ELITE PHARMACEUTICALS, INC.
CERTIFICATE OF DESIGNATIONS OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES G PREFERRED STOCK
Pursuant to NRS 78.1955
The undersigned, Chris Dick, hereby certifies
that:
1. He
is the President, of Elite Pharmaceuticals, Inc., a Nevada corporation (the “
Corporation
”).
2. The
Corporation is authorized to issue 15,000 shares of preferred stock.
3. Pursuant
to the Corporation’s Articles of Incorporation, 1,100 of the authorized shares of preferred stock were designated as Series
F (the “
Series F
”), which shares could only be issued pursuant to the terms of a December 30, 2011 Securities
Purchase Agreement (the “
2011 SPA
”).
4. The
2011 SPA was terminated prior to the date hereof and none of the Series F shares were ever issued, nor are any Series F shares
outstanding.
5. As
no Series F shares have been or can be issued, all 1,100 shares designated as Series F shares are available for designation as
a different series of preferred stock.
6. The
following resolutions were duly adopted by the Corporation’s Board of Directors:
“WHEREAS, the
Articles of Incorporation of the Corporation provides for a class of its authorized stock known as preferred stock, comprised of
15,000 shares, $0.01 par value per share (the
Preferred Stock
”), issuable from time to time in one or more series;
WHEREAS, the Corporation’s
Articles of Incorporation, designated 1,100 shares of the Preferred Stock as Series F (the “
Series F
”), which
shares could only be issued pursuant to the terms of a December 30, 2011 Securities Purchase Agreement (the “
2011 SPA
”);
WHEREAS, the 2011 SPA
has been terminated and none of the Series F shares were ever issued, nor are any Series F shares outstanding and, as a result,
no Series F shares can be issued and all 1,100 shares designated as Series F shares are available for designation as a different
series of preferred stock;
WHEREAS, the Board
of Directors of the Corporation is authorized to fix the dividend rights, dividend rate, voting rights, conversion rights, rights
and terms of redemption and liquidation preferences of any wholly unissued series of Preferred Stock and the number of shares constituting
any series and the designation thereof, of any of them; and
WHEREAS, it is the
desire of the Board of Directors of the Corporation, pursuant to its authority as aforesaid, to fix the rights, preferences, restrictions
and other matters relating to a series of Preferred Stock, which shall consist of up to 1,375 shares of the Preferred Stock
which the Corporation has the authority to issue, as follows:
NOW, THEREFORE, BE
IT RESOLVED, that the Board of Directors does hereby provide for the issuance of a series of Preferred Stock for cash or exchange
of other securities, rights or property and does hereby fix and determine the rights, preferences, restrictions and other matters
relating to such series of Preferred Stock as follows:
TERMS OF PREFERRED STOCK
‘Series G 8% Convertible Preferred
Stock. The total number of shares of Series G 8% Convertible Preferred Stock the Corporation shall have the authority to issue
is ONE THOUSAND THREE HUNDRED SEVENTY FIVE (1,375), with a par value of $0.01 per share and a stated value equal to $1,000 (the
"STATED VALUE") per share. The designations, powers, preferences, rights and restrictions granted or imposed upon the
Series G 8% Convertible Preferred Stock and holders thereof are as follows:
SECTION 1. DEFINITIONS. Capitalized terms
used and not otherwise defined herein that are defined in the 2007 Purchase Agreement shall have the meanings given such terms
in the 2007 Purchase Agreement. A copy of the 2007 Purchase Agreement as in effect on the date hereof shall be provided without
charge to any holder of Common Stock or Preferred Stock upon written request therefore For the purposes hereof, the following terms
shall have the following meanings:
"ALTERNATE CONSIDERATION” shall
have the meaning set forth in Section 7(e).
"BUSINESS DAY” means any day
except Saturday, Sunday, any day which shall be a federal legal holiday in the United States or any day on which banking institutions
in the State of New York are authorized or required by law or other governmental action to close.
"BUY-IN” shall have the meaning
set forth in Section 6(e)(iii).
"CHANGE OF CONTROL TRANSACTION”
means the occurrence after the date hereof of any of (i) an acquisition after the date hereof by an individual, legal entity or
"group”(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal
or beneficial ownership of capital stock of the Corporation, by contract or otherwise) of in excess of 40% of the voting securities
of the Corporation (other than by means of conversion or exercise of Preferred Stock and the Securities issued together with the
Preferred Stock), or (ii) the Corporation merges into or consolidates with any other Person, or any Person merges into or consolidates
with the Corporation and, after giving effect to such transaction, the stockholders of the Corporation immediately prior to such
transaction own less than 60% of the aggregate voting power of the Corporation or the successor entity of such transaction, or
(iii) the Corporation sells or transfers all or substantially all of its assets to another Person and the stockholders of the Corporation
immediately prior to such transaction own less than 60% of the aggregate voting power of the acquiring entity immediately after
the transaction, or (iv) a replacement at one time or within a one year period of more than one-half of the members of the Corporation's
board of directors which is not approved by a majority of those individuals who are members of the board of directors on the date
hereof (or by those individuals who are serving as members of the board of directors on any date whose nomination to the board
of directors was approved by a majority of the members of the board of directors who are members on the date hereof), or (v) the
execution by the Corporation of an agreement to which the Corporation is a party or by which it is bound, providing for any of
the events set forth in clauses (i) through (iv) above.
"COMMISSION” means the Securities
and Exchange Commission.
"COMMON STOCK” means the Corporation's
common stock, par value $0.001 per share, and stock of any other class of securities into which such securities may hereafter be
reclassified or changed into.
"COMMON STOCK EQUIVALENTS” means
any securities of the Corporation or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible
into or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
"CONVERSION AMOUNT” means the
sum of the Stated Value at issue.
"CONVERSION DATE” shall have
the meaning set forth in Section 6(a).
"CONVERSION PRICE” shall have
the meaning set forth in Section 6(b).
"CONVERSION SHARES” means, collectively,
the shares of Common Stock issuable upon conversion of the shares of Series G Preferred Stock in accordance with the terms hereof.
"CONVERSION SHARES REGISTRATION STATEMENT”
means a registration statement that registers the resale of all Conversion Shares of the Holder, who shall be named as a "selling
stockholder” therein and meets the requirements of the Registration Rights Agreement.
"DILUTIVE ISSUANCE” shall have
the meaning set forth in Section 7(b).
"DILUTIVE ISSUANCE NOTICE” shall
have the meaning set forth in Section 7(b).
"DIVIDEND PAYMENT DATE” shall
have the meaning set forth in Section 3(a).
"DIVIDEND SHARE AMOUNT” shall
have the meaning set forth in Section 3(a).
"EFFECTIVE DATE” means the date
that the Conversion Shares Registration Statement is declared effective by the Commission.
"EQUITY CONDITIONS” means, during
the period in question, as to a Holder, (i) the Corporation shall have duly honored all conversions scheduled to occur or occurring
by virtue of one or more Notices of Conversion of the applicable Holder on or prior to the dates so requested or required, if any,
(ii) the Corporation shall have paid all liquidated damages and other amounts owing to such Holder in respect of the Preferred
Stock, (iii) there is an effective Conversion Shares Registration Statement pursuant to which such Holder is permitted to utilize
the prospectus thereunder to resell all of the shares of Common Stock issuable to such Holder pursuant to the Transaction Documents
(and the Corporation believes, in good faith, that such effectiveness will continue uninterrupted for the foreseeable future),
(iv) the Common Stock is trading on a Trading Market and all of the shares issuable pursuant to the Transaction Documents are listed
for trading on such Trading Market (and the Corporation believes, in good faith, that trading of the Common Stock on a Trading
Market will continue uninterrupted for the foreseeable future), (v) there is a sufficient number of authorized, but unissued and
otherwise unreserved, shares of Common Stock for the issuance of all of the shares of Common Stock issuable to such Holder pursuant
to the Transaction Documents, (vi) the issuance of the shares in question (or, in the event of an Optional Redemption, of the issuance
of all the Conversion Shares underlying the Series G Preferred Stock) to such Holder would not violate the limitations set forth
in Section 6(c) and Section 6(d) herein, (vii) except with respect to Section 8(b), there has been no public announcement of a
pending or proposed Fundamental Transaction or Change of Control Transaction that has not been consummated, and (viii) such Holder
is not in possession of any information that constitutes, or may constitute, material non-public information as a result of the
disclosure of such information by the Corporation or any of its Affiliates.
“EQUITY CREDIT LINE” means
an agreement pursuant to which a funding source is obligated to purchase Common Stock at a purchase price that is no less than
the then current Conversion Price on the date of any takedown pursuant to such Equity Credit Line.
"EXCHANGE ACT” means the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
"EXEMPT ISSUANCE” means the
issuance of (a) shares of Common Stock or options to employees, consultants, officers or directors of the Corporation pursuant
to any stock or option plan duly adopted by a majority of the non-employee members of the Board of Directors of the Corporation
or a majority of the members of a committee of non-employee directors established for such purpose, (b) securities upon the exercise
or exchange of or conversion of the Securities issued pursuant to the 2007 Purchase Agreement and/or other securities exercisable
or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of the 2007 Purchase Agreement,
provided that such securities have not been amended since the date of the 2007 Purchase Agreement to increase the number of such
securities or to decrease the exercise, exchange or conversion price of any such securities, (c) securities issued pursuant to
acquisitions or strategic transactions approved by a majority of the disinterested directors, provided any such issuance shall
only be to a Person which is, itself or through its subsidiaries, an operating company in, or an individual that operates, a business
synergistic with the business of the Corporation and in which the Corporation receives benefits in addition to the investment of
funds, but shall not include a transaction in which the Corporation is issuing securities primarily for the purpose of raising
capital or to an entity whose primary business is investing in securities (each such transaction, a "STRATEGIC TRANSACTION"),
(d) up to a maximum of 1,500,000 shares of Common Stock or Common Stock Equivalents in any rolling 12 month period issued to consultants,
vendors, financial institutions or lessors in connection with services (including the provision of Permitted Indebtedness) provided
by such Persons referred to in this clause (d), but shall not include a transaction in which the Corporation is issuing securities
primarily for the purpose of raising capital or to an entity whose primary business is investing in securities, and provided that
none of such shares may be registered for sale or resale by any of such holders; (e) securities issued as a dividend or distribution
any of the Securities pursuant to the terms of the Transaction Documents; (f) securities issued in connection with any stock split,
stock dividend or recapitalization of the Common Stock (g) Securities issued pursuant to the Strategic Alliance Agreement with
Epic Pharma, LLC and Epic Investments, LLC, as amended, (h) Common Stock issued pursuant to the Equity Credit Line, (i) additional
shares of Common Stock issued to the funding source of the Equity Credit Line as a commitment fee, such shares to equal an amount
representing (i) 2.5% of the maximum dollar amount under the Equity Credit Line plus (ii) up to an additional 2.5% of the maximum
dollar amount under the Equity Credit Line, pro rata, only as the Company receives funding from the Equity Credit Line up to maximum
dollar amount under the Equity Credit Line (the purchase price for such shares shall be computed based upon the average of the
closing sale prices of the Common Stock for the twenty (20) consecutive Business Days prior to the date of execution of the letter
of intent with regard to the Equity Credit Line), (j) shares of Common Stock issuable as a “Commitment Fee” pursuant
to and as defined in the December 30, 2011 Securities Purchase Agreement with Socius CG II, Ltd., as amended and (k) Common Stock
issuable pursuant to the Class D Common Stock Purchase Warrants issued on or about September 15, 2008, as amended, that expire
on September 15 2013.
"FORCED CONVERSION AMOUNT” means
the sum of (i) 100% of the aggregate Stated Value then outstanding, (ii) accrued but unpaid dividends and (iii) all liquidated
damages and other amounts due in respect of the Series G Preferred Stock.
"FORCED CONVERSION DATE” shall
have the meaning set forth in Section 8(a).
"FORCED CONVERSION NOTICE” shall
have the meaning set forth in Section 8(a).
"FORCED CONVERSION NOTICE DATE”
shall have the meaning set forth in Section 8(a).
"FUNDAMENTAL TRANSACTION” shall
have the meaning set forth in Section 7(e).
"HOLDER” or "HOLDERS”
means the holder or holders, as the case may be, of Series G Preferred Stock.
"INDEBTEDNESS” means (a) any
liabilities for borrowed money or amounts owed in excess of $50,000 (other than trade accounts payable incurred in the ordinary
course of business), (b) all guaranties, endorsements and other contingent obligations in respect of Indebtedness of others, whether
or not the same are or should be reflected in the Company's balance sheet (or the notes thereto), except guaranties by endorsement
of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (c) the present
value of any lease payments in excess of $50,000 due under leases required to be capitalized in accordance with United States generally
accepted accounting principles applied on a consistent basis during the periods involved.
"JUNIOR SECURITIES” means the
Common Stock and all other Common Stock Equivalents of the Corporation other than those securities which are explicitly senior
or PARI PASSU to the Series G Preferred Stock in dividend rights or liquidation preference.
"LIQUIDATION” shall have the
meaning set forth in Section 5.
"NEW YORK COURTS” shall have
the meaning set forth in Section 11(d).
"NOTICE OF CONVERSION” shall
have the meaning set forth in Section 6(a).
"OPTIONAL REDEMPTION AMOUNT”
means the sum of (i) prior to September 15, 2011, 115% of the aggregate Stated Value then outstanding or after such date, 100%
of the aggregate Stated Value then outstanding, (ii) accrued but unpaid dividends and (iii) all liquidated damages and other amounts
due in respect of the Preferred Stock.
"OPTIONAL REDEMPTION” shall
have the meaning set forth in Section 8(b).
"OPTIONAL REDEMPTION DATE” shall
have the meaning set forth in Section 8(b).
"OPTIONAL REDEMPTION NOTICE”
shall have the meaning set forth in Section 8(b).
"OPTIONAL REDEMPTION NOTICE DATE”
shall have the meaning set forth in Section 8(b).
"ORIGINAL ISSUE DATE” means
the date of the first issuance of any shares of the Series G Preferred Stock regardless of the number of transfers of any particular
shares of Series G Preferred Stock and regardless of the number of certificates which may be issued to evidence such Series G Preferred
Stock.
"2007 ORIGINAL ISSUE DATE” means
the date of the first issuance of any shares of the Series C Preferred Stock regardless of the number of transfers of any particular
shares of Series C Preferred Stock and regardless of the number of certificates which may be issued to evidence such Series C Preferred
Stock.
"PERMITTED INDEBTEDNESS” means
(a) the Indebtedness existing on the 2007 Original Issue Date as set forth on the Disclosure Schedules attached to the 2007 Purchase
Agreement and (b) non-equity linked lines of credit or term loans from a regulated financial institution, lease obligations and
purchase money indebtedness of up to $3,000,000 in the aggregate.
"PERMITTED LIEN” means the individual
and collective reference to the following: (a) Liens for taxes, assessments and other governmental charges or levies not yet due
or Liens for taxes, assessments and other governmental charges or levies being contested in good faith and by appropriate proceedings
for which adequate reserves (in the good faith judgment of the management of the Corporation) have been established in accordance
with GAAP; (b) Liens imposed by law which were incurred in the ordinary course of the Corporation's business, such as carriers',
warehousemen's and mechanics' Liens, statutory landlords' Liens, and other similar Liens arising in the ordinary course of the
Corporation's business, and which (x) do not individually or in the aggregate materially detract from the value of such property
or assets or materially impair the use thereof in the operation of the business of the Corporation and its consolidated Subsidiaries
or (y) which are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing for
the foreseeable future the forfeiture or sale of the property or asset subject to such Lien, and (c) Liens incurred in connection
with Permitted Indebtedness under clause (b) thereunder, provided that such Liens are not secured by assets of the Corporation
or its Subsidiaries other than the assets so acquired or leased, except that any line of credit or term loan from a regulated financial
institution may be secured by a general Lien on all assets of the Corporation.
"PREFERRED STOCK”
means the Series C Preferred Stock, the Series G Preferred Stock and the Series E Preferred Stock collectively.
"2007 PURCHASE AGREEMENT” means
the Securities Purchase Agreement, dated as of April 25, 2007, to which the Corporation and the original Holders are parties, as
amended, modified or supplemented from time to time in accordance with its terms related, inter alia, to the purchase of Series
C Preferred Stock.
"REGISTRATION RIGHTS AGREEMENT”
means the Registration Rights Agreement, dated as of the date of the 2007 Purchase Agreement, to which the Corporation and the
original Holder are parties, as amended, modified or supplemented from time to time in accordance with its terms.
"SECURITIES ACT” means the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder.
"SERIES G PREFERRED STOCK” shall
have the meaning set forth in Section 2.
“SHARE DELIVERY DATE” shall
have the meaning set forth in Section 6(e).
"SHAREHOLDER APPROVAL” shall
have the meaning set forth in Section 6(d).
"STATED VALUE” shall have the
meaning set forth in Section 2.
"SUBSIDIARY” shall have the
meaning set forth in the 2007 Purchase Agreement.
"THRESHOLD PERIOD” shall have
the meaning set forth in Section 8(a).
"TRADING DAY” means a day on
which the principal Trading Market is open for business.
"TRADING MARKET” means the following
markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the Nasdaq Capital Market,
the Nasdaq Global Select Market, the Nasdaq Global Market, the NYSE; MKT, the New York Stock Exchange, the OTC Bulletin Board or,
if the Common Stock is not then listed or quoted on any of the foregoing, the highest market place operated by the OTC Markets
Group (or a similar organization or agency succeeding to its functions of reporting prices).
"TRANSACTION DOCUMENTS” shall
have the meaning set forth in the 2007 Purchase Agreement.
"VWAP” means, for any date,
the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a
Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the
Trading Market on which the Common Stock is then listed or quoted for trading as reported by Bloomberg Financial L.P. (based on
a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)); (b) if the Trading Market is the OTC Bulletin
Board, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin
Board; (c) if the Common Stock is not then quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are
then reported in the highest market place operated by the OTC Markets Group (or a similar organization or agency succeeding to
its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (d) in all other cases,
the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers
and reasonably acceptable to the Corporation.
SECTION 2. DESIGNATION, RANK, AMOUNT AND
PAR VALUE. This series of preferred stock shall be designated as its Series G 8% Convertible Preferred Stock (the "SERIES
G PREFERRED STOCK") and the number of shares so designated shall be 1,375 (which shall not be subject to increase without
the requisite affirmative vote of the holders of Preferred Stock as set forth in Section 4). Each share of Series G Preferred Stock
shall have a par value of $0.01 per share and a stated value equal to $1,000 (the "STATED VALUE"). The Series G Preferred
Stock shall, with respect to dividend rights, redemption rights and rights upon liquidation, dissolution or winding up, rank senior
to the Common Stock.
SECTION 3. DIVIDENDS.
a) DIVIDENDS IN CASH OR IN KIND. Holders
shall be entitled to receive, and the Corporation shall pay, cumulative dividends at the rate per share (as a percentage of the
Stated Value per share) of 8% per annum, (subject to increases pursuant to Section 9(b)), payable quarterly on January 1, April
1, July 1 and October 1, beginning on the first such date after the Original Issue Date and on each Conversion Date (except that,
if such date is not a Trading Day, the payment date shall be the next succeeding Trading Day) (each such date, a "DIVIDEND
PAYMENT DATE") in cash or duly authorized, validly issued, fully paid and non-assessable shares of Common Stock as set forth
in this Section (a), or a combination thereof (the amount to be paid in shares of Common Stock, the "DIVIDEND SHARE AMOUNT").
The form of dividend payments to each Holder shall be determined in the following order of priority: (i) if funds are legally available
for the payment of dividends and the Equity Conditions have not been met during the 20 consecutive Trading Days immediately prior
to the applicable Dividend Payment Date, in cash only; (ii) if funds are legally available for the payment of dividends and the
Equity Conditions have been met during the 20 consecutive Trading Days immediately prior to the applicable Dividend Payment Date,
at the sole election of the Corporation, in cash or shares of Common Stock which shall be valued solely for such purpose at 95%
of the average of the VWAPs for the 20 consecutive Trading Days ending on the Trading Day that is immediately prior to the Dividend
Payment Date; (iii) if funds are not legally available for the payment of dividends and the Equity Conditions have been met during
the 20 consecutive Trading Days immediately prior to the applicable Dividend Payment Date, in shares of Common Stock which shall
be valued solely for such purpose at 95% of the average of the VWAPs for the 20 consecutive Trading Days ending on the Trading
Day that is immediately prior to the Dividend Payment Date. The Holders shall have the same rights and remedies with respect to
the delivery of any such shares as if such shares were being issued pursuant to Section 6. Dividends on the Series G Preferred
Stock shall be calculated on the basis of a 360-day year, shall accrue daily commencing on the Original Issue Date, and shall be
deemed to accrue from such date whether or not earned or declared and whether or not there are profits, surplus or other funds
of the Corporation legally available for the payment of dividends. Except as otherwise provided herein, if at any time the Corporation
pays dividends partially in cash and partially in shares, then such payment shall be distributed ratably among the Holders based
upon the number of shares of Series G Preferred Stock held by each Holder on such Dividend Payment Date. Any dividends, whether
paid in cash or shares of Common Stock, that are not paid within five Trading Days following a Dividend Payment Date shall continue
to accrue and shall entail a late fee, which must be paid in cash, at the rate of 18% per annum or the lesser rate permitted by
applicable law (such fees to accrue daily, from the Dividend Payment Date through and including the date of payment). If at any
time the Corporation delivers a notice to the Holders of its election to pay the dividends in shares of Common Stock, the Corporation
shall timely file a prospectus supplement pursuant to Rule 424 disclosing such election, to the extent required by applicable law.
b) So long as any Series
G Preferred Stock shall remain outstanding, neither the Corporation nor any Subsidiary thereof shall redeem, purchase or otherwise
acquire directly or indirectly any Junior Securities except as expressly permitted by Section 9(a)(ix). So long as any Series G
Preferred Stock shall remain outstanding, (i) neither the Corporation nor any Subsidiary thereof shall directly or indirectly pay
or declare any dividend or make any distribution upon (other than a dividend or distribution described in Section 6 or dividends
due and paid in the ordinary course on preferred stock of the Corporation at such times when the Corporation is in compliance with
its payment and other obligations hereunder), (ii) nor shall any distribution be made in respect of, any Junior Securities as long
as any dividends due on the Series G Preferred Stock remain unpaid, (iii) nor shall any monies be set aside for or applied to the
purchase or redemption (through a sinking fund or otherwise) of any Junior Securities or shares PARI PASSU with the Series G Preferred
Stock.
c) The Corporation acknowledges and agrees
that the capital of the Corporation (as such term is used in NRS) in respect of the Series G Preferred Stock and any future issuances
of the Corporation's capital stock shall be equal to the aggregate par value of such Series G Preferred Stock or capital stock,
as the case may be, and that, on or after the date of the 2007 Purchase Agreement, it shall not increase the capital of the Corporation
with respect to any shares of the Corporation's capital stock issued and outstanding on such date. The Corporation also acknowledges
and agrees that it shall not create any special reserves out of funds of the corporation available for dividends for any purpose
without the prior written consent of each Holder.
SECTION 4. VOTING RIGHTS. Except as otherwise
provided herein or as otherwise required by law, the Series G Preferred Stock shall have no voting rights. However, as long as
any shares of Series G Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote of the holders
of at least 50%, in the aggregate, of the then outstanding shares of the Series G Preferred Stock, (a) alter or change adversely
the powers, preferences or rights given to the Series G Preferred Stock or alter or amend this Certificate of Designations, (b)
authorize or create any class of stock ranking as to dividends, redemption or distribution of assets upon a Liquidation (as defined
in Section 5) senior to or otherwise PARI PASSU with the Series G Preferred Stock, (c) amend its articles of incorporation or other
charter documents in any manner that adversely affects any rights of the holders of Series G Preferred Stock, (d) increase the
authorized number of shares of Preferred Stock, (e) increase the number of shares designated as Series G Preferred Stock, or (f)
enter into any agreement with respect to any of the foregoing. Notwithstanding the above, this Section 4 shall not apply to any
security issued in connection with a Strategic Transaction that ranks as to dividends, redemption or distribution of assets upon
a Liquidation that is PARI PASSU with or junior to the Series G Preferred Stock.
SECTION 5. LIQUIDATION. Upon any liquidation,
dissolution or winding-up of the Corporation, whether voluntary or involuntary (a "LIQUIDATION"), the Holders shall be
entitled to receive out of the assets, whether capital or surplus, of the Corporation an amount equal to the Stated Value, plus
any accrued and unpaid dividends thereon and any other fees or liquidated damages owing thereon, for each share of Series G Preferred
Stock before any distribution or payment shall be made to the holders of any Junior Securities, and if the assets of the Corporation
shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the Holders shall be ratably distributed
among the holders of all outstanding shares of Series G Preferred Stock in accordance with the respective amounts that would be
payable on such shares if all amounts payable thereon were paid in full. A Fundamental Transaction or Change of Control Transaction
shall not be deemed a Liquidation. The Corporation shall mail written notice of any such Liquidation, not less than 45 days prior
to the payment date stated therein, to each Holder.
SECTION 6. CONVERSION.
a) CONVERSIONS AT OPTION OF HOLDER. Each
share of Series G Preferred Stock shall be convertible at the option of the Holder, at any time and from time to time from and
after the Original Issue Date into that number of shares of Common Stock (subject to the limitations set forth in Section 6(c)
and Section 6(d)) determined by dividing the Stated Value of such share of Series G Preferred Stock by the Conversion Price. Holders
shall effect conversions by providing the Corporation with the form of conversion notice attached hereto as ANNEX A (a "NOTICE
OF CONVERSION"). Each Notice of Conversion shall specify the number of shares of Series G Preferred Stock to be converted,
the number of shares of Series G Preferred Stock owned prior to the conversion at issue, the number of shares of Series G Preferred
Stock owned subsequent to the conversion at issue and the date on which such conversion is to be effected, which date may not be
prior to the date the Holder delivers by facsimile such Notice of Conversion to the Corporation (the "CONVERSION DATE").
If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion
to the Corporation is deemed delivered hereunder. The calculations and entries set forth in the Notice of Conversion shall control
in the absence of manifest or mathematical error. To effect conversions, as the case may be, of shares of Series G Preferred Stock,
a Holder shall not be required to surrender the certificate(s) representing such shares of Series G Preferred Stock to the Corporation
unless all of the shares of Series G Preferred Stock represented thereby are so converted, in which case the Holder shall deliver
the certificate representing such shares of Series G Preferred Stock promptly following the Conversion Date at issue. Shares of
Series G Preferred Stock converted into Common Stock or redeemed in accordance with the terms hereof shall be canceled and shall
not be reissued.
b) CONVERSION PRICE. The conversion price
for the Series G Preferred Stock shall be equal to the lesser of: (i) the lowest sale price of the Common Stock on the Conversion
Date on the Trading Market or (ii) the average of the three (3) lowest closing sale prices of the Common Stock during the twelve
(12) Business Days prior to the Conversion Date on the Trading Market, subject to adjustment herein; but in no event shall the
Conversion Price be below $0.07 (the "CONVERSION PRICE").
c) BENEFICIAL OWNERSHIP
LIMITATION. The Corporation shall not effect any conversion of the Series G Preferred Stock, and a Holder shall not have the right
to convert any portion of the Series G Preferred Stock, to the extent that, after giving effect to the conversion set forth on
the applicable Notice of Conversion, such Holder (together with such Holder's Affiliates, and any other person or entity acting
as a group together with such Holder or any of such Holder's Affiliates) would beneficially own in excess of the Beneficial Ownership
Limitation (as defined below). The Corporation shall not give effect to any voting rights of the shares of Series G Preferred Stock,
and any Holder shall not have the right to exercise voting rights with respect to any Series G Preferred Stock pursuant hereto,
to the extent that giving effect to such voting rights would result in such Holder (together with its affiliates) being deemed
to beneficially own in excess of the Beneficial Ownership Limitation of the number of shares of Common Stock outstanding immediately
after giving effect to such exercise, assuming such exercise as being equivalent to conversion. For purposes of the foregoing sentence,
the number of shares of Common Stock beneficially owned by such Holder and its Affiliates shall include the number of shares of
Common Stock issuable upon conversion of the Series G Preferred Stock with respect to which such determination is being made, but
shall exclude the number of shares of Common Stock which are issuable upon (A) conversion of the remaining, unconverted Stated
Value of Series G Preferred Stock beneficially owned by such Holder or any of its Affiliates and (B) exercise or conversion of
the unexercised or unconverted portion of any other securities of the Corporation subject to a limitation on conversion or exercise
analogous to the limitation contained herein (including the Warrants) beneficially owned by such Holder or any of its Affiliates.
Except as set forth in the preceding sentence, for purposes of this Section 6(c), beneficial ownership shall be calculated in accordance
with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation
contained in this Section 6(c) applies, the determination of whether the Series G Preferred Stock is convertible (in relation to
other securities owned by such Holder together with any Affiliates) and of how many shares of Series G Preferred Stock are convertible
shall be in the sole discretion of such Holder, and the submission of a Notice of Conversion shall be deemed to be such Holder's
determination of whether the shares of Series G Preferred Stock may be converted (in relation to other securities owned by such
Holder together with any Affiliates) and how many shares of the Series G Preferred Stock are convertible, in each case subject
to such aggregate percentage limitations. To ensure compliance with this restriction, each Holder will be deemed to represent to
the Corporation each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set
forth in this paragraph and the Corporation shall have no obligation to verify or confirm the accuracy of such determination. In
addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of
the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 6(c), in determining the number
of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as stated in the most
recent of the following: (A) the Corporation's most recent Form 10-Q or Form 10-K, as the case may be, (B) a more recent public
announcement by the Corporation or (C) a more recent notice by the Corporation or the Corporation's transfer agent setting forth
the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Corporation shall within two
Trading Days confirm orally and in writing to such Holder the number of shares of Common Stock then outstanding. In any case, the
number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities
of the Corporation, including the Series G Preferred Stock, by such Holder or its Affiliates since the date as of which such number
of outstanding shares of Common Stock was reported. The "Beneficial Ownership Limitation” shall be 4.99% of the number
of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon
conversion of Series G Preferred Stock held by the Holder. By written notice to the Corporation, any Holder may from time to time
increase or decrease the Beneficial Ownership Limitation to any other percentage not in excess of 9.99% specified in such notice;
provided that (i) any such increase will not be effective until the sixty-first (61st) day after such notice is delivered to the
Corporation, and (ii) any such increase or decrease will apply only to such Holder providing such written notice and not to any
other Holder. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity
with the terms of this Section 6(c) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with
the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly
give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of Series G Preferred
Stock. This Section 6(c) shall not apply to the Corporation's exercise of its rights under Section 8.
d) TRADING MARKET LIMITATIONS. Notwithstanding
anything herein to the contrary, if the Corporation is listed on a Trading Market and has not obtained Shareholder Approval (as
defined below), then the Corporation may not issue upon conversion of the Series G Preferred Stock, a number of shares of Common
Stock, which, when aggregated with any shares of Common Stock issued prior to such Conversion Date (A) upon conversion of or as
payment of dividends on the Series G Preferred Stock, (B) upon exercise of the Warrants issued pursuant to that certain 2007 Purchase
Agreement and (C) pursuant to any warrants issued to any registered broker-dealer as a fee in connection with the Securities issued
pursuant to the 2007 Purchase Agreement, would exceed 19.999% of the number of shares of Common Stock outstanding on the Trading
Day immediately preceding the 2007 Original Issue Date (such number of shares, the "ISSUABLE MAXIMUM"). Each Holder shall
be entitled to a portion of the Issuable Maximum equal to the quotient obtained by dividing (x) such the number of shares of Series
G Preferred Stock initially purchased by such Holder by (y) the aggregate number of shares purchased by all Holders. Such portion
shall be adjusted upward ratably in the event all of the shares of Series G Preferred Stock initially purchased by any Holder are
no longer outstanding. If at any time (i) the number of shares of Common Stock which could, notwithstanding the limitation set
forth herein, be issued to all Holders during the following 12 months (assuming all dividends are paid in shares of Common Stock
during such period of determination based upon the VWAP at the time of any such determination) equals or exceeds the Issuable Maximum
and (ii) the Corporation's voting shareholders shall not have previously approved the transactions contemplated by the Transaction
Documents as may be required by an applicable rule or listing policy of a Trading Market (the "SHAREHOLDER APPROVAL"),
then the Corporation shall issue to the Holder requesting conversion a number of shares of Common Stock equal to such Holder's
pro-rata portion (which shall be calculated pursuant to the terms hereof) of the Issuable Maximum, and with respect to the remainder
of the Series G Preferred Stock (including any accrued dividends) then held by such Holder for which a conversion in accordance
with the applicable Conversion Price would result in an issuance of shares of Common Stock in excess of such Holder's pro-rata
portion (which shall be calculated pursuant to the terms hereof) of the Issuable Maximum (the "EXCESS PREFERRED"), the
Corporation shall be prohibited from converting such Excess Preferred, and shall promptly notify the Holder of the reason therefore.
The Excess Preferred shall thereafter be unconvertible to such extent until and unless Shareholder Approval is subsequently obtained,
but the rights and preferences of the Series G Preferred Stock otherwise set forth in this Certificate of Designations shall otherwise
remain in full force and effect.
e) MECHANICS OF CONVERSION
i. DELIVERY OF CERTIFICATE UPON CONVERSION.
Not later than three Trading Days after each Conversion Date (the "SHARE DELIVERY DATE"), the Corporation shall deliver,
or cause to be delivered, to the Holder (A) a certificate or certificates which, on or after the Effective Date, representing the
number of shares of Common Stock being acquired upon the conversion of shares of Series G Preferred Stock, and (B) a bank check
in the amount of accrued and unpaid dividends (if the Corporation has elected or is required to pay accrued dividends in cash).
On or after the Effective Date, the Corporation shall, upon request of the Holder, use its commercially reasonable efforts to deliver
any certificate or certificates required to be delivered by the Corporation under this Section 6 electronically through the Depository
Trust Company or another established clearing corporation performing similar functions. If in the case of any Notice of Conversion
such certificate or certificates are not delivered to or as directed by the applicable Holder by the fifth Trading Day after the
Conversion Date, the Holder shall be entitled to elect by written notice to the Corporation at any time on or before its receipt
of such certificate or certificates, to rescind such Conversion Notice by written notice to the Corporation, in which event the
Corporation shall promptly return to the Holder any original Series G Preferred Stock certificate delivered to the Corporation
and the Holder shall promptly return any Common Stock certificates representing the shares of Series G Preferred Stock tendered
for conversion to the Corporation.
ii. OBLIGATION ABSOLUTE; PARTIAL LIQUIDATED
DAMAGES. The Corporation's obligation to issue and deliver the Conversion Shares upon conversion of Series G Preferred Stock in
accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce
the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action
to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the
Holder or any other Person of any obligation to the Corporation or any violation or alleged violation of law by the Holder or any
other person, and irrespective of any other circumstance which might otherwise limit such obligation of the Corporation to the
Holder in connection with the issuance of such Conversion Shares; PROVIDED, HOWEVER, that such delivery shall not operate as a
waiver by the Corporation of any such action that the Corporation may have against the Holder. In the event a Holder shall elect
to convert any or all of the Stated Value of its Series G Preferred Stock, the Corporation may not refuse conversion based on any
claim that such Holder or any one associated or affiliated with the Holder has been engaged in any violation of law, agreement
or for any other reason, unless an injunction from a court, on notice to Holder, restraining and/or enjoining conversion of all
or part of the Series G Preferred Stock of the Holder shall have been sought and obtained. In the absence of such injunction, the
Corporation shall issue Conversion Shares and, if applicable, cash, upon a properly noticed conversion. If the Corporation fails
to deliver to the Holder such certificate or certificates pursuant to Section 6(e)(i) on the second Trading Day after the Share
Delivery Date applicable to such conversion, the Corporation shall pay to such Holder, in cash, as liquidated damages and not as
a penalty, for each $1,000 of Stated Value of Series G Preferred Stock being converted, $10 per Trading Day (increasing to $20
per Trading Day on the third Trading Day after such damages begin to accrue) for each Trading Day after such second Trading Day
after the Share Delivery Date until such certificates are delivered. Nothing herein shall limit a Holder's right to pursue actual
damages for the Corporation's failure to deliver Conversion Shares within the period specified herein and such Holder shall have
the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief. The Exercise of any such rights shall not prohibit the Holder from seeking to enforce damages
pursuant to any other Section hereof or under applicable law.
iii. COMPENSATION FOR BUY-IN ON FAILURE
TO TIMELY DELIVER CERTIFICATES UPON CONVERSION. If the Corporation fails to deliver to the Holder such certificate or certificates
by the Share Delivery Date pursuant to Section 6(e)(i), and if after such Share Delivery Date the Holder is required by its brokerage
firm to purchase (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such
Holder of the Conversion Shares which the Holder was entitled to receive upon the conversion relating to such Share Delivery Date
(a "BUY-IN"), then the Corporation shall (A) pay in cash to the Holder (in addition to any other remedies available to
or elected by the Holder) the amount by which (x) the Holder's total purchase price (including any brokerage commissions) for the
shares of Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that such Holder
was entitled to receive from the conversion at issue multiplied by (2) the actual sale price at which the sell order giving rise
to such purchase obligation was executed (including any brokerage commissions) and (B) at the option of the Holder, either reissue
(if surrendered) the shares of Series G Preferred Stock equal to the number of shares of Series G Preferred Stock submitted for
conversion or deliver to the Holder the number of shares of Common Stock that would have been issued if the Corporation had timely
complied with its delivery requirements under Section 6(e)(i). For example, if the Holder purchases shares of Common Stock having
a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of shares of Series G Preferred Stock
with respect to which the actual sale price (including any brokerage commissions) giving rise to such purchase obligation was a
total of $10,000 under clause (A) of the immediately preceding sentence, the Corporation shall be required to pay the Holder $1,000.
The Holder shall provide the Corporation written notice indicating the amounts payable to the Holder in respect of the Buy-In and,
upon request of the Corporation, evidence of the amount of such loss. Nothing herein shall limit a Holder's right to pursue any
other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Corporation's failure to timely deliver certificates representing shares of Common Stock
upon conversion of the shares of Series G Preferred Stock as required pursuant to the terms hereof.
iv. RESERVATION OF SHARES ISSUABLE UPON
CONVERSION. The Corporation covenants that it will at all times reserve and keep available out of its authorized and unissued shares
of Common Stock for the sole purpose of issuance upon conversion of the Series G Preferred Stock and payment of dividends on the
Series G Preferred Stock, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of
Persons other than the Holders of the Series G Preferred Stock, not less than such aggregate number of shares of the Common Stock
as shall (subject to the terms and conditions in the 2007 Purchase Agreement) be issuable (taking into account the adjustments
and restrictions of Section 7) upon the conversion of all outstanding shares of Series G Preferred Stock and payment of dividends
hereunder. The Corporation covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized,
validly issued, fully paid and nonassessable and, if the Conversion Shares Registration Statement is then effective under the Securities
Act, shall be registered for public sale in accordance with such Conversion Shares Registration Statement.
v. FRACTIONAL SHARES. Upon a conversion
hereunder, the Corporation shall not be required to issue stock certificates representing fractions of shares of Common Stock,
but may if otherwise permitted, make a cash payment in respect of any final fraction of a share based on the VWAP at such time.
If the Corporation elects not, or is unable, to make such a cash payment, the Holder shall be entitled to receive, in lieu of the
final fraction of a share, one whole share of Common Stock.
vi. TRANSFER TAXES. The issuance of certificates
for shares of the Common Stock on conversion of this Series G Preferred Stock shall be made without charge to the Holder hereof
for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificates, provided
that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance
and delivery of any such certificate upon conversion in a name other than that of the Holder of such shares of Series G Preferred
Stock so converted and the Corporation shall not be required to issue or deliver such certificates unless or until the Person or
Persons requesting the issuance thereof shall have paid to the Corporation the amount of such tax or shall have established to
the satisfaction of the Corporation that such tax has been paid.
SECTION 7. CERTAIN ADJUSTMENTS.
a) STOCK DIVIDENDS AND STOCK SPLITS. If
the Corporation, at any time while this Series G Preferred Stock is outstanding: (A) pays a stock dividend or otherwise makes a
distribution or distributions payable in shares of Common Stock on shares of Common Stock or any other Common Stock Equivalents
(which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Corporation upon conversion of, or payment
of a dividend on, this Series G Preferred Stock); (B) subdivides outstanding shares of Common Stock into a larger number of shares;
(C) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares; or
(D) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Corporation, then
the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding
any treasury shares of the Corporation) outstanding immediately before such event and of which the denominator shall be the number
of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section 7(a) shall become
effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
b) SUBSEQUENT EQUITY SALES. If the Corporation
or any Subsidiary thereof, at any time while this Series G Preferred Stock is outstanding, sells or grants any option to purchase
or sells or grants any right to reprice its securities, or otherwise disposes of or issues (or announces any sale, grant or any
option to purchase or other disposition) any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of
Common Stock at an effective price per share that is lower than the then applicable Conversion Price (such issuances collectively,
a "DILUTIVE ISSUANCE") (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether
by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or
due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of
Common Stock at an effective price per share that is lower than the then applicable Conversion Price, such issuance shall be deemed
to have occurred for less than the then applicable Conversion Price on such date of the Dilutive Issuance), then the then applicable
Conversion Price shall be reduced to a price determined by multiplying the then applicable Conversion Price by a fraction, the
numerator of which is the sum of (A) the number of shares of Common Stock issued and outstanding immediately prior to the Dilutive
Issuance plus (B) the number of shares of Common Stock issuable upon conversion or exercise of Common Stock Equivalents issued
and outstanding immediately prior to the Dilutive Issuance plus (C) the number of shares of Common Stock which the offering price
for such Dilutive Issuance would purchase at the then applicable Conversion Price, and the denominator of which shall be the sum
of (X) the number of shares of Common Stock issued and outstanding immediately prior to the Dilutive Issuance plus (Y) the number
of shares of Common Stock issuable upon conversion or exercise of Common Stock Equivalents issued and outstanding immediately prior
to the Dilutive Issuance plus (Z) the number of shares of Common Stock so issued or issuable in connection with the Dilutive Issuance.
Notwithstanding the foregoing, no adjustment will be made under this Section 7(b) in respect of an Exempt Issuance or any exchange
of shares of any outstanding preferred stock of the Corporation for shares of a validly authorized, newly-created series of preferred
stock. The Corporation shall notify the Holder in writing, no later than the Business Day following the issuance of any Common
Stock or Common Stock Equivalents subject to this Section 7(b), indicating therein the applicable issuance price, or applicable
reset price, exchange price, conversion price and other pricing terms (such notice, the "DILUTIVE ISSUANCE Notice").
For purposes of clarification, whether or not the Corporation provides a Dilutive Issuance Notice pursuant to this Section 7(b),
upon the occurrence of any Dilutive Issuance, the Holder is entitled to receive a number of Conversion Shares based upon the adjusted
Conversion Price on or after the date of such Dilutive Issuance, regardless of whether the Holder accurately refers to the adjusted
Conversion Price in the Notice of Conversion.
c) SUBSEQUENT RIGHTS OFFERINGS. If the
Corporation, at any time while this Series G Preferred Stock is outstanding, shall issue rights, options or warrants to all holders
of Common Stock (and not to Holders) entitling them to subscribe for or purchase shares of Common Stock at a price per share that
is lower than the VWAP on the record date referenced below, then the Conversion Price shall be multiplied by a fraction of which
the denominator shall be the number of shares of the Common Stock outstanding on the date of issuance of such rights or warrants
plus the number of additional shares of Common Stock offered for subscription or purchase, and of which the numerator shall be
the number of shares of the Common Stock outstanding on the date of issuance of such rights or warrants plus the number of shares
which the aggregate offering price of the total number of shares so offered (assuming delivery to the Corporation in full of all
consideration payable upon exercise of such rights, options or warrants) would purchase at such VWAP. Such adjustment shall be
made whenever such rights or warrants are issued, and shall become effective immediately after the record date for the determination
of stockholders entitled to receive such rights, options or warrants. If any such rights, options or warrants expire without having
been exercise, the Conversion Price as adjusted upon the issuance of such rights, options or warrants shall be readjusted to the
Conversion Price which would have been in effect had an adjustment been made on the basis that only additional shares of Common
Stock so issued were the additional shares of Common Stock, if any, actually issued or sold on the exercise of such rights, options
or warrants and such additional shares of Common Stock, if any, were issued or sold for the consideration actually received by
the Corporation upon such exercise, plus the consideration, if any, actually received by the Corporation for the granting of all
such rights, options or warrants, whether or not exercised, provided that such readjustment shall not apply to prior conversions
of the Series G Preferred Stock
d) PRO RATA DISTRIBUTIONS. If the Corporation,
at any time while this Series G Preferred Stock is outstanding, distributes to all holders of Common Stock (and not to Holders)
evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe for or purchase
any security (other than Common Stock, which shall be subject to Section 7(b)), then in each such case the Conversion Price shall
be adjusted by multiplying such Conversion Price in effect immediately prior to the record date fixed for determination of stockholders
entitled to receive such distribution by a fraction of which the denominator shall be the VWAP determined as of the record date
mentioned above, and of which the numerator shall be such VWAP on such record date less the then fair market value at such record
date of the portion of such assets, evidence of indebtedness or rights or warrants so distributed applicable to one outstanding
share of the Common Stock as determined by the Board of Directors of the Corporation in good faith. In either case the adjustments
shall be described in a statement delivered to the Holder describing the portion of assets or evidences of indebtedness so distributed
or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution
is made and shall become effective immediately after the record date mentioned above.
e) FUNDAMENTAL TRANSACTION. If, at any
time while this Series G Preferred Stock is outstanding, (A) the Corporation effects any merger or consolidation of the Corporation
with or into another Person, (B) the Corporation effects any sale of all or substantially all of its assets in one transaction
or a series of related transactions, (C) any tender offer or exchange offer (whether by the Corporation or another Person) is completed
pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property,
or (D) the Corporation effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the
Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a "FUNDAMENTAL
TRANSACTION"), then, upon any subsequent conversion of this Series G Preferred Stock, the Holder shall have the right to receive,
for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental
Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence
of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of one share of Common
Stock (the "ALTERNATE CONSIDERATION"). For purposes of any such conversion, the determination of the Conversion Price
shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable
in respect of one share of Common Stock in such Fundamental Transaction, and the Corporation shall apportion the Conversion Price
among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of
this Series G Preferred Stock following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions,
any successor to the Corporation or surviving entity in such Fundamental Transaction shall file a new Certificate of Designation
of the Series G Preferred Stock with the same terms and conditions and issue to the Holder new preferred stock consistent with
the foregoing provisions and evidencing the Holder's right to convert such preferred stock into Alternate Consideration. The terms
of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving
entity to comply with the provisions of this Section 7(e) and insuring that this Series G Preferred Stock (or any such replacement
security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction.
f) CALCULATIONS. All calculations under
this Section 7 shall be made to the nearest 1/100th of a cent or the nearest share, as the case may be. For purposes of this Section
7, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of
shares of Common Stock (excluding any treasury shares of the Corporation) issued and outstanding.
g) NOTICE TO THE HOLDERS.
i. ADJUSTMENT TO CONVERSION PRICE. Whenever
the Conversion Price is adjusted pursuant to any provision of this Section 7, the Corporation shall promptly mail to each Holder
a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such
adjustment.
ii. NOTICE TO ALLOW CONVERSION BY HOLDER.
If (A) the Corporation shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Corporation
shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Corporation shall authorize
the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock
of any class or of any rights, (D) the approval of any stockholders of the Corporation shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger to which the Corporation is a party, any sale or transfer of
all or substantially all of the assets of the Corporation, of any compulsory share exchange whereby the Common Stock is converted
into other securities, cash or property or (E) the Corporation shall authorize the voluntary or involuntary dissolution, liquidation
or winding up of the affairs of the Corporation, then, in each case, the Corporation shall cause to be filed at each office or
agency maintained for the purpose of conversion of this Series G Preferred Stock, and shall cause to be delivered to each Holder
at its last address as it shall appear upon the stock books of the Corporation, at least 20 calendar days prior to the applicable
record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose
of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders
of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined
or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective
or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their
shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof
shall not affect the validity of the corporate action required to be specified in such notice. The Holder is entitled to convert
the Conversion Amount of this Series G Preferred Stock (or any part hereof) during the 20-day period commencing on the date of
such notice through the effective date of the event triggering such notice.
SECTION 8. FORCED CONVERSION; OPTIONAL
REDEMPTION; AUTOMATIC MONTHLY CONVERSION.
a) FORCED CONVERSION. Notwithstanding anything
herein to the contrary, to the extent that VWAP for each of any 20 consecutive Trading Day period exceeds the then applicable Conversion
Price (such 20 consecutive Trading Day period, the "THRESHOLD PERIOD"), if (i)(x) the VWAP during the Threshold Period
exceeds $1.00 (subject to adjustment for forward and reverse stock splits, recapitalizations, stock dividends and the like) and
(y) the daily trading volume for each Trading Day during such Threshold Period exceeds 250,000 shares of Common Stock (subject
to adjustment for forward and reverse stock splits, recapitalizations, stock dividends and the like), (ii)(x) the VWAP during the
Threshold Period exceeds $1.25 (subject to adjustment for forward and reverse stock splits, recapitalizations, stock dividends
and the like) and (y) the daily trading volume for each Trading Day during such Threshold Period exceeds 200,000 shares of Common
Stock (subject to adjustment for forward and reverse stock splits, recapitalizations, stock dividends and the like), (iii)(x) the
VWAP during the Threshold Period exceeds $1.50 (subject to adjustment for forward and reverse stock splits, recapitalizations,
stock dividends and the like) and (y) the daily trading volume for each Trading Day during such Threshold Period exceeds 150,000
shares of Common Stock (subject to adjustment for forward and reverse stock splits, recapitalizations, stock dividends and the
like), or (iv)(x) the VWAP during the Threshold Period exceeds $1.75 (subject to adjustment for forward and reverse stock splits,
recapitalizations, stock dividends and the like) and (y) the daily trading volume for each Trading Day during such Threshold Period
exceeds 100,000 shares of Common Stock (subject to adjustment for forward and reverse stock splits, recapitalizations, stock dividends
and the like), then the Corporation may, within two Trading Days after the end of any such Threshold Period, deliver a written
notice to all Holders (a "FORCED CONVERSION NOTICE” and the date such notice is delivered to all Holders, the "FORCED
CONVERSION NOTICE DATE") to cause each Holder to convert all or part of such Holder's Series G Preferred Stock (as specified
in such Forced Conversion Notice) plus all accrued but unpaid dividends thereon and all liquidated damages and other amounts due
in respect of the Series G Preferred Stock pursuant to Section 6, it being agreed that the "Conversion Date” for purposes
of Section 6 shall be deemed to occur on the third Trading Day following the Forced Conversion Notice Date (such third Trading
Day, the "FORCED CONVERSION DATE"). The Corporation may not deliver a Forced Conversion Notice, and any Forced Conversion
Notice delivered by the Corporation shall not be effective, unless all of the Equity Conditions have been met on each Trading Day
occurring during the applicable Threshold Period through and including the later of the Forced Conversion Date and the Trading
Day after the date that the Conversion Shares issuable pursuant to such conversion are actually delivered to the Holder pursuant
to the Forced Conversion Notice. Any Forced Conversion Notices shall be applied ratably to all of the holders of Preferred Stock
based on the number of shares of Preferred Stock held by each holder of Preferred Stock as of the forced Conversion Date, provided
that any voluntary conversions by a Holder shall be applied against such Holder's pro-rata allocation, thereby decreasing the aggregate
amount forcibly converted hereunder if less than all shares of the Preferred Stock are forcibly converted. For purposes of clarification,
a Forced Conversion shall be subject to all of the provisions of Section 6, including, without limitation, the provisions requiring
payment of liquidated damages and limitations on conversions.
b) OPTIONAL REDEMPTION. Subject to the
provisions of this Section 8, the Corporation may deliver a notice to the Holders (an "OPTIONAL REDEMPTION NOTICE” and
the date such notice is deemed delivered hereunder, the "OPTIONAL REDEMPTION NOTICE DATE") of its irrevocable election
to redeem some or all of the then outstanding Series G Preferred Stock, for cash in an amount equal to the Optional Redemption
Amount on the 20th Trading Day following the Optional Redemption Notice Date (such date, the "OPTIONAL REDEMPTION DATE”
and such redemption, the "OPTIONAL REDEMPTION"). The Optional Redemption Amount is payable in full on the Optional Redemption
Date. The Corporation may only effect an Optional Redemption if each of the Equity Conditions shall have been met on each Trading
Day occurring during the period commencing on the Optional Redemption Notice Date through to the Optional Redemption Date and through
and including the date payment of the Optional Redemption Amount is actually made. If any of the Equity Conditions shall cease
to be satisfied at any time during such 20 Trading Day period, then a Holder may elect to nullify the Optional Redemption Notice
as to such Holder by notice to the Corporation within 3 Trading Days after the first day on which any such Equity Condition has
not been met (provided that if the Corporation is obligated to notify the Holders of the non-existence of an Equity Condition,
such notice period shall be extended to the third Trading Day after proper notice from the Corporation) in which case the Optional
Redemption Notice shall be null and void, AB INITIO. The Corporation covenants and agrees that it will honor all Notices of Conversion
tendered from the time of delivery of the Optional Redemption Notice through the date the Optional Redemption Amount is paid in
full. Any Optional Redemption Notices shall be applied ratably to all of the holders of Preferred Stock based the number of shares
of Preferred Stock held by each holder of Preferred Stock as of the Optional Redemption Date, provided that any voluntary conversions
by a Holder shall be applied against such Holder's pro-rata allocation, thereby decreasing the aggregate amount redeemed hereunder
if less than all shares of the Preferred Stock are redeemed.
c) AUTOMATIC MONTHLY CONVERSIONS. Subject
to the terms herein, on each Monthly Conversion Date (as defined below), a number of shares of Series G Preferred Stock equal to
each Holder’s pro-rata portion (based on the shares of Series G Preferred Stock held by each Holder on April 1, 2013) of
the Monthly Conversion Amount (as defined below) shall automatically convert into shares of Common Stock at the then-effective
Conversion Price (each such conversion, a (the “Monthly Conversion”). Each Holder may convert, pursuant to Section
6(a), all or a portion of its Series G Preferred Stock subject to a Monthly Conversion at any time prior to a Monthly Conversion
Date. Any Series G Preferred Stock converted (other than pursuant to a Monthly Conversion) during the calendar month immediately
prior to a Monthly Conversion Date shall be applied to such Holder’s pro rata portion of such Monthly Conversion Amount (up
to such Holder’s pro rata portion for such month). Notwithstanding anything to the contrary set forth herein, the Corporation
shall not be permitted to effect a Monthly Conversion on a Monthly Conversion Date unless (i) the Common Stock shall be listed
or quoted for trading on a Trading Market, (ii) there is a sufficient number of authorized shares of Common Stock for issuance
of all Common Stock to be issued upon such Monthly Conversion, (iii) as to any Holder, the issuance of the shares shall not cause
a breach of any provision of Section 6(c) herein, (iv) if requested by the Holder and a Rule 144 Rep Letter (as defined below)
shall have been provided by such Holder after request from the Corporation, the Conversion Shares are delivered electronically
through the Depository Trust Company or another established clearing corporation performing similar functions, may be resold by
the Holder pursuant to an exemption under the Securities Act and are otherwise free of restrictive legends and trading restrictions
on the Holder (in this regard, the Corporation shall at its expense provide an opinion of counsel, or, if requested by Holder,
reputable counsel selected by the Holder shall provide an opinion, to the Corporation and its transfer agent that the Conversion
Shares may be resold by the Holder pursuant to an exemption under the Securities Act and are otherwise free of restrictive legends
and trading restrictions on the Holder), (v) there has been no public announcement of a pending or proposed Fundamental Transaction
or Change of Control Transaction that has not been consummated, (vi) the applicable Holder is not in possession of any information
provided to the applicable Holder by the Corporation that constitutes material non-public information, and (vii) the average VWAP
for the 20 Trading Days immediately prior to the applicable Monthly Conversion Date equals or exceeds the then-effective Conversion
Price. As used herein, the following terms shall have the following meanings: (i) “Monthly Conversion Date “means the
first day of each month, commencing on April 1, 2013, and terminating on the date the Series G Preferred Stock is no longer outstanding;
(ii) “Monthly Conversion Amount “means an aggregate Stated Value of Series G Preferred Stock among all Holders that
is equal to 35% of aggregate dollar trading volume of the Common Stock during the 20 Trading Days immediately prior to the applicable
Monthly Conversion Date (such 20 Trading Day period, the “Measurement Period”), increasing to 50% of the aggregate
dollar trading volume during the Measurement Period if the average VWAP during such Measurement Period equals or exceeds $0.20
(subject to adjustment for forward and reverse stock splits and the like that occur after April 1, 2013) and further increasing
to 70% of the aggregate dollar trading volume during such Measurement Period if the average VWAP during such Measurement Period
equals or exceeds $0.25 (subject to adjustment for forward and reverse stock splits and the like that occur after April 1, 2013).
All shares of Common Stock issued on a Monthly Conversion Date shall be delivered otherwise in accordance with the procedures and
time frames set forth in Section 6 above. Upon the request of the Corporation, each Holder shall provide to the Corporation, a
customary Rule 144 representation letter relating to all shares of Common Stock to be issued upon each Monthly Conversion (a “Rule
144 Rep Letter ”).
SECTION 9. [intentionally omitted]
SECTION 10. NEGATIVE COVENANTS. So long
as any shares of Series G Preferred Stock are outstanding, the Corporation shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, without the affirmative written consent of the holders of at least 50%, in the aggregate, of the then
outstanding shares of the Series G Preferred Stock:
a) other than Permitted Indebtedness, for
a period of three years from the 2007 Original Issue Date, enter into, create, incur, assume, guarantee or suffer to exist any
indebtedness for borrowed money of any kind, including but not limited to, a guarantee, on or with respect to any of its property
or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom;
b) other than Permitted Liens, for a period
of three years from the 2007 Original Issue Date, enter into, create, incur, assume or suffer to exist any Liens of any kind, on
or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits
therefrom;
c) amend its articles of incorporation,
bylaws or other charter documents so as to materially and adversely affect any rights of any Holder;
d) repay, repurchase or offer to repay,
repurchase or otherwise acquire more than a DE MINIMIS number of shares of its Common Stock, Common Stock Equivalents or Junior
Securities, except for the Conversion Shares to the extent permitted or required under the Transaction Documents or as otherwise
permitted by the Transaction Documents;
e) enter into any agreement or understanding
with respect to any of the foregoing; or
f) pay cash dividends or distributions
on Junior Securities of the Corporation.
SECTION 11. MISCELLANEOUS.
a) NOTICES. Any and all notices or other
communications or deliveries to be provided by the Holder hereunder including, without limitation, any Notice of Conversion, shall
be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service, addressed to
the Corporation, at the address set forth above, facsimile number 201-750-2755, Attn: Chief Executive Officer, or such other facsimile
number or address as the Corporation may specify for such purposes by notice to the Holders delivered in accordance with this Section
11. Any and all notices or other communications or deliveries to be provided by the Corporation hereunder shall be in writing and
delivered personally, by facsimile, or sent by a nationally recognized overnight courier service addressed to each Holder at the
facsimile number or address of such Holder appearing on the books of the Corporation, or if no such facsimile number or address
appears on the books of the Corporation, at the principal place of business of the Holder. Any notice or other communication or
deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number specified in this Section 11 prior to 5:30 p.m. (New York City time) on any
date, (ii) the date immediately following the date of transmission, if such notice or communication is delivered via facsimile
at the facsimile number specified in this Section 11 between 5:30 p.m. and 11:59 p.m. (New York City time) on any date, (iii) the
second Business Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given.
b) ABSOLUTE OBLIGATION. Except as expressly
provided herein, no provision of this Certificate of Designations shall alter or impair the obligation of the Corporation, which
is absolute and unconditional, to pay liquidated damages, accrued dividends and accrued interest, as applicable, on the shares
of Series G Preferred Stock at the time, place, and rate, and in the coin or currency, herein prescribed.
c) LOST OR MUTILATED SERIES G PREFERRED
STOCK CERTIFICATE. If a Holder's Series G Preferred Stock certificate shall be mutilated, lost, stolen or destroyed, the Corporation
shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated certificate, or in lieu of or
in substitution for a lost, stolen or destroyed certificate, a new certificate for the shares of Series G Preferred Stock so mutilated,
lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such certificate, and of the
ownership hereof reasonably satisfactory to the Corporation.
d) GOVERNING LAW. All questions concerning
the construction, validity, enforcement and interpretation of the Certificate of Designations shall be governed by and construed
and enforced in accordance with the internal laws of the State of Nevada, without regard to the principles of conflict of laws
thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions
contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York,
Borough of Manhattan (the "NEW YORK COURTS"). Each party hereto hereby irrevocably submits to the exclusive jurisdiction
of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction
of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding. Each party hereby irrevocably
waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect
for notices to it under this Certificate of Designations and agrees that such service shall constitute good and sufficient service
of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other
manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Certificate of Designations
or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this
Certificate of Designations, then the prevailing party in such action or proceeding shall be reimbursed by the other party for
its attorneys' fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.
e) WAIVER. Any waiver by the Corporation
or the Holder of a breach of any provision of this Certificate of Designations shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of this Certificate of Designations. The failure
of the Corporation or the Holder to insist upon strict adherence to any term of this Certificate of Designations on one or more
occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that
term or any other term of this Certificate of Designations. Any waiver by the Corporation or the Holder must be in writing.
f) SEVERABILITY. If any provision of this
Certificate of Designations is invalid, illegal or unenforceable, the balance of this Certificate of Designations shall remain
in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other
Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable
law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of
interest permitted under applicable law.
g) NEXT BUSINESS DAY. Whenever any payment
or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding
Business Day.
h) HEADINGS. The headings contained herein
are for convenience only, do not constitute a part of this Certificate of Designations and shall not be deemed to limit or affect
any of the provisions hereof.
i) STATUS OF CONVERTED OR REDEEMED SERIES
G PREFERRED STOCK. If any shares of Series G Preferred Stock shall be converted, redeemed or reacquired by the Corporation, such
shares shall resume the status of authorized but unissued shares of preferred stock and shall no longer be designated as Series
G 8% Convertible Preferred Stock.’
RESOLVED, FURTHER,
that the chairman, chief executive officer, president, chief financial officer, or any vice-president, and the secretary or any
assistant secretary, of the Corporation be and they hereby are authorized and directed to prepare and file a Certificate of Designation
of Preferences, Rights and Limitations of Series G Preferred Stock in accordance with the foregoing resolution and the provisions
of Nevada law.”
IN WITNESS WHEREOF,
the undersigned have executed and acknowledged this Certificate this 18
th
day of April 2013.
|
|
By:
|
s/Chris Dick
|
|
|
|
|
Chris Dick, President
|
|
Exhibit 10.1
PURCHASE AGREEMENT
PURCHASE AGREEMENT
(the “
Agreement
”), dated as of April 19, 2013, by and between
ELITE PHARMACEUTICALS, INC.
, a Nevada corporation,
(the “
Company
”), and
LINCOLN PARK CAPITAL FUND, LLC
, an Illinois limited liability company (the “
Investor
”).
WHEREAS:
Subject to the terms and conditions set
forth in this Agreement, the Company wishes to sell to the Investor, and the Investor wishes to buy from the Company, up to Ten
Million Dollars ($10,000,000) of the Company's common stock, $.001 par value (the “
Common Stock
”). The shares
of Common Stock to be purchased hereunder are referred to herein as the “
Purchase Shares
.”
NOW THEREFORE, in consideration of the
mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the Company and the Investor hereby agree as follows:
1. CERTAIN
DEFINITIONS.
For purposes of this
Agreement, the following terms shall have the following meanings:
(a) “
Available
Amount
” means initially Ten Million Dollars ($10,000,000) in the aggregate which amount shall be reduced by the Purchase
Amount each time the Investor purchases shares of Common Stock pursuant to Section 2 hereof.
(b) “
Bankruptcy
Law
” means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors.
(c) “
Business
Day
” means any day on which the Principal Market is open for trading including any day on which the Principal Market
is open for trading for a period of time less than the customary time.
(d) “
Closing
Sale Price
” means, for any security as of any date, the last closing sale price for such security on the Principal Market
as reported by the Principal Market, or, if the Principal Market is not the principal securities exchange or trading market for
such security, the last closing sale price of such security on the principal securities exchange or trading market where such security
is listed or traded as reported by the Principal Market.
(e) “
Confidential
Information
” means any information disclosed by either party to the other party, either directly or indirectly, in writing,
orally or by inspection of tangible objects (including, without limitation, documents, prototypes, samples, plant and equipment),
which is designated as "Confidential," "Proprietary" or some similar designation. Information communicated
orally shall be considered Confidential Information if such information is confirmed in writing as being Confidential Information
within ten (10) Business Days after the initial disclosure. Confidential Information may also include information disclosed to
a disclosing party by third parties. Confidential Information shall not, however, include any information which (i) was publicly
known and made generally available in the public domain prior to the time of disclosure by the disclosing party; (ii) becomes publicly
known and made generally available after disclosure by the disclosing party to the receiving party through no action or inaction
of the receiving party; (iii) is already in the possession of the receiving party at the time of disclosure by the disclosing party
as shown by the receiving party’s files and records immediately prior to the time of disclosure; (iv) is obtained by the
receiving party from a third party without a breach of such third party’s obligations of confidentiality; (v) is independently
developed by the receiving party without use of or reference to the disclosing party’s Confidential Information, as shown
by documents and other competent evidence in the receiving party’s possession; or (vi) is required by law to be disclosed
by the receiving party, provided that the receiving party gives the disclosing party prompt written notice of such requirement
prior to such disclosure and assistance in obtaining an order protecting the information from public disclosure.
(f) “
Custodian
”
means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.
(g) “
DTC
”
means The Depository Trust Company, or any successor performing substantially the same function for the Company.
(h) “
DWAC
Shares
” means shares of Common Stock that are (i) issued in electronic form, (ii) freely tradable and transferable and
without restriction on resale and (iii) timely credited by the Company to the Investor’s or its designee’s specified
Deposit/Withdrawal at Custodian (DWAC) account with DTC under its Fast Automated Securities Transfer (FAST) Program or any similar
program hereafter adopted by DTC performing substantially the same function.
(i) “
Exchange
Act
” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
(j) “
Material
Adverse Effect
” means any material adverse effect on (i) the enforceability of any Transaction Document, (ii) the
results of operations, assets, business or financial condition of the Company and its Subsidiaries, taken as a whole, other than
any material adverse effect that resulted exclusively from (A) any change in the United States or foreign economies or securities
or financial markets in general that does not have a disproportionate effect on the Company and its Subsidiaries, taken as a whole,
(B) any change that generally affects the industry in which the Company and its Subsidiaries operate that does not have a
disproportionate effect on the Company and its Subsidiaries, taken as a whole, (C) any change arising in connection with earthquakes,
hostilities, acts of war, sabotage or terrorism or military actions or any escalation or material worsening of any such hostilities,
acts of war, sabotage or terrorism or military actions existing as of the date hereof, (D) any action taken by the Investor,
its affiliates or its or their successors and assigns with respect to the transactions contemplated by this Agreement, (E) the
effect of any change in applicable laws or accounting rules that does not have a disproportionate effect on the Company and its
Subsidiaries, taken as a whole, or (F) any change resulting from compliance with terms of this Agreement or the consummation
of the transactions contemplated by this Agreement, or (iii) the Company’s ability to perform in any material respect
on a timely basis its obligations under any Transaction Document to be performed as of the date of determination.
(k) “
Maturity
Date
” means the first day of the month immediately following the thirty six (36) month anniversary of the Commencement
Date.
(l) “
PEA
Period
” means the period commencing at 9:30 a.m., Eastern time, on the tenth (10
th
) Business Day immediately
prior to, and ending at 9:30 a.m., Eastern time, on the Business Day immediately following, the effective date of any post-effective
amendment to the Registration Statement or New Registration Statement (as such terms are defined in the Registration Rights Agreement).
(m) “
Person
”
means an individual or entity including but not limited to any limited liability company, a partnership, a joint venture, a corporation,
a trust, an unincorporated organization and a government or any department or agency thereof.
(n) “
Principal
Market
” means the OTC Bulletin Board (it being understood that as used herein “OTC Bulletin Board” shall
also mean any successor or comparable market quotation system or exchange to the OTC Bulletin Board such as the OTCQB operated
by the OTC Markets Group, Inc.); provided however, that in the event the Company’s Common Stock is ever listed or traded
on The NASDAQ Global Market, The NASDAQ Capital Market, The NASDAQ Global Select Market, the New York Stock Exchange, the NYSE
MKT or the NYSE Arca, then the “Principal Market” shall mean such other market or exchange on which the Company’s
Common Stock is then listed or traded.
(o) “
Purchase
Amount
” means, with respect to any particular Regular Purchase made hereunder, the portion of the Available Amount to
be purchased by the Investor pursuant to Section 2 hereof.
(p) “
Purchase
Date
” means with respect to any particular Regular Purchase made hereunder, the Business Day on which the Investor receives
by 4:30 P.M., Eastern time, of such Business Day a valid Regular Purchase Notice that the Investor is to buy Purchase Shares pursuant
to Section 2(a) hereof.
(q)
“
Purchase Price
” means the lower of (A) the lowest Sale Price of the Common Stock on the Purchase Date and (B)
the arithmetic average of the three (3) lowest Closing Sale Prices for the Common Stock during the twelve (12) consecutive Business
Days ending on the Business Day immediately preceding such Purchase Date (in each case, to be appropriately adjusted for any reorganization,
recapitalization, non-cash dividend, stock split or other similar transaction).
(r) “
Regular
Purchase Notice
” means, with respect to any Regular Purchase pursuant to Section 2(a) hereof, an irrevocable written
notice from the Company to the Investor directing the Investor to buy such applicable amount of Purchase Shares at the applicable
Purchase Price as specified by the Company therein on the Purchase Date.
(s) “
Sale
Price
” means any sale price for the shares of Common Stock on the Principal Market as reported by the Principal Market.
(t) “
SEC
”
means the U.S. Securities and Exchange Commission.
(u) “
Securities
”
means, collectively, the Purchase Shares and the Commitment Shares.
(v) “
Securities
Act
” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
(w) “
Subsidiary
”
means any Person the Company wholly-owns or controls, or in which the Company, directly or indirectly, owns a majority of the voting
stock or similar voting interest, in each case that would be disclosable pursuant to Item 601(b)(21) of Regulation S-K promulgated
under the Securities Act.
(x) “
Transaction
Documents
” means, collectively, this Agreement, the Registration Rights Agreement, the schedules and exhibits hereto
and thereto, and each of the other agreements, documents, certificates and instruments entered into or furnished by the parties
hereto in connection with the transactions contemplated hereby and thereby.
(y) “
Transfer
Agent
” means American Stock Transfer & Trust Company, or such other Person who is then serving as the transfer agent
for the Company in respect of the Common Stock.
2. PURCHASE OF COMMON STOCK.
Subject to the terms
and conditions set forth in this Agreement, the Company has the right to sell to the Investor, and the Investor has the obligation
to purchase from the Company, Purchase Shares as follows:
(a)
Commencement
of Regular Sales of Common Stock
. Upon the satisfaction of the conditions set forth in Sections 7 and 8 hereof (the “
Commencement
”
and the date of satisfaction of such conditions the “
Commencement Date
”), the Company shall have the right,
but not the obligation, to direct the Investor, by its delivery to the Investor of a Regular Purchase Notice from time to time,
to buy up to Eighty Thousand Dollars ($80,000.00) worth of Purchase Shares (each such purchase a “Regular Purchase”)
at the Purchase Price on the Purchase Date. The Regular Purchase Amount may be increased to up to One Hundred Fifty Thousand Dollars
($150,000.00) per Regular Purchase Notice if the Closing Sale Price of the Common Stock is not below $.125 (subject to equitable
adjustment for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction) on the Purchase
Date. The Regular Purchase Amount may be increased to up to Two Hundred Fifty Thousand Dollars ($250,000.00) per Regular Purchase
Notice if the Closing Sale Price of the Common Stock is not below $.175 (subject to equitable adjustment for any reorganization,
recapitalization, non-cash dividend, stock split or other similar transaction) on the Purchase Date. The Regular Purchase Amount
may be increased to up to Three Hundred Fifty Thousand ($350,000) per Regular Purchase Notice if the Closing Sale Price of the
Common Stock is not below $.25 (subject to equitable adjustment for any reorganization, recapitalization, non-cash dividend, stock
split or other similar transaction) on the Purchase Date. The Regular Purchase Amount may be increased to up to Five Hundred Thousand
($500,000) per Regular Purchase Notice if the Closing Sale Price of the Common Stock is not below $.40 (subject to equitable adjustment
for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction) on the Purchase Date. With
respect to each such Regular Purchase, the Company must deliver an instruction letter to the Company’s transfer agent requesting
delivery of the Purchase Shares on the Business Day following the Purchase Date. If on any Purchase Date the Closing Sale Price
of the Common Stock is below the Regular Purchase threshold price, such Regular Purchase shall automatically be reduced to the
next lowest applicable Regular Purchase Amount. If the Company delivers any Regular Purchase Notice for a Purchase Amount in excess
of the limitations contained in the immediately preceding sentence, such Regular Purchase Notice shall be void
ab initio
to the extent of the amount by which the Regular Purchase Amount set forth in such Regular Purchase Notice exceeds the Regular
Purchase Amount which the Company is permitted to include in such Purchase Notice in accordance herewith, and the Investor shall
have no obligation to purchase such excess Regular Purchase Amount in respect of such Regular Purchase Notice; provided that the
Investor shall remain obligated to purchase a Regular Purchase Amount which the Company is permitted to include in such Regular
Purchase Notice. The Company may deliver multiple Regular Purchase Notices to the Investor so long as at least two (2) Business
Days have passed since the most recent Regular Purchase was completed. Notwithstanding the foregoing, the Company shall not deliver
any Regular Purchase Notices during the PEA Period.
(b)
Payment
for Purchase Shares.
For each Regular Purchase, the Investor shall pay to the Company an amount equal to the Purchase Amount
with respect to such Regular Purchase as full payment for such Purchase Shares via wire transfer of immediately available funds
on the same Business Day that the Investor receives such Purchase Shares if they are received by the Investor before 1:00 p.m.,
Eastern time, or if received by the Investor after 1:00 p.m., Eastern time, the next Business Day. The Company shall not issue
any fraction of a share of Common Stock upon any purchase. If the issuance would result in the issuance of a fraction of a share
of Common Stock, the Company shall round such fraction of a share of Common Stock up or down to the nearest whole share. All payments
made under this Agreement shall be made in lawful money of the United States of America or wire transfer of immediately available
funds to such account as the Company may from time to time designate by written notice in accordance with the provisions of this
Agreement. Whenever any amount expressed to be due by the terms of this Agreement is due on any day that is not a Business Day,
the same shall instead be due on the next succeeding day that is a Business Day.
(c)
Purchase
Price Floor.
The Company and the Investor shall not effect any purchases under this Agreement on any Purchase Date that the
Closing Sale Price is less than the Floor Price. "
Floor Price
" means $.07, which shall be appropriately adjusted
for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction and, effective upon the consummation
of any such reorganization, recapitalization, non-cash dividend, stock split or other similar transaction, the Floor Price shall
mean the
lower
of (i) the adjusted price and (ii) $1.00.
(e)
Beneficial
Ownership Limitation.
Notwithstanding anything to the contrary contained in this Agreement, the Company shall not issue
or sell, and the Investor shall not purchase or acquire, any shares of Common Stock under this Agreement which, when
aggregated with all other shares of Common Stock then beneficially owned by the Investor and its affiliates (as calculated pursuant
to Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder) would result in the beneficial ownership by the Investor
and its affiliates of more than 9.99% of the then issued and outstanding shares of Common Stock (the “
Beneficial
Ownership Limitation
”). Upon the written or oral request of the Investor, the Company shall promptly (but not later than
one (1) Business Day) confirm orally or in writing to the Investor the number of shares of Common Stock then outstanding. The Investor
and the Company shall each cooperate in good faith in the determinations required hereby and the application hereof. The Investor’s
written certification to the Company of the applicability of the Beneficial Ownership Limitation, and the resulting effect thereof
hereunder at any time, shall be conclusive with respect to the applicability thereof and such result absent manifest error.
3. INVESTOR'S
REPRESENTATIONS AND WARRANTIES.
The Investor represents
and warrants to the Company that as of the date hereof and as of the Commencement Date:
(a)
Investment
Purpose
. The Investor is acquiring the Securities as principal for its own account and not with a view to or for distributing
or reselling such Securities or any part thereof in violation of the Securities Act or any applicable state securities law, has
no present intention of distributing any of such Securities in violation of the Securities Act or any applicable state securities
law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution
of such Securities in violation of the Securities Act or any applicable state securities law (this representation and warranty
not limiting the Investor’s right to sell the Securities at any time pursuant to the registration statement described herein
or otherwise in compliance with applicable federal and state securities laws and with respect to the Commitment Shares (as defined
below in Section 5(e)), subject to Section 5(e) hereof). The Investor is acquiring the Securities hereunder in the ordinary
course of its business.
(b)
Accredited
Investor Status
. The Investor is an "accredited investor" as that term is defined in Rule 501(a)(3) of Regulation
D promulgated under the Securities Act.
(c)
Reliance
on Exemptions
. The Investor understands that the Securities may be offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon
the truth and accuracy of, and the Investor's compliance with, the representations, warranties, agreements, acknowledgments and
understandings of the Investor set forth herein in order to determine the availability of such exemptions and the eligibility of
the Investor to acquire the Securities.
(d)
Information
.
The Investor understands that its investment in the Securities involves a high degree of risk. The Investor (i) is able to bear
the economic risk of an investment in the Securities including a total loss thereof, (ii) has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and risks of the proposed investment in the Securities
and (iii) has had an opportunity to ask questions of and receive answers from the officers of the Company concerning the financial
condition and business of the Company and others matters related to an investment in the Securities. Neither such inquiries nor
any other due diligence investigations conducted by the Investor or its representatives shall modify, amend or affect the Investor's
right to rely on the Company's representations and warranties contained in Section 4 below. The Investor has sought such accounting,
legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of
the Securities.
(e)
No
Governmental Review
. The Investor understands that no U.S. federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of an investment
in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.
(f)
Transfer
or Sale
. The Investor understands that (i) the Securities may not be offered for sale, sold, assigned or transferred unless
(A) registered pursuant to the Securities Act or (B) an exemption exists permitting such Securities to be sold, assigned or transferred
without such registration; (ii) any sale of the Securities made in reliance on Rule 144 may be made only in accordance with the
terms of Rule 144 and further, if Rule 144 is not applicable, any resale of the Securities under circumstances in which the seller
(or the Person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the Securities Act)
may require compliance with some other exemption under the Securities Act or the rules and regulations of the SEC thereunder.
(g)
Validity;
Enforcement
. This Agreement has been duly and validly authorized, executed and delivered on behalf of the Investor and is a
valid and binding agreement of the Investor enforceable against the Investor in accordance with its terms, subject as to enforceability
to general principles of equity and to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar
laws relating to, or affecting generally, the enforcement of applicable creditors' rights and remedies.
(h)
Residency
.
The Investor is a resident of the State of Illinois.
(i)
No
Short Selling
. The Investor represents and warrants to the Company that at no time prior to the date of this Agreement has
any of the Investor, its agents, representatives or affiliates engaged in or effected, in any manner whatsoever, directly or indirectly,
any (i) "short sale" (as such term is defined in Rule 200 of Regulation SHO of the Exchange Act) of the Common Stock
or (ii) hedging transaction, which establishes a net short position with respect to the Common Stock.
4. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
The Company represents
and warrants to the Investor that as of the date hereof and as of the Commencement Date:
(a)
Organization
and Qualification
. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite corporate
power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither
the Company nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of
formation or incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries
is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure
to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in a Material Adverse
Effect, and no proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit
or curtail such power and authority or qualification. The Company has no Subsidiaries except as set forth on
Schedule 4(a)
.
(b)
Authorization;
Enforcement; Validity
. (i) The Company has the requisite corporate power and authority to enter into and perform its obligations
under this Agreement, the Registration Rights Agreement and each of the other Transaction Documents, and to issue the Securities
in accordance with the terms hereof and thereof, (ii) the execution and delivery of the Transaction Documents by the Company and
the consummation by it of the transactions contemplated hereby and thereby, including without limitation, the issuance of the Commitment
Shares and the reservation for issuance and the issuance of the Purchase Shares issuable under this Agreement, have been duly authorized
by the Company's Board of Directors and no further consent or authorization is required by the Company, its Board of Directors
or its shareholders, (iii) this Agreement has been, and each other Transaction Document shall be on the Commencement Date, duly
executed and delivered by the Company and (iv) this Agreement constitutes, and each other Transaction Document upon its execution
on behalf of the Company, shall constitute, the valid and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors'
rights and remedies. The Board of Directors of the Company has approved the resolutions (the “
Signing Resolutions
”)
substantially in the form as set forth as
Exhibit C
attached hereto to authorize this Agreement and the transactions contemplated
hereby. The Signing Resolutions are valid, in full force and effect and have not been modified or supplemented in any respect.
The Company has delivered to the Investor a true and correct copy of such resolutions adopting the Signing Resolutions executed
by all of the members of the Board of Directors of the Company. Except as set forth in this Agreement, no other approvals or consents
of the Company’s Board of Directors and/or shareholders is necessary under applicable laws and the Company’s Articles
of Incorporation and/or By-laws to authorize the execution and delivery of this Agreement or any of the transactions contemplated
hereby, including, but not limited to, the issuance of the Commitment Shares and the issuance of the Purchase Shares.
(c)
Capitalization
.
As of the date hereof, the authorized capital stock of the Company is set forth on
Schedule 4(c).
Except as disclosed in
Schedule 4(c)
, (i) no shares of the Company's capital stock are subject to preemptive rights or any other similar rights
or any liens or encumbrances suffered or permitted by the Company, (ii) there are no outstanding debt securities, (iii) there are
no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional
shares of capital stock of the Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, (iv) there are no agreements or arrangements under which the Company or any of its Subsidiaries
is obligated to register the sale of any of their securities under the Securities Act (except the Registration Rights Agreement),
(v) there are no outstanding securities or instruments of the Company or any of its Subsidiaries which contain any redemption or
similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries, (vi) there are no securities
or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Securities as described
in this Agreement and (vii) the Company does not have any stock appreciation rights or "phantom stock" plans or agreements
or any similar plan or agreement. The Company has furnished to the Investor true and correct copies of the Company's Articles of
Incorporation, as amended and as in effect on the date hereof (the “
Articles of Incorporation
”), and the Company's
By-laws, as amended and as in effect on the date hereof (the "
By-laws
"), and summaries of the terms of all securities
convertible into or exercisable for Common Stock, if any, and copies of any documents containing the material rights of the holders
thereof in respect thereto.
(d)
Issuance
of Securities
. Upon issuance and payment thereof in accordance with the terms and conditions of this Agreement, the Purchase
Shares shall be validly issued, fully paid and nonassessable and free from all taxes, liens, charges, restrictions, rights of first
refusal and preemptive rights with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder
of Common Stock. 75,000,000 shares of Common Stock have been duly authorized and reserved for issuance upon purchase under this
Agreement as Purchase Shares. 2,929,115 shares of Common Stock (subject to equitable adjustment for any reorganization, recapitalization,
non-cash dividend, stock split or other similar transaction) have been duly authorized and reserved for issuance as Initial Commitment
Shares (as defined below in Section 5(e)) in accordance with this Agreement. The Initial Commitment Shares shall be validly issued,
fully paid and nonassessable and free from all taxes, liens, charges, restrictions, rights of first refusal and preemptive rights
with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock. 2,929,115
shares of Common Stock (subject to equitable adjustment for any reorganization, recapitalization, non-cash dividend, stock split
or other similar transaction) have been duly authorized and reserved for issuance as Additional Commitment Shares (as defined below
in Section 5(e)) in accordance with this Agreement. When issued in accordance with this Agreement, the Additional Commitment Shares
shall be validly issued, fully paid and nonassessable and free from all taxes, liens, charges, restrictions, rights of first refusal
and preemptive rights with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of
Common Stock.
(e)
No
Conflicts
. Except as disclosed in
Schedule 4(e)
, the execution, delivery and performance of the Transaction Documents
by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation,
the reservation for issuance and issuance of the Purchase Shares and the Commitment Shares) will not (i) result in a violation
of the Articles of Incorporation, any Certificate of Designations, Preferences and Rights of any outstanding series of preferred
stock of the Company or the By-laws or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time
or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party, or result in a violation of
any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and the rules
and regulations of the Principal Market applicable to the Company or any of its Subsidiaries) or by which any property or asset
of the Company or any of its Subsidiaries is bound or affected, except in the case of conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations under clause (ii), which could not reasonably be expected to result in a Material Adverse
Effect. Except as disclosed in
Schedule 4(e)
, neither the Company nor its Subsidiaries is in violation of any term of or
in default under its Articles of Incorporation, any Certificate of Designation, Preferences and Rights of any outstanding series
of preferred stock of the Company or By-laws or their organizational charter or by-laws, respectively. Except as disclosed in
Schedule
4(e)
, neither the Company nor any of its Subsidiaries is in violation of any term of or is in default under any material contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or order or any statute, rule or regulation applicable
to the Company or its Subsidiaries, except for possible conflicts, defaults, terminations or amendments which could not reasonably
be expected to have a Material Adverse Effect. The business of the Company and its Subsidiaries is not being conducted, and shall
not be conducted, in violation of any law, ordinance, regulation of any governmental entity, except for possible violations, the
sanctions for which either individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect.
Except as specifically contemplated by this Agreement and as required under the Securities Act or applicable state securities laws
and the rules and regulations of the Principal Market, the Company is not required to obtain any consent, authorization or order
of, or make any filing or registration with, any court or governmental agency or any regulatory or self-regulatory agency in order
for it to execute, deliver or perform any of its obligations under or contemplated by the Transaction Documents in accordance with
the terms hereof or thereof. Except as disclosed in
Schedule 4(e
) and set forth elsewhere in this agreement, all consents,
authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence shall
be obtained or effected on or prior to the Commencement Date. Except as listed in
Schedule 4(e)
, since one year prior to
the date hereof, the Company has not received nor delivered any notices or correspondence from or to the Principal Market. The
Principal Market has not commenced any delisting proceedings against the Company.
(f)
SEC
Documents; Financial Statements
. Except as disclosed in
Schedule 4(f)
the
Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities
Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or
such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including
the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “
SEC
Documents
”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Documents
prior to the expiration of any such extension. As of their respective dates and to the best of the Company’s knowledge,
the SEC Documents complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable.
None of the SEC Documents, when filed, contained any untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the SEC Documents comply in all material respects with
applicable accounting requirements and the rules and regulations of the SEC with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a
consistent basis during the periods involved (“
GAAP
”), except as may be otherwise specified in such financial
statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP,
and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for
the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements,
to normal, immaterial, year-end audit adjustments. Except as listed in
Schedule 4(f)
, the Company has received no notices
or correspondence from the SEC for the one year preceding the date hereof
.
The SEC has not commenced any enforcement proceedings
against the Company or any of its subsidiaries.
(g)
Absence
of Certain Changes
. Except as disclosed in
Schedule 4(g)
, since December 31, 2012, there has been no material adverse
change in the business, properties, operations, financial condition or results of operations of the Company or its Subsidiaries.
The Company has not taken any steps, and does not currently expect to take any steps, to seek protection pursuant to any Bankruptcy
Law nor does the Company or any of its Subsidiaries have any knowledge or reason to believe that its creditors intend to initiate
involuntary bankruptcy
or insolvency proceedings. The Company is financially solvent and is generally able to pay its debts
as they become due
.
(h)
Absence
of Litigation
. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its Subsidiaries, threatened
against or affecting the Company, the Common Stock or any of the Company's Subsidiaries or any of the Company's or the Company's
Subsidiaries' officers or directors in their capacities as such, which could reasonably be expected to have a Material Adverse
Effect. A description of each action, suit, proceeding, inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body which, as of the date of this Agreement, is pending or threatened in writing against
or affecting the Company, the Common Stock or any of the Company's Subsidiaries or any of the Company's or the Company's Subsidiaries'
officers or directors in their capacities as such, is set forth in
Schedule 4(h)
.
(i)
Acknowledgment
Regarding Investor's Status
. The Company acknowledges and agrees that the Investor is acting solely in the capacity of arm's
length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby. The Company further
acknowledges that the Investor is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with
respect to the Transaction Documents and the transactions contemplated hereby and thereby and any advice given by the Investor
or any of its representatives or agents in connection with the Transaction Documents and the transactions contemplated hereby and
thereby is merely incidental to the Investor's purchase of the Securities. The Company further represents to the Investor that
the Company's decision to enter into the Transaction Documents has been based solely on the independent evaluation by the Company
and its representatives and advisors.
(j)
No
General Solicitation; No Integrated Offering
. Neither the Company, nor any of its affiliates, nor any person acting on its
or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under
the Securities Act) in connection with the offer or sale of the Securities. Neither the Company, nor any of its affiliates, nor
any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any
offers to buy any security, under circumstances that would cause this offering of the Securities to be integrated with prior offerings
by the Company in a manner that would require stockholder approval pursuant to the rules of the Principal Market on which any of
the securities of the Company are listed or designated. The issuance and sale of the Securities hereunder does not contravene the
rules and regulations of the Principal Market.
(k)
Intellectual
Property Rights
. Except as set forth on
Schedule 4(k),
the Company and its Subsidiaries own or possess adequate rights
or licenses to use all material trademarks, trade names, service marks, service mark registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct
their respective businesses as now conducted. Except as set forth on
Schedule 4(k)
, none of the Company's material trademarks,
trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses,
approvals, government authorizations, trade secrets or other intellectual property rights have expired or terminated, or, by the
terms and conditions thereof, could expire or terminate within two years from the date of this Agreement. Except as set forth on
Schedule 4(k),
the Company and its Subsidiaries do not have any knowledge of any infringement by the Company or its Subsidiaries
of any material trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service
marks, service mark registrations, trade secret or other similar rights of others, or of any such development of similar or identical
trade secrets or technical information by others and, except as set forth on
Schedule 4(k)
, there is no claim, action or
proceeding being made or brought against, or to the Company's knowledge, being threatened against, the Company or its Subsidiaries
regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks, service mark
registrations, trade secret or other infringement, which could reasonably be expected to have a Material Adverse Effect.
(l)
Environmental
Laws
. The Company and its Subsidiaries, to the best of the Company’s knowledge, (i) are in compliance with any and all
applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment
or hazardous or toxic substances or wastes, pollutants or contaminants (“
Environmental Laws
”), (ii) have received
all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses
and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except where, in each of the
three foregoing clauses, the failure to so comply could not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
(m)
Title
.
The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them and good and marketable
title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case
free and clear of all liens, encumbrances and defects (“
Liens
”), except for Liens on the Company’s facility
pursuant to the NJ Economic Development Authority Bonds, Liens as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and Liens for
the payment of federal, state or other taxes, the payment of which is neither delinquent nor subject to penalties. Any
real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and
enforceable leases with which the Company and the Subsidiaries are in compliance with such exceptions as are not material and do
not interfere with the use made and proposed to be made of such property and buildings by the Company and its Subsidiaries.
(n)
Insurance
.
The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and
risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company
and its Subsidiaries are engaged. Except as set forth on Schedule 4(n), neither the Company nor any such Subsidiary has been refused
any insurance coverage sought or applied for and neither the Company nor any such Subsidiary has any reason to believe that it
will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company and its Subsidiaries, taken as a whole.
(o)
Regulatory
Permits
. The Company and its Subsidiaries possess all material certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their respective businesses, and neither the Company nor
any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate,
authorization or permit.
(p)
Tax
Status
. The Company and each of its Subsidiaries has made or filed all federal and state income and all other material tax
returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company
and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported
taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to
be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the
officers of the Company know of no basis for any such claim.
(q)
Transactions
With Affiliates
.
Except as set forth in the SEC Documents,
none of the officers or directors of the Company and, to the knowledge of the Company, none of the employees of the Company is
presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental
of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or,
to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of $120,000 other than for (i) payment of salary or consulting
fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) other employee benefits,
including stock option agreements under any stock option plan of the Company.
(r)
Application
of Takeover Protections
. The Company and its board of directors have taken or will take prior to the Commencement Date all
necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including
any distribution under a rights agreement) or other similar anti-takeover provision under the Articles of Incorporation or the
laws of the state of its incorporation which is or could become applicable to the Investor as a result of the transactions contemplated
by this Agreement, including, without limitation, the Company's issuance of the Securities and the Investor's ownership of the
Securities.
(s)
Disclosure
. Except
with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents that will be timely
publicly disclosed by the Company, the Company confirms that neither it nor any other Person acting on its behalf has provided
the Investor or its agents or counsel with any information that it believes constitutes or might constitute material, non-public
information which is not otherwise disclosed in the Registration Statement or the SEC Documents. The Company understands
and confirms that the Investor will rely on the foregoing representation in effecting purchases and sales of securities of the
Company. All of the disclosure furnished by or on behalf of the Company to the Investor regarding the Company, its business
and the transactions contemplated hereby, including the disclosure schedules to this Agreement, is true and correct and does not
contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not misleading. The press releases disseminated by the Company
during the twelve months preceding the date of this Agreement taken as a whole do not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made and when made, not misleading. The Company acknowledges and agrees that
the Investor neither makes nor has made any representations or warranties with respect to the transactions contemplated hereby
other than those specifically set forth in Section 3 hereof.
(t)
Foreign
Corrupt Practices
.
Neither the Company, nor to the knowledge
of the Company, any agent or other Person acting on behalf of the Company, has (i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns
from corporate funds, (iii) failed to disclose fully any contribution made by the Company (or made by any Person acting on its
behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of the
Foreign Corrupt Practices Act of 1977, as amended.
(u)
DTC
Eligible
. The Company, through the Transfer Agent, currently participates in the DTC Fast Automated Securities Transfer (FAST)
Program and the Common Stock can be transferred electronically to third parties via the DTC Fast Automated Securities Transfer
(FAST) Program.
(v)
Sarbanes-Oxley
.
The Company is in material compliance with all provisions of the Sarbanes-Oxley Act of 2002, as amended, which are applicable to
it as of the date hereof, except where the failure to be in compliance is not reasonably likely to result in a Material Adverse
Effect.
(w)
Certain
Fees
. Except as disclosed on
Schedule 4(w)
, no brokerage or finder’s fees or commissions are or will be payable
by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person
with respect to the transactions contemplated by the Transaction Documents. Except as disclosed on
Schedule 4(w)
, the Investor
shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees
of a type contemplated in this
Section 4(w)
that may be due in connection with the transactions contemplated by the Transaction
Documents.
(x)
Investment
Company
. The Company is not, and immediately after receipt of payment for the Securities will not be, an “investment
company” within the meaning of the Investment Company Act of 1940, as amended.
(y)
Listing
and Maintenance Requirements
. The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and
the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration
of the Common Stock pursuant to the Exchange Act nor has the Company received any notification that the SEC is currently contemplating
terminating such registration. Except as set forth on
Schedule 4(e)
: (i) the Company has not, in the twelve (12) months
preceding the date hereof, received any notice from any Person to the effect that the Company is not in compliance with the listing
or maintenance requirements of the Principal Market; and (ii) the Company is, and has no reason to believe that it will not in
the foreseeable future continue to be, in compliance with all such listing and maintenance requirements.
(z)
Accountants
.
The Company’s accountants are set forth in the SEC Documents and, to the knowledge of the Company, such accountants are an
independent registered public accounting firm as required by the Securities Act.
(aa)
Regulation
M Compliance
. The Company has not, and to its knowledge no Person acting on its behalf has, (i) taken, directly or
indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or, paid any compensation
for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any Person any compensation for soliciting
another to purchase any other securities of the Company.
(bb)
Shell
Company Status
. The Company is not currently, and within the past three years has not been, an issuer identified in Rule 144(i)(1)
under the Securities Act.
5. COVENANTS.
(a)
Filing
of Form 8-K and Registration Statement
. The Company agrees that it shall, within the time required under the Exchange Act file
a Report on Form 8-K disclosing this Agreement and the transaction contemplated hereby. The Company shall also file within thirty
(30) days from the date hereof a new registration statement (the “
Registration Statement
”) covering only the
sale of the Purchase Shares and the Commitment Shares, in accordance with the terms of the Registration Rights Agreement between
the Company and the Investor, dated as of the date hereof (“
Registration Rights Agreement
”). The Company shall
permit the Investor to review and comment upon the Current Report at least two (2) Business Days prior to its filing with the SEC,
the Company shall give due consideration to all such comments, and the Company shall not file the Current Report with the SEC in
a form to which the Investor reasonably objects. The Investor shall use its reasonable best efforts to comment upon the Current
Report within one (1) Business Day from the date the Investor receives the final pre-filing draft version thereof from the Company.
(b)
Blue
Sky
. The Company shall take such action, if any, as is reasonably necessary in order to obtain an exemption for or to qualify
(i) the issuance of the Commitment Shares and the sale of the Purchase Shares to the Investor under this Agreement and (ii) any
subsequent resale of the Commitment Shares and all Purchase Shares by the Investor, in each case, under applicable securities or
“Blue Sky” laws of the states of the United States in such states as is reasonably requested by the Investor from time
to time, and shall provide evidence of any such action so taken to the Investor.
(c)
Listing/DTC
.
The Company shall promptly secure the listing of all of the Purchase Shares and Commitment Shares to be issued to the Investor
hereunder on the Principal Market (subject to official notice of issuance). The Company shall use reasonable best efforts to maintain,
so long as any shares of Common Stock shall be listed on the Principal Market, such listing of all such Securities from time to
time issuable hereunder. The Company shall use commercially reasonable efforts to maintain the listing of the Common Stock on the
Principal Market and shall comply in all respects with the Company’s reporting, filing and other obligations under the bylaws
or rules and regulations of the Principal Market. Neither the Company nor any of its Subsidiaries shall take any action that would
reasonably be expected to result in the delisting or suspension of the Common Stock on the Principal Market. The Company shall
promptly, and in no event later than the following Business Day, provide to the Investor copies of any notices it receives from
the Principal Market regarding the continued eligibility of the Common Stock for listing on the Principal Market; provided, however,
that the Company shall not be required to provide the Investor copies of any such notice that the Company reasonably believes constitutes
material non-public information and the Company would not be required to publicly disclose such notice in any report or statement
filed with the SEC under the Exchange Act (including on Form 8-K) or the Securities Act. The Company shall pay all fees and expenses
in connection with satisfying its obligations under this Section. The Company shall take all action necessary to ensure that its
Common Stock can be transferred electronically as DWAC Shares.
(d)
Limitation
on Short Sales and Hedging Transactions
. The Investor agrees that beginning on the date of this Agreement and ending on the
date of termination of this Agreement as provided in Section 11, the Investor and its agents, representatives and affiliates shall
not in any manner whatsoever enter into or effect, directly or indirectly, any (i) "short sale" (as such term is defined
in Rule 200 of Regulation SHO of the Exchange Act) of the Common Stock or (ii) hedging transaction, which establishes a net short
position with respect to the Common Stock.
(e)
Issuance
of Commitment Shares
. In consideration for the Investor’s execution and delivery of this Agreement, the Company shall
cause the Transfer Agent to issue, on the date of this Agreement, 2,929,115 shares of Common Stock (the “
Initial Commitment
Shares
”) directly to the Investor and shall deliver to the Transfer Agent the Irrevocable Transfer Agent Instructions
with respect to the issuance of the Initial Commitment Shares in the form as set forth in Exhibit E attached hereto. For the avoidance
of doubt, all of the Initial Commitment Shares shall be fully earned as of the date of this Agreement, whether or not the Commencement
shall occur or any Purchase Shares are purchased by the Investor under this Agreement and irrespective of any termination of this
Agreement. In connection with each Regular Purchase hereunder, the Company shall issue to the Investor a number of shares of Common
Stock (the “
Additional Commitment Shares
” and, together with the Initial Commitment Shares, the “
Commitment
Shares
”) equal to the product of (x) 2,929,115 and (y) the Purchase Amount Fraction. The “
Purchase Amount Fraction
”
shall mean a fraction, the numerator of which is the Purchase Amount purchased by the Investor with respect to such Regular Purchase
of Purchase Shares and the denominator of which is Ten Million Dollars ($10,000,000). The Additional Commitment Shares shall be
issued to the Investor on the same Business Day as Purchase Shares are issued to the Investor in connection with the applicable
Regular Purchase in accordance with Section 2(c). In no event shall the amount of the Additional Commitment Shares to be issued
under this Agreement exceed 2,929,115 shares of Common Stock, provided that such Additional Commitment Shares shall be equitably
adjusted for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction.
(f)
Due
Diligence; Non-Public Information
. The Investor shall have the right, from time to time as the Investor may reasonably deem
appropriate, to perform reasonable due diligence on the Company during normal business hours. The Company and its officers and
employees shall provide information and reasonably cooperate with the Investor in connection with any reasonable request by the
Investor related to the Investor's due diligence of the Company. Each party hereto agrees not to disclose any Confidential Information
of the other party to any third party and shall not use the Confidential Information for any purpose other than in connection with,
or in furtherance of, the transactions contemplated hereby. Each party hereto acknowledges that the Confidential Information shall
remain the property of the disclosing party and agrees that it shall take all reasonable measures to protect the secrecy of any
Confidential Information disclosed by the other party. The Company confirms that neither it nor any other Person acting on its
behalf shall provide the Investor or its agents or counsel with any information that constitutes or might constitute material,
non-public information, unless a simultaneous public announcement thereof is made by the Company in the manner contemplated by
Regulation FD. In the event of a breach of the foregoing covenant by the Company or any Person acting on its behalf (as determined
in the reasonable good faith judgment of the Investor), in addition to any other remedy provided herein or in the other Transaction
Documents, the Investor shall have the right to make a public disclosure, in the form of a press release, public advertisement
or otherwise, of such material, non-public information without the prior approval by the Company; provided the Investor shall have
first provided notice to the Company that it believes it has received information that constitutes material, non-public information
and the Company shall have at least 24 hours to respond to such notice, and thereafter the Investor shall have provided a draft
final version of such press release, public advertisement or otherwise at least 24 hours prior to the Investor’s intended
public disclosure, and the Investor shall have incorporated any reasonable comments made by the Company on such draft press release,
and the Company shall have failed to publicly disclose such material, non-public information prior to such disclosure by the Investor.
The Investor shall not have any liability to the Company, any of its Subsidiaries, or any of their respective directors, officers,
employees, stockholders or agents, for any such disclosure. The Company understands and confirms that the Investor shall be relying
on the foregoing covenants in effecting transactions in securities of the Company.
(g)
Purchase
Records
. The Investor and the Company shall each maintain records showing the remaining Available Amount at any given time
and the dates and Purchase Amounts for each purchase or shall use such other method, reasonably satisfactory to the Investor and
the Company.
(h)
Taxes.
The Company shall pay any and all transfer, stamp or similar taxes
that may be payable with respect to the issuance and delivery of any shares of Common Stock to the Investor made under this Agreement.
(i)
Use
of Proceeds
. The Company will use the net proceeds from the offering as described in the Registration Statement or the SEC
Documents.
(j)
Other
Transactions
. The Company shall not enter into, announce or recommend to its stockholders any agreement, plan, arrangement
or transaction in or of which the terms thereof would restrict, materially delay, conflict with or impair the ability or right
of the Company to perform its obligations under the Transaction Documents, including, without limitation, the obligation of the
Company to deliver the Purchase Shares and the Commitment Shares to the Investor in accordance with the terms of the Transaction
Documents.
(k)
No Variable Rate Transactions.
From the date hereof until 18 months from the date hereof, the Company shall be prohibited
from effecting or entering into an agreement to effect any issuance by the Company or any of its Subsidiaries of shares of Common
Stock or Common Stock Equivalents for cash consideration (or a combination of units thereof) involving a Variable Rate Transaction,
provided that the Company shall be permitted to effect an Exempt Issuance. “
Common Stock Equivalents
”
means any securities of the Company or its Subsidiaries which entitle the holder thereof to acquire at any time shares of Common
Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time
convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, shares of Common Stock.
“
Variable Rate Transaction
” means a transaction in which the Company enters into, or issues securities under,
any “at-the-market” or similar agreement, including, but not limited to, an equity line of credit (other than any transaction
between the Company and the Investor), whereby the Company may sell securities at a future determined price. “
Exempt Issuance
”
means the issuance of (a) shares of Common Stock or options to employees, officers, directors or vendors of the Company pursuant
to any stock or option plan duly adopted for such purpose, by the Board of Directors or a majority of the members of a committee
of directors established for such purpose, (b) securities upon the exercise or exchange of or conversion of any Securities issued
hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding
on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase
the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities and (c)
securities issued pursuant to acquisitions or strategic transactions approved by the directors of the Company, which acquisitions
or strategic transactions can have a Variable Rate Transaction component, provided that any such issuance shall only
be to a Person (or to the equity holders of a Person) which is, itself or through its subsidiaries, an operating company or an
asset in a business synergistic with the business of the Company and shall provide to the Company additional benefits in addition
to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose
of raising capital or to an entity whose primary business is investing in securities.
(l)
Integration
.
From and after the date of this Agreement, the Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate
in respect of any security (as defined in Section 2 of the Securities Act) of the Company that would be integrated with the
offer or sale of the Securities such that the rules or regulations of the Principal Market would require stockholder approval of
this transaction prior to the closing of such other transaction unless stockholder approval is obtained before the closing of such
subsequent transaction.
6. TRANSFER
AGENT INSTRUCTIONS.
(a)
On the date of this Agreement, the Company shall issue irrevocable instructions to the Transfer Agent substantially in the
form attached hereto as
Exhibit E
to issue the Initial Commitment Shares in accordance with the terms of this Agreement
(the “
Initial Irrevocable Transfer Agent Instructions
”). The certificate(s) representing the Initial Commitment
Shares, except as set forth below, shall bear the following restrictive legend (the “
Restrictive Legend
”):
THE SECURITIES REPRESENTED
BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.
THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, UNLESS SOLD PURSUANT TO: (1) RULE 144 UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (2) AN OPINION OF HOLDER’S COUNSEL,
IN A CUSTOMARY FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.
(b) On
the earlier of (i) the Commencement Date and (ii) such time that the Investor shall request, provided all conditions of Rule 144
under the Securities Act are met, the Company shall, no later than one (1) Business Day following the delivery by the Investor
to the Company or the Transfer Agent of one or more legended certificates representing the Initial Commitment Shares (which certificates
the Investor shall promptly deliver on or prior to the first to occur of the events described in clauses (i) and (ii) of this sentence),
as directed by the Investor, issue and deliver (or cause to be issued and delivered) to the Investor, as requested by the Investor,
either: (A) a certificate representing such Initial Commitment Shares that is free from all restrictive and other legends or (B)
a number of shares of Common Stock equal to the number of Initial Commitment Shares represented by the certificate(s) so delivered
by the Investor as DWAC Shares. The Company shall take all actions to carry out the intent and accomplish the purposes of the immediately
preceding sentence, including, without limitation, delivering all such legal opinions, consents, certificates, resolutions and
instructions to the Transfer Agent, and any successor transfer agent of the Company, as may be requested from time to time by the
Investor or necessary or desirable to carry out the intent and accomplish the purposes of the immediately preceding sentence. On
the Commencement Date, the Company shall issue to the Transfer Agent, and any subsequent transfer agent, (i) irrevocable instructions
in the form substantially similar to those used by the Investor in substantially similar transactions (the “
Commencement
Irrevocable Transfer Agent Instructions
”) and (ii) the notice of effectiveness of the Registration Statement in the form
attached as an exhibit to the Registration Rights Agreement (the “
Notice of Effectiveness of Registration Statement
”),
in each case to issue the Commitment Shares and the Purchase Shares in accordance with the terms of this Agreement and the Registration
Rights Agreement. All Purchase Shares and Commitment Shares to be issued from and after Commencement to or for the benefit of the
Investor pursuant to this Agreement shall be issued only as DWAC Shares. The Company represents and warrants to the Investor that,
while this Agreement is effective, no instruction other than the Commencement Irrevocable Transfer Agent Instructions and the Notice
of Effectiveness of Registration Statement referred to in this
Section 6(b)
will be given by the Company to the Transfer
Agent with respect to the Commitment Shares or the Purchase Shares from and after Commencement, and the Commitment Shares and the
Purchase Shares shall otherwise be freely transferable on the books and records of the Company. The Company agrees that if the
Company fails to fully comply with the provisions of this
Section 6(b)
within five (5) Business Days of the Investor providing
the deliveries referred to above, the Company shall, at the Investor’s written instruction, purchase such shares of Common
Stock containing the Restrictive Legend from the Investor at the greater of the (i) Purchase Price paid for such shares of Common
Stock (as applicable) and (ii) the Closing Sale Price of the Common Stock on the date of the Investor’s written instruction.
7. CONDITIONS
TO THE COMPANY'S RIGHT TO COMMENCE SALES OF SHARES OF COMMON STOCK.
The right of the Company
hereunder to commence sales of the Purchase Shares on the Commencement Date is subject to the satisfaction of each of the following
conditions:
(a) The
Investor shall have executed each of the Transaction Documents and delivered the same to the Company;
(b) A
registration statement covering the sale of a portion of the Commitment Shares
and Purchase Shares shall have been declared
effective under the Securities Act by the SEC and no stop order with respect to the Registration Statement shall be pending or
threatened by the SEC; and
(c) The
representations and warranties of the Investor shall be true and correct in all material respects as of the date hereof and as
of the Commencement Date as though made at that time.
8. CONDITIONS
TO THE INVESTOR'S OBLIGATION TO PURCHASE SHARES OF COMMON STOCK.
The obligation of the
Investor to buy Purchase Shares under this Agreement is subject to the satisfaction of each of the following conditions on or prior
to the Commencement Date and, once such conditions have been initially satisfied, there shall not be any ongoing obligation to
satisfy such conditions after the Commencement has occurred:
(a) The
Company shall have executed each of the Transaction Documents and delivered the same to the Investor;
(b) The
Company shall have issued or caused to be issued to the Investor (i) one or more certificates representing the Initial Commitment
Shares free from all restrictive and other legends or (ii) a number of shares of common stock equal to the number of Initial Commitment
Shares as DWAC Shares, in each case in accordance with Section 6(b);
(c) The
Common Stock shall be listed on the Principal Market, trading in the Common Stock shall not have been within the last 365 days
suspended by the SEC or the Principal Market and all Securities to be issued by the Company to the Investor pursuant to this Agreement
shall have been approved for listing on the Principal Market in accordance with the applicable rules and regulations of the Principal
Market, subject only to official notice of issuance;
(d) The
Investor shall have received the opinion of the Company's legal counsel dated as of the Commencement Date substantially in the
form agreed to prior to the date of this Agreement by the Company’s legal counsel and the Investor’s legal counsel
generally in the form attached hereto as
Exhibit A
;
(e) The
representations and warranties of the Company shall be true and correct in all material respects (except to the extent that any
of such representations and warranties is already qualified as to materiality in Section 4 above, in which case, such representations
and warranties shall be true and correct without further qualification) as of the date when made and as of the Commencement Date
as though made at that time (except for representations and warranties that speak as of a specific date) and the Company shall
have performed, satisfied and complied with the covenants, agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by the Company at or prior to the Commencement Date. The Investor shall have received a certificate,
executed by the CEO, President or CFO of the Company, dated as of the Commencement Date, to the foregoing effect in the form attached
hereto as
Exhibit B
;
(f) The
Board of Directors of the Company shall have adopted resolutions in the form attached hereto as
Exhibit C
which shall
be in full force and effect without any amendment or supplement thereto as of the Commencement Date;
(g) As
of the Commencement Date, the Company shall have reserved out of its authorized and unissued Common Stock, (A)
solely for
the purpose of effecting purchases of Purchase Shares hereunder, 75,000,000 shares of Common Stock and (B) as Commitment Shares
in accordance with Section 5(e) hereof, 2,929,115 shares of Common Stock;
(h) The
Irrevocable Transfer Agent Instructions shall have been delivered to and acknowledged in writing by the Company and the Company's
Transfer Agent;
(i) The
Company shall have delivered to the Investor a certificate evidencing the incorporation and good standing of the Company in the
State of Nevada issued by the Secretary of State of the State of Nevada as of a date within ten (10) Business Days of the Commencement
Date;
(j) The
Company shall have delivered to the Investor a certified copy of the Articles of Incorporation as certified by the Secretary of
State of the State of Nevada within ten (10) Business Days of the Commencement Date;
(k) The
Company shall have delivered to the Investor a secretary's certificate executed by the Secretary of the Company, dated as of the
Commencement Date, in the form attached hereto as
Exhibit C
;
(l) The
Registration Statement covering the sale of a portion of the Purchase Shares and Commitment Shares shall have been declared effective
under the Securities Act by the SEC and no stop order with respect to the Registration Statement shall be pending or threatened
by the SEC. The Company shall have prepared and delivered to the Investor a final and complete form of prospectus, dated and current
as of the Commencement Date, to be used by the Investor in connection with any sales of any Purchase Shares or Commitment Shares,
and to be filed by the Company one Business Day after the Commencement Date. The Current Report shall have been filed with the
SEC, as required pursuant to Section 5(a). The Company shall have made all filings under all applicable federal and state securities
laws necessary to consummate the issuance of the Commitment Shares and Purchase Shares pursuant to this Agreement in compliance
with such laws;
(m) No
Event of Default has occurred, or any event which, after notice and/or lapse of time, would become an Event of Default has occurred;
(n) All
federal, state and local governmental laws, rules and regulations applicable to the transactions contemplated by the Transaction
Documents and necessary for the execution, delivery and performance of the Transaction Documents and the consummation of the transactions
contemplated thereby in accordance with the terms thereof shall have been complied with, and all consents, authorizations and orders
of, and all filings and registrations with, all federal, state and local courts or governmental agencies and all federal, state
and local regulatory or self-regulatory agencies necessary for the execution, delivery and performance of the Transaction Documents
and the consummation of the transactions contemplated thereby in accordance with the terms thereof shall have been obtained or
made, including, without limitation, in each case those required under the Securities Act, the Exchange Act, applicable state securities
or “Blue Sky” laws or applicable rules and regulations of the Principal Market, or otherwise required by the SEC, the
Principal Market or any state securities regulators;
(o) No
statute, regulation, order, decree, writ, ruling or injunction shall have been enacted, entered, promulgated, threatened or endorsed
by any federal, state, local or foreign court or governmental authority of competent jurisdiction which prohibits the consummation
of or which would materially modify or delay any of the transactions contemplated by the Transaction Documents;
(p) No
action, suit or proceeding before any federal, state, local or foreign arbitrator or any court or governmental authority of competent
jurisdiction shall have been commenced or threatened, and no inquiry or investigation by any federal, state, local or foreign governmental
authority of competent jurisdiction shall have been commenced or threatened, against the Company, or any of the officers, directors
or affiliates of the Company, seeking to restrain, prevent or change the transactions contemplated by the Transaction Documents,
or seeking material damages in connection with such transactions; and
(q) The
Company shall have provided the Investor with the information requested by the Investor in connection with its due diligence requests
in accordance with the terms of Section 5(f) hereof.
9. INDEMNIFICATION.
In consideration of
the Investor's execution and delivery of the Transaction Documents and acquiring the Securities hereunder and in addition to all
of the Company's other obligations under the Transaction Documents, the Company shall defend, protect, indemnify and hold harmless
the Investor and all of its affiliates, shareholders, officers, directors, employees and direct or indirect investors and any of
the foregoing Person's agents or other representatives (including, without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the “
Indemnitees
”) from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective
of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (the “
Indemnified Liabilities
”), incurred by any Indemnitee as a result of,
or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Company in
the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, (b) any breach of any
covenant, agreement or obligation of the Company contained in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, or (c) any cause of action, suit or claim brought or made against such Indemnitee and
arising out of or resulting from the execution, delivery, performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, other than with respect to Indemnified Liabilities which directly
and primarily result from the gross negligence or willful misconduct of any Indemnitee. To the extent that the foregoing undertaking
by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities which is permissible under applicable law. Payment under this indemnification shall be made
within thirty (30) days from the date Investor makes written request for it. A certificate containing reasonable detail as to the
amount of such indemnification submitted to the Company by Investor shall be conclusive evidence, absent manifest error, of the
amount due from the Company to Investor. If any action shall be brought against any Indemnitee in respect of which indemnity may
be sought pursuant to this Agreement, such Indemnitee shall promptly notify the Company in writing, and the Company shall have
the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Indemnitee. Any Indemnitee
shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnitee, except to the extent that (i) the employment thereof has been
specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume
such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of such separate counsel, a
material conflict on any material issue between the position of the Company and the position of such Indemnitee, in which case
the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel.
10. EVENTS
OF DEFAULT.
An “
Event
of Default
” shall be deemed to have occurred at any time as any of the following events occurs:
(a) the
effectiveness of a registration statement registering the Purchase Shares and Commitment Shares lapses for any reason (including,
without limitation, the issuance of a stop order) or such registration statement or the prospectus forming a part thereof is unavailable
to the Investor for resale of any or all of the Purchase Shares and Commitment Shares, and such lapse or unavailability continues
for a period of ten (10) consecutive Business Days or for more than an aggregate of thirty (30) Business Days in any 365-day period,
but excluding a lapse or unavailability where (i) the Company terminates a registration statement after the Investor has confirmed
in writing that all of the Purchase Shares and Commitment Shares covered thereby have been resold or (ii) the Company supersedes
one registration statement with another registration statement, including (without limitation) by terminating a prior registration
statement when it is effectively replaced with a new registration statement covering Purchase Shares and Commitment Shares (provided
in the case of this clause (ii) that all of the Purchase Shares and Commitment Shares covered by the superseded (or terminated)
registration statement that have not theretofore been resold are included in the superseding (or new) registration statement);
(b) the
suspension of the Common Stock from trading or the failure of the Common Stock to be listed on the Principal Market for a period
of three (3) consecutive Business Days;
(c) the
delisting of the Common Stock from the Principal Market, provided, however, that the Common Stock is not immediately thereafter
trading on the New York Stock Exchange, The NASDAQ Global Market, The NASDAQ Global Select Market, The NASDAQ Capital Market, the
NYSE MKT, the NYSE Arca or the OTC Bulletin Board (or nationally recognized successor thereto);
(d) the
failure for any reason by the Transfer Agent to issue Purchase Shares or Commitment Shares to the Investor within five (5) Business
Days after the applicable Purchase Date which the Investor is entitled to receive such Securities;
(e) the
Company breaches any representation, warranty, covenant or other term or condition under any Transaction Document if such breach
could have a Material Adverse Effect and except, in the case of a breach of a covenant which is reasonably curable, only if such
breach continues for a period of at least five (5) Business Days;
(f) if
any Person commences a proceeding against the Company pursuant to or within the meaning of any Bankruptcy Law which is not discharged
within 90 days;
(g) if
the Company pursuant to or within the meaning of any Bankruptcy Law: (i) commences a voluntary case, (ii) consents to the entry
of an order for relief against it in an involuntary case, (iii) consents to the appointment of a Custodian of it or for all or
substantially all of its property, or (iv) makes a general assignment for the benefit of its creditors or is generally unable to
pay its debts as the same become due;
(h) a
court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (i) is for relief against the Company in
an involuntary case, (ii) appoints a Custodian of the Company or for all or substantially all of its property, or (iii) orders
the liquidation of the Company or any Subsidiary;
(i) if
at any time the Company is not eligible to transfer its Common Stock electronically as DWAC Shares.
In addition to any other rights and remedies
under applicable law and this Agreement, including the Investor termination rights set forth in Section 11 hereof, so long as an
Event of Default has occurred and is continuing, or if any event which, after notice and/or lapse of time, would become an Event
of Default, has occurred and is continuing, or so long as the Closing Sale Price is below the Floor Price, the Company shall not
deliver to the Investor any Regular Purchase Notice, and the Investor shall not purchase any shares of Common Stock under this
Agreement.
11. TERMINATION
This Agreement may
be terminated only as follows:
(a) If
pursuant to or within the meaning of any Bankruptcy Law, the Company commences a voluntary case or any Person commences a proceeding
against the Company which is not discharged within 90 days, a Custodian is appointed for the Company or for all or substantially
all of its property, or the Company makes a general assignment for the benefit of its creditors (any of which would be an Event
of Default as described in Sections 10(f), 10(g) and 10(h) hereof), this Agreement shall automatically terminate without any liability
or payment to the Company (except as set forth below) without further action or notice by any Person.
(b) In
the event that the Commencement shall not have occurred, the Company shall have the option to terminate this Agreement for any
reason or for no reason without any liability whatsoever of any party to any other party under this Agreement.
(c) In
the event that the Commencement shall not have occurred on or before July 31, 2013, due to the failure to satisfy the conditions
set forth in Sections 7 and 8 above with respect to the Commencement, the non-breaching party shall have the option to terminate
this Agreement at the close of business on such date or thereafter without liability of any party to any other party (except as
set forth below).
(d)
At any time after the Commencement Date, the Company shall have the option to terminate this Agreement for any reason or for no
reason by delivering notice (a “Company Termination Notice”) to the Investor electing to terminate this Agreement without
any liability whatsoever of any party to any other party under this Agreement (except as set forth below). The Company Termination
Notice shall not be effective until one (1) Business Day after it has been received by the Investor.
(e) This
Agreement shall automatically terminate on the date that the Company sells and the Investor purchases the full Available Amount
as provided herein, without any action or notice on the part of any party and without any liability whatsoever of any party to
any other party under this Agreement (except as set forth below).
(f) If
for any reason or for no reason the full Available Amount has not been purchased in accordance with Section 2 of this Agreement
by the Maturity Date, this Agreement shall automatically terminate on the Maturity Date, without any action or notice on the part
of any party and without any liability whatsoever of any party to any other party under this Agreement (except as set forth below).
Except as set forth in Sections 11(a) (in
respect of an Event of Default under Sections 10(f), 10(g) and 10(h)) 11(e) and 11(f), any termination of this Agreement pursuant
to this Section 11 shall be effected by written notice from the Company to the Investor, or the Investor to the Company, as the
case may be, setting forth the basis for the termination hereof. The representations and warranties and covenants of the Company
and the Investor contained in Sections 3, 4, 5, and 6 hereof, the indemnification provisions set forth in Section 9 hereof and
the agreements and covenants set forth in Sections
10, 11 and 12, shall survive the Commencement and any termination of
this Agreement. No termination of this Agreement shall (i) affect the Company's or the Investor's rights or obligations (A) under
this Agreement with respect to pending Regular Purchases, and the Company and the Investor shall complete their respective obligations
with respect to any pending Regular Purchases under this Agreement, and (B) under the Registration Rights Agreement, which shall
survive any such termination, or (ii) be deemed to release the Company or the Investor from any liability for intentional misrepresentation
or willful breach of any of the Transaction Documents.
12. MISCELLANEOUS.
(a)
Governing
Law; Jurisdiction; Jury Trial
. The corporate laws of the State of Nevada shall govern all issues concerning the relative rights
of the Company and its shareholders. All other questions concerning the construction, validity, enforcement and interpretation
of this Agreement and the other Transaction Documents shall be governed by the internal laws of the State of Illinois, without
giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the State of Illinois. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in the City of Chicago, for the adjudication of any
dispute hereunder or under the other Transaction Documents or in connection herewith or therewith, or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
(b)
Counterparts
.
This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a facsimile
signature or signature delivered by e-mail in a “.pdf” format data file shall be considered due execution and shall
be binding upon the signatory thereto with the same force and effect as if the signature were an original signature.
(c)
Headings
.
The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d)
Severability
.
If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability
of any provision of this Agreement in any other jurisdiction.
(e)
Entire
Agreement
. The Transaction Documents supersede all other prior oral or written agreements between the Investor, the Company,
their affiliates and Persons acting on their behalf with respect to the subject matter thereof, and this Agreement, the other Transaction
Documents and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered
herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Investor makes any representation,
warranty, covenant or undertaking with respect to such matters. The Company acknowledges and agrees that is has not relied on,
in any manner whatsoever, any representations or statements, written or oral, other than as expressly set forth in the Transaction
Documents.
(f)
Notices
.
Any notices, consents or other communications required or permitted to be given under the terms of this Agreement must be in writing
and will be deemed to have been delivered: (i) upon receipt when delivered personally; (ii) upon receipt when sent by facsimile
(provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii)
one Business Day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such communications shall be:
If to the Company:
Elite Pharmaceuticals, Inc.
165 Ludlow Avenue
Northvale, New Jersey 07647
Telephone: 201-750-2646
Facsimile: 201-750-2755
Attention: Carter
Ward, CFO
With a copy to:
Richard Feiner, Esq.
381 Park Avenue South
16
th
Floor
New York, NY 10016
Telephone:
212-779-8600
Facsimile:
917-720-0863
If to the Investor:
Lincoln Park Capital Fund, LLC
440 North Wells, Suite 410
Chicago, IL 60654
Telephone:
312-822-9300
Facsimile:
312-822-9301
Attention:
Josh
Scheinfeld/Jonathan Cope
If to the Transfer
Agent:
American Stock Transfer & Trust
Company
6201 15
th
Avenue
Brooklyn, NY 11219
Telephone:
718-921-8208
Facsimile:
718-331-1852
Attention:
Alexandra
M. Albrecht
or at such other address and/or facsimile
number and/or to the attention of such other person as the recipient party has specified by written notice given to each other
party three (3) Business Days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient
of such notice, consent or other communication, (B) mechanically or electronically generated by the sender's facsimile machine
containing the time, date, and recipient facsimile number or (C) provided by a nationally recognized overnight delivery service,
shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery
service in accordance with clause (i), (ii) or (iii) above, respectively.
(g)
Successors
and Assigns
. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and
assigns. The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of
the Investor, including by merger or consolidation. The Investor may not assign its rights or obligations under this Agreement.
(h)
No
Third Party Beneficiaries
. This Agreement is intended for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.
(i)
Publicity
.
The Investor shall have the right to approve before issuance any press release, SEC filing or any other public disclosure made
by or on behalf of the Company whatsoever with respect to, in any manner, the Investor, its purchases hereunder or any aspect of
this Agreement or the transactions contemplated hereby; provided, however, that the Company shall be entitled, without the prior
approval of the Investor, to make any press release or other public disclosure (including any filings with the SEC) with respect
to such transactions as is required by applicable law and regulations or the rules of the Principal Market so long as the Company
and its counsel consult with the Investor in connection with any such press release or other public disclosure prior to its release.
The Investor must be provided with a copy thereof prior to any release or use by the Company thereof. The Company agrees and acknowledges
that its failure to fully comply with this provision constitutes a material adverse effect on its ability to perform its obligations
under this Agreement.
(j)
Further
Assurances
. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request
in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated
hereby.
(k)
No
Financial Advisor, Placement Agent, Broker or Finder
. The Company represents and warrants to the Investor that, except as disclosed
in
Schedule 4(w)
, it has not engaged any financial advisor, placement agent, broker or finder in connection with the transactions
contemplated hereby. The Investor represents and warrants to the Company that it has not engaged any financial advisor, placement
agent, broker or finder in connection with the transactions contemplated hereby. The Company shall be responsible for the payment
of any fees or commissions, if any, of any financial advisor, placement agent, broker or finder engaged by the Company relating
to or arising out of the transactions contemplated hereby. The Company shall pay, and hold the Investor harmless against, any liability,
loss or expense (including, without limitation, attorneys' fees and out of pocket expenses) arising in connection with any such
claim.
(l)
No
Strict Construction
. The language used in this Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against any party.
(m)
Remedies,
Other Obligations, Breaches and Injunctive Relief
. The Investor’s remedies provided in this Agreement, including, without
limitation, the Investor’s remedies provided in Section 9, shall be cumulative and in addition to all other remedies available
to the Investor under this Agreement, at law or in equity (including a decree of specific performance and/or other injunctive relief),
no remedy of the Investor contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy
and nothing herein shall limit the Investor's right to pursue actual damages for any failure by the Company to comply with the
terms of this Agreement. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm
to the Investor and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event
of any such breach or threatened breach, the Investor shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.
(n)
Enforcement
Costs
. If: (i) this Agreement is placed by the Investor in the hands of an attorney for enforcement or is enforced by the Investor
through any legal proceeding; (ii) an attorney is retained to represent the Investor in any bankruptcy, reorganization, receivership
or other proceedings affecting creditors' rights and involving a claim under this Agreement, or (iii) an attorney is retained to
represent the Investor in any other proceedings whatsoever in connection with this Agreement, then the Company shall pay to the
Investor, as incurred by the Investor, all reasonable costs and expenses including attorneys' fees incurred in connection therewith,
in addition to all other amounts due hereunder. If this Agreement is placed by the Company in the hands of an attorney for enforcement
or is enforced by the Company through any legal proceeding, then the Investor shall pay to the Company, as incurred by the Company,
all reasonable costs and expenses including attorneys' fees incurred in connection therewith, in addition to all other amounts
due hereunder.
(o)
Amendment
and Waiver; Failure or Indulgence Not Waiver
. No provision of this Agreement may be amended or waived by the parties from and
after the date that is one (1) Business Day immediately preceding the initial filing of the Registration Statement with the SEC.
Subject to the immediately preceding sentence, (i) no provision of this Agreement may be amended other than by a written instrument
signed by both parties hereto and (ii) no provision of this Agreement may be waived other than in a written instrument signed by
the party against whom enforcement of such waiver is sought. No failure or delay in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or privilege.
* * * * *
IN WITNESS WHEREOF,
the Investor
and the Company have caused this Agreement to be duly executed as of the date first written above.
|
|
THE COMPANY:
|
|
|
|
|
|
ELITE PHARMACEUTICALS, INC.
|
|
|
|
|
|
By:
|
s/ Jerry Treppel
|
|
|
Name: Jerry Treppel
|
|
|
Title: CEO
|
|
|
|
|
|
INVESTOR:
|
|
|
|
|
|
LINCOLN PARK CAPITAL FUND, LLC
|
|
|
BY: LINCOLN PARK CAPITAL, LLC
|
|
|
BY: ROCKLEDGE CAPITAL CORPORATION
|
|
|
|
|
|
By:
|
s/Josh Scheinfeld
|
|
|
Name: Josh Scheinfeld
|
|
|
Title: President
|
SCHEDULES
|
Schedule 4(a)
|
Subsidiaries
|
|
Schedule 4(c)
|
Capitalization
|
|
Schedule 4(e)
|
Conflicts
|
|
Schedule 4(f)
|
Exchange Act Filings
|
|
Schedule 4(g)
|
Material Changes
|
|
Schedule 4(h)
|
Litigation
|
|
Schedule 4(k)
|
Intellectual Property
|
|
Schedule 4(n)
|
Insurance
|
EXHIBITS
|
Exhibit A
|
Form of Company Counsel Opinion
|
|
Exhibit B
|
Form of Officer’s Certificate
|
|
Exhibit C
|
Form of Resolutions of Board of Directors of the Company
|
|
Exhibit D
|
Form of Secretary’s Certificate
|
|
Exhibit E
|
Form of Letter to Transfer Agent
|
DISCLOSURE SCHEDULES
Schedule 4(a) – Subsidiaries
Schedule 4(c) - Capitalization
Schedule 4(e) - No Conflicts
Schedule 4(f) - Exchange Act Filings
Schedule 4(g) - Absence of Certain Changes
Schedule 4(h) - Litigation
Schedule 4(k) - Intellectual Property Rights
Schedule 4(n) - Insurance
EXHIBIT A
FORM OF COMPANY COUNSEL OPINION
Capitalized terms used
herein but not defined herein, have the meaning set forth in the Purchase Agreement. Based on the foregoing, and subject to the
assumptions and qualifications set forth herein, we are of the opinion that:
1. The
Company is a corporation existing and in good standing under the laws of the State of Nevada. The Company is qualified to do business
as a foreign corporation and is in good standing in the State of New Jersey.
2. The
Company has the corporate power to execute and deliver, and perform its obligations under, each Transaction Document to which it
is a party. The Company has the corporate power to conduct its business as, to the best of our knowledge, it is now conducted,
and to own and use the properties owned and used by it.
3. The
execution, delivery and performance by the Company of the Transaction Documents to which it is a party have been duly authorized
by all necessary corporate action on the part of the Company. The execution and delivery of the Transaction Documents by the Company,
the performance of the obligations of the Company thereunder and the consummation by it of the transactions contemplated therein
have been duly authorized and approved by the Company's Board of Directors and no further consent, approval or authorization of
the Company, its Board of Directors or its stockholders is required. The Transaction Documents to which the Company is a party
have been duly executed and delivered by the Company and are the valid and binding obligations of the Company, enforceable against
the Company in accordance with their terms except as such enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting creditor’s rights
and remedies.
4. The
execution, delivery and performance by the Company of the Transaction Documents, the consummation by the Company of the transactions
contemplated thereby including the offering, sale and issuance of the Commitment Shares and the Purchase Shares in accordance with
the terms and conditions of the Purchase Agreement, and fulfillment and compliance with terms of the Transaction Documents, does
not and shall not: (i) conflict with, constitute a breach of or default (or an event which, with the giving of notice or lapse
of time or both, constitutes or could constitute a breach or a default), under (a) the Certificate of Incorporation or the Bylaws
of the Company, (b) any material agreement, note, lease, mortgage, deed or other material instrument to which to our knowledge
the Company is a party or by which the Company or any of its assets are bound, (ii) result in any violation of any statute,
law, rule or regulation applicable to the Company, or (iii) to our knowledge, violate any order, writ, injunction or decree applicable
to the Company or any of its subsidiaries.
5. The
issuance of the Purchase Shares and Commitment Shares pursuant to the terms and conditions of the Transaction Documents has been
duly authorized and the Commitment Shares and Initial Purchase Shares are validly issued, fully paid and non-assessable, to our
knowledge, free of all taxes, liens, charges, restrictions, rights of first refusal and preemptive rights. 75,000,000 shares of
Common Stock have been properly reserved for issuance under the Purchase Agreement. When issued and paid for in accordance with
the Purchase Agreement, the Purchase Shares shall be validly issued, fully paid and non-assessable, to our knowledge, free of all
taxes, liens, charges, restrictions, rights of first refusal and preemptive rights. To our knowledge, the execution and delivery
of the Registration Rights Agreement do not, and the performance by the Company of its obligations thereunder shall not, give rise
to any rights of any other person for the registration under the Securities Act of any shares of Common Stock or other securities
of the Company which have not been waived.
6. As
of the date hereof, the authorized capital stock of the Company consists of __,___,___ shares of common stock, par value $0.001
per share, of which to our knowledge __________ shares are issued and outstanding. Except as set forth on Schedule 4(c) of the
Purchase Agreement, to our knowledge, there are no outstanding shares of capital stock or other securities convertible into or
exchangeable or exercisable for shares of the capital stock of the Company.
7. Assuming
the accuracy of the representations and your compliance with the covenants made by you in the Transaction Documents, the offering,
sale and issuance of the Initial Commitment Shares to you pursuant to the Transaction Documents is exempt from registration under
the Securities Act and the securities laws and regulations of the State of Illinois.
8. Other
than that which has been obtained and completed prior to the date hereof, no authorization, approval, consent, filing or other
order of any federal or state governmental body, regulatory agency, or stock exchange or market, or any court, or, to our knowledge,
any third party is required to be obtained by the Company to enter into and perform its obligations under the Transaction Documents
or for the Company to issue and sell the Purchase Shares as contemplated by the Transaction Documents.
9. The Common Stock
is registered pursuant to Section 12(g) of the Exchange Act. To our knowledge, since one year preceding the date of the Purchase
Agreement, the Company has been in compliance with the reporting requirements of the Exchange Act applicable to it. To our knowledge,
since one year preceding the date of the Purchase Agreement, the Company has not received any written notice from the Principal
Market stating that the Company has not been in compliance with any of the rules and regulations (including the requirements for
continued listing) of the Principal Market.
We further advise you
that to our knowledge, except as disclosed on Schedule 4(h) in the Purchase Agreement, there is no action, suit, proceeding, inquiry
or investigation before or by any court, public board or body, any governmental agency, any stock exchange or market, or self-regulatory
organization, which has been threatened in writing or which is currently pending against the Company, any of its subsidiaries,
any officers or directors of the Company or any of its subsidiaries or any of the properties of the Company or any of its subsidiaries.
In addition, we have
participated in the preparation of the Registration Statement (SEC File #________) covering the sale of the Purchase Shares and
the Commitment Shares including the prospectus dated ____________, contained therein and in conferences with officers and other
representatives of the Company (including the Company’s independent auditors) during which the contents of the Registration
Statement and related matters were discussed and reviewed and, although we are not passing upon and do not assume any responsibility
for the accuracy, completeness or fairness of the statements contained in the Registration Statement, on the basis of the information
that was developed in the course of the performance of the services referred to above, considered in the light of our understanding
of the applicable law, nothing came to our attention that caused us to believe that the Registration Statement (other than the
financial statements and schedules and the other financial and statistical data included therein, as to which we express no belief),
as of their dates, contained any untrue statement of a material fact or omitted to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under which they were made, not misleading.
EXHIBIT B
FORM OF OFFICER’S CERTIFICATE
This Officer’s
Certificate (“
Certificate
”) is being delivered pursuant to Section 8(e) of that certain Purchase Agreement dated
as of ______ __, 2013, (“
Purchase Agreement
”), by and between
ELITE PHARMACEUTICALS, INC.
, a Nevada corporation
(the “
Company
”), and
LINCOLN PARK CAPITAL FUND, LLC
(the “
Investor
”). Terms used herein
and not otherwise defined shall have the meanings ascribed to them in the Purchase Agreement.
The undersigned, ___________,
______________ of the Company, hereby certifies as follows:
1. I
am the _____________ of the Company and make the statements contained in this Certificate;
2. The
representations and warranties of the Company are true and correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in Section 4 of the Purchase Agreement, in which case, such
representations and warranties are true and correct without further qualification) as of the date when made and as of the Commencement
Date as though made at that time (except for representations and warranties that speak as of a specific date);
3. The
Company has performed, satisfied and complied in all material respects with covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the Company at or prior to the Commencement Date.
4. The
Company has not taken any steps, and does not currently expect to take any steps, to seek protection pursuant to any Bankruptcy
Law nor does the Company or any of its Subsidiaries have any knowledge or reason to believe that its creditors intend to initiate
involuntary bankruptcy or insolvency proceedings. The Company is financially solvent and is generally able to pay its debts as
they become due.
IN WITNESS WHEREOF,
I have hereunder signed my name on this ___ day of ___________.
The undersigned as
Secretary of
ELITE PHARMACEUTICALS, INC.
, a Nevada corporation, hereby certifies that ___________ is the duly elected, appointed,
qualified and acting ________ of _________ and that the signature appearing above is his genuine signature.
EXHIBIT C
FORM OF COMPANY RESOLUTIONS
FOR SIGNING PURCHASE AGREEMENT
UNANIMOUS WRITTEN CONSENT OF
ELITE PHARMACEUTICALS, INC.
In accordance with the corporate laws of
the state of Nevada, the undersigned, being all of the directors of
ELITE PHARMACEUTICALS, INC.
, a Nevada corporation (the
“Corporation”) do hereby consent to and adopt the following resolutions as the action of the Board of Directors for
and on behalf of the Corporation and hereby direct that this Consent be filed with the minutes of the proceedings of the Board
of Directors:
WHEREAS, there has been presented to the
Board of Directors of the Corporation a draft of the Purchase Agreement (the “Purchase Agreement”) by and between the
Corporation and Lincoln Park Capital Fund, LLC (“Lincoln Park”), providing for the purchase by Lincoln Park of up to
Ten Million Dollars ($10,000,000) of the Corporation’s common stock, $0.001 par value per share (the “Common Stock”);
and
WHEREAS, after careful
consideration of the Purchase Agreement, the documents incident thereto and other factors deemed relevant by the Board of Directors,
the Board of Directors has determined that it is advisable and in the best interests of the Corporation to engage in the transactions
contemplated by the Purchase Agreement, including, but not limited to, the issuance of 2,929,115 shares of Common Stock to Lincoln
Park as an initial commitment fee (the “Initial Commitment Shares”) and the sale of shares of Common Stock to Lincoln
Park up to the available amount under the Purchase Agreement (the "Purchase Shares").
Transaction Documents
NOW, THEREFORE, BE
IT RESOLVED, that the transactions described in the Purchase Agreement are hereby approved and ________________________________________
(the “Authorized Officers”) are severally authorized to execute and deliver the Purchase Agreement, and any other agreements
or documents contemplated thereby including, without limitation, a registration rights agreement (the “Registration Rights
Agreement”) providing for the registration of the shares of the Company’s Common Stock issuable in respect of the Purchase
Agreement on behalf of the Corporation, with such amendments, changes, additions and deletions as the Authorized Officers may deem
to be appropriate and approve on behalf of, the Corporation, such approval to be conclusively evidenced by the signature of an
Authorized Officer thereon; and
FURTHER RESOLVED, that
the terms and provisions of the Registration Rights Agreement by and among the Corporation and Lincoln Park are hereby approved
and the Authorized Officers are authorized to execute and deliver the Registration Rights Agreement (pursuant to the terms of the
Purchase Agreement), with such amendments, changes, additions and deletions as the Authorized Officer may deem appropriate and
approve on behalf of, the Corporation, such approval to be conclusively evidenced by the signature of an Authorized Officer thereon;
and
FURTHER RESOLVED, that
the terms and provisions of the Form of Transfer Agent Instructions (the “Instructions”) are hereby approved and the
Authorized Officers are authorized to execute and deliver the Instructions (pursuant to the terms of the Purchase Agreement), with
such amendments, changes, additions and deletions as the Authorized Officers may deem appropriate and approve on behalf of, the
Corporation, such approval to be conclusively evidenced by the signature of an Authorized Officer thereon; and
Execution of Purchase
Agreement
FURTHER RESOLVED, that
the Corporation be and it hereby is authorized to execute the Purchase Agreement providing for the purchase of up to Ten Million
Dollars ($10,000,000) of the Corporation’s common stock; and
Issuance of Common
Stock
FURTHER RESOLVED, that the Corporation is
hereby authorized to issue to Lincoln Park Capital Fund, LLC, 2,929,115 shares of Common Stock as Initial Commitment Shares and
that upon issuance of the Initial Commitment Shares pursuant to the Purchase Agreement the Commitment Shares shall be duly authorized,
validly issued, fully paid and nonassessable with no personal liability attaching to the ownership thereof; and
FURTHER RESOLVED, that the Corporation is
hereby authorized to issue shares of Common Stock upon the purchase of Purchase Shares up to the Available Amount under the Purchase
Agreement in accordance with the terms of the Purchase Agreement and that, upon issuance of the Purchase Shares pursuant to the
Purchase Agreement, the Purchase Shares will be duly authorized, validly issued, fully paid and nonassessable with no personal
liability attaching to the ownership thereof; and
FURTHER RESOLVED, that
the Corporation shall initially reserve 75,000,000 shares of Common Stock for issuance as Purchase Shares under the Purchase Agreement;
and
FURTHER RESOLVED, that
the Corporation is hereby authorized to issue 2,929,115 shares of Common Stock (subject to equitable adjustment for any reorganization,
recapitalization, non-cash dividend, stock split or other similar transaction) in connection with the purchase of Purchase Shares
(the “Additional Commitment Shares”) in accordance with the terms of the Purchase Agreement and that, upon issuance
of the Additional Commitment Shares pursuant to the Purchase Agreement, the Additional Commitment Shares will be duly authorized,
validly issued, fully paid and nonassessable with no personal liability attaching to the ownership thereof; and
FURTHER RESOLVED, that
the Corporation shall initially reserve 2,929,115 shares of Common Stock (subject to equitable adjustment for any reorganization,
recapitalization, non-cash dividend, stock split or other similar transaction) for issuance as Additional Commitment Shares under
the Purchase Agreement.
Approval of Actions
FURTHER RESOLVED, that,
without limiting the foregoing, the Authorized Officers are, and each of them hereby is, authorized and directed to proceed on
behalf of the Corporation and to take all such steps as deemed necessary or appropriate, with the advice and assistance of counsel,
to cause the Corporation to consummate the agreements referred to herein and to perform its obligations under such agreements;
and
FURTHER RESOLVED, that the Authorized Officers
be, and each of them hereby is, authorized, empowered and directed on behalf of and in the name of the Corporation, to take or
cause to be taken all such further actions and to execute and deliver or cause to be executed and delivered all such further agreements,
amendments, documents, certificates, reports, schedules, applications, notices, letters and undertakings and to incur and pay all
such fees and expenses as in their judgment shall be necessary, proper or desirable to carry into effect the purpose and intent
of any and all of the foregoing resolutions, and that all actions heretofore taken by any officer or director of the Corporation
in connection with the transactions contemplated by the agreements described herein are hereby approved, ratified and confirmed
in all respects.
IN WITNESS WHEREOF, the Board of Directors
has executed and delivered this Consent effective as of __________, 2013.
______________________
______________________
______________________
being all of the directors of
ELITE PHARMACEUTICALS, INC.
EXHIBIT D
FORM OF SECRETARY’S CERTIFICATE
This Secretary’s Certificate (“Certificate”)
is being delivered pursuant to Section 7(k) of that certain Purchase Agreement dated as of _____ __, 2013(“Purchase Agreement”),
by and between
ELITE PHARMACEUTICALS, INC.
, a Nevada corporation (the “Company”) and
LINCOLN PARK CAPITAL
FUND, LLC
(the “Investor”), pursuant to which the Company may sell to the Investor up to Ten Million Dollars ($10,000,000)
of the Company's Common Stock, $0.001 par value per share (the "Common Stock"). Terms used herein and not otherwise defined
shall have the meanings ascribed to them in the Purchase Agreement.
The undersigned, ____________, Secretary
of the Company, hereby certifies as follows:
1. I
am the Secretary of the Company and make the statements contained in this Secretary’s Certificate.
2. Attached
hereto as
Exhibit A
and
Exhibit B
are true, correct and complete copies of the Company’s bylaws (“Bylaws”)
and Certificate of Incorporation (“Articles”), in each case, as amended through the date hereof, and no action has
been taken by the Company, its directors, officers or shareholders, in contemplation of the filing of any further amendment relating
to or affecting the Bylaws or Articles.
3. Attached
hereto as
Exhibit C
are true, correct and complete copies of the resolutions duly adopted by the Board of Directors of the
Company on _____________, at which a quorum was present and acting throughout. Such resolutions have not been amended, modified
or rescinded and remain in full force and effect and such resolutions are the only resolutions adopted by the Company’s Board
of Directors, or any committee thereof, or the shareholders of the Company relating to or affecting (i) the entering into and performance
of the Purchase Agreement, or the issuance, offering and sale of the Purchase Shares and the Commitment Shares and (ii) and the
performance of the Company of its obligation under the Transaction Documents as contemplated therein.
4. As
of the date hereof, the authorized, issued and reserved capital stock of the Company is as set forth on
Exhibit D
hereto.
IN WITNESS WHEREOF
,
I have hereunder signed my name on this ___ day of ____________.
The undersigned as ___________ of ELITE
PHARMACEUTICALS, INC., a Nevada corporation, hereby certifies that ____________ is the duly elected, appointed, qualified and acting
Secretary of _________, and that the signature appearing above is his genuine signature.
EXHIBIT E
FORM OF LETTER TO THE TRANSFER AGENT
FOR THE ISSUANCE OF THE COMMITMENTS SHARES AT SIGNING OF THE PURCHASE AGREEMENT
[COMPANY LETTERHEAD]
[DATE]
[TRANSFER AGENT]
__________________
__________________
__________________
Re: Issuance of Common Shares to Lincoln Park Capital Fund,
LLC
Dear ________,
On behalf of
ELITE PHARMACEUTICALS, INC.
, (the “Company”),
you are hereby instructed to issue
as soon as possible
2,929,115
shares of our common stock in the name of
Lincoln
Park Capital Fund, LLC
. The share certificate should be dated [DATE OF THE PURCHASE AGREEMENT]. I have included a true
and correct copy of a unanimous written consent executed by all of the members of the Board of Directors of the Company adopting
resolutions approving the issuance of these shares. The shares should be issued subject to the following restrictive legend:
THE SECURITIES REPRESENTED
BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.
THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, UNLESS SOLD PURSUANT TO: (1) RULE 144 UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (2) AN OPINION OF HOLDER’S COUNSEL,
IN A CUSTOMARY FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.
The share certificate should be sent
as soon as possible
via overnight mail
to the following address:
Lincoln Park Capital Fund, LLC
440 North Wells, Suite 410
Chicago, IL 60654
Attention: Josh Scheinfeld/Jonathan
Cope
Thank you very much for your help. Please call me at ______________
if you have any questions or need anything further.
ELITE PHARMACEUTICALS,
INC.
Exhibit
10.2
REGISTRATION
RIGHTS AGREEMENT
REGISTRATION
RIGHTS AGREEMENT
(this "
Agreement
"), dated as of April 19, 2013, by and between
ELITE PHARMACEUTICALS,
INC.,
a Nevada corporation, (the "
Company
"), and
LINCOLN PARK CAPITAL FUND, LLC,
an
Illinois limited liability company
(together with it permitted assigns, the “
Buyer
”). Capitalized terms
used herein and not otherwise defined herein shall have the respective meanings set forth in the Purchase Agreement by and between
the parties hereto, dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time to time, the
"
Purchase Agreement
").
WHEREAS:
The
Company has agreed, upon the terms and subject to the conditions of the Purchase Agreement, to sell to the Buyer up to Ten Million
Dollars ($10,000,000) of the Company’s Common Stock, and to induce the Buyer to enter into the Purchase Agreement, the Company
has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "
Securities Act
"), and applicable state securities
laws.
NOW,
THEREFORE,
in consideration of the promises and the mutual covenants contained herein and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Company and the Buyer hereby agree as follows:
1.
DEFINITIONS
.
As
used in this Agreement, the following terms shall have the following meanings:
a. "
Investor
"
means the Buyer, any transferee or assignee thereof to whom a Buyer assigns its rights under this Agreement in accordance with
Section 9 and who agrees to become bound by the provisions of this Agreement and any transferee or assignee thereof to whom a
transferee or assignee assigns its rights under this Agreement in accordance with Section 9 and who agrees to become bound by
the provisions of this Agreement.
b. "
Person
"
means any individual or entity including but not limited to any corporation, a limited liability company, an association, a partnership,
an organization, a business, an individual, a governmental or political subdivision thereof or a governmental agency.
c. "
Register
,"
"
registered
," and "
registration
" refer to a registration effected by preparing and filing one
or more registration statements of the Company in compliance with the Securities Act and pursuant to Rule 415 under the Securities
Act or any successor rule providing for offering securities on a continuous basis ("
Rule 415
"), and the declaration
or ordering of effectiveness of such registration statement(s) by the United States Securities and Exchange Commission (the "
SEC
").
d. "
Registrable
Securities
" means (i) all of the Purchase Shares and all of the Commitment Shares which may from time to time be issued
or issuable to the Investor under the Purchase Agreement (without regard to any limitation or restriction on purchases), and (ii)
any shares of capital stock issued or issuable with respect to the Purchase Shares, the Commitment Shares
or the Purchase
Agreement as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise, without regard
to any limitation on purchases under the Purchase Agreement.
e. "
Registration
Statement
" means a registration statement of the Company covering only the sale of the Registrable Securities.
2.
REGISTRATION
.
a.
Mandatory
Registration.
The Company shall, within thirty (30) days from the date hereof, file with the SEC the Registration Statement
on Form S-1. The Registration Statement shall register only the resale of the Registrable Securities and no other securities of
the Company. The Registration Statement, upon filing with the SEC and at the time it is declared effective by the SEC, shall satisfy
all of the requirements of the Securities Act to register the resale of the Registrable Securities by the Investor in accordance
with this Agreement under Rule 415 promulgated under the Securities Act at then-prevailing market prices, and not fixed prices.
The Investor and its counsel shall have a reasonable opportunity to review and comment upon such Registration Statement or amendment
to such Registration Statement and any related prospectus prior to its filing with the SEC. Investor shall furnish all information
reasonably requested by the Company for inclusion therein. The Company shall use its best efforts to have the Registration Statement
or amendment declared effective by the SEC at the earliest possible date after the filing thereof. The Company shall use its best
efforts to keep the Registration Statement effective pursuant to Rule 415 promulgated under the Securities Act and available for
sales of all of the Registrable Securities at all times until the earlier of (i) the date as of which the Investor may sell all
of the Registrable Securities without restriction pursuant to Rule 144 promulgated under the Securities Act (or successor thereto)
or (ii) the date on which the Investor shall have sold all the Registrable Securities and no Available Amount remains under the
Purchase Agreement (the "
Registration Period
"). The Registration Statement (including any amendments or supplements
thereto and prospectuses contained therein) shall not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein, or necessary to make the statements therein, in light of the circumstances in which they were
made, not misleading.
b.
Rule
424 Prospectus
. The Company shall, as required by applicable securities regulations, from time to time file with the SEC,
pursuant to Rule 424 promulgated under the Securities Act, the prospectus and prospectus supplements, if any, to be used in connection
with sales of the Registrable Securities under the Registration Statement. The Investor and its counsel shall have a reasonable
opportunity to review and comment upon such prospectus prior to its filing with the SEC. The Investor shall use its reasonable
best efforts to comment upon such prospectus within one (1) Business Day from the date the Investor receives the final version
of such prospectus.
c.
Sufficient
Number of Shares Registered
. In the event the number of shares available under the Registration Statement is insufficient
to cover all of the Registrable Securities, the Company shall amend the Registration Statement or file a new registration statement
(a ”
New Registration Statement
”), so as to cover all of such Registrable Securities as soon as practicable,
but in any event not later than ten (10) Business Days after the necessity therefor arises, subject to any limits that may be
imposed by the SEC pursuant to Rule 415 under the Securities Act. The Company shall use its best efforts to cause such amendment
and/or New Registration Statement to become effective as soon as practicable following the filing thereof.
3.
RELATED
OBLIGATIONS
.
With
respect to the Registration Statement and whenever any Registrable Securities are to be registered pursuant to Section 2 including
on any New Registration Statement, the Company shall use its reasonable best efforts to effect the registration of the Registrable
Securities in accordance with this Agreement and, pursuant thereto, the Company shall have the following obligations:
a. The
Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to any registration
statement and the prospectus used in connection with such registration statement, which prospectus is to be filed pursuant to
Rule 424 promulgated under the Securities Act, as may be necessary to keep the Registration Statement or any New Registration
Statement effective at all times during the Registration Period, and, during such period, comply with the provisions of the Securities
Act with respect to the disposition of all Registrable Securities of the Company covered by the Registration Statement or any
New Registration Statement until such time as all of such Registrable Securities shall have been disposed of in accordance with
this Agreement by the Buyer as set forth in such registration statement.
b. The
Company shall permit the Investor to review and comment upon the Registration Statement or any New Registration Statement and
all amendments and supplements thereto at least two (2) Business Days prior to their filing with the SEC, and not file any document
in a form to which Investor reasonably objects. The Investor shall use its reasonable best efforts to comment upon the Registration
Statement or any New Registration Statement and any amendments or supplements thereto within two (2) Business Days from the date
the Investor receives the final version thereof. The Company shall furnish to the Investor, without charge any correspondence
from the SEC or the staff of the SEC to the Company or its representatives relating to the Registration Statement or any New Registration
Statement.
c. Upon
request of the Investor, the Company shall furnish to the Investor, (i) promptly after the same is prepared and filed with the
SEC, at least one copy of such registration statement and any amendment(s) thereto, including financial statements and schedules,
all documents incorporated therein by reference and all exhibits, (ii) upon the effectiveness of any registration statement, a
copy of the prospectus included in such registration statement and all amendments and supplements thereto (or such other number
of copies as the Investor may reasonably request) and (iii) such other documents, including copies of any preliminary or final
prospectus, as the Investor may reasonably request from time to time in order to facilitate the disposition of the Registrable
Securities owned by the Investor.
d. The
Company shall use reasonable best efforts to (i) register and qualify the Registrable Securities covered by a registration statement
under such other securities or "blue sky" laws of such jurisdictions in the United States as the Investor reasonably
requests, (ii) prepare and file in those jurisdictions, such amendments (including post-effective amendments) and supplements
to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period,
(iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during
the Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition
thereto to (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section
3(d), (y) subject itself to general taxation in any such jurisdiction, or (z) file a general consent to service of process in
any such jurisdiction. The Company shall promptly notify the Investor who holds Registrable Securities of the receipt by the Company
of any notification with respect to the suspension of the registration or qualification of any of the Registrable Securities for
sale under the securities or "blue sky" laws of any jurisdiction in the United States or its receipt of actual notice
of the initiation or threatening of any proceeding for such purpose.
e. As
promptly as practicable after becoming aware of such event or facts, the Company shall notify the Investor in writing of the happening
of any event or existence of such facts as a result of which the prospectus included in any registration statement, as then in
effect, includes an 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, in light of the circumstances under which they were made, not misleading, and promptly prepare
a supplement or amendment to such registration statement to correct such untrue statement or omission, and deliver a copy of such
supplement or amendment to the Investor (or such other number of copies as the Investor may reasonably request). The Company shall
also promptly notify the Investor in writing (i) when a prospectus or any prospectus supplement or post-effective amendment has
been filed, and when a registration statement or any post-effective amendment has become effective (notification of such effectiveness
shall be delivered to the Investor by facsimile on the same day of such effectiveness and by overnight mail), (ii) of any request
by the SEC for amendments or supplements to any registration statement or related prospectus or related information, and (iii)
of the Company's reasonable determination that a post-effective amendment to a registration statement would be appropriate.
f. The
Company shall use its reasonable best efforts to prevent the issuance of any stop order or other suspension of effectiveness of
any registration statement, or the suspension of the qualification of any Registrable Securities for sale in any jurisdiction
and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment
and to notify the Investor of the issuance of such order and the resolution thereof or its receipt of actual notice of the initiation
or threat of any proceeding for such purpose.
g. The
Company shall (i) cause all the Registrable Securities to be listed on each securities exchange on which securities of the same
class or series issued by the Company are then listed, and (ii) secure designation and quotation of all the Registrable Securities
on the Principal Market. The Company shall pay all fees and expenses in connection with satisfying its obligation under this Section.
h. The
Company shall cooperate with the Investor to facilitate the timely issuance of the Registrable Securities as set forth in the
Purchase Agreement, it being agreed that all Registrable Securities to be issued pursuant to the Purchase Agreement shall be issued
as DWAC Shares.
i. The
Company shall at all times provide a transfer agent and registrar with respect to its Common Stock.
j. If
reasonably requested by the Investor, the Company shall (i) immediately incorporate in a prospectus supplement or post-effective
amendment such information as the Investor believes should be included therein relating to the sale and distribution of Registrable
Securities, including, without limitation, information with respect to the number of Registrable Securities being sold, the purchase
price being paid therefor and any other terms of the offering of the Registrable Securities; (ii) make all required filings of
such prospectus supplement or post-effective amendment as soon as notified of the matters to be incorporated in such prospectus
supplement or post-effective amendment; and (iii) supplement or make amendments to any registration statement.
k. The
Company shall use its reasonable best efforts to cause the Registrable Securities covered by any registration statement to be
registered with or approved by such other governmental agencies or authorities as may be necessary to consummate the disposition
of such Registrable Securities.
l. Within
one (1) Business Day after any registration statement which includes the Registrable Securities is ordered effective by the SEC,
the Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable
Securities (with copies to the Investor) confirmation that such registration statement has been declared effective by the SEC
in the form attached hereto as
Exhibit A
. Thereafter, if requested by the Buyer at any time, the Company shall require
its counsel to deliver to the Buyer a written confirmation whether or not the effectiveness of such registration statement has
lapsed at any time for any reason (including, without limitation, the issuance of a stop order) and whether or not the registration
statement is current and available to the Buyer for sale of all of the Registrable Securities.
m. The
Company shall take all other reasonable actions necessary to expedite and facilitate disposition by the Investor of Registrable
Securities pursuant to any registration statement.
4.
OBLIGATIONS
OF THE INVESTOR
.
a. The
Company shall notify the Investor in writing of the information the Company reasonably requires from the Investor in connection
with any registration statement hereunder. Within two (2) business days of the Company’s request, the Investor shall furnish
to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition
of the Registrable Securities held by it as shall be reasonably required to effect the registration of such Registrable Securities
and shall execute such documents in connection with such registration as the Company may reasonably request.
b. The
Investor agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing
of any registration statement hereunder.
c. The
Investor agrees that, upon receipt of any notice from the Company of the happening of any event or existence of facts of the kind
described in Section 3(f) or the first sentence of 3(e), the Investor will immediately discontinue disposition of Registrable
Securities pursuant to any registration statement(s) covering such Registrable Securities until the Investor's receipt of the
copies of the supplemented or amended prospectus contemplated by Section 3(f) or the first sentence of 3(e). Notwithstanding anything
to the contrary, the Company shall cause its transfer agent to promptly deliver shares of Common Stock without any restrictive
legend in accordance with the terms of the Purchase Agreement in connection with any sale of Registrable Securities with respect
to which an Investor has entered into a contract for sale prior to the Investor's receipt of a notice from the Company of the
happening of any event of the kind described in Section 3(f) or the first sentence of 3(e) and for which the Investor has not
yet settled.
5.
EXPENSES
OF REGISTRATION
.
All
reasonable expenses, other than sales or brokerage commissions, incurred in connection with registrations, filings or qualifications
pursuant to Sections 2 and 3, including, without limitation, all registration, listing and qualifications fees, printers and accounting
fees, and fees and disbursements of counsel for the Company, shall be paid by the Company.
6.
INDEMNIFICATION
.
a. To
the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend the Investor, each
Person, if any, who controls the Investor, the members, the directors, officers, partners, employees, agents, representatives
of the Investor and each Person, if any, who controls the Investor within the meaning of the Securities Act or the Securities
Exchange Act of 1934, as amended (the "
Exchange Act
") (each, an "
Indemnified Person
"), against
any losses, claims, damages, liabilities, judgments, fines, penalties, charges, costs, attorneys' fees, amounts paid in settlement
or expenses, joint or several, (collectively, "
Claims
") incurred in investigating, preparing or defending any
action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental,
administrative or other regulatory agency, body or the SEC, whether pending or threatened, whether or not an indemnified party
is or may be a party thereto ("
Indemnified Damages
"), to which any of them may become subject insofar as such
Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any
untrue statement or alleged untrue statement of a material fact in the Registration Statement, any New Registration Statement
or any post-effective amendment thereto or in any filing made in connection with the qualification of the offering under the securities
or other "blue sky" laws of any jurisdiction in which Registrable Securities are offered ("
Blue Sky Filing
"),
or the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements
therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in the final prospectus
(as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or
alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances
under which the statements therein were made, not misleading, (iii) any violation or alleged violation by the Company of the Securities
Act, the Exchange Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities pursuant to the Registration Statement or any New Registration Statement
or (iv) any material violation by the Company of this Agreement (the matters in the foregoing clauses (i) through (iv) being,
collectively, "
Violations
"). The Company shall reimburse each Indemnified Person promptly as such expenses are
incurred and are due and payable, for any reasonable legal fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not apply to a Claim by an Indemnified Person arising out of or based upon a Violation
which occurs in reliance upon and in conformity with information about the Investor furnished in writing to the Company by such
Indemnified Person expressly for use in connection with the preparation of the Registration Statement, any New Registration Statement
or any such amendment thereof or supplement thereto, if such prospectus was timely made available by the Company pursuant to Section
3(c) or Section 3(e); (ii) with respect to any superseded prospectus, shall not inure to the benefit of any such person from whom
the person asserting any such Claim purchased the Registrable Securities that are the subject thereof (or to the benefit of any
person controlling such person) if the untrue statement or omission of material fact contained in the superseded prospectus was
corrected in the revised prospectus, as then amended or supplemented, if such revised prospectus was timely made available by
the Company pursuant to Section 3(c) or Section 3(e), and the Indemnified Person was promptly advised in writing not to use the
incorrect prospectus prior to the use giving rise to a violation and such Indemnified Person, notwithstanding such advice, used
it; (iii) shall not be available to the extent such Claim is based on a failure of the Investor to deliver or to cause to be delivered
the prospectus made available by the Company, if such prospectus was timely made available by the Company pursuant to Section
3(c) or Section 3(e); and (iv) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of the Company, which consent shall not be unreasonably withheld. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the transfer
of the Registrable Securities by the Investor pursuant to Section 9.
b. In
connection with the Registration Statement or any New Registration Statement, the Investor agrees to severally and not jointly
indemnify, hold harmless and defend, to the same extent and in the same manner as is set forth in Section 6(a), the Company, each
of its directors, each of its officers who signs the Registration Statement or any New Registration Statement, each Person, if
any, who controls the Company within the meaning of the Securities Act or the Exchange Act (collectively and together with an
Indemnified Person, an "
Indemnified Party
"), against any Claim or Indemnified Damages to which any of them may
become subject, under the Securities Act, the Exchange Act or otherwise, insofar as such Claim or Indemnified Damages arise out
of or are based upon any Violation, in each case to the extent, and only to the extent, that such Violation occurs in reliance
upon and in conformity with written information about the Investor set forth on
Exhibit B
attached hereto and furnished
to the Company by the Investor expressly for use in connection with such registration statement; and, subject to Section 6(d),
the Investor will reimburse any legal or other expenses reasonably incurred by them in connection with investigating or defending
any such Claim; provided, however, that the indemnity agreement contained in this Section 6(b) and the agreement with respect
to contribution contained in Section 7 shall not apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Investor, which consent shall not be unreasonably withheld; provided, further, however,
that the Investor shall be liable under this Section 6(b) for only that amount of a Claim or Indemnified Damages as does not exceed
the net proceeds to the Investor as a result of the sale of Registrable Securities pursuant to such registration statement. Such
indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Investor pursuant to Section 9.
c. Promptly
after receipt by an Indemnified Person or Indemnified Party under this Section 6 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall,
if a Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party
a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense
thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party shall have the right to retain its own counsel
with the fees and expenses to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate
due to actual or potential differing interests between such Indemnified Person or Indemnified Party and any other party represented
by such counsel in such proceeding. The Indemnified Party or Indemnified Person shall cooperate fully with the indemnifying party
in connection with any negotiation or defense of any such action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the Indemnified Party or Indemnified Person which relates to such action or claim.
The indemnifying party shall keep the Indemnified Party or Indemnified Person fully apprised at all times as to the status of
the defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any
action, claim or proceeding effected without its written consent, provided, however, that the indemnifying party shall not unreasonably
withhold, delay or condition its consent. No indemnifying party shall, without the consent of the Indemnified Party or Indemnified
Person, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party or Indemnified Person of a release from all liability
in respect to such claim or litigation. Following indemnification as provided for hereunder, the indemnifying party shall be subrogated
to all rights of the Indemnified Party or Indemnified Person with respect to all third parties, firms or corporations relating
to the matter for which indemnification has been made. The failure to deliver written notice to the indemnifying party within
a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified
Person or Indemnified Party under this Section 6, except to the extent that the indemnifying party is prejudiced in its ability
to defend such action.
d. The
indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or Indemnified Damages are incurred.
e. The
indemnity agreements contained herein shall be in addition to (i) any cause of action or similar right of the Indemnified Party
or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject
to pursuant to the law.
7.
CONTRIBUTION
.
To
the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make
the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent
permitted by law; provided, however, that: (i) no seller of Registrable Securities guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any seller of Registrable Securities
who was not guilty of fraudulent misrepresentation; and (ii) contribution by any seller of Registrable Securities shall be limited
in amount to the net amount of proceeds received by such seller from the sale of such Registrable Securities.
8.
REPORTS
AND DISCLOSURE UNDER THE SECURITIES ACTS
.
With
a view to making available to the Investor the benefits of Rule 144 promulgated under the Securities Act or any other similar
rule or regulation of the SEC that may at any time permit the Investor to sell securities of the Company to the public without
registration ("
Rule 144
"), the Company agrees, at the Company’s sole expense, to:
a. make
and keep public information available, as those terms are understood and defined in Rule 144;
b. file
with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange
Act so long as the Company remains subject to such requirements and the filing of such reports and other documents is required
for the applicable provisions of Rule 144;
c. furnish
to the Investor so long as the Investor owns Registrable Securities, promptly upon request, (i) a written statement by the Company
that it has complied with the reporting and or disclosure provisions of Rule 144, the Securities Act and the Exchange Act, (ii)
a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company,
and (iii) such other information as may be reasonably requested to permit the Investor to sell such securities pursuant to Rule
144 without registration; and
d. take
such additional action as is requested by the Investor to enable the Investor to sell the Registrable Securities pursuant to Rule
144, including, without limitation, delivering all such legal opinions, consents, certificates, resolutions and instructions to
the Company’s Transfer Agent as may be requested from time to time by the Investor and otherwise fully cooperate with Investor
and Investor’s broker to effect such sale of securities pursuant to Rule 144.
The
Company agrees that damages may be an inadequate remedy for any breach of the terms and provisions of this Section 8 and that
Investor shall, whether or not it is pursuing any remedies at law, be entitled to equitable relief in the form of a preliminary
or permanent injunctions, without having to post any bond or other security, upon any breach or threatened breach of any such
terms or provisions.
9.
ASSIGNMENT
OF REGISTRATION RIGHTS
.
The
Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Investor.
The Investor may not assign its rights under this Agreement without the written consent of the Company, other than to an affiliate
of the Investor controlled by Jonathan Cope or Josh Scheinfeld.
10.
INTENTIONALLY
OMITTED
.
11.
MISCELLANEOUS
.
a. A
Person is deemed to be a holder of Registrable Securities whenever such Person owns or is deemed to own of record such Registrable
Securities. If the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the
same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from the registered
owner of such Registrable Securities.
b. Any
notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be
in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent
by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending
party); or (iii) one (1) Business Day after deposit with a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be:
If
to the Company:
Elite
Pharmaceuticals, Inc.
165
Ludlow Avenue
Northvale,
New Jersey 07647
Telephone: 201-750-2646
Facsimile: 201-750-2755
Attention: Carter
Ward, CFO
With
a copy to:
Richard
Feiner, Esq.
381
Park Avenue South
16
th
Floor
New
York, NY 10016
Telephone:
212-779-8600
Facsimile:
917-720-0863
If
to the Investor:
Lincoln
Park Capital Fund, LLC
440
N. Wells, Suite 410
Chicago,
IL 60654
Telephone: 312-822-9300
Facsimile: 312-822-9301
Attention: Josh
Scheinfeld/Jonathan Cope
or at such
other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written
notice given to each other party three (3) Business Days prior to the effectiveness of such change. Written confirmation of receipt
(A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated
by the sender's facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or
(iii) above, respectively.
c. No
provision of this Agreement may be amended or waived by the parties from and after the date that is one Business Day immediately
preceding the initial filing of the Registration Statement with the SEC. Subject to the immediately preceding sentence, no provision
of this Agreement may be (i) amended other than by a written instrument signed by both parties hereto or (ii) waived other than
in a written instrument signed by the party against whom enforcement of such waiver is sought. Failure of any party to exercise
any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate
as a waiver thereof.
d. The
corporate laws of the State of Nevada shall govern all issues concerning the relative rights of the Company and its stockholders.
All other questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed
by the internal laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Illinois or any other jurisdictions) that would cause the application of the laws of any jurisdictions
other than the State of Illinois. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting the City of Chicago, for the adjudication of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof
to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction,
such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction.
EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER
OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
e. This
Agreement, and the Purchase Agreement constitute the entire agreement among the parties hereto with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to
herein and therein. This Agreement and the Purchase Agreement supersede all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof and thereof.
f. Subject
to the requirements of Section 9, this Agreement shall inure to the benefit of and be binding upon the successors and permitted
assigns of each of the parties hereto.
g. The
headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
h. This
Agreement may be executed in identical counterparts, each of which shall be deemed an original but all of which shall constitute
one and the same agreement. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile
transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement or by e-mail in a “.pdf”
format data file.
i. Each
party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry
out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
j. The
language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent and no
rules of strict construction will be applied against any party.
k. This
Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns, and is not
for the benefit of, nor may any provision hereof be enforced by, any other Person.
* * * * *
*
IN
WITNESS WHEREOF,
the parties have caused this Registration Rights Agreement to be duly executed as of day and year first above
written.
|
|
THE COMPANY
:
|
|
|
|
|
|
ELITE PHARMACEUTICALS, INC.
|
|
|
|
|
|
By:
|
s/Jerry Treppel
|
|
|
Name: Jerry Treppel
|
|
|
Title: CEO
|
|
|
|
|
|
BUYER:
|
|
|
|
|
|
LINCOLN PARK CAPITAL FUND, LLC
|
|
|
BY:
LINCOLN PARK CAPITAL PARTNERS, LLC
|
|
|
BY: ROCKLEDGE CAPITAL CORPORATION
|
|
|
|
|
|
By:
|
s/Josh Scheinfeld
|
|
|
Name: Josh Scheinfeld
|
|
|
Title: President
|
EXHIBIT
A
TO REGISTRATION
RIGHTS AGREEMENT
FORM OF NOTICE
OF EFFECTIVENESS
OF REGISTRATION
STATEMENT
[Date]
[TRANSFER
AGENT]
___________________
___________________
Re: [__________]
Ladies and
Gentlemen:
We
are counsel to
ELITE PHARMACEUTICALS, INC.
, a Nevada corporation (the
“Company”
), and have represented
the Company in connection with that certain Purchase Agreement, dated as of _________, 2013 (the
“Purchase Agreement”
),
entered into by and between the Company and Lincoln Park Capital Fund, LLC (the
“Buyer”
) pursuant to which
the Company has agreed to issue to the Buyer shares of the Company's Common Stock, par value $.001 per share (the
“Common
Stock”
), in an amount up to Ten Million Dollars ($10,000,000) (the
“Purchase Shares”
), in accordance
with the terms of the Purchase Agreement. In connection with the transactions contemplated by the
Purchase Agreement, the
Company has registered with the U.S. Securities & Exchange Commission the following shares of Common Stock:
|
|
1)
|
75,000,000
shares of Common Stock to be issued upon purchase from the Company
by the Buyer from time to time (the
“Purchase Shares,”
).
|
|
|
2)
|
2,929,115
shares of Common Stock which have been issued to the Buyer as a
commitment fee (the
“Commitment Shares”
).
|
|
|
3)
|
2,929,115
shares of Common Stock to be issued in connection with each purchase
of Purchase Shares as a commitment fee (the
“Additional
Commitment Shares”
)
|
Pursuant to
the Purchase Agreement, the Company also has entered into a Registration Rights Agreement, dated as of ______, 2013, with the
Buyer (the
“Registration Rights Agreement”
) pursuant to which the Company agreed, among other things, to register
the Purchase Shares and the Commitment Shares under the Securities Act of 1933, as amended (the
“Securities Act”
).
In connection with the Company's obligations under the Purchase Agreement and the Registration Rights Agreement, on _______, 2013,
the Company filed a Registration Statement (File No. 333-_________) (the
“Registration Statement”
) with the
Securities and Exchange Commission (the
“SEC”
) relating to the sale of the Purchase Shares, and the Additional
Commitment Shares.
In
connection with the foregoing, we advise you that a member of the SEC's staff has advised us by telephone that the SEC has entered
an order declaring the Registration Statement effective under the Securities Act at _____ P.M. on __________, 2013 and we have
no knowledge, after telephonic inquiry of a member of the SEC's staff, that any stop order suspending its effectiveness has been
issued or that any proceedings for that purpose are pending before, or threatened by, the SEC and the Purchase Shares and the
Commitment Shares are available for sale under the Securities Act pursuant to the Registration Statement and may issued without
any restrictive legend.
|
|
Very truly yours,
|
|
|
[Company Counsel]
|
|
|
|
|
|
By:
|
|
|
|
|
CC:
|
Lincoln Park Capital Fund,
LLC
|
EXHIBIT
B
TO REGISTRATION
RIGHTS AGREEMENT
Information
About The Investor Furnished To The Company By The Investor
Expressly
For Use In Connection With The Registration Statement
As of the date
of the Purchase Agreement, Lincoln Park Capital Fund, LLC, beneficially owned _______ shares of common stock of the Company. Josh
Scheinfeld and Jonathan Cope, the Managing Members of Lincoln Park Capital, LLC, are deemed to be beneficial owners of all of
the shares of common stock owned by Lincoln Park Capital Fund. Messrs. Cope and Scheinfeld have shared voting and investment power
over the shares being offered under the prospectus filed with the SEC in connection with the transactions contemplated under the
Purchase Agreement. Lincoln Park Capital is not a licensed broker dealer or an affiliate of a licensed broker dealer.
