EXHIBIT 10.13


                           ELITE PHARMACEUTICALS, INC.
                            PLACEMENT AGENT AGREEMENT

         This Placement  Agent  Agreement dated as of August 12, 2004 is entered
into by and between  Elite  Pharmaceuticals,  Inc.  (the  "Company")  and Indigo
Securities,  LLC (the  "Placement  Agent").  The Company and the Placement Agent
shall  sometimes  collectively  be  referred to as the  Parties,  or singly as a
"Party."

         WHEREAS,  the  Company  desires to appoint the  Placement  Agent as its
agent to sell on a "best  efforts"  basis up to $6,000,000 in shares of Series A
Preferred Stock  convertible  into shares of Common Stock (subject to a 10% over
allotment  option in favor of the  Placement  Agent) and  warrants  to  purchase
shares of Common Stock (the  "Investor  Warrants" and together with the Series A
Preferred  Stock  the  "Securities")  pursuant  to a  Term  Sheet  and  offering
documents to be prepared by the Company; and

         WHEREAS,  the Placement Agent desires to accept such appointment on the
terms and conditions set forth below.

         NOW,  THEREFORE,  for good and valuable  consideration  the receipt and
sufficiency  of  which is  hereby  acknowledged,  the  Parties  hereby  agree as
follows:

         1.       DEFINITIONS.  The following  terms shall have the meanings set
                  forth below:

                  "Blue Sky"  means the laws of any state or other  jurisdiction
relating to the requirements for registering and offering securities for sale in
such state or other jurisdiction.

                  "Blue Sky Application" means any application or other document
executed  by  the  Company  specifically  for  the  purpose  of  qualifying  the
Securities  in any  state or other  jurisdiction  under the Blue Sky laws of any
such state or other jurisdiction.

                  "Closing"  shall  refer to that  event  which,  subject to the
terms hereof,  occurs when the Placement Agent has received and delivered to the
Company  subscriptions  which the  Company  has  agreed to accept for at least a
minimum of gross proceeds from Subscribers on or prior to the Termination  Date.
Upon the prior consent of the Company,  one or more  additional  Closings may be
held for  additional  subscriptions  accepted  by the  Company no later than the
Termination Date of the offering.

                  "Closing Date" means the date when the Closing occurs.

                  "Closing  Price"  means the  average  closing  sale price of a
share of Common Stock reported on the American  Stock  Exchange  during the five
(5) trading days ending two (2) trading days immediately preceding the Closing.

                  "Company" shall have the meaning set forth in the preface.

                  "Common  Stock" means common stock,  par value $0.01 per share
of the Company.

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                  "Controlling  Person"  shall have the  meaning set forth under
Section 15 of the Securities Act.

                  "Covered  Claims"  shall  refer  to the  claims  set  forth in
Section 10.1 for which a party may seek indemnification under Section 10.

                  "Exchange Act" means the Securities Exchange Act of 1934.

                  "Financial   Statements"   means  the   audited   consolidated
financial  statements  of the Company for the fiscal  years ended March 31, 2004
and  2003,   including   balance  sheets  and  related   statements  of  income,
stockholders' equity and cash flows, together with the related notes, audited by
the Company's  independent  certified  public  accountants as the same have been
filed with the SEC as part of the SEC Documents  and the unaudited  consolidated
financial  statements  of the Company for the  quarters  ended June 30, 2004 and
2003,  including balance sheets and related statements of income,  stockholders'
equity  and cash  flows as the same have been  filed with the SEC as part of the
SEC Documents.

                  "Holder"  or  "Holders"  means the  holder  of any  Securities
and/or  any  Placement  Agent  Warrant,  and the  securities  contained  in, and
underlying each of, the foregoing securities.

                  "Indemnified  Party"  refers  to a party  who is  entitled  to
indemnification  under  Section 10 and shall refer  either to (i) the  Placement
Agent,  or (ii) the  Company,  as the case may be,  and (iii)  their  respective
stockholders, directors, officers, employees, and Controlling Persons.

                  "Indemnifying  Party"  means a party who has agreed to provide
indemnification under Section 10.

                  "Intellectual  Property  Rights"  means  all  patents,  patent
applications, trademarks, service marks, copyrights, trade secrets, processes or
formulations  used or proposed to be used in the conduct of the  business of the
Company and any Subsidiaries.

                  "Investor  Warrants" means the LT Warrants and the ST Warrants
to purchase  shares of Common Stock of the Company to be issued to the Investors
in connection with the Offering.

                  "Knowledge"  shall  mean the  actual  knowledge  of the  Chief
Executive Officer and the Financial Officer of the Company.

                  "License" or "Licenses" means all licenses,  permits and other
governmental  certificates,  authorizations  and permits,  and  approvals of the
Company or any Subsidiary.

                  "LT Warrants"  means the warrants to purchase shares of Common
Stock to be issued to the Investors in connection with the Offering which expire
on the fifth anniversary of the Closing.

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                  "Material  Adverse  Effect" means any change or effect that is
materially adverse to the business, results of operations,  financial condition,
or material proprietary rights of the Company or any Subsidiary.

                  "Most   Recent   Balance   Sheet  Date"  shall  refer  to  the
consolidated  balance sheet of the Company dated as of June 30, 2004 as the same
has been filed with the SEC as part of the SEC Documents.

                  "NASDR" means the NASD Regulation, Inc.

                  "NOBO List" means the list of non-objecting  beneficial owners
of the Company's publicly traded securities.

                  "Offering"  means the  solicitation  by the Placement Agent of
Subscribers for the purchase of Securities pursuant to this Agreement,  the Term
Sheet and applicable law.

                  "Offering  Documents"  shall  refer to the Term  Sheet and all
attachments  and exhibits  thereto,  including but not limited to Elite's Annual
Report on Form 10-K for the year ended March 31, 2004 and Elite Quarterly Report
on Form 10-Q for the period ended June 30, 2004, the form of Registration Rights
Agreement, and Subscription Agreement.

                  "Offering  Period"  shall refer to the period during which the
Offering may occur as more particularly described in Section 3.1 hereof.

                  "Placement  Agent"  shall  have the  meaning  set forth in the
preface.

                  "Placement  Agent Warrants" shall refer to the warrants issued
to the  Placement  Agent  as  part of its  compensation  for  services  rendered
hereunder in the form attached hereto as EXHIBIT A.

                  "Private   Placement"  shall  mean  the  placement  of  up  to
$6,000,000 in shares of Series A Preferred  Stock  (subject to an over allotment
option in favor of the  Placement  Agent) and  Investor  Warrants  to purchase a
number of shares of Common  Stock by the  Company  through the  Placement  Agent
pursuant to this Agreement and the Term Sheet.

                  "Registration  Rights Agreement" shall refer to that agreement
by and between the Company,  on one hand and the Placement  Agent and Holders on
the other hand.

                  "SEC" refers to the Securities and Exchange Commission.

                  "SEC Documents" means any registration statement,  reports and
documents filed with the SEC by the Company.

                  "Securities" shall have the meaning set forth in the preface.

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<PAGE>

                  "Securities  Act" means the U.S.  Securities  Act of 1933,  as
amended.

                  "Selected  Dealer"  means a person or entity which is a member
of the NASDR and which is  selected  by the  Placement  Agent  pursuant  to this
Placement Agent Agreement to assist the Placement Agent in the Offering.

                  "Series A Preferred  Stock"  means a newly  created  series of
preferred stock designated by the Company as Series A Preferred Stock, par value
$0.01 per share, of the Company.

                  "ST Warrants"  means the warrants to purchase shares of Common
Stock to be issued to the Investors in connection with the Offering which expire
180 days after the date upon which a registration  statement covering the shares
of Common Stock issuable upon exercise of such warrants is declared effective by
the SEC.

                  "Subscriber" or "Subscribers" means an "accredited  investor,"
as  defined  under  Rule 501 of the  Securities  Act,  subscribing  to  purchase
Securities.

                  "Subscription  Agreement"  means  the  agreement  between  the
Company and a Subscriber for the purchase of one or more Securities, pursuant to
the Term Sheet.

                  "Termination Date" means the date set forth in Section 3.1.

                  "Term Sheet" means the document  prepared by the Company which
sets forth the terms and conditions of the Offering.


Capitalized terms used herein, not otherwise expressly defined above, shall have
the same  meanings  provided  in the  Offering  Documents  unless a contrary  or
differing meaning is provided herein.

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<PAGE>

         2.  NATURE OF OFFERING.

         2.1 BEST  EFFORTS.  The  Placement  Agent  shall  offer  to  accredited
investors,  as defined by Rule 501 under the Securities  Act, on a "best efforts
basis" during the Offering  Period (a) a minimum of $4,000,000  and a maximum of
$6,600,000  of  Series A  Preferred  Stock at a price  per  share  equal  (i) 10
multiplied  by (ii) the Closing  Price,  (b) LT Warrants to purchase a number of
shares  of Common  Stock  equal to 50% of the  number of shares of Common  Stock
issuable at the Closing  upon the  conversion  in full of all shares of Series A
Preferred  Stock at an exercise price equal to 125% of the Closing Price and (c)
ST  Warrants  to  purchase a number of shares of Common  Stock  issuable  at the
Closing upon the conversion in full of all shares of Series A Preferred Stock at
an exercise price equal to 125% of the Closing Price.  The Company and Placement
Agent shall take all necessary  steps to insure that the Offering is exempt from
registration   under  Section  4(2)  under  the  Securities  Act  and  Rule  506
thereunder.  The Offering  shall be made solely to prospective  investors  which
qualify  as  "accredited  investors"  as  defined  in  Rule  501(a)  of  Reg.  D
promulgated  under the  Securities  Act.  The Company has prepared a Term Sheet,
acceptable to the Placement  Agent,  containing  the terms and conditions of the
Offering.

         2.2 SUBSCRIPTION  PROCEEDS.  All subscriptions shall be deposited in an
escrow account at Bank of New York reference: Elite Pharmaceuticals, Inc for the
benefit of customers  established  under  Exchange  Act Rule 15c2-4  pending the
Closing or termination  of the Offering.  Prior to the Closing or termination of
the Offering,  the Company will notify the Placement  Agent as to which, if any,
subscriptions it will not accept;  provided that proceeds for  subscriptions not
accepted will be promptly returned without interest following termination of the
Offering. The Company may not accept subscriptions if the aggregate subscription
do not equal or exceed $4,000,000 or if the Closing Price is less than $1.40.

         2.3 SUBSCRIPTION  DOCUMENTS.  Each prospective  investor who desires to
purchase  Securities shall be required to deliver to a Placement Agent, one copy
of  an  executed   Subscription   Agreement,   including   applicable   investor
questionnaire,  one copy of the  Registration  Rights  Agreement,  and any other
documents  required  by the  Company  in  connection  with the  purchase  of the
Securities.

         3.   APPOINTMENT OF PLACEMENT AGENT.

         3.1  APPOINTMENT.  The Company hereby  appoints the Placement Agent its
exclusive agent (subject to Section 3.3 hereof), for the purposes of placing the
Securities with qualified Subscribers during the Offering Period pursuant to the
Offering as  described  in the Offering  Documents.  The  Offering  Period shall
commence  on the day the  Offering  Documents  are first made  available  by the
Company to the Placement  Agent for delivery in connection  with the offering of
Securities  for sale and such  appointment  shall continue until the earliest to
occur of (i) the  closing  of the sale of  $6,600,000  of the  Securities,  (ii)
September  [___],  2004(1), or (iii) the date the parties agree to terminate the
Offering (the "Termination Date").

---------------------------------------
(1) To be 30 days after the Offering Materials are complete.

                                      -5-
<PAGE>

         3.2 ACCEPTANCE OF AGENCY.  Subject to the performance by the Company of
all of its  obligations  to be performed  under this  Agreement and to the other
terms  contained in this  Agreement,  the  Placement  Agent hereby  accepts such
agency and agrees to use its best  efforts to assist the  Company in placing the
Securities with qualified  Subscribers pursuant to the Offering described in the
Offering Documents.  It is understood that the Placement Agent has no commitment
to sell any Securities.

         3.3 SELECTED  DEALERS.  The  Placement  Agent may engage other  persons
selected by the Placement  Agent and approved by the Company that are members of
NASDR,  and that have executed a selected dealer agreement in a form approved by
or  acceptable  to the  Placement  Agent to assist  the  Placement  Agent in the
Offering.  The  Placement  Agent  may  allow  such  persons  such  part  of  the
compensation and payment of expenses payable to the Placement Agent hereunder as
it shall  determine.  No compensation or other  obligation  shall be due to such
Selected Dealers by the Company. Each Selected Dealer shall be required to agree
in writing to comply with the  provisions  of, and to make the  representations,
warranties and covenants  contained in this Agreement  applicable to the sale of
Securities.

         3.4   SUBSCRIPTION   AGREEMENTS  FOR  SECURITIES.   Subscriptions   for
Securities  shall be evidenced by the execution by Subscribers of a Subscription
Agreement in the form of Exhibit B hereto.  No  Subscription  Agreement shall be
effective unless and until it is accepted by the Company.

         3.5  RIGHT OF FIRST  OFFER TO  SUBSEQUENT  OFFERINGS.  If,  during  the
eighteen  (18)  month  period  immediately  following  the final  closing of the
Offering  (the "FO Period"),  the Company  seeks to engage a placement  agent or
finder to assist  the  Company in the  placement  of any  equity  securities  or
securities  convertible  into equity  securities  of the Company  (other than an
underwritten public offering) to any party that is not an affiliate at such time
or  shareholder  of the  Company as of the date of this  Agreement,  the Company
shall  provide to the  Placement  Agent a written  summary of the terms for such
offering  (a " Offering  Notice").  During  the ten (10) day period  immediately
following  the delivery of the Offering  Notice,  the Company and the  Placement
Agent shall  negotiate in good faith, on an exclusive  basis,  the terms of such
offering. If, at the end of such ten (10) day period, the Placement Agent elects
to assist in such  offering,  the Placement  Agent shall (i) provide the Company
with written  notice of its election to  participate  (a "Election  Notice") and
include in such notice the agreed upon terms of such  offering  and (ii) provide
to the Company  evidence  of  commitments  for at least the minimum  prospective
offering  within thirty (30) days after  delivery to the Company of the Election
Notice.  If either  of the  conditions  set  forth in clause  (i) or (ii) of the
previous  sentence  is not  satisfied  with  respect  to an  prospective  equity
financing  during  the FO  Period,  the  Company  may  enter  into  a  placement
arrangement with any third party or directly with prospective investors on terms
no more favorable to the prospective investors or placement agent than the terms
contained in the Offering Notice.


         4.   REPRESENTATIONS  AND  WARRANTIES  OF  THE  COMPANY.   The  Company
represents and warrants to the Placement Agent and each Selected Dealer, if any,
which  representations  and  warranties  which are true and correct and shall be
true and correct as of the time of the Closing, as follows:

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<PAGE>

         4.1 SECURITIES LAW COMPLIANCE. The Offering Documents shall not contain
any untrue  statement  of a  material  fact or omit to state any  material  fact
necessary in order to make the statements therein, in light of the circumstances
in which they were made, not misleading.  If at any time prior to the completion
of the Offering or other  termination of this Agreement any event shall occur as
a result of which it might become  necessary to amend or supplement the Offering
Documents so that they do not include any untrue  statement of any material fact
or omit to state any material  fact  necessary  in order to make the  statements
therein,  in light of the  circumstances  then  existing,  not  misleading,  the
Company shall promptly notify the Placement Agent and shall supply the Placement
Agent with amendments or supplements  correcting such statement or omission. The
Company shall also provide the Placement  Agent for delivery to all offerees and
their representatives,  if any, any information, documents and instruments which
the  Placement  Agent and the Company  deem  necessary  to comply with state and
federal law applicable to the offering.

         4.2 ORGANIZATION.  The Company is a corporation duly organized, validly
existing  and in good  standing  under the laws of the State of Delaware and has
all requisite power and authority to own and lease its  properties,  to carry on
its business as currently  conducted,  to execute and deliver this Agreement and
to carry out the  transactions  contemplated by this Agreement,  as appropriate,
and is duly  licensed or  qualified to do business as a foreign  corporation  in
each  jurisdiction  in which the conduct of its business or ownership or leasing
of is properties requires it to be so qualified,  except where the failure to be
so qualified would not have a Material Adverse Effect.

         4.3  CAPITALIZATION.  The authorized,  issued and  outstanding  capital
stock of the Company prior to the consummation of the transactions  contemplated
hereby is as set forth in the  Offering  Documents  and the SEC  Documents.  All
issued and outstanding shares of common stock of the Company are validly issued,
fully  paid and  nonassessable  and have not been  issued  in  violation  of the
preemptive  rights  of any  stockholder  of the  Company.  All  prior  sales  of
securities of the Company were either  registered  under the  Securities Act and
applicable state securities laws or exempt from such registration.

         4.4 DERIVATIVE SECURITIES;  RIGHTS. Except as disclosed on SCHEDULE 4.4
hereof or as set forth in the most  recent  Form 10-Q or Form 10-K  filed by the
Company, there are not, nor shall there be immediately prior to the Closing, any
outstanding warrants, options,  agreements,  convertible securities,  preemptive
rights to subscribe  for or other  commitments  pursuant to which the Company or
any of its Subsidiaries is, or may become,  obligated to issue any shares of its
capital stock or other  securities  of the Company and this  Offering  shall not
cause any anti-dilution adjustments to such securities or commitments. Since the
most recent Form 10-Q or Form 10-K filed by the Company,  there has not been any
additional re-pricing of any outstanding,  warrants, options or other securities
of the Company.

         4.5  SUBSIDIARIES  AND  INVESTMENTS.  SCHEDULE 4.5 sets forth as of the
date hereof for each Subsidiary of the Company (i) its name and  jurisdiction of
incorporation;  (ii) the number of shares of  authorized  capital  stock of each
class of its capital stock; (iii) the number of issued and outstanding shares of
each class of its capital stock, all of which is owned by the Company;  and (iv)
its directors and officers.  Each  Subsidiary is a corporation  duly  organized,
validly existing, and in
in

                                      -7-
<PAGE>

good standing  under the laws of the  jurisdiction  of its  incorporation.  Each
Subsidiary is duly authorized to conduct  business and is in good standing under
the laws of each jurisdiction where such qualification is required, except where
the failure shall not have a Material  Adverse Effect.  Each Subsidiary has full
power and authority and all licenses,  permits, and authorizations  necessary to
carry on the businesses in which it is engaged andwhich it presently proposes to
engage and to own and use the properties  owned and used by it, except where the
failure shall not have a Material Adverse Effect. The Company has made available
to the Placement  Agent correct and complete copies of the charter and bylaws of
each Subsidiary (as amended to date).  All of the issued and outstanding  shares
of capital stock of each  Subsidiary  has been duly  authorized  and are validly
issued,  fully paid,  and  nonassessable.  The Company  holds of record and owns
beneficially all of the outstanding shares of each Subsidiary, free and clear of
any restrictions on transfer (other than  restrictions  under the Securities Act
and state  securities  laws),  taxes,  security  interests,  options,  warrants,
purchase rights, contracts,  commitments,  equities,  claims, and demands. There
are  no  outstanding  or  authorized   options,   warrants,   purchase   rights,
subscription rights,  conversion rights,  exchange rights, or other contracts or
commitments  that could  require any of the Company or any  Subsidiary  to sell,
transfer,  or otherwise  dispose of any capital  stock of any of a Subsidiary or
that could require any Subsidiary to issue,  sell, or otherwise  cause to become
outstanding  any of its  own  capital  stock.  There  are no  outstanding  stock
appreciation,  phantom  stock,  profit  participation,  or similar  rights  with
respect  to any  Subsidiary.  There  are no  voting  trusts,  proxies,  or other
agreements or understandings  with respect to the voting of any capital stock of
any  Subsidiary.  The minute  books  (containing  the records of meetings of the
stockholders,  the  board  of  directors,  and any  committees  of the  board of
directors),  the stock  certificate  books,  and the stock  record books of each
Subsidiary  are correct and complete.  None of the  Subsidiaries  are in default
under or in violation of any provision of their  respective  charters or bylaws.
Neither the Company nor any Subsidiary controls,  directly or indirectly, or has
any direct or indirect equity  participation  in any  corporation,  partnership,
trust, or other business association which is not a Subsidiary.

         4.6  FINANCIAL  STATEMENTS.  The Financial  Statements  included in the
Offering  Documents are: (i) in accordance with all books,  records and accounts
of the  Company;  (ii) are true,  correct  and  complete;  and  (iii)  have been
prepared  in  accordance   with  generally   accepted   accounting   principles,
consistently  applied.  The Financial Statements fairly present, in all material
respects,  the results of operations and cash flow for the periods covered.  The
Company has no material  liabilities,  contingent or otherwise,  other than: (a)
liabilities reflected on the Most Recent Balance Sheet; (b) liabilities incurred
in the  ordinary  course of business  subsequent  to the date of such  Financial
Statements;  and (c) obligations under contracts and commitments incurred in the
ordinary course of business and not required under generally accepted accounting
principles to be reflected in such Financial Statements.

         4.7 ABSENCE OF CHANGES.  Since the Most Recent  Balance  Sheet,  to the
Company's Knowledge, neither the Company nor any Subsidiary has (i) incurred any
liabilities or obligations,  direct or contingent, not in the ordinary course of
business,  (ii)  entered  into any  transaction  not in the  ordinary  course of
business, which is material to the business of the Company or any Subsidiary, or
(iii) incurred any adverse change or any  development  involving,  so far as the
Company or any Subsidiary can now reasonably foresee which would have a Material
Adverse  Effect,  and neither the Company nor any  Subsidiary has become a party
to, and neither the business  nor the property of the Company or any  Subsidiary
has become the subject of, any litigation,

                                      -8-
<PAGE>

whether or not in the ordinary course of their  respective  businesses.  Nor has
there been any change in the capital  stock of, or any  incurrence  of long-term
debt by the Company or any Subsidiary,  or any issuance of options,  warrants or
other rights to purchase the capital stock of the Company or any Subsidiary.

         4.8 TITLE.  Except as  disclosed on SCHEDULE 4.8 hereto or as set forth
in the SEC  Documents,  each of the  Company and the  Subsidiaries  has good and
marketable  title to their respective  properties and assets,  free and clear of
all liens,  charges,  encumbrances or restrictions,  which would have a Material
Adverse  Effect;  all of the leases and subleases under which the Company or any
Subsidiary is the lessor or sublessor of properties or assets or under which the
Company or any Subsidiary  holds properties or assets as lessee or sublessee are
in full force and effect,  and neither the Company  (nor any  Subsidiary)  is in
default in any material  respect with respect to any of the terms or  provisions
of any of such leases or subleases,  and no material  claim has been asserted by
anyone adverse to rights of the Company or any Subsidiary as lessor,  sublessor,
lessee or sublessee  under any of the leases or subleases  mentioned  above,  or
affecting or questioning the right of the Company or any Subsidiary to continued
possession of the leased or subleased premises or assets under any such lease or
sublease.  To its Knowledge,  the Company and each Subsidiary owns or leases all
such  properties  as  are  necessary  to  their  respective  operations  as  now
conducted.

         4.9 LITIGATION.  Except as set forth in the SEC Documents,  there is no
action, suit, investigation,  inquiry or similar governmental proceeding,  claim
or  proceeding  at law or in equity by or before  any  arbitrator,  governmental
instrumentality  or other agency now pending or, to the  Knowledge of any of the
Company or its  Subsidiaries,  threatened  against the Company or any Subsidiary
(or basis  therefore known to the Company or any Subsidiary) the adverse outcome
of which  would have a Material  Adverse  Effect.  Neither  the  Company nor any
Subsidiary is subject to any judgment,  order, writ, injunction or decree of any
federal,  state,  municipal or other governmental  instrumentality,  commission,
board, bureau, agency or instrumentality, domestic or foreign which would have a
Material Adverse Effect.

         4.10 NON-DEFAULT; NON-CONTRAVENTION. Neither the Company nor any of the
Subsidiaries is in breach of, or in default under,  any term or provision of any
indenture, mortgage, deed of trust, lease, note, loan or credit agreement or any
other  agreement or instrument  evidencing an obligation for borrowed  money, or
any other  agreement or  instrument to which it is a party or by which it or any
of its properties  may be bound or affected.  Neither the Company nor any of the
Subsidiaries  is in  violation  of any  provision of its charter or Bylaws or in
violation of any franchise,  license, permit,  judgment,  decree or order, or in
violation of any statute,  rule or regulation that would  individually or in the
aggregate have a Material Adverse Effect.  Neither the execution and delivery of
this  Agreement,  the  Subscription  Agreements,  nor the  issuance  and sale or
delivery of the securities  comprising  the  Securities and the Placement  Agent
Warrants, nor the consummation of any of the transactions contemplated herein or
in the  Subscription  Agreements,  or the Term Sheet,  nor the compliance by the
Company with the terms and provisions hereof or thereof,  has conflicted with or
will conflict with, or has resulted in or will result in a breach of, any of the
material  terms and  provisions  of, or has  constituted  or will  constitute  a
default  under,  or has resulted in or will result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the Company or
any of the  Subsidiaries  or pursuant to the terms of any  indenture,  mortgage,
deed of  trust,  note,  loan or  credit  agreement  or any  other  agreement  or
instrument  evidencing an obligation for borrowed  money, or any other agreement
or instrument to which the Company or any of the

                                      -9-
<PAGE>

Subsidiaries  may be bound or to which  any of the  property  or  assets  of the
Company or any of the  Subsidiaries  is subject;  nor will such action result in
any  violation of the  provisions of the charter or the Bylaws of the Company or
any of the  Subsidiaries or, assuming the due performance by the Placement Agent
of its  obligations  hereunder,  any  statute or any order,  rule or  regulation
applicable  to the  Company  or any of the  Subsidiaries  of any court or of any
foreign,  federal,  state or other regulatory authority or other government body
having jurisdiction over the Company or any of the Subsidiaries.

         4.11 TAXES. Each of the Company and its Subsidiaries has filed all U.S.
federal,  state, local and foreign tax returns which are required to be filed by
each of them and all such returns are true and correct in all material respects.
The Company and each  Subsidiary  has paid all taxes pursuant to such returns or
pursuant to any assessments  received by any of them or by which any of them are
obligated to withhold  from  amounts  owing to any  employee,  creditor or third
party.  The Company and each Subsidiary has properly  accrued all taxes required
to be accrued  and/or paid,  except where the failure  would not have a Material
Adverse  Effect.  The tax returns of the Company  and its  Subsidiaries  are not
currently being audited by any state, local or federal authorities.  Neither the
Company nor any Subsidiary has waived any statute of limitations with respect to
taxes or agreed to any  extension of time with respect to any tax  assessment or
deficiency.

         4.12 COMPLIANCE WITH LAWS, LICENSES,  ETC. To the best of the Company's
Knowledge,  neither the Company nor any  Subsidiary  has received  notice of any
violation of or noncompliance with any federal,  state, local or foreign,  laws,
ordinances, regulations and orders applicable to its business (including but not
limited to all  applicable  laws and  regulations  relating to the protection of
human health and safety,  the  environment  or hazardous or toxic  substances or
wastes, pollutants or contaminants), which has not been cured, the violation of,
or noncompliance  with which would have a Material  Adverse Effect.  The Company
and each Subsidiary has all Licenses required by every federal,  state and local
government  or  regulatory  body for the  operation of its business as currently
conducted and the use of its properties, except where the failure to be licensed
would not have a Material  Adverse  Effect.  The  Licenses are in full force and
effect and no violations are or have been recorded in respect of any License and
no proceeding is pending or threatened to revoke, modify or limit any thereof.

         4.13  AUTHORIZATION  OF AGREEMENT,  ETC.  This  Agreement has been duly
executed  and  delivered  by  the  Company  and  the  execution,   delivery  and
performance  by the Company of this  Agreement,  the Offering  Documents and the
Placement  Agent  Warrants have been duly  authorized by the Company's  board of
directors and no further consent or  authorization  of its board of directors or
its stockholders is required by the Company and constitute the legal,  valid and
binding  obligations  of the  Company,  enforceable  in  accordance  with  their
respective terms,  except as enforceability  may be limited by general equitable
principles,  bankruptcy,  insolvency,  reorganization,  moratorium or other laws
affecting creditors' rights generally.

         4.14  AUTHORIZATION  OF SECURITIES AND PLACEMENT  AGENT  WARRANTS.  The
Securities  and the  Placement  Agent  Warrants,  when issued and  delivered  in
accordance with this Agreement, and the

                                      -10-
<PAGE>

shares of common stock underlying the Placement Agent Warrants,  when issued and
delivered upon exercise of the Placement Agent Warrants shall be validly issued,
fully  paid,  and  nonassessable  and shall not be  issued in  violation  of any
preemptive rights of stockholders.

         4.15  EXEMPTION  FROM  REGISTRATION.  Assuming  (i) the accuracy of the
information   provided  by  the  respective   Subscribers  in  the  Subscription
Documents,  and (ii) that each Placement Agent shall comply in all respects with
the  provisions of Rule 506 Regulation D promulgated  under the Securities  Act,
the offer and sale of the  Securities and Placement  Agent Warrants  pursuant to
the terms of this Agreement shall be exempt from the  registration  requirements
of the Securities Act and the rules and regulations promulgated thereunder.  The
Company is not  disqualified  from the exemption under Regulation D by virtue of
the disqualifications contained in Rule 507 promulgated thereunder.

         4.16 BROKERS.  Neither the Company nor any of its officers,  directors,
employees or  stockholders  has employed any broker or finder in connection with
the transactions contemplated by this Agreement other than the Placement Agent.

         4.17  TITLE  TO  SECURITIES  AND  PLACEMENT  AGENT  WARRANTS.  When the
certificates  representing  the Securities and the Placement Agent Warrants have
been duly  delivered  and payment  shall have been made  therefor by the Holders
and/or the Placement Agent as the case may be (i) the Subscribers  shall receive
good title to the  Securities,  and the Placement Agent shall receive good title
to the Placement Agent Warrants,  (and the underlying common stock upon exercise
of the Investor  Warrants or Placement Agent Warrants).  All such title shall be
free and clear of all liens, security interests, pledges, charges, encumbrances,
stockholders' agreement, and voting trusts (with the exception of claims arising
or through the acts of the Holders and except as arising from applicable federal
and  securities  laws),  and the Company  shall have paid all taxes,  if any, in
respect of the original issuance thereof. .

         4.18  RIGHTS  OF  FIRST  REFUSAL.  Except  for  rights  granted  to the
Placement Agent pursuant to Section 7.3 hereof,  no other person,  firm or other
business entity is a party to any agreement, contract or understanding,  written
or oral  entitling  such  party to a right  of first  refusal  with  respect  to
securities to be issued by the Company.

         4.19  INTELLECTUAL  PROPERTY.  The Company owns or possesses  valid and
binding  licenses or other  rights to use,  whether or not  registered,  all its
Intellectual   Property.  The  Intellectual  Property  constitutes  all  of  the
intellectual  property  necessary to operate the Company's business as presently
conducted. Neither the Company nor any Subsidiary has received any notice of any
claims, nor do any of them have any Knowledge of any threatened claims, and none
of them know of any facts which  would form the basis of any claim,  asserted by
any person to the effect that the sale or use of any product or process now used
or offered by the Company or any Subsidiary or proposed to be used or offered by
the  Company  or any  Subsidiary  infringes  upon the use of any  such  patents,
trademarks,  copyrights,  technology,  know-how, processes or other intellectual
property of another person. To the best of the Company's Knowledge, no person is
infringing  upon the  Intellectual  Property.  The Company has taken  reasonable
security  measures  to protect  the  secrecy,  confidentiality  and value of the
Intellectual  Property.  No  person,  other  than the  Company,  owns or has any
proprietary,  financial or other  interest,  direct or indirect,  in whole or in
part, in any Intellectual Property.

                                      -11-
<PAGE>

         4.20 FOREIGN CORRUPT PRACTICES. To the best of the Company's Knowledge,
neither the  Company nor any  Subsidiary  nor to the  Knowledge  of any of their
respective  directors,  officers,  agents,  employees or other persons acting on
their behalf, in the course of their actions for, or on behalf of the Company or
any Subsidiary,  used any corporate  funds,  which would have a Material Adverse
Effect for any unlawful  contribution,  gift,  entertainment  or other  unlawful
expenses  relating to political  activity;  made any direct or indirect unlawful
payment  to any  foreign  or  domestic  government  official  or  employee  from
corporate  funds;  violated or is in violation  of any  provision of the Foreign
Corrupt Practices Act of 1977, as amended;  or made any bribe,  rebate,  payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.

         4.21  FILINGS  WITH THE SEC.  The Company has made all filings with the
SEC that it has been required to make under the  Securities Act and the Exchange
Act. All documents  required to be filed as exhibits to the SEC  Documents  have
been so filed, and all material contracts so filed as exhibits are in full force
and effect,  except those which have expired in accordance with their terms, and
neither the Company nor any of its  subsidiaries is in material default of these
material  contracts.  Each of the  Company's  SEC  Documents has complied in all
material  respects with the  Securities Act and the Exchange Act in effect as of
their  respective  dates of filing.  None of the Company's SEC Documents,  as of
their respective filing dates, 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  made  therein,  in light of the  circumstances
under which they were made, not misleading.

         5.  REPRESENTATIONS  AND WARRANTIES OF PLACEMENT  AGENT.  The Placement
Agent represents, warrants and covenants to the Company that:

         5.1 The Placement Agent is a member in good standing of the NASDR., and
is duly registered as a broker-dealer under the Exchange Act, and under the laws
of each  state in which we propose to offer the  Securities,  except  where such
registration would not be required by law.

         5.2  Each  purchaser  of  Securities  will  execute  the   Subscription
Agreement  in the form  attached as Exhibit B to the Term Sheet.  The  Placement
Agent will have no reason to believe that the persons  executing  such Agreement
do not have the qualifications set forth therein.

         5.3 This Agreement when accepted and approved will be duly  authorized,
executed  and  delivered  by the  Placement  Agent  and is a valid  and  binding
agreement on its part in accordance with its terms, except as enforceability may
be  limited   by   general   equitable   principles,   bankruptcy,   insolvency,
reorganization, moratorium or other laws affecting creditors' rights generally.

         5.4 The consummation of the transactions contemplated by the Term Sheet
related  to the  offering  will not  result  in any beach of any of the terms or
conditions of or constitute a default  under any  indenture,  agreement or other
instrument  to which  the  Placement  Agent is a party,  or  violate  any  order
applicable to the  Placement  Agent of any federal or state  regulatory  body or
administrative agency having jurisdiction over it or its property.

                                      -12-
<PAGE>

         5.5 Until the termination of this Agreement, if any event affecting the
Company or the Placement  Agent shall occur which,  in the opinion of counsel to
the Company, should be set forth in a supplement or amendment to the Term Sheet,
the  Placement  Agent agrees to distribute  each  supplement or amendment to the
Term Sheet to each person who has  previously  received a copy of the Term Sheet
from the  Company or the  Placement  Agent and  further  agrees to include  each
supplement or amendment in all future deliveries of the Term Sheet.

         5.6      In recommending to an investor the purchase of the Securities,
                  the Placement Agent shall:

         (a)      have   reasonable   grounds  to  believe,   on  the  basis  of
                  information   obtained  from  the  investor   concerning   his
                  investment objectives, other investments,  financial situation
                  and needs, any and other information known by it, that:

                  (1)      the  investor is or will be in a  financial  position
                           appropriate to enable him to realize to a significant
                           extent the benefits described in the Term Sheet.

                  (2)      the  investor is an  accredited  investor and able to
                           sustain the risks  inherent in the  investment in the
                           Securities,  including loss of investment and lack of
                           liquidity; and

                  (3)      the   investment   is  otherwise   suitable  for  the
                           investor; and

         (b)      maintain in the  Placement  Agent's  files for a period of six
                  years  following the Closing  documents  disclosing  the basis
                  upon which the  determination of suitability was reached as to
                  each investor.

         5.7 The Placement Agent shall not execute any  transaction  relating to
the Company in a  discretionary  account  without prior written  approval of the
transaction by the customer.

         5.8 The Placement  Agent has  reasonable  grounds to believe,  based on
information  made available to it by the Company through the Term Sheet or other
materials,  that all material facts are adequately and accurately  disclosed and
provide a basis for evaluating the Company.

         5.9 Prior to executing a purchase transaction the Placement Agent shall
inform the prospective investor of all pertinent facts relating to the liquidity
and marketability of the Securities during the term of the investment.

         6. CLOSING; CONDITIONS OF CLOSING.

         6.1 CLOSING.  The Closing  shall be subject to this Section 6 and shall
take  place at such  place  as the  parties  shall  mutually  agree,  as soon as
practicable.  At the Closing,  payment for the Securities issued and sold by the
Company shall be made against delivery of the Securities.  In addition,  a final
Closing (if applicable) shall occur as soon as practicable following termination
of the Offering.

                                      -13-
<PAGE>

         6.2 CONDITIONS TO PLACEMENT AGENT'S OBLIGATIONS. The obligations of the
Placement Agent hereunder shall be subject to the representations and warranties
of the Company and each  Subsidiary  contained  herein being true and correct in
all material  respects as of the date hereof and as of the Closing  Date, to the
performance  by the Company of its  obligations  hereunder  and to the following
additional conditions:

              6.2.1 NO MATERIAL  MISSTATEMENTS.  The  Placement  Agent shall not
have  notified  the Company  that the Blue Sky  qualification  materials  or the
Offering Documents, or any supplement thereto, contains an untrue statement of a
fact which in its opinion is  material,  or omits to state a fact,  which in its
opinion is material and is necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.

              6.2.2 RECEIPT OF CONFIDENTIALITY AGREEMENTS FROM SUBSCRIBERS.  The
Company shall have received  from each  Subscriber  prior to the delivery of the
Offering  Documents to any  Subscriber,  a  confidentiality  agreement from such
Subscriber in form and substance satisfactory to the Company and its counsel and
which  confidentiality  agreement  shall meet the  requirements of Regulation FD
under the Exchange Act.

              6.2.3 COMPLIANCE WITH AGREEMENTS.  The Company shall have complied
in all material respects with this Agreement and satisfied all conditions on its
part to be performed or satisfied hereunder at or prior to the Closing.

              6.2.4 CORPORATE ACTION. The Company shall have taken all necessary
corporate action, including,  without limitation,  obtaining the approval of the
Company's board of directors,  for the execution and delivery of this Agreement,
the performance by the Company of its obligations  hereunder and the offering of
the Securities and Placement Agent Warrants.

              6.2.5   CERTIFICATES.   The   Placement   Agent  shall  receive  a
certificate of the Company,  signed by the President and Chief Financial Officer
thereof,  that the representations and warranties  contained in Section 4 hereof
are true and  accurate in all  respects  at the Closing  with the same effect as
though expressly made at the Closing.

              6.2.6 BRING-DOWN CERTIFICATES.  If there is more than one Closing,
then at each such  Closing  there  shall be  delivered  to the  Placement  Agent
updated certificates as described in Section 6.2.5 above.

              6.2.7  EXECUTION OF  AGREEMENTS.  The Company shall have delivered
duly  executed  counterparts  of  the  Registration  Rights  Agreement  and  the
Placement Agent Warrants.

              6.2.8 OPINION OF COUNSEL. On the Closing Date, the Placement Agent
shall  receive  the  opinion  of either  the  Company's  general  counsel or the
Company's  securities  counsel,  in  substantially  the form attached  hereto as
EXHIBIT 6.2.8.

              6.2.9.  SUPPORTING DOCUMENTS. On or prior to the Closing Date, the
Placement

                                      -14-
<PAGE>

Agent and its counsel shall have been furnished such documents, certificates and
opinions as they may  reasonably  request  for the  purpose of enabling  them to
review or pass upon the  matters  referred to in Section  6.2.8,  or in order to
evidence   the   accuracy,   completeness   or   satisfaction   of  any  of  the
representations, warranties or conditions herein contained.

              6.2.10.  NO ADVERSE  CHANGES.  On and prior to the  Closing  Date,
there shall have been no  transaction,  not in the ordinary  course of business,
entered  into by the  Company  from the  latest  date as of which the  financial
condition  of the  Company  is set  forth  in the  Offering  Documents  which is
material to the Company which has not been  disclosed to the Placement  Agent in
writing;  (ii) the Company  shall not be in default  under any  provision of any
instrument  relating  to any  outstanding  indebtedness;  (iii) no assets of the
Company  shall have been pledged or  mortgaged as of the date hereof,  except as
disclosed in this  Agreement or as  indicated  or  contemplated  in the Offering
Documents;  and (iv) no action, suit or proceeding,  at law or in equity,  shall
have been  pending or  threatened  against the Company or  affecting  any of its
respective  properties or businesses  before or by any court of federal or state
commission,   board  or  other  administrative  agency  wherein  an  unfavorable
decision,  ruling or finding  could  materially  adversely  affect the  business
operations,  prospects,  financial condition or income of the Company, except as
set forth in the Offering Documents.

         6.3  CONDITIONS TO THE COMPANY'S  OBLIGATIONS.  The  obligations of the
Company hereunder shall be subject to the  representations and warranties of the
Placement  Agent  contained  herein being true and correct in all respects as of
the date hereof and as of the Closing Date, to the  performance by the Placement
Agent of its obligations hereunder and to the following additional conditions:

              6.3.1 DUE QUALIFICATION OR EXEMPTION. The Offering contemplated by
this   Agreement  and  the  Placement   Agent  Warrants  shall  be  exempt  from
registration  under Section 4(2) of the  Securities  Act and Rule 506 thereunder
and from  registration  or  qualification  under the applicable Blue Sky laws as
provided in Section 7 hereof not later than the Closing,  all  required  filings
shall have been made with the SEC and  applicable  Blue Sky  administrators  not
applicable to a private placement.

              6.3.2 RECEIPT OF CONFIDENTIALITY AGREEMENTS FROM SUBSCRIBERS.  The
Company shall have received  from each  Subscriber  prior to the delivery of the
Offering  Documents to any  Subscriber,  a  confidentiality  agreement from each
Subscriber in form and substance satisfactory to the Company and its counsel and
which  confidentiality  agreement  shall meet the  requirements of Regulation FD
under the Exchange Act.

              6.3.3 COMPLIANCE WITH  AGREEMENTS.  The Placement Agent shall have
complied with all  agreements  and  satisfied  all  conditions on its part to be
performed or satisfied hereunder at or prior to the Closing.

         7. BLUE SKY.  Prior to the Closing,  a summary Blue Sky survey shall be
prepared by counsel to the  Placement  Agent for the states listed on SCHEDULE 7
(as  it  may  be  supplemented,   summarizing  the  pre-filing  and  post-filing
requirements of each such state in which the Securities are to be offered and it
is understood that such survey may be based on or rely upon the

                                      -15-
<PAGE>

representations  and warranties of the Subscribers as to their  qualification as
accredited investors.

         8. PLACEMENT AGENT  COMPENSATION.  Upon the Closing,  the Company shall
pay to the Placement Agent the following compensation:

         8.1  COMMISSIONS.  Simultaneous  with  payment for and  delivery of the
Securities,  at the Closing as provided in Section 6.1 above,  the Company shall
pay the Placement Agent an aggregate commission of 10% percent of the gross cash
proceeds of the  subscription  for Securities  accepted by the Company as of the
Closing.

         8.2 EXPENSES.  The Company shall pay the actual  reasonable  legal fees
and expenses of the counsel to the Placement Agent in an aggregate amount not to
exceed  (i) if the  Offering  closes  $75,000 or (ii) if the  Offering  does not
close, $40,000, in each case, upon provision of reasonable evidence of such fees
and expenses.

         8.3 BLUE SKY EXPENSES.  The Placement  Agent's  attorneys shall prepare
all forms to be filed with state  securities  regulators in connection with this
Offering.  The Company shall advance the Blue Sky filing fees as incurred and at
the Closing of the Offering,  the Company shall pay all related  attorneys  fees
and expenses of Placement  Agent's  counsel  incurred as in connection with Blue
Sky filings up to a maximum of [$5,000].

         8.4 PLACEMENT  AGENT  WARRANTS.  At the Closing of this  Offering,  the
Company  shall grant to the  Placement  Agent (or their  respective  designees),
Placement Agent Warrants to purchase a number of shares of Common Stock equal to
10% of the  total  number of shares of  Common  Stock  into  which the  Series A
Preferred  Stock sold in the Offering is  convertible as of the Closing (but not
any of the Investor Warrants). The Placement Agent Warrants shall be exercisable
at a price equal to 100% of the Closing Price.

         9. COVENANTS OF THE COMPANY.

         9.1 USE OF PROCEEDS. The Company shall not use any of the proceeds from
the  Offering to repay any  indebtedness  to any current  executive  officers or
directors of the Company.

         9.2 EXPENSES OF OFFERING.  Whether or not the transactions contemplated
hereunder are  consummated,  the Company shall be responsible for, and shall pay
all costs and expenses  directly  incurred by it in connection with the proposed
Offering including,  but not limited to, its legal fees, the costs of preparing,
printing or  photocopying  and  binding,  filing and  distributing  the Offering
Documents and all amendments,  supplements and exhibits thereto,  and the filing
fees in connection with Blue Sky Applications.

         9.3  NOTIFICATION.   The  Company  shall  notify  the  Placement  Agent
immediately,  and in writing (i) when any event shall have  occurred  during the
period  commencing  on the date hereof and ending on the later of the Closing or
the Termination  Date as a result of which the Offering  Documents would include
any untrue  statement  of a  material  fact or omit to state any  material  fact
necessary to make the statements therein not misleading,  (ii) whenever it files
any report or other document with the SEC or it receives  notice that any person
or entity has filed any Schedule 13D or

                                      -16-
<PAGE>

other  documents  with the SEC  relating  to the  Company,  and/or  (iii) of the
receipt  of any  notification  with  respect  to the  modification,  rescission,
withdrawal,  suspension of any exemption from registration or qualification,  in
any jurisdiction. The Company shall use its best efforts to prevent the issuance
of any such modification, rescission, withdrawal, or suspension and, if any such
modification, rescission, withdrawal, stop order or suspension is issued and you
so request, to obtain the lifting thereof as promptly as possible.

         9.4 BLUE SKY.  The  Company  shall use its best  efforts  to qualify or
register  the  shares  of  common  stock  contained  in the  Securities  and the
Placement  Agent Warrants for offering and sale under, or establish an exemption
from such  qualification or registration  under, the securities or Blue Sky laws
of such jurisdictions as the Placement Agent may reasonably  request;  PROVIDED,
HOWEVER  that the  Company  shall  not be  obligated  to  qualify  as a  foreign
corporation or as a dealer in securities in any  jurisdiction in which it is not
so  qualified.  The Company shall not  consummate  any sale of Securities or the
Placement Agent Warrants in any  jurisdiction in which it is not so qualified or
in any manner in which such sale may not be lawfully  made.  The  Company  shall
file such consents to service of process or other  documents as may be requested
by the  Placement  Agent and which,  in the  opinion of the  Placement  Agent or
counsel to the  Placement  Agent,  are necessary or advisable in order to effect
such registration or qualification and continue the same in effect for so long a
period as may be necessary to complete the distribution,  PROVIDED,  HOWEVER, in
each  jurisdiction  where the Securities or Placement  Agent Warrants shall have
been  registered  or  qualified as above,  the Company  shall make and file such
statements  and  reports  as are or may be  required  under  the  laws  of  such
jurisdiction  to continue such  qualification  in effect for so long a period as
the Offering in such jurisdiction is in effect.

         9.5 FORM D FILING.  The  Company  shall file five copies of a Notice of
Sales of  Securities  on Form D with the SEC prior to the Closing and shall file
promptly such amendments  thereto on Form D as shall become necessary.  It shall
also  comply  with any  filing  requirement  imposed by the laws of any state or
jurisdiction  in which offers and sales of  Securities  or the  Placement  Agent
Warrants are made prior to the Closing.  The Company shall furnish the Placement
Agent with copies of all such filings.

         9.6 REPORTS.  The Company shall furnish to the Placement Agent,  during
the period ending three YEARS from the  Termination  Date, that number of copies
of such  of the  following  documents  as the  Placement  Agent  may  reasonably
request: (i) as soon as they are available, a copy of all communications sent to
holders of the Company's  securities other than reports filed with SEC; and (ii)
such other  information of a public nature as a Placement Agent may from time to
time reasonably request.

         9.7 NO  ADDITIONAL  OFFERS  OR  SALES.  Until  the  termination  of the
Offering,  the  Company  shall not  without  the prior  written  consent  of the
Placement Agent,  offer, issue, sell, contract to sell, grant any option for the
sale of, or otherwise  dispose of, directly or indirectly,  any shares of common
stock, preferred stock or warrants (or any security or other instrument which by
its terms is convertible  into,  exercisable  for, or exchangeable for shares of
common stock) except as permitted or  authorized by this  Agreement,  except for
shares of common  stock  issuable  upon  exercise  of a  previously  outstanding
warrant or option or the granting of options under the Stock Option Plan.

                                      -17-
<PAGE>

         9.8 TRANSFER OF THE PLACEMENT  AGENT  WARRANTS.  The Company shall upon
the Closing or promptly  following the  Termination  Date,  cancel the Placement
Agent Warrants upon  presentment and transfer them to persons  designated by the
Placement Agent as instructed by the Placement Agent in writing.

         10.  INDEMNIFICATION.

         10.1 The Company  agrees to indemnify  and hold  harmless the Placement
Agent  and  each  Selected  Dealer,  if any  (collectively,  referred  to as the
Placement  Agent in this Section 10.1) and  Indemnified  Parties against any and
all  losses,  liabilities,  claims,  damages  and  expenses  whatsoever,  and to
reimburse the Placement Agent for reasonable  legal fees and related expenses as
incurred, arising out of the following Covered Claims: (i) any breach or alleged
breach of any  representation or warranty of the Company under this Agreement or
the Offering Documents; (ii) any untrue statement or alleged untrue statement of
a material fact contained in the Offering  Documents,  or under any Blue Sky law
or in any Blue Sky  Application;  or (iii)  the  omission  or  alleged  omission
therefrom of a material fact necessary in order to make the statements  therein,
in light of the circumstances under which they were made, not misleading.

         10.2 Each  Placement  Agent agrees to indemnify  and hold  harmless the
Company  and each  Indemnified  Party of the  Company to the same  extent as the
indemnity  from the Company to such  Placement  Agent,  pursuant to Section 10.1
hereof,  but only  with  respect  to (i) any  breach  or  alleged  breach of any
representation  or warranty of such Placement Agent in this  Agreement;  or (ii)
any untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon or in conformity with written information relating to such
Placement  Agent  offering  furnished by such  Placement  Agent or on its behalf
expressly  for use in  connection  with the  Offering  Documents or any Blue Sky
Application as each may be amended or supplemented.

         10.3  Promptly  after receipt by a person  entitled to  indemnification
pursuant to the foregoing Section 10.1 or 10.2, as applicable,  of notice of the
commencement of any action,  the Indemnified  Party shall, if a claim in respect
thereof is to be or has been made against an  Indemnifying  Party under  Section
10.1 or 10.2, as applicable,  promptly notify in writing the Indemnifying  Party
of the  commencement  thereof;  but the  omission so to notify the  Indemnifying
Party  shall  not  relieve  it  from  any  liability  which  it may  have to the
Indemnified  Party except to the extent the Indemnifying  Party is prejudiced by
the delay or failure to notify it. In case any such action is brought against an
Indemnified  Party, and it notifies the  Indemnifying  Party of the commencement
thereof, the Indemnifying Party shall be entitled to participate in, and, to the
extent that it may wish,  jointly with any other  Indemnifying  Party  similarly
notified,  to assume  the  defense  thereof,  subject to the  provisions  herein
stated, with counsel reasonably satisfactory to the Indemnified Party, and after
notice from the Indemnifying  Party to the Indemnified  Party of its election so
to assume the defense thereof, the Indemnifying Party shall not be liable to the
Indemnified  Party  under  this  Section  10 for any  legal  or  other  expenses
subsequently  incurred by the  Indemnified  Party in connection with the defense
thereof other than reasonable  costs of  investigation.  The  Indemnified  Party
shall  have the right to  employ  separate  counsel  in any such  action  and to
participate  in the defense  thereof,  but the fees and expenses of such counsel
shall not be at the expense of the Indemnifying  Party if the Indemnifying Party
has assumed the defense of the action with counsel  reasonably  satisfactory  to
the Indemnified Party; provided that the fees and

                                      -18-
<PAGE>

expenses of such counsel  shall be at the expense of the  Indemnifying  Party if
(i) the employment of such counsel has been  specifically  authorized in writing
by the  Indemnifying  Party,  or (ii)  the  named  parties  to any  such  action
(including any impleaded  parties) include both the Indemnified Party or parties
and the  Indemnifying  Party and, in the judgment of counsel for the Indemnified
Party, it is advisable  because of conflicts of their  respective  interests for
the Indemnified Party or parties to be represented by separate counsel, in which
case the  Indemnifying  Party  shall not have the right to assume the defense of
such action on behalf of the Indemnified Party or parties,  it being understood,
however,  that the Indemnifying Party shall not, in connection with any one such
action or  separate  but  substantially  similar or related  actions in the same
jurisdiction  arising out of the same general  allegations or circumstances,  be
liable for the  reasonable  fees and expenses of more than one separate  firm of
attorneys  for the  Indemnified  Party or parties.  No  settlement of any action
against  an  Indemnified  Party  shall  be  made  without  the  consent  of  the
Indemnified  Party,  which  shall not be  unreasonably  withheld in light of all
factors of importance to the Indemnified Party.

         11.   CONTRIBUTION.

         11.1  To  provide  for  just  and  equitable  contribution,  if  (i) an
Indemnified Party makes a claim for  indemnification  pursuant to Section 10 but
it is found in a final judicial  determination,  not subject to further  appeal,
that such  indemnification  may not be enforced  in such case,  even though this
Agreement  expressly  provides   indemnification  in  such  case,  or  (ii)  any
Indemnified or Indemnifying  Party seeks  contribution under the Securities Act,
the Exchange Act or otherwise,  then the Indemnifying  Party (including for this
purpose any contribution made by or on behalf of any officer, director, employee
or agent for an Indemnifying Party, or any Controlling Person of an Indemnifying
Party),  on the one hand, and the Indemnified  Party (including for this purpose
any contribution by or on behalf of any other  Indemnified  Party), on the other
hand, shall contribute to the losses, liabilities, claims, damages, and expenses
whatsoever  to which  any of them may be  subject,  in such  proportions  as are
appropriate to reflect the relative benefits received by the Indemnifying Party,
on the one  hand,  and the  Indemnifying  Party,  on the other  hand;  PROVIDED,
HOWEVER,  that if  applicable  law does not permit such  allocation,  then other
relevant equitable  considerations such as the relative fault of an Indemnifying
Party in connection  with the facts which resulted in such losses,  liabilities,
claims,  damages,  and expenses  shall also be considered.  Notwithstanding  the
foregoing,  in no case shall the Placement Agent, a Selected Dealer of either or
any  Controlling  Person  be  responsible  for a  portion  of  the  contribution
obligation  in excess of the  compensation  received by the  Placement  Agent or
Selected Dealer  pursuant to Section 8 hereof or the Selected Dealer  Agreement,
as the case may be. No person liable for a fraudulent misrepresentation shall be
entitled to  contribution  from any person who is not liable for such fraudulent
misrepresentation.

         11.2 For purpose of this Section 11, each Person,  if any, who controls
the Placement Agent or a Selected Dealer within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act and each officer,  director,
stockholder,  employee and agent of the  Placement  Agent or a Selected  Dealer,
shall  have  the same  rights  to  contribution  as the  Placement  Agent or the
Selected  Dealer,  and each person,  if any who controls the Company  within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act
and each officer,  director,  employee and agent of the Company,  shall have the
same  rights  to  contribution  as the  Company,  subject  in  each  case to the
provisions of this Section 11.  Notwithstanding,  anything in this Section 11 to
the

                                      -19-
<PAGE>

contrary,  no  party  shall be  liable  for  contribution  with  respect  to the
settlement of any claim or action  effected  without its written  consent.  This
Section  11 is  intended  to  supersede  any  right to  contribution  under  the
Securities Act, the Exchange Act, or otherwise.

         11.3 Notwithstanding any of the other provisions of this Agreement, the
aggregate  indemnification or contribution  obligations of a Placement Agent for
or on account of any  losses,  claims,  damages,  liabilities  or actions  under
Section 10, this Section 11 or other applicable section of this Agreement, shall
not exceed the amount of cash  commissions  actually  received by the  Placement
Agent.

         12.  TERMINATION.

         12.1 This  Agreement may be  terminated  by the Placement  Agent at any
time prior to the Termination  Date, if (i) the Company  sustains a loss that is
material to the Company,  whether or not insured, by reason of fire, earthquake,
flood,  accident  or other  calamity,  or from  any  labor  dispute  or court or
government action,  order or decree;  (ii) the Company shall fail to meet any of
the closing conditions set forth in this Agreement;  (iii) trading in securities
on the New York or American  Stock  Exchange or the Nasdaq Stock Market has been
suspended or limited; (iv) material governmental  restrictions have been imposed
on trading in securities  generally (not in force and effect on the date of this
Agreement);  (v) a banking  moratorium  has been declared by federal or New York
state authorities;  (vi) an outbreak of major international hostilities or other
national or international calamity has occurred;  (vii) any action,  proceeding,
investigation  or inquiry  has been  instituted  against  (or  relating  to) the
Company  (or any  subsidiary  thereof)  or by any  federal,  state or  municipal
commission,  board or agency  wherein  any  unfavorable  decision  would  have a
Material  Adverse Effect,  regardless of whether the  possibility  thereof shall
have been  disclosed  in the  Offering  Documents;  or (viii) the passage by the
Congress of the United States or by any state  legislative body of any action or
measure, or the adoption of any orders, rules or regulations by any governmental
body or any authoritative  accounting  institute,  or board, or any governmental
executive,  which is  reasonably  likely to have a  Material  Adverse  Effect or
materially affects the marketing of the Securities.

         12.2 This  Agreement may be terminated by the Company on written notice
to the Placement Agent on or after the Termination Date.

         13. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY.  Except as the
context   otherwise   requires,   the   respective   indemnities,    agreements,
representations, warranties, and other statements of the Company set forth in or
made pursuant to this Agreement  regardless of any  investigation  made by or on
behalf of the Placement Agent or any Controlling  Person thereof,  shall survive
delivery of, and payment for, the Securities and the Placement  Agent  Warrants.
PROVIDED,  HOWEVER, no claim or indemnification shall be brought by or on behalf
of the Placement Agent more than two years after the Closing.

         14. SEVERABILITY. In the event any parts of this Agreement are found to
be void,  the  remaining  provisions of this  Agreement  shall  nevertheless  be
binding with the same effect as though the void parts were deleted.

                                      -20-
<PAGE>

         15.  COUNTERPARTS.  This  Agreement  may be  executed  in  one or  more
counterparts,  each of  which  shall  be  deemed  an  original  but all of which
together  shall  constitute one and the same  instrument.  The execution of this
Agreement may be by actual or facsimile signature.

         16.  ARBITRATION.  Any controversy,  dispute or claim arising out of or
relating to this Agreement, or its interpretation,  application, implementation,
breach or  enforcement  which  the  Parties  are  unable  to  resolve  by mutual
agreement,  shall be settled by submission  by either party of the  controversy,
claim or dispute to binding arbitration in New York County, New York (unless the
Parties agree in writing to a different location),  in accordance with the rules
of the NASDR then in effect.  In any such  arbitration  proceeding  the  Parties
agree to provide all discovery deemed necessary by the arbitrators. The decision
and award made by the arbitrator  shall be final,  binding and conclusive on all
Parties  hereto for all  purposes,  and judgment  may be entered  thereon in any
court having jurisdiction thereof.

         17.  BENEFIT.  This  Agreement  shall be binding  upon and inure to the
benefit of the Parties  hereto and their legal  representatives,  successors and
assigns.

         18.  NOTICES AND  ADDRESSES.  All notices,  offers,  acceptance and any
other acts under this Agreement (except payment) shall be in writing,  and shall
be  sufficiently  given if  delivered  to the  addresses  in person,  by Federal
Express or similar receipted delivery, or by facsimile delivery as follows:

         the Company:           Elite Pharmaceuticals, Inc.
                                150 Northvale Avenue
                                Ludlow, New Jersey 07647
                                Facsimile: (201) 750-2755
                                Attention: Bernard Berk, Chief Executive Officer

         with a copy to:        Reitler Brown & Rosenblatt LLC
                                800 Third Avenue, 21st Floor
                                New York, New York 10022
                                Facsimile: (212) 371-5500
                                Attention: Scott H. Rosenblatt, Esq.

         the Placement Agent:   Indigo Securities, LLC
                                780 Third Avenue
                                Suite 2302
                                New York, NY 10017
                                Facsimile: (212) 298-9933
                                Attention: Eric Brachfeld

         with a copy to:        Wollmuth Maher & Deutsch LLP
                                500 Fifth Avenue
                                New York, New York 10110
                                Facsimile: (212) 382-0050
                                Attention: Rory M. Deutsch, Esq.

                                      -21-
<PAGE>

or to such other address as either of them, by notice to the other may designate
from time to time.  The  transmission  confirmation  receipt  from the  sender's
facsimile machine shall be evidence of successful facsimile delivery. Time shall
be  counted  to,  or from,  as the case may be,  the  delivery  in  person or by
mailing.

         19.  ATTORNEY'S  FEES.  In the event that there is any  controversy  or
claim arising out of or relating to this  Agreement,  or to the  interpretation,
breach or  enforcement  thereof,  and any  action  or  proceeding  including  an
arbitration proceeding is commenced to enforce the provisions of this Agreement,
the  prevailing  party shall be entitled to an award by the court or arbitrator,
as appropriate, of reasonable attorney's fees, costs and expenses.

         20.  GOVERNING  LAW. This Agreement and any dispute,  disagreement,  or
issue of construction or  interpretation  arising  hereunder whether relating to
its execution,  its validity,  the  obligations  provided  herein or performance
shall be governed or interpreted  according to the internal laws of the State of
New York without regard to choice of law considerations.

         21. ENTIRE AGREEMENT.  This Agreement  constitutes the entire Agreement
between the Parties and supersedes all prior oral and written agreements between
the Parties  hereto with  respect to the subject  matter  hereof.  Neither  this
Agreement  nor any  provision  hereof  may be  changed,  waived,  discharged  or
terminated  orally,  except by a  statement  in  writing  signed by the Party or
Parties against which enforcement or the change, waiver discharge or termination
is sought.

         22.  ADDITIONAL  DOCUMENTS.  The  Parties  hereto  shall  execute  such
additional  instruments as may be reasonably  required by their counsel in order
to carry  out the  purpose  and  intent of this  Agreement  and to  fulfill  the
obligations of the Parties hereunder.

         23. SECTION OR PARAGRAPH  HEADINGS.  Section  headings herein have been
inserted  for  reference  only and shall  not be  deemed  to limit or  otherwise
affect,  in any matter, or be deemed to interpret in whole or in part any of the
terms or provisions of this Agreement.

                [REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK.]

                                      -22-
<PAGE>

         IN  WITNESS  WHEREOF,  the  Parties  hereto  have  duly  executed  this
Agreement that date and year first above written.


Witnesses:                                  ELITE PHARMACEUTICALS, INC.


------------------------                    By:  /s/ Bernard J. Berk
                                                 -------------------------------
                                                 Bernard J. Berk
                                                 Chief Executive Officer
------------------------


                                            INDIGO SECURITIES, LLC


------------------------                    By:  /s/ Erich Brachfeld
                                                 -------------------------------
                                                 Erich Brachfeld
                                                 Managing Partner

                                      -23-
<PAGE>

                                    EXHIBIT A

                        FORM OF PLACEMENT AGENT WARRANTS



                                      -24-