INDIGO SECURITIES, LLC
November 9, 2005
Mr. Bernard Berk
Chief Executive Officer
Elite Pharmaceuticals, Inc.
150 Northvale Avenue
Ludlow, New Jersey 07647
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). This letter agreement shall be referred to
herein as the "AGREEMENT" and the "EFFECTIVE DATE" shall mean 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 ENGAGEMENT; WARRANT TRANSACTION.
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 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 such issuance,
together with the Warrant Transaction, the "TRANSACTIONS"). It is contemplated
that the New Warrants issued in the Transactions will be issued by the Company
in a private placement transaction (the "PRIVATE PLACEMENT") 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.
2. THE PRIVATE PLACEMENT.
The Company and Indigo will each reasonably believe at the time of the
Private Placement that each Exchanging 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 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 Securities required by Rule 503 of Regulation D and will furnish to
Indigo promptly thereafter a signed copy of each such notice.
Elite Pharmaceuticals, Inc.
November 9, 2005
Page 2
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 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) 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 (i) 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 (ii) New Warrants exercisable for a
number of shares of the Company's common stock equal to 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 Closing for its reasonable expenses incurred in
connection with the Engagement including, without limitation, legal fees of the
Placement Agent's counsel and disbursements of Placement Agent's counsel, in an
amount not to exceed $20,000; provided, that Placement Agent's counsel presents
a copy of the bill at Closing documenting such fees and disbursements.
(b) 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 on-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 by the
Parties.
5. NOTICES.
All communications hereunder shall be in writing and shall be mailed or
delivered (a) to the Company, at its offices at 165 Northvale Avenue, Ludlow,
New Jersey 07647, and (b) to Indigo, at its offices at 780 Third Avenue, Suite
2302, New York, NY 10017, Attention: Eric Brachfeld.
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
Elite Pharmaceuticals, Inc.
November 9, 2005
Page 3
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. 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 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 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.
Elite Pharmaceuticals, Inc.
November 9, 2005
Page 4
(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. 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 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 letter agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions of this letter agreement shall not in any way be affected
or impaired thereby.
Elite Pharmaceuticals, Inc.
November 9, 2005
Page 5
(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 letter 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 letter
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: /s/ Eric Brachfeld
Print Name: Eric Brachfeld
Title: Managing Partner
ACCEPTED AS OF THE DATE FIRST WRITTEN ABOVE:
ELITE PHARMACEUTICALS, INC.
By: /s/ Bernard Berk
Print Name: Bernard Berk
Title: CEO