EX-10.3
INDIGO SECURITIES, LLC
March 6, 2006
Xx. Xxxxxxx Xxxx
Chief Executive Officer
Elite Pharmaceuticals, Inc.
000 Xxxxxxxxx Xxxxxx
Xxxxxx, Xxx Xxxxxx 00000
Re: SECOND AMENDED PLACEMENT AGENT AGREEMENT
Ladies and Gentlemen:
Pursuant to our ongoing relationship, we are writing to confirm with you
the arrangements under which Indigo Securities, LLC ("INDIGO") has acted as
financial advisor to Elite Pharmaceuticals, Inc. (the "COMPANY") with respect to
the Transactions (as defined below)(the "ENGAGEMENT"). This Second Amended
Placement Agent Agreement shall be referred to herein as the "AGREEMENT" and the
"EFFECTIVE DATE" shall mean November 9, 2005. This Agreement amends the first
amended engagement letter by and between Indigo and the Company dated as of
December 16, 2005 which amended the original engagement letter by and between
Indigo and the Company dated as of November 9, 2005. Each of Indigo and the
Company may be referred to herein individually as a "PARTY" and collectively as
the "PARTIES".
1. THE ENGAGEMENTS; WARRANT TRANSACTION AND EQUITY OFFERING.
A. In connection with the Engagement, the Company has requested
Indigo's assistance in facilitating (i) the exercise of warrants (the "OLD
WARRANTS") by investors ("EXCHANGING HOLDERS") who received warrants to purchase
shares of the Company's common stock ("COMMON STOCK") in connection with the
Company's private placement transaction dated as of October, 2004 (such exercise
shall be referred to as the "WARRANT TRANSACTION"); and (ii) the issuance of new
warrants by the Company (as described in the term sheet attached hereto as
EXHIBIT A) to Exchanging Holders participating in the Warrant Transaction (the
"NEW WARRANTS"); and (iii) the issuance of Preferred (as defined below) in an
Equity Offering (as defined below) described in Section 1.B. below. It is
contemplated that the New Warrants and Preferred issued in the Transactions will
be issued by the Company in a private placement transaction (the "PRIVATE
PLACEMENT"; together with the Equity Offering, the issuance of New Warrants and
the Warrant Transaction, the "PRIVATE PLACEMENTS" or the "TRANSACTIONS") exempt
from registration under the U.S. Securities Act of 1933 (the "SECURITIES ACT"),
and otherwise in compliance with the applicable laws and regulations of any
jurisdiction in which the Securities are offered. Indigo shall only be obligated
to assist the Company with the Transactions on a "best efforts" basis as
described above.
B. The Company hereby engages the Placement Agent to act as its
exclusive agent in connection with the offering (the "EQUITY OFFERING") by the
Company of up to $8,250,000, including a 10% over-allotment (the "MAXIMUM
AMOUNT"), of the Company's perpetual Convertible Preferred Stock (the
"PREFERRED") convertible into shares of Common Stock at a conversion price of
$2.25 per
Elite Pharmaceuticals, Inc.
Page 2
share (the "CONVERSION PRICE" and such stock, the "PREFERRED") and warrants to
acquire Common Stock (the "WARRANTS" and, together with the Preferred, the
"SECURITIES" and the purchasers of the Securities, each a "HOLDER" and
collectively, the "HOLDERS") pursuant to the terms set forth on Exhibit B or
such other terms as may be agreed upon by the Holders and the Company. The
Equity Offering shall be conducted as a private placement to be made pursuant to
the exemption afforded by Section 4(2) of the Securities Act and Rule 506 of
Regulation D promulgated thereunder, as well as applicable state laws.
C. The Offering is being made upon the terms and conditions set forth
on the term sheet attached as EXHIBIT B hereto (the "TERM SHEET") or upon other
terms and conditions mutually agreed on by the Company and the Placement Agent,
by means of written documentation, inclusive of a Securities Purchase Agreement
(which shall include an investor questionnaire), a Registration Rights
Agreement, a Certificate of Designations, Investor Warrants, Placement Agent
Warrants and any other necessary documents, agreements and/or instruments
necessary to appropriately document the transaction, (collectively, the
"OFFERING DOCUMENTS"), which written documentation shall be delivered to each
Holder.
2. THE PRIVATE PLACEMENTS.
The Company and Indigo will each reasonably believe at the time of the
Private Placements that each Exchanging Holder and Holder will be an "accredited
investor" as defined in Rule 501 of Regulation D of the Securities Act and will
satisfy any private placement requirements applicable in any non-U.S.
jurisdiction where the New Warrants or Securities may be offered. The Company
will file in a timely manner with the U.S. Securities and Exchange Commission
(the "SEC") any notices with respect to the New Warrants or Securities required
by Rule 503 of Regulation D and will furnish to Indigo promptly thereafter a
signed copy of each such notice.
3. INFORMATION SUPPLIED; REPRESENTATIONS.
The Company will furnish to Indigo such information as Indigo believes
appropriate to its engagement hereunder. In addition, the representations and
warranties of the Company made in the Exchange Agreement and Equity Offering
Documents, as applicable, are hereby incorporated herein by reference in their
entirety with the same legal effect as if such representations and warranties
were set forth herein. This Agreement has been duly and validly authorized by
the Company and Indigo is a valid and binding agreement of the Company and
Indigo, enforceable in accordance with its terms.
4. FEES AND EXPENSES.
A. Warrant Exchange Fees.
(i) Simultaneous with payment of the exercise price under the Old
Warrants and the delivery of the New Warrants, at the Closing, the Company shall
pay the Placement Agent a commission equal to (1) seven and one-half percent
(7.5%) of the gross cash proceeds received by the Company from the exercise of
the Old Warrants (the "CASH FEE"), and (2) New Warrants exercisable for a number
of shares of the Company's common stock equal the Cash Fee divided by the
exercise price of the New Warrants (the "PLACEMENT AGENT WARRANT"). The
Placement Agent Warrant shall include a "cashless exercise" provision. Placement
Agent shall be reimbursed at
Elite Pharmaceuticals, Inc.
Page 3
Closing for its reasonable expenses incurred in connection with the Offering
including, without limitation, legal fees of the Placement Agent's counsel and
disbursements of Placement Agent's counsel in connection with the Offering and
Equity Offering, in an amount not to exceed $50,000 assuming that the terms of
the Equity Offering conform, in all material respects, with the terms described
on the Term Sheet; provided, that Placement Agent's counsel presents a copy of
the xxxx at Closing documenting such fees and disbursements.
(ii) If the Company conducts a separate private placement of securities
to any investor(s) introduced to the company by the Placement Agent ("PA
INVESTORS") at any time during the eighteen (18) month period following the
Termination Date, then the Company will pay to the Placement Agent a commission
equal to seven and one-half percent (7.5%) of the gross cash proceeds received
by the company from the PA Investors in such new private placement ("SUBSEQUENT
CASH FEE"), and, in addition thereto, issue to the Placement Agent warrants to
purchase a number of shares common stock of the Company equal to the Subsequent
Cash Fee divided by the per share purchase price of the Company's common stock
in such private placement, or such other fee as mutually agreed to the Parties.
B. Equity Offering Fees.
(i) At each closing in the Equity Offering, the Placement Agent will
receive a cash fee (the "CASH FEE") for Securities sold in the Equity Offering
to Holders, which Cash Fee shall be equal to eight percent (8%) of the aggregate
purchase price of the Securities sold in the Equity Offering.
(ii) At the final Closing the Company shall deliver to the Placement
Agent a placement agent warrant (the "PLACEMENT AGENT WARRANT") exercisable for
a number of shares of Common Stock equal to the Section 4.B(i) Cash Fee
attributable to the sale of Securities divided by the per share price paid by
Holders on the Closing Date ("CLOSING PRICE"). The Placement Agent Warrants
shall initially be exercisable at an amount equal to the Closing Price per share
of Common Stock, subject to adjustment, commencing upon the date of issuance and
continuing for five (5) years after issuance. The Placement Agent Warrants shall
be transferable by the Placement Agent only to its officers, directors,
shareholders and employees, as well as by such persons to their immediate family
affiliates in connection with estate planning, provided that no such transfer or
disposition may be made other than in compliance with applicable securities laws
and furnishing satisfactory evidence of such compliance to the Company. The
Placement Agent Warrant shall contain the same terms as the Warrants except that
the Placement Agent Warrant shall also include a "cashless exercise" provision.
(iii) At each Closing, the Placement Agent will receive a
non-accountable expense allowance equal to 2% of the total gross proceeds
received by the Company at that Closing from the sale of Preferred to Holders at
that Closing (other than investors introduced by management or affiliates of the
Company or management), such 2% amount being sometimes hereafter referred to as
the "NON-ACCOUNTABLE EXPENSE ALLOWANCE". In addition, the Placement Agent will
be reimbursed for its (a) legal fees and expenses in connection with the Equity
Offering, and (b) post-closing documented fees and expenses (including without
limitation legal fees and expenses) in connection with the Securities.
Elite Pharmaceuticals, Inc.
Page 4
5. NOTICES.
All communications hereunder shall be in writing and shall be mailed or
delivered (a) to the Company, at its offices at 000 Xxxxxxxxx Xxxxxx, Xxxxxx,
Xxx Xxxxxx 00000, and (b) to Indigo, at its offices at 000 Xxxxx Xxxxxx, Xxxxx
0000, Xxx Xxxx, XX 00000, Attention: Xxxx Xxxxxxxxx.
6. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless Indigo, its
employees and representatives and each person who controls Indigo within the
meaning of Section 15 of the Securities Act against any and all losses, claims,
damages or liabilities, joint or several, to which they or any of them may
become subject under the Securities Act or any other statute or at common law in
connection with the performance of its duties described herein and to reimburse
persons indemnified as above for any legal or other expense (including the cost
of any investigation and preparation) incurred by them in connection with any
litigation whether or not resulting in any liability, provided, however, that
the indemnity agreement contained in this Section 6(a) shall not apply to
amounts paid in settlement of any such litigation if such settlement is effected
without the consent of the Company, nor shall it apply to Indigo or any person
controlling Indigo in respect of any such losses, claims, damages, or
liabilities arising out of, or based upon, any such untrue statement or alleged
untrue statement, or any such omission or alleged omission, if such statement or
omission was made in reliance upon information furnished in writing to the
Company by Indigo. Indigo agrees within ten days after the receipt by it of
written notice of the commencement of any action against it or against any
person controlling it as aforesaid, in respect of which indemnity may be sought
from the Company on account of the indemnity agreement contained in this Section
6(a), to notify the Company in writing of the commencement thereof. The omission
of Indigo so to notify the Company of any such action shall not relieve the
Company from any liability which it may have to Indigo or any person controlling
it as aforesaid on account of the indemnity agreement contained in this
subsection except to the extent that any such failure in giving notice causes
the amounts paid by the Company to be greater than it otherwise would have been.
In case any such action shall be brought against Indigo or any such controlling
person and Indigo shall notify the Company of the commencement thereof, the
Company shall be entitled to participate in (and, to the extent that it shall
wish, to direct) the defense thereof at its own expense but such defense shall
be conducted by counsel of recognized standing and reasonably satisfactory to
Indigo or such controlling person or persons, defendant or defendants in the
litigation; provided, that the Company shall not be required to pay for more
than one firm of counsel for all indemnified parties, which firm shall be
designated by Indigo. The Company agrees to notify Indigo promptly of the
commencement of any litigation or proceeding against it or in connection with
the issue and sale of any of its securities and to furnish to Indigo, at its
request, copies of all pleadings therein and permit Indigo to be an observer
therein and apprise Indigo of all developments therein, all at the Company's
expense.
(b) Indigo agrees, in the same manner and to the same extent as set
forth in Section 6(a) of this Agreement, to indemnify and hold harmless the
Company and each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act, with respect to any statement in or omission
from the information provided to investors any amendments thereto, if such
statement or omission was made in reliance upon information furnished in writing
to the Company by Indigo, on its behalf, specifically for use in connection with
the preparation of documents to be provided to prospective investors or any
amendment thereof or supplement thereto or by reason of improper selling
practices (including failure to comply with, or a violation of, any law or
regulation by Indigo, its officers, directors and registered placement agents).
Indigo shall not be liable for amounts paid in
Elite Pharmaceuticals, Inc.
Page 5
settlement of any such litigation if such settlement was effected without its
consent. In case of commencement of any action, in respect of which indemnity
may be sought from Indigo on account of the indemnity agreement contained in
this Section 6(b), each person agreed to be indemnified by Indigo shall have the
same obligation to notify Indigo as Indigo has toward the Company in Section
6(a) of this Agreement, subject to the same potential loss of indemnity in the
event such notice is not given, and Indigo shall have the same right to
participate in (and to the extent that it shall wish, to direct) the defense of
such action at its own expense, but such defense shall be conducted by one firm
of counsel of recognized standing and satisfactory to the Company. Indigo agrees
to notify the Company promptly of the commencement of any litigation or
proceeding against it or against any such controlling person, of which it may be
advised, in connection with the issue and sale of any of the securities of the
Company, and to furnish the Company at its request copies of all pleadings
therein and permit the Company to be an observer therein and apprise it of all
developments therein, all at Indigo's expense.
(c) The respective indemnity agreements between Indigo and the Company
contained in Sections 6(a) and 6(b) of this Agreement, and the representations
and warranties of the Company set forth elsewhere in this Agreement, shall
remain operative and in full force and effect, regardless of any investigation
made by or on behalf of Indigo or by or on behalf of any controlling person of
Indigo or the Company any controlling person of the Company, shall survive the
delivery of the Units. Any successor of the Company and Indigo or of any
controlling person of Indigo, as the case may be, shall be entitled to the
benefits of the respective indemnity agreements.
(d) In order to provide for just and equitable contribution under the
Securities Act in any case in which (i) any person entitled to indemnification
under this Section 6 makes claim for indemnification pursuant hereto but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 6 provides for indemnification in
such case, or (ii) contribution under the Securities Act may be required on the
part of any such person in circumstances for which indemnification is provided
under this Section 6, then, and in each such case, the Company and Indigo shall
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (after any contribution from others) in such proportions so that
Indigo is responsible for the proportion that the fees provided for herein bear
to the purchase price of the Securities, and the Company is responsible for the
remaining portion; provided, that, in any such case, no person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
Within ten days after receipt by any party to this Agreement of notice of
the commencement of any action, suit or proceeding, such party will, if a claim
for contribution in respect thereof is to be made against another party (the
"CONTRIBUTING PARTY"), notify the contributing party, in writing, of the
commencement thereof, but the omission so to notify the contributing party will
not relieve it from any liability which it may have to any other party other
than for contribution hereunder except to the extent that any such failure in
giving notice causes the amounts paid by the contributing party to be greater
than it otherwise would have been. In case any such action, suit or proceeding
is brought against any party, and such party so notifies a contributing party or
his or its Placement Agent of the commencement thereof within the aforesaid ten
days, the contributing party will be entitled to participate therein with the
notifying party and any other contributing party similarly
Elite Pharmaceuticals, Inc.
Page 6
notified. Any such contributing party shall not be liable to any party seeking
contribution on account of any settlement of any claim, action or proceeding
effected by such party seeking contribution without the written consent of such
contributing party. The contribution provisions contained in Section 6 are in
addition to any other rights or remedies which either party hereto may have with
respect to the other or hereunder.
7. MISCELLANEOUS.
(a) No waiver, amendment or other modification of this Agreement shall
be effective unless in writing and signed by each party to be bound. This
Agreement shall inure to the benefit of and be binding on the Company, Indigo
and their respective successors.
(b) In case any provision of this Agreement shall be invalid, illegal
or unenforceable, the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
(c) The Company has retained Indigo to act as an independent
contractor, and any duties of Indigo arising out of its engagement shall be owed
solely to the Company and to no other party.
(d) This Agreement shall be governed by, and construed and interpreted
in accordance with, the laws of the State of New York.
(e) Each of Indigo and the Company (on its own behalf and, to the
extent permitted by applicable law, on behalf of its shareholders) waives all
right to trial by jury in any action, proceeding or counterclaim (whether based
upon contract, tort or otherwise) related to or arising out of this Agreement.
Please confirm that the foregoing correctly sets forth our agreement by
signing and returning to Indigo the enclosed duplicate copy of this Agreement.
We are delighted to participate in this engagement and have enjoyed working with
you on the assignment.
Very truly yours,
INDIGO SECURITIES LLC
By:
-----------------------------------
Print Name:
-----------------------------
Title:
----------------------------------
ACCEPTED AS OF THE DATE FIRST WRITTEN ABOVE:
ELITE PHARMACEUTICALS, INC.
By:
--------------------------------------------------
Print Name:
------------------------------------------
Title:
-----------------------------------------------
EXHIBIT A
WARRANT EXCHANGE TERM SHEET
Elite Pharmaceuticals, Inc.
Page 8
EXHIBIT B
BUSHIDO CAPITAL PARTNERS, LTD.
THIS TERM SHEET HAS BEEN PREPARED BY BUSHIDO CAPITAL PARTNERS FOR THE SOLE USE
OF ELITE PHARMACEUTICALS AND INDIGO SECURITIES AND IS NOT TO BE DISTRIBUTED TO
OTHER PARTIES WITHOUT THE CONSENT OF BUSHIDO CAPITAL PARTNERS.
TERM SHEET
THIS TERM SHEET SUMMARIZES THE PRINCIPAL TERMS OF A PROPOSED FINANCING OF THE
COMPANY. THIS TERM SHEET IS FOR DISCUSSION PURPOSES ONLY. THE TERMS AND
CONDITIONS ARE SUBJECT TO CHANGE AND THIS TERM SHEET DOES NOT CONSTITUTE EITHER
AN OFFER TO SELL OR AN OFFER TO PURCHASE SECURITIES. THE ISSUANCE AND SALE OF
ANY SECURITIES IS SUBJECT TO COMPLETION OF DUE DILIGENCE TO THE INVESTORS'
SATISFACTION, THE PREPARATION AND NEGOTIATION OF DEFINITIVE DOCUMENTATION AND,
SUBSEQUENT TO THE DATE HEREOF, NO MATERIAL ADVERSE DEVELOPMENTS SHALL HAVE
OCCURRED RELATING TO THE BUSINESS, ASSETS, OPERATIONS, PROPERTIES, CONDITION
(FINANCIAL OR OTHERWISE) OR PROSPECTS OF THE COMPANY AND ITS SUBSIDIARIES, TAKEN
AS A WHOLE.
February 21, 2006
ISSUER: Elite Pharmaceuticals Inc. (AMEX: XXX) or the "Company"
ISSUE: Minimum of $5 million and maximum of $7.5 million (10%
maximum over allotment) of perpetual Convertible
Preferred Stock (the "Preferred Stock").
INVESTORS: Bushido Capital Partners and a small number of
Qualified Institutional Buyers/Accredited Investors
approved by the Company.
CLOSING DATE: Expected within 7 days after the signing of a term
sheet by the Company and the Investor. Only one Closing
permitted.
ISSUE PRICE: The Issue Price for each Preferred Share shall be
$1000. The Investor may elect to convert the stated
value of Preferred Stock into Common Stock at any time
following the Closing Date.
CONVERSION PRICE: The Conversion Price to convert the Convertible
Preferred Shares to Common Stock will be equal to $2.50
per Common share.
PREFERRED DIVIDEND: 8% annual rate, payable quarterly in arrears in cash
or, subject to standard Equity Conditions (see below),
in Common Stock, at the Company's option. If the
Company elects to pay the Preferred Dividend in stock,
it must deliver a written notice to that effect to the
Investors at least 5 trading days prior to the date set
for payment of the Dividend. Common Stock delivered in
payment of Dividends will be valued at 95% of the
average of each of the VWAPs for the 20 trading day
period ending on the trading day immediately prior to
the date set for payment of the Dividend.
FORCED CONVERSION: The Company shall have the right but not the obligation
to force the Investors to convert any outstanding
Preferred Stock into the Company's Common Stock at the
Conversion Price if the daily VWAP of the Company's
Common Stock exceeds 250% of the Closing Price and
trade volume averages at least 75k shares per day for
each of 20 consecutive trading days.
Elite Pharmaceuticals, Inc.
Page 9
WARRANTS: Total Warrants coverage of 50% of the number of shares
of Common Stock that the stated value of Preferred
Stock would buy at the Conversion Price will be issued
to the Investors. All Warrants shall have a 5 year
term.
o Half of the total Warrants will be considered
Series A Warrants and shall have an exercise
price of $3.00.
o Half of the total Warrants will be considered
Series B Warrants and shall have an exercise
price of $3.50.
The Company shall have the right but not the obligation
to force the Investors to exercise any outstanding
Warrants into the Company's Common Stock at the
Conversion Price if the daily VWAP of the Company's
Common Stock exceeds 250% of the Closing Price and
trading volume average at least 75k shares per day for
each of 10 consecutive trading days.
REGISTRATION: The Company shall file to register the underlying
common shares within 30 days of the Closing Date and
make its best efforts to have the Registration declared
effective at the earliest date. If the registration
statement is not filed as indicated above or declared
effective within 90 days following the date by which
the Company is required to file the registration
statement in accordance with the preceding sentence (or
120 days in the event of a regulatory review), then the
Company will have to pay to the Investors liquidated
damages equal to 2% per month of the face value of the
Preferred Stock issued. A maximum of 18% liquidated
damages.
ANTI-DILUTION: In the event the Company issues at any time while
Preferred Stock are still outstanding Common Stock or
any type of securities giving right to Common Stock at
a price below the Issue Price, the Investor shall be
extended weighted anti-dilution protection on the
Preferred Stock and the Warrants.
RIGHT OF PARTICIPATION: For as long as any Preferred Stock are outstanding, the
Investors shall have a right of participation in any
new fund raising undertaken by the Company in a
percentage equal to the ratio of the principal value of
the outstanding Preferred Stock to the amount raised in
the new financing at the time of the new financing.
ADDITIONAL COVENANTS:
o The Company is prohibited from issuing equity or
equity linked securities for 180 days post the
Effective Date (subject to customary carve out
exceptions).
o The Company is prohibited from issuing variable
priced equity and variable priced equity linked
securities.
o The Company is prohibited from executing a stock
split or reverse split for a period of one (1) year
from receiving an Effective registration.
o The Investors agree NOT to enter into any short
sales of the Common Stock prior to the Effectiveness
Date.
DOCUMENTATION
COUNSEL: Xxxxxxx Xxxxxxxxx, LLP
GOVERNING LAW: New York
Elite Pharmaceuticals, Inc.
Page 10
LEGAL/DUE
DILIGENCE FEES: On the Closing Date, the Company shall reimburse
Bushido Capital Partners for legal, transactional and
due diligence costs associated with this transaction.
The amount will be not more than $50,000 and will be
non-accountable.
DILIGENCE FEES: On the Closing Date, the Company shall reimburse
Bushido Capital Partners for legal, transactional and
due diligence costs associated with this transaction.
The amount will be not more than $50,000 and will be
non-accountable.
PLACEMENT AGENT FEES: 8% cash and warrants with the same terms as those
issued to Purchasers exercisable for 8% of the Common
Stock for which the Purchaser's warrant are
exercisable, provided that the Placement Agent warrant
shall have a cashless exercise provision.
EXPIRATION DATE: The present term sheet will expire, unless signed by
both parties or extended in writing, at the close of
business on Wednesday, February 22nd, 2006.
ELITE PHARMACEUTICALS, INC.
______________________ Date ___________
XXXXXXX XXXX
Chairman & CEO &
BUSHIDO CAPITAL PARTNERS, LTD.
______________________ Date ___________
Xxxxxx X. Xxxxx
Partner
