|
EXHIBIT 10(a)
EXECUTION VERSION
STRATEGIC ALLIANCE AGREEMENT (this "AGREEMENT"), dated
as of December 6, 2006 (the "EFFECTIVE DATE"), by and
between ELITE PHARMACEUTICALS, INC., a Delaware
corporation ("ELITE"), VEERAPPAN S. SUBRAMANIAN ("VS"),
and VGS PHARMA, LLC, a Delaware limited liability
company ("VGS", and together with VS, the "VGS PARTIES")
--------------------------------------------------------
INTRODUCTION
Elite Pharmaceuticals is a specialty pharmaceutical company
principally
engaged in the development and manufacturing of oral
controlled-release
products. Elite, both independently and with selected partners,
develops and
in-licenses new drug products as wells as generic drug
products.
VS is an expert in the formulation and development of drug
products,
particularly generic drug products. VGS is wholly-owned subsidiary
of Kali
Capital, L.P., a Delaware limited partnership which is controlled
by Kali
Management, LLC ("KALI"), its general partner, and Kali is
controlled by Anu
Subramanian, its managing member.
Elite and the VGS Parties wish to enter into a strategic alliance
whereby,
among other things, the parties have incorporated Novel
Laboratories, Inc., a
Delaware corporation ("NOVEL") as a joint venture for the research,
development,
manufacturing, in-licensing, out-licensing, marketing, product
acquisition, and
distribution of certain agreed upon pharmaceutical products.
Elite desires to have VS perform, and VS has agreed to perform,
certain
strategic advisory services for Elite, advising Elite on the
research,
development and commercialization of Elite's existing and
prospective
pharmaceutical products.
As a condition to the formation of Novel and the commencement of
this
strategic relationship, VGS desires to purchase, and Elite has
agreed to sell,
shares of its common stock and warrants exercisable for shares of
its common
stock to VGS.
AGREEMENT
In consideration of the foregoing and the mutual promises,
representations, warranties, and covenants hereinafter set forth,
and for other
good and valuable consideration, the receipt and sufficiency of
which are hereby
acknowledged, the parties hereto agree as follows:
1. SALE AND PURCHASE.
1.1 SALE AND PURCHASE OF COMMON STOCK OF ELITE AND NOVEL.
(a) SALE AND PURCHASE OF ELITE COMMON STOCK AND WARRANTS. At
the Closing (as defined below), Elite shall sell and issue to VGS,
and VGS shall
purchase and accept from Elite (i) 957,396 shares (the "PURCHASED
SHARES") of
common stock, par value US$0.01 of Elite (the "COMMON STOCK"), for
an aggregate
purchase price of Two Million United States Dollars (US$2,000,000)
(the
"PURCHASE PRICE"), with the purchase price per Purchased Share
<PAGE>
being equal to the trailing average closing price of the Common
Stock as listed
on the American Stock Exchange during the ten (10) trading days
immediately
preceding the execution of this Agreement, and (ii) a warrant (the
"WARRANT",
and together with the Purchased Shares, the "SECURITIES"), in
substantially the
form attached hereto as EXHIBIT A, to purchase 478,698 shares of
Common Stock,
at a purchase price per share of US$ 3.00 (the "WARRANT
SHARES").
(b) SALE AND PURCHASE OF NOVEL COMMON STOCK. At the Closing,
(i) Elite shall subscribe for 49,000 shares of Class A Voting
Common Stock, par
value US$0.0001 per share, of Novel (collectively, the "ELITE NOVEL
SHARES"),
for an aggregate purchase price of US$9,800 ("ELITE NOVEL
SUBSCRIPTION PRICE");
and (ii) VGS shall subscribe for 51,000 shares of Class A Voting
Common Stock,
par value US$0.0001 per share, of Novel (collectively, the "VGS
NOVEL SHARES"),
for and aggregate purchase price of US$10,200 ("VGS NOVEL
SUBSCRIPTION PRICE").
1.2 CLOSING. The closing of the transactions described in
Sections
1.1 (the "CLOSING") shall take place at the offices of Reitler
Brown &
Rosenblatt LLC, 800 Third Avenue, 21st Floor, New York, New York on
December 6,
2006, or at such other time or place as Elite and VS may mutually
agree.
1.3 CLOSING DELIVERIES. At the Closing:
(a) VGS shall pay to Elite or its designee, by wire transfer
to the account or accounts listed on EXHIBIT B, attached hereto,
the Purchase
Price in immediately available funds;
(b) Elite shall deliver to VGS (i) a certificate evidencing
VGS's ownership of the number of Purchased Shares purchased by VS
hereunder, and
(ii) the Warrant, registered in the name of VGS, to the address set
forth for
VGS on the signature page hereof; and
(c) Elite shall deliver to Novel, by wire transfer of
immediately available funds, the Initial Contribution (as defined
below).
1.4 CONDITIONS TO OBLIGATIONS OF THE VGS PARTIES AT THE CLOSING.
The
obligations of the VGS Parties at the Closing are subject to the
satisfaction
(or waiver by VS) of each of the following conditions at or prior
to the
Closing:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties made by Elite in Section 2.2 shall be true and
correct in all
material respects as of the Closing with the same force and effect
as if they
had been made as of the Closing;
(b) PERFORMANCE OF OBLIGATIONS. Elite shall have performed and
complied with all agreements and covenants herein required to be
performed or
complied with by Elite on or prior to the Closing pursuant to this
Agreement;
(c) Elite shall pay to Novel the Elite Novel Subscription
Price;
(d) VGS shall pay to Novel the VGS Novel Subscription Price;
-2-
<PAGE>
(e) Elite shall pay to Novel the Initial Contribution;
(f) DELIVERY OF SECURITIES. Elite or its transfer agent for
Common Stock shall have delivered the instruments evidencing the
Securities as
described in Section 1.3(b) hereof;
(g) ADDITIONAL DELIVERIES. Delivery of the following executed
documents and instruments (collectively with the agreement
identified in Section
1.5(c)(v), the "STRATEGIC ALLIANCE Documents"):
(i) this Agreement duly executed by Elite;
(ii) that certain Advisory Agreement between VS and
Elite, in substantially the form attached hereto as EXHIBIT C
(the
"ADVISORY AGREEMENT"), duly executed by Elite;
(iii) that certain Non-Qualified Stock Option Agreement
between VS and Elite, in substantially the form attached hereto as
EXHIBIT
D (the "STOCK OPTION AGREEMENT"), duly executed by Elite;
(iv) that certain Employment Agreement between VS and
Novel, in substantially the form attached hereto as EXHIBIT E
(the
"EMPLOYMENT AGREEMENT"), duly executed by Novel;
(v) that certain Subscription Agreement between VGS and
Novel for the purchase by VGS of the VGS Novel Shares, in
substantially
the form attached hereto as EXHIBIT F-1, (the "SUBSCRIPTION
AGREEMENT")
duly executed by Novel;
(vi) a stock certificate of Novel evidencing VGS's
ownership of the VGS Novel Shares, duly executed on behalf of
Novel;
(vii) that certain Stockholders' Agreement, dated as of
the date hereof, between Elite, VS, VGS and Novel, in substantially
the
form attached hereto as EXHIBIT G (the "STOCKHOLDERS' AGREEMENT"),
duly
executed by both Elite and Novel; and
(viii) the certain Registration Rights Agreement between
Elite, VS and VGS, in substantially the form attached hereto as
EXHIBIT H
(the "REGISTRATION RIGHTS AGREEMENT"), duly executed by Elite.
(h) CONSENTS, PERMITS, AND WAIVERS. Elite shall have obtained
any and all consents, permits and waivers necessary or appropriate
for
consummation of the transactions contemplated hereby.
1.5 CONDITIONS TO ELITE'S OBLIGATIONS AT THE CLOSING. Elite's
obligations at the Closing are subject to the satisfaction (or
waiver by Elite)
of each of the following conditions at or prior to the Closing:
-3-
<PAGE>
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties made by the VGS Parties in Section 2.3 shall be true
and correct
in all material respects as of the Closing with the same force and
effect as if
they had been made as of the Closing;
(b) PERFORMANCE OF OBLIGATIONS. Each VGS Party shall have
performed and complied with all agreements and covenants herein
required to be
performed or complied with by such VGS Party on or before the
Closing pursuant
to this Agreement;
(c) DELIVERIES. Delivery of the following payments and
executed documents and instruments:
(i) the Purchase Price;
(ii) this Agreement duly executed by VS and VGS;
(ii) the Advisory Agreement, duly executed by VS;
(iii) the Stock Option Agreement, duly executed by VS;
(iv) the Employment Agreement, duly executed by Novel
and VS;
(v) that certain Subscription Agreement between Elite
and Novel for the purchase by Elite of the Elite Novel Shares,
in
substantially the form attached hereto as EXHIBIT F-2, duly
executed by
Novel;
(vi) a stock certificate of Novel evidencing Elite's
ownership of the Elite Novel Shares, duly executed on behalf of
Novel;
(vii) the Subscription Agreement, duly executed by VGS
and Novel;
(viii) the Stockholders Agreement, duly executed by VS,
VGS and Novel; and
(ix) the Registration Rights Agreement, duly executed by
VGS and VS.
(d) CONSENTS, PERMITS, AND WAIVERS. The VGS Parties shall have
obtained any and all consents, permits and waivers necessary or
appropriate for
consummation of the transactions contemplated hereby.
1.6 TERMINATION. Prior to the Closing, this Agreement may be
terminated by (a) the mutual written consent of Elite and VS, or
(b) either
Elite or VS in the event that the Closing does not occur on or
prior to December
7, 2006.
-4-
<PAGE>
2. REPRESENTATIONS AND WARRANTIES.
2.1 CONSTRUCTION. For purposes of this Section 2, a Person (as
defined below) shall be deemed to have "knowledge" of a particular
fact or other
matter if the Person is actually aware of such fact or other
matter. A Person
that is a corporation, partnership or other business entity shall
be deemed to
have "knowledge" of a particular fact or other matter if any
executive officer,
a director (in the case of a corporation), a manager or managing
member (in the
case of a limited liability company), or a general partner (in the
case of a
partnership) of such Person has knowledge (as described in the
preceding
sentence) of such fact or other matter. For purposes of this
Agreement, the term
"PERSON" shall mean an individual, corporation, partnership, trust,
limited
liability company, unincorporated organization, joint stock
corporation, joint
venture, association or other entity, or any government, or any
agency or
political subdivision thereof or any branch of any legal
entity.
2.2 ELITE'S REPRESENTATIONS AND WARRANTIES. Except as set forth
in
the SEC Reports (as defined below) or under the corresponding
section of the
disclosure schedules delivered to the VGS Parties 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, Elite hereby makes the following
representations
and warranties to the VGS Parties as of the date of this Agreement
and as of the
time of the Closing. For purposes of this Section 2.2, the SEC
Reports shall be
deemed to have been "provided" to VS:
(a) ORGANIZATION, GOOD STANDING AND QUALIFICATION. Elite is a
corporation duly organized, validly existing and in good standing
under the laws
of the State of Delaware. Elite has all requisite corporate power
and authority
to own and operate its properties and assets, to execute and
deliver the
Strategic Alliance Documents to which it is a party, and to carry
out the
provisions of the Strategic Alliance Documents to which it is a
party and to
carry on its business as presently conducted and as presently
proposed to be
conducted. Elite is duly qualified and is authorized to do business
and is in
good standing as a foreign corporation in all jurisdictions in
which the nature
of its activities and of its properties makes such qualification
necessary,
except for those jurisdictions in which failure to do so would not
have or
reasonably be expected to result in (i) a material adverse effect
on the results
of operations, assets, business, prospects or condition (financial
or otherwise)
of Elite, or (ii) a material adverse effect on Elite's ability to
perform, in
any material respect, on a timely basis its obligations under the
Strategic
Alliance Documents to which it is a party (a "MATERIAL ADVERSE
EFFECT").
(b) AUTHORIZATION; VALID AND BINDING AGREEMENT. The execution
and
delivery by Elite of the Strategic Alliance Documents to which it
is a party,
the performance by Elite of its obligations and undertakings
hereunder and
thereunder, and the consummation by Elite of the transactions
contemplated
hereby and thereby, have been duly and validly authorized by all
necessary
action on the part of Elite and no other proceedings on the part of
Elite are
necessary to authorize the execution or delivery by Elite of the
Strategic
Alliance Documents to which it is a party, the performance by Elite
of its
obligations and undertakings hereunder and thereunder or the
consummation by
Elite of the transactions contemplated hereby and thereby. The
Strategic
Alliance Documents to which it is a party have been duly executed
and delivered
by Elite, and constitute the valid and binding obligations of
Elite, enforceable
against Elite in
-5-
<PAGE>
accordance with their terms except as limited by applicable
bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting
enforcement and by general principles of equity.
(c) CONFLICTS; CONSENTS. The execution and delivery by Elite
of the Strategic Alliance Documents to which it is a party, the
performance by
Elite of its obligations and undertakings contemplated hereunder
and thereunder,
and the consummation by Elite of the transactions contemplated
hereby and
thereby, do not and will not conflict with, or result in any
violation of, or
default under or result in the creation of any mortgage, pledge,
lien,
encumbrance, charge or adverse claim (each, a "LIEN") on the
properties or
assets of Elite under, any provision of (i) the certificate of
incorporation,
bylaws or other charter or governance documents of Elite, each as
the same has
been amended to date, (ii) any contract, agreement, instrument or
arrangement to
which Elite is a party or by which any of Elite's properties or
assets are
bound, (iii) any license, franchise, permit or other similar
authorization held
by Elite, or (iv) to the knowledge of Elite, any judgment, order or
decree,
statute, law, ordinance, rule or regulation applicable to Elite or
Elite's
properties or assets.
(d) ISSUANCE OF THE SECURITIES. The Purchased Shares are duly
authorized and, when issued and paid for in accordance with the
terms and
conditions hereof, will be validly issued, fully paid and
non-assessable, and
free and clear of all Liens imposed by Elite other than
restrictions on transfer
or other dispositions provided for in the Strategic Alliance
Documents. The
shares of Common Stock issuable upon exercise of the Warrant (the
"WARRANT
SHARES"), when issued in accordance with the terms of the Warrant,
will be duly
authorized, validly issued, fully paid and non-assessable, and free
and clear of
all Liens imposed by Elite other than restrictions or transfer or
other
dispositions provided for in the Strategic Alliance Documents.
Elite has
reserved from its duly authorized capital stock a number of shares
of Common
Stock for issuance upon the exercise of the Warrant equal to the
aggregate
number of Warrant Shares issuable upon exercise of the Warrant
immediately
following the Closing.
(e) CAPITALIZATION. Except as set forth on SCHEDULE 2.2(E) of
the Disclosure Schedules attached hereto, prior to giving effect to
the
transaction contemplated in the Strategic Alliance Documents, the
authorized
capital stock of Elite immediately prior to the Closing consists of
(i)
65,000,000 shares of Common Stock, of which 19,599,325 shares are
issued and
outstanding, and of which 7,000,000 shares are reserved for future
issuance upon
exercise of options granted to employees, officers, directors and
consultants
pursuant to Elite's 2004 Stock Option Plan, as amended, and (ii)
5,000,000
shares of preferred stock, of which 10,000 shares are designated as
Series B
Preferred Stock, par value U.S.$ 0.01 per share (the "SERIES B
PREFERRED
STOCK"), 9,695 of which are issued and outstanding. As of the
Closing, Elite
shall have reserved a sufficient number of shares of Common Stock
for issuance
upon exercise of the Warrant. Other than in connection with the
offering and the
sale by Elite of the Series B Preferred Stock and except as set
forth in the SEC
Reports or as set forth on SCHEDULE 2.2(E) of the Disclosure
Schedules attached
hereto, there are no preemptive rights, voting agreements, rights
of first offer
or refusal, options, warrants or other conversion or exchange
privileges or
rights presently outstanding to purchase, subscribe for or
otherwise acquire any
of Elite's capital stock. The Warrant, when issued against payment
therefore in
accordance with this Agreement, will be duly authorized and validly
issued.
-6-
<PAGE>
(f) LITIGATION. Except as set forth on SCHEDULE 2.2(F), there
is no action, suit, inquiry, notice of violation, proceeding or
investigation
pending or, to the knowledge of Elite, threatened against or
affecting Elite,
any subsidiary of Elite (each, a "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 Strategic
Alliance Documents
to which Elite is a party 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 Elite 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.
(g) SEC REPORTS; FINANCIAL STATEMENTS. Elite has filed all
reports, schedules, forms, statements and other documents required
to be filed
with the Commission by it under the Securities Act of 1933, as
amended (the
"SECURITIES ACT") and the Securities Exchange Act of 1934, as
amended (the
"EXCHANGE ACT"), for the two years preceding the date hereof (or
such shorter
period as Elite 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 which they were made, not
misleading.
2.3 PURCHASER'S REPRESENTATIONS, WARRANTIES AND COVENANTS. Each
VGS
Party, jointly and severally, hereby represents, warrants and
covenants to Elite
as of the date of this Agreement and as of the time of Closing as
follows:
(a) ORGANIZATION, GOOD STANDING AND QUALIFICATION. VGS is a
limited liability company duly organized, validly existing and in
good standing
under the laws of the State of Delaware. VGS has all requisite
corporate power
and authority to own and operate its properties and assets, to
execute and
deliver the Strategic Alliance Documents to which it is a party,
and to carry
out the provisions of the Strategic Alliance Documents to which it
is a party
and to carry on its business as presently conducted and as
presently proposed to
be conducted. VGS is duly qualified and is authorized to do
business in all
jurisdictions in which the nature of its activities and of its
properties makes
such qualification necessary, except for those jurisdictions in
which failure to
do so would not have or reasonably be expected to result in a
Material Adverse
Effect.
(b) VGS OWNERSHIP. Schedule 2.3(b) set forth a true and
complete list of the holders own all of the outstanding partnership
interests in
VGS and each holder's type of partnership interest, percentage of
voting rights
as to actions to be taken by VGS and right to receive allocations
of profit and
losses from VGS. There are no preemptive rights, voting agreements,
rights of
first offer or refusal, options, warrants or other conversion or
exchange
-7-
<PAGE>
privileges or rights presently outstanding to purchase, subscribe
for or
otherwise acquire any of the partnership interests in VGS.
(c) AUTHORIZATION; VALID AND BINDING AGREEMENT. Such VGS Party
has all requisite legal capacity, power and authority to execute
and deliver the
Strategic Alliance Documents to which he or it is a party, to
perform their
obligations and undertakings hereunder and thereunder, and to
consummate the
transactions contemplated hereby and thereby. The execution and
delivery of the
Strategic Alliance Documents to which he or it is a party, the
performance of
his or its obligations and undertakings hereunder and thereunder,
and the
consummation of the transactions contemplated hereby and thereby,
have been duly
and validly authorized by all necessary action on the part of such
VGS Party and
no other proceedings on the part of, or on behalf of, such VGS
Party are
necessary to authorize the execution or delivery of the Strategic
Alliance
Documents to which he or it is a party, the performance of its
obligations and
undertakings hereunder and thereunder or the consummation of the
transactions
contemplated hereby and thereby. The Strat
|
