EXHIBIT 10(e)
EXECUTION VERSION
STOCKHOLDERS' AGREEMENT (this "AGREEMENT"), dated as of
December 6, 2006 (the "EFFECTIVE DATE"), among Novel
Laboratories, Inc., a Delaware corporation (the
"COMPANY"), and Elite Pharmaceuticals, Inc. ("ELITE")
and VGS Pharma LLC, a Delaware limited liability company
("VGS") and Veerappan Subramanian ("SUBRAMANIAN" and
together with Elite and VGS, each a "STOCKHOLDER" and
collectively, the "STOCKHOLDERS").
--------------------------------------------------------
INTRODUCTION
In connection with that certain Strategic Alliance Agreement, dated
as of the date hereof (the "STRATEGIC ALLIANCE AGREEMENT"), among Elite, VGS and
Subramanian and the transactions contemplated thereby, the parties hereto are
entering into this Agreement;
In connection with Subramanian's potential acquisition of shares of
the Company's capital stock pursuant to any Stock Option Plan (as defined
below), he is being made a party to this Agreement;
The Strategic Alliance Agreement states that as a condition to its
effectiveness, the Company and the Stockholders shall enter into this Agreement;
and
The Stockholders and the Company desire to promote their mutual
interests by agreeing to certain matters relating to, among other things, the
governance of the Company and the disposition of shares of capital stock of the
Company, held, or hereafter acquired, by the Stockholders.
IN CONSIDERATION of the foregoing and the covenants and obligations
set forth below, the parties hereto, intending to be legally bound, hereby agree
as follows:
ARTICLE I
INTERPRETATION OF THIS AGREEMENT
1.1. CERTAIN DEFINITIONS. As used herein, the following terms shall
have the following meanings:
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with,
such Person. A Person shall be deemed to "CONTROL" another Person if such Person
possesses, directly or indirectly, the power to direct or cause the direction of
the management or policies of such other Person, whether through the ownership
of voting securities, by contract or otherwise. For the avoidance of doubt, the
Company is not considered an Affiliate of Elite at the time this Agreement is
executed.
"BANKRUPTCY EVENT" means, with respect to any affected holder of
Shares (a) the initiation of a voluntary case or other proceeding seeking
liquidation, reorganization or other relief under any bankruptcy, insolvency or
other similar law; (b) the commencement of an involuntary case or other
proceeding against such holder seeking liquidation, reorganization or
other relief under the bankruptcy, insolvency or other similar laws, and is not
dismissed within ninety (90) days; or (c) the entry of an order for relief
against such holder under the federal bankruptcy laws as now or hereafter in
effect.
"BOARD" means the Board of Directors of the Company.
"BUSINESS PLAN" means either of the Initial Business Plan and each
Annual Business Plan, as each such term is defined in the Strategic Alliance
Agreement.
"BY-LAWS" means the By-Laws of the Company, as amended from time to
time.
"CERTIFICATE OF INCORPORATION" means the Certificate of
Incorporation of the Company, as amended from time to time.
"CHANGE OF CONTROL" means, with respect to any Stockholder that
holds at least ten percent (10%) of the outstanding shares of capital stock of
the Company (other than a Permitted Transfer pursuant to Section 3.1(ii)), a
change in the ownership of fifty percent (50%) or more of the equity or
partnership interests (or economic benefit thereof) in a Person, or the
acquisition, directly or indirectly, of the fifty percent (50%) or more of the
equity or partnership interests (or economic benefit thereof) in a person.
"CLASS A COMMON STOCK" means the Class A Common Stock, par value
$0.0001 per share, of the Company.
"CLASS B COMMON STOCK" means the Class B Common Stock, par value
$0.0001 per share, of the Company.
"DIRECTOR" means a member of the Board.
"DIVESTITURE EVENT" means the occurrence of any of the following
events with respect to a holder of Shares: (i) liquidation, dissolution or
winding up; (ii) the occurrence of a Bankruptcy Event; or (iii) a Change of
Control.
"ELITE CONTRIBUTIONS" shall have the meaning ascribed to such term
in the Strategic Alliance Agreement.
"FAMILY MEMBER" means any parent, spouse, child, brother, sister or
any other relative with a relationship (by blood, marriage or adoption) not more
remote than first cousin.
"GOOD REASON" shall have the meaning assigned to such term in the
Subramanian Employment Agreement.
"NEW SECURITIES" except as set forth below, shall mean any shares of
capital stock of the Company issued after the date hereof, including Class A
Common Stock, Class B Common Stock, whether now authorized or not, and rights,
options, or warrants to purchase such common stock, and securities of any type
whatsoever that are, directly or indirectly, convertible into said common stock.
Notwithstanding the foregoing, the term New Securities does not include (i)
registered securities offered to the public pursuant to a registration statement
filed and
2
declared effective by the SEC pursuant to the Act, (ii) Class B Common Stock or
warrants or options exercisable for Class B Common Stock, or other capital stock
or warrants or options exercisable for other capital stock, issued or granted to
employees, consultants, officers and directors of the Company, pursuant to the
Stock Option Plan, as amended from time to time, and any successor plan thereto,
(iii) stock issued in connection with any stock split, stock dividend,
distribution, reclassification or recapitalization by the Company, (iv) stock
issued in respect of any warrant, option or upon conversion or exchange of
convertible or exchangeable securities outstanding as of the date of this
Agreement, and (v) securities of the Company issued after the date hereof in
connection with the Company's entering into an acquisition or strategic
partnership, or issued to lenders, lessors or vendors of the Company, in each
case approved by the Board.
"ORIGINAL ELITE SHARES" means the shares of Class A Common Stock
held by Elite as of the Effective Date of this Agreement, and all capital stock
or other securities of the Company representing a dividend on any such shares of
Class A Common Stock, or representing a distribution or return of capital upon
or in respect of such shares of Class A Common Stock, or resulting from a stock
split, revision, reclassification or other exchange therefor, and any
subscriptions, warrants, rights or options issued to Elite or its permitted
transferee, or otherwise in respect of, such shares of Class A Common Stock,
without regard to Transfers made subsequent to the Effective Date hereof.
"ORIGINAL VGS SHARES" means the shares of Class A Common Stock held
by VGS as of the Effective Date of this Agreement, and all capital stock or
other securities of the Company representing a dividend on any such shares of
Class A Common Stock, or representing a distribution or return of capital upon
or in respect of such shares of Class A Common Stock, or resulting from a stock
split, revision, reclassification or other exchange therefor, and any
subscriptions, warrants, rights or options issued to VGS or its permitted
transferee, or otherwise in respect of, such shares of Class A Common Stock,
without regard to Transfers made subsequent to the Effective Date hereof.
"PERFORMANCE MILESTONE" shall have the meaning ascribed to such term
in the Strategic Alliance Agreement.
"PERMITTED TRANSFER" shall have the meaning ascribed to such term in
Section 3.3 hereof.
"PERSON" means any individual, partnership, joint venture, firm,
corporation, limited liability company, association, trust, unincorporated
organization or other enterprise or any government or political subdivision or
any agency, department or instrumentality thereof.
"PUBLICLY TRADED" means (i) the initial public offering of any class
of equity securities of the Company pursuant to an effective registration
statement under the Securities Act of 1933 (excluding registration statements on
Form S-4 and Form S-8 and similar limited purpose forms); (ii) any class of
equity securities of the Company become eligible to be traded in any public
securities market; or (iii) the Company becomes subject to the reporting
requirements of the Securities and Exchange Act of 1934, as amended.
3
"REMAINING CONTRIBUTIONS" shall have the meaning ascribed to such
term in the Strategic Alliance Agreement.
"SHARES" means all capital stock and equity securities of the
Company.
"STRATEGIC ALLIANCE DOCUMENTS" shall have the meaning ascribed to
such term in the Strategic Alliance Agreement.
"STOCK OPTION PLAN" means the Company's 2006 Stock Option Plan.
"SUBRAMANIAN EMPLOYMENT AGREEMENT" means that certain Employment
Agreement, dated as of the date hereof, between the Company and Subramanian.
"TRANSFER" means, as to any Share, to directly or indirectly sell,
assign, transfer, offer, grant a participation in, mortgage, pledge,
hypothecate, create a security interest in or lien upon, encumber, donate,
contribute, place in trust, enter into any voting agreement in respect of, or
otherwise dispose of, such Share.
1.2. DIRECTLY OR INDIRECTLY. Where any provision in this Agreement
refers to action to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether such action is taken
directly or indirectly by such Person.
ARTICLE II
CORPORATE GOVERNANCE
2.1. BOARD OF DIRECTORS AND BY-LAWS.
(a) At each election of Directors during the term of this Agreement,
the Stockholders shall vote their Shares, and otherwise use commercially
reasonable efforts as stockholders of the Company,
(i) to cause and maintain the election to the Board comprised
of:
(x) for so long as Elite and its Affiliates,
collectively, are holders of at least ten percent (10%) of the issued and
outstanding capital stock of the Company, one (1) designee of Elite (the
"ELITE DESIGNEE"); and
(y) for so long as VGS and its Affiliates, collectively,
are holders of at least ten percent (10%) of the issued and outstanding
capital stock of the Company, one (1) designee of VGS (the "VGS
DESIGNEE");
(ii) to remove, reappoint and replace any such designee in
accordance with the direction of the relevant Stockholder.
For so long as Elite is the holder of at least ten percent (10%) of the issued
and outstanding capital stock of the Company, VGS shall only designate
Subramanian pursuant to the terms of this Section 2.1(a) and may only designate
another person as the VGS Designee (A) upon
4
Subramanian's death or disability, (B) upon Subramanian's retirement after his
sixty-fifth (65th) birthday, or (C) with the prior written consent of Elite.
(b) The number of Directors shall be (2) voting members.
(c) At each election of Directors during the term of this Agreement,
the Stockholders shall vote their respective Shares and otherwise use
commercially reasonable efforts as stockholders of the Company, to prevent any
amendment of the Certificate of Incorporation or By-Laws of the Company
inconsistent with this Agreement.
2.2. PROTECTIVE PROVISIONS. The affirmative consent of each of the
Elite Designee (so long as Elite is a holder of at least ten percent (10%) of
the issued and outstanding capital stock of the Company) and the VGS Designee
(so long as Elite is a holder of at least ten percent (10%) of the issued and
outstanding capital stock of the Company) shall be required for the following
actions to the taken by the Board or any officer of the Company with respect to
the Company or its subsidiaries:
(i) any amendment to the Certificate of Incorporation, By-Laws or other
governance documents;
(ii) spin-off or public offering of equity securities;
(iii) liquidation, dissolution, winding-up, recapitalization,
reorganization, merger, consolidation or sale;
(iv) any sale, exclusive lease or out-license, exchange, transfer or other
disposition, of any Material (as defined below) asset or Material drug product,
other than sales of products in the ordinary course of business;
(v) authorization, creation, designation or issuance of any additional
equity or debt securities, including under the Stock Option Plan;
(vi) declaration or payment of dividends or distributions;
(vii) except as expressly provided in the Strategic Alliance Documents,
any repurchase or redemption of securities;
(viii) commencement of any voluntary bankruptcy proceeding, liquidation,
reorganization, dissolution, conservation, delinquency or receivership
proceeding, or a proceeding similar to any of the foregoing or permitting any
involuntary bankruptcy, liquidation, reorganization, dissolution, conservation,
delinquency or receivership proceeding to remain unstayed for more than thirty
(30) days from the date of the petition therefore or commencement thereof;
(ix) a Material change in the nature or focus of the business or any
Business Plan;
(x) approval of each Business Plan, and the yearly operating budget;
(xi) incurrence of indebtedness in excess of amounts approved in the
Business Plan, or the grant or creation of any security interest in or other
encumbrance on any Material asset;
5
(xii) capital expenditures and investments (including creation of a
subsidiary) in excess of, in the case of capital expenditures, one hundred ten
percent (110%) of the amounts approved in the Business Plan and, in the case of
investments, the amounts approved in the Business Plan;
(xiii) approval of any transaction with any executive officer, director or
equity holder or any affiliate of an executive officer, director or equity
holder (including Family Members), including the award of bonuses to
Subramanian;
(xiv) entering into any agreement restricting the ability of the Company
to compete, in any Material respect, in any area of business;
(xv) commencement or settlement of any Material litigation or proceeding,
or threatened litigation or proceeding;
(xvi) removal, replacement or appointment of the Company's independent
accountants (other than Weiser LLP, which the parties hereto agree shall be the
Company's initial independent accounts);
(xvii) increasing or decreasing the size of the Board;
(xviii) the purchase or license of Material products from third parties;
(xix) entry into Material joint ventures, licensing, marketing,
distribution and similar Material arrangements;
(xx) any public offering of securities of the Company, or any registration
for sale to the public of securities of the Company; and
(xxi) any investment (whether equity or debt) by Subramanian, or any
Affiliate of Subramanian, in any Competitive Company (as defined in the
Strategic Alliance Agreement).
For purposes of this Section 2.2, shall "MATERIAL" mean material to the
business, assets, operations, properties, financial position, results of
operations, liabilities or prospects of the Company as a whole.
2.3. CONFIDENTIALITY REQUIREMENTS. Each Stockholder agrees that all
financial or other information about the Company, or other information of the
Company of a confidential or proprietary nature, disclosed to them at any time,
in connection with this Agreement or otherwise, shall be kept confidential by
them and shall not be directly or indirectly disclosed to any Person (other
than, as necessary, to such Stockholder's agents, employees or lenders) or used
by such Stockholder except: (i) with the prior written consent of the Company;
(ii) as may be required by applicable law, court process or other obligations
pursuant to any listing agreement with any national securities exchange
(including the Nasdaq Stock Market); or (iii) such information which is or
becomes generally available other than as a result of a violation of this
provision.
2.4 TERMINATION FOR CAUSE UNDER THE SUBRAMANIAN EMPLOYMENT
AGREEMENT; BINDING ARBITRATION.
(a) Notwithstanding anything in this Agreement to the contrary, the
determination of the existence of "Cause" or "Disability" as a basis for the
termination of Subramanian under Subramanian Employment Agreement shall be made
solely in the reasonable
6
discretion of the Elite Designee, not the Board, in good faith, and upon receipt
of written notice from the Elite Designee setting forth the basis of "Cause" or
"Disability" for such termination, the Company shall take all requisite steps to
terminate Subramanian for "Cause" or "Disability" in accordance with the terms
of the Subramanian Employment Agreement.
(b) Any action, claim, dispute or controversy arising out of or in
connection with the determination of the existence of "Cause" or "Disability"
(each, a "DISPUTE") shall be determined by binding arbitration in New York, New
York, before a single JAMS arbitrator who is an expert in the subject matter in
dispute and reasonably acceptable to each party, and administered by JAMS
pursuant to its Comprehensive Arbitration Rules and Procedures ("ARBITRATION").
Either party may initiate Arbitration with respect to a Dispute by filing a
written demand for Arbitration with JAMS. The parties acknowledge and agree that
judgment on the award in any Arbitration shall be binding upon the parties
hereto and may be entered and enforced in any court having jurisdiction. Each
party acknowledges and agrees that all Disputes shall be decided in accordance
with this Section 2.4(b) and hereby waives any rights to have those matters
litigated in a court and/or by jury trial. Each party acknowledges and agrees
that the provisions of this Section 2.4(b) are binding upon such party and may
be enforced by any court of competent jurisdiction. Each party further
irrevocably consents to service of process in any Dispute in the manner provided
for notices in Section 9.9. Nothing in this Agreement will affect the right of
any party to serve process in any other manner permitted by law or by
Arbitration rules.
ARTICLE III
TRANSFERS OF SHARES
3.1. GENERAL PROHIBITION ON TRANSFER. No Stockholder may Transfer
any of its Shares without the prior written consent of the other Stockholder(s),
except in the case of: (i) a Permitted Transfer (as defined in Section 3.3);
(ii) a Transfer by VGS to its members or a Family Member of any of its members
or to a trust wholly controlled by, or for the sole benefit of, its members or a
Family Member of any of its members, provided that all Shares transferred remain
subject to the terms of this Agreement, including, without limitation, Article
III, Section 4.1, Article V, Article VIII and Article IX; or (iii) a Transfer by
Elite, due to a restructuring of, or a sale of substantially all of the assets
of, Elite.
3.2. RESTRICTIONS ON TRANSFERS TO COMPETITORS. Notwithstanding
anything in this Agreement to the contrary, no Stockholder may Transfer any
Shares to any Person who or which is (i) a competitor of the Company or any of
its subsidiaries; (ii) a competitor of Elite or any of its subsidiaries; or
(iii) a shareholder or other security holder of any Person referred to in
sub-clause (i) or sub-clause (ii).
3.3. PERMITTED TRANSFERS. A "PERMITTED TRANSFER" shall be a Transfer
that complies with each of the following conditions:
(a) the non-transferring Stockholder(s) shall have provided prior
written consent to the Transfer to such proposed transferee; PROVIDED that such
consent may not be unreasonably withheld, conditioned or delayed (it being
acknowledged and agreed among the parties hereto
7
that withholding consent to a proposed transferee that is a financial investor
with no business operations in the pharmaceutical industry is presumed to be
unreasonable);
(b) such Transfer, when combined with any prior Transfers by such
transferring Stockholder, does not cause all such Transfers by such Stockholder
to exceed thirty-three and one third percent (33 1/3%) of the Shares held by
such transferring Stockholder on the Effective Date of this Agreement;
(c) such transferring Stockholder shall have first provided a
written offer to purchase the Shares proposed to be Transferred (the "OFFER
NOTICE") to the other Stockholder(s) stating the number of Shares to be
Transferred, the price and the material terms concerning the Transfer as to
which the non-transferring Stockholder shall have at least thirty (30) days (the
"NOTICE PERIOD") to elect to purchase the Shares contained in the Offer Notice
at such price and upon such terms contained in the Offer Notice, PROVIDED, if
such non-transferring Stockholder(s) elects to purchase any such Shares, the
closing shall take place within sixty (60) days of the date the Offer Notice is
given; PROVIDED FURTHER, if such non-transferring Stockholder elects not to
purchase any such Shares, then such transferring Stockholder may, during the
ninety (90) day period following the expiration of the Notice Period, offer and
sell the Shares to any Person or Persons at a price not less than, and upon
terms no more favorable to the terms specified in the Offer Notice (following
such ninety (90) day period, the right contained in this Section 3.3(c) shall be
deemed revived); and
(d) the transferee shall not be conferred with any right to
representation of the Company's Board nor any other special rights, powers or
privileges not otherwise provided under Delaware law.
3.4. TRANSFER MECHANICS. (a) Notwithstanding anything to the
contrary in this Agreement, no Transfer shall be deemed effective unless and
until (i) the relevant transferee (other than the Company or an existing
Stockholder) executes and delivers to the Company, an agreement, in the form of
EXHIBIT I, attached hereto, to be bound by all of the terms and conditions of
this Agreement applicable to the relevant transferor, (ii) such Transfer is in
compliance with the Federal securities laws, all applicable state securities
laws and all applicable foreign securities laws, and upon its request, the
Company shall have received satisfactory evidence of such compliance (including
an opinion of counsel to the transferor), and (iii) upon its request, the
Company is indemnified for any costs and expenses reasonably incurred by the
Company in connection with such Transfer; and
(b) Any Transfer or purported Transfer made in violation of this
Article III shall be null and void and of no effect, and the Company shall not
register any such Transfer on its stock ledger or transfer books.
ARTICLE IV
PURCHASE RIGHTS
4.1. ELITE PURCHASE RIGHT. (a) Subject to the limitations set forth
in Section 4.1(b) below, Elite shall have the right (the "ELITE PURCHASE RIGHT")
to purchase from the holder(s) of the Original VGS Shares up to seventy-five
percent (75%) of the Original VGS
8
Shares upon (i) Subramanian's resignation from the Company for other than Good
Reason, (ii) the Company's termination of Subramanian for Cause, or (iii)
Subramanian's death or Disability (as such term is defined in the Subramanian
Employment Agreement), in each case, at a price per share equal to $10,200
divided by the aggregate number of Original VGS Shares.
(b) The number of Original VGS Shares that Elite shall be entitled
to purchase pursuant to the Elite Purchase Right shall:
(i) be reduced to fifty percent 50% of the Original VGS Shares
upon the first anniversary of the Effective Date;
(ii) be reduced to 25% of the Original VGS Shares upon the
second anniversary of the Effective Date; and
(iii) be reduced to 0% of the Original VGS Shares, and such
right shall terminate in its entirety, upon the third anniversary of the
Effective Date.
(c) Upon Subramanian's death or Disability, the Elite Purchase Right
shall be adjusted, PRO RATA, for partial vesting with respect to the period from
the prior decrease, if any, through the date of the termination of the
Subramanian such death or Disability.
(d) The purchase price paid for the Original VGS Shares purchasable
pursuant to the Elite Purchase Right shall be paid in cash and the closing of
such purchase shall take place at the time and the place agreed to among the
parties, PROVIDED, such closing shall occur on the date designated by Elite but
not later than ninety (90) days after the event triggering the Elite Purchase
Right. VGS acknowledges and agrees, for itself and each transferee permitted
pursuant to this Agreement, that the Original VGS Shares shall remain subject to
the Elite Purchase Right pursuant to the terms of this Section 4.1, whether such
Shares are held by VGS or its permitted transferee at the time of the exercise
of such right.
4.2. VGS PURCHASE RIGHT. (a) In the event Elite fails to fund all or
a portion of the Remaining Contribution pursuant to Section 3.3(b)(ii) of the
Strategic Alliance Agreement, VGS shall have the right to purchase from Elite
(the "VGS PURCHASE RIGHT") that number of Original Elite Shares required to
reduce Elite's ownership of outstanding Class A Common Stock to the following
amount (at a price per share equal to $9,800 divided by the aggregate number of
Original Elite Shares):
X = Original Elite Shares * ( Y / Z )
Wherein:
X = the number of Shares owned by Elite after giving full
effect to the VGS Purchase Right;
Y = Amount of Remaining Contributions actually funded by Elite
in cash or through Use Credits (as defined in the Strategic Alliance Agreement);
and
Z = $25,000,000.
9
The VGS Purchase Right granted to VGS pursuant to the terms of this Section 4.2
shall constitute the sole and exclusive remedy of VGS in the event Elite fails
to fund all or a portion of the Remaining Contribution pursuant to the Strategic
Alliance Agreement or under the Initial Business Plan that results in the event
triggering the VGS Purchase Right.
(b) The purchase price paid for the Original Elite Shares
purchasable pursuant to the VGS Purchase Right shall be paid in cash and the
closing of such purchase shall take place at the time and place agreed to among
the parties, PROVIDED, such closing shall occur on the date designated by VGS
but not later than ninety (90) days after the event triggering the VGS Purchase
Right. Elite acknowledges and agrees, for itself and each transferee permitted
pursuant to this Agreement, that the Original Elite Shares shall remain subject
to the VGS Purchase Right pursuant to the terms of this Section 4.2, whether
such Shares are held by Elite or a permitted transferee at the time of the
exercise of such right.
(c) Notwithstanding anything to the contrary in this Section 4.2 or
Section 3.3 of the Strategic Alliance Agreement, Elite shall have no obligation
to make a Remaining Contribution tied to the Company's achievement of a specific
Performance Milestone unless and until the Company has achieved such Performance
Milestone and Elite has been presented written and verifiable evidence of such
achievement, and Elite's deferral of a Remaining Contribution for failure to
timely or fully achieve a Performance Milestone shall not trigger the VGS
Purchase Right.
ARTICLE V
DIVESTITURE EVENT
5.1. ELITE DIVESTITURE EVENT. If Elite or its Permitted Transferees
are affected by a Divestiture Event, the Company (or if not exercised by the
Company, which exercise shall be in the sole discretion of VGS, then VGS or its
respective designee(s)), shall have the option to purchase all or any portion of
the Shares held by the affected holder for a price equal to the then applicable
fair market value of the Company, multiplied by a fraction (i) the numerator of
which is equal to the number of Shares held by the affected holder, and (ii) the
denominator of which is equal to the aggregate number of Shares held by all
stockholders of the Company. The fair market value of the Company shall in the
first instance be determined in good faith by negotiations between VGS and
Elite. In the event that such parties cannot agree upon a fair market value
within thirty (30) days of the Divestiture Event, then Elite and VGS shall each
promptly appoint as an appraiser a nationally-recognized investment banking
firm. Each appraiser shall, within thirty (30) days of appointment, separately
investigate the value of the Company as of the proposed purchase date and shall
submit a notice of an appraisal of that value to each interested party. If the
appraised values rendered by the two initial appraisers chosen by Elite and VGS
(the "EARLIER APPRAISALS"), vary by less than 10%, the average of the two
appraisals shall be controlling as to the value of the Company for purposes of
this Section 5.1. If the appraised values vary by more than 10%, the appraisers,
within the ten (10) days of the submission of the Earlier Appraisals, shall
appoint a third appraiser which shall be a nationally recognized investment
banking firm unaffiliated with the two initial appraisers chosen by Elite and
VGS. The third appraiser shall, within thirty (30) days of its appointment,
appraise the value
10
of the Company as of the date of the Divestiture Event and submit a notice of
his appraisal to each interested party. The value determined by the third
appraiser shall be controlling as to the value of the Company for purposes of
this Section 5.1 unless the value is greater than the two Earlier Appraisals, in
which case the higher of the two Earlier Appraisals will control, and unless
that value is lower than the two Earlier Appraisals, in which case the lower of
the two Earlier Appraisals will control. If any party fails to appoint an
appraiser or if one of the two initial appraisers fails after appointment to
submit its appraisal within the required period, the appraisal submitted by the
remaining appraiser shall be controlling. Elite and VGS shall each bear the cost
of their respective appointed appraiser. The cost of the third appraisal shall
be shared equally between Elite and VGS.
5.2. VGS DIVESTITURE EVENT. To the extent the Original VSG Shares
are not subject to the Elite Purchase Right, or to the extent that the Elite
Purchase Right was exercised for fewer than the maximum allowable Original VGS
Shares, if VGS or any of its transferees is affected by a Divestiture Event, the
Company (or if not exercised by the Company, which exercise shall be in the sole
discretion of Elite, then Elite or its respective designee(s)) shall have the
option to purchase all or any portion of the Shares held by such affected holder
for a price equal to the then applicable fair market value of the Company,
multiplied by a fraction (i) the numerator of which is equal to the number of
Shares held by the affected holder, and (ii) the denominator of which is equal
to the aggregate number of Shares held by all holders. The fair market value of
the Company shall in the first instance be determined in good faith by
negotiations amongst VGS and Elite. In the event that such parties cannot agree
upon a fair market value within thirty (30) days of the Divestiture Event, then
the appraisal procedure set forth in Section 5.1 shall apply.
5.3 PUT RIGHT. In the event that a purchase has been made under the
purchase rights set forth in either Section 5.1 or 5.2 hereof, and as a result
of such purchase, the party affected by the Divesture Event (together with its
Permitted Transferees) (collectively, the "Affected Party"), after giving effect
to the purchase, owns less than ten percent (10%) of the shares of the Company
purchased on the Effective Date, such Affected Party shall have the right, but
not the obligation, to require the party that effected the purchase as a result
of the Divestiture Event to purchase from the Affected Party all remaining
shares of the Company held by such Affected Party.
11
ARTICLE VI
SUBSCRIPTION RIGHT
6. SUBSCRIPTION RIGHT ON ISSUANCES BY THE COMPANY. (a) The Company
hereby grants each Stockholder the right of first offer to purchase, PRO RATA,
all or any part of New Securities that the Company may, from time to time,
propose to sell or issue. Each Stockholder's pro rata share of any issuance of
New Securities shall be determined by multiplying the number of shares of New
Securities the Company proposes to issue by a fraction, the numerator of which
is the number of shares of Class A Common Stock then owned by such Stockholder
and the denominator of which is the aggregate number of shares of Class A Common
Stock then owned by all holders of the Company's Class A Common Stock.
(b) REQUIRED NOTICES. In the event the Company proposes to undertake
an issuance of New Securities, it shall give each Stockholder written notice of
its intention, describing the type and amount of New Securities, the price and
the general terms upon which the Company proposes to issue the same. Each
Stockholder shall have sixty (60) days from the date of receipt of any such
notice to agree to purchase up to its PRO RATA share of such New Securities for
the price and upon the general terms specified in the Company's notice by giving
written notice to the Company and stating therein the quantity of New Securities
to be purchased. The closing of the purchase and sale of the New Securities, if
any, the Stockholders elect to acquire pursuant to any exercise of the right of
first offer granted under this Section 6 shall be at least thirty (30) days
after the expiration of the sixty (60) day period described above.
(c) COMPANY'S RIGHT TO SELL. To the extent that the Stockholders
fail to exercise the right of first refusal for all New Securities within said
sixty (60) day period, the Company shall have ninety (90) days thereafter to
sell or enter into an agreement (pursuant to which the sale of New Securities
covered thereby shall be closed, if at all, within thirty (30) days from the
date of said agreement) to sell the New Securities not elected to be purchased
by the Stockholders at the price and upon general terms no more favorable to the
purchasers of such securities than specified in the Company's notice. In the
event the Company has not sold within said ninety (90) day period or entered
into an agreement to sell New Securities within said ninety (90) day period (or
sold and issued New Securities in accordance with the foregoing within thirty
(30) days from the date of said agreement), the Company shall not thereafter
issue or sell any New Securities, without first offering such securities to the
Stockholders in the manner provided above.
(d) NEW SECURITIES SOLD SUBJECT TO AGREEMENT. In the event of any
sale of New Securities by the Company to persons not parties to this Agreement
accomplished in accordance with the provisions of this Agreement, the Company
shall make such sale subject to this Agreement, the purchaser shall receive and
hold any and all Shares so purchased subject to the terms and provisions of this
Agreement and subject to the obligations of a Stockholder hereunder, as
applicable, and shall forthwith execute an Additional Signature Page in the form
of EXHIBIT I, attached hereto.
12
(e) ASSIGNMENT. The right of first offer set forth in this Section 6
may be assigned by each Stockholder to any Person that acquires such
Stockholder's Shares in a Transfer permitted by this Agreement.
ARTICLE VII
ADDITIONAL AGREEMENTS AND RESTRICTIONS
7. LEGENDS. (a) Each certificate evidencing Shares will bear legends
substantially to the following effect:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN
REGISTERED UNDER APPLICABLE FEDERAL OR STATE SECURITIES
LAWS AND INSTEAD ARE BEING ISSUED PURSUANT TO EXEMPTIONS
CONTAINED IN SAID LAWS. THE SECURITIES REPRESENTED BY
THIS CERTIFICATE MAY NOT BE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES
SHALL BE EFFECTIVE UNDER THE SECURITIES ACT OF 1933 (2)
SUCH SECURITIES ARE TRANSFERRED PURSUANT TO RULE 144, OR
ANY SUCCESSOR RULE, UNDER SUCH ACT OR (3) THE ISSUER
SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO IT THAT NO VIOLATION OF SUCH ACT OR
SIMILAR STATE ACTS WILL RESULT FROM SUCH TRANSFER.
THE SECURITIES EVIDENCED HEREBY ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND VOTING UNDER THAT CERTAIN
STOCKHOLDERS' AGREEMENT, DATED AS OF DECEMBER 6, 2006 AS
SUCH AGREEMENT MAY BE AMENDED FROM TIME TO TIME, BY AND
AMONG THE ISSUER AND THE HOLDERS OF THE COMPANY'S
SECURITIES SIGNATORIES THERETO. A COPY OF SUCH AGREEMENT
IS ON FILE WITH THE ISSUER AND IS AVAILABLE UPON
REQUEST."
(b) The Company agrees that any certificates, agreements or
instruments evidencing any Shares which are issued after the date hereof to any
Person who, is or, in conjunction with such issuance, becomes, a party to this
Agreement, shall bear the legends set forth in Section 7(a).
(c) DIRECTORS AND OFFICERS INSURANCE. The Company shall cause to be
maintained director's and officer's liability insurance covering the directors
and officers of the Company on customary terms and conditions.
13
ARTICLE VIII
TERMINATION
8. The Agreement shall terminate on the earliest to occur of:
(a) the day on which any Shares become Publicly Traded;
(b) the consummation of a Transfer of all of the issued and
outstanding capital stock of the Company; or
(c) the written consent of Stockholders holding not less than
eighty percent (80%) of the aggregate number of shares of
Class A Common Stock held by all Stockholders.
ARTICLE IX
MISCELLANEOUS
9.1. SPECIFIC PERFORMANCE; INJUNCTION; PAYMENT OF COSTS. (a) The
parties agree that it is impossible to determine the monetary damages which
would accrue to the Company or any Stockholder or its personal representative by
reason of the failure of any other Stockholder or the Company to perform any of
his or its obligations under this Agreement requiring the performance of an act
other than the payment of money only, including, without limitation, any
obligation under Article II, Article III, Article IV, Article V or Article VI
hereof. The Company and each Stockholder shall be entitled to enforce their
respective rights under this Agreement specifically and to exercise all other
rights existing in his or its favor. Because the Shares cannot be readily
purchased or sold in the open market, the parties hereto agree and acknowledge
that money damages may not be an adequate remedy for any breach of the
provisions of this Agreement, and are not an adequate remedy with respect to any
provisions of Article II, Article III, Article IV, Article V or Article VI
hereof, and that they may be irreparably damaged in the event that this
Agreement is not specifically enforced, and therefore, each party may, in its
sole discretion, apply to any court of law or equity of competent jurisdiction
for specific performance and/or injunctive relief (without posting a bond or
other security) in order to enforce or prevent any violation of the provisions
of this Agreement.
(b) In the event of a breach or threatened breach by a Stockholder
of any of the provisions of this Agreement, the Company, and the remaining
Stockholder(s) shall be entitled to an injunction restraining such Stockholder
from any such breach. The availability of these remedies shall not prohibit the
Company or any other Stockholder from pursuing any other remedies available at
law or in equity for such breach or threatened breach, including the recovery of
damages from the breaching Stockholder.
9.2. AMENDMENTS AND WAIVERS. This Agreement may only be modified,
amended or restated with the written consent of the Company and Stockholders
holding at least eighty percent (80%) of the issued and outstanding shares of
Class A Common Stock, as determined as of the date of such proposed amendment;
PROVIDED, HOWEVER, that the Board may, in its sole discretion, modify or amend
this Agreement if such modifications or amendments are:
14
(a) of an inconsequential nature, as reasonably determined by the Board, (b)
contemplated by this Agreement including, without limitation, adding the
signature pages of new Stockholders and removing the signature pages of former
Stockholders, or (c) for the purposes of reflecting changes to the information
set forth on any exhibits hereto. Any such modification, amendment or
restatement of all or any part of this Agreement shall be adhered to and have
the same effect from and after its effective date, and be binding upon all
parties to this Agreement, as if the same had originally been embodied in, and
formed a part of, this Agreement. The Board shall give written notice to all
Stockholders promptly after any amendment made unilaterally by the Board has
become effective. Any amendment to this Agreement must be in writing. No
provision of this Agreement may be waived except with the prior written consent
of the party by whom such waiver is intended to be given or with respect to whom
such waiver is intended to be enforceable.
9.3. SURVIVAL. Notwithstanding anything to the contrary in this
Agreement, regardless of the manner in which this Agreement is terminated, the
terms of Sections 2.3, Article VII and Article IX shall survive until, by their
respective terms, they are no longer operative.
9.4. FURTHER ASSURANCES. Each of the parties hereto shall, at any
time and from time to time after the date hereof, at the request and expense of
the other party, (i) promptly and duly execute and deliver, or cause to be duly
executed and delivered to the requested Person, all such further documents and
instruments, and (ii) take or cause to be taken all such other and further
actions, in each case as may be reasonably requested by the other party to
implement and effect the terms of this Agreement.
9.5. BENEFITS OF AGREEMENT. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, be binding upon,
and be enforceable by, the parties hereto and their respective successors and
assigns.
9.6. ASSIGNMENT. This Agreement and the rights and obligations
hereunder shall not be assignable or transferable by either party without the
prior written consent of the other party. Any instrument purporting to make an
assignment in violation of this Section 9.6 shall be void.
9.7. SEVERABILITY. If, in any jurisdiction, any term or provision
hereof is determined to be invalid or unenforceable, (a) the remaining terms and
provisions hereof shall be unimpaired; (b) any such invalidity or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such term or provision in any other jurisdiction; and (c) the
invalid or unenforceable term or provision shall, for purposes of such
jurisdiction, be deemed replaced by a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision.
9.8. ENTIRE AGREEMENT. This Agreement, together with the other
Strategic Alliance Documents, constitute the full and entire understanding and
agreement between the parties with regard to the subject matters hereof and
thereof and, except as otherwise specifically provided therein, no party shall
be liable or bound to any other in any manner by any other representations,
warranties, covenants or agreements with respect to such subject matters.
15
9.9. NOTICES. All notices, requests and other communications to any
party hereunder shall be in writing and sufficient if delivered personally or
sent by telecopy (with confirmation of receipt) or by registered or certified
mail, postage prepaid, return receipt requested, to the appropriate addresses
listed below or, if applicable, on the signature page of the relevant
Stockholder to this Agreement, attached hereto:
If to the Company: Novel Laboratories, Inc.
c/o Elite Pharmaceuticals, Inc.
165 Ludlow Avenue
Northvale, New Jersey 07647
Attention: Chief Executive Officer
Telephone: (201) 750-2646
Facsimile: (201) 750-2755
or to such other address or telecopy number as the party to whom notice is to be
given may have furnished to the other party in writing in accordance herewith.
Each such notice, request or communication shall be effective when received or,
if given by mail, when delivered at the address specified in this Section 9.9 or
on the fifth business day following the date on which such communication is
posted, whichever occurs first.
9.10. ENFORCEABILITY. It is the desire and intent of the parties
hereto that the provisions of this Agreement shall be enforced to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, if any particular
provision of this Agreement shall be adjudicated to be invalid or unenforceable,
such provision shall be deemed amended to delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such deletion to apply only with
respect to the operation of such provision in the particular jurisdiction in
which such adjudication is made.
9.11. DESCRIPTIVE HEADINGS; CERTAIN INTERPRETATIONS. (a) Descriptive
headings are for convenience only and shall not control or affect the meaning or
construction of any term or provision of this Agreement.
(b) The following rules of interpretation apply to this Agreement:
(i) wherever it appears appropriate from the context, each term stated in either
the singular or plural shall include the singular and the plural, and pronouns
stated in either the masculine, feminine or neuter shall include the masculine,
feminine and neuter; (ii) "or" and "any" are not exclusive and "include" and
"including" are not limiting; and (iii) a reference to any agreement or other
contract includes permitted supplements and amendments.
9.12. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
one or more counterparts, and by the two parties hereto in separate
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.
16
9.13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING
EFFECT TO ANY CHOICE OR CONFLICT OF LAWS PROVISIONS).
9.14. CONSENT TO JURISDICTION. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE JURISDICTION OF ANY FEDERAL OR
STATE COURT OF NEW YORK SITTING IN NEW YORK CITY AND IRREVOCABLY AGREES THAT ALL
ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY SHALL BE LITIGATED EXCLUSIVELY IN SUCH COURTS.
EACH OF THE PARTIES HERETO AGREES NOT TO COMMENCE ANY LEGAL PROCEEDING RELATED
HERETO EXCEPT IN SUCH COURT. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY
SUCH PROCEEDING IN ANY SUCH COURT AND HEREBY FURTHER IRREVOCABLY AND
UNCONDITIONALLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT
ANY SUCH ACTION, SUIT OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM.
9.15. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH OF THE PARTIES HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT BOTH PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT, BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.15.
9.16. GENERAL. All exhibits to this Agreement are hereby
incorporated by reference and made a part of this Agreement.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
17
IN WITNESS WHEREOF, the parties hereto have executed, or caused
their duly authorized representatives to execute, this Stockholders' Agreement
as of the date first above written.
NOVEL LABORATORIES, INC.
By: /s/ Veerappan Subramanian
-------------------------------
Name: Veerappan Subramanian
Title: Chairman and Chief
Executive Officer
STOCKHOLDER(S):
ELITE PHARMACEUTICALS, INC.:
/s/ Bernard Berk
-----------------------------------
Name: Bernard Berk
Title: Chief Executive Officer
c/o Elite Pharmaceuticals, Inc.
165 Ludlow Avenue
Northvale, New Jersey 07647
Attention: Bernard Berk
Telephone: (201) 750-2646
Facsimile: (201) 750-2755
VGS Pharma, LLC
By: /s/ Anu R. Subramanian
-------------------------------
Name: Anu R. Subramanian
Title: Manager
ADDRESS:
475 Bernardsville Road
Mendham, New Jersey 07945
Facsimile: (908) 766-4006
[Stockholders' Agreement Signature Page]
EXHIBIT I
ADDITIONAL SIGNATURE PAGE
AND AGREEMENT TO BE BOUND
The undersigned, intending to be legally bound, hereby agrees to be
bound, as if the undersigned was an original signatory thereto, by all of the
terms and conditions applicable to a "Stockholder" under that certain
Stockholders' Agreement, dated as of December 6, 2006 by and among Novel
Laboratories, Inc. and certain holders of its securities signatories thereto, as
the same may be amended from time to time in accordance with the terms thereof.
Dated: ________________________ INDIVIDUAL(S):
_______________________________________
Name:
_______________________________________
Name:
NON-INDIVIDUAL:
_______________________________________
Name of Entity
By:____________________________________
Name:
Title:
ADDRESS:
_______________________________________
_______________________________________
_______________________________________
Attention:_____________________________
Telecopy:______________________________
[Additional Signature Page and Agreement To Be Bound]