EXHIBIT 10(e)
EXECUTION VERSION
STOCKHOLDERS' AGREEMENT (this "AGREEMENT"), dated as of
December 6, 2006 (the
"EFFECTIVE
DATE"), among Novel
Laboratories,
Inc., a
Delaware corporation (the
"COMPANY"), and Elite
Pharmaceuticals,
Inc. ("ELITE")
and VGS Pharma LLC, a Delaware limited liability company
("VGS") and Veerappan
Subramanian
("SUBRAMANIAN"
and
together with Elite
and VGS, each a
"STOCKHOLDER" and
collectively, the "STOCKHOLDERS").
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INTRODUCTION
In connection with that certain Strategic Alliance Agreement,
dated
as of the date hereof (the "STRATEGIC ALLIANCE AGREEMENT"), among
Elite, VGS and
Subramanian and the transactions contemplated thereby, the parties hereto are
entering into this Agreement;
In connection with Subramanian's potential acquisition of shares
of
the Company's
capital stock pursuant to any Stock Option Plan (as defined
below), he is being made a party to this Agreement;
The Strategic Alliance
Agreement states that
as a condition to its
effectiveness, the Company and the Stockholders shall enter into
this Agreement;
and
The Stockholders
and the Company
desire to promote
their mutual
interests by agreeing to certain matters relating to, among other things,
the
governance of the Company and the disposition of shares of capital
stock of the
Company, held, or hereafter acquired, by the Stockholders.
IN CONSIDERATION of
the foregoing and the covenants and obligations
set forth below, the parties hereto, intending to be legally bound,
hereby agree
as follows:
ARTICLE I
INTERPRETATION OF THIS AGREEMENT
1.1. CERTAIN DEFINITIONS. As used herein, the following
terms shall
have the following meanings:
"AFFILIATE" means,
with respect to any Person,
any other Person
directly or indirectly controlling, controlled by, or under common
control with,
such Person. A Person shall be deemed to "CONTROL" another Person
if such Person
possesses, directly or indirectly, the power to direct or cause the
direction of
the management or policies of such other Person, whether through the ownership
of voting securities,
by contract or otherwise. For the avoidance of doubt, the
Company is not
considered an
Affiliate of Elite at the time this Agreement is
executed.
"BANKRUPTCY EVENT"
means, with respect to any affected
holder of
Shares (a) the
initiation
of a voluntary case or other proceeding seeking
liquidation,
reorganization or other relief under any bankruptcy, insolvency
or
other similar
law; (b) the commencement of an involuntary case or other
proceeding against such holder seeking liquidation, reorganization
or
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other relief under the bankruptcy, insolvency or other similar laws,
and is not
dismissed within
ninety (90) days; or (c) the entry of an order for
relief
against such holder
under the federal
bankruptcy
laws as now or
hereafter in
effect.
"BOARD" means the Board of Directors of the Company.
"BUSINESS PLAN" means
either of the Initial
Business Plan and each
Annual Business
Plan, as each such
term is defined in the
Strategic Alliance
Agreement.
"BY-LAWS" means the By-Laws of the Company, as amended from time to
time.
"CERTIFICATE OF
INCORPORATION"
means
the Certificate of
Incorporation of the Company, as amended from time to time.
"CHANGE OF CONTROL"
means, with
respect to any
Stockholder
that
holds at least ten percent (10%) of the outstanding shares of capital stock of
the Company (other than a Permitted Transfer pursuant to Section 3.1(ii)), a
change in the
ownership of fifty percent (50%) or more of the equity or
partnership interests
(or economic benefit thereof) in a Person, or the
acquisition, directly
or indirectly, of the
fifty percent (50%) or more of the
equity or partnership interests (or economic benefit thereof) in a
person.
"CLASS A COMMON STOCK"
means the Class A
Common Stock,
par value
$0.0001 per share, of the Company.
"CLASS B COMMON STOCK"
means the Class B
Common Stock,
par value
$0.0001 per share, of the Company.
"DIRECTOR" means a member of the Board.
"DIVESTITURE EVENT"
means the occurrence
of any of the
following
events with
respect to a holder of
Shares: (i)
liquidation,
dissolution
or
winding up; (ii) the
occurrence of a
Bankruptcy
Event; or (iii) a Change of
Control.
"ELITE CONTRIBUTIONS"
shall have the meaning
ascribed to such term
in the Strategic Alliance Agreement.
"FAMILY MEMBER" means any parent, spouse, child, brother,
sister or
any other relative with a relationship (by blood, marriage or
adoption) not more
remote than first cousin.
"GOOD REASON"
shall have the meaning
assigned to such term
in the
Subramanian Employment Agreement.
"NEW SECURITIES" except as set forth below, shall mean any shares
of
capital stock of the
Company issued after
the date hereof,
including Class A
Common Stock, Class B
Common Stock, whether
now authorized or not, and rights,
options, or warrants
to purchase such common stock, and securities of any type
whatsoever that are, directly or indirectly, convertible into said
common stock.
Notwithstanding the
foregoing,
the term New
Securities
does not include
(i)
registered securities offered to the public pursuant to a
registration statement
filed and
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declared effective by
the SEC pursuant to the Act, (ii) Class B Common Stock or
warrants or options exercisable for Class B Common Stock, or other
capital stock
or warrants or options exercisable for other capital stock, issued
or granted to
employees,
consultants, officers
and directors of the Company, pursuant to the
Stock Option Plan, as amended from time to time, and any successor
plan thereto,
(iii) stock
issued in connection with any stock split, stock dividend,
distribution,
reclassification or
recapitalization by the Company, (iv) stock
issued in respect of any warrant, option or upon conversion or exchange of
convertible or
exchangeable
securities
outstanding
as of the date of this
Agreement, and (v)
securities
of the Company
issued after the date
hereof in
connection with
the Company's entering into an acquisition or strategic
partnership, or issued
to lenders, lessors or
vendors of the Company, in each
case approved by the Board.
"ORIGINAL ELITE
SHARES" means the shares of Class A Common
Stock
held by Elite as of the Effective Date of this Agreement,
and all capital
stock
or other securities of the Company representing a dividend on any
such shares of
Class A Common Stock,
or representing a
distribution or return of capital upon
or in respect of such shares of Class A Common Stock, or resulting from a stock
split, revision,
reclassification
or other exchange therefor, and any
subscriptions,
warrants, rights or
options issued to Elite or its
permitted
transferee, or
otherwise in respect of, such shares of
Class A Common
Stock,
without regard to Transfers made subsequent to the Effective Date
hereof.
"ORIGINAL VGS SHARES"
means the shares of Class A Common Stock held
by VGS as of the
Effective Date of this
Agreement,
and all capital
stock or
other securities of
the Company
representing a
dividend on any such shares of
Class A Common Stock,
or representing a
distribution or return of capital upon
or in respect of such shares of Class A Common Stock, or resulting from a stock
split, revision,
reclassification
or other exchange therefor, and any
subscriptions,
warrants, rights
or options issued to VGS or its permitted
transferee, or
otherwise in respect of, such shares of
Class A Common
Stock,
without regard to Transfers made subsequent to the Effective Date
hereof.
"PERFORMANCE MILESTONE" shall have the meaning ascribed to such
term
in the Strategic Alliance Agreement.
"PERMITTED TRANSFER" shall have the meaning ascribed to such term
in
Section 3.3 hereof.
"PERSON" means any
individual,
partnership, joint
venture, firm,
corporation, limited
liability company, association, trust, unincorporated
organization or other
enterprise or any government or political subdivision or
any agency, department or instrumentality thereof.
"PUBLICLY TRADED" means (i) the initial public offering of any
class
of equity securities
of the Company pursuant to an effective registration
statement under the Securities Act of 1933 (excluding registration
statements on
Form S-4 and Form S-8 and similar limited purpose forms); (ii) any class of
equity securities
of the Company become eligible to be traded in any
public
securities market;
or (iii) the Company becomes subject to the reporting
requirements of the Securities and Exchange Act of 1934, as
amended.
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"REMAINING
CONTRIBUTIONS" shall
have the meaning
ascribed to such
term in the Strategic Alliance Agreement.
"SHARES" means all
capital stock and equity securities of the
Company.
"STRATEGIC ALLIANCE
DOCUMENTS"
shall have the meaning
ascribed to
such term in the Strategic Alliance Agreement.
"STOCK OPTION PLAN" means the Company's 2006 Stock Option Plan.
"SUBRAMANIAN
EMPLOYMENT AGREEMENT"
means that certain
Employment
Agreement, dated as of the date hereof, between the Company and
Subramanian.
"TRANSFER" means, as
to any Share, to directly or indirectly sell,
assign,
transfer, offer,
grant
a participation in, mortgage, pledge,
hypothecate, create a
security interest in or lien upon, encumber, donate,
contribute, place in
trust, enter into any
voting agreement in
respect of, or
otherwise dispose of, such Share.
1.2. DIRECTLY OR
INDIRECTLY. Where any
provision in this Agreement
refers to action to be taken by any Person, or which such Person is
prohibited
from taking, such
provision shall be applicable whether such action is taken
directly or indirectly by such Person.
ARTICLE II
CORPORATE GOVERNANCE
2.1. BOARD OF DIRECTORS AND BY-LAWS.
(a) At each election of Directors during the term of this
Agreement,
the Stockholders
shall vote
their Shares, and otherwise use commercially
reasonable efforts as stockholders of the Company,
(i) to cause and maintain the election to the Board comprised
of:
(x) for
so long as Elite and its Affiliates,
collectively, are
holders of at least ten percent (10%) of the issued and
outstanding capital
stock of the Company,
one (1) designee of Elite (the
"ELITE
DESIGNEE"); and
(y) for so long as VGS and its Affiliates, collectively,
are
holders of at least
ten percent (10%) of
the issued and
outstanding
capital
stock of the Company, one (1) designee of VGS (the "VGS
DESIGNEE");
(ii) to remove, reappoint and replace any such designee in
accordance
with the direction of the relevant Stockholder.
For so long as Elite is the holder of at least ten percent (10%) of the issued
and outstanding
capital stock of the Company, VGS shall only designate
Subramanian pursuant
to the terms of this Section 2.1(a) and may only designate
another person as the VGS Designee (A) upon
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Subramanian's death or disability, (B) upon Subramanian's
retirement after
his
sixty-fifth (65th) birthday, or (C) with the prior written consent
of Elite.
(b) The number of Directors shall be (2) voting members.
(c) At each election of Directors during the term of this
Agreement,
the Stockholders
shall
vote their respective Shares and otherwise use
commercially
reasonable efforts as stockholders of the Company, to prevent any
amendment of the
Certificate
of Incorporation or By-Laws of the Company
inconsistent with this Agreement.
2.2. PROTECTIVE
PROVISIONS. The
affirmative consent of each of the
Elite Designee
(so long as Elite is a
holder of at least ten percent (10%) of
the issued and
outstanding capital
stock of the Company)
and the VGS Designee
(so long as Elite is a holder of at least ten percent (10%) of the issued and
outstanding capital
stock of the Company)
shall be required for
the following
actions to the taken by the Board or any officer of the Company
with respect to
the Company or its subsidiaries:
(i) any
amendment to the
Certificate of
Incorporation, By-Laws
or other
governance documents;
(ii)
spin-off or public offering of equity securities;
(iii)
liquidation, dissolution,
winding-up,
recapitalization,
reorganization, merger, consolidation or sale;
(iv) any
sale, exclusive lease or out-license, exchange, transfer or
other
disposition, of any
Material (as defined below) asset or Material drug product,
other than sales of products in the ordinary course of
business;
(v)
authorization,
creation, designation or issuance of any additional
equity or debt securities, including under the Stock Option
Plan;
(vi)
declaration or payment of dividends or distributions;
(vii)
except as expressly
provided in the Strategic Alliance Documents,
any repurchase or redemption of securities;
(viii)
commencement of any voluntary bankruptcy proceeding, liquidation,
reorganization,
dissolution,
conservation,
delinquency or
receivership
proceeding, or a
proceeding similar to
any of the foregoing or permitting any
involuntary bankruptcy, liquidation, reorganization, dissolution, conservation,
delinquency or
receivership
proceeding to remain unstayed for more than thirty
(30) days from the date of the petition therefore or commencement
thereof;
(ix) a
Material change in the nature or focus of the
business or any
Business Plan;
(x)
approval of each Business Plan, and the yearly operating
budget;
(xi)
incurrence
of indebtedness in excess of amounts approved in the
Business Plan,
or the grant or
creation of any
security interest in
or other
encumbrance on any Material asset;
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(xii)
capital expenditures and investments (including creation of a
subsidiary) in excess of, in the case of capital expenditures, one hundred ten
percent (110%) of the amounts approved in the Business Plan and,
in the case of
investments, the amounts approved in the Business Plan;
(xiii)
approval of any transaction with any executive officer, director
or
equity holder or any
affiliate of an executive officer, director or equity
holder
(including
Family Members),
including
the award of bonuses to
Subramanian;
(xiv)
entering into any agreement restricting the ability of the Company
to compete, in any Material respect, in any area of business;
(xv)
commencement or settlement of any Material litigation or proceeding,
or threatened litigation or proceeding;
(xvi)
removal, replacement
or appointment of the Company's
independent
accountants (other
than Weiser LLP, which the parties hereto agree shall be the
Company's initial independent accounts);
(xvii)
increasing or decreasing the size of the Board;
(xviii)
the purchase or license of Material products from third
parties;
(xix)
entry into Material joint ventures, licensing, marketing,
distribution and similar Material arrangements;
(xx) any
public offering of securities of the Company, or any
registration
for sale to the public of securities of the Company; and
(xxi)
any investment (whether equity or debt) by Subramanian, or any
Affiliate of
Subramanian,
in any Competitive Company (as defined in the
Strategic Alliance Agreement).
For purposes
of this Section 2.2, shall "MATERIAL" mean material to the
business, assets,
operations,
properties,
financial position, results of
operations, liabilities or prospects of the Company as a whole.
2.3. CONFIDENTIALITY REQUIREMENTS. Each Stockholder agrees that
all
financial or other
information about the
Company, or other
information of the
Company of a confidential or proprietary nature, disclosed to them at any time,
in connection with
this Agreement or otherwise, shall be kept confidential by
them and shall not be
directly or indirectly
disclosed to any Person (other
than, as necessary, to such Stockholder's agents, employees or lenders) or used
by such Stockholder
except: (i) with the
prior written consent of the Company;
(ii) as may be required by applicable law, court process or other
obligations
pursuant to
any listing agreement with any national securities exchange
(including the Nasdaq
Stock Market); or (iii) such information which is or
becomes generally
available other than as a result of a violation of this
provision.
2.4 TERMINATION
FOR CAUSE UNDER THE SUBRAMANIAN EMPLOYMENT
AGREEMENT; BINDING ARBITRATION.
(a) Notwithstanding
anything in this Agreement to the contrary, the
determination of the
existence of "Cause"
or "Disability"
as a basis for the
termination of Subramanian under Subramanian Employment Agreement shall be
made
solely in the reasonable
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discretion of the Elite Designee, not the Board, in good faith, and
upon receipt
of written notice from the Elite Designee setting forth the basis of "Cause"
or
"Disability" for such termination, the Company shall take all
requisite steps to
terminate Subramanian
for "Cause" or
"Disability" in accordance with the terms
of the Subramanian Employment Agreement.
(b) Any action, claim,
dispute or controversy
arising out of or in
connection with the
determination
of the existence of
"Cause" or "Disability"
(each, a "DISPUTE") shall be determined by binding arbitration in New York, New
York, before a single
JAMS arbitrator who is an expert in the subject matter in
dispute and reasonably
acceptable
to each party, and administered by JAMS
pursuant to its Comprehensive Arbitration Rules and Procedures
("ARBITRATION").
Either party may
initiate Arbitration with respect to a Dispute by filing
a
written demand for Arbitration with JAMS. The parties acknowledge
and agree that
judgment on the award
in any Arbitration
shall be binding upon the parties
hereto and may be entered and enforced in any court having
jurisdiction.
Each
party acknowledges
and agrees that all
Disputes shall be decided in accordance
with this Section
2.4(b) and hereby waives any rights to have those
matters
litigated in a court and/or by jury trial. Each party acknowledges and agrees
that the provisions of
this Section 2.4(b)
are binding upon such party and may
be enforced
by any court of competent jurisdiction. Each party further
irrevocably consents to service of process in any Dispute in the
manner provided
for notices in Section 9.9. Nothing in this Agreement will affect the right
of
any party to serve process in any other manner permitted by law or by
Arbitration rules.
ARTICLE
III
TRANSFERS OF SHARES
3.1. GENERAL
PROHIBITION ON
TRANSFER. No
Stockholder may Transfer
any of its Shares without the prior written consent of the other
Stockholder(s),
except in the case of: (i) a Permitted Transfer (as defined in Section 3.3);
(ii) a Transfer by VGS to its members or a Family Member of any of its members
or to a trust wholly controlled by, or for the sole benefit of, its
members or a
Family Member of any of its members, provided that all Shares
transferred remain
subject to the terms of this Agreement, including, without limitation,
Article
III, Section 4.1, Article V, Article VIII and Article IX; or (iii)
a Transfer by
Elite, due to a restructuring of, or a sale of substantially
all of the assets
of, Elite.
3.2. RESTRICTIONS
ON TRANSFERS TO COMPETITORS. Notwithstanding
anything in this
Agreement to the
contrary, no
Stockholder
may Transfer any
Shares to any Person who or which is (i) a competitor of the Company or any of
its subsidiaries;
(ii) a competitor
of Elite or any of its
subsidiaries;
or
(iii) a shareholder
or other security holder of any Person referred to in
sub-clause (i) or sub-clause (ii).
3.3. PERMITTED TRANSFERS. A "PERMITTED TRANSFER" shall be a
Transfer
that complies with each of the following conditions:
(a) the
non-transferring
Stockholder(s) shall
have provided prior
written consent to the Transfer to such proposed transferee;
PROVIDED that such
consent may not be
unreasonably
withheld, conditioned or delayed (it being
acknowledged and agreed among the parties hereto
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that withholding
consent to a proposed
transferee that is a financial investor
with no business
operations in the
pharmaceutical
industry is presumed
to be
unreasonable);
(b) such Transfer,
when combined with any
prior Transfers by
such
transferring Stockholder, does not cause all such Transfers
by such Stockholder
to exceed thirty-three
and one third
percent (33 1/3%) of the Shares held
by
such transferrin
