Neither the Company nor any Subsidiary (i) is in
default under or in violation of (and no event has occurred that has not
been waived that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the Company or
any Subsidiary received notice of a claim that it is in default under or
that it is in violation of, any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it or any
of its properties is bound (whether or not such default or violation has
been waived), (ii) is in violation of any order of any court, arbitrator
or governmental body, or (iii) is or has been in violation of any statute,
rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws applicable to its
business and all such laws that affect the environment, except in each
case as could not have or reasonably be expected to result in a Material
Adverse Effect.
(m) REGULATORY PERMITS. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to
conduct their respective businesses as described in the SEC Reports,
except where the failure to possess such permits could not have or
reasonably be expected to result in a Material Adverse Effect ("MATERIAL
PERMITS"), and neither the Company nor any Subsidiary has received any
notice of proceedings relating to the revocation or modification of any
Material Permit.
(n) TITLE TO ASSETS. Except as set forth on SCHEDULE 3.1(N), the
Company and the Subsidiaries have good and marketable title in fee simple
to all real property owned by them that is material to the business of the
Company and the Subsidiaries and good and marketable title in all personal
property owned by them that is material to the business of the Company and
the Subsidiaries, in each case free and clear of all Liens, except for
Liens as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such
property by the
13
Company and the Subsidiaries and Liens for the payment of federal, state
or other taxes, the payment of which is neither delinquent nor subject to
penalties. Any real property and facilities held under lease by the
Company and the Subsidiaries are held by them under valid, subsisting and
enforceable leases with which the Company and the Subsidiaries are in
compliance.
(o) PATENTS AND TRADEMARKS. The Company and the Subsidiaries have,
or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, trade secrets,
inventions, copyrights, licenses and other intellectual property rights
and similar rights necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the
failure to so have could have a Material Adverse Effect (collectively, the
"INTELLECTUAL PROPERTY RIGHTS"). To the knowledge of the Company, all such
Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights.
The Company and its Subsidiaries have taken reasonable security measures
to protect the secrecy, confidentiality and value of all of their
intellectual properties, except where failure to do so could not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. None of the Company's registered, or applied for,
Intellectual Property Rights have expired or terminated or have been
abandoned, or are expected to expire or terminate or expected to be
abandoned within three years of the date of this Agreement. There is no
claim, action or proceeding being made or brought, or to the knowledge of
the Company, being threatened against the Company or its Subsidiaries
regarding its Intellectual Property Rights, except for any claim, action
or proceeding which, if determined against the Company, would not have a
Material Adverse Effect.
(p) INSURANCE. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the businesses
in which the Company and the Subsidiaries are engaged, including, but not
limited to, directors and officers insurance coverage as set forth in
SCHEDULE 3.1(P). Neither the Company nor any Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage
as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business without a
significant increase in cost.
(q) TRANSACTIONS WITH AFFILIATES AND EMPLOYEES. Except as set forth
in the SEC Reports, none of the officers or directors of the Company and,
to the knowledge of the Company, none of the employees of the Company is
presently a party to any transaction with the Company or any Subsidiary
(other than for services as employees, officers and directors), including
any contract, agreement or other arrangement providing for the furnishing
of services to or by, providing for rental of real or personal property to
or from, or otherwise requiring payments to or from any officer, director
or such employee or, to the knowledge of the Company, any entity in which
any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of
US$60,000 per annum other than (i) for payment of salary or consulting
fees for services rendered, (ii) reimbursement for expenses incurred
14
on behalf of the Company and (iii) for other employee benefits, including
stock option agreements under any stock option plan of the Company.
(r) CERTAIN FEES. Except as set forth on SCHEDULE 3.1(R), no
brokerage or finder's fees or commissions are or will be payable by the
Company to any broker, financial advisor or consultant, finder, placement
agent, investment banker, bank or other Person with respect to the
transactions contemplated by the Transaction Documents. The Purchasers
shall have no obligation with respect to any fees or with respect to any
claims made by or on behalf of other Persons for fees of a type
contemplated in this Section that may be due in connection with the
transactions contemplated by the Transaction Documents.
(s) PRIVATE PLACEMENT. Assuming the accuracy of the Purchasers
representations and warranties set forth in Section 3.2, no registration
under the Securities Act is required for the offer and sale of the
Securities by the Company to the Purchasers as contemplated hereby. The
issuance and sale of the Securities hereunder does not contravene the
rules and regulations of the Trading Market.
(t) INVESTMENT COMPANY. The Company is not, and is not an Affiliate
of, and immediately after receipt of payment for the Securities, will not
be or be an Affiliate of, an "investment company" within the meaning of
the Investment Company Act of 1940, as amended. The Company shall conduct
its business in a manner so that it will not become subject to the
Investment Company Act.
(u) LISTING AND MAINTENANCE REQUIREMENTS. The Company's Common Stock
is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and
the Company has taken no action designed to, or which to its knowledge is
likely to have the effect of, terminating the registration of the Common
Stock under the Exchange Act nor has the Company received any notification
that the Commission is contemplating terminating such registration.
(v) NO INTEGRATED OFFERING. Assuming the accuracy of the Purchasers'
representations and warranties set forth in Section 3.2, neither the
Company, nor any of its affiliates, nor any Person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under circumstances
that would cause this offering of the Securities to be integrated with
prior offerings by the Company for purposes of the Securities Act or any
applicable shareholder approval provisions of any Trading Market on which
any of the securities of the Company are listed or designated.
(w) TAX STATUS. Except for matters that would not, individually or
in the aggregate, have or reasonably be expected to result in a Material
Adverse Effect, the Company and each Subsidiary has filed all necessary
federal, state and foreign income and franchise tax returns and has paid
or accrued all taxes shown as due thereon, and the Company has no
knowledge of a tax deficiency which has been asserted or threatened
against the Company or any Subsidiary.
15
(x) NO GENERAL SOLICITATION. Neither the Company nor any person
acting on behalf of the Company has offered or sold any of the Securities
by any form of general solicitation or general advertising. The Company
has offered the Securities for sale only to the Purchasers and certain
other "accredited investors" within the meaning of Rule 501 under the
Securities Act.
(y) FORM S-3 ELIGIBILITY. The Company is eligible to register the
resale of the Underlying Shares for resale by the Purchaser on Form S-3
promulgated under the Securities Act.
3.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows:
(a) ORGANIZATION; AUTHORITY. Such Purchaser, if an entity, is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with full right, corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. Such Purchaser, if an individual,
has legal capacity and authority to enter into and consummate the
transactions contemplated by the Transaction Documents and otherwise to
carry out his or her obligations hereunder and thereunder. The execution,
delivery and performance by such Purchaser of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate or similar action on the part of such Purchaser. Each
Transaction Document to which it is a party has been duly executed by such
Purchaser, and when delivered by such Purchaser in accordance with the
terms hereof, will constitute the valid and legally binding obligation of
such Purchaser, enforceable against it in accordance with its terms,
except (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors' rights generally,
(ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (iii)
insofar as indemnification and contribution provisions may be limited by
applicable law.
(b) OWN ACCOUNT. Such Purchaser understands that the Securities are
"restricted securities" and have not been registered under the Securities
Act or any applicable state securities law and is acquiring the Securities
as principal for its own account and not with a view to or for
distributing or reselling such Securities or any part thereof in violation
of the Securities Act or any applicable state securities law, has no
present intention of distributing any of such Securities in violation of
the Securities Act or any applicable state securities law and has no
direct or indirect arrangement or understandings with any other persons to
distribute or regarding the distribution of such Securities (this
representation and warranty not limiting such Purchaser's right to sell
the Securities pursuant to the Registration Statement or otherwise in
compliance with applicable federal and state securities laws) in violation
of the Securities Act or any
16
applicable state securities law. Such Purchaser is acquiring the
Securities hereunder in the ordinary course of its business.
(c) PURCHASER STATUS. At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is, and on each date on
which it converts any shares of Series C Preferred Stock or exercises any
Warrants, it will be either: (i) an "accredited investor" as defined in
Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act
or (ii) a "qualified institutional buyer" as defined in Rule 144A(a) under
the Securities Act. Such Purchaser is not required to be registered as a
broker-dealer under Section 15 of the Exchange Act.
(d) EXPERIENCE OF SUCH PURCHASER. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such investment.
Such Purchaser is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss of
such investment. Such Purchaser has been given the opportunity to ask
questions of, and receive answers from, the Company concerning the terms
and conditions of the offer of the Securities and other matters pertaining
to such investment.
(e) GENERAL SOLICITATION. To the Purchaser's knowledge, such
Purchaser is not purchasing the Securities as a result of any
advertisement, article, notice or other communication regarding the
Securities published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any
other general solicitation or general advertisement.
(f) SHORT SALES AND CONFIDENTIALITY PRIOR TO THE DATE HEREOF. Other
than the transaction contemplated hereunder, such Purchaser has not
directly or indirectly, nor has any Person acting on behalf of or pursuant
to any understanding with such Purchaser, executed any disposition,
including Short Sales, in the securities of the Company during the period
commencing from the time that such Purchaser first received a term sheet
(written or oral) from the Company or any other Person setting forth the
material terms of the transactions contemplated hereunder until such time
as the transactions contemplated by this Agreement are publicly disclosed
by the Company as described in Section 4.6 ("DISCUSSION TIME").
Notwithstanding the foregoing, in the case of a Purchaser that is a
multi-managed investment vehicle whereby separate portfolio managers
manage separate portions of such Purchaser's assets and the portfolio
managers have no direct knowledge of the investment decisions made by the
portfolio managers managing other portions of such Purchaser's assets, the
representation set forth above shall only apply with respect to the
portion of assets managed by the portfolio manager that made the
investment decision to purchase the Securities covered by this Agreement.
Other than to other Persons party to this Agreement, such Purchaser has
maintained the confidentiality of all disclosures made to it in connection
with this transaction (including the existence and terms of this
transaction).
17
(g) MANIPULATION OF PRICE PRIOR TO CLOSING. Such Purchaser has not,
and to its knowledge no one acting on its behalf has, (i) taken, directly
or indirectly, any action designed to cause or to result in the
manipulation of the price of any security of the Company at or prior to
the Closing Date, (ii) sold, bid for, purchased, or paid any compensation
for soliciting purchases of, any security of the Company, or (iii) paid or
agreed to pay to any Person any compensation for soliciting another to
purchase any securities of the Company.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 TRANSFER RESTRICTIONS.
(a) The Securities may only be disposed of in compliance with state
and federal securities laws. In connection with any transfer of Securities
other than pursuant to an effective registration statement or Rule 144, to
the Company or to an affiliate of a Purchaser or in connection with a
pledge as contemplated in Section 4.1(b), the Company may require the
transferor thereof to provide to the Company an opinion of counsel
selected by the transferor and reasonably acceptable to the Company, the
form and substance of which opinion shall be reasonably satisfactory to
the Company, to the effect that such transfer does not require
registration of such transferred Securities under the Securities Act. As a
condition of transfer, any such transferee shall agree in writing to be
bound by the terms of this Agreement and shall have the rights of a
Purchaser under this Agreement and the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is required
by this Section 4.1(b), of a legend on any of the Securities in the
following form:
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [EXERCISABLE] [CONVERTIBLE]] HAVE BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE
TO THE COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON
[EXERCISE] [CONVERSION] OF THESE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY
SUCH SECURITIES.
18
(c) Certificates evidencing the Underlying Shares shall not contain
any legend (including the legend set forth in Section 4.1(b) hereof): (i)
while a registration statement (including the Registration Statement)
covering the resale of such security is effective under the Securities
Act, or (ii) following any sale of such Underlying Shares pursuant to Rule
144, or (iii) if such Underlying Shares are eligible for sale under Rule
144(k), or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission). The Company shall
cause its counsel to issue a legal opinion to the Company's transfer agent
promptly after the Effective Date if required by the Company's transfer
agent to effect the removal of the legend hereunder. If all or any shares
of Series C Preferred Stock or any portion of a Warrant is converted or
exercised (as applicable) at a time when there is an effective
registration statement to cover the resale of the Underlying Shares, or if
such Underlying Shares may be sold under Rule 144(k) or if such legend is
not otherwise required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff
of the Commission) then such Underlying Shares shall be issued free of all
legends. The Company agrees that following the Effective Date or at such
time as such legend is no longer required under this Section 4.1(c), it
will, following the delivery by a Purchaser to the Company or the
Company's transfer agent of a certificate representing Underlying Shares,
as applicable, issued with a restrictive legend, deliver or cause to be
delivered to such Purchaser a certificate representing such shares that is
free from all restrictive and other legends. The Company may not make any
notation on its records or give instructions to any transfer agent of the
Company that enlarge the restrictions on transfer set forth in this
Section. Certificates for Underlying Shares subject to legend removal
hereunder shall be transmitted by the transfer agent of the Company to the
Purchasers by crediting the account of the Purchaser's prime broker with
the Depository Trust Company System.
(d) Each Purchaser, severally and not jointly with the other
Purchasers, agrees that the removal of the restrictive legend from
certificates representing Securities as set forth in this Section 4.1 is
predicated upon the Company's reliance that the Purchaser will sell any
Securities pursuant to either the registration requirements of the
Securities Act, including any applicable prospectus delivery requirements,
or an exemption therefrom, and that if Securities are sold pursuant to a
Registration Statement, they will be sold in compliance with the plan of
distribution set forth therein.
4.2 FURNISHING OF INFORMATION.
(a) As long as any Purchaser owns Securities, the Company covenants
to timely file (or obtain extensions in respect thereof and file within
the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the Exchange Act. As long as any
Purchaser owns Securities, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the
Purchasers and make publicly available in accordance with Rule 144(c) such
information as is required for the Purchasers to sell the Securities under
Rule 144. The Company further covenants that it will take such further
action as any holder of Securities may
19
reasonably request, to the extent required from time to time to enable
such Person to sell such Securities without registration under the
Securities Act within the requirements of the exemption provided by Rule
144.
(b) The Company agrees to send the following to each Purchaser
during the Reporting Period (as defined in the Registration Rights
Agreement), unless the following are filed with the SEC through the XXXXX
system and are available to the public through the EGDAR system within one
(1) Business Day after the filing thereof with the SEC, (i) a copy of its
Annual and Quarterly Reports on Form 10-K, 10-KSB, 10-Q or 10-QSB, any
interim report or any consolidated balance sheets, income statements,
stockholders' equity statements and/or cash flow statements for any period
other than annual, any Current Reports on Form 8-K and any registration
statements (other than Form S-8) or amendments filed pursuant to the 1933
Act, (ii) all press releases issued by the Company or any of its
Subsidiaries, and (iii) copies of any notices and other information made
available or given to the stockholders of the Company generally.
4.3 INTEGRATION. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market.
4.4 CONVERSION AND EXERCISE PROCEDURES. The form of Notice of Exercise
included in the Warrants and the form of Notice of Conversion included in the
Certificate of Designation set forth the totality of the procedures required of
the Purchasers in order to exercise the Warrants or convert the Series C
Preferred Stock. No additional legal opinion or other information or
instructions shall be required of the Purchasers to exercise their Warrants or
convert their Series C Preferred Stock. The Company shall honor exercises of the
Warrants and conversions of the Series C Preferred Stock and shall deliver
Underlying Shares in accordance with the terms, conditions and time periods set
forth in the Transaction Documents.
4.5 SECURITIES LAWS DISCLOSURE; PUBLICITY. The Company shall issue a press
release describing the material terms of the transactions contemplated hereby,
and a Current Report on Form 8-K disclosing the material terms of the
transactions contemplated hereby, and shall attach the Transaction Documents
thereto. The Company shall provide the Purchasers with a draft of such press
release prior to filing and provide an opportunity for comments. Each Purchaser
shall consult with the Company prior to issuing any press releases with respect
to the transactions contemplated hereby, and no Purchaser shall issue any such
press release or otherwise make any such public statement without the prior
consent of the Company, which consent shall not unreasonably be withheld or
delayed, except if such disclosure is required by law, in which case the
disclosing party shall promptly provide the other party with prior notice of
such public statement or communication. Notwithstanding the foregoing, the
Company shall not publicly disclose the name of any Purchaser, or include the
name of any Purchaser in any filing with the Commission or any regulatory agency
or Trading Market, without the prior written consent of such Purchaser, except
(i) as required by federal securities law in connection with (A) any
20
registration statement contemplated by the Registration Rights Agreement and (B)
the filing of final Transaction Documents (including signature pages thereto)
with the Commission and (ii) to the extent such disclosure is required by law or
Trading Market regulations, in which case the Company shall provide the
Purchasers with prior notice of such disclosure permitted under this subclause
(ii).
4.6 USE OF PROCEEDS. Except as set forth on SCHEDULE 4.6 attached hereto,
the Company shall use the net proceeds from the sale of the Securities hereunder
for working capital purposes and not for the satisfaction of any portion of the
Company's debt (other than payment of trade payables in the ordinary course of
the Company's business and prior practices), to redeem Common Stock or Common
Stock Equivalents or to settle any outstanding litigation.
4.7 RESERVATION AND LISTING OF SECURITIES.
(a) The Company shall maintain a reserve from its duly authorized
shares of Common Stock for issuance pursuant to the Transaction Documents
in such amount as may be required to fulfill its obligations in full under
the Transaction Documents.
(b) If, on any date, the number of authorized but unissued (and
otherwise unreserved) shares of Common Stock is less than 110% of (i) the
Actual Minimum on such date, minus (ii) the number of shares of Common
Stock previously issued pursuant to the Transaction Documents, then the
Board of Directors of the Company shall use commercially reasonable
efforts to amend the Company's certificate or articles of incorporation to
increase the number of authorized but unissued shares of Common Stock to
at least the Actual Minimum at such time (minus the number of shares of
Common Stock previously issued pursuant to the Transaction Documents), as
soon as possible and in any event not later than the 75th day after such
date; provided that the Company will not be required at any time to
authorize a number of shares of Common Stock greater than the maximum
remaining number of shares of Common Stock that could possibly be issued
after such time pursuant to the Transaction Documents.
(c) The Company shall, if applicable: (i) in the time and manner
required by the principal Trading Market, prepare and file with such
Trading Market an additional shares listing application covering a number
of shares of Common Stock at least equal to the Actual Minimum on the date
of such application, (ii) take all steps necessary to cause such shares of
Common Stock to be approved for listing on such Trading Market as soon as
possible thereafter, (iii) provide to the Purchasers evidence of such
listing, and (iv) maintain the listing of such Common Stock on any date at
least equal to the Actual Minimum on such date on such Trading Market or
another Trading Market. In addition, the Company shall hold a special
meeting of shareholders (which may also be at the annual meeting of
shareholders) on or before September 30, 2007 for the purpose of obtaining
Shareholder Approval, with the recommendation of the Company's Board of
Directors that such proposal be approved, and the Company shall solicit
proxies from its shareholders in connection therewith in the same manner
as all other management proposals in such proxy statement and all
management-appointed proxyholders shall vote their proxies in favor of
such proposal. If the Company does not obtain Shareholder
21
Approval at the first meeting, the Company shall call a meeting every four
months thereafter to seek Shareholder Approval until the earlier of the
date Shareholder Approval is obtained or the Series C Preferred Stock is
no longer outstanding.
4.8 PARTICIPATION IN FUTURE FINANCING.
(a) From the date hereof until the date that the Series C Preferred
Stock is no longer outstanding, upon any issuance by the Company or any of
its Subsidiaries of Common Stock or Common Stock Equivalents (a
"SUBSEQUENT FINANCING"), each Purchaser shall have the right to purchase
its PRO RATA share of the Common Stock or Common Stock Equivalents on the
same terms, conditions and price provided for in the Subsequent Financing.
Each Purchaser's PRO RATA share is equal to the ratio of (a) the number of
shares of the Company's Common Stock (including all shares of Common Stock
issued or issuable upon conversion of the Series C Preferred Stock) which
such Purchaser is deemed to hold immediately prior to the issuance of such
Common Stock or Common Stock Equivalents to (b) the total number of shares
of the Company's outstanding Common Stock (including all shares of Common
Stock issued or issuable upon conversion of the Series C Preferred Stock)
immediately prior to the issuance of the Common Stock or Common Stock
Equivalents.
(b) At least 5 Trading Days prior to the closing of the Subsequent
Financing, the Company shall deliver to each Purchaser a written notice of
its intention to effect a Subsequent Financing ("PRE-NOTICE"), which
Pre-Notice shall ask such Purchaser if it wants to review the details of
such financing (such additional notice, a "SUBSEQUENT FINANCING NOTICE").
Upon the request of a Purchaser, and only upon a request by such
Purchaser, for a Subsequent Financing Notice, the Company shall promptly,
but no later than 2 Trading Days after such request, deliver a Subsequent
Financing Notice to such Purchaser. The Subsequent Financing Notice shall
describe in reasonable detail the proposed terms of such Subsequent
Financing, the amount of proceeds intended to be raised thereunder, the
Person or Persons through or with whom such Subsequent Financing is
proposed to be effected, and attached to which shall be a term sheet or
similar document relating thereto. If requested by a Purchaser, the
Company shall provide a copy of the then current drafts of the documents
relating to such Subsequent Financing. This Section 4.8(b) shall not
restrict or limit the ability of the Company to provide information
regarding a Subsequent Financing if such delivery is in connection with
the solicitation of consents or waivers relating to such Subsequent
Financing.
(c) Any Purchaser desiring to participate in such Subsequent
Financing must provide written notice to the Company by not later than
5:30 p.m. (New York City time) on the 5th Trading Day after all of the
Purchasers have received the Pre-Notice that the Purchaser is willing to
purchase its PRO RATA share of the Common Stock or Common Stock
Equivalents for the price and upon the terms and conditions specified in
the Subsequent Financing Notice and stating the quantity of Common Stock
or Common Stock Equivalents to be purchased, and that the Purchaser has
such funds ready, willing, and available for investment. Such written
notice to the Company shall be a binding obligation of such Purchaser to
participate in such Subsequent Financing upon terms
22
substantially similar to those set forth in the Subsequent Financing
Notice. If the Company receives no notice from a Purchaser as of such 5th
Trading Day, such Purchaser shall be deemed to have notified the Company
that it does not elect to participate.
(d) The Company may effect the remaining portion of such Subsequent
Financing on the terms and with the Persons set forth in the Subsequent
Financing Notice.
(e) The Company must provide the Purchasers with a second Subsequent
Financing Notice, and the Purchasers will again have the right of
participation set forth above in this Section 4.8, if the Subsequent
Financing subject to the initial Subsequent Financing Notice is not
consummated for any reason on the terms set forth in such Subsequent
Financing Notice within 60 Trading Days after the date of the initial
Subsequent Financing Notice.
(f) Notwithstanding the foregoing, this Section 4.8 shall not apply
in respect of an Exempt Issuance.
4.9 EQUAL TREATMENT OF PURCHASERS. No consideration shall be offered or
paid to any Person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration is
also offered to all of the parties to the Transaction Documents. For
clarification purposes, this provision constitutes a separate right granted to
each Purchaser by the Company and negotiated separately by each Purchaser, and
is intended for the Company to treat the Purchasers as a class and shall not in
any way be construed as the Purchasers acting in concert or as a group with
respect to the purchase, disposition or voting of Securities or otherwise.
4.10 SHORT SALES AND CONFIDENTIALITY AFTER THE DATE HEREOF. Each Purchaser
severally and not jointly with the other Purchasers covenants that neither it
nor any Affiliate acting on its behalf or pursuant to any understanding with it
will execute any Short Sales during the period commencing at the Discussion Time
and ending on the public announcement of the transactions contemplated hereby in
accordance with Section 4.6. Each Purchaser, severally and not jointly with the
other Purchasers, covenants that until such time as the transactions
contemplated by this Agreement are publicly disclosed by the Company as
described in Section 4.6, such Purchaser will maintain the confidentiality of
all disclosures made to it in connection with this transaction (including the
existence and terms of this transaction). Each Purchaser understands and
acknowledges, severally and not jointly with any other Purchaser, that the
Commission currently takes the position that coverage of short sales of shares
of the Common Stock "against the box" prior to the Effective Date of the
Registration Statement with the Securities is a violation of Section 5 of the
Securities Act, as set forth in Item 65, Section A, of the Manual of Publicly
Available Telephone Interpretations, dated July 1997, compiled by the Office of
Chief Counsel, Division of Corporation Finance.
4.11 FORM D; BLUE SKY FILINGS. The Company agrees to timely file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof, promptly upon request of any Purchaser. The Company shall take
such action as the Company shall
23
reasonably determine is necessary in order to obtain an exemption for, or to
qualify the Securities for, sale to the Purchasers at the Closing under
applicable securities or "Blue Sky" laws of the states of the United States, and
shall provide evidence of such actions promptly upon request of any Purchaser.
4.12 CONDUCT OF BUSINESS. The business of the Company and its Subsidiaries
shall not be conducted in violation of any law, ordinance or regulation of any
governmental entity, except where such violations would not result, either
individually or in the aggregate, in a Material Adverse Effect.
4.13 VARIABLE RATE SECURITIES. For so long as any Series C Preferred Stock
or Warrants remain outstanding, the Company shall not, in any manner, issue or
sell any rights, warrants or options to subscribe for or purchase Common Stock
or directly or indirectly convertible into or exchangeable or exercisable for
Common Stock at a price which varies or may vary with the market price of the
Common Stock, including by way of one or more reset(s) to any fixed price unless
the conversion, exchange or exercise price of any such security cannot be less
than the then applicable Conversion Price (as defined in the Certificate of
Designation) with respect to the Common Stock into which any Warrant is
exercisable.
4.14 LIMITATION ON CERTAIN ISSUANCES. Until Shareholder Approval is
obtained and for so long as any Series C Preferred Stock or Warrants remain
outstanding, the Company shall not, in any manner, enter into or affect any
Dilutive Issuances (as defined in the Certificate of Designation) if the effect
of such Dilutive Issuance is to cause the Company to be required to issue upon
conversion of any shares of Series C Preferred Stock or exercise of any Warrant
any shares of Common Stock in excess of that number of shares of Common Stock
which the Company may issue upon conversion of the Series C Preferred Stock and
exercise of the Warrants without breaching the Company's obligations under Rule
713 of the AMEX Company Guide or any successor rule or regulation that may
replace Rule 713.
ARTICLE V
MISCELLANEOUS
5.1 TERMINATION. This Agreement may be terminated by any Purchaser, as to
such Purchaser's obligations hereunder only and without any effect whatsoever on
the obligations between the Company and the other Purchasers, by written notice
to the other parties, if the Closing has not been consummated on or before May
1, 2007; PROVIDED, HOWEVER, that no such termination will affect the right of
any party to xxx for any breach by the other party (or parties).
5.2 FEES AND EXPENSES. Each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement. The Company shall pay all transfer
agent fees, stamp taxes and other taxes and duties levied in connection with the
delivery of any Securities to the Purchasers.
5.3 ENTIRE AGREEMENT. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject
24
matter hereof and supersede all prior agreements and understandings, oral or
written, with respect to such matters, which the parties acknowledge have been
merged into such documents, exhibits and schedules.
5.4 NOTICES. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto prior to 5:30 p.m. (New York
City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day, (c) the 2nd Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (d) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as set forth on the signature pages attached
hereto.
5.5 AMENDMENTS; WAIVERS. No provision of this Agreement may be waived,
modified, supplemented or amended except in a written instrument signed, in the
case of an amendment, by the Company and each Purchaser or, in the case of a
waiver, by the party against whom enforcement of any such waived provision is
sought. No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in the
future or a waiver of any subsequent default or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any such
right.
5.6 HEADINGS. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
5.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser (other than by merger). Any
Purchaser may assign any or all of its rights under this Agreement to any Person
to whom such Purchaser assigns or transfers any Securities in the minimum Stated
Value of US$500,000, provided such transferee agrees in writing to be bound,
with respect to the transferred Securities, by the provisions of the Transaction
Documents that apply to the "Purchasers" (provided, however, a Purchaser shall
not knowingly assign or transfer any of its Series C Preferred Stock or Warrants
to an entity whose primary business operations are in direct competition with
the primary business operations of the Company, without the prior written
consent of the Company).
5.8 NO THIRD-PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
5.9 GOVERNING LAW. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and
25
enforced in accordance with the internal laws of the State of New York, without
regard to the principles of conflicts of law thereof. Each party agrees that all
legal proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and any other Transaction Documents
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced exclusively in
the state and federal courts sitting in the City of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or is an inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other
manner permitted by law. The parties hereby waive all rights to a trial by jury.
If either party shall commence an action or proceeding to enforce any provisions
of the Transaction Documents, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its reasonable attorneys'
fees and other costs and expenses incurred with the investigation, preparation
and prosecution of such action or proceeding.
5.10 SURVIVAL. The representations, warranties, covenants and other
agreements contained herein shall survive the Closing and the delivery, exercise
and/or conversion of the Securities, as applicable for the applicable statue of
limitations.
5.11 EXECUTION. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission or by e-mail delivery of a ".pdf" format
data file, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile or ".pdf" signature page were an original
thereof.
5.12 SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
26
5.13 RESCISSION AND WITHDRAWAL RIGHT. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) any of
the other Transaction Documents, whenever any Purchaser exercises a right,
election, demand or option under a Transaction Document and the Company does not
timely perform its related obligations within the periods therein provided, then
such Purchaser may rescind or withdraw, in its sole discretion from time to time
upon written notice to the Company, any relevant notice, demand or election in
whole or in part without prejudice to its future actions and rights; PROVIDED,
HOWEVER, in the case of a rescission of a conversion of the Series C Preferred
Stock or exercise of a Warrant, the Purchaser shall be required to return any
shares of Common Stock subject to any such rescinded conversion or exercise
notice.
5.14 REPLACEMENT OF SECURITIES. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof (in the case of mutilation), or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction. The
applicant for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs (including customary indemnity)
associated with the issuance of such replacement Securities.
5.15 REMEDIES. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described and hereby agrees to waive and not to assert in any action
for specific performance of any such obligation the defense that a remedy at law
would be adequate.
5.16 PAYMENT SET ASIDE. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
5.17 INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance or non-performance of the obligations
of any other Purchaser under any Transaction Document. Nothing contained herein
or in any other Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the
27
transactions contemplated by the Transaction Documents. Each Purchaser shall be
entitled to independently protect and enforce its rights, including without
limitation, the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose. Each
Purchaser has been represented by its own separate legal counsel in their review
and negotiation of the Transaction Documents.
5.18 CONSTRUCTION. The parties agree that each of them and/or their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto.
[SIGNATURE PAGE FOLLOWS]
28
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
ELITE PHARMACEUTICALS, INC. ADDRESS FOR NOTICE:
By:______________________________ Elite Pharmaceuticals, Inc.
Name: Xxxxxxx X. Xxxx 000 Xxxxxx Xxxxxx
Title: Chief Executive Officer Northvale, New Jersey 07647
Attention: Chief Executive Officer
With a copy to (which shall not constitute notice):
Reitler Xxxxx & Xxxxxxxxxx LLC
000 Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxxxx
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
29
[PURCHASER SIGNATURE PAGES TO XXX SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
Name of Purchaser: _____________________________________________________________
SIGNATURE OF AUTHORIZED SIGNATORY OF PURCHASER: ________________________________
Name of Authorized Signatory: __________________________________________________
Title of Authorized Signatory: _________________________________________________
Email Address of Purchaser: ____________________________________________________
Fax Number of Purchaser: _______________________________________________________
Address for Notice of Purchaser:
Address for Delivery of Securities for Purchaser (if not same as above):
Subscription Amount:
Shares of Series C Preferred Stock:
Warrant Shares:
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[SIGNATURE PAGES CONTINUE]
30
DISCLOSURE SCHEDULE
This Disclosure Schedule (this "DISCLOSURE SCHEDULE") is arranged in
schedules corresponding to the numbered and lettered sections and subparagraphs
contained in the Securities Purchase Agreement (the "Agreement").
No representation or warranty contained in the Agreement shall be deemed
to be inaccurate if the actual situation is explicitly disclosed in any section
in this Disclosure Schedule and would reasonably relate to another section of
this Disclosure Schedule where the context of such disclosure in a section
reasonably relates to such other section.
31
SCHEDULE 3.1(A)
SUBSIDIARIES
Elan Laboratories, Inc., a Delaware corporation
Elan Research, Inc., a Delaware corporation
32
SCHEDULE 3.1(G)
CAPITALIZATION
20,863,592 shares of common stock outstanding.
9,550 shares of Series B Preferred Stock outstanding, currently convertible into
4,244,440 shares of Common Stock.
3,846,500 options to purchase shares of common stock, under the Company's stock
option plan.
2,805,000 options to purchase shares of common stock outside the Company's stock
option plan.
6,640,446 warrants to purchase shares of common stock outstanding with exercise
prices ranging from $1.50 to $4.20, subject to applicable vesting.
Contingent with the closing of the transactions contemplated hereby, the
expiration date of the warrants purchased by the holders of the Company's Series
B Preferred Stock was extended from the fifth anniversary of the grant date to
the sixth anniversary of the grant date of such warrants.
Commitment to issue options during the term of a current employment agreement
upon the following milestones (which commitments terminate at the end of the
initial term of such employment agreement):
(a) 50,000 options upon the closing of each product license or product sales
transaction in which the Company receives an aggregate of at least
$5,000,000 in net cash;
(b) 10,000 options upon filing with FDA of either an abbreviated new drug
application (an "ANDA") or new drug application (an "NDA"); and
(c) 40,000 options upon approval by the FDA of any ANDA or NDA for a product
not previously approved by the FDA.
Commitment to issue options during the term of a current employment agreement
upon the following milestones (which commitments terminate at the end of the
initial term of such employment agreement):
(a) 125,000 options upon commencement of Phase III clinical trials relating to
the Company first non-generic opioid drug, to the extent previously
granted options have not vested upon the occurrence of such event;
(b) 125,000 options upon commencement of Phase III clinical trials relating to
the Company second first non-generic opioid drug, to the extent previously
granted options
33
have not vested upon the occurrence of such event;
(c) 50,000 options upon the closing of each exclusive product license for the
US market or product sales transaction, excluding certain specific
non-generic opioid drugs;
(d) 10,000 options upon filing with FDA of either an abbreviated new drug
application (an "ANDA") or new drug application (an "NDA");
(e) 40,000 options upon approval by the FDA of any ANDA or NDA for a product
not previously approved by the FDA;
(f) 25,000 options upon filing of an application for a new US patent; and
(g) 25,000 upon granting of a new US patent by the US Patent and Trademark
Office.
Commitment to issue options during the term of a current employment agreement
upon the following milestones (which commitments terminate at the end of the
initial term of such employment agreement):
(a) 125,000 options upon commencement of Phase III clinical trials relating to
the Company first non-generic opioid drug, to the extent previously
granted options have not vested upon the occurrence of such event;
(b) 125,000 options upon commencement of Phase III clinical trials relating to
the Company second first non-generic opioid drug, to the extent previously
granted options have not vested upon the occurrence of such event;
(c) 50,000 options upon the closing of each exclusive product license for the
US market or product sales transaction, excluding certain specific
non-generic opioid drugs;
(d) 10,000 options upon filing with FDA of either an abbreviated new drug
application (an "ANDA") or new drug application (an "NDA");
(e) 40,000 options upon approval by the FDA of any ANDA or NDA for a product
not previously approved by the FDA;
(f) 25,000 options upon filing of an application for a new US patent; and
(g) 25,000 upon granting of a new US patent by the US Patent and Trademark
Office.
VOTING AGREEMENTS:
Pursuant to Section 3.1 of the Strategic Alliance Agreement, dated as of
December 6, 2006, between the Company, Xxxxxxxxx X. Xxxxxxxxxxx ("VS"), and VGS
Pharma, LLC, so long as
34
the Company holders at least forty percent (40%) of the outstanding capital
stock of Novel Laboratories, Inc., the Company has agreed to use its best
efforts to include VS in each slate of directors to be presented by the
Company's board of directors to the Company's stockholders of Elite at each
annual and special stockholder meeting for the election of the Company's
directors.
So long as Midsummer Investment, Ltd. ("MIDSUMMER") and Bushido Capital Master
Fund, LP ("BUSHIDO" and collectively with Midsummer, the "PRINCIPAL SERIES B
INVESTORS"), continue to hold as least 25% of the Company's then outstanding
shares of the Series B Preferred Stock, in the event that the Company intends to
take an action, pursuant to Section 4 or Section 10 of the Certificate of
Designation of the Series B Preferred Stock, as amended, which would require the
affirmative vote or written consent of the Holders of at least 70% of the then
outstanding shares of the Series B and Series C Preferred Stock, then the
Company shall not take such action unless both Principal Series B Investors vote
in favor of, or consent to, such action.
35
SCHEDULE 3.1(I)
MATERIAL CHANGES; UNDISCLOSED EVENTS, LIABILITIES OR DEVELOPMENTS
ISSUANCE OF EQUITY SECURITIES:
o Grant to Xxxxxxxxx X. Xxxxxxxxxxx of options to purchase up to an
aggregate number of 1,750,000 shares common stock outstanding at an
exercise price of $2.13, grant date December 6, 2006.
o Issuance to VGS Pharma, LLC, an affiliate of Xxxxxxxxx X.
Xxxxxxxxxxx, on December 6, 2006, for an aggregate purchase price of
$2,000,000, 957,396 shares of common stock and a warrant to purchase
478,698 shares of common stock, at a purchase price per share of
$3.00.
36
SCHEDULE 3.1(N)
TITLE TO ASSETS
New Jersey Economic Development Authority ("NJEDA"), and The Bank of New
York, as Indenture Trustee have security interests in the following assets of
Elite Pharmaceuticals, Inc. and Elite Laboratories, Inc.:
o Elite Pharmaceuticals, Inc.: The premises located at 000 Xxxxxx
Xxxxxx, Xxx Xxxxxx and all fixtures and equipment acquired, or to be
acquired, with the proceeds of the bond issued by NJEDA; and.
o Elite Laboratories, Inc.: Certain laboratory equipment acquired by
Elite Laboratories, Inc., with the proceeds of the bond issued by
NJEDA
37
SCHEDULE 3.1(P)
INSURANCE
The Company has Director's and Officer's liability coverage of $5,000,000 from
The Hartford Insurance.
38
SCHEDULE 3.1(Q)
TRANSACTIONS WITH AFFILIATES AND EMPLOYEES
Up to 300,000 shares of common stock issuable upon exercise of a Warrant granted
to Indigo Ventures LLC, subject to vesting and exercisable, at $3.00 per share.
Xxxxxx Neugenboren, a director of the Company, is an affiliate of Indigo
Ventures LLC.
39
SCHEDULE 3.1(R)
CERTAIN FEES
Xxxxxxxxxxx & Co., Inc., the placement agent, is entitled to:
(i) Cash commissions equal to 7.0% of the gross proceeds resulting from
the sale of the Series C Preferred Stock in the offering;
(ii) A five year non-callable warrant to purchase shares of Common Stock
equal to 3.0% of the number of shares of Common Stock into which the
Series C Preferred Stock sold in the offering may be converted; and
(iii) An amount equal to Xxxxxxxxxxx & Co., Inc.'s aggregate documented
out-of-pocket expenses limited to $25,000.
Additionally, Xxxxxxxxxxx & Co., Inc., may engage one or more
sub-placement agents.
40
EXHIBIT A
CERTIFICATE OF DESIGNATIONS
(see attached)
41
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
(see attached)
42
EXHIBIT C
FORM OF WARRANT
(see attached)
43
