SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ELITE PHARMACEUTICALS, INC.
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(Name of small business issuer in its charter)
DELAWARE 2834 22-3542636
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(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Code Number) No.)
230 West Passaic Street, Maywood, NJ 07606 / (201)845-6611
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(Address and telephone number of principal executive offices and
principal place of business)
Atul M. Mehta, President, Elite Pharmaceuticals,Inc.
230 West Passaic Street, Maywood, NJ 07606 (201)845-6611
(Name, address and telephone number of agent for service)
Copies to:
Pender R. McElroy, James, McElroy & Diehl, P.A.
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600 South College Street, Charlotte, NC 28202 / (704)372-9870
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Approximate date of proposed sale to the public: As soon as practicable
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after the effective date of this registration statement.
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If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ] ____________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ] ____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box.[]
CALCULATION OF REGISTRATION FEE
<S> <C> <C> <C> <C>
Proposed Proposed
Maximum Maximum Amount of
Title of Each Class of Amount to be Offering Price Aggregate Registration
Securities to be Registered(1) Registered per Security(2) Offer Price Fee
Common Stock, $.01 par value 2,200,000 $2.50 $5,500,000 $1,896.55
Class A Redeemable Common
Stock Purchase Warrants 1,525, 000 $1.00 $1,525,000 $ 525.86
Common Stock, $.01 par
value Underlying Class A
Redeemable Common Stock
Purchase Warrants(3) 1,525,000 $2.50 $3,812,500 $1,314.66
Total Registration Fee (4): -- -- -- $3,737.07
(1) All Securities registered herein are held by Selling Security Holders; the
Registrant is registering none of its own securities.
(2) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933, as amended. Based
upon the price for which the Common Stock and Warrants were sold in a
private placement conducted by the Registrant on October 30, 1997. The
allocation of the offering price in the above described private placement
between the shares of Common Stock and Warrants offered herein is purely
arbitrary.
(3) Reserved for issuance upon exercise of the Class A. Redeemable Common Stock
Purchase Warrants.
(4) $3,737.07 has been previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A)
MAY DETERMINE.
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ELITE PHARMACEUTICALS, INC.
CROSS REFERENCE PAGE
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<S> <C>
Registration Statement Item
Number and Heading Location in Prospectus
1.Front of Registration Statement and
Outside Front Cover Page of Prospectus.........................Cover Page
2.Inside Front and Outside Back Cover Pages
of Prospectus..................................................Inside Front and Outside Cover
3.Summary Information and Risk Factors.............................Summary; Risk Factors
4.Use of Proceeds..................................................Use of Proceeds
5.Determination of Offering Price..................................Cover Page; Risk Factors
6. Dilution.......................................................Dilution
7.Selling Security Holders.........................................Selling Security Holders
8.Plan of Distribution.............................................Risk Factors, Selling Security Holders
9.Legal Proceedings................................................Business - Legal Proceedings
10.Directors, Executive Officers, Promotors
and Control Persons.............................................Management
11.Security Ownership of Certain Beneficial
Owners and Management...........................................Principal Stockholders
12.Description of Securities.......................................Description of Securities
13.Interests of Named Experts and Counsel..........................Experts and Counsel
14.Disclosure of Commission Position on
Indemnification for Securities Act Liabilities..................Management
15.Organization Within Last Five Years.............................Business - Organization
16.Description of Business.........................................Business - Description
17.Management's Discussion and Analysis
or Plan of Operation............................................Management's Discussion and Analysis
18.Description of Property.........................................Business - Property
19.Certain Relationships and Related Transactions..................Certain Transactions
20.Market for Common Equity and Related
Stockholder Matters.............................................Cover Page; Principal Stockholders;
Description of Securities; Risk Factors
21.Executive Compensation..........................................Management
22.Financial Statements............................................Financial Statements
23.Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure..........................Not applicable
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SUBJECT TO COMPLETION
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there by any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
Subject to Completion, Dated July 14, 1998
PROSPECTUS
ELITE PHARMACEUTICALS, INC.
3,725,000 VOTING COMMON SHARES
(includes 1,525,000 Common Shares Underlying Class A
Redeemable Common Stock Purchase Warrants)
1,525,000 CLASS A REDEEMABLE COMMON STOCK PURCHASE WARRANTS
This Prospectus covers an aggregate of 3,725,000 shares of the common
stock of ("Common Stock"), $.01 par value, and 1,525,000 Class A Redeemable
Common Stock Purchase Warrants ("Warrants") of Elite Pharmaceuticals, Inc.
("Elite Pharmaceuticals" or the "Company"), a Delaware corporation, on behalf of
certain selling security holders of the Company ("Selling Security Holders"). Of
the securities offered hereunder (i) 2,000,000 shares of Common Stock and
1,000,000 Warrants were heretofore issued in a private offering beginning on
September 15, 1997 and ending on November 30, 1997 ("Private Placement"); (ii)
200,000 shares of Common Stock and 100,000 Warrants are issuable pursuant to
warrants issued to the placement agent of the Private Placement ("Placement
Agent Warrants"); (iii) 425,000 Warrants were issued in connection with the
following private placements: (x) 250,000 Warrants issued to Bridge Ventures on
July 14, 1998, (y) 100,000 Warrants issued to Saggie Capital on July 14, 1998,
and (z) 75,000 Warrants issued to Jerome Belson on July 14, 1998; and (iv)
1,525,000 shares of Common Stock are issuable upon the exercise of the Warrants
referred to in items (i) through (iii) above. See "Selling Security Holders."
Only the 2,000,000 shares of Common Stock referred to in item (i) above are
being registered to the current holders; the remaining items are being
registered for resale, and the securities underlying the Warrants are not
registered for sales to the purchasers of the Warrants. Each Warrant entitles
the holder to purchase one share of Common Stock at an exercise price of $6.00
commencing November 30, 1997 and continuing until November 29, 2002. See
"Description of Securities." The offering price will be determined by the
Selling Security Holders. See "Selling Security Holders" "Plan of Distribution"
and "Underwriting." The Company will receive proceeds only upon the exercise of
the Warrants or the Placement Agent Warrants. If each Warrant and Placement
Agent Warrant were exercised, the Company would receive $9,870,000.00. See "Use
of Proceeds".
Elite Pharmaceuticals applied on April 8, 1998 for quotation of the
Common Stock and Warrants on the Nasdaq Bulletin Board. There can be no
assurance that these securities will be approved for listing, or, if approved,
that an active trading market will develop. See "Risk Factors."
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
INVESTORS SHOULD NOT INVEST ANY FUNDS IN THIS OFFERING UNLESS THEY CAN AFFORD
TO LOSE THEIR ENTIRE INVESTMENT.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The securities are being offered for cash as follows:
Underwriting discounts Proceeds to issuer
Price to public(1) and commissions(1) or other persons(1)
Per Share of unknown unknown unknown
Common Stock unknown unknown unknown
Per Warrant unknown unknown unknown
Total
(1) The securities offered hereunder will be offered by the Selling Security
Holders at market price; Elite Pharmaceuticals is unaware of any arrangements
entered into between such Selling Security Holders and any broker or dealer, or
underwriter. It is anticipated that the securities will be offered through the
over the counter market.
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Elite Pharmaceuticals intends to furnish its shareholders and holders of
Warrants with annual reports containing audited financial statements, examined
by an independent accounting firm, and such interim reports as it may determine
to furnish or as may be required by law.
Where any document is incorporated by reference in the Prospectus but not
delivered therewith, Elite Pharmaceuticals will undertake to provide without
charge to each person, including any beneficial owner, to whom a prospectus is
delivered, upon oral or written request of such person, a copy of any and all of
the information incorporated by reference in the Prospectus (not including
exhibits to the information incorporated by reference unless the exhibits are
specifically incorporated by reference into the information that the Prospectus
contains). Requests should be addressed to Catherine A. Barnes at (704)
372-9870.
Elite Pharmaceuticals is not currently a reporting company under the Securities
Exchange Act of 1934, but upon approval of the Registration Statement will have
a reporting obligation under Section 15(d) thereof and will file reports
electronically pursuant thereto, and such reports will be available upon the
Securities and Exchange Commission's web site, at http://www.sec.gov.
UNTIL 90 DAYS AFTER THE LATER TO OCCUR OF (i) THE EFFECTIVE DATE OF THE
REGISTRATION STATEMENT OR (ii) THE DATE ON WHICH THE SECURITIES REGISTERED
HEREUNDER ARE BONA FIDE OFFERED TO THE PUBLIC, ALL DEALERS EFFECTING
TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
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PROSPECTUS SUMMARY
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The following summary is qualified in its entirety by the detailed
information financial statements appearing elsewhere in this Memorandum. Each
prospective investor is urged to read this Memorandum in its entirety. All
statements other than statements of historical fact contained in this Memorandum
are forward-looking statements. Forward-looking statements in this Memorandum
generally are accompanied by words such as "intend," "anticipate," "believe,"
"estimate," "project," or "expect" or similar statements. Although Elite
Pharmaceuticals believes that the expectations reflected in such forward-looking
statements are reasonable, no assurance can be given that such expectations will
prove correct. Factors that could cause the Company's results to differ
materially from the results discussed in such forward-looking statements include
the risks described under "Risk Factors." All forward-looking statements in this
Memorandum are expressly qualified in their entirety by the cautionary
statements in this paragraph.
ON MARCH 30, 1998, ELITE PHARMACEUTICALS, INC. UNDERWENT A 1 FOR 2
REVERSE SPLIT OF ITS COMMON STOCK. ALL NUMBERS USED THROUGHOUT THIS PROSPECTUS,
INCLUDING THOSE DESCRIBING EVENTS THAT OCCURRED PRIOR TO MARCH 30,
1998, REFLECT THIS 1 FOR 2 REVERSE SPLIT.
THE COMPANY
The business of Elite Pharmaceuticals, Inc. ("Elite Pharmaceuticals")
is to own one hundred percent of the shares of Elite Laboratories, Inc.
("Elite Labs"). Therefore, before discussing the history of Elite
Pharmaceuticals, this Prospectus will first describe the history and nature of
this wholly owned subsidiary.
ELITE LABORATORIES, INC.
Elite Labs was incorporated in the State of Delaware on August 23,
1990. It engages in the research, development, licensing, manufacturing and
marketing of both new and generic, controlled-release pharmaceutical products.
Controlled drug delivery involves releasing a drug into the bloodstream or
delivering it to a target site in the body over an extended period of time, or
at predetermined times. Since its inception in 1990, Elite Labs has established
a research and development laboratory and has developed six oral controlled
release pharmaceutical products to varying stages of the development process.
There is no assurance that any of Elite Labs's products will be approved by the
United States Food and Drug Administration ("FDA"), be marketed, or be
commercially viable products. Furthermore, there are no agreements in effect
requiring the payment of royalties to Elite Labs, except under certain
conditions, which may not be fulfilled. Elite Labs has also conducted several
research and development projects on behalf of large pharmaceutical companies.
These activities have generated only limited revenues to date.
ELITE PHARMACEUTICALS, INC.
Elite Pharmaceuticals is the successor to Prologica International,
Inc. Prologica was incorporated in the State of Pennsylvania on April 20,1984.
Following its incorporation and completion of its initial public
offering in August 1988, Prologica did not possess any
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significant assets or engage in any business other than searching for suitable
acquisitions. Until it began discussions with Elite Labs in the spring of 1997
it had not identified any such acquisitions. In order to facilitate the
acquisition of Elite Labs, Prologica undertook the following steps: (i) on
October 9, 1997, it underwent a three-for-one reverse split of its issued and
outstanding stock; (ii) on October 1, 1997, it caused the incorporation of a
subsidiary, Elite Pharmaceuticals, Inc., a Delaware corporation ("Elite
Pharmaceuticals"), into which it merged on October 28, 1997 in order to change
its name and its state of incorporation; and (iii) on August 1, 1997, it caused
the incorporation of a subsidiary, HMF Enterprises, Inc. ("HMF") with the intent
that HMF would merge into Elite Labs, and thus effect the acquisition.
The merger of Prologica with Elite Pharmaceuticals and the merger of
Elite Labs with HMF were made in conjunction with a private offering of the
common stock and warrants to purchase common stock of Prologica beginning on
September 15, 1997 and continuing through November 30, 1997 (the "Private
Placement"). Through the Private Placement new investors purchased 2,000,000
shares and 1,000,000 warrants of Elite Pharmaceuticals. Under the terms of the
offering and merger agreements, Elite Labs and HMF merged on October 30, 1997,
with Elite Labs surviving the merger. In the merger, each shareholder of Elite
Labs received one share of Elite Pharmaceuticals for each share of Elite Labs
that he or she owned.
As of the date of the merger of Elite Labs and HMF (which was the date
that Elite Pharmaceuticals acquired Elite Labs), Prologica had assets equal to
$1,134 and a shareholder deficiency equal to $12,588; Elite Labs had assets
equal to $114,521 and shareholder deficit equal to $135,479.
In summation, as a result of the merger between Prologica and Elite
Pharmaceuticals, Prologica changed its name to Elite Pharmaceuticals, Inc. and
its state of incorporation to Delaware. As a result of the merger between Elite
Labs and HMF, Elite Labs became the wholly owned subsidiary of Elite
Pharmaceuticals. In addition, as a result of the mergers and the Private
Placement, the former equity holders of Prologica received 450,000 shares (6%)
of Elite Pharmaceuticals; the former equity holders of Elite Labs received
4,787,600 shares (66%) of Elite Pharmaceuticals, plus options or warrants to
purchase an additional 1,175,000 shares; and new investors purchased 2,000,000
shares (28%) of Elite Pharmaceuticals, plus warrants to purchase an additional
1,000,000 shares. In addition, the placement agent received Placement Agent
Warrants entitling it to purchase ten units, at $72,000 each, of 20,000 shares
and 10,000 Warrants. In the private offering, the new investors invested a total
of $6,000,000 in Elite Pharmaceuticals. A portion of these funds were used to
pay the legal fees, filing fees and commissions associated with the private
placement and mergers and the present registration, and the balance have been
and will be used to fund certain capital improvements, research and development,
and general operating expenses of Elite Labs.
All of the numbers of shares, options and warrants referred to in the
above paragraph and throughout this Prospectus reflect the March 1998 reverse
split of Elite Pharmaceuticals.
For purposes of convenience, Elite Pharmaceuticals and Elite Labs may
be referred to collectively hereinafter as the "Company", however any references
to the "Registrant" shall refer exclusively to Elite Pharmaceuticals.
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Elite Pharmaceuticals' and Elite Labs' principal offices are located at 230 W.
Passaic Street, Maywood, New Jersey 07607 its telephone number is (201)
845-6611.
THE OFFERING
Although this is the initial public offering of the stock of Elite
Pharmaceuticals, the Company itself is issuing no securities. All of the
securities registered in connection with this offering are currently held by,
and will be offered by, current Selling Security Holders, or are subject to
execution of Warrants currently held by Selling Security Holders. (See "Terms of
the Offering", and "Description of Securities").
SECURITIES OUTSTANDING
There are 7,237,613 shares of common stock of Elite Pharmaceuticals,
Inc. ("Common Stock") issued and outstanding. In addition, there are Warrants
and options outstanding to purchase an additional 2,875,000 shares of Common
Stock.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of shares of
Common Stock by the Selling Shareholders. See "Selling Shareholders". The
Company will receive proceeds only upon the exercise of the Warrants or the
Placement Agent Warrants by the holders thereof. See "Use of Proceeds".
RISK FACTORS
The Securities offered hereby are highly speculative and involve a high
degree of risk and should not be purchased by investors who cannot afford the
loss of their entire investment. Prospective investors should carefully review
and consider the factors set forth under "Risk Factors" as well as all other
information contained herein, before subscribing for any of the Securities.
NASDAQ LISTING
On April 8, 1998, Elite Pharmaceuticals applied to list the Common
Stock and Warrants on the Nasdaq Bulletin Board. The Company will attempt to
obtain the ticker symbol "ELIP". There can be no assurance that the Company will
be approved for listing of these securities, or if approved, that it will be
able to continue to meet the requirements for continued quotation or that a
public trading factor will develop or be sustained. See "Risk Factors".
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RISK FACTORS
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The securities offered hereby are highly speculative in nature and
investment therein involves a high degree of risk. Therefore each prospective
investor should consider very carefully the risks and speculative factors
inherent in and affecting the business of, and investment in, Elite
Pharmaceuticals prior to the purchase of any of the securities offered hereby,
as well as all of the other matters set forth elsewhere in this Memorandum.
Investors should be prepared to suffer a loss of their entire investment.
Hereinafter Elite Pharmaceuticals and Elite Labs shall sometimes collectively be
referred to as the "Company." The material risks and speculative factors
involved are as follows:
1. Limited Operating History - Anticipated Future Losses.
Since the inception in 1984, of Elite Pharmaceutical's predecessor,
Prologica, neither Prologica nor Elite Pharmaceuticals has carried on any
business or generated any revenues. Its sole source of income is income received
through its ownership of Elite Labs. The Company expects to realize significant
losses in the next year of operation. Since Elite Labs' inception in 1990, it
has not generated any significant revenues. As of its fiscal year ended March
31, 1998, the Company has consolidated net assets of $4,641,868, stockholders'
equity of $4,512,022, an accumulated earnings deficit of (2,396,759) and working
capital of $4,301,289. The Company's operations are subject to all of the risks
inherent in the establishment of a new commercial enterprise and the likelihood
of the success of the Company must be considered in light of various factors,
including working capital deficits, competition with established and well
financed entities, anticipated negative cash flow in the period following
completion of this offering, the absence of substantial written commitments for
purchase of Elite Labs' services and the need for further development of the its
products. The Company expects to continue to incur losses until it is able to
generate sufficient revenues to support its operations and offset operating
costs. There can be no assurance of revenues or of the Company's eventual
profitability.
2. Significant Capital Requirements; Need for Additional Financing.
The Company anticipates, based on its currently proposed plans and
assumptions relating to its operations, and after acquiring its new building
facility, that it currently has sufficient operating capital to satisfy its
contemplated cash requirements for its normal operating cycle. After such time,
the completion of the Company's development activities will require significant
funding other than that which is otherwise currently available to the Company,
although the Company is currently negotiating a commercial line of credit and
mortgage financing for the building facility with various institutions. The
Company has no current arrangements with respect to sources of additional
financing other than with respect to the potential exercise of the options and
warrants currently outstanding. There can be no assurance that any of the
warrants will be exercised or that other additional financing will be available
to the Company on commercially reasonable terms, or at all. The inability of the
Company to obtain additional financing, when needed, would have a material
adverse effect on the Company, including possibly requiring the Company to
curtail or cease its operations. To the extent that any future financing
involves the sale of the Company's equity securities, the Company's
then-existing stockholders' equity, including investors in this Offering, could
be substantially diluted. On the other hand, to the extent the Company recurs
indebtedness or
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otherwise issues debt securities, the Company will be subject to risks
associated with indebtedness, including the risk that interest rates may
fluctuate and cash flow may be insufficient to pay principal and interest on
such indebtedness.
3. Possible Earlier Need for Additional Financing.
In the event the Company's plans change, its assumptions change or
prove to be inaccurate, or its cash flow proves to be insufficient to fund the
Company's operations (due to unanticipated expenses, delays, problems,
difficulties or otherwise), the Company would be required to seek additional
financing sooner than anticipated. There can be no assurance that any of such
warrants will be exercised or that the Company would be able to secure
additional financing to fund its operations.
4. No Assurance of Successful Product Development.
Elite Labs has not yet developed a product to the stage of generating
commercial sales. While Elite Labs' President has successfully developed
controlled release products for his prior employers, Elite Labs' research
activities are characterized by the inherent risk that the research will not
yield results which will receive FDA approval or otherwise be suitable for
commercial exploitation.
5. No Assurance of Successful Licensing and Marketing.
Initially, the Company plans to market its products, once developed,
either directly or through agreements with third parties and by way of licensing
agreements with other pharmaceutical companies. There can be no assurance that
such third-party arrangements can be successfully negotiated or that any such
arrangements, if available, will be on commercially reasonable terms. Even if
acceptable and timely marketing arrangements are entered into, there can be no
assurance that products developed by the Company will be competitive and
profitable in the marketplace. Because the Company's clients will in many cases
make all or many material marketing and other commercialization decisions
regarding such products, a significant number of the variables that affect the
Company's royalties and fees, and, in turn, profitability, are not exclusively
within the Company's control. Achieving market acceptance for the Company's
products and services requires additional funding for which a portion of the
proceeds of this Offering have been allocated. The Company's business strategy
is to expand its client relations for various new pharmaceutical products.
However, to date, the Company has had only a limited number of clients.
Implementation of the Company's growth will depend upon, among other things, the
Company's ability to hire and retain skilled marketing personnel.
6. Government Regulation.
The design, development and marketing of pharmaceutical
compounds are reviewed, and manufacturing facilities are inspected, by
government regulatory agencies, including the United States Food and Drug
Administration and comparable agencies in other countries (collectively
"Agency"). The Company is unable to predict the effect that reviews by any
Agency will have on the development, clinical testing, manufacturing, marketing
or sale of its pharmaceutical products. Failure to obtain Agency approvals in a
timely fashion or on the terms and with the scope or breadth contemplated by the
Company could adversely affect the Company. In addition, in certain cases, the
Company's license agreements for new
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<PAGE>
formulations of pharmaceutical compounds may provide that the licensees, rather
than the Company, are responsible for obtaining the Agency approval of new
formulations. In such cases, the timing of the submission of applications for
Agency approval and of any supplementary data requested by an Agency is not
within the Company's control. Any delays in the submission of such applications
and supplementary data requested could adversely affect the business of the
Company. Continued growth in the Company's revenues and profits will depend, in
large part if not exclusively, on successful introduction and marketing of
products subject to Agency approval. There can be no assurance as to when or
whether such approvals from such regulatory authorities will be received. See
"Business-Governmental Regulation."
7. Competition.
In recent years, an increasing number of pharmaceutical companies have
become interested in the development and commercialization of products
incorporating advanced or novel drug delivery systems. The Company expects that
competition in the field of drug delivery will significantly increase in the
future since smaller specialized research and development companies are
beginning to concentrate on this aspect of the business. Some of the major
pharmaceutical companies have invested and are continuing to invest significant
resources in the development of their own drug delivery systems and technologies
and some have invested funds in such specialized drug delivery companies. Many
of these companies have greater financial and other resources as well as more
experience than the Company in commercializing pharmaceutical products. Such
companies may develop new drug formulations and products or may improve existing
drug formulations and products more efficiently than the Company. While the
Company's product development capabilities and patent protection may help the
Company to maintain its market position in the field of advanced drug delivery,
there can be no assurance that others will not be able to develop such
capabilities or alternative technologies outside the scope of the Company's
patents if any, or that even if patent protection is obtained, such patents will
not be successfully challenged in the future.
8. Proprietary Technology: Unpredictability of Patent Protection.
The Company's success, competitive position and amount of royalty
income will depend in part on its ability to obtain patent protection in various
jurisdictions related to the technologies, processes and products it develops.
The Company may file patent applications seeking such protection. There can be
no assurance that these applications will result in the issuance of patents(s),
or if any patent(s) are issued, that litigation will not be commenced seeking to
challenge such patent protection or that such challenges will fail. In addition,
there can be no assurance that the scope and validity of the Company's patents
will prevent third parties from developing similar or competing products. The
expenses involved in litigation regarding patent protection or a challenge
thereto can be significant and cannot be estimated by the Company.
Furthermore, there can be no assurance that the Company's activities
will not infringe on patents owned by others. The Company could incur
substantial costs in defending itself in suits brought against it, or in suits
in which the Company may assert, against others, claiming infringement of the
Company's patents. There can be no assurance that the Company would possess
sufficient funds to protect its patents from infringement. Should the products
be found
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<PAGE>
to infringe upon patents issued to third parties, the manufacture, use
and sale of such products could be enjoined and the Company could be required to
pay substantial damages. In addition, the Company may be required to obtain
licenses to patents, or other proprietary rights of third parties, in connection
with the development and use of the Company's products and technologies as they
relate to other persons' technologies. No assurance can be given that any
licenses required under any such patents or proprietary rights would be
available on acceptable terms, if at all.
The Company also relies, and will continue to rely, upon trade secrets
and proprietary know-how, which it seeks to protect in part, by confidentiality
agreements. The Company consistently requires its employees and potential
business partners to execute confidentiality agreements prior to doing business
with the Company, and it is currently a party to well over one hundred such
agreements. Representative samples of such agreements are attached hereto.
However, there can be no assurance that such employees or others, will maintain
the confidentiality of such trade secrets or proprietary information or that
trade secrets or proprietary know-how of the Company will not otherwise become
known or be independently developed in such manner that the Company will have no
practical recourse. See "Business-Patents."
9. Key Research Personnel.
The Company is heavily dependent upon the scientific expertise of Dr.
Atul M. Mehta, President and CEO of Elite Pharmaceuticals and Elite Labs.
Although Elite Labs now employs and will in the future continue to employ other
qualified scientists, as of the date of this Prospectus, only Dr. Mehta has the
advanced knowledge, knowhow and track record of having successfully developed
controlled-release products for other companies. The loss of Dr. Mehta's
services would have a material adverse effect on the Company's business.
Therefore, Elite Labs entered into a five-year employment contract with Dr.
Mehta which ends on December 31, 2000. The key terms of the agreement are a
salary currently set at $200,000 with provisions for annual increases, incentive
commissions, a discretionary bonus, health insurance, and term life insurance
for the benefit of Dr. Mehta's family. Additionally, Elite Labs has obtained
insurance coverage with respect to Dr. Mehta's life in an amount of $1,000,000,
payable to the Company. The details of these arrangements are described in
detail in "Management."
10. Lack of Trading Market.
Purchasers of the securities offered hereby must be aware of the
long-term nature of their investment and be able to bear the economic risks of
their investment for an indefinite period of time. No trading market exists for
the Common Stock or Warrants, although those shares of Elite Pharmaceuticals'
Common Stock held by the former shareholders of Prologica are currently listed
for trading in the over-the-counter market in the National Quotation Service
Bureau "pink sheets". A limited market for the securities offered hereunder may
develop on the over-the-counter bulletin board, although there can be no
assurance of such an occurrence. Even if such a market developed, it would still
be more difficult for an investor to dispose of, or to obtain quotations as to,
the price of the Common Stock than a security traded on a national securities
exchange.
9
<PAGE>
11. Nasdaq Listing Requirements.
The Registrant has applied for a listing Nasdaq Bulletin Board
("Nasdaq") for the Common Stock and Warrants. The Registrant has not yet
received a final decision from the NASD regarding its request for listing, and
there can be no assurance that it will obtain such listing. Nasdaq has recently
proposed amendments to its rules increasing listing eligibility and maintenance
criteria. Existing eligibility criteria for inclusion on Nasdaq require, among
other things, the following: (i) that an issuer have total assets of $4 million,
market capitalization of $50 million or net income of $750,000; (ii) public
float of $1 million; (iii) a minimum bid price of $4.00 per share; (iv) a
minimum of 300 shareholders and (v) either an operating history of 1 year or
market capitalization of $50 million. The Company does not currently meet these
requirements.
12. Penny Stock Regulation.
The trading of the Company's Common Stock, if any, will be subject to
Rule 15g-9 promulgated under the Exchange Act for non-Nasdaq and non-exchange
listed securities. Under such rule, brokers-dealers who recommend such
securities to persons other than established customers and accredited investors
must make a special written suitability determination for the purchaser and
receive the purchaser's written agreement to a transaction prior to sale.
Securities are exempt from this rule if the market price is at least $5.00 per
share. The Commission has adopted regulations that generally define a "penny
stock" to be an equity security that has a market price of less than $5.00 per
share or an exercise price of less than $5.00 per share subject to certain
exceptions. Such exceptions include equity securities listed on Nasdaq and
equity securities issued by an issuer that has (i) net tangible assets of at
least $2,000,000, if such issuer has been in continuous operation for more than
three years, or (ii) net tangible assets of at least $5,000,000, if such issuer
has been in continuous operation for less than three years, or (iii) average
revenue of at least $6,000,000 for the preceding three years. Unless an
exception is available, the regulations require the delivery, prior to any
transaction involving a penny stock, of a risk of disclosure schedule explaining
the penny stock market and the risks associated therewith. Elite
Pharmaceuticals' Common Stock is currently a penny stock as defined in the
Exchange Act and as such, the market liquidity for the Common Stock will be
limited to the ability of broker-dealers to sell the Common Stock in compliance
with the above-mentioned disclosure requirements.
13. Outstanding Warrants and Options.
There are outstanding warrants and options to purchase an aggregate of
2,875,000 shares of Common Stock for prices ranging from $2.00 to $7.00, for a
weighted average offering price of $4.55. Of these options and warrants,
1,331,250 are held by officers, directors and/or five-percent shareholders. To
the extent that outstanding warrants or options are exercised, dilution of the
interests of Elite Pharmaceuticals' stockholders will occur. Moreover, the terms
upon which the Company will be able to obtain additional equity may be adversely
affected since the holders of the outstanding warrants can be expected to
exercise them at a time when the Company would, in all likelihood, be able to
obtain capital on terms more favorable to the Company than those provided by
such securities.
10
<PAGE>
14. No Dividends.
Elite Pharmaceuticals has not paid any cash dividends to date and does
not expect to pay cash dividends in the foreseeable future.
15. Potential Anti-Takeover Effects of Delaware Law.
Certain provisions of Delaware law could make more difficult a merger,
tender offer or proxy contest involving the Company, even if such events could
be beneficial to the interests of the shareholders. These provisions include
Section 2.03 of the Delaware General Corporation law. Such provisions could
limit the price that certain investors might be willing to pay in the future for
shares of the Company's Common Stock.
16. Arbitrary Offering Price.
The Securities offered hereunder will be offered by the Selling
Security Holders at a price or prices to be determined by such Selling Security
Holders. The Company does not know that the offering price of the Common Stock
and Warrants will be; the offering price will be arbitrarily determined by the
Selling Security Holders and will bear no relation to Elite Pharmaceuticals'
book value, assets, or any other objective criteria of value. There can be no
assurance that the Securities offered hereby can be resold at or near the
offering price. In addition, the exercise price of the Warrants bears no
relation to Elite Pharmaceuticals' book value, assets, or any other objective
criteria of value. The Company does not know whether all, or even any, of the
Selling Security Holders will sell their securities, or when they will do so.
See "Selling Security Holders" and "Plan of Distribution".
17. Limitation on Personal Liability of Directors.
The Articles of Incorporation and Bylaws of the Company contain
provisions reducing the potential personal liability of the directors of the
Company for certain monetary damages and providing for indemnity of directors.
The Company is unaware of any present, pending or threatened litigation which
would result in any liability for which a director would seek such
indemnification or protection. The provisions affecting personal liability
provide that the Company will indemnify its directors to the fullest extent
permitted by Section145 of the Delaware Corporation Law against (a) expenses
(including attorney's fees) reasonably incurred in connection with any
threatened, pending or completed civil, criminal, administrative, investigative
or arbitrative action, suit or proceeding (and appeal therefrom) against any
director, whether or not brought by or on behalf of the Company seeking to hold
the director liable by reason of the fact that he was acting in such capacity;
and (b) any reasonable payments made by him in satisfaction of any judgment,
money decree, fine, penalty or settlement in such action, suit or proceeding. In
that respect, the provisions diminish the potential right of action which might
otherwise be available to shareholders by affording indemnification by the
Company against most damages and settlement amounts paid by a director.
18. Product Liability.
The design, development and manufacture of the Company's Products
involve an inherent risk of product liability claims. The Company has applied
for, but has not yet
11
<PAGE>
received, product liability insurance. A successful claim against the
Company could have a material adverse effect upon the Company's results of
operations and financial position to the extent the Company does not have such
coverage. To the best of the Company's knowledge, no claim has been made against
the Company as of July 14, 1998.
19. Forward Looking Statements.
All statements other than statements of historical fact contained in
this Memorandum are forward-looking statements. Forward-looking statements in
this Memorandum generally are accompanied by words such as "intend,"
"anticipate," "believe," "estimate," "project," or "expect" or similar
statements. Although Elite Pharmaceuticals believes that the expectations
reflected in such forward-looking statements are reasonable, no assurance can be
given that such expectations will prove correct. Factors that could cause the
Company's results to differ materially from the results discussed in such
forward-looking statements include the risks described hereinabove. All
forward-looking statements in this Memorandum are expressly qualified in their
entirety by the cautionary statements in this paragraph.
20. Control by Directors.
There are currently 7,237,613 shares of Company stock issued and
outstanding, as well as options and warrants to purchase an additional 2,875,000
shares. Of the shares issued and outstanding, officers and/or directors of the
Company hold 1,887,600 shares (26%), and options or warrants to purchase an
additional 895,214 shares. If every holder of an option or warrant exercised his
or her rights under such option or warrant, there would be 10,112,600 shares
issued and outstanding, of which the officers and directors of the Company would
own 2,782,814, or 28 percent. However, if only the officers and directors
exercised such rights, there would be 8,132,814 shares issued and outstanding,
of which the officers' and directors' 2,782,814 shares would equal 34 percent.
12
SELLING SECURITY HOLDERS
------------------------
Any securities offered and sold pursuant hereto will be offered and
sold from time to time by existing security holders of the Company ("Selling
Security Holders") for their own accounts. The securities offered may be sold
directly by the Selling Security Holders; alternatively, the Selling Security
Holders may offer such securities through underwriters, dealers or agents. The
distribution of securities by Selling Security Holders may be effected in one or
more transactions that may take place on the over-the-counter market, including
broker's transactions, privately-negotiated transactions or through sales to one
or more broker-dealers for resale of such securities as principals, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. Usual and customary or specifically
negotiated brokerage fees or commissions may be paid by the Selling Security
Holders in connection with such sales of securities. The Selling Security
Holders and intermediaries through whom such securities are sold may be deemed
"underwriters" within the meaning of the Securities Act with respect to the
securities offered, and any profits realized or commissions received may be
deemed underwriting compensation.
At the time a particular offer of securities is made by a Selling
Security Holder, the Selling Security Holder must, to the extent required by
law, deliver a prospectus setting forth the number of shares being offered, and
the terms of the offering, including the name or names of any underwriters,
dealers or agents, if any, the purchase price paid by any underwriter for shares
purchased from the Selling Security Holder, and any discounts, commissions, or
concessions allowed or reallowed or paid to dealers, and the proposed selling
price to the public. The Selling Security Holders will be subject to the
applicable provisions of the Exchange Act and the rules and regulations
thereunder, which provisions may limit the time of purchases and sales by the
Selling Security Holders.
The following table shows the names of Selling Security Holders, along
with any material relationships such security holders have or have had with the
Company and the amount of securities held by such security holder and available
to be offered.
Column A shows the name of the Selling Security Holder; Column B
describes any positions or offices held by the Selling Security Holder within
the last three years with the Company, its predecessor or its affiliates; Column
C shows number of Shares being offered that are owned by the Security Holder
prior to the offering; Column D shows the number of Warrants being offered that
are owned by the Selling Security Holder. As used in the preceding sentence
"Shares" means shares of Common Stock of Elite Pharmaceuticals, Inc., and
"Warrants" mean Class A Redeemable Common Stock Purchase Warrants, each warrant
entitling the holder to purchase one share of Common Stock at an exercise price
of $6.00 exercisable for five years from November 30, 1997. As stated above, the
Company does not know which, if any, Security Holders will be offering their
securities for sale, when they intend to do so, or what percentage of their
securities will be offered.
13
<PAGE>
<TABLE>
(See Note 1 for method used in calculating securities held.)
<CAPTION>
Securities issued in Private Placement.
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
A. B. C. D. E. F. G.
# of Percent # of Total Percent
Positions Shares of Warrants # of of
Name of Security Holder Held Owned Owned Owned Securities Total
Maurice J. Abadi None 10,000 * 5,000 15,000 *
Robert G. Ackerly None 10,000 * 5,000 15,000 *
Hymie Akst None 10,000 * 5,000 15,000 *
Joan F. Albrecht None 10,000 * 5,000 15,000 *
All American Funding None 20,000 * 10,000 30,000 *
David Altschuler None 10,000 * 5,000 15,000 *
The Aquidneck Trust, Marielle
T. Reilly and Michael
Plunkett TTEES None 20,000 * 10,000 30,000 *
Marcel Aronheim None 20,000 * 10,000 30,000 *
Joan Rich Baer, Inc. Pension
Plan and Trust U/A/D 1/1/78,
Joan Rich Baer and Arthur
Bugs Baer TTEE None 20,000 * 10,000 30,000 *
Robert W. Baird & Co.
TTEE, FBO Albert L.
Saphier IRA None 20,000 * 10,000 30,000 *
Mayer Ballas, M.D. None 10,000 * 5,000 15,000 *
Norman Barrie and Laurel Barrie None 10,000 * 5,000 15,000 *
B&B Management, Ltd. None 52,000 * 26,000 78,000 1.5%
Jerome Belson None 140,000 2% 70,000 210,000 Note 2
Susan J. Bender None 20,000 * 10,000 30,000 *
Birchcrest Industries, Inc.
Employee Profit
Sharing Plan and Trust None 10,000 * 5,000 15,000 *
Harvey Blitz None 20,000 * 10,000 30,000 *
Dr. Daniel Scott Brandwein None 10,000 * 5,000 15,000 *
Bridge Ventures, Inc. See Note 1 50,000 * 25,000 75,000 Note 3
Susan Brauser None 10,000 * 5,000 15,000 *
Michael E. Bushey DDS Inc.
Profit Sharing Trust None 10,000 * 5,000 15,000 *
C. Ames Byrd and
Donna M. Byrd, JT None 10,000 * 5,000 15,000 *
Joseph Michael Cafiero and
Veronica Walsh Cafiero JT None 5,000 * 2,500 7,500 *
McDonald & Company
Securities, Inc. FBO Frank
B. Carr IRA None 30,000 * 15,000 90,000 *
Chillington Corporation N.V. None 70,000 * 35,000 105,000 *
Alan R. Cohen None 10,000 * 5,000 15,000 *
Israel Cohen None 10,000 * 5,000 15,000 *
Phyllis J. Cohen None 5,000 * 2,500 7,500 *
14
<PAGE>
Irving W. Davies None 5,000 * 2,500 7,500 *
Ronny Lee Doran None 5,000 * 2,500 7,500 *
Joseph A. Dussich None 20,000 * 10,000 30,000 *
Sidney Dworkin None 20,000 * 10,000 30,000 *
Anita Elias Living Trust, Anita
and Jack Elias, TTEES None 10,000 * 5,000 15,000 *
Dr. Edward R. Falkner, Inc.
Profit Sharing Trust None 10,000 * 5,000 15,000 *
Alan Feldman None 10,000 * 5,000 15,000 *
Cary Fields None 40,000 * 20,000 60,000 *
Stuart Flaum None 10,000 * 5,000 15,000 *
F&N Associates, Inc. None 6,667 * 3,333 10,000 *
Gary W. Funk None 20,000 * 10,000 30,000 *
Joseph Giamanco None 80,000 1.5% 40,000 120,000 2%
Lawrence and Diane Gorelick None 20,000 * 10,000 30,000 *
Edward A. Harycki None 10,000 * 5,000 15,000 *
Hasenfield-Stein, Inc.
Pension Trust None 6,667 * 3,333 10,000 *
Delaware Charter Gurantee
& Trust Co. FBO Ronald I.
Heller IRA None 15,000 * 7,500 45,000 *
Richard A. Horstmann None 40,000 * 20,000 60,000 *
Intergalactic Growth Fund, Inc. None 40,000 * 20,000 60,000 *
Barbara Kantor None 10,000 * 5,000 15,000 *
Robert Karsten, D.D.S. None 20,000 * 10,000 30,000 *
Richard Katz None 10,000 * 5,000 15,000 *
E. Gerald Kay None 20,000 * 10,000 30,000 *
Kentucky National Ins. Co. None 10,000 * 5,000 15,000 *
Keys Foundation None 80,000 1.5% 40,000 120,000 2%
Ali H. Khin and
Mariam K. Ohn None 20,000 * 10,000 30,000 *
Ernest Howard King, Jr. None 10,000 * 5,000 15,000 *
Marvin Kogod and
Muriel Kogod JTWROS None 10,000 * 5,000 15,000 *
Jay Lieberman None 20,000 * 10,000 30,000 *
Andrew Licari None 20,000 * 10,000 30,000 *
James Lynch None 10,000 * 5,000 15,000 *
Leonard Makowka None 40,000 * 20,000 60,000 *
Virginia Meade None 5,000 * 2,500 7,500 *
Beno Michel M.D. Trust None 10,000 * 5,000 15,000 *
Harold Miller None 10,000 * 5,000 15,000 *
Farrell Moore and
Ann Moore JT None 10,000 * 5,000 15,000 *
Gee Gee Morgan None 5,000 * 2,500 7,500 *
Morgan Steel Limited None 40,000 * 20,000 60,000 *
Delaware Charter Guarantee
& Trust Co. FBO David S.
Nagelberg IRA None 15,000 * 7,500 22,500 *
Daniel Orenstein None 28,000 * 14,000 42,000 *
Donald Orenstein None 10,000 * 5,000 15,000 *
15
Seymour Orenstein None 16,000 * 8,000 24,000 *
The Chandrakant and
Krishna Patel Family
Trust Dtd. 8/25/92 None 20,000 * 10,000 30,000 *
Sanjay K. Patel None 20,000 * 10,000 30,000 *
Vijay Patel None 30,000 * 15,000 90,000 *
James M. Persky None 5,000 * 2,500 7,500 *
Stephen J. Posner None 20,000 * 10,000 30,000 *
Delaware Charter Guaranty
Trust TTEE FBO
Paul Prager IRA None 30,000 * 15,000 45,000 *
Tis Prager None 20,000 * 10,000 30,000 *
R. Capital II, Ltd. None 40,000 * 20,000 60,000 *
Kenneth M. Reichle, Jr. None 10,000 * 5,000 15,000 *
Fahnestock & Co., Inc.
C/F Gerald Richter IRA None 10,000 * 5,000 15,000 *
R&J Trust Dtd. 7/1/93,
Roger P. Siegel and
Joan K. Siegel TTEES None 20,000 * 10,000 30,000 *
Kenneth M. Robbins None 10,000 * 5,000 15,000 *
Wayne Robbins None 20,000 * 10,000 30,000 *
Joseph Roselle None 40,000 * 20,000 60,000 *
Carl Rosen None 20,000 * 10,000 30,000 *
Robert M. Rosin None 10,000 * 5,000 15,000 *
Harvey L. Ross None 20,000 * 10,000 30,000 *
Irving Russo None 10,000 * 5,000 15,000 *
Rutgers Casualty Ins. Co. None 10,000 * 5,000 15,000 *
Ronald Schaffer None 24,000 * 12,000 36,000 *
Harry Schwartz None 10,000 * 5,000 15,000 *
Mark Schwartz None 10,000 * 5,000 15,000 *
Merton J. Segal None 20,000 * 10,000 30,000
Nrman Seiden None 40,000 * 20,000 60,000 *
Robert Shiff None 10,000 * 5,000 15,000 *
Barbara Snyder None 20,000 * 10,000 30,000 *
Nachum Stein None 6,667 * 3,333 10,000 *
Myron M. Teitelbaum, M.D. None 5,000 * 2,500 7,500 *
Edmund Tennenhaus None 20,000 * 10,000 30,000 *
Tissera Overseas Fund N.V. None 20,000 * 10,000 30,000 *
Robert and Sarah Wax None 20,000 * 10,000 15,000 *
Securities Underlying Placement Agent Warrants
- ----------------------------------------------
Norman Gottlieb Note 4 52,290 * 26,145 78,435 1.5%
Dino Liso None 52,290 * 26,145 78,435 1.5%
First Montauk Securities Corp. None 29,240 * 14,620 43,860 *
Ameriprop, Inc. None 18,340 * 9,170 27,510 *
Cantella & Company, Inc. None 4,520 * 2,260 6,780 *
Lawrence Zaslow None 12,600 * 6,300 18,900 *
Nathan Low None 5,400 * 2,700 8,100 *
Susan Bender None 1,500 * 750 2,250 *
16
<PAGE>
M.H. Meyerson None 2,240 * 1,120 3,360 *
Z/A Associates None 5,400 * 2,700 8,100 *
Comprehensive Capital None 1,500 * 750 2,250 *
First National Fund Corp None 6,000 * 3,000 9,000 *
Stephen J. Posner None 4,740 * 2,370 7,110 *
Donald Orenstein None 2,380 * 1,190 3,570 *
Benjamin Leifer None 1,184 * 592 1,776 *
Southwall Capital None 296 * 148 444 *
To be determined (Note 5) None 80 * 40 120 *
Other Private Placements.
- -------------------------
Jerome Belson None 0 * 75,000 75,000 Note 2
Bridge Ventures Note 6 0 * 250,000 250,000 Note 3
Saggi Captial Corporation Note 7 0 * 100,000 100,000 1.5%
* Less than 1%
</TABLE>
Note 1. For purposes of computing the percentage of securities held by each
person, any security which such person or persons has the right to acquire
within sixty days of March 31, 1998 is deemed to be outstanding but is not
deemed to be outstanding for the purpose of computing the percentage ownership
of any other person.
Percentages are rounded up to the nearest one-half percent.
Note 2. When Belson's holdings under the Private Placement are added with his
warrants issued July 14, 1998, he owns 4.0% of the total issued and
outstanding securities.
Note 3. When Bridge Ventures' holdings under the Private Placement are added
with warrants issued July 14, 1997, it owns 3.5% of the total issued and
outstanding securities.
Note 4: Norman Gottleib is a principal of Normandy Securities, which is a
consultant under terms of a Consulting Agreement entered into between Elite
Laboratories, Inc. and Normandy Securities, Inc., dated as of October 31, 1997,
and effective through October 31, 1998. Under the terms of said agreement,
Normandy Securities, Inc. provides to Elite Labs consulting services relating to
corporate finance in exchange for monthly payments of $3,000.
Note 5. A total of ten Placement Agent Warrants (granting in the aggregate the
right to purchase 200,000 Shares and 100,000 Warrants) were issued to Normandy
Securities, Inc. ("Normandy Securities"), the placement agent for the private
placement. Normandy Securities allocated the Placement Agent Warrants among the
broker-dealers involved in the Private Placement. The numbers reflected above
are the numbers as reported by counsel for Normandy Securities; however, they
represent the right to purchase in the aggregate 199,920 Shares and 99,960
Warrants. The difference has been reflected by the entry "Uncertain".
Note 6: Consultant under terms of Consulting Agreement entered into between
Elite Laboratories, Inc. and Bridge Ventures, Inc., dated as of August 1,
1997, and assumed by Elite Pharmaceuticals, Inc. as of November 7, 1997.
Note 7: Consultant under terms of Consulting Agreement entered into between
Elite Laboratories, Inc. and Saggi Capital Corporation, dated as of
August 1, 1997, and assumed by Elite Pharmaceuticals, Inc. as of November 7,
1997.
17
<PAGE>
USE OF PROCEEDS
---------------
The Company will not receive any proceeds from the sale of shares of
Common Stock by the Selling Shareholders. See "Selling Shareholders". The
Company will receive proceeds only upon the exercise of the Warrants or the
Placement Agent Warrants by the holders thereof. If all of the Warrants (other
than those underlying the Placement Agent Warrants) are exercised (each Warrant
entitling the holder thereof to purchase one share of Common Stock at 6.00 per
share), the proceeds generated therefrom will be $8,550,000. If all the
Placement Agent Warrants are exercised (each Placement Agent Warrant entitling
the holder thereof to purchase 20,000 shares of Common Stock and 10,000 Warrants
for $72,000), the proceeds therefrom will be $720,000. If, subsequent to the
exercise of the Placement Agent Warrants, the holders of the underlying Warrants
exercise such warrants, the proceeds therefrom will be $600,000. There can be no
assurance as to when, if ever, any or all of such securities will be exercised.
Proceeds, if any, received from the exercise of the Warrants, Placement Agent
Warrants and Warrants underlying the Placement Agent Warrants will be used for
working capital requirements and other general corporate purposes.
DILUTION
--------
There will be no dilution of the book value of the Common Stock since
no additional shares are being issued as a result of this offering. There are
outstanding options and warrants not offered hereunder which entitle the holders
thereof to purchase shares of Common Stock at exercise prices ranging from $2.00
to $7.00; exercise of such options or warrants by the holders thereof may dilute
the book value of the Common Stock if such warrants or options are exercised at
a time when the book value of the Common Stock exceeds the exercise price.
PLAN OF DISTRIBUTION
--------------------
Any securities offered and sold pursuant hereto will be offered and
sold from time to time by Selling Security Holders for their own accounts. The
securities offered may be sold from directly by the Selling Security Holders, or
the Selling Security Holders may offer such securities through underwriters,
dealers or agents. The distribution of securities by Selling Security Holders
may be effected in one or more transactions that may take place on the
over-the-counter market, including broker's transactions, privately-negotiated
transactions or through sales to one or more broker-dealers for resale of such
securities as principals, at market prices prevailing at the time, at prices
related to such prevailing market prices or at negotiated prices. Usual and
customary or specifically negotiated fees or commissions may be paid by the
Selling Security Holders in connection with such sales of securities. The
Selling Security Holders and intermediaries through whom such securities are
sold may be deemed "underwriters" within the meaning of the Securities Act with
respect to the securities offered, and any profits realized or commissions
received may be deemed underwriting compensation.
18
<PAGE>
At the time a particular offer of securities is made by a Selling
Security Holder, the Selling Security Holder must, to the extent required by
law, deliver a prospectus setting forth the number of shares being offered, and
the terms of the offering, including the name or names of any underwriters,
dealers or agents, if any, the purchase price paid by any underwriter for shares
purchased from the Selling Security Holder, and any discounts, commissions, or
concessions allowed or reallowed or paid to dealers, and the proposed selling
price to the public. The Selling Security Holders will be subject to the
applicable provisions of the Exchange Act and the rules and regulations
thereunder, which provisions may limit the time of purchases and sales by the
Selling Security Holders.
The Company is unaware of securities being offered other than for cash.
No Selling Security Holder has the right to designate any of the Company's Board
of Directors. No persons are or have been indemnified against liability arising
under the Securities Act with respect to this offering of the Common Stock and
Warrants, except to the extent that the Articles of Incorporation and Bylaws of
the Company indemnify the members of its Board of Directors generally against
civil, criminal and administrative actions against any director by reason of
action taken by such person in his or her capacity as director. (See "Risk
Factors - Limitation on Personal Liability of Directors"). The Company is
unaware any contracts that any Selling Security Holder may have entered into
with any dealer, underwriter or finder, or of any passive market making activity
being contemplated or undertaken by any Selling Security Holder.
Pursuant to the provisions under the Exchange Act and the rules and
regulations thereunder, any persons engaged in a distribution of the Common
Stock offered by this Prospectus may not simultaneously engage in market making
activities with regard to the Common Stock of the Company during applicable
"cooling off" periods prior to the commencement of such distribution. In
addition, and without limiting the foregoing, the Selling Security Holders will
be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder including, without limitation, Rules 10b-6 and 10b-7,
which provisions may limit the timing of purchases and sales of Common Stock by
the Selling Security Holders.
19
MANAGEMENT
----------
Identification of Directors and Executive Officers.
- ---------------------------------------------------
The directors and executive officers of the Elite Pharmaceuticals and Elite Labs
are identical, and are:
Name Age Position
---- --- --------
Atul M. Mehta 49 President, Chief Executive Officer
and Director
Barri M. Blauvelt 44 Director
John W. Jackson 53 Director
Mark Gittelman 38 Treasurer
Atul M. Mehta has been a director of Elite Labs since its inception in
1990, and a director of Elite Pharmaceuticals since 1997. Barri Blauvelt has
served as a director of Elite Labs since 1992, and as a director of Elite
Pharmaceuticals since 1997. John Jackson has served as a director of Elite Labs
since 1995, and as a director of Elite Pharmaceuticals since 1997. There are no
arrangements between any director or executive officer and any other person,
pursuant to which the director or officer is to be selected as such. There is no
family relationship between the directors, executive officers, or persons
nominated or chosen by the Company to become directors or executive officers.
Dr. Mehta, the founder of Elite Labs, has been employed as the
President of Elite Labs since 1990, and President of Elite Pharmaceuticals since
1997. Prior to that, he was Vice President at Nortec Development Associates, a
company specializing in the development of food, pharmaceutical and chemical
specialty products, from 1984 to 1989. From 1981 to 1984, he was associated with
Ayerst Laboratories, a division of American Home Products Corporation in the
solids formulation section as Group Leader. His responsibilities included
development of formulations of ethical drugs for conventional and
controlled-release dosage forms for both USA and international markets. He
received his B.S. degree in Pharmacy with honors from Shivaii University,
KoIhapur, India, and a BS, MS, and a Doctorate of Philosophy in Pharmaceutics
from the University of Maryland in 1981. Other than Elite Labs, no company with
which Mr. Mehta was affiliated in the past was a parent, subsidiary or other
affiliate of the Company.
Barri M. Blauvelt, Director of Elite, has been employed since 1983 as the
President of Innovara, Inc., a company engaged in pharmaceutical marketing and
management. Prior to forming Innovara, Inc. in 1983, Mrs. Blauvelt had ten years
of marketing and management experience at Pfizer (USA) and American Cyanamid
Company (International). Mrs. Blauvelt holds an MBA in Marketing from Columbia
University, and was an instructor in the Pharmaceutical Degree Program, Graduate
School of Business, at Farleigh Dickensen University. Other than Elite Labs, no
company with which Ms. Blauvelt was affiliated in the past was a parent,
subsidiary or other affiliate of the Company.
John W. Jackson, Director of Elite, is Chairman and CEO of Celgene Corporation,
a reporting company under the Securities Exchange Act (Nasdaq:CELG), and has
been employed as such since 1996. Celgene Corporation uses proprietary expertise
in small molecule chemistry to serve the pharmaceutical, agricultural and allied
industries. From 1991 to 1996 he was President of Gemini Medical, a company
engaged in providing consulting to medical
20
<PAGE>
companies, inventors and investors. From 1986 to 1991 he was President of
Medical Device Division of American Cyanamid Company and from 1978-1986 he was
VP International for Medical Products. From 1971-1978 he worked for Merck &
Company in international marketing. Mr. Jackson obtained an MBA from the
European Institute of Business Administration, France, a BA in Political Science
from Yale University and graduated from Gordonstoun School in Scotland. Other
than Elite Labs, no company with which Mr. Jackson was affiliated in the past
was a parent, subsidiary or other affiliate of the Company.
Mark Gittelman, CPA, Treasurer of Elite, is the President of Goldman &
Gittelman, P.C., an accounting firm. Prior to forming Goldman & Gittelman in
1984, he worked as a certified public accountant with the international
accounting firm of KPMG Peat Marwick, LLP. Mr. Gittelman holds a B.S. in
accounting from New York University, and is currently completing his Masters of
Science in Taxation at Farleigh Dickinson University. He is a Certified Public
Accountant licensed in New Jersey and New York, and is a member of the American
Institute of Certified Public Accountants ("AICPA"), the Securities and Exchange
Practice Section of the AICPA, and the New Jersey State and New York States
Societies of CPAs. Other than Elite Labs, no company with which Mr. Gittelman
was affiliated in the past was a parent, subsidiary or other affiliate of the
Company.
Involvement in Certain Legal Proceedings.
- -----------------------------------------
No director, executive officer, or person nominated to become an executive
officer or director, or control person has been the subject of any of the
following actions taken during the past ten years and not subsequently
reversed, suspended, vacated, annulled or otherwise rendered of no
effect: (a) bankruptcy or insolvency proceedings as described in Reg.
Section 228.401(d)(1)(i); (b) criminal proceedings as described in Reg.
Section 228.401(d)(1)(ii); (c) civil or administrative proceedings as described
in Reg. Section 228.401(d)(1)(iii); or (d) self-regulatory organization
proceedings as described in Reg. Section 228.401(d)(1)(i).
Disclosure Of Commission Position On Indemnification For Securities Act
- -----------------------------------------------------------------------
Liabilities.
- ------------
The Articles of Incorporation and Bylaws of the Company contain
provisions reducing the potential personal liability of the directors of the
Company for certain monetary damages and providing for indemnity of directors.
The Company is unaware of any present, pending or threatened litigation which
would result in any liability for which a director would seek such
indemnification or protection. In addition, the Company has applied for
directors and officers liability insurance, but has not yet received such
coverage.
The provisions affecting personal liability provide that the Company
will indemnify its directors to the fullest extent permitted by Section 145 of
the Delaware Corporation Law against (a) expenses (including attorney's fees)
reasonably incurred in connection with any threatened, pending or completed
civil, criminal, administrative, investigative or arbitrative action, suit or
proceeding (and appeal therefrom) against any director, whether or not brought
by or on behalf of the Company seeking to hold the director liable by reason of
the fact that he was acting in such capacity; and (b) any reasonable payments
made by him in satisfaction of any judgment, money decree, fine, penalty or
settlement in such action, suit or proceeding. In that respect, the provisions
diminish the potential right of action which might otherwise be available to
shareholders by affording indemnification by the Company against most damages
and settlement amounts paid by a director.
21
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.
Compensation.
- -------------
Summary Executive Compensation Table for years 1995, 1996 and 1997.
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
a b c d e f g h i
Name and Calendar Base Bonus Other Restricted Securities LTIP All other
principal Year(1) Salary Annual stock Underlying payouts compen-
position Compen- awards options sation
sation
Atul M. Mehta 1997 $180,000 $0 $1,795 (2) -- 545,214(4) -- --
President 1996 $165,000 $0 $1,795 (2) -- 100,000 -- --
1995 $150,000 $0 $ 870 (3) -- _________ -- --
</TABLE>
(1) Dr. Mehta's compensation is paid on a calendar year basis. The Company's
fiscal year is from April 1 through March 31. (2) Represents use of a company
car, and premiums on life insurance Dr. Mehta's life for the benefit of his wife
paid by the Company. (3) Represents premiums on life insurance Dr. Mehta's life
for the benefit of his wife paid by the Company. (4) 400,000 of the above
options were initially to vest at the rate of 100,000 per year each year from
1996 through 2001; however, upon completion of the Private Placement, they
became 100% vested; the remaining 125,000 options were initially to vest at the
rate of 41,667 per year for each year from 1997 through 1999; however upon
completion of the Private Placement, they became 100% vested.
<TABLE>
<CAPTION>
Executive Option Grants Table for fiscal year ended March 31, 1998.
- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
a b c d e
Number of Securities % Grant Represents Per-Share Exercise
Name Underlying Options of Options to Employees or Base Price Expiration date
Atul M. Mehta 420,214(1) 100% $2.00 1/1/2007
125,000(2) 100% $7.00 9/1/2002
</TABLE>
(1) The number of securities underlying the options were initially shares of
Elite Labs; however under the terms of the Private Placement, they have been
replaced with shares of Elite Pharmaceuticals. The options were initially to
vest at the rate of 100,000 per year each year from 1996 through 2001; however,
upon completion of the Private Placement, they became 100% vested.
(2) Granted under Incentive Stock Option Plan. The number of securities
underlying the options were initially shares of Elite Labs; options
were initially to vest at the rate of 41,667 per year for each year from 1997
through 1999; however upon completion of the Private Placement, they
became 100% vested.
22
<PAGE>
<TABLE>
<CAPTION>
Aggregated Executive Option Exercises and Fiscal Year End
Option Value Table for fiscal year ended March 31, 1998.
- --------------------------------------------------------
<S> <C> <C> <C> <C>
a b c d e
# of Securities Underlying Value of Unexercised
Unexercised Options In-the-Money Options/
at FY-End at FY-End
Name Shares Acquired Value Exercisable/ Exercisable/
on Exercise Realized Unexercisable(1) Unexercisable
Atul M. Mehta None $0 520,214 $520,214(2)
Exercisable
None $0 125,000 $0(2)
</TABLE>
(1) The number of securities underlying the options were initially shares of
Elite Labs; however under the terms of the Private Placement, they have been
replaced with shares of Elite Pharmaceuticals. The number of shares reflects the
two-for-one split of Elite Labs' stock undertaken on August 14, 1997.
(2) The market value of the shares of Common Stock is unknown and uncalculable.
However, in the Private Placement, units consisting of 20,000 shares of Common
Stock and 10,000 Warrants were issued for $60,000 per unit. Based on that
offering price, the maximum amount the shares of Common Stock could be worth is
$6.00. It is on this hypothetical value that the figure in column (e) is
calculated. This figure may have no relation to the actual value of the
unexercised options.
<TABLE>
<CAPTION>
Director Compensation for Fiscal Year Ending March 31, 1998
- -----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
a b c d e f
Cash Compensation Security Grants
------------------------------------------ ----------------------------
Annual Consulting or Number Number of Securities
Name Retainer Fee Meeting Fees Other Fees of Shares Underlying Options
Barri M. Blauvelt $0 $1,000(1) $0 0 65,000 shares(2)
John W. Jackson $0 $1,000(1) $0 0 105,000 shares(3)
</TABLE>
(1) Pursuant to a resolution of the Board of Directors of the company as of
February 11, 1998, under the terms of which all non-affiliated directors will
receive $1,000 as compensation for each meeting personally attended.
(2) Exercisable until December 21, 2005, at an exercise price of $2.00. The
securities underlying the options were initially shares of Elite Labs; however
under the terms of the Private Placement, they have been replaced with shares of
Elite Pharmaceuticals. The options were awarded on December 21, 1995, and were
to vest at the rate of 40,000 immediately, and 20,000 on December 21 of each of
1996, 1997 and 1998; however, upon completion of the Private Placement, the
remaining 40,000 unvested options vested immediately. In addition, Ms. Blauvelt
was awarded an additional 25,000 on August 7, 1997 in connection with the
twenty-five percent upgrade of all optionsholders awarded on that date.
(3) Exercisable until December 21, 2005, at an exercise price of $2.00. The
securities underlying the options were initially shares of Elite Labs; however
under the terms of the Private Placement, they have been replaced with shares of
Elite Pharmaceuticals. The options were awarded on December 21, 1995, and were
to vest at the rate of 20,000 on December 21 of each of 1996, 1997 and 1998;
23
<PAGE>
however, upon completion of the Private Placement, the remaining 40,000 unvested
options vested immediately. In addition, Mr. Jackson was awarded an additional
40,000 shares on August 7, 1997, and was awarded an additional 25,000 on August
7, 1997 in connection with the twenty-five percent upgrade of all optionsholders
awarded on that date.
Employment Contracts and Termination of Employment and Change-in-Control
- ------------------------------------------------------------------------
Arrangements.
- -------------
The Company entered into an employment contract with Atul M. Mehta,
effective January 1, 1996. Pursuant to the employment agreement, as amended, Dr.
Mehta is employed full time as President and CEO of the company. The agreement
will remain in effect until December 31, 2000, and will then be renewed for an
additional five years unless notice is given by either party, in which case it
will be renewed for successive one year terms. Under the terms of the agreement,
Dr. Mehta agrees to devote a sufficient amount of his business time to
diligently perform his obligations. His base salary under the agreement is
$165,000 in 1996, $180,000 in 1997, $200,000 in 1998, with a raise in 1999 and
2000 to be determined by the Board of Directors, but not to be less than 5% of
the preceding year's salary. Under the agreement, Dr. Mehta is entitled to a
bonus equal to five percent of the net profits of the company; to health
insurance for him and his dependents; term life insurance in a minimum amount of
$300,000 for the benefit of his spouse or estate; and any benefits provided to
employees generally, including any incentive stock option plans. He also became
entitled to receive options on January 1 of each year beginning with January 1,
1996 through January 1, 2001, to purchase 100,000 shares of Common Stock at
$2.00 per share; upon completion of the Private Placement, these options
immediately vested. The agreement provides that, in the event that Dr. Mehta
loses his job as a result of a change of control in the Company, he will be
entitled to the present value of all salary, bonuses and deferred compensation
through the earlier of May 22, 2001 or three years following his termination.
Dr. Mehta is required to refrain from competing with the Company during
the term of the Agreement.
24
PRINCIPAL SHAREHOLDERS
The following table sets forth the security ownership of certain
beneficial owners(1) and management as of the date of this prospectus with
respect to the beneficial ownership of the Companies Common Stock by (i) each
person known by the Company to be the beneficial owner of more than 5% of the
Company's Common Stock; (ii) each director of the Company; (iii) each executive
officer of the Company; and (iv) the officers and directors of the Company as a
group.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
a b c d
Title of Class Name and Address of Amount and Nature of Percent of Class
Beneficial Owner Beneficial Ownership
Voting Common Atul M. Mehta, Director/Officer 2,357,814 (2) 29.9%
252 E. Crescent Avenue
Ramsey, NJ 07446
Voting Common John de Neufville, Trustee 925,000 (3) 12.7%
Margaret deNeufville Revocable Trust
197 Meister Avenue
North Branch, NJ 08876
Voting Common Bakul and Dilip Mehta 630,000 8.7%
P.O. Box 438
Muscat, Sultanate of Oman
Voting Common Bridge Ventures, Inc. 591,667 (4) 7.9%
575 Lexington Avenue, Ste. 410
New York, NY 10022
Voting Common Vijay Patel 441,036 (5) 6.0%
19139 Pebble Court
Woodbridge, CA 95258
Voting Common Barri M. Blauvelt, Director 300,000 (6) 4.1%
175 Cherry Lane
Amherst, MA 01022
Voting Common John W. Jackson, Director 125,000 (7) 1.7%
32 Gregory Lane
Warren, NJ 07059
Voting Common Officers and Directors as a Group 2,782,814 (8) 34.2%
</TABLE>
(1) For purposes of this table, a person or group of persons is deemed to have
"beneficial ownership" of any shares of Common Stock which such person has the
right to acquire within 60 days of January 28, 1998. For purposes of computing
the percentage of outstanding shares of Common Stock held by each person or
group of persons named above, any security which such person or persons has or
have the right to acquire within such date is deemed to be outstanding but is
not deemed to be outstanding for the purpose of computing the percentage
ownership of any other person. Except
25
<PAGE>
as indicated in the footnotes to this table and pursuant to applicable community
property laws, the Company believes based on information supplied by such
persons, that the persons named in this table have sole voting and investment
power with respect to all shares of Common Stock which they beneficially own.
(2) Includes (i) 100,000 shares of Common Stock held by Asha Mehta, Dr. Mehta's
wife; (ii) 6,300 shares held by Dr. Mehta C/F Amar Mehta; (iii) 6,300 shares
held by Dr. Mehta C/F Anand Mehta; and (iv) options to purchase 645,214 shares
of Common Stock.
(3) Represents (i) 900,000 shares of Common Stock held by the Margaret de
Neufville Revocable Trust, of which Mr. de Neufville is Trustee, and (ii)
options held by Mr. de Neufville to purchase 25,000 shares of Common Stock
(4) Includes (i) 133,333 shares owned by SMACs Holding Company, an Affiliate of
Bridge Ventures, Inc., and (ii) warrants to purchase 275,000 shares of Common
Stock held by Bridge Ventures, Inc.
(5) Includes options to purchase 18,750 shares of Common Stock and
warrants to purchase 117,286 shares of Common Stock.
(6) Includes (i) 10,000 shares of Common Stock held by G.C. and Barri Blauvelt
C/F Heather Blauvelt; (ii) 10,000 shares held by G.C. and Barri Blauvelt C/F
Meghaan Blauvelt; (iii) 10,000 shares held by G.C. and Barri Blauvelt C/F Chris
Blauvelt; and (iv) options to purchase 125,000 shares of Common Stock.
(7) Represents options to purchase 125,000 shares of Common Stock.
(8) Includes options to purchase 895,214 shares of Common Stock.
26
DESCRIPTION OF SECURITIES
-------------------------
Elite Pharmaceuticals increased the number of authorized shares of its
Common Stock from 10,000,000 to 25,000,000 by amendment to its Articles of
Incorporation filed June 1, 1998. There are 7,237,613 shares of Common Stock
outstanding, and an additional 2,955,000 shares of Common Stock are subject to
outstanding options or warrants to purchase said shares. Of such shares,
4,787,600 shares of such Common Stock could be sold pursuant to Rule 144 under
the Securities Act, subject to the volume and time limitations contained
therein; it is currently registering 3,725,000 shares under the Securities Act
for sale by Security Holders (1,525,000 of which such shares underlie Warrants
held by such Security Holders); and 448,791 shares of Common Stock of the Elite
Pharmaceuticals have been previously registered under the name of Prologica
International, Inc. The shares, options and warrants are held by approximately
188 security holders.
Description of Common Stock.
- ----------------------------
The Common Stock registered is the sole class of stock in the Company.
The holders of Common Stock are entitled to one vote for each share held of
record on each matter submitted to a vote of stockholders and do not have
cumulative voting rights for the election of directors. The Common Stock has no
conversion rights and includes no preemptive subscription, conversion,
redemption or other rights to subscribe for additional securities. The holders
of the Common Stock will be entitled to receive dividends, if any, as may be
declared by the Board of Directors out of legally available funds and to share
pro rata in any distribution to the stockholders, including any distribution
upon liquidation, dissolution or winding up of the Company subject to the rights
of any holders of Preferred Stock, if any Preferred Stock is ever issued. All
outstanding Common Stock and the Shares issuable upon exercise of the Warrants,
upon issuance and when paid for, will be duly authorized, validly issued, fully
paid and nonassessable.
The Company has not, to date, paid any cash dividends upon its Common
Stock and does not expect to declare or pay any dividends.
Warrants.
- ---------
The Company is also registering 1,525,000 Warrants, each of which
entitles the holder to purchase one share of Common Stock at an exercise price
of $6.00 during the five-year period commencing November 30, 1997. There are
currently warrants and options issued and outstanding exercisable for 2,950,000
shares of Common Stock, including the Warrants being Registered (and including
75,000 options issued to an employee on April 1, 1998), although not all
warrants or options outstanding have the same exercise rights, exercise period
or exercise price as those being Registered. No fractional shares will be issued
upon exercise of the Warrants. However, if a Warrant Holder exercises all
Warrants then owned of record by him or her, the Company will pay to such
holder, in lieu of the issuance of any fractional share which is otherwise
issuable, an amount in cash based on the market value of the Common Stock on the
last trading day prior to the exercise date
Placement Agent Warrants.
- -------------------------
Ten Placement Agent Warrants were issued to the placement agent and
its designees in connection with the Private Placement of the Company's
securities. Each Placement Agent
27
<PAGE>
Warrant entitles the holder(s) thereof to purchase for the sum of
$72,000 one unit consisting of 20,000 shares of Common Stock and 10,000 Warrants
exercisable at $6.00 per share. The Placement Agent Warrants are not themselves
being registered or offered hereunder; however the securities underlying them
are being registered and, if the Placement Agent Warrants are exercised and the
holders thereof become the holders of the underlying securities, such securities
may be offered by the holders thereof in the same manner as any other Security
Holder. See "Use of Proceeds" and "Plan of Distribution".
Transfer Agent.
- ---------------
The transfer agent and registrar for the Company's Common Stock and
Warrants registered hereunder is Jersey Transfer and Trust Company, 201
Bloomfield Avenue, Verona, New Jersey, 07044.
Trading Market.
- ---------------
There is currently no established trading market for Common Stock or
Warrants.
EXPERTS AND COUNSEL
-------------------
Counsel.
- --------
The legality of the securities offered hereby and certain other legal
matters will be passed upon for the Company by James, McElroy & Diehl, P.A, 600
South College Street, Charlotte, North Carolina 28202.
Experts.
- --------
The consolidated financial statements of Elite Pharmaceuticals, Inc. and
Subsidiary included in the Company's Prospectus and Registration Statement on
Form SB-2 Amendment #1 for the years ended March 31, 1998 and 1997, have been
audited by Miller, Ellin & Company, LLP, independent auditors, to the extent and
for the periods set forth in their report dated May 28, 1998, appearing
elsewhere herein, and is included in reliance upon the report of said firm given
upon their authority as experts in accounting and auditing.
Interests of Experts and Counsel
- --------------------------------
Neither (a) any expert named in the Registration Statement as having
prepared or certified any part of the Registration Statement or a report, or
valuation to be used in connection with the Registration Statement, nor (b) any
counsel for the Company named in the Prospectus as having given an opinion on
the validity of the securities being registered or on other legal matters in
connection with the Registration or the Offering, (i) was employed for that
purpose on a contingency basis; (ii) had at any time prior hereto, or is to
receive in connection with the offering; a substantial interest, direct or
indirect, in the Company, its parents or subsidiaries; or (iii) was connected
with the Company or any of its parents or subsidiaries as a promoter, managing
underwriter, or principal underwriter, voting trustee, director, officer or
employee.
28
<PAGE>
DESCRIPTION OF BUSINESS
-----------------------
Elite Pharmaceuticals, Inc.'s Business.
- ----------------------------- ---------
Elite Pharmaceuticals' predecessor, Prologica International, Inc., was
incorporated in the State of Pennsylvania on April 20, 1984. From the time of
its incorporation, and the completion of its initial public offering in August
1988, until the date of its merger with Elite Pharmaceuticals, Prologica engaged
in no business other than searching for suitable acquisitions. Except for Elite
Pharmaceuticals, it located no such acquisitions. Elite Pharmaceuticals was
incorporated in the State of Delaware on October 1, 1997, for the purpose of
merging with Prologica in order to change the name and state of incorporation of
Prologica. (Prior to the merger, Prologica underwent a three-for-one reverse
split on October 9, 1997.) Elite Pharmaceuticals survived the merger with
Prologica; Prologica ceased to exist at the time of the merger on October 24,
1997. Contemporaneous with the merger of Elite Pharmaceuticals and Prologica,
Elite Labs (the business of which is described below) merged with a wholly owned
subsidiary of Prologica, HMF. HMF was incorporated on August 1, 1997 for the
purpose of providing a vehicle into which Elite Labs could merge. Elite Labs and
HMF merged on October 30, 1997. (Prior to the merger, Elite Labs underwent a
two-for-one forward split on August 21, 1997.) Elite Labs survived the merger
with HMF and HMF ceased to exist subsequent to the merger. The net result of the
two mergers is that Prologica and HMF have ceased to exist, and Elite
Pharmaceuticals owns one hundred percent of the stock of Elite Labs. Such stock
ownership is Elite Pharmaceuticals' sole business.
There were no promotors of Elite Pharmaceuticals prior to its incorporation.
Neither Elite Pharmaceuticals nor Prologica had had any operating revenue for
the three years preceding the merger. At the present time, Elite Pharmaceuticals
has no plans to conduct any other business apart from the ownership of Elite
Labs. None of the proceeds of the current offering will inure to the benefit of
Elite Pharmaceuticals or Elite Labs.
Elite Laboratories, Inc.'s Business.
- ------------------------------------
Elite Laboratories, Inc. was incorporated in the State of Delaware on August 23,
1990. As described above, on October 30, 1997, one hundred percent of the stock
of Elite Labs was acquired by Elite Pharmaceuticals, Inc. via the merger between
Elite Labs and HMF. With that exception, no acquisition or disposition of any
material assets, nor any material changes in the method of conducting business
have incurred since its incorporation.
Products and Markets
- --------------------
Elite Labs primarily engages in researching, developing, licensing,
manufacturing, and marketing proprietary drug delivery systems and products.
Elite Labs' drug delivery technology involves releasing a drug into the
bloodstream or delivering it to a target site in the body over an extended
period of time or at predetermined times. Such products are designed to allow
drugs to be administered less frequently, with reduced side effects and, in
certain circumstances, in reduced dosages. Elite Labs has concentrated on
developing orally administered controlled release products. Elite Labs'
primarily targets existing controlled release drugs that are reaching the end of
their exclusivity period, and works to develop cheaper generic
controlled-release version of those drugs. Six controlled release products
developed by Elite Labs are at various stages of testing. The products include
drugs which
29
<PAGE>
provides, therapeutic benefits for angina and hypertension, a nonsteroidal
analgesic drug, and one which appears to lower blood glucose by stimulating
insulin from the pancreas. None of these products have yet been approved by the
FDA, and Elite therefore does not yet market any products.
Elite Labs also engages in contract research and development activities
sponsored by several other pharmaceutical companies.
Controlled drug delivery of a pharmaceutical compound is a relatively new
concept which offers a safer and more effective means of administering drugs
through releasing a drug into the bloodstream or delivering it to a certain site
in the body at predetermined rates or predetermined times. Its goal is to
provide more effective drug therapy while reducing or eliminating many of the
side effects associated with conventional drug therapy.
In the United States and European health care communities, a great deal of
interest has been evident in the area of new drug delivery systems. Several
pharmaceutical products have been introduced as oral controlled-release dosage
forms, both as tablets and as capsules.
Research and Development Costs.
- -------------------------------
Elite Labs spent approximately $377,637 in fiscal year ending March 31,
1997 and $541,164 in fiscal year ending March 31, 1998, on company-sponsored
research and development activities. As Elite Labs does not yet sell any of its
products, no part of the cost of such research was passed on to consumers of
Elite Labs' products.
Distribution Methods of Products or Services. As yet, Elite Labs has not
- --------------------------------------------------
developed nor needed an elaborate method of distribution of products or
services.
Competitive Business Conditions and Issuer's Competitive Position.
- ------------------------------------------------------------------
Elite Labs competes in two related but distinct markets: It performs
contract research and development work regarding controlled-release drug
technology for large pharmaceutical companies, and it seeks to develop and
market (either on its own or by licensure to other companies) proprietary
controlled-release pharmaceutical products. In both arenas, Elite's competition
consists of those companies which are able (or are perceived as able) to develop
controlled-release drugs.
In recent years, an increasing number of pharmaceutical companies have become
interested in the development and commercialization of products incorporating
advanced or novel drug delivery systems. The Company expects that competition in
the field of drug delivery will significantly increase in the future since
smaller specialized research and development companies are beginning to
concentrate on this aspect of the business. Some of the major pharmaceutical
companies have invested and are continuing to invest significant resources in
the development of their own drug delivery systems and technologies and some
have invested funds in such specialized drug delivery companies. Many of these
companies have greater financial and other resources as well as more experience
than the Company in commercializing pharmaceutical products. A comparatively
small number of companies have a track record of success in developing
controlled-release drugs. Significant among these are Alza Corporation, Andrx,
Elan Corporation, Biovail Corporation, Faulding, Schering, KV Pharmaceutical,
Forest Laboratories, etc. Each of these companies have developed expertise in
certain types of drug delivery systems, although such expertise does not carry
over to developing a
30
<PAGE>
controlled-release version of all drugs. Such companies may develop new drug
formulations and products or may improve existing drug formulations and products
more efficiently than the Company. While the Company's product development
capabilities and patent protection may help the Company to maintain its market
position in the field of advanced drug delivery, there can be no assurance that
others will not be able to develop such capabilities or alternative technologies
outside the scope of the Company's patents if any, or that even if patent
protection is obtained, such patents will not be successfully challenged in the
future. In addition, it must be noted that almost all of the Company's
competitors have vastly greater resources than the Company.
Sources and Availability of Raw Material.
- -----------------------------------------
The Company is not yet in the manufacturing phase of any product and therefore
does not have a requirement for significant amounts of raw materials. It
currently obtains what limited raw materials it needs from over twenty
suppliers.
Dependence on One or a Few Major Customers.
- -------------------------------------------
Each year, the Company has had some customers that have accounted for a large
percentage of its sales. It is the intention of the Company to expand its
business to service a greater number of customers at one time.
Patents, Trademarks, Royalty Agreements etc..
- ---------------------------------------------
Elite Labs has received Notices of Allowance from the U.S. Patent and Trademark
Office for the following trademarks: Albulite CR, Nifelite CR, Diltilite CD,
Ketolite CR, Verelite CR and Glucolite CR.
The Company has applied for two patents for one of its products and intends to
apply for patents for other products in the future; however, there can be no
assurance that these or any future patents will be granted. The Company believes
that future patent protection of its technologies and processes and of its
products may be important to its operations. The success of the Company's
products may depend, in part, upon the Company's ability to obtain strong patent
protection. There can be no assurance, however, that these patents, if issued,
or any additional patents will prevent other companies from developing similar
or functionally equivalent dosage forms of products. Furthermore, there can be
no assurance that (i) any additional patents will be issued to the Company in
any or all appropriate jurisdictions, (ii) the Company's patents will not be
successfully challenged in the future, (iii) the Company's processes or products
do not infringe upon the patents of third parties or (iv) the scope and validity
of the Company's patents will prevent third parties from developing similar
products. Although a patent has a statutory presumption of validity in the
United States, there can be no assurance that patents issued covering the
Company's technologies will not be infringed or successfully avoided through
design innovation or by the challenge of that presumption of validity. Finally,
there can be no assurance that products utilizing the Company's technologies, if
and when issued, will not infringe patents or other rights of third parties. It
is also possible that third parties will obtain patents or other proprietary
rights that might be necessary or useful to the Company. In cases where third
parties are first to invent a particular product or technology, it is possible
that those parties will obtain patents that will be sufficiently broad so as to
prevent the Company from using such technology or from marketing such products.
31
<PAGE>
In addition, the Company consistently enters into confidentiality
agreements with its employees and business partners; it is currently a party to
well over one hundred such agreements. A representative copy of such an
agreement is attached hereto.
Government Regulation and Approval
- ----------------------------------
The design, development and marketing of pharmaceutical compounds, those
activities on which the Company's success depends, are intensely regulated by
governmental regulatory agencies, including the Food and Drug Administration.
Non-compliance with applicable requirements can result in fines and other
judicially imposed sanctions, including product seizures, injunction actions and
criminal prosecution based on products or manufacturing practices that violate
statutory requirements. In addition, administrative remedies can involve
voluntary withdrawal of products, as well as the refusal of the Government to
enter into supply contracts or to approve abbreviated new drug applications
("ANDAs") and new drug applications ("NDAs"). The FDA also has the authority to
withdraw approval of drugs in accordance with statutory due process procedures.
Before a drug may be marketed, it must be approved by the FDA. Because Elite
Labs has concentrated, during the first few years of its business operations, on
developing products which are intended to be bio-equivalent to existing
controlled-release formulations, the Company expects that most of its drug
products will require ANDA filings: FDA approval procedure for an ANDA relies on
bio-equivalency tests which compare the applicant's drug with an already
approved reference drug, rather than with clinical studies. There can be no
marketing in the United States of a product for which ANDA is required until it
has been approved by the FDA.
The FDA approval procedure for an NDA is a two-step process. During the Initial
Product Development stage, an investigational new drug ("IND") for each product
is filed with the FDA. A 30-day waiting period after the filing of each IND is
required by the FDA prior to the commencement of initial (Phase I) clinical
testing in healthy subjects. If the FDA does not comment on or question the IND
within such 30-day period, initial clinical studies may begin. If, however, the
FDA has comments or questions, the questions must be answered to the
satisfaction of the FDA before initial clinical testing can begin. In some
instances this process could result in substantial delay and expense. Phase I
studies are intended to demonstrate the functional characteristics and safety of
a product.
After Phase I testing, extensive efficacy and safety studies in patients must be
conducted. After completion of the required clinical testing, an NDA is filed,
and its approval, which is required for marketing in the United States, involves
an extensive review process by the FDA. The NDA itself is a complicated and
detailed document and must include the results of extensive clinical and other
testing, the cost of which is substantial. While the FDA is required to review
applications within 180 days of their filing, in the process of reviewing
applications, the FDA frequently requests that additional information be
submitted and starts the 180-day regulatory review period anew when the
requested additional information is submitted. The effect of such request and
subsequent submission can significantly extend the time for the NDA review
process. Until an NDA is actually approved, there can be no assurance that the
information requested and submitted will be considered adequate by the FDA to
justify approval. The packaging and labeling of all Company developed products
are also subject to FDA regulation.
32
<PAGE>
It is impossible to anticipate the amount of time that will be required to
obtain approval from the FDA to market any product. The time period to obtain
FDA approval of the ANDA may range from approximately 12 to 36 months while that
for an NDA may range from 12 to 24 months.
Whether or not FDA approval has been obtained, approval of the product by
comparable regulatory authorities in any foreign country must be obtained prior
to the commencement of marketing of the product in that country. All marketing
in territories other than the United States shall be conducted through other
pharmaceutical companies based in those countries. The approval procedure varies
from country to country, can involve additional testing, and the time required
may differ from that required for FDA approval. Although there are some
procedures for unified filings for certain European countries, in general each
country has its own procedures and requirements, many of which are time
consuming and expensive. Thus, there can be substantial delays in obtaining
required approvals from both the FDA and foreign regulatory authorities after
the relevant applications are filed. After such approvals are obtained, further
delays may be encountered before the products become commercially available.
All facilities and manufacturing techniques used for the manufacture of products
for clinical use or for sale must be operated in conformity with Good
Manufacturing Practice ("GMP") regulations. In the event the Company shall
engage in manufacturing, it will be required to operate its facilities in
accordance with GMP regulations. If the Company shall hire another company to
perform contract manufacturing for it, it must take steps to ensure that its
contractor's facilities conform to GMP regulations.
Under the Generic Drug Enforcement Act, ANDA applicants (including officers,
directors and employees) who are convicted of a crime involving dishonest or
fraudulent activity (even outside the FDA regulatory context) are subject to
debarment. Debarment is disqualification from submitting or participating in the
submission of future ANDAs for a period of years or permanently. The Generic
Drug Enforcement Act also authorizes the FDA to refuse to accept ANDAs from any
company which employs or uses the services of a debarred individual. The Company
does not believe that it receives any services from any debarred person.
The Company is governed by federal, state, and local laws of general
applicability, such as laws relating to working conditions and environmental
protection. The Company estimates that it spends approximately $3,000.00 per
year in order to comply with applicable environmental laws. The Company is also
licensed by, registered with, and subject to periodic inspection and regulation
by the DEA and New Jersey state agencies, pursuant to federal and state
legislation relating to drugs and narcotics. Certain drugs that the Company may
develop in the future may be subject to regulation under the Controlled
Substances Act and related Statutes. At such time as the Company being
manufacturing products, it may become subject to the Prescription Drug Marketing
Act, which regulates wholesale distributors of prescription drugs.
33
<PAGE>
Employees.
- ----------
The Company has six full-time employees (one hired after the March 31, 1998
year-end) and three part-time employees. Its full-time employees are engaged in
administrative, research and development; its part-time employees are engaged in
research and development. In addition, the company has one summer intern, hired
after the March 31, 1998 year-end. Elite Pharmaceuticals does not have any
employees except its President/CEO. Elite Labs believes its employee relations
to be satisfactory; it is not a party to any labor agreements and none of its
employees are represented by a labor union. Atul M. Mehta is the sole
significant employee of the Company at this time.
Employee Incentive Stock Option Plan. On August 7, 1997, the shareholders of the
Elite Labs approved the Company's Incentive Stock Option Plan ("Plan"). The
purpose of the Plan is to promote the success of the Company by providing a
method wherein eligible employees may be awarded additional remuneration for
services rendered. The Plan provides that the maximum number of shares of Common
Stock reserved for awards thereunder shall be 625,000. The purpose of this stock
option plan (this "Plan") is to secure for the company and its stockholders the
benefits which flow from providing key employees and officers with the incentive
inherent in common stock ownership. The stock options granted under the Plan are
intended to qualify as incentive stock options within the meaning of Internal
Revenue Code Section 422. The total number of shares of common stock to be
subject to the options granted pursuant to the Plan shall not exceed 625,000
shares. The plan is administered by the Board of Directors. The purchase price
per share of Stock purchasable under options granted pursuant to the Plan shall
not be less than 100% of the fair market value at the time the options are
granted. The purchase price per share of Stock purchasable under options granted
pursuant to the Plan to a person who owns more than 10 percent of the voting
power of the company's voting stock shall not be less than 110% of the fair
market value at the time the options are granted. No option granted pursuant to
this Plan shall be exercisable after the expiration of ten years from the date
it is first granted. No option granted pursuant to this Plan to a person who
owns more than 10 percent of the voting power of the company's voting stock will
be exercisable after the expiration of five years from the date it is first
granted.
In September 1997, Atul M. Mehta was awarded options to purchase
125,000 shares of Common Stock under the Incentive Stock Option Plan. The
options were to vest over three years; however, under their terms, they vested
immediately at the time the Company undertook the registration of its
securities. The exercise price for the options is $7.00 per share. In addition,
as of April 1, 1998, 75,000 options were awarded under the Plan to Manish Shah.
The exercise price for Mr. Shah is $6.00; one-third of his options will vest on
April 1, 1999, and one-third on each April 1 thereafter until fully vested.
Legal Proceedings
- -----------------
Neither Elite Pharmaceuticals nor Elite Labs is involved in or the
subject of any current or aware of any pending legal proceedings, nor is any of
the property of either company the subject of any such legal proceedings.
34
<PAGE>
Property
- --------
The Company has recently completed the purchase of a piece of real
property and improvements, suitable for use as a laboratory and offices, and
located at 165 Ludlow Avenue, Northvale, New Jersey. The purchase price for the
property was $1,050,000. Elite Labs currently leases approximately 5,000 sq.ft.
at 230 W. Passaic Street, Maywood, New Jersey, at a rental of $62,832 per annum.
The lease term expires on October 30, 1998. Given the purchase of the new
premises, Elite will not undertake to extend or renew the lease, but will use
the time remaining on its lease to move its operations to the new facility. The
Company's operations are not dependent on any specific location.
Elite Pharmaceuticals is located at 230 W. Passaic Street, Maywood, NJ 07607; at
the time that the operations of Elite Labs move, Elite Pharmaceuticals will move
to the same location.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION OF THE COMPANY AND ITS SUBSIDIARY
Introduction
Elite Pharmaceuticals' predecessor , Prologica International, Inc., was
incorporated in the State of Pennsylvania on April 20, 1984. From the time of
its incorporation, and the completion of its initial public offering in August
1988, until the date of its merger with Elite Pharmaceuticals, Prologica engaged
in no business other than searching for suitable acquisitions. Except for Elite
Pharmaceuticals, it located no such acquisitions. Elite Pharmaceuticals was
incorporated in the State of Delaware on October 1, 1997, for the purpose of
merging with Prologica in order to change the name and state of incorporation of
Prologica. (Prior to the merger with Elite Pharmaceuticals, Prologica underwent
a three-for-one reverse split of its stock.) Elite Pharmaceuticals survived the
merger with Prologica; Prologica ceased to exist at the time of the merger on
October 24, 1997. Contemporaneous with the merger of Elite Pharmaceuticals and
Prologica, Elite Labs (described below) merged with a wholly owned subsidiary of
Prologica, HMF. HMF was incorporated on August 1, 1997 for the purpose of
providing a vehicle into which Elite Labs could merge. Elite Labs and HMF merged
on October 30, 1997. (Prior to the merger with HMF, Elite Labs underwent a
two-for-one forward split of its stock.) Elite Labs survived the merger with HMF
and HMF ceased to exist subsequent to the merger. The net result of the two
mergers is that Prologica and HMF have ceased to exist, and Elite
Pharmaceuticals owns one hundred percent of the stock of Elite Labs. Such stock
ownership is Elite Pharmaceuticals' sole business.
Elite Labs was incorporated in the State of Delaware on August 23,
1990. As described above, on October 30, 1997, one hundred percent of the stock
of Elite Labs was acquired by Elite Pharmaceuticals, Inc. via the merger between
Elite Labs and HMF. With that exception, no acquisition or disposition of any
material assets, nor any material changes in the method of conducting business
have incurred since its incorporation.
In a private placement concluding on November 30, 1997, Elite
Pharmaceuticals raised $6,000,000. The private placement offering consisted of
100 units, each unit consisting of 20,000 shares of common stock of the Company
and 10,000 warrants, each warrant entitling
35
<PAGE>
the holder to purchase one share of common stock at an exercise price of $6.00
per share during the five year period commencing with the date of closing of the
private offering memorandum (November 30, 1997). The price per unit was $60,000.
Elite Labs, now a wholly owned subsidiary of Elite Pharmaceuticals,
engages in the research, development, licensing, manufacturing and marketing of
both new and generic controlled-release pharmaceuticals products. Elite Labs is
a 100% owned subsidiary of Elite Pharmaceuticals, Inc. The Company has developed
six oral controlled release pharmaceutical products to varying states of the
development process. Elite Labs has granted an option on a one of its products
to a multinational company for the worldwide market, however the agreement does
not provide for any royalties or other payments to Elite Labs unless certain
conditions are met, which may or may not occur.
Elite Labs has also conducted several research and development projects
on behalf of several large pharmaceuticals companies. These activities have
generated only limited revenue for Elite Labs to date.
Elite Labs was founded by Dr. Atul M. Mehta who was Elite's President
and CEO. Dr. Mehta, who has extensive experience in controlled drug release
technology, is principally responsible for the development of all of Elite
Labs' products.
The Company intends to utilize the net proceeds from the private
placement offering of approximately $5,232,061 for research and development of
existing and new products, capital improvements, legal expenses and patent
filings, additional administrative and technical personnel, and general
corporate and working capital purpose.
Elite Labs expects that substantially all of its immediate and future
revenues will be dependent upon the sales and licensing of its current
controlled release pharmaceutical products, from the development of future new
products, and possibly from contract research and development work for other
companies.
Plan of Operations
For the twelve months following the completion of the offering, the
Company plans to focus its efforts on the following areas: (i) to receive FDA
approval for one or all six of the oral controlled release pharmaceutical
products already developed, either directly or through other companies; (ii) to
commercially exploit these drugs either by licensure and the collection of
royalties, or through the manufacturing of tablets and capsules using the
formulations developed by the Company, and (iii) to continue the development of
new products and the expansion of its licensing agreements with other large
multinational pharmaceutical companies including contract research and
development projects.
To effectively achieve its goals, the Company has recently purchased an
office and laboratory facility in Northvale, New Jersey, and will be moving its
operations to the facility over the next months. This facility is larger and
better suited to Elite's needs than its prior,
36
<PAGE>
leased, space, and will increase the space available to conduct further research
and development and scale-up, and possibly for the eventual manufacturing of its
products.
Results of Consolidated Operations
Year Ended March 31, 1998 vs. Year Ended March 31, 1997.
Elite's revenues for the year ended March 31, 1998 were $51,958 a
decrease of $278,701 or approximately 84% over the comparable period of the
prior year. Net revenues primarily consisted of license fees of $20,000
(compared with $160,000 for the comparable period of the prior year), contract
research and development fees of $0 (compared with $153,000 for the comparable
period of the prior year), and consulting and test fees of $31,958 (compared
with $17,659 for the comparable period of the prior year).
General and administrative expenses for the year ended March 31, 1998
were $336,063 an increase of $179,392, or approximately 115% from the comparable
period of the prior year. The increase in general and administrative expenses
was substantially due to legal fees, consulting fees, salaries and interest paid
on a related party loan agreement. General and administrative expenses expressed
as a percentage of revenues was approximately 647% for the year ended March 31,
1998 as compared to 47% for the comparable period of the prior year.
Research and development costs for the year ended March 31, 1998, were
$541,164, an increase of $163,527, or approximately 43%, from the comparable
period of the prior year. The increase in research and development costs can be
attributed to increases in salaries, laboratory raw materials and supplies and
payments for biostudies on drug technologies developed by the Company. These
increases have been made possible principally because of the Company raising
equity in its recent private placement offering, and reflects increased efforts
to develop drug release products and technology in accordance with management's
plan of operations.
Elite's net loss for year ended March 31, 1998 was $788,591 as compared
to $260,111 for the comparable period of the prior year. The increase in the net
loss was primarily due to decreases in revenue derived from contract research
and development and licensing fees, and increased internal research and
development costs. The decrease in contract research and development fees
reflects a conscious decision on the part of the Company to turn away contract
work in order to be able to focus the resources of the Company on developing its
own proprietary products.
Liquidity and Capital Resources
From inception through March 31, 1997, cash flow from financing
activities principally came from the issuance of common stock, initially from a
private placement on August 15, 1991. Subsequently, the Company raised
additional funds from common stock issuance and received a loan from a related
party in the amount of $100,000. This loan was subsequently repaid during the
eight months ended November 30, 1997.
37
<PAGE>
During the fiscal year ended March 31, 1998, the Company raised an
additional $5,232,061 (net of offering costs of $767,939) in cash flows from
financing activities through the issuance of common stock and warrants in a
private placement offering beginning on September 15, 1997 and concluding on
November 30, 1997.
The Company estimates that the net proceeds from the private placement
offering will be sufficient to meet its cash requirements for a period of
between 18 and 24 months following the date of the closing of the private
placement offering. However, there can be no assurance that unexpected future
developments may result in the Company requiring additional financing or, that
if required, additional financing will be available to the Company.
For the year ended March 31, 1998, net cash of $739,l99 was used in
operating activities due to the Company's net loss of $788,591, decreased by
decreases in the Company's contract revenues receivable and increases in accrued
expenses and other liabilities. For the year ended March 31, 1997, net cash of
$211,550 was used in operating activities as a result of the Company's net loss
of $260,111.
CERTAIN TRANSACTIONS
Transactions With Management and Others.
Elite Laboratories, Inc. is a party to a three-year Consulting
Agreement entered into with Bridge Ventures, Inc. ("Bridge") on August 1, 1997,
under which Bridge provides the company with marketing and management consulting
services. Under the terms of the Consulting Agreement, Elite Labs pays Bridge
the sum of $10,000 per month and reimburses Bridge for all out-of-pocket
expenses incurred on behalf of Elite Labs. Bridge is an owner of at least five
percent of the Elite Pharmaceuticals' Common Stock, as described in more detail
in the section entitled Security Ownership of Certain Beneficial Owners and
Management.
Elite Pharmaceuticals, Inc. is a party to an agreement whereby fees are
paid to a company wholly owned by Mark Gittelman, the Company's Treasurer, in
consideration for services rendered by Mr. Gittelman in his capacity as
Treasurer. For the years ended March 31, 1998 and 1997, the fees paid to that
company were $18,338.00 and $9,715.00, respectively.
Other than as described above, the Company is not (and has not been in
the last two years) a party to any transaction in which any of the persons
described in Reg. Sec. 228.404(a) has or had a direct or indirect
material interest.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
38
<PAGE>
FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
Consolidated Financial Statements of Elite Pharmaceuticals, Inc. and Subsidiary
Fiscal Years Ending March 31, 1998 and 1997
Independent Auditor's Report
Consolidated Audited Balance Sheet
Consolidated Audited Statements of Operations
Consolidated Audited Statements of Cash Flows
Consolidated Audited Statements of Stockholders' Equity
Notes to Consolidated Financial Statements
39
<PAGE>
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
REPORT ON CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
F-1
<PAGE>
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
REPORT ON CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
CONTENTS
PAGE
----
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-3
CONSOLIDATED BALANCE SHEET F-4
CONSOLIDATED STATEMENT OF OPERATIONS F-5
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY F-6
CONSOLIDATED STATEMENTS OF CASH FLOWS F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-8 - F-18
F-2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Elite Pharmaceuticals, Inc.
Maywood, New Jersey
We have audited the accompanying consolidated balance sheet of Elite
Pharmaceuticals, Inc. and Subsidiary as of March 31, 1998, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the years ended March 31, 1998 and 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements of the Company referred to
above present fairly, in all material respects, the financial position as of
March 31, 1998 and the results of their operations and their cash flows for the
periods presented in conformity with generally accepted accounting principles.
MILLER, ELLIN & COMPANY, LLP
CERTIFIED PUBLIC ACCOUNTANTS
May 28, 1998
New York, New York
F-3
<PAGE>
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $4,347,147
Consulting and test fees receivable 25,000
Prepaid expenses and other current assets 11,967
------
Total current assets 4,384,114
EQUIPMENT - net of accumulated
depreciation and amortization 107,481
INTANGIBLE ASSETS - net of accumulated amortization 18,216
OTHER ASSETS:
Deposits and related acquisition costs 132,057
$4,641,868
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of capitalized lease obligation $42,331
Accounts payable 13,670
Accrued expenses and other current liabilities 26,824
------
Total current liabilities 82,825
CAPITALIZED LEASE OBLIGATION - net of current portion 47,021
Total liabilities 129,846
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock - $.01 par value:
Authorized - 10,000,000 shares
Issued and outstanding - 7,237,613 shares 72,376
Additional paid-in capital 6,836,405
Accumulated deficit (2,396,759)
---------
Total stockholders' equity 4,512,022
$4,641,868
The accompanying notes are an integral part of the consolidated
financial statements
F-4
<PAGE>
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED
MARCH 31,
1998 1997
---- ----
REVENUES:
Licensing fees $ 20,000 $ 160,000
Contract research and development - 153,000
Consulting and test fees 31,958 17,659
------------ -------------
Total revenues 51,958 330,659
------------ -------------
OPERATING EXPENSES:
Research and development 541,164 377,637
General and administrative 336,063 156,671
Depreciation and amortization 25,160 35,701
------------ -------------
902,387 570,009
------------ -------------
LOSS FROM OPERATIONS (850,429) (239,350)
------------ -------------
OTHER INCOME (EXPENSE):
Interest income 86,794 852
Interest expense - related parties (9,956) (8,500)
------------ -------------
76,838 (7,648)
- --- ------------ -------------
LOSS BEFORE PROVISION FOR INCOME TAXES (773,591) (246,998)
PROVISION FOR INCOME TAXES 15,000 13,113
------------ -------------
NET LOSS $ (788,591) $(260,111)
============ ==========
NET LOSS PER COMMON SHARE $ (.13) $ (.06)
============ ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 5,858,238 4,685,149
============ ============
The accompanying notes are an integral part of the consolidated
financial statements
F-5
<PAGE>
<TABLE>
<CAPTION>
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<S> <C> <C> <C> <C> <C>
ADDITIONAL TOTAL
*COMMON STOCK PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY
BALANCE AT MARCH 31, 1996 4,645,327 $46,453 $1,438,823 $(1,348,057) $137,219
Sale of securities 122,286 1,223 194,149 - 195,372
Net loss for the year ended
March 31, 1997 - - - (260,111) (260,111)
---- ---- ---- -------- ----------
BALANCE AT MARCH 31, 1997 4,767,613 47,676 1,632,972 (1,608,168) 72,480
Sale of securities 20,000 200 27,800 - 28,000
Sale of warrants - - 150 - 150
Sale of securities through
private placement 2,000,000 20,000 5,980,000 - 6,000,000
Offering costs in connection
with sale of securities - - (767,939) - (767,939)
Offering costs in connection
with registration of securities - - (32,078) - (32,078)
Common stock exchanged in
connection with merger 450,000 4,500 (4,500) - -
Net loss for the year ended
March 31, 1998 - - - (788,591) (788,591)
---- ---- ---- -------- --------
BALANCE AT MARCH 31, 1998 7,237,613 $72,376 $6,836,405 $(2,396,759) $4,512,022
========= ====== ========== =========== ==========
</TABLE>
* All references to shares and per share data have been restated
for 1996 and 1997 to reflect a two for one stock split on
August 21, 1997 and a reverse stock split on March 30, 1998.
The accompanying notes are an integral part of the consolidated financial
statements
F-6
<PAGE>
<TABLE>
<CAPTION>
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<S> <C> <C>
YEARS ENDED
MARCH 31,
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(788,591) $(260,111)
Adjustments to reconcile net loss to cash
used in operating activities:
Depreciation 23,883 34,640
Amortization of intangibles 1,277 1,061
Deferred income taxes 14,800 12,900
Changes in assets and liabilities:
Consulting and test fees receivable (12,792) (3,408)
Prepaid expenses and other current assets (9,812) 5,951
Accounts payable 10,957 (824)
Accrued expenses and other
current liabilities 21,079 (1,759)
---------------- -------------
NET CASH USED IN OPERATING ACTIVITIES (739,199) (211,550)
---------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for patent and trademark filings (2,100) -
Payment of building deposit and
related acquisition costs (123,057) -
Purchases of property and equipment (7,392) (6,704)
---------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (132,549) (6,704)
---------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of notes payable - related parties (100,000) -
Proceeds from issuance of common
stock and warrants 28,150 195,372
Proceeds from issuance of common
stock and warrants in connection
with private placement 6,000,000 -
Payments of offering costs in connection
with private placement (767,939) -
Payments of offering costs in connection
with registration filing (32,078) -
---------------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 5,128,133 195,372
---------------- -------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 4,256,385 (22,882)
CASH AND CASH EQUIVALENTS - beginning 90,762 113,644
---------------- -------------
CASH AND CASH EQUIVALENTS - ending $ 4,347,147 $ 90,762
================ =============
SCHEDULE OF NON-CASH ACTIVITIES:
Purchase of property and equipment
by capital leases $ 89,352 $ -
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 11,240 $ 8,592
Cash paid for income taxes 200 213
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements
F-7
<PAGE>
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Elite
Pharmaceuticals, Inc. and its Subsidiary, (ACompany@), which is wholly-owned.
All significant intercompany accounts and transactions have been eliminated in
consolidation.
Nature of Business
Elite Pharmaceuticals, Inc. was incorporated on October 1, 1997 under the Laws
of the State of Delaware, and its wholly-owned subsidiary Elite Laboratories,
Inc. was incorporated on August 23, 1990 under the Laws of the State of
Delaware, in order to engage in research and development activities for the
purpose of obtaining Food and Drug Administration approval, and, thereafter,
commercially exploiting generic and new controlled-release pharmaceutical
products. The Company also engages in contract research and development on
behalf of other pharmaceutical companies.
Merger Activities
In October 1997, concurrent with its private placement offering, Elite
Pharmaceuticals, Inc. merged with Prologica International, Inc. (APrologica@) (a
Pennsylvania Corporation (see Note 7), a publicly traded inactive corporation,
with Elite Pharmaceuticals, Inc. surviving the merger. In addition, in October
1997, Elite Laboratories, Inc. merged with a wholly-owned subsidiary of
Prologica, with the Company=s subsidiary surviving this merger. The former
shareholders of the Company=s subsidiary exchanged all of their shares of Class
A voting common stock for shares of the Company=s voting common stock in a tax
free reorganization under Internal Revenue Code Section 368. The result of the
merger activity qualifies as a reverse acquisition. In connection with the
reverse acquisition, options exercisable for shares of Class A voting and Class
B nonvoting common stock of the Company=s subsidiary were exchanged for options
exercisable for shares of the Company=s voting common stock.
On October 9, 1997, Prologica authorized a one for three reverse stock split,
which decreased the number of outstanding shares of common stock from 2,692,750
to 897,583 shares. The 20,000,000 shares of Prologica=s authorized common stock
remained unchanged.
Cash and Cash Equivalents
The Company considers highly liquid short-term investments purchased with
initial maturities of three months or less to be cash equivalents.
F-8
<PAGE>
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Equipment
Equipment is stated at cost. Depreciation is provided on the straight-line
method based on the estimated useful lives of the respective assets which range
from five to seven years. Major repairs or improvements are capitalized. Minor
replacements and maintenance and repairs which do not improve or extend asset
lives are expensed currently.
Upon retirement or other disposition of assets, the cost and related accumulated
depreciation are removed from the accounts and the resulting gain or loss, if
any, is recorded.
Research and Development
Research and development expenditures are charged to expense as incurred.
Patents and Trademarks
Costs incurred for the application of patents and trademarks are capitalized and
amortized on the straight-line method, based on an estimated useful life of
fifteen years, upon approval of the patent and trademarks. These costs are
charged to expense if the patent or trademark is unsuccessful.
Concentration of Credit Risk
The Company derives substantially all of its revenues from contracts with other
pharmaceutical companies, subject to licensing and research and development
agreements.
The Company maintains cash balances in its bank which, at times, may exceed the
limits of the Federal Deposit Insurance Corp.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Income Taxes
The Company adopted SFAS No. 109, AAccounting for Income Taxes,@ which requires
the use of the liability method of accounting for income taxes. The liability
method measures deferred income taxes by applying enacted statutory rates in
effect at the balance sheet date to the differences between the tax bases of
assets and liabilities and their reported amounts in the financial statements.
The resulting deferred tax assets or liabilities are adjusted to reflect changes
in tax laws as they occur.
F-9
<PAGE>
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Loss Per Common Share
The Company adopted SFAS No. 128, AEarnings Per Share,@ which establishes new
standards for computing and presenting earnings per share. The statement also
requires restatement of all prior period earnings per share data presented.
Net loss per common share is based on the weighted average number of shares
outstanding during the period. The weighted average number of shares outstanding
has been adjusted to reflect the recapitalization in connection with the private
placement as if it had occurred as of the beginning of the period for which loss
per share is presented as well as the effect of stock splits and reverse stock
splits issued during the periods. Common stock equivalents have not been
included as their effect would be antidilutive.
Revenue Recognition
Revenues are earned primarily by performing research and development services
under fixed price contracts. Such revenues are recorded as certain projected
goals are attained, as defined in the individual contract.
Recently Issued Pronouncements
SFAS No. 130, AReporting Comprehensive Income,@ requires an entity to report
comprehensive income and its components in a full set of financial statements
and is effective for fiscal years beginning after December 15, 1997.
Comprehensive income is the change in equity of a business enterprise during a
period from transactions and other events and circumstances from non-owner
sources.
The Company has elected to adopt SFAS No. 130 in 1999.
American Institute of Certified Public Accountants Statement of Position No.
96-1, AEnvironmental Remediation Liabilities,@ establishes specific criteria for
the recognition and measurement of environmental remediation liabilities. The
adoption of the statement in 1998 did not have a significant effect on the
Company=s financial condition or results of operations.
F-10
<PAGE>
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997
NOTE 2 - EQUIPMENT
Equipment at March 31, 1998, consists of the following:
Laboratory equipment $ 270,884
Furniture and fixtures 8,521
Equipment under capital lease 94,714
----------
374,119
Less: Accumulated depreciation 266,638
$ 107,481
Depreciation expense amounted to $23,883 and $34,640 for the years ended March
31, 1998 and 1997, respectively.
NOTE 3 - INTANGIBLE ASSETS
Intangible assets at March 31, 1998, consists of the following:
Patents $ 13,384
Trademarks 7,170
----------
20,554
Less: Accumulated amortization 2,338
$ 18,216
Amortization amounted to $1,277 and $1,061 for the years ended March 31, 1998
and 1997, respectively.
NOTE 4 - CONTRACT FOR PURCHASE OF BUILDING
In February 1998, the Company entered into a contract to purchase a 15,000
square foot building to house its new office, laboratory and manufacturing
facility in Northvale, New Jersey. The contract purchase price is $1,050,000
plus certain closing and related acquisition costs. At March 31, 1998, the
Company paid a 10% deposit of $105,000 towards the purchase of the building in
addition to related acquisition costs and legal fees totaling $18,057. This
deposit and related costs totaling $123,057 are included in the consolidated
financial statements as of March 31, 1998 under other assets - deposits and
related acquisition costs.
On May 28, 1998, the Company purchased the building under contract.
F-11
<PAGE>
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997
NOTE 5 - OBLIGATIONS UNDER CAPITAL LEASE
In March 1998, the Company acquired laboratory equipment under a capital lease
that expires on March 18, 2000. Lease obligations are due in monthly
installments of $4,146 including interest at approximately 10.5%. This lease is
collateralized by laboratory equipment with a net carrying value of $85,243 at
March 31, 1998.
Minimum future lease payments under this capitalized lease at March 31, 1998 is
as follows:
Year Ending March 31,
1999 $ 49,752
2000 49,750
----------
Total minimum lease payments 99,502
Less: Interest (10,150)
----------
Present value of minimum lease payments $ 89,352
==========
No interest has been expensed for the years ended March 31, 1998 and 1997.
NOTE 6 - INCOME TAXES
The components of provision for income taxes by taxing jurisdiction are as
follows:
1998 1997
- ----------------------------------------------- --------
Federal:
Current $ - $ -
Deferred 11,200 9,800
----------- -----------
11,200 9,800
- ----------------------------------------------- -----------
State:
Current 200 213
Deferred 3,600 3,100
----------- -----------
3,800 3,313
- ----------------------------------------------- -----------
$ 15,000 $ 13,113
=========== ===========
F-12
<PAGE>
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997
NOTE 6 - INCOME TAXES (CONTINUED)
The major components of deferred tax assets at March 31, 1998 are as follows:
Net operating loss carryforwards $ 794,000
Valuation allowance (794,000)
-----------
$ -
At March 31, 1998, a 100% valuation allowance is provided as it is uncertain if
the deferred tax assets will be utilized.
At March 31, 1998, for income tax purposes, the Company has unused net operating
loss carryforwards of approximately $2,193,000 expiring in 1999 through 2013.
NOTE 7 - STOCKHOLDERS= EQUITY
Issuance of Common Stock
For the years ended March 31, 1998 and 1997, before its private placement
offering, the Company issued 142,286 shares of its common stock for a total of
$223,372. The shares were sold on various dates as follows:
Date Issued Shares Issued Amount
July 25, 1996 27,286 $ 54,572
October 24, 1996 13,000 26,000
March 20, 1997 82,000 114,800
May 20, 1997 20,000 28,000
-------- ----------
142,286 $ 223,372
======== ==========
During October 1997, in connection with the aforementioned Prologica merger,
450,000 shares of the Company's common stock were issued to the former
shareholders of Prologica.
Private Placement Offering
In a private placement concluding on November 30, 1997, the Company raised
$6,000,000 consisting of 100 units, each unit consisting of 40,000 shares of
common stock of the Company and 20,000 warrants, each warrant entitling the
holder to purchase one share of common stock at an exercise price of $3.00 per
share during the five year period commencing with the date of closing of the
private placement memorandum (November 30, 1997). The price per unit was
$60,000. This resulted in the issuance of 2,000,000 shares of common stock and
1,000,000 warrants to purchase common stock, at an exercise price of $6.00 per
share, after giving effect to the one for two reverse split on March 30, 1998.
The Company received net proceeds of $5,232,061 from the private placement after
underwriting costs, legal fees and sales commissions.
F-13
<PAGE>
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997
NOTE 7 - STOCKHOLDERS' EQUITY (CONTINUED)
Placement Agent Agreement
On August 8, 1997, in connection with its private placement offering, the
Company entered into a placement agent agreement with its underwriter. Terms of
this one year agreement include the following:
a. Placement fees equal to ten percent (10%) of the gross proceeds. b.
Consulting fees in the amount of $3,000 per month.
c. The issuance of ten placement agent warrants, each made up of 20,000 shares
of common stock and 10,000 warrants to purchase common stock, at an exercise
price of $6.00 per share, for a price of $72,000 per unit. Such warrants are
exercisable for a period of five years from the date of issuance.
For the year ended March 31, 1998, placement agent fees in the amount of
$618,000 have been charged to additional paid-in capital.
Warrants
The Company authorized the issuance of common stock purchase warrants, with
terms of five to six years, to various corporations and individuals, in
connection with the sale of securities, loan agreements and consulting
agreements. Exercise prices range from $4.00 to $6.00 per warrant. The warrants
expire at various times from August 1, 2002 to October 31, 2002.
A summary of warrant activity for the periods indicated were as follows:
1998 1997
--------- --------
Beginning balance 122,286 -
Warrants issued 1,745,000 122,286
Warrants exercised or expired - -
----------- ---------
Ending balance 1,867,286 122,286
=========== =========
There were no warrants exercised as of March 31, 1998.
F-14
<PAGE>
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997
NOTE 7 - STOCKHOLDERS' EQUITY (CONTINUED)
Stock Split and Reverse Split
On August 21, 1997, Elite Laboratories, Inc. authorized a two for one stock
split, increasing its authorized common stock to 20,000,000 shares, and
increasing the number of outstanding shares of common stock from 4,787,613 to
9,575,226 shares.
On March 30, 1998, Elite Pharmaceuticals, Inc. authorized a one for two reverse
stock split, decreasing its authorized common stock to 10,000,000 shares, and
decreasing the number of outstanding shares of common stock from 14,475,226 to
7,237,613 shares.
Change in Authorized Common Shares
In May 1998, the Company increased the authorized common shares, par value $.01,
to 25,000,000.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Lease
The Company leases its laboratory and office space in Maywood, New Jersey under
an operating lease, which expires on October 30, 1998, at $5,300 per month. The
leases provide for the landlord to pay all utility costs and for increases in
rent based on cost of living formulas. Future minimum payments under the lease
are as follows:
Year Ending March 31,
1999 $ 37,100
=========
Rent expense amounted to $63,240 and $62,083, for the years ended March 31, 1998
and 1997, respectively.
Employment Agreement
On February 11, 1998, the Company amended an employment agreement with its
President/CEO, originally entered into on May 23, 1991, and extended on December
28, 1995. The amended agreement runs for a term of five years through December
31, 2000. Minimum annual salary as of March 31, 1998 is as follows:
12 Months Ending December 31,
1998 (Remaining portion) $ 150,000
1999 210,000
2000 220,500
----------
$ 580,500
F-15
<PAGE>
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997
NOTE 8 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
On December 31, 2000, this agreement will be automatically renewed for an
additional five years, unless written notice is given by December 31, 1999.
Annual compensation under the renewed agreement shall be equal to no less than
five percent (5%) of the previous years base salary.
Among other certain standard employee benefits, the agreement also provides for
the following:
a. Incentive commissions equal to five percent (5%) of net profit, as
defined, for each fiscal year.
b. Options to purchase 520,214 shares of common stock at a price of $2.00 per
share, to be granted at the beginning of each calendar year through December 31,
2000, in increments of 100,000 options each year. Such options are exercisable
from the date that they are granted through either one year after termination of
employment or ten years from the date of grant. c. Incentive stock options to
purchase 125,000 shares of common stock, at a price of $7.00 per share. d.
Certain additional compensation on termination as a result of a change in
control of the Company through the earlier of May 22, 2001 or three years
following termination.
Compensation expense under this agreement amounted to $205,000 and
$168,750 for the years ended March 31, 1998 and 1997,
respectively.
Technology Agreement
On November 26, 1996, the Company entered into a formulation development
agreement with a multinational pharmaceutical company, which was subsequently
amended on May 23, 1997. The terms of the agreement provide for the right to
acquire the license of the developed product for sale, manufacture and
distribution worldwide, subject to licensing fees, royalties, and development
funds as defined, and annual royalty payments of net sales, as defined, subject
to minimum annual payments based on certain economic conditions.
As of March 31, 1998, this product has not yet reached a commercialization
stage.
On April 14, 1998, the Company terminated a development and license agreement,
originally entered into on September 21, 1993. In accordance with this
termination, the Company has retained all rights to the Aintellectual property,@
as defined in the agreement, including the rights to use, develop and market
such property.
On May 2, 1996, the Company entered into a research and development agreement to
undertake formulation of a new oral medication. The terms of the agreement
provide for revenues to be earned as certain projected goals, as defined in the
agreement, are attained.
F-16
<PAGE>
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997
NOTE 8 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
Consulting Agreements
On August 1, 1997, the Company entered into two agreements with corporations
which provide various consulting services for a period of three years. Terms of
the agreements include the following:
a. Combined monthly fees of $15,000.
b. The issuance of 350,000 warrants to purchase common stock at an
exercise price of $6.00 per share for a period of five (5)years (see Note 7).
Consulting expenses under these agreements amounted to $120,000 for the year
ended March 31, 1998.
NOTE 9 - STOCK OPTION PLANS
Under various qualified and nonqualified plans, the Company may grant stock
options to officers, selected employees, as well as members of the board of
directors and advisory board members. The options must be granted at exercise
prices of not less than fair market value and expire within ten years from the
date of grant. All of these options are considered to be fully vested upon the
filing of the Company=s registration statement on Form SB-2 under the Securities
Act of 1933, as amended. Transactions under the various stock option and
incentive plans for the periods indicated were as follows:
Years Ended March 31, 1998 1997
--------------------- ------------- -----------
Outstanding at beginning of year 750,000 700,000
Granted 257,714 50,000
Exercised - -
----------- ---------
Outstanding at end of year 1,007,714 750,000
=========== =========
Options outstanding at March 31, 1998 and 1997 ranged in price from
$2.00 to $7.00. There were no options exercised as of
March 31, 1998.
F-17
<PAGE>
ELITE PHARMACEUTICALS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997
NOTE 10 - PROPOSED PUBLIC OFFERING
The Company has filed a registration statement on Form SB-2 under the Securities
Act of 1933, as amended, for the purpose of registering securities previously
sold to and held by various corporations and individuals. Accordingly, the
Company will not receive any proceeds upon filing of Form SB-2.
The securities being registered consist of 3,725,000 shares of the
Company's $.01 par value common stock, including 1,525,000
redeemable common stock purchase warrants.
The Company incurred legal fees and other costs amounting to $32,078, in
connection with its public filing, which has been charged to additional paid-in
capital.
NOTE 11 - MAJOR CUSTOMERS
For the years ended March 31, revenues from major customers are as follows:
1998 1997
- ------------------------------------------------------------------------------
Customer A - 48.4%
Customer B 53.9% 46.4%
Customer C 38.5% -
As at March 31, 1998, consulting and test fees receivable from Customer B
amounted to $25,000, representing 100% of the total fees receivable.
F-18
<PAGE>
No dealer, salesperson, or any other person has been authorized to give any
information or to make any representations in connection with this offering
other than those contained in this Prospectus. Any information or presentations
not herein contained, if given or made, must not be relied upon as having been
authorized by the Company. This Prospectus does not constitute an offer to sell
or a solicitation of an offer to buy any security other than the securities
offered by this Prospectus, nor does it constitute an offer to sell or
solicitation for an offer to buy securities by any person in any jurisdiction
where such an offer or solicitation is not authorized, or in which the person
making such offer is not qualified to do so, or to any person to whom it is
unlawful to make such offer or solicitation. The delivery of this Prospectus
shall not, under any circumstances, create any implication that there has been
no change in the affairs of the Company since the date hereof.
TABLE OF CONTENTS
Prospectus Summary 3
Risk Factors 6
Selling Security Holders 13
Use of Proceeds 18
Dilution 18
Plan of Distribution 18
Management 20
Principal Shareholders 25
Description of Securities 27
Experts and Counsel 28
Description of Business 29
Management's Discussion and Analysis 35
Certain Transactions 38
Financial Statements 39
<PAGE>
`
3,725,000 VOTING COMMON
SHARES (includes 1,525,000 Common Shares
Underlying Class A Redeemable
Common Stock Purchase Warrants)
1,525,000 CLASS A REDEEMABLE COMMON STOCK PURCHASE WARRANTS
ELITE PHARMACEUTICALS, INC.
-----------------
PROSPECTUS
-----------------
_______________, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Bylaws of the Company contain provisions reducing the potential
personal liability of the directors of the Company for certain monetary damages
and providing for indemnity of directors. The Company is unaware of any present,
pending or threatened litigation which would result in any liability for which a
director would seek such indemnification or protection. The provisions affecting
personal liability provide that the Company will indemnify its directors to the
fullest extent permitted by Section145 of the Delaware Corporation Law against
(a) expenses (including attorney's fees) reasonably incurred in connection with
any threatened, pending or completed civil, criminal, administrative,
investigative or arbitrative action, suit or proceeding (and appeal therefrom)
against any director, whether or not brought by or on behalf of the Company
seeking to hold the director liable by reason of the fact that he was acting in
such capacity; and (b) any reasonable payments made by him in satisfaction of
any judgment, money decree, fine, penalty or settlement in such action, suit or
proceeding.
In addition, the Company has obtained directors and officers liability
insurance with a coverage amount of $5,000,000.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.
II-1
<PAGE>
RECENT SALES OF UNREGISTERED SECURITIES
The following represents all shares of unregistered securities sold by the
Company within the last three years. The first group represents shares of Common
Stock and Warrants sold in the Private Offering. The second group represents all
other securities sold by the Company within the last three years.
Private Offering. The aggregate offering price in the Private Offering was
$6,000,000. There were sales commissions of 8% and a placement agent fee of 2%
paid, for an aggregate paid of $600,000. The Private Offering was made under the
exemption from registration afforded by Section 4(6) of the Securities Act and
Rule 506 of Regulation D promulgated thereunder.
<TABLE>
<S> <C> <C>
Number of Number of
Name of Purchaser Shares Warrants
Maurice J. Abadi 20,000 10,000
Robert G. Ackerly 20,000 10,000
Hymie Akst 20,000 10,000
Joan F. Albrecht 20,000 10,000
All American Funding 40,000 20,000
David Altschuler 20,000 10,000
The Aquidneck Trust, Marielle T. Reilly and Michael Plunkett TTEES 40,000 20,000
Marcel Aronheim 40,000 20,000
Joan Rich Baer, Inc. Pension Plan and Trust U/A/D 1/1/78,
Joan Rich Baer and Arthur Bugs Baer TTEE 40,000 20,000
Robert W. Baird & Co.
TTEE, FBO Albert L. Saphier IRA 40,000 20,000
Mayer Ballas, M.D. 20,000 10,000
Norman Barrie and Laurel Barrie 20,000 10,000
B&B Management, Ltd. 104,000 52,000
Jerome Belson 280,000 140,000
Susan J. Bender 40,000 20,000
Birchcrest Industries, Inc. Employee Profit Sharing Plan and Trust 20,000 10,000
Harvey Blitz 40,000 20,000
Dr. Daniel Scott Brandwein 20,000 10,000
Bridge Ventures, Inc. 100,000 50,000
Susan Brauser 20,000 10,000
Michael E. Bushey DDS Inc. Profit Sharing Trust 20,000 10,000
C. Ames Byrd and Donna M. Byrd, JT 20,000 10,000
Joseph Michael Cafiero and Veronica Walsh Cafiero JT 10,000 5,000
McDonald & Company Securities, Inc.FBO Frank B. Carr IRA 60,000 30,000
Chillington Corporation N.V. 140,000 70,000
Alan R. Cohen 20,000 10,000
Israel Cohen 20,000 10,000
Phyllis J. Cohen 10,000 5,000
Irving W. Davies 10,000 5,000
Ronny Lee Doran 10,000 5,000
Joseph A. Dussich 40,000 20,000
Sidney Dworkin 40,000 20,000
II-2
<PAGE>
Anita Elias Living Trust, Anita and Jack Elias, TTEES 20,000 10,000
Dr. Edward R. Falkner, Inc. Profit Sharing Trust 20,000 10,000
Alan Feldman 20,000 10,000
Cary Fields 80,000 40,000
Stuart Flaum 20,000 10,000
F&N Associates, Inc. 13,333 6,666
Gary W. Funk 40,000 20,000
Joseph Giamanco 160,000 80,000
Lawrence and Diane Gorelick 40,000 20,000
Edward A. Harycki 20,000 10,000
Hasenfield-Stein, Inc. Pension Trust 13,333 6,666
Delaware Charter Gurantee & Trust Co. FBO Ronald I. Heller IRA 30,000 15,000
Richard A. Horstmann 80,000 40,000
Intergalactic Growth Fund, Inc. 80,000 40,000
Barbara Kantor 20,000 10,000
Robert Karsten, D.D.S. 40,000 20,000
Richard Katz 20,000 10,000
E. Gerald Kay 40,000 20,000
Kentucky National Insurance Co. 20,000 10,000
Keys Foundation 160,000 80,000
Ali H. Khin and Mariam K. Ohn 40,000 20,000
Ernest Howard King, Jr. 20,000 10,000
Marvin Kogod and Muriel Kogod JTWROS 20,000 10,000
Jay Lieberman 40,000 20,000
Andrew Licari 40,000 20,000
James Lynch 20,000 10,000
Leonard Makowka 80,000 40,000
Virginia Meade 10,000 5,000
Beno Michel M.D. Trust 20,000 10,000
Harold Miller 20,000 10,000
Farrell Moore and Ann Moore JT 20,000 10,000
Gee Gee Morgan 10,000 5,000
Morgan Steel Limited 80,000 40,000
Delaware Charter Guarantee & Trust Co. FBO David S. Nagelberg IRA 30,000 15,000
Daniel Orenstein 56,000 28,000
Donald Orenstein 20,000 10,000
Seymour Orenstein 32,000 16,000
The Chandrakant and Krishna
Patel Family Trust Dtd. 8/25/92 40,000 20,000
Sanjay K. Patel 40,000 20,000
Vijay Patel 60,000 30,000
James M. Persky 10,000 5,000
Stephen J. Posner 40,000 20,000
Delaware Charter Guaranty Trust TTEE FBO Paul Prager IRA 60,000 30,000
Tis Prager 40,000 20,000
R. Capital II, Ltd. 80,000 40,000
Kenneth M. Reichle, Jr. 20,000 10,000
Fahnestock & Co., Inc. C/F Gerald Richter IRA 20,000 10,000
R&J Trust Dtd. 7/1/93, Roger P. Siegel and Joan K. Siegel TTEES 40,000 20,000
II-3
<PAGE>
Kenneth M. Robbins 20,000 10,000
Wayne Robbins 40,000 20,000
Joseph Roselle 80,000 40,000
Carl Rosen 40,000 20,000
Robert M. Rosin 20,000 10,000
Harvey L. Ross 40,000 20,000
Irving Russo 20,000 10,000
Rutgers Casualty Insurance Co. 20,000 10,000
Ronald Schaffer 48,000 24,000
Harry Schwartz 20,000 10,000
Mark Schwartz 20,000 10,000
Merton J. Segal 40,000 20,000
Norman Seiden 80,000 40,000
Robert Shiff 20,000 10,000
Barbara Snyder 40,000 20,000
Nachum Stein 13,333 6,666
Myron M. Teitelbaum, M.D. 10,000 5,000
Edmund Tennenhaus 40,000 20,000
Tissera Overseas Fund N.V. 40,000 20,000
Robert and Sarah Wax 40,000 20,000
</TABLE>
Other Sales of Securities within Last Three Years
On or about July 23, 1996, the Company sold (i) 12,286 shares of its Common
Stock at $2.00 per share, for an aggregate of $24,572, to Vijay Patel, (ii)
10,000 shares of its Common Stock at $2.00 per share, for an aggregate of
$20,000 to Vijay Patel, C/F Amisha Patel, and (iii) 5,000 shares of its Common
Stock at $2.00 per share, for an aggregate of $10,000 to Vijay Patel, C/F Sagar
Patel. The sales were made in reliance upon Section 4(2) of the Securities Act
of 1993. The numbers in the preceding paragraph do not reflect the reverse
one-for-two reverse split the Company undertook in March 1998.
On or about October 21, 1996, the Company sold 13,000 shares of its Common Stock
at $2.00 per share, for an aggregate of $26,000, to Vijay Patel. The sale was
made in reliance upon Section 4(2) of the Securities Act of 1993. The numbers in
the preceding paragraph do not reflect the reverse one-for-two reverse split the
Company undertook in March 1998.
On or about March 5, 1997, the Company sold 21,000 shares of its Common Stock at
$1.40 per share, for an aggregate of $58,800 to Vijay Patel. The sale was made
in reliance upon Section 4(2) of the Securities Act of 1993. The numbers in the
preceding paragraph do not reflect the reverse one-for-two reverse split the
Company undertook in March 1998.
On or about May 15, 1997, the Company sold 10,000 shares of its Common Stock at
$1.40 per share, for an aggregate of $14,000 to Vijay Patel; (ii) 5,000 shares
of its Common Stock at $1.40 per share, for an aggregate of $7,000 to Vijay
Patel, C/F Amisha Patel; and (iii) 5,000 shares of its Common Stock at $1.40 per
share, for an aggregate of $7,000 to Vijay Patel, C/F
II-4
<PAGE>
Sagar Patel. The sales were made in reliance upon Section 4(2) of the
Securities Act of 1993. The numbers in the preceding paragraph do not
reflect the reverse one-for-two reverse split the Company undertook in March
1998.
On or about July 14, 1998, the Companyissued to Jerome Belson warrants to
purchase 75,000 shares of Common Stock at $6.00 per share, exercisable for five
years. The purchase price for the warrants was $150.00 in the aggregate. The
sales were made in reliance upon Section 4(2) of the Securities Act of 1993.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Registration Fees: $3,737.07
Federal Taxes: $0.00
State Taxes and Fees: $0.00
Trustee's Fees $0.00
Transfer Agents' Fees: $11,134.00
Costs of Printing and Engraving: $0.00
Stock Exchange or NASD Fees: $0.00
Legal, Accounting and Engineering Fees: $69,578.00
Premiums Paid by Registrant or Selling
Security Holder on any Policy that Insures
or Indemnifies Directors and Officers Against
any Liabilities They May Incur in Connection
with the Registration, Offering or Sale of
Securities: $61,130.00
Total: $145,579.07
===========
The above numbers represent estimated costs incurred or to be incurred by
Registrant, and do not take into account any unforeseen future contingencies.
II-5
<PAGE>
UNDERTAKINGS
------------
Rule 415 Offering.
The Registrant hereby undertakes to file during any period in which it
offers or sells securities, a post -effective amendment to this Registration
Statement to:
(i) include any prospectus required by Section 10(a)(3)
of the Securities Act;
(ii) reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information contained in the
Registration Statement; and notwithstanding the foregoing, (if the total value
of securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range may
be reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b), if, in the aggregate the changes in the volume and price represent
no more than a 20% change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective registration
statement; and
(iii) include any additional or changed material information on the
plan of distribution.
The Registrant further undertakes that, for the purpose of determining
any liability under the Securities Act, each post-effective amendment will be
treated as a new registration statement relating to the securities offered
therein, and the offering of the securities at the time of the post-effective
amendment will be treated as the initial bona fide offering of the securities.
The Registrant further undertakes to file a post-effective amendment
remove from registration by a post-effective amendment any securities remaining
unsold at the termination of the offering.
Section 512(e)
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, void.
II-6
<PAGE>
EXHIBITS
3.1 Certificate of Incorporation of Registrant
3.2 Bylaws of Registrant
4.1 Specimen Common Stock Certificate
4.2 Form of Warrant Agreement (including Warrant Certificate)
4.3 Form of Placement Agent's Warrant
4.4 Registration Rights Agreement
5.1 Form of Opinion and Consent of James, McElroy & Diehl, P.A.
regarding the legality of the securities being registered
10.1 Employment Agreement dated December 28, 1995 between the Registrant
and Atul M. Mehta
10.2 Consulting Agreement dated August 1, 1997 between the Registrant and
Bridge Ventures, Inc.
10.3 Consulting Agreement dated August 1, 1997 between the Registrant and
Saggi Capital Corporation
10.4 Commercial Lease
10.5 Form of Private Placement Subscription Agreement
10.6 1997 Incentive Stock Option Plan
10.7 Form of Confidentiality Agreement (corporate)
10.8 Form of Confidentiality Agreement (employee)
23.1 Consent of James, McElroy & Diehl, P.A. (included in Exhibit 5.1)
23.2 Consent of Miller, Ellin & Company
27.1 Financial Data Schedule
II-7
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorizes this Amendment its
Registration Statement to be signed on its behalf by the undersigned in the City
of Maywood, State of New Jersey, on July 14, 1998.
ELITE PHARMACEUTICALS, INC.
By: /s/
-------------------------
Atul M. Mehta, President
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates dated.
/s/
--------------------------------
Atul M. Mehta, President and Director
Date: July 14, 1998
/s/
--------------------------------
John W. Jackson, Director
Date: July 13, 1998
II-8
<PAGE>
CERTIFICATE OF INCORPORATION
OF
ELITE PHARMACEUTICALS, INC.
- --------------------------
The undersigned, for the purposes of forming a
corporation under the laws of the State of Delaware, do make, file, and record
this Certificate, and do certify that:
FIRST: The name of the corporation is ELITE PHARMACEUTICALS, INC.
SECOND: Its Registered office in the State of Delaware is to be located at
9 East Lockerman Street, in the City of Dover, County of Kent, 19901.
The Registered Agent in charge thereof is National Registered Agents, Inc.
THIRD: The purpose of the corporation is to engage in lawful act or
activity for which a corporation may be organized under the General
Corporation Law of Delaware,
FOURTH: The amount of the total authorized capital stock of the corporation is
20 million, all of which are of a par value of $.01 dollars each and classified
as Common Stock.
FIFTH: The name and mailing address of the incorporator are as follows:
NAME MAILING ADDRESS
Thresa Lennon Intercounty Clearance Corporation
111 Washington Avenue
Albany, New York 12210
SIXTH: The duration of the corporation shall be perpetual.
SEVENTH: When a compromise or arrangement is proposed between the corporation
and its creditors or any class of them or between the corporation and its
shareholders or any class of them, a court of equity jurisdiction within the
state, on application of the corporation or a creditor or shareholder thereof,
or on application of a receiver appointed for the corporation pursuant to the
provisions of Section 291 of Title 8 of the Delaware Code order a meeting of the
creditors or class of creditors or of the shareholders or class of shareholders
to be affected by the proposed compromise or arrangement or reorganization, to
be summoned in such manner as the court directs. If a majority in number
representing 3/4 in value of the creditors or class of creditors, or of the
shareholders or class of shareholders to be affected by the proposed compromise
or arrangement or reorganization, agree to a compromise or arrangement or a
reorganization of the corporation as a consequence of the compromise or
arrangement, the compromise or arrangement and the reorganization, if sanctioned
by the court to which the application has been made, shall be binding on all the
creditors or class of creditors, or on all the shareholders or class of
shareholders and also on the corporation.
EIGHTH: The personal liability of the directors of the corporation is hereby
eliminated to the fullest extent allowed as provided by the Delaware General
Corporation Law, as the same may be supplemented and amended.
NINTH: The corporation shall, to the fullest extent permissible under the
provisions of the Delaware General Corporation Law, as the same may be amended
and supplemented, shall indemnify and hold harmless any and all persons whom it
shall have the power to indemnify under said provisions from and against any and
all liabilities (including expenses) imposed upon or reasonably incurred by him
in connection with any action, suit or other proceeding in which he may be
involved or with which he may be threatened, or other matters referred to in or
covered by said provisions both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be a director or officer of the corporation. Such
indemnification provided shall not be exclusive of any other rights to which
those indemnified may be entitled under any Bylaw, Agreement or Resolution
adopted by the shareholders entitled to vote thereon after notice.
Dated on this 1st day of October, 1997.
/S/
Theresa Lennon, Incorporator
<PAGE>
BYLAWS
OF
ELITE PHARMACEUTICALS, INC.
ARTICLE I.
OFFICES
Section 1.1. Principal office. The principal office of the corporation
shall be located at such place as the Board of Directors may fix from time to
time.
Section 1.2. Registered office. The registered office of the
corporation required by law to be maintained in the State of Delaware may be,
but need not be, identical with the principal office.
Section 1.3. Other offices. The corporation may have offices at such
other places, either within or without the State of Delaware, as the Board of
Directors may designate or as the affairs of the corporation may require from
time to time.
ARTICLE II.
MEETINGS OF THE SHAREHOLDERS
Section 2.1. Place of meetings. All meetings of the shareholders shall
be held at the principal office of the corporation, or at such other place,
either within or without the State of Delaware, as shall in each case be (i)
fixed by the President, the Secretary, or the Board of Directors and designated
in the notice of meeting or (ii) agreed upon by a majority of the shareholders
entitled to vote at the meeting.
Section 2.2. Annual meetings. The annual meeting of the shareholders
shall be held at a date and time fixed, from time to time, by the Board of
Directors or the President, provided that the annual meeting shall be held on a
date no later than thirteen months after the previous annual meeting, for the
purpose of electing directors of the corporation and for the transaction of such
other business as may be properly brought before the meeting. If the day fixed
for the annual meeting shall be a legal holiday, such meeting shall be held on
the next succeeding business day.
Section 2.3. Substitute annual meeting. If the annual meeting shall not
be held on the day designated by these bylaws, a substitute annual meeting may
be called in accordance with the provisions of Section 4 of this Article II. A
meeting so called shall be designated and treated for all purposes as the annual
meeting.
Section 2.4. Special meetings. Special meetings of the shareholders may
be called at any time by the President, the Secretary, or the Board of
Directors, and shall be called pursuant to the written request of the holders of
not less than forty percent of all the votes entitled to be cast on any issue
proposed to be considered at the meeting.
Section 2.5. Notice of meetings. Written notice stating the time, and
place of the meeting shall be given not less than ten nor more than sixty days
before the date of any shareholders' meeting, either by personal delivery, or by
telegraph, teletype, or other form of wire or wireless communication, or by
facsimile transmission or by mail or private carrier, by or at the direction of
the Board of Directors, the President, the Secretary, or other person calling
the meeting, to each shareholder entitled to vote at such meeting; provided that
such notice must be given to all shareholders with respect to any meeting at
which a merger or share exchange is to be considered and in such other instances
as required by law. If mailed, such notice shall be deemed to be effective when
deposited in the United States mail, correctly addressed to the shareholder at
the shareholder's address as it appears on the current record of shareholders of
the corporation, with postage thereon prepaid.
In the case of a special meeting, the notice of meeting shall include a
description of the purpose or purposes for which the meeting is called; but, in
the case of an annual or substitute annual meeting, the notice of meeting need
not include a description of the purpose or purposes for which the meeting is
called unless such a description is required by the provisions of the Delaware
General Corporation Law.
When a meeting is adjourned to a different date, time, or place, notice
need not be given of the new date, time, or place if the new date, time, or
place is announced at the meeting before adjournment and if a new record date is
not fixed for the adjourned meeting; but if a new record date is fixed for the
adjourned meeting (which must be done if the new date is more than 120 days
after the date of the original meeting), notice of the adjourned meeting must be
given as provided in this section to persons who are shareholders as of the new
record date.
Section 2.6. Waiver of notice. Any shareholder may waive notice of any
meeting before or after the meeting. The waiver must be in writing, signed by
the shareholder, and delivered to the corporation for inclusion in the minutes
or filing with the corporate records. A shareholder's attendance, in person or
by proxy, at a meeting (a) waives objection to lack of notice or defective
notice of the meeting, unless the shareholder or his proxy at the beginning of
the meeting objects to holding the meeting or transacting business at the
meeting, and (b) waives objection to consideration of a particular matter at the
meeting that is not within the purpose or purposes described in the meeting
notice, unless the shareholder or his proxy objects to considering the matter
before it is voted upon.
Section 2.7. Shareholders' list. Before each meeting of shareholders,
the corporation shall prepare an alphabetical list of the shareholders entitled
to notice of such meeting. The list shall be arranged by voting group (and
within each voting group by class or series of shares) and show the address of
and number of shares held by each shareholder. The list shall be kept on file at
the principal office of the corporation, or at a place identified in the meeting
notice in the city where the meeting is held, for the period beginning two
business days after notice of the meeting is given and continuing through the
meeting, and shall be available for inspection by any shareholder, his agent or
attorney, at any time during regular business hours. The list shall also be
available at the meeting and shall be subject to inspection by any shareholder,
his agent or attorney, at any time during the meeting or any adjournment
thereof.
Section 2.8. Voting Group. All shares of one or more classes or series
that under the Articles of Incorporation or the Delaware General Corporation Law
are entitled to vote and be counted together collectively on a matter at a
meeting of shareholders constitute a voting group. All shares entitled by the
Articles of Incorporation or the Delaware General Corporation Law to vote
generally on a matter are for that purpose a single voting group. Classes or
series of shares shall not be entitled to vote separately by voting group unless
expressly authorized by the Articles of Incorporation or specifically required
by law.
Section 2.9. Quorum. Shares entitled to vote as a separate voting group
may take action on a matter at the meeting only if a quorum of those shares
exists. A majority of the votes entitled to be cast on the matter by the voting
group constitutes a quorum of that voting group for action on that matter.
Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for that
adjourned meeting.
If the absence of a quorum at the opening of any meeting of the
shareholders, such meeting may be adjourned from time to time by the vote of a
majority of the votes cast on the motion to adjourn; and, subject to the
provisions of Section 2.5 of this Article II, at any adjourned meeting any
business may be transacted that might have been transacted at the original
meeting if a quorum exists with respect to the matter proposed.
Section 2.10. Proxies. Shares may be voted either in person or by one
or more proxies authorized by a written appointment of proxy signed by the
shareholder or by his duly authorized attorney in fact. An appointment of proxy
is valid for eleven months from the date of its execution, unless a different
period is expressly provided in the appointment form.
Section 2.11. Voting of shares. Subject to the provisions of the
Articles of Incorporation, each outstanding share shall be entitled to one vote
on each matter voted on at a meeting of the shareholders.
Except in the election of directors as governed by the provisions of
Section 3.3 of Article III, if a quorum exists, action on a matter by a voting
group is approved if the votes cast within the voting group favoring the action
exceed the votes cast opposing the action, unless a greater vote is required by
law or the Articles of Incorporation or these bylaws.
Absent special circumstances, shares of the corporation are not
entitled to vote if they are owned, directly or indirectly, by another
corporation in which the corporation owns, directly or indirectly, a majority of
the shares entitled to vote for directors of the second corporation; provided
that this provision does not limit the power of the corporation to vote its own
shares held by it in a fiduciary capacity.
Section 2.12. Informal action by shareholders. Any action that is
required or permitted to be taken at a meeting of the shareholders may be taken
without a meeting if one or more written consents, describing the action so
taken, shall be signed by a majority of the shareholders who would be entitled
to vote upon such action at a meeting, and delivered to the corporation for
inclusion in the minutes or filing with the corporation records.
If the corporation is required by law to give notice to nonvoting
shareholders of action to be taken by written consent of the voting
shareholders, then the corporation shall give the nonvoting shareholders, if
any, written notice of the proposed action at least ten days before the action
is taken.
ARTICLE III.
BOARD OF DIRECTORS
Section 3.1. General powers. All corporate powers shall be exercised by
or under the authority of, and the business and affairs of the corporation shall
be managed under the direction of, the Board of Directors.
Section 3.2. Number and qualifications. The number of directors
constituting the Board of Directors shall be set by the Board of Directors, but
shall be no less than three (3) nor more than ten (10). Directors need not be
residents of the State of Delaware or shareholders of the corporation. Should
the number of directors decrease due to the resignation, removal, death or other
event in which a person ceases to serve as a director, the remaining directors
shall be entitled to act as if this provisions required no more directors than
the number which remains.
Section 3.3. Election. Except as provided in Section 3.6 of this
Article III, the directors shall be elected at the annual meeting of
shareholders. Those persons who receive the highest number of votes at a meeting
at which a quorum is present shall be deemed to have been elected.
Section 3.4. Term of directors. Each initial director shall hold office
until the first shareholders' meeting at which directors are elected, or until
such director's death, resignation, or removal. The term of every other director
shall expire at the next annual shareholders' meeting following the director's
election or upon such director's death, resignation, or removal. The term of a
director elected to fill a vacancy expires at the next shareholders' meeting at
which directors are elected. A decrease in the number of directors does not
shorten an incumbent director's term. Despite the expiration of a director's
term, such director shall continue to serve until a successor shall be elected
and qualifies or until there is a decrease in the number of directors.
Section 3.5. Removal. Any director may be removed at any time with or
without cause by a vote of the shareholders if the number of votes cast to
remove such director exceeds the number of votes cast not to remove him. If a
director is elected by a voting group of shareholders, only the shareholders of
that voting group may participate in the vote to remove him. A director may not
be removed by the shareholders at a meeting unless the notice of the meeting
states that the purpose, or one of the purposes, of the meeting is removal of
the director.
If any directors are so removed, new directors may be elected at the same
meeting.
Section 3.6. Vacancies. Any vacancy occurring in the Board of
Directors, including without limitation a vacancy resulting from an increase in
the number of directors or from the failure by the shareholders to elect the
full authorized number of directors, may be filled by the shareholders or by the
Board of Directors, whichever group shall act first. If the directors remaining
in office do not constitute a quorum, the directors may fill the vacancy by the
affirmative vote of a majority of the remaining directors. If the vacant office
was held by a director elected by a voting group, only the remaining director or
directors elected by that voting group or the holders of shares of that voting
group are entitled to fill the vacancy.
Section 3.7. Chairman of Board. There may be a Chairman of the Board of
Directors elected by the directors from their number at any meeting of the
Board. The Chairman shall preside at all meetings of the Board of Directors and
perform such other duties as may be directed by the Board.
Section 3.8. Compensation. The Board of Directors may provide
for the compensation of directors for their services as such and for
the payment or reimbursement of any or all expenses incurred by them in
connection with such services.
ARTICLE IV.
MEETINGS OF DIRECTORS
Section 4.1. Regular meetings. A regular meeting of the Board of
Directors shall be held immediately after, and at the same place as, the annual
meeting of shareholders. In addition, the Board of Directors may provide, by
resolution, the time and place, either within or without the State of Delaware,
for the holding of additional regular meetings.
Section 4.2. Special meetings. Special meetings of the Board of
Directors may be called by or at the request of the Chairman of the Board, if
any, by the President or by a majority of directors. Such a meeting may be held
either within or without the State of Delaware, as fixed by the person or
persons calling the meeting.
Section 4.3. Notice of meetings. Regular meetings of the Board of
Directors may be held without notice. The person or persons calling a special
meeting of the Board of Directors shall, at least two days before the meeting,
give or cause to be given notice thereof by any usual means of communication.
Such notice need not specify the purpose for which the meeting is called. Any
duly convened regular or special meeting may be adjourned by the directors to a
later time without further notice.
Section 4.4. Waiver of notice. Any director may waive notice of any
meeting before or after the meeting. The waiver must be in writing, signed by
the director entitled to the notice, and delivered to the corporation for
inclusion in the minutes or filing with the corporate records. A director's
attendance at or participation in a meeting waives any required notice of such
meeting unless the director at the beginning of the meeting, or promptly upon
arrival, objects to holding the meeting or to transacting business at the
meeting and does not thereafter vote for or assent to action taken at the
meeting.
Section 4.5. Quorum. Unless the Articles of Incorporation or these
bylaws provide otherwise, a majority of the number of directors fixed by or
pursuant to these bylaws shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors, or if no number is so fixed,
the number of directors in office immediately before the meeting begins shall
constitute a quorum.
Section 4.6. Manner of acting. Except as otherwise provided in the
Articles of Incorporation or these bylaws, including Section 4.9 of this Article
IV, the affirmative vote of a majority of the directors present at a meeting at
which a quorum is present shall be the act of the Board of Directors. Unless
impracticable, a director may, upon request, participate in a meeting by
telephone.
Section 4.7. Presumption of assent. A director who is present at a
meeting of the Board of Directors or a committee of the Board of Directors when
corporate action is taken is deemed to have assented to the action taken unless
(a) he objects at the beginning of the meeting, or promptly upon his arrival, to
holding it or to transacting business at the meeting, or (b) his dissent or
abstention from the action taken is entered in the minutes of the meeting, or
(c) he files written notice of his dissent or abstention with the presiding
officer of the meeting before its adjournment or with the corporation
immediately after the adjournment of the meeting. Such right of dissent or
abstention is not available to a director who votes in favor of the action
taken.
Section 4.8. Action without meeting. Action required or permitted to be
taken at a meeting of the Board of Directors may be taken without a meeting if
the action is taken by all members of the Board. The action must be evidenced by
one or more written consents signed by each director before or after such
action, describing the action taken, and included in the minutes or filed with
the corporate records.
Section 4.9. Committees of the Board. The Board of Directors may create
an Executive Committee and other committees of the board and appoint members of
the Board of Directors to serve on them. The creation of a committee of the
board and appointment of members to it must be approved by the greater of (a) a
majority of the number of directors in office when the action is taken or (b)
the number of directors required to take action pursuant to Section 6 of this
Article IV. Each committee of the board must have two or more members and, to
the extent authorized by law and specified by the Board of Directors, shall have
and may exercise all of the authority of the Board of Directors in the
management of the corporation. Each committee member serves at the pleasure of
the Board of Directors. The provisions in these bylaws governing meetings,
action without meetings, notice and waiver of notice, and quorum and voting
requirements of the Board of Directors apply to committees of the board
established under this section.
ARTICLE V.
OFFICERS
Section 5.1. Officers of the corporation. The officers of the
corporation shall consist of a President, a Secretary, a Treasurer, and such
Vice-Presidents, Assistant Secretaries, Assistant Treasurers, and other officers
as may from time to time be appointed by or under the authority of the Board of
Directors. Any two or more offices may be held by the same person, but no
officer may act in more than one capacity where action of two or more officers
is required. The President shall report and be directly responsible to the Board
of Directors. Except as otherwise directed by the Board of Directors, the other
officers shall report and be directly responsible to the President.
Section 5.2. Appointment and term. The officers of the corporation
shall be appointed by the Board of Directors or by a duly appointed officer
authorized by the Board of Directors to appoint one or more officers or
assistant officers. Each officer shall hold office until his death, resignation,
retirement, removal, disqualification, or his successor shall have been
appointed.
Section 5.3. Compensation of officers. The compensation of the
President of the corporation shall be fixed by the Board of Directors, and the
compensation of other officers shall be fixed by the President or the Board of
Directors. No officer shall serve the corporation in any other capacity and
receive compensation therefor unless such additional compensation shall be duly
authorized. The appointment of an officer does not itself create contract
rights.
Section 5.4. Removal. Any officer may be removed by the Board at any
time with or without cause; provided that this provision for removal shall not
be invoked to impair or contravene the officer's contract rights, if any, with
the corporation.
Section 5.5. Resignation. An officer may resign at any time by
communicating his resignation to the corporation, orally or in writing. A
resignation is effective when communicated unless it specifies in writing a
later effective date. If a resignation is made effective at a later date that is
accepted by the corporation, the Board of Directors may fill the pending vacancy
before the effective date if the Board provides that the successor does not take
office until the effective date. An officer's resignation does not affect the
corporation's contract rights, if any, with the officer.
Section 5.6. Bonds. The Board of Directors may by resolution require
any officer, agent, or employee of the corporation to give bond to the
corporation, with sufficient sureties, conditioned on the faithful performance
of these duties of his respective office or position, and to comply with such
other conditions as may from time to time be required by the Board of Directors.
<PAGE>
Section 5.7. President. The President shall be the principal executive
officer of the corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the corporation. He shall, when present, preside at all meetings of
the shareholders. He shall sign, with the Secretary, an Assistant Secretary, or
any other proper officer of the corporation thereunto authorized by the Board of
Directors, certificates for shares of the corporation, any deeds, mortgages,
bonds, contracts, or other instruments which the Board of Directors has
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors or by these
bylaws to some other officer or agent of the corporation, or shall be required
by law to be otherwise signed or executed; and in general he shall perform all
duties incident to the office of President and such other duties as may be
prescribed by the Board of Directors from time to time.
Section 5.8. Vice-Presidents. In the absence of the President or in the
event of his death, inability or refusal to act, the Vice-Presidents in the
order of their length of service as such, unless otherwise determined by the
Board of Directors, shall perform the duties of the President, and when so
acting shall have all the powers of and be subject to all the restrictions upon
the President. Any Vice-President may sign, with the Secretary or an Assistant
Secretary, certificates for shares of the corporation; and shall perform such
other duties as from time to time may be prescribed by the President or Board of
Directors.
Section 5.9. Secretary. The Secretary shall: (a) keep the minutes of
the meetings of shareholders, of the Board of Directors, and of all committees
in one or more books provided for that purpose; (b) see that all notices are
duly given in accordance with the provisions of these bylaws or as required by
law; (c) maintain and authenticate the records of the corporation and be
custodian of the seal of the corporation and see that the seal of the
corporation is affixed to all documents the execution of which on behalf of the
corporation under its seal is duly authorized; (d) sign with the President, or a
Vice-President, certificates for shares of the corporation, the issuance of
which shall have been authorized by resolution of the Board of Directors; (e)
maintain and have general charge of the stock transfer books of the corporation;
(f) prepare or cause to be prepared shareholder lists prior to each meeting of
the shareholders as required by law; (g) attest the signature or certify the
incumbency or signature of any officer of the corporation; and (h) in general
perform all duties incident to the office of secretary and such other duties as
from time to time may be prescribed by the President or by the Board of
Directors.
Section 5.10. Assistant Secretaries. In the absence of the Secretary or
in the event of his death, inability or refusal to act, the Assistant
Secretaries in the order of their length of service as Assistant Secretary,
unless otherwise determined by the Board of Directors, shall perform the duties
of the Secretary, and when so acting shall have all the powers of and be subject
to all the restrictions upon the Secretary. They shall perform such other duties
as may be prescribed by the Secretary, by the President, or by the Board of
Directors. Any Assistant Secretary may sign, with the President or a
Vice-President, certificates for shares of the corporation.
Section 5.11. Treasurer. The Treasurer shall: (a) have charge and
custody of and be responsible for all funds and securities of the corporation;
receive and give receipts for moneys due and payable to the corporation from any
source whatsoever, and deposit all such moneys in the name of the corporation in
such depositories as shall be selected in accordance with the provisions of
Section 4.4 of Article VI of these bylaws; (b) maintain appropriate accounting
records as required by law; (c) prepare, or cause to be prepared, annual
financial statements of the corporation that include a balance sheet as of the
end of the fiscal year and an income and cash flow statement for that year,
which statements, or a written notice of their availability, shall be mailed to
each shareholder within 120 days after the end of such fiscal year; and (d) in
general perform all of the duties incident to the office of treasurer and such
other duties as from time to time may be prescribed by the President or by the
Board of Directors.
Section 5.12. Assistant Treasurers. In the absence of the Treasurer or
in the event of his death, inability or refusal to act, the Assistant Treasurers
in the order of their length of service as such, unless otherwise determined by
the Board of Directors, shall perform the duties of the Treasurer, and when so
acting shall have all the powers of and be subject to all the restrictions upon
the Treasurer. They shall perform such other duties as may be prescribed by the
Treasurer, by the President, or by the Board of Directors.
ARTICLE VI.
CONTRACTS, LOANS, CHECKS, AND DEPOSITS
Section 6.1. Contracts. The Board of Directors may authorize any
officer or officers, agent or agents, to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances.
Section 6.2. Loans. No loans shall be contracted on behalf
of the corporation and no evidence of indebtedness shall be issued in
its name unless authorized by the Board of Directors. Such authority may
be general or confined to specific instances.
Section 6.3. Checks and drafts. All checks, drafts, or other orders for
the payment of money, issued in the name of the corporation, shall be signed by
such officer or officers, agent or agents of the corporation and in such manner
as shall from time to time be determined by the Board of Directors.
Section 6.4. Deposits. All funds of the corporation not
otherwise employed shall be deposited from time to time to the credit of
the corporation in such depositories as may be selected by or under the
authority of the Board of Directors.
ARTICLE VII.
SHARES AND THEIR TRANSFER
Section 7.1. Certificates for shares. The Board of Directors may
authorize the issuance of some or all of the shares of the corporation's classes
or series without issuing certificates to represent such shares. If shares are
represented by certificates, the certificates shall be in such form as required
by law and as determined by the Board of Directors. Certificates shall be
signed, either manually or in facsimile, by the President or a Vice-President
and by the Secretary or Treasurer or an Assistant Secretary or Assistant
Treasurer. All certificates for shares shall be consecutively numbered or
otherwise identified and entered into the stock transfer books of the
corporation. When shares are represented by certificates, the corporation shall
issue and deliver, to each shareholder to whom such shares have been issued or
transferred, certificates representing the shares owned by him. When shares are
not represented by certificates, then within a reasonable time after the
issuance or transfer of such shares, the corporation shall send the shareholder
to whom such shares have been issued or transferred a written statement of the
information required by law to be on certificates.
Section 7.2. Stock transfer books. The corporation shall keep a book or
set of books, to be known as the stock transfer books of the corporation,
containing the name of each shareholder of record, together with such
shareholder's address and the number and class or series of shares held by him.
Transfers of shares of the corporation shall be made only on the stock transfer
books of the corporation by the holder of record thereof or by his legal
representative, who shall furnish proper evidence of authority to transfer, or
by his attorney authorized to effect such transfer by power of attorney duly
executed and filed with the Secretary, and on surrender for cancellation of the
certificate for such shares (if the shares are represented by certificates).
Section 7.3. Lost certificate. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
corporation claimed to have been lost or destroyed, upon receipt of an affidavit
of such fact from the person claiming the certificate to have been lost or
destroyed. When authorizing such issue of a new certificate, the Board of
Directors shall require that the owner of such lost or destroyed certificate, or
his legal representative, give the corporation a bond in such sum and with such
surety or other security as the Board may direct as indemnity against any claim
that may be made against the corporation with respect to the certificate claimed
to have been lost or destroyed, except where the Board of Directors by
resolution finds that in the judgment of the directors the circumstances justify
omission of a bond.
Section 7.4. Fixing record date. The Board of Directors may fix a
future date as the record date for one or more voting groups in order to
determine the shareholders entitled to notice of a shareholders' meeting, to
demand a special meeting, to vote, or to take any other action. Such record date
may not be more than seventy days before the meeting or action requiring a
determination of shareholders. A determination of shareholders entitled to
notice of or to vote at a shareholders' meeting is effective for any adjournment
of the meeting unless the Board of Directors fixes a new record date for the
adjourned meeting, which it must do if the meeting is adjourned to a date more
than 120 days after the date fixed for the original meeting.
If no record date is fixed by the Board of Directors for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, the close of business on the day before the first notice of the
meeting is delivered to shareholders shall be the record date for such
determination of shareholders.
The Board of Directors may fix a date as the record date for
determining shareholders entitled to a distribution or share dividend. If no
record date is fixed by the Board of Directors for such determination, it is the
date the Board of Directors authorizes the distribution or share dividend.
Section 7.5. Holder of record. Except as otherwise required by law, the
corporation may treat the person in whose name the shares stand of record on its
books as the absolute owner of the shares and the person exclusively entitled to
receive notification and distributions, to vote, and to otherwise exercise the
rights, powers, and privileges of ownership of such shares.
Section 7.6. Shares held by nominees. The corporation shall recognize
the beneficial owner of shares registered in the name of a nominee as the owner
and shareholder of such shares for certain purposes if the nominee in whose name
such shares are registered files with the Secretary a written certificate in a
form prescribed by the corporation, signed by the nominee, indicating the
following: (i) the name, address, and taxpayer identification number of the
nominee; (ii) the name, address, and taxpayer identification number of the
beneficial owner; (iii) the number and class or series of shares registered in
the name of the nominee as to which the beneficial owner shall be recognized as
the shareholder; and (iv) the purposes for which the beneficial owner shall be
recognized as the shareholder.
The purposes for which the corporation shall recognize the beneficial
owner as the shareholder may include the following: (i) receiving notice of,
voting at, and otherwise participating in shareholders' meetings; (ii) executing
consents with respect to the shares; (iii) exercising dissenters' rights under
Article 13 of the Business Corporation Act; (iv) receiving distributions and
share dividends with respect to the shares; (v) exercising inspection rights;
(vi) receiving reports, financial statements, proxy statements, and other
communications from the corporation; (vii) making any demand upon the
corporation required or permitted by law; and (viii) exercising any other rights
or receiving any other benefits of a shareholder with respect to the shares.
The certificate shall be effective ten (10) business days after its
receipt by the corporation and until it is changed by the nominee, unless the
certificate specifies a later effective time or an earlier termination date.
If the certificate affects less than all of the shares registered in
the name of the nominee, the corporation may require the shares affected by the
certificate to be registered separately on the books of the corporation and be
represented by a share certificate in effect with respect to the shares
represented by the share certificate.
ARTICLE VIII.
INDEMNIFICATION
Any person who at any time serves or has served as a director of the
corporation, or who, while serving as a director of the corporation, serves or
has served, at the request of the corporation, as a director, officer, partner,
trustee, employee, or agent of another corporation, partnership, joint venture,
trust, or other enterprise, or as a trustee or administrator under an employee
benefit plan, shall have a right to be indemnified by the corporation to the
fullest extent permitted by law against (a) reasonable expenses, including
attorneys' fees, incurred by him in connection with any threatened, pending, or
completed civil, criminal, administrative, investigative, or arbitrative action,
suit, or proceeding (and any appeal therein), whether or not brought by or on
behalf of the corporation, seeking to hold him liable by reason of the fact that
he is or was acting in such capacity, and (b) reasonable payments made by him in
satisfaction of any judgment, money decree, fine (including an excise tax
assessed with respect to an employee benefit plan), penalty, or settlement for
which he may have become liable in any such action, suit, or proceeding.
The Board of Directors of the corporation shall take all such action as
may be necessary and appropriate to authorize the corporation to pay the
indemnification required by this bylaw, including, without limitation, making a
determination that indemnification is permissible in the circumstances and a
good faith evaluation of the manner in which the claimant for indemnity acted
and of the reasonable amount of indemnity due him. The Board of Directors may
appoint a committee or special counsel to make such determination and
evaluation. To the extent needed, the Board shall give notice to, and obtain
approval by, the shareholders of the corporation for any decision to indemnify.
Any person who at any time after the adoption of this bylaw serves or
has served in the aforesaid capacity for or on behalf of the corporation shall
be deemed to be doing or to have done so in reliance upon, and as consideration
for, the right of indemnification provided herein. Such right shall inure to the
benefit of the legal representatives of any such person and shall not be
exclusive of any other rights to which such person may be entitled apart from
the provision of this bylaw.
The purpose of this bylaw is to provide indemnification (and
reimbursement upon indemnified expenses) to officers and directors to the
broadest and greatest extent permitted under '145 of the Delaware General
Corporation Law and any other applicable laws permitting indemnification, and
this bylaw shall be construed accordingly. Nothing in this provision shall limit
the authority of the directors to provide indemnification to other employees and
agents of the corporation.
ARTICLE IX.
GENERAL PROVISIONS
Section 9.1. Distributions. The Board of Directors may
from time to time authorize, and the corporation may grant,
distributions and share dividends to its shareholders pursuant to law
and subject to theprovisions of its Article of Incorporation.
Section 9.2. Seal. The corporate seal of the corporation shall consist
of two concentric circles between which is the name of the corporation and in
the center of which is inscribed SEAL; and such seal, as impressed or affixed on
the margin hereof, is hereby adopted as the corporate seal of the corporation.
Section 9.3. Fiscal year. The fiscal year of the corporation
shall be fixed by the Board of Directors.
Section 9.4. Amendments. Except as otherwise provided in the
Articles of Incorporation or by law,these bylaws may be amended or
repealed and new bylaws may be adopted by the Board of Directors or by
the shareholders.
No bylaw adopted, amended, or repealed by the shareholders shall be
readopted, amended, or repealed by the Board of Directors, unless the Articles
of Incorporation or by a bylaw adopted by the shareholders authorizes the Board
of Directors to adopt, amend, or repeal that particular bylaw or the bylaws
generally.
Section 9.5. Facsimiles. Any document transmitted by facsimile
telecommunication may be substituted or used in lieu of the original writing or
document for all purposes for which the original document could be used under
these bylaws; provided that the facsimile is legible and that there is no
evidence that it is not a complete reproduction of the original document.
Section 9.6. Definitions. Unless the context otherwise requires,
terms used in these bylaws shall have the meanings assigned to them in the
Delaware General Corporation Law to the extent defined therein.
********************
<PAGE>
COMMON STOCK CERTIFICATE
PAR VALUE $0.01
NUMBER ______ SHARES _____
ELITE PHARMACEUTICALS, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES THAT ___________ IS THE REGISTERED HOLDER OF ________ SHARES
FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK OF ELITE
PHARMACEUTICALS, INC.
TRANSFERABLE ONLY ON THE BOOKS OF THE CORPORATION BY THE HOLDER HEREOF IN PERSON
OR BY ATTORNEY UPON SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED. IN WITNESS
WHEREOF, THE SAID CORPORATION HAS CAUSED THIS CERTIFICATE TO BE SIGNED BY ITS
DULY AUTHORIZED OFFICERS AND ITS CORPORATE SEAL TO BE HEREUNTO AFFIXED THIS ____
DAY OF ______, 19____.
ELITE PHARMACEUTICALS, INC.
CORPORATE SEAL 1997 DELAWARE
SECRETARY PRESIDENT
<PAGE>
FORM OF WARRANT AGREEMENT
NUMBER WARRANTS
ELITE PHARMACEUTICALS, INC.
COMMON STOCK PURCHASE WARRANTS
CUSIP 28659T 119
THIS CERTIFIES THAT _______________ IS THE OWNER OF ___________
OR REGISTERED ASSIGNS, IS ENTITLED TO PURCHASE ONE FULLY PAID AND NONASSESSABLE
SHARE OF ELITE PHARMACEUTICALS, INC., A DELAWARE CORPORATION (HEREIN CALLED THE
COMPANY) FOR EACH TWO WARRANTS EVIDENCED BY THIS CERTIFICATE FOR $6.00 PER SHARE
DURING THE PERIOD COMMENCING UPON THE FIRST DAY THAT THE COMMON STOCK TRADES AND
EXPIRING NOVEMBER 30, 2002, UPON ITS SURRENDER, AND PAYMENT OF THE PURCHASE
PRICE AT THE AGENTS OFFICE, 201 BLOOMFIELD AVE., VERONA, NEW JERSEY 07044
SUBJECT TO THE FOLLOWING CONDITIONS: 1. THE EXERCISE PRICE IS PAYABLE IN CASH,
CERTIFIED CHECK OR BANK DRAFT; 2. ADJUSTMENTS IN THE EXERCISE PRICE OR NUMBER OF
SHARES ISSUABLE WILL BE MADE FOR STOCK SPLITS, RECAPITALIZATION, MERGER,
CONSOLIDATION OR OTHER EVENT AFFECTING WARRANT HOLDERS INTEREST, ADJUSTMENTS FOR
THE STATED EVENT WILL MAINTAIN THE WARRANT HOLDER'S SAME RELATIVE POSITION TO
THE COMPANY AS EXISTED PRIOR TO EXERCISE. 3. WARRANT EXERCISE REQUIRES
APPROPRIATE COMPLETION OF THE "ELECTION TO PURCHASE" PRINTED ON THE BACK OF THIS
CERTIFICATE, IF THE EXERCISED SHARES ARE LESS THAN THE TOTAL NUMBER OF WARRANTS
ON THE BACK OF THIS CERTIFICATE, IF THE EXERCISED SHARES ARE LESS THAN THE TOTAL
NUMBER OF WARRANTS CONTAINED IN THIS CERTIFICATES, THE HOLDER WILL BE ISSUED A
NEW CERTIFICATE GIVING CREDIT FOR THE UNEXERCISED WARRANTS. 4. NO FRACTIONAL
SHARS WILL BE ISSUED UPON EXERCISE. THE COMPANY WILL PAY HOLDERS THE
PROPORATIONATE PURCHASE PRICE FOR ANY FRACTIONAL SHARES ARISING THROUGH
ADDJUSTMENTS. 5. THIS CERTIFICATE CONTAINS ALL THE WARRANT AND RIGHTS OF THE
WARRANT HOLDERS. 6. THE HOLDER OR HIS AUTHORIZED AGENT IS ENTITLED OT EXCHANGE
THIS CERTIFICATE FOR NEW. 7. HOLDERS CAN REGISTER OR TRANSFER CERTIFICATES AT
THE WARRANT AGENT'S PRINCIPAL OFFICE AFTER PAYMENT OF FEES AND APPLICABLE TAXES.
NEW CERTIFICATES WILL BE EQUIVALENT TO THE OLD AND TOTALING THE WARRANTS ISSUED
TO THE HOLDER OR HIS TRANSFEREE IN EXCHANGE FOR THE OLD, AND CONTAINING THE SAME
TERMS AND WARRANT AMOUNTS. 8. PRIOR TO PRESENTMENT FOR REGISTRATION OR TRANSFER,
THE COMPANY AND WARRANT AGENT MAY TREAT THE REGISTERED WARRANT HOLDER AS THE
ABSOLUTE OWNER OF THIS CERTIFICATE FOR EXERCISE, TRANSFER OR ANY OTHER PURPOSE
AND NEITHER THE COMPANY NOR THE WARRANT AGENT SHALL BE AFFECTED BY ANY NOTICE IN
WRITING TO THE CONTRARY. 9. IF THIS CERTIFICATE IS SURRENDERED FOR WARRANT
EXERCISE WHILE THE COMPANY'S TRANSFER BOOKS ARE CLOSED, SHARE CERTIFICATES WILL
NOT BE ISSUED UNTIL THE BOOKS ARE REOPENED FOR TRANSFER. 10. THIS WARRANT IS NOT
EXERCISABLE BEYOND THE EXPIRATION DATE SHOWN ABOVE UNLESS EXTENDED IN WRITING BY
THE COMPANY. FAILURE TO EXERCISE SOME OR ALL WARRANTS WITHIN THE TIME PERIOD
VOIDS THEM.
DATED:________
ELITE PHARMACEUTICALS, INC.
SECRETARY
PRESIDENT
COUNTERSIGNED
JERSEY TRANSFER AND TRUST CO.
201 BLOOMFIELD AVE. (P.O. BOX 36)
VERONA, NJ 07044
TRANSFER AGENT
AUTHORIZED SIGNATURE
<PAGE>
FORM OF PLACEMENT AGENT'S WARRANT
NO SALE OR TRANSFER OF THIS WARRANT OR THE SECURITIES UNDERLYING THIS WARRANT
MAY BE MADE UNTIL THE EFFECTIVENESS OF A REGISTRATION STATEMENT OR OF A
POST-EFFECTIVE AMENDMENT THERETO UNDER THE SECURITIES ACT OF 1933 (THE "ACT"),
COVERING THIS WARRANT OR THE SECURITIES UNDERLYING THIS WARRANT, OR UNTIL THE
COMPANY RECEIVES AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY TO THE EFFECT
THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
ACT. TRANSFER OF THIS WARRANT IS RESTRICTED UNDER PARAGRAPH 2 BELOW.
PLACEMENT AGENTS' WARRANT TO PURCHASE UNITS, EACH
CONSISTING OF 40,000 SHARES OF COMMON STOCK AND
20,000 CLASS A COMMON STOCK PURCHASE WARRANTS
ELITE PHARMACEUTICALS, INC.
(a Delaware corporation)
Dated: October 31, 1997
THIS CERTIFIES THAT, for value received, Normandy Securities, Inc. (the
"Placement Agent") or its registered assigns (the Placement Agent and any such
registered assign, a "Holder") is the owner of this warrant (the "Placement
Agents' Warrant") to purchase from Elite Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), during the period and at the prices hereinafter
specified, up to 2.347 Units of the Company, each unit consists of 40,000 shares
of the Company's common stock, $.01 par value per share (the "Common Stock"),
and 20,000 Class A common stock purchase warrants. Each Warrant entitles the
holder to purchase one share of Common Stock at an exercise price of $3.00 (the
"Warrants" and, together with the Common Stock, the "Units") collectively, the
warrants to purchase such shares and the warrants issuable upon exercise of this
Warrant are called the "Warrants".
This Placement Agents' Warrant is issued pursuant to a Placement Agent
Agreement dated August 8, 1997 between the Company, the Placement Agent and
Elite Laboratories, Inc. in connection with a private placement through the
Placement Agent (the "Private Placement") of a minimum of 40 Units and a maximum
of 100 Units. The Warrants will be issued pursuant to, and subject to the terms
and conditions set forth herein.
1. Exercise of the Placement Agents' Warrant.
(a) The rights represented by this Placement Agents' Warrant shall be
exercisable between October 31, 1997 and November 1, 2002, inclusive, the Holder
shall have the option to purchase 2.347 Units hereunder at a price of $72,000
per Unit and the Warrants have an exercise price of $3.00 (the "Exercise
Price"), respectively, the purchase price of the Units being 120% of the private
offering prices for the Units set forth in the Private Placement Memorandum of
the Company, dated September 15, 1997 (the "Memorandum").
(b) The rights represented by this Placement Agents' Warrant may be
exercised at any time within the period above specified, in whole or in part, by
(i) the surrender of this Placement Agents' Warrant (with the purchase form at
the end hereof properly executed) at the principal executive office of the
Company (or such other office or agency of the Company as it may designate by
notice in writing to the Holder at the address of the Holder appearing on the
books of the Company); (ii) payment to the Company of the exercise price then in
effect for the number of Units specified in the above-mentioned purchase form
together with applicable stock transfer taxes, if any; and (iii) delivery to the
Company of a duly executed agreement signed by the person(s) designated in the
purchase form to the effect that such person(s) agree(s) to be bound by the
provisions of Paragraph 5 and subparagraphs (b), (c) and (d) of Paragraph 6
hereof. This Placement Agents' Warrant shall be deemed to have been exercised,
in whole or in part to the extent specified, immediately prior to the close of
business on the date this Placement agents' Warrant is surrendered and payment
is made in accordance with the foregoing provisions of this Paragraph 1, and the
person or persons in whose name or names the certificates for the Securities
shall be issuable upon such exercise shall become the Holder or Holders of
record of such Units at that time and date. This Units so purchased shall be
delivered to the Holder within a reasonable time, not exceeding ten business
days, after the rights represented by this Placement Agents' Warrant shall have
been so exercised.
2. Restrictions on Transfer. This Placement Agents' Warrant shall not
be sold, transferred, assigned, pledged or hypothecated, except that it may be
transferred to successors of the Holder, and may be assigned in whole or in part
to any person who is an officer of the Placement Agent or a partner, officer of
any other member of the selling group during such period. Any such assignment
shall be effected by the Holder by (i) completing and executing the transfer
form at the end hereof and (ii) surrendering this Placement Agents' Warrant with
such duly completed and executed transfer form for cancellation, accompanied by
funds sufficient to pay any transfer tax, at the office or agency of the Company
referred to in Paragraph I hereof, accompanied by a certificate (signed by a
duly authorized representative of the Holder), stating that each transferee is a
permitted transferee under this Paragraph 2; whereupon the Company shall issue,
in the name or names specified by the Holder, a new Placement Agents' Warrant or
Placement Agents' Warrants of like tenor and representing in the aggregate
rights to purchase the same number of Units as are then purchasable hereunder.
The Holder acknowledges that this Placement Agents' Warrant may not be offered
or sold except pursuant to an effective registration statement under the Act or
an opinion of counsel satisfactory to the Company that an exemption from
registration under the Act is available. Notwithstanding the foregoing, the
Placement Agents' Warrant shall not be sold, transferred, assigned, pledged or
hypothecated, unless i) the shares underlying the Warrant are exempt from
registration under the Securities and Exchange Act of 1922, as amended (the
"Act") or ii) registered under the Act.
3. Covenants of the Company.
(a) The Company covenants and agrees that all Common Stock issuable
upon the exercise of this Placement Agents' Warrant will, upon issuance thereof
and payment therefor in accordance with the terms hereof, and all Common Stock
issuable upon exercise of the Warrants underlying this Placement Agents' Warrant
will, upon the issuance thereof and payment therefor in accordance with the
terms hereof, be duly and validly issued, fully paid and nonassessable and no
personal liability will attach to the Holder thereof by reason of being such a
Holder, other than as set forth herein.
(b) The Company covenants and agrees that during the period within
which this Placement Agents' Warrant may be exercised, the Company will at all
times have authorized and reserved a sufficient number of shares of Common Stock
to provide for the exercise of this Placement Agents' Warrant and the Warrants
included therein.
(c) The Company covenants and agrees it shall use its best efforts to
cause all shares of Common Stock issuable upon the exercise of the Placement
Agents' Warrant and the Warrants included therein, to be included on the NASDAQ
Stock Market or listed on a national securities exchange, at such time as the
Company Common Stock and Warrants are so listed.
4. No Rights as Stockholder. This Placement Agents' Warrant shall not
entitle the Holder to any voting rights or other rights as a stockholder of the
Company, either at law or in equity, and the rights of the Holder are limited to
those expressed in this Placement Agents' Warrant and are not enforceable
against the Company except to the extent set forth herein.
5. Registration Rights.
(a) The Company will include the Units underlying the Warrants (the
"Registrable Securities") in a registration statement filed with the Securities
and Exchange Commission ("SEC") pursuant to the Act, other than pursuant to
Forms S-4 or S-8, or comparable forms (the "Registration Statement") prior to
January ____, 1998. The Company shall advise the Holder, whether the Holder
holds this Placement Agents' Warrant or has exercised this Placement Agents'
Warrant and holds Common Stock and Warrants, or Common Stock underlying the
Warrants (the "Warrant Shares"), by written notice at least 30 days prior to the
filing of any post-effective amendment to the Registration Statement or of any
new registration statement or post-effective amendment thereto under the Act,
covering any securities of the Company, for its own account or for the account
of others, and upon the request of the Holder made during such five-year period,
include in any such post-effective amendment or registration statement such
information as may be required to permit a public offering of any of the Common
Stock or Warrants issuable hereunder, and/or the Warrant Shares (the
"Registrable Securities"); provided, that this Paragraph 5(a) shall not apply to
any registration statement filed pursuant to registrations of shares in
connection with an employee benefit plan or a merger, consolidation or other
comparable acquisition or solely for registration of Non-convertible debt or
preferred equity securities of the Company; and provide, further, that,
notwithstanding the foregoing, the Holder shall have no right to include any
Registrable Securities in any new registration statement or post-effective
amendment thereto unless as of the effective date thereof the Registration
Statement (as it may hereafter be amended or supplemented) or any new
registration statement under which the Registrable Securities are registered
shall have ceased to be effective or the prospectus contained in such
Registration Statement shall have ceased to be current. The Company shall
provide, at the Company's sole cost and expense, the Holder and its counsel,
with copies of all filings, correspondence, and other non-privileged documents,
relating to the Registration Statement and its Amendments. In addition, the
Company shall supply prospectuses in order to facilitate the public sale or
other disposition of the Registrable Securities, use its best efforts to
register and qualify any of the Registrable Securities for sale in such states
in which the Common Stock and Warrants are offered and sold in the Public
Offering as such Holder reasonably designates, furnish indemnification in the
manner provided in Paragraph 6 hereof, and do any and all other acts and things
which may be necessary to enable such Holder to consummate the public sale of
the Registrable Securities; provided, that, without limiting the foregoing, the
Company shall not be obligated to execute or file any general consent to service
of process or to qualify as a foreign corporation to do business under the laws
of any such jurisdiction. The holder shall furnish information reasonably
requested by the Company in accordance with such post-effective amendments or
registration statements, including its intentions with respect thereto, and
shall furnish indemnification as set forth in Paragraph 6. The Company shall
continue to advise the Holders of the Registrable Securities of its intention to
file a registration statement or amendment pursuant to this Paragraph 5(a) until
the earliest of (i) October _____, 2002; or (ii) such time as all of the
Registrable Securities have been registered and sold under the Act; or (iii)
such time as all of the Registrable Securities have been otherwise transferred,
new certificates for them not bearing a legend restricting further transfer
shall have been delivered by the Company and subsequent public distribution of
them shall not require registration or qualification of them under the Act; or
(iv) such time as in the opinion of legal counsel for the Company, the
Registrable Securities may be offered and sold by the Holders thereof without
being registered under the Act and such securities, upon receipt by the
purchasers thereof pursuant to such sale, will not constitute "restricted
securities" as such term is defined in Rule 144 under the Act.
(b) The Holder may, in accordance with Paragraph 5(a), at his or its
option, and subject to the limitations set forth in Paragraph 1(a) hereof,
request the registration of any of the Registrable Securities in a filing made
by the Company prior to the acquisition of the Securities upon exercise of this
Placement Agents' Warrant. The Holder may thereafter exercise this Placement
Agents' Warrant at any time or from time to time subsequent to the effectiveness
under the Act of the registration statement which relates to the Common Stock
underlying the Underwriters' Warrants and Warrants included therein.
(c) The following provisions of this Paragraph 5 shall also be
applicable:
(i) The Company shall bear the entire cost and expense of any
registration of securities initiated by it under Paragraph 5(a) hereof
notwithstanding that the Registrable Securities subject to this Placement
Agents' Warrant may be included in any such registration. Notwithstanding the
foregoing, any Holder whose Registrable Securities are included in any such
registration statement pursuant to this Paragraph 5 shall, however, bear the
fees of any counsel retained by him and any transfer taxes or underwriting
discounts or commissions applicable to the Registrable Securities sold by him
pursuant thereto and, in the case of a registration pursuant to Paragraph 5(a)
hereof, any additional registration or "blue sky" or state securities fees
attributable to the registration or qualification of such Holder's Registrable
Securities.
(ii) If the underwriter or managing underwriter in any
underwritten offering made pursuant to Paragraph 5(a) hereof shall advise the
Company that it declines to include a portion or all of the Registrable
Securities requested by the Holders to be included in the registration
statement, then distribution of all or a specified portion of the Registrable
Securities shall be excluded from such registration statement (in case of an
exclusion as to a portion of such Registrable Securities, such portion to be
allocated among such Holders in proportion to the respective numbers of
Registrable Securities requested to be registered by each such Holder). In such
event the Company shall give the Holder prompt notice of the number of
Registrable Securities excluded. Further, in such event the Company shall,
commencing six months after the completion of such underwritten offering, file
and use its best efforts to have declared effective, at its sole expense
(subject to the last sentence of Paragraph 5(a)(ii)), a registration statement
relating to such excluded securities.
(iii) If a registration pursuant to Paragraph 5(a) hereof
involves an underwritten offering, the Company shall have the right to select
the investment banker or investment bankers and manager or managers that will
serve as underwriters with respect to the underwritten offering. No Holder of
Registrable securities may participate in any underwritten offering under this
Agreement unless such Holder completes and executes all questionnaires, powers
of attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwritten offering, in each case, in the form and
upon terms reasonably acceptable to the Company and the underwriters.
6. Indemnification.
(a) Whenever pursuant to Paragraph 5, a registration statement relating
to any Registrable Securities is filed under the Act, amended or supplemented,
the Company will indemnify and hold harmless each Holder of the Registrable
Securities covered by such registration statement, amendment or supplement (such
holder hereinafter referred to as the "Distributing Holder"), each person, if
any, who controls (within the meaning of the Act) the Distributing Holder, and
each officer, employee, partner or agent of the Distributing Holder, if the
Distributing Holder is a broker or dealer, and each underwriter (within the
meaning of the Act) of such securities and each person, if any, who controls
(within the meaning of the Act) any such underwriter and each officer, employee,
agent or partner of such underwriter against any losses, claims, damages or
liabilities, joint or several, to which the Distributing Holder, any such
underwriter or any other person may become subject under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any such registration statement or
any preliminary prospectus or final prospectus constituting a part thereof or
any amendment or supplement thereto, or arise out of or are based upon the
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which such statements were made, not misleading; and will reimburse the
Distributing Holder or such other person for any legal or other expenses
reasonably incurred by the Distributing Holder, or Placement Agent or such other
person, in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company will not be
liable in any such case (i) to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
such preliminary prospectus, such final prospectus or such amendment or
supplement in reliance upon and in conformity with written information furnished
by such Distributing Holder, any other Distributing Holder for use in the
preparation thereof, or (ii) such losses, claims, damages or liabilities arise
out of or are based upon any actual or alleged untrue statement or omission made
in or from any preliminary prospectus, but corrected in the final prospectus, as
amended or supplemented.
(b) Whenever pursuant to Paragraph 5 a registration statement relating
to the Registrable Securities is filed under the Act, or is amended or
supplemented, the Distributing Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed such
registration statement and such amendments and supplements thereto, and each
person, if any, who controls the Company (within the meaning of the Act) against
any losses, claims, damages or liabilities to which the Company or any such
director, officer or controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue or alleged untrue
statement of any material fact contained in any such registration statement or
any preliminary prospectus or final prospectus constituting a part thereof, or
any amendment or supplement thereto, or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in such
registration statement, such preliminary prospectus, such final prospectus or
such amendment or supplement in reliance upon and in conformity with written
information furnished by such Distributing Holder for use in the preparation
thereof; and will reimburse the Company or any such director, officer or
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action.
(c) Promptly after receipt by an indemnified party under this Paragraph
6 of notice of commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party, give the
indemnifying party notice of the commencement thereof; but the omission to so
notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party otherwise than under this Paragraph 6.
(d) In case any such action is brought against any indemnified party,
and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnifying party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Paragraph 6 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation.
7. Adjustment of Warrant Price, Number of Shares of Common Stock and
Warrants Underlying Placement Agents' Warrant. The Exercise Price of the
Placement Agents' Warrants, as well as the number of Units issuable upon
exercise of the Placement Agents' Warrants and the shares of Common Stock
purchasable upon the exercise of the Warrants underlying the Placement Agents'
Warrants shall be subject to adjustment as set forth in Paragraph 7 of the
Warrant.
8. Fractional Shares.
(a) The Company shall not be required to issue fractions of
shares of Common Stock or fractional Warrants on the exercise of this Placement
Agents' Warrant; provided, however, that if the Holder exercises the Placement
Agents' Warrant in full, any fractional shares of Common Stock shall be
eliminated by rounding any fraction up to the nearest whole number of shares of
Common Stock.
(b) The Holder of this Placement Agent's Warrant, by acceptance hereof,
expressly waives his right to receive any fractional share of Common Stock or
fractional Warrant upon exercise of this Placement Agents' Warrant.
9. Miscellaneous.
(a) This Placement Agents' Warrant shall be governed by and in
accordance with the laws of the State of New York without regard to the
conflicts of law principles thereof.
(b) All notices, requests, consents and other communications hereunder
shall be made in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt requested:
(i) if to a Holder, to the address of such Holder as shown on the books of the
Company, or (ii) if to the Company, 230 W. Passaic Street, Maywood, New Jersey
07607.
(c) The Company and the Representative may from time to time supplement
or amend this Placement Agents' Warrant without the approval of any other
Holders in order to cure any ambiguity, to correct or supplement any provision
contained herein which may be defective or inconsistent with any provisions
herein, or to make any other provisions in regard to matters or questions
arising hereunder which the Company and the Placement Agent may deem necessary
or desirable and which the Company and the Placement Agent deem not to
materially adversely affect the interest of the Holders.
(d) All the covenants and provisions of this Placement Agents' Warrant
by or for the benefit of the Company and the Holders shall bind and inure to the
benefit of their respective successors and assigns hereunder.
(e) Nothing in this Placement Agent's Warrant shall be construed to
give to any person or corporation other than the Company and the Placement Agent
and any other registered Holder or Holders, any legal or equitable right, and
this Placement Agent's Warrant shall be for the sole and exclusive benefit of
the Company and the Placement Agent and any other Holder or Holders.
(f) This Placement Agents' Warrant may be executed in any number of
counterparts and each of such counterparts shall for the purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
IN WITNESS WHEREOF, the Company has caused this Placement Agents'
Warrant to be signed by its duly authorized officer and to be dated October
_______, 1997.
ELITE PHARMACEUTICALS, INC.
By: _____________________________
Name: Atul M. Mehta
Title: President
PURCHASE FORM
(To be signed only upon receipt of the Placement Agents' Warrant)
The undersigned, the Holder of the foregoing Placement Agents' Warrant,
hereby irrevocably elects to exercise the purchase rights represented by such
Placement Agents' Warrant for, and to purchase thereunder, ________________
shares of Common Stock and/or ___________ Warrants of Elite Pharmaceuticals,
Inc. and herewith makes payment of $____________________ therefor, and requests
that the certificates for Common Stock and/or Warrants be issued in the name(s)
of, and delivered to __________________________________ whose addresses is (are)
_________________________________and whose social security or taxpayer
identification number(s) is (are)
- ------------------.
Dated: __________________________
================================
Address
- --------------------------------
Telephone
- --------------------------
Signatures must conform in all respects to name of registered Holder.
<PAGE>
TRANSFER FORM
(To be signed only upon transfer of the Placement Agents' Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto_____________________________________ the right to purchase
shares of Common Stock and/or Warrants of Elite Pharmaceuticals, Inc.
represented by the foregoing Placement Agents' Warrant to the extent of
____________________ shares of Common Stock and/or ______________
Warrants, and appoints _______________________________, attorney to
transfer such rights on the books of Elite Pharmaceuticals, Inc. with full
power of substitution in the premises.
Dated:_____________________________
- -----------------------------------
(name of holder)
- ------------------------------------
Address
- -----------------------------------
In the presence of:
====================================
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of ______, 1997 by and
between Prologica International, Inc., a Delaware corporation (the "Company"),
and the person whose name appears on the signature page attached hereto
(individually a "Holder" and collectively, with the holders of other securities
issued in the Offering, the "Holders").
WHEREAS, pursuant to a Offering Memorandum dated September l,
1997 (Memorandum) and Subscription Agreement (the "Subscription Agreement"), the
Holder has offered to purchase shares of the Company's Common Stock, no par
value ("Common Stock") from the Company;
WHEREAS, in order to induce the Holders to enter into the Subscription
Agreement and to purchase the Common Stock, the Company and the Holders have
agreed to enter into this Agreement;
WHEREAS, it is intended by the Company and the Holders that this
Agreement shall become effective immediately upon the acquisition by the Holders
of the Common Stock;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the Company hereby agrees as follows:
A. REGISTRATION RIGHTS
1. Registration Rights
(a) Option to Include Securities in Registration Statement.
The Company agrees to file a registration statement, seeking to register all
shares of Common Stock, Warrants, and shares of Common Stock underlying the
Warrants (as defined in the Memorandum)(the Common Stock, Warrants and Common
Stock underlying the Warrants are collectively referred to herein as the
"Shares") on Form S-l or other comparable form, with the Securities and Exchange
Commission no later than 90 days from the initial closing of the sale of the
Minimum Units, (as defined in the Memorandum)("Registration Statement"). The
Company agrees to use its best efforts to have the Registration Statement
declared effective. The Holders agree to execute and/or deliver such documents
in connection with such registration as the Company may request. If the Holders'
Shares are so registered, the Company's obligations under Article 1 herein will
be deemed satisfied in full.
(b) Cooperation with Company. The Holders will cooperate with
the Company in all respects in connection with this Agreement, including, timely
supplying all information reasonably requested by the Company and executing and
returning all documents reasonably requested in correction with the registration
and sale of the Shares.
2. Registration Procedures. If and whenever the Company is required by
any of the provisions of this Agreement to use its best efforts to effect the
registration of any of the Shares under the Securities Act of 1933, as amended
("Acts), the Company shall (except as otherwise provided in this Agreement), as
expeditiously as possible:
(a) prepare and file with the Commission a Registration
Statement and shall use its best efforts to cause such Registration Statement to
become effective and remain effective until all the Shares are sold or become
capable of being publicly sold without registration under the Act.
(b) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective and
to comply with the provisions of the Act with respect to the sale or other
disposition of all securities covered by such Registration Statement whenever
the Holder or Holders of such securities shall desire to sell or otherwise
dispose of the same (including prospectus supplements with respect to the sales
of securities or the exercise of the Shares from time to time in connection with
a Registration Statement pursuant to Rule 415 of the Commission);
(c) notify each Holder of Shares covered by such Registration
Statement, at any time when a prospectus relating thereto covered by such
Registration Statement is required to be delivered under the Act, of the
happening of any event of which it has knowledge as a result of which the
prospectus included in such Registration Statement, as then in effect, includes
any untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing; and
(d) take such other actions as shall be reasonably requested
by any Holder to facilitate the registration and sale of the Shares; provided,
however, that the Company shall not be obligated to take any actions not
specifically required elsewhere herein which in the aggregate would cost in
excess of $5,000.
3. Expenses. All expenses incurred in any registration of the Holders'
Shares under this Agreement shall be paid by the Company, including, without
limitation, printing expenses, fees and disbursements of counsel for the Company
and each participating Holder, expenses of any audits to which the Company shall
agree or which shall be necessary to comply with governmental requirements in
connection with any such registration, all registration and filing fees for the
Holders' Shares under federal and state securities laws; provided, however, the
Company shall not be liable for (a) any discounts or commissions to any
underwriter or broker/dealer; (b) any stock transfer taxes incurred with respect
to Shares sold in the Offering; or (c) the fees and expenses of counsel for any
Holder, provided that the Company will pay the costs and expenses of Company
counsel when the Company's counsel is representing any or all selling Holders.
4. Indemnification. In the event arty included in a Registration
Statement pursuant to this Agreement:
(a) Company Indemnity. Without limitation of any other
indemnity provided to any Holder, either in connection with the Offering or
otherwise, to the extent permitted by law, the Company shall indemnify and hold
harmless each Holder, the affiliates, officers, directors and partners of each
Holder, any underwriter (as defined in the Act) for such Holder, and each
person, if any, who controls such Holder or underwriter (within the meaning of
the Act or the Securities Exchange Act of 1934 ("Exchange Act"), against any
losses, claims, damages or liabilities (joint or several) to which they may
become subject under the Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a Violation): (i) any untrue statement or
alleged untrue statement of a material fact contained in such Registration
Statements, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, (iii) any violation or alleged violation
by the Company of the Act or the Exchange Act, or (iv) any state securities law
or any rule or regulation promulgated under the Act, the Exchange Act or any
state securities law. The Company shall reimburse each such Holder, affiliate,
officer or director or partner, underwriter or controlling person for any legal
or other expenses incurred by them in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
Company shall not be liable to any Holder in any such case for any such loss,
claim, damage, liability or action to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any such Holder or any other officer, director or controlling
person thereof.
(b) Holder Indemnity. Each Holder shall indemnify and hold harmless the
Company, its affiliates, its counsel, officers, directors, shareholders and
representatives, any underwriter (as defined in the Act), against any losses,
claims, damages, or liabilities Joint or several) to which they may become
subject under any federal or state securities law, and the Holder shall
reimburse the Company, its affiliates, counsel, officers, directors,
shareholders, representatives, underwriters or controlling persons for any legal
or other expenses incurred by them in connection with investigating or defending
any such loss, claim, damage, liability or action; insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any statements or information provided by such Holder to the
Company in connection with the offer or sale of Shares.
(c) Notice; Right to Defend. Promptly after receipt by an
indemnified party under this ss.4, of notice of the commencement of any action
(including any governmental action), such indemnified party shall, if a claim in
respect thereof is to be made against any indemnifying party under this ss.4,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party agrees that it will be responsible for any costs,
expenses, judgments, damages and losses incurred by the indemnified party with
respect to such clam, jointly with any other indemnifying party similarly
noticed, and to assume the defense thereof with counsel mutually satisfactory to
the parties; provided, however, that an indemnified party shall have the right
to retain its own counsel, with the fees and expenses to be paid by the
indemnifying party, if the indemnified party reasonably believes that
representation of the indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall relieve such indemnifying party of any liability to the indemnified
party under this Agreement only if and to the extent that such failure is
prejudicial to its ability to defend such action, and the omission to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Agreement.
(d) Contribution. If the indemnification provided for in this
Agreement is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage or expense
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
hand in connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relevant fault of the indemnifying party and the indemnified
party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
Notwithstanding the foregoing, the amount any Holder shall be obligated to
contribute pursuant to the Agreement shall be limited to an amount equal to the
proceeds to such Holder of the Shares sold pursuant to the Registration
Statement which gives rise to such obligation to contribute (less the aggregate
amount of any damages which the Holder has otherwise been required to pay in
respect of such loss, claim, damage, liability or action or any substantially
similar loss, claim, damage, liability or action arising from the sale of such
Shares).
(e) Survival of Indemnity. The indemnification provided by
this Agreement shall be a continuing right to indemnification and shall survive
the registration and sale of any registrable securities by any person entitled
to indemnification hereunder and the expiration or termination of this
Agreement.
5. Assignment of Registration Rights. The rights of the Holders under
this Agreement, including the rights to cause the Company to register Shares may
not be assigned without the written prior consent of the Company.
6. Remedies.
(a) Time is of Essence. The Company agrees that time is of the
essence for each of the covenants contained herein and that, in the event of a
dispute hereunder, this Agreement is to be interpreted and construed in a manner
that will enable the Holders to sell their Shares as quickly as possible after
such Holders have indicated to the Company that they desire their Shares to be
registered. Any delay on the part of the Company not expressly permitted under
this Agreement, whether material or not, shall be deemed a material breach of
this Agreement.
(b) Remedies Upon Default or Delay. The Company acknowledges
that the breach of any part of this Agreement may cause irreparable harm to a
Holder and that monetary damages alone may be inadequate. The Company therefore
agrees that the Holder shall be entitled to injunctive relief or such other
applicable remedy as a court of competent jurisdiction may provide. Nothing
contained herein will be construed to limit a Holder's right to any remedies at
law, including recovery of damages for breach of any part of this Agreement.
7. Notices.
(a) All communications under this Agreement shall be in
writing and shall be mailed by first class mail, postage prepaid, or telegraphed
or telexed with conflation of receipt or delivered by hand or by overnight
delivery service,
(i). If to the Company, at:
Elite Laboratories, Inc.
230 West Passaic Street
Maywood, New Jersey 07607
Attn: Dr. Atul M. Mehta
or at such other address as it may have furnished in writing to the Holders
of Shares at the time outstanding, or
(ii) if to any Holder of any Shares, to the
address of such Holder as it appears in the stock or warrant ledger of
the Company.
(b) Any notice so addressed, when mailed by registered or
certified mail shall be deemed to be given three days after so mailed, when
telegraphed or telexed shall be deemed to be given when transmitted, or when
delivered by hand or overnight shall be deemed to be given when delivered.
8. Successors and Assigns. Except as otherwise expressly provided
herein, this Agreement shall inure to the benefit of and be binding upon the
successors and permitted assigns of the Company and each of the Holders.
9. Amendment and Waiver. This Agreement may be amended, and the
observance of any term of this Agreement may be waived, but only with the
written consent of the Company and the Holders of securities representing a
majority of the Shares; provided, however, that no such amendment or waiver
shall take away any registration right of any Holder of Shares or reduce the
amount of reimbursable costs to any Holder of Shares in connection with any
registration hereunder without the consent of such Holder; further provided,
however, that without the consent of any other Holder of Shares, any Holder may
from time to time enter into one or more agreements amending, modifying or
waiving the provisions of this Agreement if such action does not adversely
affect the rights or interest of any other Holder of Shares. No delay on the
part of any party in the exercise of any right, power or remedy shall operate as
a waiver thereof, nor shall any single or partial exercise by any party of any
right, power or remedy preclude any other or further exercise thereof, or the
exercise of any other right, power or remedy.
10. Counterparts. One or more counterparts of this Agreement may be
signed by the parties, each of which shall be an original but all of which
together shall constitute one and same instrument.
11. Governing Law. This Agreement shall be construed in accordance with
and governed by the internal laws of the State of New York, without giving
effect to conflicts of law principles.
12. Invalidity of Provisions. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validly and
enforceability of the remaining provisions contained herein shall not be
affected thereby.
13. Headings. The headings in this Agreement are for convenience of
reference only and shall not be deemed to alter or affect the meaning or
interpretation of any provisions hereof.
IN WITNESS WHEREOF, undersigned have executed this Agreement as of
the ___, day of ______, 1997
-----------------------------------------
Signature of Holder
PROLOGICA INTERNATIONAL, INC.
By:___________________________ _________________________________________
Michael H. Freedman, Print Name of Holder
President
-----------------------------------------
-----------------------------------------
Print Address of Holder
<PAGE>
FORM OF OPINION AND CONSENT OF JAMES, McELROY & DIEHL
January 29,1998
Elite Pharmaceuticals, Inc. 230 West Passaic Street Maywood, New Jersey 07606
Re: Elite Pharmaceuticals, Inc. (the "Company")
Registration Statement on Form SB-2
Ladies and Gentlemen:
You have requested our opinion with respect to the shares of the
Company's common stock, $.01 par value (the "Shares") included in the Company's
registration statement on Form SB-2 (the "Registration Statement"). The
Registration Statement has been filed with the United States Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended (the
"Securities Act").
As counsel to the Company, we have examined the original or certified
copies of such records of the Company, and such arrangements, certificates of
public officials, certificates of officers or representatives of the Company and
others, and such other documents as we deem relevant and necessary for the
opinion expressed in this letter. In such examination, we have assumed the
genuineness of all signatures on original documents, and the conformity to
original documents of all copies submitted to us as conformed or photostatic
copies. As to various questions of fact material to such opinion, we have relied
upon statements or certificates of officials and representatives of the Company
and others.
Based on, and subject to the foregoing, we are of the opinion that the
shares of Common Stock included in the Registration Statement either (i) in the
case of outstanding shares, are duly and validly issued, fully paid and
non-assessable or (ii) in the case of Shares issuable upon exercise of the
Warrants or Placement Agent's Warrants, when issued and paid for pursuant to the
terms thereof, will be duly and validly issued, fully paid and non-assessable.
In rendering this opinion, we advise you that members of this Firm are
members of the Bar of the State of North Carolina, and we express no opinion
herein concerning the applicability or effect of any laws of any other
jurisdiction, except the securities laws of the United States of America
referred to herein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We also consent to the use of our name in the
Registration Statement. In giving such consent, we do not thereby admit that we
are included within the category of persons whose consent is required under
Section 7 of the Securities Act, or the rules and regulations promulgated
thereunder.
Very truly yours,
JAMES McELROY & DIEHL, P.A.
Pender R. McElroy
Attorney at Law
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into this 28th day of December 1995, by and between
Elite Laboratories, Inc., a Delaware corporation (hereinafter "ELITE") and Atul
M. Mehta of Ramsey, New Jersey (hereinafter "MEHTA").
STATEMENT OF PURPOSE
MEHTA is currently employed by ELITE under a contract dated May 23, 1991
presently terminable at will at any time. ELITE desires to continue to employ
MEHTA for a period of five (5) years commencing January 1, 1996 in order to be
more certain of his continued services and in order to have access to his
research and development skills and experience relating to pharmaceutical and
similar products. MEHTA desires to accept continued employment upon the terms
herein. Therefore, the parties have agreed, and do hereby agree, that ELITE will
employ MEHTA and MEHTA will accept such continued employment, upon the terms and
conditions subsequently set out in this Agreement.
AGREEMENT OF THE PARTIES
1. Term. ELITE hereby agrees to employ MEHTA and MEHTA agrees to
continue being employed by ELITE for a period of five (5) years ending December
31, 2000, provided that this Agreement is not sooner terminated pursuant to the
provisions contained herein. The current employment agreement shall be
superseded by this Agreement, effective January 1, 1996.
2. Duties. MEHTA agrees to devote a sufficient amount of his business
time to diligently and faithfully perform his duties and responsibilities on
behalf of ELITE. MEHTA, however, shall not be precluded from (a) delivering
lectures, fulfilling speaking engagements, and writing or publishing any
material related to his area of expertise, (b) participating in professional
organizations and program activities, (c) serving as a consultant in his area of
expertise to government, industrial, and academic entities where it does not
conflict with the interests of ELITE, (d) serving as a director or member of a
committee of any organization or corporation or engaging in any other business
activities; provided that such activities do not materially interfere with the
regular performance of his duties hereunder and except to the extent limited by
paragraphs 11 and 12 of this Agreement.
3. Responsibilities. ELITE agrees that during the term of this
Agreement, MEHTA shall serve as and retain the title of both President and Chief
Executive Officer of ELITE. His responsibilities shall include the overall
management and direction of ELITE'S affairs, the hiring, direction and dismissal
of all subordinate employees, and the development of ELITE'S products. In
addition, MEHTA shall be entitled to continue to serve as a director of ELITE
for the entire term of this Agreement.
4. Compensation. As compensation for the services rendered hereunder,
including any services provided as President, Chief Executive Officer, and
Director, MEHTA shall receive the following:
a. An annual salary in the following amounts:
(1) From January 1, 1996 until December 31, 1996, $165,000.00,
payable in installments of $6,875.00 semi monthly;
(2) From January 1, 1997 until December 31, 1997, $180,000.00,
payable in installments of $7,500.00 semi monthly;
(3) From January 1, 1998 until December 31, 1998, $200,000.00,
payable in installments of $8,333.33 semi monthly;
(4) From January 1, 1999 until December 31, 2000, at
a salary not less than $200,000.00 plus an additional amount
(i.e. a raise) to be determined by the Board of Directors, in
its discretion, for each of the two years.
b. Additional incentive commissions equal to five percent (5
%) of net profit of each fiscal year as determined in accordance with
generally accepted accounting principles, payable no later than the
15th day of the fourth month following the completion of each such
fiscal year.
c. Health insurance, purchased and maintained by ELITE, which
shall cover all medical expenses incurred by MEHTA and his family.
d. Term life insurance on MEHTA'S life, for the benefit of
MEHTA'S surviving spouse or his estate, in an amount of at least
$300,000 for each year the policy is in effect.
e. Such discretionary bonus as the Board may (with MEHTA
abstaining) from time to time determine to be appropriate.
f. Options to purchase Class A Common voting stock of ELITE
to be granted on January 1, 1996 and each of the four succeeding
anniversaries thereafter in increments of 100,000 such options each
year. The options shall be exercisable from the date that they are
granted until earlier of (a) one year after MEHTA ceases to be employed
by ELITE or to serve as an officer or director of ELITE; or (b) the
expiration of ten years from the date the options are granted. The
options shall provide for MEHTA to purchase shares at a price of:
$1.00 for options issued January 1, 1996;
$1,50 for options issued January 1, 1997;
$2.00 for options issued January 1, 1998;
$2.50 for options issued January 1, 1999;
$3.00 for options issued January 1, 2000;
The Options shall be issued upon such additional terms and conditions as ELITE
deems appropriate, provided that such terms and conditions are not materially
different from terms and conditions of options issued to members of the Board of
Directors of ELITE.
5. Expenses. ELITE shall reimburse MEHTA for all reasonable expenses
incurred by him in connection with his employment pursuant to this Agreement.
ELITE will reimburse MEHTA for such expenses upon the presentation of an
itemized account together with such receipts, invoices, or other evidence of the
expenditure that would constitute satisfactory documentation for tax purposes.
Additionally, during the term of this Agreement, ELITE shall provide MEHTA with
the use of an automobile to be selected by MEHTA, provided that the automobile
selected has a fair market value at the time of acquisition not exceeding
$50,000. MEHTA shall be responsible for accounting for the use of the automobile
in compliance with all applicable regulations imposed by federal and state
taxing authorities.
6. Incentive and Benefit Plans. MEHTA shall be entitled to (a)
participate in any Management Incentive Compensation Plans adopted by ELITE'S
Board of Directors (provided any such plan is adopted upon a vote in which MEHTA
abstains or does not cast a deciding vote) on a basis to be determined by the
Board of Directors at such time; (b) participate in any stock option plan
established by the Board of Directors; and (c) participate in, and benefit from,
any and all pension, profit-sharing, life, dental, medical, and other group
benefit plans provided to management and/or other employees of ELITE.
7. Key Man Life Insurance. MEHTA shall do anything that is reasonably
necessary to enable ELITE to maintain key man insurance upon his life should the
Board of Directors so determine, with all benefits payable to ELITE. Upon
termination of employment for reasons other than MEHTA's death, MEHTA shall have
the right to (a) cancel such insurance policy or (b) rename the beneficiary
provided he assumes all subsequent payment of premiums.
8. Termination. MEHTA'S employment hereunder shall terminate upon the
occurrence of any of the following:
a. the death of MEHTA;
b. by election of either party upon the inability of MEHTA to
perform his duties on account of disability for a total of one hundred
twenty (120) days or more during any consecutive twelve (12) month
period;
c. by election of ELITE upon "Severe cause", defined as (i)
MEHTA'S commission of an act involving dishonesty, embezzlement or
fraud causing material damage to ELITE, (ii) MEHTA'S conviction for the
commission of a felony involving an act of dishonesty or (iii) willful
misconduct by MEHTA which is materially and demonstrably injurious to
ELITE (and which MEHTA cannot or does not cease or correct upon
request). For purposes of this provision, no act or failure to act by
MEHTA shall be considered "willful", unless done, or omitted to be
done, by him in bad faith and with knowledge that it was contrary to
the interests of ELITE;
d. by election of MEHTA upon (i) failure of ELITE to meet its
obligations under paragraph 4, (ii) substantial interference with the
discharge of his responsibilities under paragraph 3, (iii) purported
change by ELITE without MEHTA's consent, of the duties and
responsibilities of MEHTA from those duties and responsibilities
described in this Agreement, (iv) a change in ownership of more than
fifty percent (50%) of ELITE's shares in any one twelve (12) month
period, or if any person or entity (or commonly owned or controlled
group of entities) acquires shares which cause such person or entity's
shares to total more than fifty percent (50 %) of the shares of ELITE;
provided that shares acquired from MEHTA shall not be counted in
calculating the fifty percent (50%) of shares, and provided that
"ownership" shall mean ownership or de facto control, (v) requirement
by ELITE that MEHTA be based anywhere more than 40 miles from Ramsey,
New Jersey unless mutually agreed, (vi) any purported termination of
MEHTA'S employment which is not effected pursuant to the terms of this
Agreement or which does not constitute grounds for termination under
this Agreement, or (vii) the occurrence of a vote by a majority of
shares voting upon an issue contrary to the vote of MEHTA, if MEHTA in
his sole discretion deems the vote "likely to result in an interference
in management" and requests at the meeting that the shareholders
reconsider and the shareholders fail to reverse the vote.
The parties recognize that there may arise disputes and controversies over
alleged conditions or conduct that is wrongful or that constitutes a breach of
this Agreement. However, the parties agree that such conditions or conduct
(which may give rise to a claim for damages) shall not constitute grounds for
termination of employment or excuse performance under this Agreement unless, and
to the extent, provided above.
9. Payments upon Termination.
a. In the event of termination due to MEHTA's death, his
surviving spouse (or if she predeceases MEHTA, his estate), shall be
entitled to receive MEHTA's salary, incentive commissions, benefits and
any deferred compensation accrued through the last day of the third
calendar month following the month in which the termination of
employment occurs and additional salary payable monthly for the
following three years at the rate of one-half the aggregate annual
amounts shown in paragraph 4a above; provided that ELITE may purchase
life insurance (other than the life insurance provided under paragraph
4d) payable to a designated beneficiary of MEHTA to cover all or a
portion of the obligation under this paragraph 9a.
b. In the event of MEHTA's termination in accordance with
paragraphs 8b or c, MEHTA's salary, incentive commissions, benefits and
any deferred compensation accrued through the last day of the calendar
month in which the termination of employment occurs shall be paid
promptly. No other unaccrued salary or benefits shall be paid.
c. In the event of termination pursuant to paragraph 8d,
MEHTA shall receive all accrued salary, incentive commissions,
benefits, and any deferred compensation and all salary and commissions
payable under paragraph 4b through a period ending upon the later of
(i) May 22, 2001 or (ii) the third anniversary of such termination,
provided that the salary portion of such amounts shall be aggregated
and discounted to Present Value, using as the discount factor the prime
Rate published on the date of termination (or nearest date thereafter)
in the Wall Street Journal; and provided that salary for the period
after May 22, 2001 shall be imputed at the same rate as provided for
under paragraph da(4).
10. Procedure for Termination. Termination of employment by ELITE or
MEHTA shall not be effective until notice is received by the other party. The
notice shall not be effective unless it indicates the specific termination
provision(s) in paragraph 8 of this Agreement relied upon and sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of employment under the provisions indicated. Additionally, no
purported termination by ELITE shall be effective unless and until there has
been delivered to MEHTA a copy of a resolution duly adopted by the affirmative
vote of not less than a majority of the entire membership of the Board of
Directors at a meeting of the Board held for the purpose (after opportunity for
MEHTA, together with his counsel, to be heard before said Board), finding that
in the good faith opinion of the Board, the facts and circumstances claimed to
provide a basis for termination under paragraph 8b or c of this Agreement exist
and specifying the particulars thereof.
11. Covenant Not To Compete. MEHTA covenants and agrees that during the
term of this Agreement, he will not directly or indirectly engage in, conduct,
solicit, be involved in, aid or assist, either personally or as an employee,
partner, director or consultant any business which is competitive with the
business of ELITE. MEHTA, however, shall be free to conduct any business he
desires outside of the United States, so long as such business does not sell any
product sold or licensed by ELITE in any market in which ELITE competes, and
provided that MEHTA does not use confidential information that he could not
disclose under paragraph 12.
12. Confidentiality. MEHTA acknowledges and recognizes that the
disclosure of confidential information to ELITE'S competitors will be highly
detrimental to ELITE'S business. Therefore, MEHTA agrees that he will not
disclose, reveal, or disseminate to any person, firm, or organization, any
information concerning ELITE'S business which is of a confidential nature. This
shall not preclude MEHTA from disclosing confidential information (i) to the
extent that such information is generally available and known in the industry or
is available from a source other than ELITE, through no action of MEHTA, or (ii)
as required by law, or (iii) information respecting the business of ELITE after
the Expiration Date of this Agreement; or (iv) if such disclosure is in the
Company's best interest or is made in order to promote and enhance the Company's
business. This provision shall also not preclude MEHTA from using or disclosing
any information and experience he possesses in his memory and knowledge.
13. Entire Agreement. Each party acknowledges that he has read this
Agreement, understands it, and agrees to be bound by its terms, and further
agrees that this Agreement supersedes and merges all prior proposals,
understandings and all other agreements, oral or written, between the parties
relating to its subject matter. The parties further agree that this Agreement
may not be modified or altered except by a written instrument duly executed by
both parties.
14. Nonwaiver. No failure of a party to exercise any right or waiver of
any remedy shall operate or be construed to constitute a waiver or bar affecting
such party's assertion of the right or obtaining the remedy at any future time.
No failure of a party to insist upon compliance with any provision of this
Agreement at any time or for any period of time shall impair the party's right
to insist upon compliance with such provision at any future time.
15. Legality. In the event any provision of this Agreement shall be
held to be invalid, illegal, or unenforceable, the validity, legality and
enforceability of the remaining provisions shall in no way be affected or
impaired thereby and said Agreement shall remain in full force and effect as if
such cause or provision had not been inserted therein.
16. Binding Effect. This Agreement shall be binding upon the parties,
their respective successors and permitted assigns. Neither party may assign this
Agreement or any of its rights or obligations hereunder without the prior
written consent of the other party, and any such attempt at assignment shall be
void.
17. Notices. Any notice to be given under this Agreement shall be
sufficient if it is in writing and is sent by Certified or Registered Mail, or
hand-delivered by a person who is not affiliated with the sender. Notices to
MEHTA shall be sent to 252 East Crescent Avenue, Ramsey, New Jersey 07446 or
such other address as he designates in writing. Notice to ELITE shall be sent to
its Secretary or to any member of its Board of Directors (other than MEHTA).
IN WITNESS WHEREOF, the parties have here unto executed this document
the day and year first above written.
ELITE LABORATORIES, INC.
[Corporate Seal] by: _____________________________
Director, acting with authority of the
______________________ Board of Directors
Assistant Secretary
------------------------------
Atul M. Mehta
<PAGE>
BRIDGE VENTURES, INC. 1241 Gulf of Mexico Dr. Longboat Key, Florida 34228
CONSULTING AGREEMENT
THE CONSULTING AGREEMENT ("Agreement") is made this 1st day of August
1997, by and between Bridge Ventures, Inc.] (the "Consultant") whose principal
place of business is 1241 Gulf of Mexico Dr., Longboat Key, Florida, and Elite
Laboratories, Inc. (Elite), a Delaware corporation (the "Client") whose
principal place of business is 230 W. Passaic Street, Maywood, New Jersey 07607.
W I T N E S S E T H
WHEREAS, the Consultant is willing and capable of providing various marketing
and management consultant services for and on behalf of the Client in connection
with the marketing and manufacturing of time release pharmaceuticals.
WHEREAS, THE Client wishes to retain the services of the Consultant to consult
on strategic alliances for the Client pursuant to the terms hereof.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is agreed as follows:
1. Engagement. The client hereby retains the Consultant subject to the
provisions of paragraph 4, and Consultant hereby accepts the engagement, to
provided Management and Marketing and Advisory services the Client. Such
services shall include assisting management in their strategic planning,
building a management team, and such other managerial assistance as Bridge and
Elite shall deem necessary or appropriate for Clients business.
The Consultant hereby agrees to devote such time as is necessary to the
Client to fulfill the obligations set forth in this Paragraph 1. It is expressly
agreed between the parties that the Consultant shall have no fixed or minimum
number of hours within which to perform its obligations under this Agreement,
however, the Consultant will be diligent and use its best efforts to perform the
services hereunder. The Consultant shall strictly observe all securities
regulations and laws, and all other laws.
It is understood that the services rendered under this Agreement will
be provided by either Harris Freedman or Stanley Zaslow, or by a person directly
under their supervision.
2. Proprietary Information. In connection with their services pursuant
to this Agreement, Consultant will obtain certain information from the Client
concerning the Client's business, operations and certain inventions, know-how
and technology, which the Client considers proprietary. The Consultant agrees to
treat any such information (herein collectively referred to as the "Confidential
Information") in accordance with the provisions of this paragraph 2.
Confidential Information does not include information which (I) is independently
obtained from members of the public to whom the information was made available
other than as a result of a disclosure by the Consultant or its directors,
officers, employees, agents or advisors, or (ii) was or becomes available to the
Consultant on a non-confidential basis from a source other than the Client or
its directors, officers, employees, agent or advisors provided that such source
is not known to the Consultant to be bound by a confidentiality agreement with
the Client.
The Consultant hereby agrees that the Confidential Information will be
kept confidential by the Consultant, provided, however, that any disclosure of
such Confidential Information may be made to which the Client consents in
writing.
Upon expiration or termination of this Agreement, the Consultant shall
promptly redeliver to the Client any and all written material containing or
reflecting any of the Confidential Information and will not retain any copies,
extracts or other reproductions in whole or in part of such written material.
All documents, memoranda, notes and other writings whatsoever prepared by the
Consultant or its advisor based on the information contained in the Confidential
Information shall be destroyed, and such destruction shall, upon demand, be
certified in writing to the Client by an authorized officer supervising such
destruction. It is agreed that all information and materials produced by the
Client shall be the sole and exclusive property of the Client. All copyright and
title of said work shall be the property of the Client, free and clear of all
claims thereto by the Consultant, and the consultant shall retain no claim of
authorship therein.
The provisions of this paragraph 2 shall survive expiration and
termination of this Agreement.
The Consultant agrees to perform the work hereunder diligently and in
the highest professional manner and shall provide all necessary personnel to
complete the work in the time and manner reasonably set forth by the Client. The
Consultant shall strictly observe all securities regulations and laws, and all
other laws.
3. Remuneration. In consideration for the services to be provide to the
Client by the Consultant under this Agreement, the Client hereby agrees to the
payment of remuneration to the Consultant as follows:
(a) The Client hereby agrees to pay the Consultant an annual consulting fee in
the amount between $84,000 and $120,000, payable in equal monthly installments
of between $7,000 and $10,000 per month for a period of thirty six (36) months
from the date of this Agreement. Such payment shall be due on the first (1st)
day of each and every month hereafter.
(b) Upon execution of this Agreement, or as soon thereafter as
possible, the Client shall cause to be issued to the Consultant pursuant to the
authority granted from the Client's Board of Directors 400,000 to 500,000
Warrants exercisable for a period of 5 years at $3.00 per share of its common
stock, which will be identical to the Warrants purchased by investors in any
subsequent offering. The share certificate to be issued shall be issued in the
name which the Consultant provides to the Client in the Consultant's sole
discretion. The shares underlying the warrants shall be free and clear of all
liens and encumbrances except it shall bear a legend containing the restrictive
language of Rule 144 of the Securities Act of 1933, as amended.
(c) The Client agrees to reimburse the consultant for all travel,
entertainment, mailing, printing, postage and all other out-of-pocket expenses
directly related to the services to be provided. Expenses in excess of $100 per
occasion shall be preapproved by the Client. Upon termination of this Agreement,
any continuing obligation under this paragraph shall cease; however any accrued
but unpaid expenses due to the Consultant under this subparagraph shall be due
and payable within ten (10) days from such date.
4. Term. It is agreed between the parties that this Agreement shall
expire on the last day of the Thirty Six (36) full month from the date here
unless terminated as provided for in paragraph 3(a). The Consultant's obligation
to provide services hereunder shall commence on the date on which the Consultant
receives from the Client the first payment compensation under paragraph 3(a) and
the Client has caused to be issued the option certificate referred to in
paragraph 3(b) hereof.
Notwithstanding the foregoing, this Agreement may be terminated by
Client upon a material breach by Consultant, or if Consultant or any of its
directors, officers, employees or consultants become the subject of any criminal
prosecution or any enforcement proceeding by the Securities and Exchange
Commission or any other state or federal agency.
5. Miscellaneous Provisions.
(a) This Agreement and the duties and responsibilities
creased hereby may not be assigned, transferred or delegated by the Consultant
without the prior written consent of the Client.
(b) This Agreement shall be interpreted and governed by the
laws of the State of New York; all clauses of this Agreement are distinct and
severable and if any clause shall be held illegal or void, it shall not affect
the validity or legality of the remaining provisions of this Agreement.
(c) No waiver of any breach of any condition herein will
constitute a waiver of any subsequent reach of the same or any other condition.
(d) The parties hereto agree to execute such other documents
as are necessary to carry out the intent and the spirit of this Agreement.
(e) Subject to the other provisions hereof, the terms and
conditions of this Agreement shall extend to and be binding upon and shall inure
to the benefit of the successors and assigns of the Parties hereto.
(f) This Agreement may not be assigned without the prior
written consent of all parties, and that any attempted assignment in violation
of this provision will be null and void.
6. Notices. All notices, demands or requests required or authorized
hereunder shall be deemed sufficiently given if in writing and sent by
registered or certified mail, return receipt requested and postage prepaid, or
by telex, telegram or cable to:
Client: ELITE LABORATORIES, INC.
230 Passaic Street
Maywood, New Jersey 07607
and if to Consultant:
BRIDGE VENTURES, INC.
1241 Gulf of Mexico Dr.
Longboat Key, Fl. 34228
Attn: Harris Freedman
7. Status of Parties. For the purpose of this Agreement, and the
services, duties and responsibilities created hereunder, nothing other than
exercise of warrants provided for in paragraph 3, nothing contained herein shall
create an equity or ownership interest of one party in the other. It is
understood and agreed between the parties that the Consultant is an independent
contractor of the Client for the purposes set forth herein.
8. Entire Agreement. This instrument contains the entire agreement of
the parties relating to the subject matter hereof. The parties have made no
agreements, representations or warranties relating to the subject matter hereof
which are not set forth herein. No modification of this Agreement shall be valid
unless made in writing and signed by the parties hereto.
9. Notwithstanding the foregoing, this Agreement may be terminated by
client upon a material breach by consultant, or if consultant or any of its
directors or officers become the subject of any criminal prosecution or any
enforcement proceeding by the Securities and Exchange Commission or any other
state or federal agency.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
CONSULTANT:
BRIDGE VENTURES, INC.
By: /s/
Harris freedman
CLIENT:
ELITE LABORATORIES, INC.
By: /s/
<PAGE>
SAGGI CAPITAL CORP. 545 Madison Avenue New York New York 10022
CONSULTING AGREEMENT
THE CONSULTING AGREEMENT ("Agreement") is made this 1st day of August
1997, by and between Saggi Capital Corp. (the "Consultant") whose principal
place of business is 545 Madison Avenue, New York, New York, and Elite
Laboratories, Inc. (Elite), a Delaware corporation (the "Client") whose
principal place of business is 230 W.
Passaic Street, Maywood, New Jersey 07607.
W I T N E S S E T H
WHEREAS, the Consultant is willing and capable of providing various consulting
and investor relation services for and on behalf of the Client in connection
with the Client's interaction with broker dealers, shareholders and members of
the general public.
WHEREAS, THE Client wishes to retain the services of the Consultant to consult
on strategic alliances for the Client pursuant to the terms hereof.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is agreed as follows:
1. Engagement. The client hereby retains the Consultant subject to the
provisions of paragraph 4, and Consultant hereby accepts the engagement, act as
an investor relations and consultant to the Client. It is the intention of the
parties to this Agreement that the Consultant will gather all publicly available
information on the Client and confer with officers and directors of the Client
in an effort to consolidate the information obtained into summary for telephonc
dissemination to interested parties. The Consultant will then disseminate such
information about the Client to individuals and registered representatives of
broker-dealers who the Consultant in its reaosnable discretion, believes can
most effectively disseminate such infomration to the general pubic. The
Conulstant will nto provide any investment advice or recommmendations to any of
its contacts bout the client; rather the Consultant will focus on telephonic and
person-to-person meetings with individuals targeted by the Client for contact
and familiarization with information which the Consultant has collected and is
otherwise available to the general public about the Client.
However, the Consultant will be diligent and use its best efforts to perform its
obligations under this Agreement. It is agreed that the consultant will strictly
deserve [sic] all securities regulations and laws, and all other laws.
The Consultant hereby agrees to devote such time as is necessary to the Client
to fulfill the obligations set forth in this Paragraph 1. It is expressly agreed
between the parties that the Consultant shall have no fixed or minimum number of
hours within which to perform its obligations under this Agreement. It is
understood that the services rendered under this Agreement will be provided by
Sharon Will or a person directly under her supervision.
2. Proprietary Information. In connection with their services pursuant
to this Agreement, Consultant will obtain certain information from the Client
concerning the Client's business, operations and certain inventions, know-how
and technology, which the Client considers proprietary. The Consultant agrees to
treat any such information (herein collectively referred to as the "Confidential
Information") in accordance with the provisions of this paragraph 2.
Confidential Information does not include information which (i) is independently
obtained from members of the public to whom the information was made available
other than as a result of a disclosure by the Consultant or its directors,
officers, employees, agents or advisors, or (ii) was or becomes available to the
Consultant on a non-confidential basis from a source other than the Client or
its directors, officers, employees, agent or advisors provided that such source
is not known to the Consultant to be bound by a confidentiality agreement with
the Client.
The Consultant hereby agrees that the Confidential Information will be
kept confidential by the Consultant, provided, however, that any disclosure of
such Confidential Information may be made to which the Client consents in
writing.
Upon expiration or termination of this Agreement, the Consultant shall
promptly redeliver to the Client any and all written material containing or
reflecting any of the Confidential Information and will not retain any copies,
extracts or other reproductions in whole or in part of such written material.
All documents, memoranda, notes and other writings whatsoever prepared by the
Consultant or its advisor based on the information contained in the Confidential
Information shall be destroyed, and such destruction shall, upon demand, be
certified in writing to the Client by an authorized officer supervising such
destruction. It is agreed that all information and materials produced by the
Client shall be the sole and exclusive property of the Client. All copyright and
title of said work shall be the property of the Client, free and clear of all
claims thereto by the Consultant, and the consultant shall retain no claim of
authorship therein.
The provisions of this paragraph 2 shall survive expiration and
termination of this Agreement.
The Consultant agrees to perform the work hereunder diligently and in
the highest professional manner and shall provide all necessary personnel to
complete the work in the time and manner reasonably set forth by the Client.
3. Remuneration. In consideration for the services to be provide to the
Client by the Consultant under this Agreement, the Client hereby agrees to the
payment of remuneration to the Consultant as follows:
(a) The Client hereby agrees to pay the Consultant an annual consulting fee in
the amount between $42,000 and $60,000, payable in equal monthly installments of
between $3,600 and $5,000 per month for a period of thirty six (36) months from
the date of this Agreement. Such payment shall be due on the first (1st) day of
each and every month hereafter.
(b) Upon execution of this Agreement, or as soon thereafter as
possible, the Client shall cause to be issued to the Consultant pursuant to the
authority granted from the Client's Board of Directors 150,000 to 200,000
Warrants exercisable for a period of 5 years at $3.00 per share of its common
stock, which will be identical to the Warrants purchased by investors in any
subsequent offering. The share certificate to be issued shall be issued in the
name which the Consultant provides to the Client in the Consultant's sole
discretion. The shares underlying the warrants shall be free and clear of all
liens and encumbrances except it shall bear a legend containing the restrictive
language of Rule 144 of the Securities Act of 1933, as amended.
(c) The Client agrees to reimburse the consultant for all travel,
entertainment, mailing, printing, postage and all other out-of-pocket expenses
directly related to the services to be provided. Expenses in excess of $100 per
occasion shall be preapproved by the Client. Upon termination of this Agreement,
any continuing obligation under this paragraph shall cease; however any accrued
but unpaid expenses due to the Consultant under this subparagraph shall be due
and payable within ten (10) days from such date.
4. Term. It is agreed between the parties that this Agreement shall
expire on the last day of the Thirty Six (36) full month from the date here
unless terminated as provided for in paragraph 3(a). The Consultant's obligation
to provide services hereunder shall commence on the date on which the Consultant
receives from the Client the first payment compensation under paragraph 3(a) and
the Client has caused to be issued the option certificate referred to in
paragraph 3(b) hereof.
Notwithstanding the foregoing, this Agreement may be terminated by
Client upon a material breach by Consultant, or if Consultant or any of its
directors, officers, employees or consultants become the subject of any criminal
prosecution or any enforcement proceeding by the Securities and Exchange
Commission or any other state or federal agency.
5. Miscellaneous Provisions.
(a) This Agreement and the duties and responsibilities
creased hereby may not be assigned, transferred or delegated by the
Consultant without the prior written consent of the Client.
(b) This Agreement shall be interpreted and governed by the
laws of the State of New York; all clauses of this Agreement are distinct and
severable and if any clause shall be held illegal or void, it shall not affect
the validity or legality of the remaining provisions of this Agreement.
(c) No waiver of any breach of any condition herein will
constitute a waiver of any subsequent reach of the same or any other condition.
(d) The parties hereto agree to execute such other documents
as are necessary to carry out the intent and the spirit of this Agreement.
(e) Subject to the other provisions hereof, the terms and
conditions of this Agreement shall extend to and be binding upon and shall inure
to the benefit of the successors and assigns of the Parties hereto.
6. Notices. All notices, demands or requests required or authorized
hereunder shall be deemed sufficiently given if in writing and sent by
registered or certified mail, return receipt requested and postage prepaid, or
by telex, telegram or cable to:
Client: ELITE LABORATORIES, INC.
230 Passaic Street
Maywood, New Jersey 07607
and if to Consultant:
SAGGI CAPITAL CORP.
545 Madison Avenue
New York, NY 10022
Attn: Sharon Will
7. Status of Parties. For the purpose of this Agreement, and the
services, duties and responsibilities created hereunder, nothing other than the
exercise of warrants provided for in Paragraph 3 contained herein shall create
an equity or ownership interest of one party in the other. It is understood and
agreed between the parties that the Consultant is an independent contractor of
the Client for the purposes set forth herein.
8. Entire Agreement. This instrument contains the entire agreement of
the parties relating to the subject matter hereof. The parties have made no
agreements, representations or warranties relating to the subject matter hereof
which are not set forth herein. No modification of this Agreement shall be valid
unless made in writing and signed by the parties hereto.
9. Notwithstanding the foregoing, this Agreement may be terminated by
client upon a material breach by consultant, or if consultant or any of its
directors or officers become the subject of any criminal prosecution or any
enforcement proceeding by the Securities and Exchange Commission or any other
state or federal agency.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
CONSULTANT:
SAGGI CAPITAL CORP.
By: /s/
Sharon Will
CLIENT:
ELITE LABORATORIES, INC.
By: /s/
<PAGE>
Commercial Lease
This lease is made between Serex, Inc., a New Jersey corporation, herein called
Landlord and Elite Laboratories of Englewood Cliffs herein called Tenant.
Landlord hereby offers to lease to Tenant the premises situated in the City of
Maywood, County of Bergen, State of New Jersey, described as approximately 5000
square feet of offices and laboratory space and common use of cafeteria area and
organic laboratory on the top floor of 230 W. Passaic Street delineated in
accompanying diagram, upon the following terms and conditions. Term and rent.
Landlord demises the above premises for a term of two years commencing 1
November 1993 and terminating 30 October 1995, for a monthly sum of $4,600
(3,000 rent plus $1,600 for utilities, services and maintenance), for the first
year and a monthly sum of $5,000 ($3,400 rent plus $1600 for utilities, services
and maintenance) for the second year, payable in advance on the first day of
each month for that months rental during the term of the lease. All rental
payments shall be made to Landlord at 230 W. Passaic St. Maywood NJ Tenant shall
use and occupy the premises for Pharmaceutical Research and Development, small
scale manufacturing and related office and administrative purposes. The premises
shall be used for no other purpose. Landlord represents that the premises may
lawfully be used for such purpose.
Care and maintenance of premises. Landlord represents that the premises are in
good order and repaid, and will at his own expense and at all times maintain the
premises in good and safe condition, including plate glass, electrical wiring,
plumbing and heating and air conditioning installations and any other system or
equipment upon the premises. Tenant shall surrender the premises at termination
of lease in as good condition as received, normal wear and tear excepted.
Landlord shall be responsible for all repairs required including the roof,
exterior walls, structural foundation and shall also maintain in good condition
portions adjacent to the premises, such as sidewalks, driveways, lawns and
shrubbery and be responsible for snow removal. Landlord shall supply 2 hours per
week cleaning of the laboratory and office space and will remove and dispose of
tenants non-hazardous garbage. Landlord shall maintain outside of building in
good and safe condition
Alternations. Tenant shall not, without first obtaining the written consent
of landlord, make any alterations,additions or improvements in or to or about
the premises. Permission shall not be unreasonably withheld.
Ordinances and Statutes. Tenant shall comply with all statutes, ordinances and
requirements of all municipal, state and federal authorities now in force or
which my hereafter be in force, pertaining to the premises, occasioned by or
affecting the use thereof by Tenant
Assignment and Subletting. Tenant shall not assigned this lease or sublet any
portion of the premises without prior written consent which may not be
unreasonably withheld. Tenant understand that since it is shared space, Serex
must reasonably satisfy themselves as to the potential subtenants effect upon
the security of Serex proprietary technology - no company in any area competing
with Serex technology will be considered--, the stringent requirements of FDA
manufacturing code and ECRA etc., and the necessity that there be mutual
compatibility to feel comfortable with a sharer of space.
All utilities, including sewer, water, gas, electricity, distilled water and a
common security system will be supplied by Landlord, subject to utilities
payment by tenant as per paragraph 1.
Landlord shall have the right to enter upon the premises at reasonable times and
upon reasonable notice for the purpose of inspecting the same, and will permit
Landlord at any time within 90 days of the expiration of the lease to place upon
the premises any usual to "To Let" or "For Lease" signs and permit persons
desiring to lease the same to inspect the premises thereafter.
Possession. If Landlord is unable to deliver possession of the premises by
September 16th 1993, Landlord shall not be liable for any damage caused thereby
but the lease shall be void or voidable. By delivering possession, Landlord
represents that Tenant can move all equipment in on the 16th of September and
that by the 20th of September 1993 the laboratory space shall be securable and
by 30 September 1993 the office space shall be securable. Tenant shall not be
responsible for rent until possession i.e. walls and securable space is
available or November 1, whichever is later. Tenant shall not be responsible for
December rent until all painting and repairing is complete.
Indemnification of Landlord. Landlord shall not be liable for any damage or
injury to Tenant, or any other person, or to any property, occurring on the
demised premises or any part thereof, and Tenant agrees to held Landlord
harmless from any claims for damages no matter how caused
Insurance. Tenant at his expense, shall maintain public liability insurance
including bodily injury and property damage insuring Landlord and tenant with
minimum coverage as follows, $100,000 per person bodily injury, $1,000,000
aggregate
Tenant shall provide Landlord with a Certificate of Insurance showing Landlord
as additional insured. The Certificate shall provide for a ten-day written
notice to Landlord in the event of cancellation or material change of coverage.
Eminent Domain. If the premises or any part thereof or any estate therein, or
any other part of the building materially affecting Tenants use of the premises,
shall be taken by eminent domain, this lease shall terminate as of the date when
title vests pursuant to such taking. The rent, and any additional rent, shall be
portioned as of the termination date, and any rent paid for any period beyond
that date shall be repaid to Tenant. Tenant shall not be entitled to any part of
the award for such taking or any payment in lieu thereof, but Tenant my file a
claim for any taking of fixtures and improvements owned by Tenant and for moving
expenses.
Destruction of Premises. In the event of a partial destruction of the premises
during the term hereof, from any cause, landlord shall forthwith repair the
same, provided that such repairs can be made within sixty (60) days under
existing governmental laws and regulations, but such partial destruction shall
not terminate this lease, except that Tenant shall be entitled to a
proportionate reduction of rent while such repairs are being made, based upon
the extent to which the making of such repairs shall interfere with the business
of Tenant on he premises. If such repairs cannot be made within said sixty days,
Tenant, at his option, may make the same within a reasonable time, this lease
continuing in effect with the rent proportionately abated as aforesaid, and in
the event that the Landlord shall not elect to make such repairs which cannot be
made within sixty days, this lease may be terminated at the option of either
party. In the event that the building in which the demised premises may be
situated is destroyed to an extent or not less than one-third of the replacement
costs thereof, Landlord may elect to terminate this lease whether the demised
premises by injured or not. A total destruction of the building in which the
premises are situated shall terminate this lease.
Landlord's Remedies on default. If Tenant defaults in the payment of rent, or
any additional rent, or defaults in the performance of any of the other
covenants or conditions hereof, Landlord may give Tenant notice of such default
and if Tenant does not cure any such default within 45 days after the giving of
such notice (or if such other default is of such nature that it cannot be
completely cured with such period, if Tenant does not commence such curing
within such 45 days and thereafter proceed with reasonable diligence and in good
faith to cure such default), then Landlord may terminate this lease on not less
than 30 days notice to Tenant. On the date specified in such notice the term of
this lease shall terminate and the Tenant shall then quit and surrender the
premises to Landlord but Tenant shall remain liable as hereinafter provided. If
this lease shall have been so terminated by Landlord, landlord may at any time
thereafter resume possession of the premises by any lawful means and remove
Tenant or other occupants and their effects. No failure to enforce any terms
shall be deemed a waiver.
Securing Deposit. Tenant shall deposit with Landlord $9,000.00 security deposit
as follows; on the signing of this lease the sum of $6,000, upon completion of
construction, $3,000.00 additional security is not dependent upon completion of
cosmetic touches, including painting. Deposit will not accrue interest. Deposit
is security for the performance of Tenant obligations under this lease,
including without limitation the surrender of possession of the premises to
Landlord as herein provided. If landlord applies any part of the deposit to cure
any default of Tenant, Tenant shall on demand deposit with Landlord the amount
so applied so that Landlord shall have the full deposit amount at all times
during the term of this lease
Option to renew. Provided that Tenant is not in default in the performance of
this lease, Tenant shall have the option to renew the lease for an additional
term of thirty six months commencing at the expiration of the initial lease
term. All of the terms and conditions of the lease shall apply during the
renewal term except that he monthly rent shall be the sum of $3400 plus a cost
of living increase (based on CPI) + $1600 to reflect increases in taxes,
utilities and garbage of 1995 base year using 1995 as the base year, for 1996
(and base year of 1996 for 1997 rent). Should taxes or any significant
expensable service increase substantially more than the cost of living Elite
will be assessed 20% of the increase over and above the CPI.
The option shall be exercise by written notice given to Landlord not less than
90 days prior to the expiration of the initial lease term. If notice is not
given in the manner provided herein within the time specified, this option shall
expire.
Legal Fees. In case suit should be brought for recovery of the premises, or for
any sum due hereunder, or because of any act which may arise out of the
possession of the premises, by either party, the prevailing party shall be
entitled to all reasonable costs incurred in attorney's fees. All legal actions
shall be settled by binding arbitration under the laws of New Jersey and neither
party will use an attorney who has agreed to payment by contingency fee.
Waiver. No failure of Landlord to enforce any term hereof shall be deemed to
be a waiver.
Notices. Any notice which either party may or is required to give, shall be
given by mailing the same, postage prepaid, to Tenant at the premises, or the
Landlord at the address shown below, or at such other places as may be
designated by the parties from time to time.
Heirs, Assigns, Successors. This lease is binding upon and inures to the
benefit of the heirs, assigns and successors in interest to the parties.
Subordination. This lease is and shall be subordinated to all existing and
future liens and encumbrances against the property.
The foregoing constitutes the entire agreement between the parties and may be
modified only b a writing signed by both parties. The following exhibits; floor
plan, listing work to be done; Binding Agreement letter and rider, have been
made a part of this lease before the parties' execution hereof.
Signed this 7th day of September, 1993.
By: Dr. Atula Mehta By: [ ]
Elite Laboratories, Inc.
<PAGE>
RIDER TO LEASE Between Serex, Inc.(as Landlord) and Elite Laboratories, Inc.
(as Tenant) Date: September 7, 1993
The Tenant shall pay to the Landlord the following rent
For the period from 1 November 1993 to 30October 1994 the rent of $36,000 and
utilities and amenities fees of $19,200 payable in equal monthly installments of
$4,600.00 on the first day of each month in advance
For the period 1 November 1994 to 30 October 1995 the rent of $40,800 and
utilities and amenities fees of $19,300 payable in equal monthly installment of
$5000.00 on the first day of each month in advance If any required payment of
rent is not made by the seventh day of the month, Tenant shall pay to the
Landlord a late charge equal to 5% of the payment due, which late charge shall
accompany the late payment
Landlord shall provide utilities and amenities as per the binder letter dated
September 2 1993 attached herewith and incorporated by reference.
Landlord warrants that Tenant's current operation does not require governmental
approval to share lab and office space with Serex; should the operation of
tenants business change, or governmental regulations change so as to require
governmental approvals these and any other associated costs that are solely
caused by tenant, shall be at Tenant's sole cost and expense.
Landlord shall at Landlords expense construct a full wall to separate the
laboratory areas from the common office and traffic areas, a wall to separate
the office area and demolish the wall directly in front of the front door
entrance thereby creating a hallway as shown in the accompanying diagram.
Landlord shall install locks so as to make Elites offices and laboratory areas
securable, according to the plan attached herewith. Landlord will remove safe
from laboratory office to a Serex office.
Tenant shall have access to heating and air conditioning on weekends and nights
and shall exercise care to turn these on and off in a prudent fashion.
It is understood that Landlord herein is the Tenant of the entire premises at
230 West Passaic Street, Maywood, New Jersey pursuant to a written lease ("the
prime lease") dated August 21, 1991 with Thomas E. Davis and Judith F. Davis
("the prime landlord"). The Landlord herein represents that it has the authority
to enter into this Lease and shall deliver to the Tenant herein the consent of
the Prime landlord to the within lease. Tenant herein shall be given notice of
any tenant default in the Prime Lease and will be given the opportunity, within
thirty (30) days after notice to cure said default.
Tenant shall have two (2) reserved parking spaces located near the entrance
located at the northeast corner of the building and an additional 10 spaces in
the rear of the building. If Tenant desires to mark said spaces as being
reserved for its exclusive use, Tenant may, at its sole cost and expense and in
compliance with all governmental requirements and limitations, install signage
at said spaces so indicating.
Tenant acknowledges that smoking is prohibited in the common areas and the
balance of the building of which the demised premises form a part and that said
prohibition is essential to the operations of the Landlord and other tenants.
Accordingly Tenant agrees to monitor the activities of its agents, employees and
invitees so that this prohibition shall be complied with.
Landlord reserves the right to establish uniform sign and window treatment
requirements for all tenants. No sign shall be installed by the Tenant except
upon first obtaining any and all required governmental approvals and the prior
written consent of the Landlord, which shall not be unreasonably withheld.
Tenants name will e on main building sign on lawn. Additional Tenant signage
costs shall be the responsibility of the Tenant.
Tenant and its employees, agents, contractors, invitees or representatives shall
not process, store, handle, generate, spill, manufacture, bury, discharge or
treat any Hazardous Material (as defined by any governmental statute, law, rule,
regulation, ordinance, order, decree, or interpretation now or hereafter in
effect) at the demised premises in a manner not consistent with governmental
regulations. Tenant shall, at Tenant's own cost and expense, comply with all
such governmental environmental laws and regulations and shall keep and maintain
the demised premises free from leaks or spills or contamination of Hazardous
Materials. Tenant shall indemnify, defend and save harmless the landlord from
all fines, suits, procedures, claims actions of any kind and all losses, damages
and expenses (including, without limitation, attorneys' fees) arising out of a
breach by the Tenant of any of the aforesaid representations by the Tenant
In the event of any inconsistency between this Rider and the printed lease to
which it is attached, the provisions of this Rider shall govern.
Signed this 7th day of September, 1993.
[ ] (Landlord)
By: __________________________________
Elite Laboratories, Inc.
By: Atul M. Mehta
<PAGE>
SUBSCRIPTION AGREEMENT
PROLOGICA INTERNATIONAL, INC.
The undersigned hereby subscribes for ____ Units ("Units") of Prologica
International, Act. Inc. ("Company"), each Unit consisting of (i) 40,000 shares
of the Company's Common Stock, no par value ("Common Stock"); and (ii) 20,000
warrants to purchase Common Stock exercisable during the five year period
commencing the date of the Closing of the Offering, as defined in the Offering
Memorandum dated September 1, 1997 ("Memorandum") at $3.00 per share. The
undersigned agrees to pay an aggregate of $ ____________ as a subscription for
the Units being purchased hereunder. The entire purchase price is due and
payable upon the execution of this Subscription Agreement, and shall be paid by
check, subject to collection, or by wire transfer, made payable to the order of
Prologica International, Inc. - Escrow Account (wire instructions attached
hereto). The Company shall have the right to reject this subscription in whole
or in part.
The undersigned acknowledges that the Units, as well as any shares of
Common Stock issuable upon conversion of the warrants (collectively, the
"Shares") being purchased hereunder will not be registered under the Securities
Act of 1933, as amended ("Act"), or the securities laws of any State, that
absent an exemption from registration contained in those laws, the issuance and
sale of the securities comprising the Shares would require registration, and
that the Company's reliance upon any such exemption is invariably based upon the
undersigned's representations, warranties, and agreements contained in this
Subscription Agreement and the accompanying Confidential Prospective Purchaser
Questionnaires ("Questionnaire")(collectively, the "Subscription Documents").
1. The undersigned represents, warrants, and agrees as follows:
(a) The undersigned agrees that this Subscription Agreement is
and shall be irrevocable unless it has not been accepted by the Company by
October 16, 1997, subject to a 30 day extension at the discretion of the
Company.
(b) The undersigned has carefully read this Subscription
Agreement and the Company's Memorandum dated September 1, 1997 (collectively the
"Disclosure Materials") all of which the undersigned acknowledges have been made
available to him/her/it. The undersigned acknowledges that, except for the
Disclosure Materials, no offering memorandum has been distributed regarding the
Shares and that the undersigned has been given the opportunity to ask questions
of, and receive answers from, the Company concerning the terms and conditions of
this Subscription Agreement and the Disclosure Materials and to obtain such
additional written information, to the extent the Company possesses such
information or can acquire it without unreasonable effort or expense, necessary
to verify the accuracy of same, as the undersigned desires in order to evaluate
the investment. The undersigned further acknowledges that he or she has received
no representations or warranties from the Company, or their respective employees
or agents in making this investment decision other than as set forth in the
Disclosure Materials.
(c) The undersigned is aware that the purchase of the Shares
is a speculative investment involving a high degree of risk and that there is no
guarantee that he or she will realize any gain from this investment, and that
the entire investment could be lost.
(d) The undersigned understands that no federal or state
agency has made any finding or determination regarding the fairness of this
offering of the Shares for investment, or any recommendation or endorsement of
this offering.
(e) The undersigned is purchasing the Shares for his or her
own account, with the intention of holding the Shares with no present intention
of dividing or allowing others to participate in this investment or of reselling
or otherwise participating, directly or indirectly, in a distribution of the
Shares, and shall not make any sale, transfer, or pledge thereof without
registration under the Act and any applicable securities laws of any state or
unless an exemption from registration is available under those laws.
(f) The undersigned represents he or she, if an individual,
has adequate means of providing for his or her current needs and personal and
family contingencies and has no need for liquidity in this investment in the
Shares. The undersigned has no reason to anticipate any material change in his
or her personal financial condition for the foreseeable future.
(g) The undersigned is financially able to bear the economic
risk of this investment, including the ability to hold the Shares indefinitely
or to afford a complete loss of his or her investment in the Shares.
(h) The undersigned represents that his or her overall
commitment to investments which are not readily marketable is not
disproportionate to his or her net worth, and the investment in the Shares will
not cause such overall commitment to become excessive. The undersigned
understands that the statutory basis on which the Shares are being sold to him
or her and to others would not be available if the undersigned's present
intention were to hold the Shares for a fixed period or until the occurrence of
a certain event. The undersigned realizes that in the view of the Securities and
Exchange Commission, a purchase now with a present intent to resell by reason of
a foreseeable specific contingency or any anticipated change in the market
value, or in the condition of the Company, or that of the industry in which the
business of the Company is engaged or in connection with a contemplated
liquidation, or settlement of any loan obtained by the undersigned for the
acquisition of the Shares, and for which such Shares may be pledged as security
or as donations to religious or charitable institutions for the purpose of
securing a deduction on an income tax return, would, in fact, represent a
purchase with an intent inconsistent with the undersigned's representations to
the Company, and the Securities and Exchange Commission would then regard such
sale as one for which no exemption from registration is available. The
undersigned will not pledge, transfer or assign this Subscription Agreement.
(i) The undersigned represents that the funds provided for
this investment are either separate property of the undersigned, community
property over which the undersigned has the right of control, or are otherwise
funds as to which the undersigned has the sole right of management.
(j) FOR PARTNERSHIPS, CORPORATIONS, TRUSTS, OR OTHER ENTITIES
ONLY: If the undersigned is a partnership, corporation, trust or other entity,
(i) the undersigned has enclosed with this Subscription Agreement appropriate
evidence of the authority of the individual executing this Subscription
Agreement to act on its behalf (e.g., if a trust, a certified copy of the trust
agreement; if a corporation, a certified corporate resolution authorizing the
signature and a certified copy of the articles of incorporation; or if a
partnership, a certified copy of the partnership agreement), (ii) the
undersigned represents and warrants that it was not organized or reorganized for
the specific purpose of acquiring Shares, and (iii) the undersigned has the full
power and authority to execute this Subscription Agreement on behalf of such
entity and to make the representations and warranties made herein on its behalf,
and (iv) this investment in the Company has been affirmatively authorized, if
required, by the governing board of such entity and is not prohibited by the
governing documents of the entity.
(k) The address shown under the undersigned's signature at the
end of this Subscription Agreement is the undersigned's principal residence if
he or she is an individual, or its principal business address if a corporation
or other entity.
(1) The undersigned has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of an investment in the Shares.
(m) The undersigned acknowledges that the certificates for the
securities comprising the Shares which the undersigned will receive will contain
a legend substantially as follows:
THE SECURITIES WHICH ARE REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT
PURPOSES ONLY AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE,
AND MAY NOT BE SOLD, TRANSFERRED, MADE SUBJECT TO A SECURITY
INTEREST, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
UNLESS AND UNTIL REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR AN OPINION OF COUNSEL FOR THE COMPANY IS
RECEIVED THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT.
(n) The Questionnaire being delivered by the undersigned to
the Company simultaneously herewith is true, complete and correct in all
material respects.
(o) Other than as set forth in the Registration Rights
Agreement between the Company and the undersigned, the Company is under no
obligation to register the Shares, under the Act or any state securities laws,
or to take any action to make any exemption from any such registration
provisions available.
(p) This Subscription Agreement is a legally binding
obligation of the undersigned in accordance with its terms.
(q) The undersigned is an "accredited investor," as such term
is defined in Regulation D of the Rules and Regulations promulgated under the
Act and as set forth in the Questionnaire.
2. The undersigned expressly acknowledges and agrees that the Company
is relying upon the undersigned's representation contained in the Subscription
Documents.
3. The undersigned subscriber acknowledges that he or she understands
the meaning and legal consequences of the representations and warranties which
are contained herein and hereby agrees to indemnify, save and hold the Company,
and their respective officers, directors and counsel harmless from and against
any and all claims or actions arising out of a breach of any representation,
warranty or acknowledgment of the undersigned contained in any Subscription
Document including but not limited to the Questionnaire. Such indemnification
shall be deemed to include not only the specific liabilities or obligation with
respect to which such indemnity is provided, but also all reasonable costs,
expenses, counsel fees and expenses of settlement relating thereto, whether or
not any such liability or obligation shall have been reduced to judgment.
4. The Company has been duly and validly incorporated and is validly
existing and in good standing as a corporation under the laws of the State of
Delaware. The Company has all requisite power and authority, and all necessary
authorizations, approvals and orders required as of the date hereof to own its
properties and conduct its business as described in the Disclosure Materials and
to enter into this Subscription Agreement and to be bound by the provisions and
conditions hereof.
5. Except as otherwise specifically provided for hereunder, no party
shall be deemed to have waived any of his or her or its rights hereunder or
under any other agreement, instrument or papers signed by any of them with
respect to the subject matter hereof unless such waiver is in writing signed by
the party waiving said right. A waiver on any one occasion with respect to the
subject matter hereof shall not be construed as a bar to, or waiver of, any
right or remedy on any future occasion. All rights and remedies with respect to
the subject matter hereof, whether evidenced hereby or by any other agreement,
instrument, or paper, will be cumulative, and may be exercised separately or
concurrently.
6. The parties have not made any representations or warranties with
respect to the subject matter hereof not set forth herein, and this Subscription
Agreement, together with any instruments executed simultaneously herewith,
constitutes the entire agreement between them with respect to the subject matter
hereof. All understandings and agreements heretofore had between the parties
with respect to the subject matter hereof are merged in this Subscription
Agreement and any such instrument, which alone fully and completely expresses
their agreement.
7. This Agreement may not be changed, modified, extended, terminated or
discharged orally, but only by an agreement in writing, which is signed by all
of the parties to this Agreement.
8. The parties agree to execute any and all such other and further
instruments and documents, and to take any and all such further actions
reasonably required to effectuate this Subscription Agreement and the intent and
purposes hereof.
9. This Subscription Agreement shall be governed by and construed in
accordance with the laws of the State of New York and the undersigned hereby
consents to the jurisdiction of the courts of the State of New York and/or the
United States District Court for the Southern District of New York.
10. The undersigned understands that this subscription is not binding
upon the Company until the Company accepts it, which acceptance is at the sole
discretion of the Company and is to be evidenced by the Company's execution of
this Subscription Agreement where indicated. This Subscription Agreement shall
be null and void if the Company does not accept it as aforesaid.
11. The undersigned understands that the Company may, in its sole
discretion, reject this subscription and, in the event that the offering to
which this Subscription relates is oversubscribed, reduce this subscription in
any amount and to any extent, whether or not pro rata reductions are made of any
other investor's subscription.
12. Neither this Subscription Agreement nor any of the rights of the
undersigned hereunder may be transferred or assigned by the undersigned.
JURISDICTIONAL NOTICES
For Residents of all States:
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATES OF THE
UNITED STATES OR ANY OTHER JURISDICTION AND ARE BEING OFFERED AND SOLD IN
RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH
LAWS. THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE
AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH
LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE
THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES
COMMISSION OR ANY OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING
AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY
OR ADEQUACY OF THE MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
IT IS THE RESPONSIBILITY OF ANY SUBSCRIBER WISHING TO PURCHASE THE SHARES TO
SATISFY ITSELF AS TO THE FULL OBSERVANCE OF THE LAWS OF ANY RELEVANT TERRITORY
OUTSIDE THE UNITED STATES IN CONNECTION WITH ANY SUCH PURCHASE, INCLUDING
OBTAINING ANY REQUIRED GOVERNMENTAL OR OTHER CONSENTS OR OBSERVING ANY OTHER
APPLICABLE FORMALITIES.
<PAGE>
ALL SUBSCRIBERS MUST COMPLETE THIS PAGE
- ----------------------------------------------------------------------
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement on this ____ day of __________________, 1997.
__________________ (Units Subscribed) x $60,000 per Unit = $___________.
1. |__| Individual
2. |__| Joint Tenants with Right of Survivorship
3. |__| Community Property
4. |__| Tenants in Common
5. |__| Corporation/Partnership
6. |__| IRA of ________________
7. |__| Trust Dated Opened ___________
8. |__| As a Custodian For _____________________________________
Under the Uniform Gift to Minors Act of the State of
-----------------
9. |__| Married with Separate Property
10. |__| Keogh of ________________
<PAGE>
EXECUTION BY SUBSCRIBER WHO IS A NATURAL PERSON
- ---------------------------------------------------------
Exact Name in Which Title is to be Held
- ---------------------------------------------------------
(Signature)
- ---------------------------------------------------------
Name (Please Print)
- ---------------------------------------------------------
Residence: Number and Street
- ---------------------------------------------------------
City State Zip Code
- ---------------------------------------------------------
Social Security Number
Accepted this ___ day of _______________, 1997, on behalf of
PROLOGICA INTERNATIONAL, INC.
By: ____________________
Name:
Title:
<PAGE>
EXECUTION BY SUBSCRIBER WHICH IS A CORPORATION,
PARTNER, TRUST, ETC.
- ---------------------------------------------------------
Exact Name in Which Title is to be Held
- ---------------------------------------------------------
Signature
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Name (Please Print)
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Title of Person Executing Agreement
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Address: Number and Street
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City State Zip Code
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Tax Identification Number
Accepted this ____ day of _____________, 1997, on behalf of
PROLOGICA INTERNATIONAL, INC.
BY:_______________
<PAGE>
1997 INCENTIVE STOCK OPTION PLAN
ELITE LABORATORIES, INC.
INCENTIVE STOCK OPTION PLAN
I. Purpose. The purpose of this stock option plan (this "Plan") is to secure for
the Corporation and its stockholders the benefits which flow from providing key
employees and officers with the incentive inherent in common stock ownership.
The stock options granted under the Plan are intended to qualify as incentive
stock options within the meaning of Internal Revenue Code Section 422.
II. Amount of Stock. The total number of shares of Class A common stock to be
subject to the options granted on and after __________________, 1997 pursuant to
the Plan shall not exceed 1,250,000 shares of the Corporation's Class A common
stock ("Stock"), par value $.01 per share. This total number of shares takes
into account the proposed increase in the authorized number of Class A common
shares to 20,000,000; however this number shall be subject to appropriate
increase or decrease in the event of a subsequent dividend or subdivision, split
up, combination or reclassification of the shares purchasable under such
options. In the event that options granted under this Plan shall lapse without
being exercised, in whole or in part, other options may be granted covering the
shares not purchased under such lapsed options.
III. Method of Granting. The Board of Directors of the Corporation ("Board")
shall designate from time to time a person for receipt of an option, at which
time the Secretary of the Corporation shall send notice thereof to the designee.
The notice may be accompanied by an Incentive Option Agreement to be signed by
the Company and by the Optionee if the Board shall so direct, which shall be an
a form that the Board deems advisable.
IV. Eligibility. Options may be granted pursuant to the plan to employees and
officers of the Corporation, its parent or any subsidiary. From time to time the
Board shall select the employees and officers to whom options may be granted and
shall determine the number of shares to be covered by each option so granted.
Directors of the Board who are not officers or employees of the Corporation are
not eligible to participate under the Plan.
V. Incentive Option Agreement. The terms and provisions of options granted
pursuant to this Plan shall be set forth in an incentive option agreement
("Incentive Option Agreement") between the Corporation and the employee
receiving the same. The option may be in such form, not inconsistent with the
terms of this Plan, as shall be approved by the Board of Directors.
VI. Price. The purchase price per share of Stock purchasable under options
granted pursuant to the Plan shall not be less than 100 percent of the fair
market value at the time the options are granted. The purchase price per share
of Stock purchasable under options granted pursuant to the Plan to a person who
owns more than 10 percent of the voting power of the Corporation's voting stock
shall not be less than 110 percent of the fair market value at the time the
options are granted. For purposes of this section, (a) an employee shall be
considered to own stock (i) owned directly or indirectly by or for himself, his
brothers and sisters, spouse, ancestors and lineal descendants and (ii) the
stock which the employee may purchase under outstanding options and (b) stock
owned directly or indirectly by or for a corporation, partnership, estate or
trust shall be considered as being owned proportionately by or for its
shareholders, partners or beneficiaries. For purposes of this Plan, the fair
market value of the Stock shall be determined in good faith at the time of the
grant of any option by decision of the Board. The Board shall not take into
account the effect of any restrictions on the Stock, except restrictions that
will never lapse.
VII. Payment. The full purchase price of any Stock purchased under the
options shall be paid upon exercise.
VIII. Option Period. No option granted pursuant to this Plan shall be
exercisable after the expiration of ten years from the date it is first granted.
No option granted pursuant to this Plan to a person who owns more than 10
percent of the voting power of the Corporation's voting stock shall be
exercisable after the expiration of five years from the date it is first
granted. For purposes of this section, , (a) an employee shall be considered to
own stock (i) owned directly or indirectly by or for himself, his brothers and
sisters, spouse, ancestors and lineal descendants and (ii) the stock which the
employee may purchase under outstanding options and (b) stock owned directly or
indirectly by or for a corporation, partnership, estate or trust shall be
considered as being owned proportionately by or for its shareholders, partners
or beneficiaries. The expiration date stated in the Incentive Option Agreement
is hereinafter called the Expiration Date.
IX. Termination of Employment. The Incentive Option Agreement shall
provide that:
A. If prior to the Expiration Date the employee shall for any reason
whatever other than his death or his authorized retirement as defined
in (b) below, cease to be employed by the Corporation, its parent or a
subsidiary of it, any unexercised portion of the option granted shall
automatically terminate;
B. If prior to the Expiration Date the employee shall (1) retire upon
or after reaching the normal retirement age for employees of the
Corporation or (2) with the written consent of the Corporation retire
prior to the normal retirement age on account of physical or mental
disability (retirement pursuant to (1) or (2) hereinafter referred to
as "Authorized Retirement"), any unexercised portion of the option
shall expire at the end of three months after such Authorized
Retirement, and during the three months' period, the employee may
exercise all or any part of the unexercised portion of the option; and
C. If prior to the Expiration Date the employee shall die (either while
employed or within three months after his Authorized Retirement), the
legal representatives of his estate shall have the privilege for a
period of six months after his death, of exercise any or all of the
unexercised portion of the option.
D. Nothing in this section shall extend the exercise period beyond the
Expiration Date.
X. Assignability. The Incentive Option Agreement shall provide that the option
granted shall not be transferable or assignable except by will or the laws of
descent and distribution, and during the employee's lifetime shall be
exercisable only by him.
XI. Adjustment. The Incentive Option Agreement may contain provisions, as
approved by the Board of Directors, concerning the effect upon the option and
upon the option price of (a) stock dividends, subdivisions, split-ups,
combinations, etc. of the Common Stock; or (b) proposals to merge or consolidate
the Corporation, to sell substantially all of its assets, or to liquidate and
dissolve the Corporation.
XII. Stock for Investment. The Incentive Option Agreement shall provide that the
employee shall upon each exercise of a part or all of the option granted
represent and warrant that his purchase of stock pursuant to such option is for
investment only and not with a view to distribution involving a public offering.
At any time the Board of Directors of the Corporation may waive the foregoing
requirement.
XIII. Amendment of Plan. The Board of Directors may from time to time alter,
amend, suspend or discontinue the Plan and make rules for its administration,
except that the Board of Directors shall not amend the Plan in any manner which
would have the effect of preventing options issued under the Plan from being
"incentive stock options" as defined in Section 422 of the Internal Revenue Code
of 1986. Furthermore, if Section 422 of the Internal Revenue Code of 1986
requires any additional or different provisions in order for this Plan to be
considered "qualified" such changes or provisions are deemed to be incorporated
herein by reference.
XIV. Options Discretionary. The granting of options under the Plan shall
be entirely discretionary with the Committee.
XV. Limitation as to Amount. No person to whom options are granted hereunder
shall receive options first exercisable during any single calendar year for
shares, the fair market value of which (determined at the time of the grant of
the options) exceeds $100,000. Accordingly, no optionee shall be entitled to
exercise options in any single calendar year, except to the extent first
exercisable in previous calendar years, for shares of Common Stock the value of
which (determined at the time of the grant of options) exceeds $100,000.
XVI. Stockholder Approval. The Plan will be submitted to the common
stockholders of the Corporation for approval by the holders of a majority of
the oustanding shares of common stock of the Corporation.
Dated: ____________________, 1997.
<PAGE>
CONFIDENTIALITY AGREEMENT - CORPORATION
CONFIDENTIALITY AGREEMENT
NON-DISCLOSURE AGREEMENT
Elite Laboratories, Inc. of 230 W. Passaic Street, Maywood, New Jersey 07607, a
Delaware corporation (hereinafter referred to as "ELITE") have in their
possession certain samples and confidential and proprietary information
(hereinafter referred to as "CONFIDENTIAL INFORMATION") related to products
developed by Elite.
It is understood that _________ hereafter referred to as "DISCLOSEE") desires to
obtain such samples and certain of this CONFIDENTIAL INFORMATION to enable it to
evaluate a possible business relationship with ELITE. It is understood that the
term DISCLOSEE includes, without limitation, all personnel, subsidiaries and
affiliate companies of DISCLOSEE.
It is understood and agreed that any information Elite discloses to DISCLOSEE
relating to in-vitro and in-vivo data, processes, marketing, formulae, plans,
know-how, patent applications and business information including the present and
future plans of ELITE shall be maintained in the confidence normally accorded
DISCLOSEE's own internal materials and shall not be used, except for the purpose
of evaluation in the furtherance of entering into an arrangement between ELITE
and DISCLOSEE for a period of ten (10) years from the date of disclosure by
ELITE.
ELITE is prepared to make certain of such CONFIDENTIAL INFORMATION available to
DISCLOSEE through its representatives, to the extent ELITE deems it necessary,
for the sole purpose stated above, provided that:
1 . DISCLOSEE agrees to hold such CONFIDENTIAL INFORMATION and any
further information developed in the course of its services in trust and
confidence and not to disclose to others, nor to use for any purpose other than
that stated above, any and all CONFIDENTIAL INFORMATION disclosed directly or
indirectly to DISCLOSEE by ELITE, except:
a) Information which, at the time of disclosure,
is generally available to the public and was
separately obtained from such a source by DISCLOSEE;
b) Information which, after disclosure, becomes
generally available to the public, by
publication or otherwise, through no fault
of DISCLOSEE;
c) Information which DISCLOSEE can show was in its
possession prior to disclosure hereunder
and which was not acquired directly or indirectly
from ELITE;
d) Information which DISCLOSEE can show was received by
it after the time of disclosure hereunder from a
third party imposing no obligation of confidentiality
and who did not acquire any such information directly
or indirectly from ELITE; and
e) Information which DISCLOSEE is required by law to
disclose.
For the purpose of the provisions of this paragraph, disclosures made
to DISCLOSEE which are specific, e.g. as to compositions, processes, operating
conditions, etc., shall not be deemed to be within the foregoing exceptions
merely because they are embraced by general disclosures which are generally
available to the public or in DISCLOSEE's possession. In addition, any
combination of features shall not be deemed to be within the foregoing
exceptions merely because individual features thereof are generally available to
the public or in DISCLOSEE's possession, but only if the combination itself and
its principle of operation are generally available or in DISCLOSEE's possession.
2. No right or license is granted by ELITE to DISCLOSEE in relation to
such CONFIDENTIAL INFORMATION except as expressly set forth in this
Agreement.
3. DISCLOSEE shall return to ELITE, upon demand, any and all written
documents
entrusted to it by ELITE hereunder and shall not copy or reproduce, in whole or
in part, any such documents without ELITE's written permission. One copy,
however, may be retained if desired by DISCLOSEE for legal purposes to show what
information had been provided to it.
ELITE LABORATORIES, INC.
Atul M. Mehta, Ph.D.
President
Date: Date:
<PAGE>
CONFIDENTIALITY AGREEMENT - EMPLOYEE
CONFIDENTIALITY AGREEMENT
THIS AGREEMENT is entered into by ("Employee")
and Elite Laboratories, Inc.("Elite") this _____ day of ________________,
199____.
RECITALS
A. Employee is an employee of Elite. As such, he may obtain
confidential information pertaining to the business of Elite and companies or
other entities with which it does business.
B. Disclosure of confidential information could be highly detrimental
to Elite. In addition to providing possible benefits to the competitors of Elite
and entities with which it conducts business, such disclosure could adversely
affect the relationship of Elite with such other entities. Elite is frequently
required, in conducting its business, to assure other entities that all
personnel of Elite who obtain confidential information will have executed an
agreement not to disclose it.
C. The purpose of this Agreement is to document the assurance of the
Employee that he will not disclose any confidential information of Elite and
thereby permit information pertaining to its business to be disclosed to
Employee, to the extent such Employee needs to know certain confidential
information to make more informed decisions.
AGREEMENT
1. Confidential Information. For purposes of this Agreement,
confidential information constitutes any and all information concerning Elite's
business, including but not limited to, the qualifications and capabilities of
its technical employees, the scope and nature of technical work being performed
by Elite, the terms of any and all agreements between Elite and other entities
related to research, development, licensing, or testing of products and
potential products, the data or results generated by any testing or evaluation,
the decisions to develop or forgo development of any product, and any other fact
or matter pertaining to the business of Elite that is not generally available
and known in the pharmaceutical industry.
2. Nondisclosure. Employee covenants that he will not disclose any
confidential information at any time, under any circumstances, to any person
other than an officer or director of Elite, unless pursuant to a valid subpoena
or order of a court of competent jurisdiction. Employee further warrants and
represents that he has not, during his tenure as a director, disclosed any
confidential information to any person or entity.
3. Conflicts of Interest. Employee covenants that he will reveal to the
board of directors any potential conflicts of interest which he may have at any
time with respect to Elite. Such potential conflicts shall be defined to include
any legal or beneficial interest in a business operating in the pharmaceutical
industry, and any relationship, formal or informal, as an officer, director,
partner, employee, consultant, agent or otherwise, with a company in the
pharmaceutical industry. The potential conflict so disclosed shall be fully
described. Disclosure of the potential conflict shall not, in and of itself,
constitute an indication of any wrongdoing on the part of Employee, nor shall
Employee be required to eliminate the potential conflict of interest (although
disclosure of information to the Employee may be redacted as appears in the best
interest of Elite).
4. Governing Law. This Agreement shall be governed by the laws of the
state of New Jersey, provided that nothing in this Agreement shall diminish the
obligations of Employee under the laws of Delaware governing corporations
created thereunder.
Employee
Print Name
ELITE LABORATORIES, INC.
By:
Atul M. Mehta, President
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Amendment No. 1 to Form SB-2
of Elite Pharmaceuticals, Inc. and Subsidiary ("Elite") of our report dated May
28, 1998, relating to the consolidated financial statements of Elite for the
years ended March 31, 1998 and 1997.
We also consent to the reference to us under the heading "Experts".
/s/ Miller, Ellin & Company, LLP
CERTIFIED PUBLIC ACCOUNTANTS
July 14, 1998
elitecn.st
<TABLE> <S> <C>
<ARTICLE>5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S BALANCE SHEET AS OF MARCH 31,1998 AND STATEMENT OF OPERATIONS FOR
THE YEAR ENDED MARCH 31, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 4,347,147
<SECURITIES> 0
<RECEIVABLES> 25,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,384,114
<PP&E> 374,119
<DEPRECIATION> 266,638
<TOTAL-ASSETS> 4,641,868
<CURRENT-LIABILITIES> 82,825
<BONDS> 0
<COMMON> 72,376
0
0
<OTHER-SE> 4,439,646
<TOTAL-LIABILITY-AND-EQUITY> 4,641,868
<SALES> 51,958
<TOTAL-REVENUES> 51,958
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 902,387
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,956
<INCOME-PRETAX> (773,591)
<INCOME-TAX> 15,000
<INCOME-CONTINUING> (788,591)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (788,591)
<EPS-PRIMARY> (.13)
<EPS-DILUTED> (.13)
</TABLE>
