Execution Copy: August 1, 2013
NEITHER THIS SECURED
CONVERTIBLE PROMISSORY NOTE (THE “NOTE”) NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE (COLLECTIVELY,
THE “SECURITIES”) HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL, THE SUBSTANCE
OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THE NOTE,
INCLUDING SECTION 7(b) HEREOF. THE PRINCIPAL AMOUNT OUTSTANDING UNDER THIS NOTE MAY BE LESS THAN THE AMOUNT STATED ON THE FACE
HEREOF PURSUANT TO SECTION 7(b) HEREOF.
|Issue Date: August 1, 2013
||Principal Amount: $10,000,000.|
ELITE PHARMACEUTICALS, INC. AND ELITE
SECURED CONVERTIBLE NOTE DUE 2016
FOR VALUE RECEIVED,
pursuant to the Purchase Agreement (as defined below), ELITE PHARMACEUTICALS, INC., a Nevada corporation (the “Company”)
and its wholly-owned subsidiary, ELITE LABORATORIES, INC., a Delaware corporation (“Elite” and, together
with the Company, the “Debtors”), jointly and severally, promise to pay to the order of MIKAH PHARMA
LLC, a limited liability company organized under the laws of the State of Delaware (the “Holder”), the
principal sum of Ten Million Dollars and no cents ($10,000,000), on the Maturity Date (as defined below), or such earlier date
as the Note is required or permitted to be repaid as provided hereunder.
This Note is interest
Payments of principal
shall be made in lawful money of the United States of America to the Holder at its address as provided in Section 13
or by wire transfer to such account specified from time to time by the Holder hereof for such purpose by notice as provided in
Definitions. In addition to the terms defined elsewhere in this Note, (a) capitalized terms that are not
otherwise defined herein have the meanings given to such terms in the Asset Purchase Agreement by and between Holder and Elite
of even date (the “Purchase Agreement”), and (b) the following terms have the meanings indicated:
Event” means any of the following events: (a) any of the Debtors commences a case or other proceeding under any bankruptcy,
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction relating to such Debtor; (b) there is commenced against any of the Debtors any such case or proceeding that is not
dismissed within 60 days after commencement; (c) any of the Debtors is adjudicated insolvent or bankrupt or any order of relief
or other order approving any such case or proceeding is entered; (d) any of the Debtors suffers any appointment of any custodian
or the like for it or any substantial part of its property that is not discharged or stayed within 60 days; (e) any of the Debtors
makes a general assignment for the benefit of creditors; (f) any of the Debtors calls a meeting of its creditors with a view to
arranging a composition, adjustment or restructuring of its debts; or (g) any of the Debtors, by any act or failure to act, expressly
indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose
of effecting any of the foregoing.
8K 2013 8 5 Exhibit 10 2 Secured Convertible Note.doc
of Control” will be deemed to exist if (i) there occurs any consolidation, merger or other business combination of
a Debtor with or into any other corporation or other entity or person (whether or not such Debtor is the surviving corporation),
or any other corporate reorganization or transaction or series of related transactions in which in any of such events the voting
stockholders of such Debtor prior to such event cease to own fifty percent (50%) or more of the voting power, or corresponding
voting equity interests, of the surviving corporation after such event (including without limitation: (x) any “going private”
transaction under Rule 13e-3 promulgated pursuant to the 1934 Act or (y) any tender offer by the Company under Rule 13e-4 promulgated
pursuant to the 1934 Act for twenty percent (20%) or more of the Company's Common Stock), (ii) any person (as defined in Section
13(d) of the 1934 Act) beneficially owns or is deemed to beneficially own (as described in Rule 13d-3 under the 1934 Act without
regard to the 60-day exercise period) in excess of fifty percent (50%) of the Company’s voting power, (iii) there is a replacement
of more than one-half of the members of the Company’s Board of Directors which is not approved by a majority of those individuals
who are members of the Company’s Board of Directors on the Original Issue Date, (iv) in one or a series of related transactions,
there is a sale or transfer of all or substantially all of the assets of the Company, determined on a consolidated basis, or (v)
any Debtor enters into any agreement providing for an event set forth in (i), (ii), (iii) or (iv) above.
Stock” means shares of the Company’s common stock, $0.001 par value.
Stock Deemed Outstanding” means, at any given time, the sum of (a) the number of shares of Common Stock actually
outstanding at such time, plus (b) the number of shares of Common Stock issuable upon exercise of options outstanding at such time,
plus (c) the number of shares of Common Stock issuable upon conversion or exchange of Convertible Securities actually outstanding
at such time (treating as outstanding any Convertible Securities issuable upon exercise of options outstanding at such time), in
each case, regardless of whether the options or Convertible Securities are actually exercisable at such time; provided,
that Common Stock Deemed Outstanding at any given time shall not include shares owned or held by or for the account of the Company
or any of its wholly owned subsidiaries.
Date” means the date any Conversion Notice is delivered to the Company together with the Conversion Schedule pursuant
to Section 6(a).
Notice” means a written notice in the form attached hereto as Schedule 1.
Price” means $0.07, subject to adjustment from time to time pursuant to Section 10.
Shares” means shares of Common Stock issuable to holder upon Conversion.
Securities” means any convertible securities, preferred stock, warrants, options or other rights to subscribe for
or to purchase or exchange for, shares of Common Stock.
Stock” means the issuance of (a) shares of Common Stock or options to employees, consultants, officers or directors
of the Company pursuant to (i) any stock or option plan duly adopted by a majority of the non-employee members of the Board of
Directors of the Company or a majority of the members of a committee of non-employee directors established for such purpose or
(ii) employment agreements with Company employees, (b) securities upon the exercise or exchange of or conversion of Convertible
Securities outstanding as of the date of this Note, provided that such securities are not amended subsequent to the date of this
Note 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 Company and in which the Company receives 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, (d) up to a maximum of 5,000,000
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 provided by such Persons referred to in this clause (d), 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, and provided that none of such shares may be registered for sale or resale by any of such holders;
(e) securities issued as dividends payable upon any shares of Company Preferred Stock issued and outstanding as of the Original
Issue Date; (f) securities issued pursuant to the terms of any of the Transaction Documents and (g) securities issued in connection
with any stock split, stock dividend or recapitalization of the Common Stock.
Maximum” means: (a) for purposes of Section 6(b)(i) a number of shares of Common Stock equal to 19.99% of
the of the Company's outstanding shares on the Original Issue Date; and (b) for purposes of Section 6(b)(ii) and (iii) the
balance of authorized shares of Common Stock that are not issued, outstanding or reserved for issuance.
Price” means the average closing price of a share of Common Stock on the principal Trading Market on which such shares
are then trading for the 10 Trading Days immediately preceding the Mandatory Conversion Date.
Date” means the third anniversary of the Original Issue Date.
Issue Date” means the date of the first issuance of this Note, regardless of the number of transfers of any particular
means any individual, corporation, partnership, limited liability company, joint venture, trust, business association, organization,
Governmental Entity or other entity.
Agreement” means the Security Agreement of even date between the Holder as Secured Party and the Debtors as Debtors.
Approval” means (a) for purposes of Section 6(b)(i), the vote of Company shareholders, if and as may be required
by the applicable rules and regulations of the Company’s Trading Market (or any successor entity) to approve the issuance
of shares of Common Stock in excess of the Issuable Maximum; and (b) for purposes of Section 6(b)(iii), the vote of Company
shareholders, as may be required by Nevada law to approve the issuance of shares of Common Stock in excess of the Issuable Maximum.
Day” means any day that the Trading Market upon which the Common Stock trades or is quoted is open.
Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading
on the date in question: (a) the following National Markets: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market,
the Nasdaq Global Select Market, the New York Stock Exchange or (b) the OTC Bulletin Board (or any successors to any of the foregoing).
Documents” means, collectively, this Note, the Purchase Agreement, the Security Agreement, and the schedules and
exhibits hereto and thereto.
Event” means any of the following events: (a) the Common Stock is not listed or quoted, or is suspended from trading,
on a Trading Market for a period of five or more Trading Days (which need not be consecutive Trading Days); (b) subject to subsection
c below, the Company fails to have available a sufficient number of authorized but unissued and otherwise unreserved shares
of Common Stock available to issue the Conversion Shares upon any conversion of this Note; (c) if at any time commencing 30 Trading
Days after the Shareholder Approval, any Common Stock issuable pursuant to the Transaction Documents is not listed on a Trading
Market; (d) if Shareholder Approval is required, the Company shall have failed to receive the Shareholder Approval within four
(4) months of the requirement to obtain such Shareholder Approval; (e) any of the Debtors fails to make any cash payment required
under the Transaction Documents and such failure is not cured within fifteen (15) calendar days after notice of such default is
first given to such Debtor by the Holder; or (f) any of the Debtors defaults in the timely performance of any other obligation
under the Transaction Documents and such default continues uncured for a period of thirty (30) calendar days after the date on
which notice of such default is first given to such Debtor by the Holder (it being understood that no prior notice need be given
in the case of a default that cannot reasonably be cured within such thirty (30) days).
Payment of Principal.
Principal Payment at Maturity. The Company shall pay the outstanding principal balance of this Note to the Holder
on the Maturity Date.
Except to the extent that Shareholder Approval is required by Section 6(b), the Company covenants that it will at
all times reserve and keep available out of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose
of enabling it to issue Conversion Shares as required hereunder, the number of Conversion Shares which are then issuable and deliverable
upon the conversion of (and otherwise in respect of) this entire Note (taking into account the adjustments set forth in Section
10), free from preemptive rights or any other contingent purchase rights of Persons other than the Holder. The Company covenants
that all Conversion Shares so issuable and deliverable shall, upon issuance in accordance with the terms hereof, be duly and validly
authorized and issued and fully paid and nonassessable.
Registration of Notes. The Debtors shall register the Note upon records to be maintained by the Debtors for that
purpose (the “Note Register”) in the name of the record holder thereof from time to time. The Debtors
may deem and treat the registered Holder of this Note as the absolute owner hereof for the purpose of any conversion hereof or
any payment of principal hereon, and for all other purposes, absent actual notice to the contrary.
Transfers; Registration thereof.
The Holder is not permitted to transfer this Note or any of its rights thereunder; except to its sole member or any other
entity wholly-owned by its sole member; provided that the transferee of any such permitted transfer agrees to be bound by this
and any other restrictions of Holder under the Note.
The Debtors shall register the transfer of any portion of this Note in the Note Register upon surrender of this Note to
the Debtors at its address for notice set forth herein. Upon any such registration or transfer, a new Note, in substantially the
form of this Note (any such new Note, a “New Note”), evidencing the portion of this Note so transferred
shall be issued to the transferee and a New Note evidencing the remaining portion of this Note not so transferred, if any, shall
be issued to the transferring Holder. The acceptance of the New Note by the transferee thereof shall be deemed the acceptance by
such transferee of all of the rights and obligations of a holder of a Note. No service charge or other fee will be imposed in connection
with any such registration of transfer or exchange.
At the Option of the Holder. All or any portion of the principal of this Note shall be convertible into shares of
Common Stock (subject to the limitations set forth in Section 6(b)), at the option of the Holder, at any time, and from
time to time, from and after the first anniversary of the Original Issue Date. The number of Conversion Shares issuable upon any
conversion hereunder shall equal the outstanding principal amount of this Note to be converted, divided by the Conversion Price.
The Holder shall effect conversions under this Section 6(a) by delivering to the Company a Conversion Notice together with
a schedule in the form of Schedule 2 attached hereto (the “Conversion Schedule”). If the Holder
is converting less than all of the principal amount of this Note, or if a conversion hereunder may not be effected in full due
to the application of Section 6(b), the Company shall honor such conversion to the extent permissible hereunder and shall
promptly deliver to the Holder a Conversion Schedule indicating the principal amount which has not been converted.
Conversion Restrictions. Anything set forth herein to the contrary notwithstanding:
If the Company is listed on a Trading Market that is a National Market and the Company has not previously obtained Shareholder
Approval, and such National Market requires Shareholder Approval then the Company may not issue in excess of the Issuable Maximum
upon conversions of the Notes. If on any Conversion Date: (A) the aggregate number of shares of Common Stock that would then be
issuable upon conversion in full of the then outstanding principal amount of Note would exceed the Issuable Maximum, and (B) the
Company shall not have previously obtained Shareholder Approval, then the Company shall issue to the converting Holder a number
of shares of Common Stock up to the Issuable Maximum. The Company and the Holder understand and agree that shares of Common Stock
issued to and then held by the Holder as a result of conversions of the Note shall not be entitled to cast votes on any resolution
to obtain Shareholder Approval pursuant hereto.
If, upon any Conversion Date prior to the second anniversary of the Original Issue Date, there is not a sufficient number
of authorized shares of Common Stock (that are not issued, outstanding or reserved for issuance) available to effect the entire
Conversion, such conversion shall not exceed the Issuable Maximum.
If, upon any Conversion Date on or after the second anniversary of the Original Issue Date, there is not a sufficient number
of authorized shares of Common Stock (that are not issued, outstanding or reserved for issuance) available to effect the entire
Conversion, such conversion shall not exceed the Issuable Maximum; however, the Company shall use its best efforts to obtain Shareholder
Approval within four (4) months of such Conversion Date to permit the balance of the conversion.
Conversion. Notwithstanding any other provision of this Note to the contrary, if, on the date (the “Mandatory Conversion
Date”) any payment under this Note is due and payable whether on the date on which the obligations under the Note
mature or by acceleration, redemption, prepayment or otherwise other than as a result of a Bankruptcy Event (a “Payment”),
the Market Price of the Common Stock is below $0.15 (as adjusted for any stock split, stock dividend or recapitalization of the
Common Stock), any such Payment shall automatically be converted into Common Stock at the Conversion Price. If there is not a sufficient
number of authorized shares of Common Stock that are not issued, outstanding or reserved for issuance to permit full conversion
of the payment under this Subsection 6(c) (such insufficient number of shares of Common Stock, the “Balance
Shares”), the Company shall issue to the Holder, in lieu of the Balance Shares a one year option to acquire the Balance
Shares in exchange for the portion of the Payment represented by the Balance Shares. Should the Company not increase its authorized
number of shares of Common Stock to permit exercise of such option within four (4) months of the date of the issuance of such options,
the Company shall be required to redeem such option for the portion of the Payment represented by the Balance Shares.
Mechanics of Conversion.
Upon conversion of this Note, the Company shall promptly (i) issue or cause to be issued and cause to be delivered to or
upon the written order of the Holder and in the name of the Holder a certificate for the Conversion Shares issuable upon such conversion
or (ii) instruct the Company’s transfer agent to issue such Conversion Shares in book entry form and promptly notify Holder
of same. Such Shares shall be restricted securities, not transferable unless registered under the Securities Act or such transfer
is permitted pursuant to an exemption from such registration under the Securities Act. The Holder shall be deemed to have become
holder of record of such Conversion Shares as of the Conversion Date.
The Holder shall not be required to deliver the original Note in order to effect a conversion hereunder. Execution and delivery
of the Conversion Notice shall have the same effect as cancellation of the original Note and issuance of a New Note representing
the remaining outstanding principal amount. Upon surrender of this Note following one or more partial conversions, the Debtors
shall promptly deliver to the Holder a New Note representing the remaining outstanding principal amount.
Events of Default.
“Event of Default” means any one of the following events (whatever the reason and whether it shall
be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order,
rule or regulation of any administrative or governmental body):
any default in the payment of principal in respect of the Note, as and when the same becomes due and payable (whether on
the date on which the obligations under the Note mature or by acceleration, redemption, prepayment or otherwise) and such default
continues for a period of fifteen (15) Trading Days;
a material breach by any of the Debtors of its covenants, representations or warranties hereunder or in any other Transaction
Document that remains uncured for a period of thirty (30) days following receipt by the Debtors of written notice of such breach;
the occurrence of a Triggering Event;
any Debtor, which is a partnership, limited liability company, limited partnership or a corporation, dissolves, suspends
or discontinues doing business (other than a consolidation or similar transaction between the Debtors); or
the occurrence of a Bankruptcy Event.
At any time or times following the occurrence of an Event of Default, all amounts due and owing under this Note shall become
immediately due and payable.
Upon the occurrence of any Bankruptcy Event, all amounts due and owing under this Note shall immediately become due and
payable in full in cash and not in Common Stock, without any further action by the Holder.
In connection with any Event of Default, the Holder need not provide and the Debtors hereby waive any presentment, demand,
protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and
all of its rights and remedies hereunder, under any of the Transaction Documents and all other remedies available to it under applicable
law. Any such declaration may be rescinded and annulled by the Holder at any time prior to payment hereunder. No such rescission
or annulment shall affect any subsequent Event of Default or impair any right consequent thereto. The remedies under this Note
and any other Transaction Document or available under applicable law shall be cumulative.
9. Charges, Taxes
and Expenses. Issuance of certificates for Conversion Shares upon conversion of (or otherwise in respect of) this Note shall
be made without charge to the Holder for any issue or transfer tax, withholding tax, transfer agent fee or other incidental tax
or expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company. The Holder
shall be responsible for all other tax liability that may arise as a result of holding or transferring this Note or receiving Conversion
Shares in respect hereof.
10. Certain Adjustments. The Conversion
Price is subject to adjustment from time to time as set forth in this Section 10.
(a) Stock Dividends
and Splits. If the Company, at any time while this Note is outstanding, (i) pays a stock dividend on its Common Stock or otherwise
makes a distribution on any class of capital stock that is payable in shares of Common Stock (other than regular dividends on shares
of the Company’s shares of preferred stock issued and outstanding as of the Original Issue Date), (ii) subdivides outstanding
shares of Common Stock into a larger number of shares, or (iii) combines outstanding shares of Common Stock into a smaller number
of shares, then in each such case the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number
of shares of Common Stock 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 clause (i) of this Section 10(a)
shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend
or distribution, and any adjustment pursuant to clause (ii) or (iii) of this Section 10(a) shall become effective immediately
after the effective date of such subdivision or combination.
(b) Pro Rata
Distributions. If the Company, at any time while this Note is outstanding, distributes to all holders of Common Stock (i) evidences
of its indebtedness, (ii) any security (other than a distribution of Common Stock described in Section 10(c)), (iii) rights
or warrants to subscribe for or purchase any security, or (iv) cash or any other asset (in each case, “Distributed
Property”), then, at the request of the Holder delivered before the 90th day after the record date fixed for determination
of stockholders entitled to receive such distribution, the Company will deliver to the Holder, within five (5) Trading Days after
such request (or, if later, on the effective date of such distribution), the Distributed Property that the Holder would have been
entitled to receive in respect of the Conversion Shares for which this Note could have been converted immediately prior to such
record date. If such Distributed Property is not delivered to the Holder pursuant to the preceding sentence, upon any conversion
of this Note that occurs after such record date, the Holder shall be entitled to receive, in addition to the Conversion Shares
otherwise issuable upon such conversion, the Distributed Property that the Holder would have been entitled to receive in respect
of such number of Conversion Shares had the Holder been the record holder of such Conversion Shares immediately prior to such record
Changes. If, at any time while this Note is outstanding, (i) the Company effects any merger or consolidation of the Company
with or into another Person, (ii) any Debtor effects any sale of all or substantially all of its assets in one or more transactions,
(iii) any tender offer or exchange offer (whether by the Company 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 (iv) the Company 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 (other than as a result of a subdivision or combination of shares of Common
Stock described in Section 10(a)) (in any such case, a “Fundamental Change”), then upon any subsequent
conversion of this Note, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon
such conversion absent such Fundamental Change, the same kind and amount of securities, cash or property as it would have been
entitled to receive upon the occurrence of such Fundamental Change if it had been, immediately prior to such Fundamental Change,
the holder of one share of Common Stock (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 Change, then the Holder shall be given
the same choice as to the Alternate Consideration it receives upon any conversion of this Note following such Fundamental Change.
In the event of a Fundamental Change, the Debtors or the successor or purchasing Person, as the case may be, shall execute with
the Holder a written agreement providing that:
This Note shall thereafter entitle the Holder to purchase the Alternate Consideration, and
In the case of any such successor or purchasing Person, upon such consolidation, merger, statutory exchange, combination,
sale or conveyance such successor or purchasing Person shall be jointly and severally liable with the Debtors for the performance
of all of the Debtors’ obligations under this Note and the other Transaction Documents.
If, in the case of
any Fundamental Change, the Alternate Consideration includes shares of stock, other securities, other property or assets of a Person
other than the Company or any such successor or purchasing Person, as the case may be, in such Fundamental Change, then such written
agreement shall also be executed by such other Person and shall contain such additional provisions to protect the interests of
the Holder as the Board of Directors of the Company shall reasonably consider necessary by reason of the foregoing. At the Holder’s
request, any successor to any of the Debtors or surviving Person in such Fundamental Change shall issue to the Holder a new Note
consistent with the foregoing provisions and evidencing the Holder’s right to convert such Note into Alternate Consideration.
The terms of any agreement pursuant to which a Fundamental Change is effected shall include terms requiring any such successor
or surviving Person to comply with the provisions of this Section 10(c) and insuring that this Note (or any such replacement
security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Change.
Adjustment of Conversion Price upon Issuance of Common Stock. If at any time this Note is outstanding, the Company issues
or sells, or in accordance with this Section 10(d) is deemed to have issued or sold, any shares of Common Stock, with the
exception of Excluded Stock, for a consideration per share less than the Conversion Price in effect immediately prior to such time
(each such sale or issuance, a “Dilutive Issuance”), then concurrent
with such Dilutive Issuance, the Conversion Price then in effect shall be reduced to a price (rounded to the nearest cent) equal
to the product of (A) the Conversion Price in effect immediately prior to such Dilutive Issuance and (B) the quotient determined
by dividing (1) the sum of (I) the product derived by multiplying the Conversion Price in effect immediately prior to such Dilutive
Issuance and the number of shares of Common Stock Deemed Outstanding immediately prior to such Dilutive Issuance plus (II) the
consideration, if any, received by the Company upon such Dilutive Issuance, by (2) the product derived by multiplying (I) the Conversion
Price in effect immediately prior to such Dilutive Issuance by (II) the number of shares of Common Stock Deemed Outstanding immediately
after such Dilutive Issuance.
All calculations under this Section 10 shall be made to the nearest cent or the nearest 1/100th of a share, as applicable.
The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account
of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock.
(f) Notice of
Adjustments. Upon the occurrence of each adjustment pursuant to this Section 10, the Company at its expense will promptly
compute such adjustment in accordance with the terms hereof and prepare and deliver to the Holder a certificate describing in reasonable
detail such adjustment and the transactions giving rise thereto, including all facts upon which such adjustment is based.
(g) Notice of
Corporate Events. If the Company (i) declares a dividend or any other distribution of cash, securities or other property in
respect of its Common Stock, including without limitation any granting of rights or warrants to subscribe for or purchase any capital
stock of the Company or any Subsidiary, (ii) authorizes or approves, enters into any agreement contemplating, or solicits stockholder
approval for, any Fundamental Change or (iii) authorizes the voluntary dissolution, liquidation or winding up of the affairs of
the Company, then the Company shall deliver to the Holder a notice describing the material terms and conditions of such transaction,
at least twenty (20) Trading Days prior to the applicable record or effective date on which a Person would need to hold Common
Stock in order to participate in or vote with respect to such transaction, and the Company will take all steps reasonably necessary
in order to insure that the Holder is given the practical opportunity to convert this Note prior to such time so as to participate
in or vote with respect to such transaction; provided, however, that the failure to deliver such notice or any defect therein shall
not affect the validity of the corporate action required to be described in such notice.
No Fractional Shares. The Company shall not issue or cause to be issued fractional Conversion Shares on conversion
of this Note. If any fraction of an Conversion Share would, except for the provisions of this Section 11, be issuable upon
conversion of this Note, the number of Conversion Shares to be issued will be rounded up to the nearest whole share.
Grant of Security Interest. This Note and payments of principal and all other obligations with respect to this
Note are hereby secured by all of the Purchased Assets. Elite hereby conveys to Holder a first priority security interest in all
Purchased Assets as set forth in the Security Agreement.
Notices. Any and all notices or other communications or deliveries hereunder (including any Conversion Notice)
shall be in writing and 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 13 prior to 5:30 p.m. (New
York City time) on a Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile number specified in this Section 13 on a day that is not a Trading Day or later
than 5:30 p.m. (New York City time) on any Trading Day, (iii) the Trading 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. The
addresses for such communications shall be: (i) if to any of the Debtors, care of Elite as set forth in the Purchase Agreement,
or (ii) if to the Holder, as set forth in the Purchase Agreement.
This Note shall be binding on and inure to the benefit of the parties hereto and their respective successors and permitted
assigns. The Debtors shall not be permitted to assign this Note and the Holder shall not be permitted to assign this Note other
than pursuant to Section 5.
Subject to Section 14(a), nothing in this Note shall be construed to give to any person or corporation other than
the Debtors and the Holder any legal or equitable right, remedy or cause under this Note.
Governing Law; Venue; Waiver Of Jury Trial. all questions concerning the
construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance
with the internal laws of the state of new JERSEY, without regard to the principles of conflicts of law thereof. each party hereby
irrevocably submits to the exclusive jurisdiction of the federal courts sitting in the county of ESSEX, CITY OF NEWARK AND OF THE
STATE COURTS SITTING IN THE COUNTY OF BERGEN, city of HACKENSACK, 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 any such court, that 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 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 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. the borrowers hereby waives all rights to a trial by jury.
The headings herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or
affect any of the provisions hereof.
In case any one or more of the provisions of this Note shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Note shall not in any way be affected or impaired thereby and the
parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute
therefor, and upon so agreeing, shall incorporate such substitute provision in this Note.
No provision of this Note may be waived or amended except in a written instrument signed, in the case of an amendment, by
the Debtors and the Holder or, or, in the case of a waiver, by the Holder. No waiver of any default with respect to any provision,
condition or requirement of this Note shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default
or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right.
(g) Each Party
and its counsel have participated fully in the review and revision of this Note and the Transaction Documents. Any rule of construction
to the effect that ambiguities are to be resolved against the drafting party shall not apply in interpreting this Agreement. The
language in this Note and the Transaction Documents shall be interpreted as to its fair meaning and not strictly for or against
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF,
the Debtors have caused this Note to be duly executed by a duly authorized officer as of the date first above indicated.
||ELITE PHARMACEUTICALS, INC
||ELITE LABORATORIES, INC.
Execution Copy: August 1, 2013
FORM OF CONVERSION NOTICE
(To be executed by the registered Holder
in order to convert a Convertible Note)
|TO:||ELITE PHARMACEUTICALS, INC.
|Re:||Secured Convertible Note due 2016 (this “Note”) issued by Elite Pharmaceuticals, Inc. and Elite Laboratories,
Inc. to Mikah Pharma LLC on or about August 1, 2013 in the original principal amount of $10,000,000.|
The undersigned hereby elects to convert
the aggregate principal amount indicated below of this Note into shares of common stock, par value $0.001 per share (the “Common
Stock”), of Elite Pharmaceuticals, Inc., a Nevada corporation (the “Corporation”), according to the
conditions hereof, as of the date written below.
|Date of Conversion:
|Aggregate Principal Amount of Note Being Converted:
|Number of Shares of Common Stock to be Issued:
|Applicable Conversion Price:
The Corporation hereby acknowledges
this Conversion Notice and hereby directs American Stock Transfer & Trust Company to issue the above indicated number of shares
of Common Stock.
||ELITE PHARMACEUTICALS, INC.
Execution Copy: August 1, 2013
This Conversion Schedule reflects conversions
of the Secured Convertible Note Due 2016 issued by Elite Pharmaceuticals, Inc. and Elite Laboratories, Inc.
|Date of Conversion
||Amount of Conversion
||Aggregate Principal Amount Remaining Subsequent to Conversion|