ELITE PHARMACEUTICALS, INC
INCENTIVE STOCK OPTION LETTER AGREEMENT
TO: Bernard Berk
We are pleased to inform you that you have been selected by the Board
of Directors, (the "Plan Administrator") of the Elite Pharmaceuticals, Inc. (the
"Company") 2004 Stock Option Plan, as amended (the "Plan") to receive an
incentive option for the purchase of 400,000 shares of the Company's common
stock, par value $.01 per share (the "Shares"), at an exercise price of $2.69
per share (the "exercise price"). Such option to the maximum extent permitted
under applicable law, shall qualify as "incentive stock options" within the
meaning of Section 422 of the Internal Revenue Code. A copy of the Plan and the
provisions thereof, including, without limitation, those relating to withholding
taxes, are incorporated into this Agreement by reference.
The terms of the option are as set forth in the Plan and in this
Agreement. The most important of the terms are summarized as follows:
1. TERM. The term of the option is ten years from date of grant, unless
sooner terminated.
2. EXERCISE. During your lifetime only you can exercise the option. The
Plan also provides for exercise of the option by the personal representative of
your estate or the beneficiary thereof following your death. You may use the
Notice of Exercise in the form attached to this Agreement when you exercise the
option.
3. PAYMENT FOR SHARES. The option may be exercised by the delivery of:
(a) Cash, personal check (unless at the time of exercise the Plan
Administrator determines otherwise), or bank certified or cashier's checks;
(b) Unless the Plan Administrator in its sole discretion determines
otherwise, shares of the capital stock of the Company held by you having a fair
market value at the time of exercise, as determined in good faith by the Plan
Administrator, equal to the exercise price;
(c) Unless the Plan Administrator in its sole discretion determines
otherwise, a properly executed Notice of Exercise, together with instructions to
the Company to withhold from the shares that would otherwise be issued upon
exercise that number of shares having a fair market value equal to the option
exercise price; or
(d) Unless the Plan Administrator in its sole discretion determines
otherwise, a properly executed Notice of Exercise, together with irrevocable
instructions to a broker to promptly deliver to the Company the amount of sale
or loan proceeds to pay the exercise price.
4. TERMINATION. The option will terminate on the earlier of (i)
September 2, 2015 or (ii) 90 days following the date of termination of your
employment by the Company or a
subsidiary or after cessation of your relationship with the Company or an
Affiliate thereof, unless cessation is due to death or total disability, in
which case 12 months after cessation of such relationship; provided, that in the
case of a termination of the Optionee by the Company without Cause (as such term
is defined in the Employment Agreement, dated as of September 2, 2005, by and
between the Company and the Optionee) 180 days following the date of termination
of your employment by the Company or a subsidiary or after cessation of your
relationship with the Company or an Affiliate thereof.
5. TRANSFER OF OPTION. Subject to the Plan, the option is not
transferable, except by will or by the applicable laws of descent and
distribution or pursuant to a qualified domestic relations order.
6. VESTING. The option shall vest as follows:
(i) 50,000 shares upon the closing of each product license or
product sale transaction (on a product by product basis and only once
for each product) in which the Company receives an aggregate of at
least $5,000,000 in net cash proceeds (including royalties and signing,
license and milestone payments) in connection with such product
transaction;
(ii) 10,000 shares upon the filing by the Company (in the
Company's name) with the United States Food and Drug Administration
(the "FDA") of either an abbreviated new drug application (an "ANDA")
or a new drug application (including a NDA filed with the FDA under
Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act, 21
U.S.C. Section 301 et seq.) (a "NDA"), for a product not covered by a
previous FDA application; and
(iii) 40,000 shares upon the approval by the FDA of any ANDA
or NDA (filed in the Company's name) for a product not previously
approved by the FDA;
provided however, that on September 2, 2009 all unvested options shall
terminate.
7. DATE OF GRANT. The date of grant of the option is September 2, 2005.
YOUR PARTICULAR ATTENTION IS DIRECTED TO PROVISIONS OF THE PLAN WHICH
DESCRIBES CERTAIN IMPORTANT CONDITIONS THAT MUST BE SATISFIED BEFORE THE OPTION
CAN BE EXERCISED AND BEFORE THE COMPANY CAN ISSUE ANY SHARES TO YOU. THE COMPANY
HAS NO OBLIGATION TO REGISTER UNDER THE SECURITIES ACT OF 1933, AS AMENDED THE
SHARES THAT WOULD BE ISSUED UPON THE EXERCISE OF YOUR OPTION, AND IF IT NEVER
REGISTERS THE SHARES, YOU WILL NOT BE ABLE TO EXERCISE THE OPTION UNLESS AN
EXEMPTION FROM REGISTRATION IS AVAILABLE. AT THE PRESENT TIME, EXEMPTIONS FROM
REGISTRATION UNDER FEDERAL AND STATE SECURITIES LAWS ARE VERY LIMITED AND MIGHT
BE UNAVAILABLE TO YOU PRIOR TO THE EXPIRATION OF THE OPTION. CONSEQUENTLY, YOU
MIGHT HAVE NO OPPORTUNITY TO EXERCISE THE OPTION AND TO RECEIVE SHARES UPON SUCH
EXERCISE. IN ADDITION, YOU SHOULD CONSULT WITH YOUR TAX ADVISOR
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CONCERNING THE RAMIFICATIONS TO YOU OF HOLDING OR EXERCISING YOUR OPTIONS OR
HOLDING OR SELLING THE SHARES UNDERLYING SUCH OPTIONS.
If you are or have been a director of officer of the Company you
understand that during any period in which the Shares acquired pursuant to an
exercise of your option are subject to the provisions of Section 16 of the
Securities Exchange Act of 1934, as amended (and you yourself are also so
subject), and in order for your transactions under the Plan to qualify for the
exemption from Section 16(b) provided by Rule 16b-3, a total of six months must
elapse between the grant of the option and the sale of shares underlying the
option.
Please execute the Acceptance and Acknowledgement set forth below on
the enclosed copy of this Agreement and return it to the undersigned.
Very truly yours,
Elite Pharmaceuticals, Inc.
By: /s/ Edward Neugeboren
--------------------------
Name: Edward Neugeboren
Title: Director
ACCEPTANCE AND ACKNOWLEDGEMENT
I, a resident of the State of __________, accept the stock option
described above granted under the Elite Pharmaceuticals, Inc. 2004 Stock Option
Plan, and acknowledge receipt of a copy. I have read and understand the Plan.
Dated: September 2, 2005
/s/ Bernard Berk
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Taxpayer I.D. Number Signature
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NOTICE OF EXERCISE
The undersigned, pursuant to an Incentive Stock Option Letter Agreement
(the "Agreement") between the undersigned and Elite Pharmaceuticals, Inc. (the
"Company"), hereby irrevocably elects to exercise purchase rights represented by
the Agreement, and to purchase thereunder _______ shares (the "Shares") of the
Company's common stock, par value $.01 per share ("Common Stock"), covered by
the Agreement and herewith makes payment in full therefor.
1. If the sale of the Shares and the resale thereof has not, prior to
the date hereof, been registered pursuant to a registration statement filed and
declared effective under the Securities Act of 1933, as amended (the "Act"), the
undersigned hereby agrees, represents, and warrants that: (a) the undersigned is
acquiring the Shares for his or her own account (and not for the account of
others), for investment and not with a view to the distribution or resale
thereof; (b) by virtue of his or her position, the undersigned has access to the
same kind of information which would be available in a registration statement
filed under the Act; (c) the undersigned is a sophisticated investor; (d) the
undersigned understands that he or she may not sell or otherwise dispose of the
Shares in the absence of either (i) a registration statement filed under the Act
or (ii) an exemption from the registration provisions thereof; and (e) The
certificates representing the Shares may contain a legend to the effect of
subsection (d) of this Section 1.
2. If the sale of the Shares and the resale thereof has been registered
pursuant to a registration statement filed and declared effective under the Act,
the undersigned hereby represents and warrants that he or she has received the
applicable prospectus and a copy of the most recent annual report of the
Company, as well as all other material sent to stockholders generally. The
undersigned acknowledges that the number of shares of Common Stock subject to
the Agreement is hereafter reduced by the number of shares of Common Stock
represented by the Shares.
Very truly yours,
______________________________________
(type name under signature line)
Social Security No. __________________
Address: _____________________________
______________________________________
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