EXHIBIT 10.1
WOLFF & SAMSON PC
THE OFFICES AT CRYSTAL LAKE
ONE BOLAND DRIVE
WEST ORANGE, NEW JERSEY 07052
973-325-1500
Attorneys for Defendants Elite Pharmaceuticals,
Inc. and Elite Laboratories, Inc.
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SUPERIOR COURT OF NEW JERSEY
ATUL M. MEHTA, Ph.D., LAW DIVISION - BERGEN COUNTY
Plaintiff, DOCKET NO. L-4769-03
vs.
ELITE PHARMACEUTICALS, INC.,
ELITE LABORATORIES, INC., and,
JOHN MOORE as a Director of Elite
Pharmaceuticals, Inc. and in his Individual
Capacity,
Defendants.
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SETTLEMENT AGREEMENT AND MUTUAL RELEASE
WHEREAS, by complaint filed on July 3, 2003, Plaintiff Atul Mehta
("MEHTA") commenced an action (the "ACTION") in the Superior Court of New Jersey
(the "COURT") seeking, among other things, damages relating to an alleged breach
of his employment agreement with Defendant Elite Pharmaceuticals, Inc. ("ELITE")
and alleged defamatory remarks by Defendant John A. Moore ("MOORE");
WHEREAS, Defendants filed their answer and counterclaims to the
Complaint on September 17, 2003, denying Mehta's the material allegations and
seeking, among other things Judgment Dismissing Plaintiff's Complaint;
WHEREAS, after motion practice and lengthy settlement negotiations over
which the Court presided, the parties, desirous of avoiding the time and cost of
further litigation agreed to resolve their differences in accordance with the
basic terms read into the record by the Court on November 21, 2003 and confirmed
by the parties on April 12, and April 13, 2004 (the "RECORD OF SETTLEMENT
TERMS");
WHEREAS, as indicated in the Record of Settlement Terms, the parties
desire that the terms of the settlement be set forth in an agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereby agree as follows (this "AGREEMENT"):
1. SETTLEMENT CONSIDERATION TO PLAINTIFF. Upon the terms and subject to
the conditions set forth in this Agreement:
(a) SETTLEMENT PAYMENT. On the date upon which all parties
shall have executed and delivered this Agreement (or should earlier date as to
which the Court to have deemed the parties to have executed and delivered this
Agreement) (the "EFFECTIVE DATE"), Elite will pay Mehta $400,000, in cash, by
certified check or wire transfer in immediately available funds (provided that
in the case of a wire transfer, such transfer instructions must be delivered to
Elite two (2) business days prior to the Effective Date).
(b) EXTENSION OF EXPIRATION DATE OF CERTAIN OPTIONS. Effective
on the Effective Date, Elite will extend the expiration date of the 700,000
vested and outstanding options to purchase shares of Common Stock, par value
$0.01, of Elite (the "ELITE COMMON STOCK") owned by Mehta as of the Termination
Date, as set forth in Part I of SCHEDULE II hereto.
(c) VESTING AND EXTENSION OF CERTAIN TERMINATED OPTIONS.
Effective on the Effective Date, Elite will cause to vest, and extend the
expiration date of, 70,000 additional options to purchase Elite Common Stock
that have previously terminated as a result of the termination of Mehta's
employment with Elite, as set forth in Part II of SCHEDULE II hereto. The
options referred to in Sections 1(b) and 1(c) are hereinafter referred to as the
"MEHTA OPTIONS". In the event that prior to the exercise in full of the Mehta
Options, Elite shall have effected any stock dividend, stock split,
recapitalization, reorganization, merger, consolidation, reclassification, or
similar event (each an "ADJUSTMENT EVENT"), Elite shall immediately equitably
adjust the number, kind and exercise price per share of the Common Stock
remaining subject to the Mehta Options and thereafter, all provisions of this
Settlement Agreement relating to restrictions or lapse of restrictions shall
thereupon be deemed applicable to such new or additional or different shares of
common stock or securities to the same extent applicable to the Mehta Options as
in effect immediately prior to such event. The provision of this Section shall
apply similarly to successive consolidations, mergers, stock dividends, stock
splits, recapitalizations, reorganization or reclassification. Whenever the
number of shares of Common Stock to be obtained upon exercise of the Mehta
Options or the exercise price for the Mehta Options is adjusted, as provided
herein, Elite shall immediately send by first class mail, postage prepaid, to
Mehta, notice of such adjustment.
(d) PIGGYBACK REGISTRATION RIGHTS. If, at any time or from
time to time, after the Effective Date, Elite shall register the sale of any of
the Elite Common Stock under the Securities Act of 1933 (the "SECURITIES ACT")
for its own account or the account of any of its security holders, other than a
registration on Form S-8 relating solely to an employee benefit plan or a
registration on Form S-4 relating solely to a transaction under Rule 145 of the
Securities Act, Mehta shall be entitled to piggyback registration rights with
respect to the shares of Elite Common Stock (the "REGISTRABLE SECURITIES")
issuable upon due and proper exercise of the Mehta Options, as follows:
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(i) Elite shall notify Mehta in writing at least
twenty (20) days prior to the filing of any registration statement under the
Securities Act for purposes of registering Elite Common Stock for its own
account or the account of any of its security holders and will afford Mehta an
opportunity to include in such registration statement all or part of such
Registrable Securities at Elite's sole cost and expense (other than the fees and
disbursement of counsel to Mehta and any discounts or commissions to any
underwriter, if any, payable in respect of the Registrable Securities sold by
Mehta). If Mehta desires to include in any such registration statement all or
any part of the Registrable Securities held by him, he shall, within ten (10)
days after the above-described notice from Elite, so notify Elite in writing.
(ii) If the registration statement under which Elite
gives Mehta notice is for an underwritten offering, Elite shall so advise Mehta.
In such event, (A) Mehta's rights pursuant to this Section 1(d) shall be
conditioned upon Mehta's participation in such underwriting, (B) Mehta shall
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by Elite, and (C) if the underwriter
determines in good faith that marketing factors require a limitation of the
number of shares to be underwritten, the number of shares that may be included
in the underwriting shall be allocated in the following manner: FIRST, to Elite;
SECOND, to all holders of securities proposed to be registered in such
underwriting based upon a demand registration right; and THIRD to all other
holders of securities proposed to registered in such underwriting on a PRO RATA
basis based on the total number of securities proposed to be registered held by
all such holders thereof. Such registration shall be at no cost or expense to
Mehta (other than the fees and disbursement of counsel to Mehta and any
discounts or commissions to any underwriter, if any, payable in respect of the
Registrable Securities sold by Mehta). If Mehta disapproves of the terms of any
such underwriting, he may elect to withdraw therefrom by written notice to Elite
and the underwriter, delivered at least ten (10) business days prior to the
effective date of the registration statement. Any Registrable Securities
excluded or withdrawn from such underwriting shall be excluded and withdrawn
from the registration.
(iii) Elite shall have the right to terminate or
withdraw any registration initiated by it prior to the effectiveness of such
registration whether or not Mehta has elected to include securities in such
registration.
(iv) If within one hundred and eighty (180) days
prior to the expiration of the Mehta Options, the Registrable Securities have
not been registered pursuant to a registration statement that has been declared
effective by the Securities and Exchange Commission, and pursuant to which Mehta
can sell his shares of Elite Common Stock (whether or not Mehta in fact sells
any Registrable Securities), Elite shall extend the expiration date of the Mehta
Options by additional one hundred and eighty (180) day increments until such
registration occurs. If, at the time of the effectiveness of a registration
statement pursuant to which Mehta can sell his shares of Elite Common Stock
(whether or not Mehta in fact sells any Registrable Securities), the Mehta
Options are to expire less than one hundred and eighty (180) days after the
effectiveness of such registration statement, Elite will extend the expiration
of the Mehta Options such that they shall expire at least one hundred and eighty
(180) days after the effectiveness of such registration statement.
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(v) Mehta agrees to timely furnish such information
regarding each person and the securities sought to be registered and to take
such other action as Elite may reasonably request, including the entering into
of agreements and the providing of documents, in connection with the
registration or qualification of such securities and/or the compliance of such
registration statement with all applicable laws. Mehta agrees that, in
connection with any offering undertaken pursuant to paragraph (d), Elite shall
have the right to, if it deems an underwriter or underwriters necessary or
appropriate, designate such underwriter(s).
(vi) INDEMNIFICATION.
(a) Subject to applicable law, Elite will
indemnify and hold harmless Mehta, against all claims, losses, damages and
liabilities, including legal and other expenses reasonably incurred, arising out
of any untrue or allegedly untrue statement of a material fact contained in the
registration statement, or any omission or alleged omission to state a material
fact required to be stated in the registration statement or necessary to make
any statements therein not misleading, or arising out of any violation by Elite
of the Securities Act, any state securities or "blue sky" laws or any applicable
rule or regulation, except with respect to an untrue statement or omission
contained in any information or affidavit furnished in writing by Mehta for
inclusion in such registration statement.
(b) Subject to applicable law, Mehta, will
indemnify and hold harmless Elite, each of its directors, its officers, its
underwriters and each person or entity, if any, who or which controls Elite
within the meaning of the Securities Act, against all claims, losses, damages
and liabilities (joint or several), including legal and other expenses
reasonably incurred by Elite, each of its directors, its officers, its
underwriters and each person or entity, if any, who or which controls Elite
within the meaning of the Securities Act, arising out of any untrue or allegedly
untrue statement of a material fact contained in the registration statement or
necessary to make the statements contained therein not misleading, to the
extent, but only to the extent, that such untrue statement or omission is
contained in any information or affidavit furnished in writing by Mehta to Elite
specifically for inclusion in such registration statement provided, however,
that in no event shall any indemnity by Mehta under this Section, exceed the net
proceeds received by Mehta from the offering.
(e) REIMBURSEMENT OF EXPENSES. On or after the Effective
Date, upon receipt by Elite of receipts or other reasonable documents, Elite
shall pay and reimburse Mehta for any and all of his work related expenses
incurred prior to his end of work commencing on January 1, 2000 up to and
including June 3, 2003, in an amount not to exceed $10,000 in the aggregate.
(f) PAYMENT OF MEDICAL BENEFITS. On or after the Effective
Date, upon receipt by Elite of receipts or other reasonable documents, Elite
shall pay and reimburse Mehta for health, dental and life insurance premiums and
car expense for a period of two years from the execution of the Agreement, in an
amount not to exceed $50,000 in the aggregate for such two year period.
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(g) LETTER OF RECOMMENDATION. On the Effective Date, Elite
shall provide to Asha Mehta (Mehta's assistant and wife) a letter of
recommendation for use by her in obtaining other employment, in the form
attached hereto as EXHIBIT A, and shall pay to her any unpaid salary (in an
amount not to exceed $2,000 in the aggregate).
(h) DISMISSAL OF ACTION. On the Effective Date, the Action
shall be deemed dismissed, with prejudice, and Elite shall be entitled to file,
without further notice or settlement, the stipulation of dismissal annexed
hereto as EXHIBIT B (the "STIPULATION OF DISMISSAL"). In connection with the
foregoing, on the Effective Date, Mehta's counsel shall deliver to Elite the
executed Stipulation of Dismissal.
2. COVENANTS REGARDING COMPANY INTELLECTUAL PROPERTY; NON-COMPETITION;
FURTHER ASSURANCES.
(a) INTELLECTUAL PROPERTY AND CONFIDENTIAL INFORMATION. All
company Intellectual Property (as defined below) shall be the exclusive property
of Elite. Mehta shall not, directly or indirectly: (i) use any Company
Intellectual Property or (ii) use or disclose any Confidential Information,
except as authorized by Elite in writing. Mehta shall keep confidential all
Confidential Information (as defined below). Specifically, Mehta agrees that (i)
all Company Intellectual Property developed as a direct or indirect result of
Mehta's efforts on behalf of Elite during any period of his employment with
Elite shall be, and shall remain, the exclusive property of Elite and (ii) Mehta
shall have no ownership interest therein. To the extent Mehta may have any
interest in such Company Intellectual Property and subject to the exceptions set
forth in "COMPANY INTELLECTUAL PROPERTY" and "CONFIDENTIAL INFORMATION,"
hereinbelow, Mehta hereby assigns and transfers to Elite all right, title and
interest in and to any and all Company Intellectual Property. In particular,
Mehta hereby assigns and transfers all interest in the inventions described in
the following patent and patent applications (which are included in, but not
exhaustive of, the Company Intellectual Property):
o Patent No. 6,620,439 granted September 16, 2003 entitled
"Chrono Delivery Formulations and Method of Use Thereof";
o Registration No. 01975612.1 in EPO entitled "Chrono
Delivery Formulations and Method of Use Thereof";
o Registration No. 2002-532201 in Japan entitled "Chrono
Delivery Formulations and Method of Use Thereof";
o Registration No. 2002-537294 in Japan entitled "Delayed
and Sustained Release Formulations and Method of Use
Thereof";
o Registration No. 01988581.3 in EPO entitled "Delayed and
Sustained Release Formulations and Method of Use Thereof";
o Application No. 09/695,903 filed October 26, 2000 entitled
"Delayed and Sustained Release Formulations and Method of
Use Thereof";
o Application No. 10/409,992 filed April 8, 2003 entitled
"Abuse-Resistant Oral Dosage Forms and Method of Use
Thereof";
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o Application No. 10/406,961 filed April 4, 2003 entitled
"Chrono Delivery Formulations and Method of Use Thereof";
o Application No. 10/412,110 filed April 10, 2003 entitled
"Chrono Delivery Formulations and Method of Treating
Atrial Fibrillation";
o U.S. provisional application no. 60/508,531 filed October
3, 2003 entitled "Extended Release
Formulations of Opioids and Method of Use Thereof";
o PCT international application filed April 8, 2004 entitled
"Abuse-Resistant Oral Dosage Forms and Method of Use
Thereof" (international application no. not yet assigned),
corresponding to and claiming priority from U.S.
application no. 10/409,992 filed April 8, 2003; and
o PCT international application filed April 8, 2004 entitled
"Chrono Delivery Formulations and Method of Treating
Atrial Fibrillation" (international application no. not
yet assigned), corresponding to and claiming priority from
U.S. application no. 10/412,110 filed April 10, 2003.
For purposes of this Section 2(a), the following terms shall have the following
meanings:
(x) "COMPANY INTELLECTUAL PROPERTY" means the information and material,
whether or not reduced to writing and whether or not patentable, that Mehta,
during any period of Employment with Elite had, conceived, created or developed
(as those terms are commonly used in the Patent Law), in whole or in part, as a
direct or indirect result of either his efforts on behalf of Elite or through
the use of any of Elite's facilities or resources or using any confidential
information of Elite or of any third party authorizing, or having authorized,
Elite to have, or have had, access and use of the same, including, without
limitation: (i) production processes, formulation procedures and techniques; and
(ii) discoveries, concepts, inventions, developments (including but not limited
to the nature and results of research and development activities), formulae,
specialized rather than general "know-how," designs, drawings and
specifications, provided, however, that "Company Intellectual Property" does not
include any general knowledge or "know-how" known to Mehta, (including any
general knowledge or "know-how" known to Mehta), relating to any formulations,
processes, designs, technique in the field of oral-drug delivery system.
(y) "CONFIDENTIAL INFORMATION" means (i) Elite's confidential financial
information, customer requirements, data and other information or material
relating to the manner in which the customer, prospective customer or Elite do
business, and (ii) any of the information or material described herein which is
the property of any other person or firm which has disclosed, revealed or
delivered such information or material to Elite pursuant to a contractual
relationship with Elite or otherwise in the course of Elite's business,
provided, however, that "Confidential Information" shall not include any
information or material of the type described herein to the extent that such
information or material; (A) is or becomes publicly known through no act on
Mehta's part in violation of his nondisclosure obligations, (B) is required to
be used or disclosed by applicable law or governmental order or process, (C) is
known to or independently developed by Mehta prior to or after his employment by
Elite and in compliance with the restrictions set forth in this Section 2, or
(D) that is disclosed to Mehta by a third-party that is both (I) not bound
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by any nondisclosure obligation with respect to such information or material and
(II) is authorized to disclose such information or material to Mehta.
(b) FURTHER ASSURANCES RELATING TO COMPANY INTELLECTUAL
PROPERTY. Subject to subsection 2(d) below, and at Elite's expense Mehta shall
cooperate with Elite in taking such actions as may be necessary to allow Elite
to secure patent, copyright or other protections for any such Company
Intellectual Property. Mehta shall return to Elite all documents and files
pertinent to the Company Intellectual Property and shall execute and deliver to
Elite such further documentation relating to assignments at no additional cost
to Elite, including, without limitation, assignment agreements for filing with
the US Patent and Trademark Office, and foreign patent offices in the forms
annexed hereto as EXHIBIT C. However, Mehta's patent counsel may retain one copy
of patent applications and the related correspondence for archival purposes.
(c) NON-COMPETITION.
(i) Mehta shall not, prior to 180 days from the
effective date, (whether as an employee, partner, owner, shareholder, agent,
consultant or otherwise) compete with Gentamycin, Diltiazem, Nifedipine,
Ketoprofen, or Methylphenidate or develop any generic version thereof. For the
purposes of this Section 2(c)(i) only, "compete" shall not be deemed or
construed to include competing with products that are in the same therapeutic
category as the above referenced molecules.
(ii) Mehta shall not, prior to one (1) year from the
effective date (whether as an employee, partner, owner, shareholder, agent,
consultant or otherwise) compete with a product which contains Oxycodone alone,
or a product which contains Oxycodone in combination with another molecule in
which Oxycodone is in a sustained release form. Notwithstanding anything set
forth in this Section 2(c), this Section 2(c) shall not restrict Mehta's ability
to own no greater than 5% of the outstanding shares of any class of equity
securities listed to trade on a nationally recognized stock exchange or quoted
on the NASDAQ.
(d) COMPENSATION. Mehta shall reasonably cooperate with Elite
upon reasonable advance notice to Mehta and take such actions as may be
necessary to allow Elite to secure and maintain its rights in the Company
Intellectual Property (after giving effect to the Section 2(a)). Elite shall
reasonably cooperate with Mehta and provide him with information needed to
comply with his obligations. In addition, to the extent requested by Elite,
Mehta shall assist Elite in a professional consulting capacity in the
prosecution of the Company Intellectual Property as follows (the "SERVICES"):
(i) the first ten (10) hours of Services shall be considered pre-paid and
included in the $400,000 payment made to Mehta on the effective date; (ii)
thereafter, Services shall be performed at an hourly rate of $300.00 and all
payments therefor shall be due within ten (10) business days of an invoice being
received; and (iii) Elite has the option, but not the obligation to request the
performance of any Services after the first ten (10) hours of Services.
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3. MEHTA STOCK PURCHASE OPTION; RELEASE OF MEHTA STOCK TRANSFER
RESTRICTIONS.
(a) PURCHASE OPTION OF ELITE.
(i) Elite and/or any its designees (who may be any
third party other than Harris Freedman and his Affiliates (as such term
is defined in Rule 144 promulgated under the Securities Act)) shall
have the irrevocable option (but not the obligation) to exercise and
complete the purchase, at any time on or prior to ninety (90) days
after the Effective Date (the "OPTION PERIOD"), from Mehta and each of
the Other Mehta Holders (as defined below), any or all shares of
capital stock of Elite (including, without limitation, all shares of
Elite Common Stock) then owned by Mehta and any Other Mehta Holder
(collectively, the "MEHTA STOCK"), at a price per share of $2.00 (the
"OPTION"), as adjusted in the case of an Adjustment Event. The purchase
of the Mehta Stock shall be by stock purchase agreement (the "PURCHASE
AGREEMENT") in substantially the form annexed hereto as EXHIBIT D. The
Option shall be exercised on one or more occasion during the Option
Period by a purchaser or purchasers providing Mehta and the Other Mehta
Holders with written notice of such exercise by executing and
delivering a Purchase Agreement, which shall then be executed and
delivered by Mehta (and, to the extent applicable, the Other Mehta
Holders). To the extent the Option is exercised for a number of shares
of Mehta Stock that constitutes less than all shares of Mehta Stock at
the time of such exercise, the purchaser(s) shall purchase first from
Mehta and then from the Other Mehta Holders on a pro rata basis, and
Mehta (and, to the extent applicable, the Other Mehta Holders) shall
sell to such purchaser(s), as provided above.
(ii) On the Effective Date, Elite shall pay $100,000
into an interest bearing escrow account to be maintained by Wolf &
Samson, as counsel to Elite in the Action (the "ESCROW"). If the Option
has not been exercised as to all of the Mehta Stock by the expiration
of the Option Period, the principal of the Escrow ($100,000) shall be
released to Mehta and the interest earned on such principal shall be
released to Elite. If the Option is exercised as to all of the Mehta
Stock within the Option Period and completed in accordance with the
Purchase Agreement, the principal and interest of the Escrow shall be
released to Elite.
(b) REPRESENTATION, WARRANTY AND RENOUNCEMENT OF OWNERSHIP
INTEREST IN ELITE. Mehta represents and warrants to Elite as follows:
(i) he is the beneficial owner of 1,175,100 shares of
Elite Common Stock and, other than the options listed on SCHEDULE II
hereto, Mehta has no other (and hereby renounces any other), ownership
interest in Elite (legal, equitable or otherwise) or the capital stock
of Elite;
(ii) Schedule I attached hereto sets forth a true and
complete list of all Affiliates of Mehta that own any shares of capital
stock of Elite (including Elite Common Stock), or any right to purchase
or acquire any shares of capital stock of Elite (including Elite Common
Stock) (such holders, the "OTHER MEHTA HOLDERS" and each an "OTHER
MEHTA HOLDER");
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(iii) when executed and delivered, this Agreement
(and in the case of the Other Mehta Holders, only as to Section 3 of
this Agreement) will be valid and binding obligation of Mehta and each
of the Other Mehta Holders enforceable in accordance with their terms;
(iv) neither the execution or delivery of this
Agreement, nor the sale of the Mehta Stock pursuant to the Option, will
conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which Mehta or any of the Other Mehta Holders is now
obligated; and
(v) each of Mehta and the Other Mehta Holders has
good and marketable title to the number of shares of the Mehta Stock
set forth in this section, subject to no mortgage, pledge, lien, lease,
encumbrance or charge.
(c) TRANSFER RESTRICTIONS.
(i) During the Option Period, neither Mehta nor any
Other Mehta Holder may, 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 (collectively, "TRANSFER") any of its, his or her
shares of Mehta Stock, except as follows:
(x) if the closing price on the American
Stock Exchange on the trading day immediately prior to the
date of sale is $2.50 per share or greater, Mehta
(individually and not any Other Mehta Holder) may sell not
more than one thousand (1,000) shares on the trading day
immediately following; or
(y) if the closing price on the American
Stock Exchange on the trading day immediately prior to the
date of sale is less than $2.50 per share, Mehta (individually
and not any Other Mehta Holder) may sell not more than one
thousand five hundred (1,500) shares on the trading day
immediately following.
(ii) After the expiration of the Option Period, to
the extent Mehta and any Other Mehta Holder remains in possession of
any shares of Mehta Stock, the restrictions set forth in Section
3(c)(i) hereof shall terminate and Mehta and each Other Mehta Holder
shall be permitted to transfer all remaining shares of the Mehta Stock
in accordance with Rule 144 or other applicable federal and state
securities laws. Elite represents and warrants that on the date hereof,
so long as Mehta and each Other Mehta Holder complies with the
provisions of Rule 144 or another applicable exemption from
registration under the Securities Act in connection with the sale of
his shares Common Stock, Elite knows of no reason why such holders
should be prevented from selling its, his or her respective shares
after the expiration of the Option Period.
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(d) AUTHORIZATION LETTER TO ELITE TRANSFER AGENT AND MEHTA
BROKER.
(i) On the Effective Date, Elite shall provide to its
stock transfer agent, Jersey Transfer & Trust Company, a written
instruction and opinion of counsel to the Company in substantially the
form attached hereto as EXHIBIT E.
(ii) On the Effective Date, Mehta shall provide to
his broker, Merrill Lynch Pierce Fenner and Smith, Inc., a written
instruction in substantially the form attached hereto as EXHIBIT F.
4. RELEASES; INDEMNIFICATION.
(a) RELEASE OF ELITE. Mehta hereby releases, acquits, and
forever discharges Elite and its direct and indirect subsidiaries, predecessors,
successors and assigns, and each of their respective past, present and future
officers, directors (including Moore), employees, agents, representatives,
attorneys, licensees, successors and assigns, and each and every one of them in
their representative and individual capacities, from any and all losses,
liabilities, claims, demands, causes of action, and fees and expenses, of every
kind and nature, whether known or unknown, asserted or unasserted, in law or
equity, which Mehta ever had, now has or hereafter can, shall or may have,
whether jointly or severally, against the Released Party, for, upon or by reason
of any matter, cause of action or thing whatsoever from the beginning of the
world to the date hereof.
(b) RELEASE OF MEHTA. Elite (and its officers, directors,
employees, subsidiaries, predecessors, successors and assigns) and Moore hereby
release, acquit, and forever discharge Mehta and his agents, representatives,
attorneys, heirs and assigns, and each and every one of them in their
representative and individual capacities, from any and all losses, liabilities,
claims, demands, causes of action, and fees and expenses, of every kind and
nature, whether known or unknown, asserted or unasserted, in law or equity,
which Elite or Moore ever had, now has or hereafter can, shall or may have,
whether jointly or severally, against the Released Party, for, upon or by reason
of any matter, cause of action or thing whatsoever from the beginning of the
world to the date hereof.
(c) INDEMNIFICATION OF MEHTA. Elite shall indemnify and hold
Mehta harmless from any and all claims arising from a certain matter entitled
ELITE V. PHOENIX INTERNATIONAL LIFE SCIENCES (U.S.), INC., ET AL. (DOCKET NO.
BER-L-9903-00) (the "PHOENIX LITIGATION") from the beginning of time through the
execution of this Settlement Agreement (including all reasonable attorneys fees
and costs). Upon the assertion of any claim, or the commencement of any action,
suit or other proceeding, by Phoenix International Life Sciences (or any of its
affiliates) against Mehta arising from the Phoenix Litigation or the facts that
gave rise to such action (a "THIRD PARTY CLAIM"), Mehta shall promptly notify
Elite in writing of such Third Party Claim and provide Elite such information
with respect thereto as Elite may reasonably request. Elite shall have the
right, exercisable by written notice (the "NOTICE") to Mehta within 14 days of
receipt of notice from Mehta of commencement of or assertion of any Third Party
Claim, to assume the defense of such Third Party Claim, using counsel selected
by Elite and reasonably acceptable to Mehta. If Elite fails to give Mehta the
Notice complying with the provisions stated above within the stated time period,
Mehta shall have the right to assume control of the defense of the Third
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Party Claim and all losses in connection therewith (including all reasonable
attorneys fees and costs) shall be reimbursed by Elite from time to time upon
the demand of Mehta. Elite or Mehta, as the case may be, shall in any event have
the right to participate at its own expense, in the defense of any Third Party
Claim which the other is defending. If Elite shall have assumed the defense of
any Third Party Claim in accordance with the terms hereof, Elite shall have the
right to consent to the entry of judgment with respect to, or otherwise settle,
such Third Party Claim; provided that Elite shall be responsible to pay all
amounts due under such judgment or settlement.
5. MISCELLANEOUS.
(a) NO ASSIGNMENT OR TRANSFER OF ACTION. Mehta represents and
warrants that he has not assigned or transferred any of his rights concerning
the Action or his rights in or to the Mehta Stock. Elite and Moore represent and
warrant, individually and not severally, to Mehta that each has not assigned or
transferred any of their respective rights concerning the Action.
(b) BINDING AGREEMENT. This Agreement shall be binding upon
each of the Parties and upon their respective present or former directors,
partners, principals, officers, employees, agents, trustees, attorneys, insurers
and reinsurers, parents, subsidiaries, affiliates, divisions, managers,
representatives, predecessors or successors, partnerships or corporations and
their respective heirs, administrators, successors and assigns. If any fact now
believed to be true is found hereafter to be other than, or different from, that
which is now believed, each Party expressly assumes the risk of such difference
in fact, this Agreement shall be, and will remain, effective notwithstanding any
such difference in fact.
(c) RES JUDICATA; ATTORNEYS' FEES. This Agreement may be
pleaded as a full and complete defense to, and used as a basis for an injunction
against, any action, suit or other proceeding that may be instituted, prosecuted
or attempted in breach of this Agreement. Should any Party institute any action
and proceeding to enforce any provision of this Agreement, or for damages by
reason of any alleged breach of any provision of this Agreement, or for a
declaration of such party's rights or obligations hereunder, or for any other
judicial remedy, the prevailing party shall be entitled to be reimbursed by the
losing party for all reasonable and necessary costs and expenses incurred
thereby, including, but not limited to, attorneys' fees for the services
rendered to the party finally prevailing in any such action or proceeding.
(d) NO WAIVER. Any Party's failure to enforce any of the
provisions of this Agreement shall in no way be construed as a waiver of such
provisions.
(e) AMENDMENTS. No modification, amendment, waiver or
termination of this Agreement, in whole or in part, shall be valid or binding
unless in a writing signed by each of the parties.
(f) NOTICES. All notices, payments and other communications
set forth in this Agreement are to be deemed duly given if sent by mail,
registered or certified (return receipt requested), or sent by same-day or
overnight commercial service to the applicable party at the following address
(or such other address for a party as may be specified by like notice):
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IF TO MEHTA:
Dr. Atul M. Mehta, Ph.D.
76 Walsh Drive
Mahwah, NJ 07430
WITH A COPY TO:
Edwards & Caldwell LLC
P.O. Box 23
1600 Route 208
Hawthorne, New Jersey 07507
Facsimile: 973-636-0505
Attention: John A. Stone, Esq.
Douglas Doyle, Esq.
and
Howard S. Jacobs
KMZ Rosenman
575 Madison Ave.
New York, New York 10022-2585
Facsimile: 212-894-5505
IF TO ELITE OR MOORE:
Elite Pharmaceuticals, Inc.
165 Ludlow Avenue
Northvale, NJ 07647
Facsimile: 201-750-2755
Attention: Mr. John A. Moore, Chairman
WITH A COPY TO:
Wolff & Samson, P.C.
The Offices at Crystal Lake
One Boland Drive
West Orange, New Jersey 07057
Facsimile: 973-530-2284
Attention: Arthur Goldstein, Esq.
and
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Reitler Brown LLC
800 Third Avenue, 21st Floor
New York, New York 10022
Facsimile: (212) 371-5500
Attention: Scott H. Rosenblatt, Esq.
(g) FURTHER ASSURANCES. The Parties agree to execute all
documents and to do all things necessary to effectuate the terms of this
Agreement.
(h) GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New Jersey (without
giving effect to any choice or conflict of laws provisions) as it exists on the
date hereof. Each of the parties hereby agrees that the Court shall maintain
exclusive jurisdiction over all actions or proceedings arising out of or
relating to this Agreement or the transactions contemplated hereby.
(i) PRESS RELEASES AND OTHER PUBLIC FILINGS. Elite and Mehta
shall mutually agree to the substance and content of any and all press releases
and other public filings relating to the Settlement Agreement. To facilitate
Mehta's review, Elite shall provide a draft of such proposed press releases or
other public filings and Mehta shall have the right to correct any material
inaccuracies and eliminate any disparaging comments or reference to Mehta.
Nothing in this section is intended to limit Elite's obligation to properly
disclose the terms of the Settlement Agreement as required by the Securities and
Exchange Commission and its rules and regulations.
(j) EXECUTION IN COUNTERPARTS. This Agreement may be executed
in one or more counterparts, each of which shall be deemed to be an original and
all of which taken together shall constitute one and the same agreement (and all
signatures need not appear on any one counterpart), and this Agreement shall
become effective when one or more counterparts has been signed by each of the
parties hereto and delivered to each of the other parties hereto.
(k) EQUITABLE RELIEF BY MEHTA. Elite acknowledges and admits
that a breach of any of the covenants contained in the Agreement may cause Mehta
irreparable harm or damages that are difficult or impossible to ascertain or
which cannot be compensated monetarily. Therefore, subject to and as part of the
Court's retained jurisdiction pursuant to Section 5(h) of this Settlement
Agreement, Elite agrees that Mehta may seek and be awarded equitable relief as a
result of a breach of this Agreement as permitted by law.
(l) EQUITABLE RELIEF BY ELITE. Mehta acknowledges and admits
that a breach of any of the covenants contained in this Agreement may cause
Elite irreparable harm or damages that are difficult or impossible to ascertain
or which cannot be compensated monetarily. Therefore, subject to and as part of
the Court's retained jurisdiction pursuant to Section 5(h) of this Settlement
Agreement, Mehta agrees that Elite may seek and be awarded equitable relief as a
result of a breach of this Agreement as permitted by law.
(EXECUTION PAGE FOLLOWS)
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WE, THE UNDERSIGNED, HEREBY CERTIFY THAT WE HAVE READ THIS ENTIRE SETTLEMENT
AGREEMENT AND MUTUAL RELEASE AND HAVE HAD THE TERMS HEREIN AND THE CONSEQUENCES
THEREOF EXPLAINED BY OUR RESPECTIVE ATTORNEYS. WE FULLY UNDERSTAND ALL THE TERMS
AND CONSEQUENCES OF THIS SETTLEMENT AGREEMENT AND MUTUAL RELEASE AND HAVE
EXECUTED THIS MUTUAL RELEASE OF ALL CLAIMS.
ELITE PHARMACEUTICALS, INC.
Dated: April 21, 2004 By: /s/ Bernard Berk
----------------------------------
Name: Bernard Berk
Title: CEO
Dated: April 21, 2004 /s/ Atul Mehta
----------------------------------
ATUL MEHTA
Solely as to Section 4(b) of this Agreement:
Dated: April 21, 2004 /s/ John A. Moore
----------------------------------
JOHN A. MOORE
Solely as to Sections 3 and 5 of this Agreement:
Dated: April 21, 2004 /s/ Asha Mehta
----------------------------------
ASHA MEHTA
Dated: April 21, 2004 /s/ Anand Mehta
----------------------------------
ANAND MEHTA
Dated: April 21, 2004 /s/ Amar Mehta
----------------------------------
AMAR MEHTA
MEHTA PARTNERS
Dated: April 21, 2004 By: /s/ Atul M. Mehta
----------------------------
Name: Atul M. Mehta
Title: General Partner
-15-
SCHEDULE I
SCHEDULE OF
OTHER MEHTA HOLDERS
- ---------------------------- ---------------------------- --------------------
HOLDER CLASS OF SHARES OF CAPITAL NUMBER OF SHARES
STOCKOWNED BY SUCH HOLDER
- ---------------------------- ---------------------------- --------------------
Asha Mehta Elite Common Stock 100,000
- ---------------------------- ---------------------------- --------------------
Mehta Partners Elite Common Stock 200,000
- ---------------------------- ---------------------------- --------------------
Atul Mehta C/f Anand Mehta Elite Common Stock 6,300
- ---------------------------- ---------------------------- --------------------
Amar Mehta Elite Common Stock 6,300
- ---------------------------- ---------------------------- --------------------
SCHEDULE II
OPTION SCHEDULE
---------------
PART I
- ------------------ ------------- ----------------- --------------- ------------------ --------------------- ------------------------
GRANT DATE GRANT ORIGINAL CURRENT STATUS EXERCISE PRICE ORIGINAL EXPIRATION AGREEMENT OF ELITE IN
VESTING DATE DATE CONSIDERATION OF
SETTLEMENT*
- ------------------ ------------- ----------------- --------------- ------------------ --------------------- ------------------------
03/31/2000 100,000 12/31/2001 Vested $10.00/share 06/13/2004 Expiration date
extended to 06/13/2005
- ------------------ ------------- ----------------- --------------- ------------------ --------------------- ------------------------
03/31/2000 100,000 12/31/2002 Vested $10.00/share 06/13/2004 Expiration date
extended to 06/13/2005
- ------------------ ------------- ----------------- --------------- ------------------ --------------------- ------------------------
01/02/1996 100,000 01/01/1996 Vested $1.00/share 06/13/2004 Expiration date
extended to 06/13/2005
- ------------------ ------------- ----------------- --------------- ------------------ --------------------- ------------------------
01/02/1996 100,000 01/01/1997 Vested $1.50/share 06/13/2004 Expiration date
extended to 06/13/2005
- ------------------ ------------- ----------------- --------------- ------------------ --------------------- ------------------------
01/02/1996 100,000 01/01/1998 Vested $2.00/share 06/13/2004 Expiration date
extended to 06/13/2005
- ------------------ ------------- ----------------- --------------- ------------------ --------------------- ------------------------
01/02/1996 100,000 01/01/1999 Vested $2.50/share 06/13/2004 Expiration date
extended to 06/13/2005
- ------------------ ------------- ----------------- --------------- ------------------ --------------------- ------------------------
01/02/1996 100,000 01/01/2000 Vested $3.00/share 06/13/2004 Expiration date
extended to 06/13/2005
- ------------------ ------------- ----------------- --------------- ------------------ --------------------- ------------------------
PART II
- ------------------ ------------- ----------------- --------------- ------------------ --------------------- ------------------------
03/31/2000 100,000 12/31/2003 Terminated $10.00/share 06/13/2001 70,000 options shall
be deemed vested and
the expiration date
shall be extended to
06/13/2005
- ------------------ -----------------------------------------------------------------------------------------------------------------
NET RESULT MEHTA SHALL HAVE A TOTAL 770,000 OPTIONS TO PURCHASE ELITE COMMON STOCK, WHICH OPTIONS SHALL ALL
EXPIRE IF NOT EXERCISED ON OR BEFORE JUNE 13, 2005. THE OPTIONS SHALL HAVE VARYING EXERCISE PRICES AS
FOLLOWS: 270,000 OPTIONS SHALL HAVE AN EXERCISE PRICE OF $10/SHARE; 100,000 OPTIONS SHALL HAVE AN
EXERCISE PRICE OF $1.00/SHARE; 100,000 OPTIONS SHALL HAVE AN EXERCISE PRICE OF $1.50/SHARE; 100,000
OPTIONS SHALL HAVE AN EXERCISE PRICE OF $2.00/SHARE; 100,000 OPTIONS SHALL HAVE AN EXERCISE PRICE OF
$2.50/SHARE; 100,000 OPTIONS SHALL HAVE AN EXERCISE PRICE OF $3.00/SHARE. AS OF THE EXECUTION OF THIS
AGREEMENT, MEHTA SHALL NOT HAVE ANY OTHER OPTIONS TO PURCHASE CAPITAL STOCK OF ELITE.
- ------------------ -----------------------------------------------------------------------------------------------------------------
* Expiration shall be subject to section 1(d)(iv).
- --------------------------------