Document:

EXHIBIT 10(a)

                                                               EXECUTION VERSION

            STRATEGIC ALLIANCE AGREEMENT (this  "AGREEMENT"),  dated
            as of December 6, 2006 (the  "EFFECTIVE  DATE"),  by and
            between   ELITE   PHARMACEUTICALS,   INC.,   a  Delaware
            corporation ("ELITE"),  VEERAPPAN S. SUBRAMANIAN ("VS"),
            and  VGS  PHARMA,  LLC,  a  Delaware  limited  liability
            company ("VGS", and together with VS, the "VGS PARTIES")
            --------------------------------------------------------

                            INTRODUCTION

      Elite  Pharmaceuticals is a specialty  pharmaceutical  company principally
engaged  in  the  development  and  manufacturing  of  oral   controlled-release
products.  Elite, both  independently and with selected  partners,  develops and
in-licenses new drug products as wells as generic drug products.

      VS is an expert  in the  formulation  and  development  of drug  products,
particularly  generic drug  products.  VGS is  wholly-owned  subsidiary  of Kali
Capital,  L.P.,  a Delaware  limited  partnership  which is  controlled  by Kali
Management,  LLC ("KALI"),  its general  partner,  and Kali is controlled by Anu
Subramanian, its managing member.

      Elite and the VGS Parties wish to enter into a strategic alliance whereby,
among other things,  the parties have incorporated Novel  Laboratories,  Inc., a
Delaware corporation ("NOVEL") as a joint venture for the research, development,
manufacturing,  in-licensing, out-licensing, marketing, product acquisition, and
distribution of certain agreed upon pharmaceutical products.

      Elite  desires to have VS perform,  and VS has agreed to perform,  certain
strategic  advisory  services  for  Elite,   advising  Elite  on  the  research,
development   and   commercialization   of  Elite's   existing  and  prospective
pharmaceutical products.

      As a condition  to the  formation  of Novel and the  commencement  of this
strategic  relationship,  VGS desires to purchase, and Elite has agreed to sell,
shares of its common  stock and  warrants  exercisable  for shares of its common
stock to VGS.

                                    AGREEMENT

      In   consideration   of   the   foregoing   and   the   mutual   promises,
representations,  warranties, and covenants hereinafter set forth, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

      1. SALE AND PURCHASE.

            1.1 SALE AND PURCHASE OF COMMON STOCK OF ELITE AND NOVEL.

                  (a) SALE AND PURCHASE OF ELITE COMMON STOCK AND  WARRANTS.  At
the Closing (as defined below), Elite shall sell and issue to VGS, and VGS shall
purchase and accept from Elite (i) 957,396  shares (the  "PURCHASED  SHARES") of
common stock, par value US$0.01 of Elite (the "COMMON STOCK"),  for an aggregate
purchase  price  of  Two  Million  United  States  Dollars  (US$2,000,000)  (the
"PURCHASE PRICE"), with the purchase price per Purchased Share

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being equal to the trailing  average closing price of the Common Stock as listed
on the American  Stock  Exchange  during the ten (10)  trading days  immediately
preceding the execution of this  Agreement,  and (ii) a warrant (the  "WARRANT",
and together with the Purchased Shares, the "SECURITIES"),  in substantially the
form attached  hereto as EXHIBIT A, to purchase  478,698 shares of Common Stock,
at a purchase price per share of US$ 3.00 (the "WARRANT SHARES").

                  (b) SALE AND PURCHASE OF NOVEL COMMON  STOCK.  At the Closing,
(i) Elite shall subscribe for 49,000 shares of Class A Voting Common Stock,  par
value  US$0.0001 per share, of Novel  (collectively,  the "ELITE NOVEL SHARES"),
for an aggregate purchase price of US$9,800 ("ELITE NOVEL SUBSCRIPTION  PRICE");
and (ii) VGS shall  subscribe  for 51,000 shares of Class A Voting Common Stock,
par value US$0.0001 per share, of Novel (collectively,  the "VGS NOVEL SHARES"),
for and aggregate purchase price of US$10,200 ("VGS NOVEL SUBSCRIPTION PRICE").

            1.2 CLOSING.  The closing of the transactions  described in Sections
1.1  (the  "CLOSING")  shall  take  place  at the  offices  of  Reitler  Brown &
Rosenblatt LLC, 800 Third Avenue,  21st Floor, New York, New York on December 6,
2006, or at such other time or place as Elite and VS may mutually agree.

            1.3 CLOSING DELIVERIES. At the Closing:

                  (a) VGS shall pay to Elite or its  designee,  by wire transfer
to the account or accounts  listed on EXHIBIT B, attached  hereto,  the Purchase
Price in immediately available funds;

                  (b) Elite shall  deliver to VGS (i) a  certificate  evidencing
VGS's ownership of the number of Purchased Shares purchased by VS hereunder, and
(ii) the  Warrant,  registered  in the name of VGS, to the address set forth for
VGS on the signature page hereof; and

                  (c)  Elite  shall  deliver  to  Novel,  by  wire  transfer  of
immediately available funds, the Initial Contribution (as defined below).

            1.4 CONDITIONS TO OBLIGATIONS OF THE VGS PARTIES AT THE CLOSING. The
obligations  of the VGS Parties at the  Closing are subject to the  satisfaction
(or  waiver  by VS) of each  of the  following  conditions  at or  prior  to the
Closing:

                  (a)  REPRESENTATIONS  AND WARRANTIES TRUE. The representations
and  warranties  made by Elite in Section  2.2 shall be true and  correct in all
material  respects as of the  Closing  with the same force and effect as if they
had been made as of the Closing;

                  (b) PERFORMANCE OF OBLIGATIONS. Elite shall have performed and
complied with all  agreements and covenants  herein  required to be performed or
complied with by Elite on or prior to the Closing pursuant to this Agreement;

                  (c) Elite  shall pay to Novel  the  Elite  Novel  Subscription
Price;

                  (d) VGS shall pay to Novel the VGS Novel Subscription Price;

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                  (e) Elite shall pay to Novel the Initial Contribution;

                  (f) DELIVERY OF  SECURITIES.  Elite or its transfer  agent for
Common Stock shall have delivered the  instruments  evidencing the Securities as
described in Section 1.3(b) hereof;

                  (g) ADDITIONAL DELIVERIES.  Delivery of the following executed
documents and instruments (collectively with the agreement identified in Section
1.5(c)(v), the "STRATEGIC ALLIANCE Documents"):

                        (i) this Agreement duly executed by Elite;

                        (ii) that  certain  Advisory  Agreement  between  VS and
      Elite,  in  substantially  the form  attached  hereto  as  EXHIBIT  C (the
      "ADVISORY AGREEMENT"), duly executed by Elite;

                        (iii) that certain  Non-Qualified Stock Option Agreement
      between VS and Elite, in substantially the form attached hereto as EXHIBIT
      D (the "STOCK OPTION AGREEMENT"), duly executed by Elite;

                        (iv) that certain  Employment  Agreement  between VS and
      Novel,  in  substantially  the form  attached  hereto  as  EXHIBIT  E (the
      "EMPLOYMENT AGREEMENT"), duly executed by Novel;

                        (v) that certain Subscription  Agreement between VGS and
      Novel for the purchase by VGS of the VGS Novel  Shares,  in  substantially
      the form attached  hereto as EXHIBIT F-1, (the  "SUBSCRIPTION  AGREEMENT")
      duly executed by Novel;

                        (vi) a  stock  certificate  of  Novel  evidencing  VGS's
      ownership of the VGS Novel Shares, duly executed on behalf of Novel;

                        (vii) that certain Stockholders' Agreement,  dated as of
      the date hereof,  between Elite, VS, VGS and Novel, in  substantially  the
      form attached hereto as EXHIBIT G (the  "STOCKHOLDERS'  AGREEMENT"),  duly
      executed by both Elite and Novel; and

                        (viii) the certain Registration Rights Agreement between
      Elite, VS and VGS, in substantially  the form attached hereto as EXHIBIT H
      (the "REGISTRATION RIGHTS AGREEMENT"), duly executed by Elite.

                  (h) CONSENTS,  PERMITS, AND WAIVERS. Elite shall have obtained
any  and  all  consents,  permits  and  waivers  necessary  or  appropriate  for
consummation of the transactions contemplated hereby.

            1.5  CONDITIONS  TO  ELITE'S  OBLIGATIONS  AT THE  CLOSING.  Elite's
obligations at the Closing are subject to the  satisfaction (or waiver by Elite)
of each of the following conditions at or prior to the Closing:

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                  (a)  REPRESENTATIONS  AND WARRANTIES TRUE. The representations
and warranties  made by the VGS Parties in Section 2.3 shall be true and correct
in all material  respects as of the Closing with the same force and effect as if
they had been made as of the Closing;

                  (b)  PERFORMANCE  OF  OBLIGATIONS.  Each VGS Party  shall have
performed and complied with all agreements and covenants  herein  required to be
performed or complied  with by such VGS Party on or before the Closing  pursuant
to this Agreement;

                  (c)  DELIVERIES.   Delivery  of  the  following  payments  and
executed documents and instruments:

                        (i) the Purchase Price;

                        (ii) this Agreement duly executed by VS and VGS;

                        (ii) the Advisory Agreement, duly executed by VS;

                        (iii) the Stock Option Agreement, duly executed by VS;

                        (iv) the  Employment  Agreement,  duly executed by Novel
      and VS;

                        (v) that certain  Subscription  Agreement  between Elite
      and  Novel  for the  purchase  by  Elite of the  Elite  Novel  Shares,  in
      substantially  the form  attached  hereto as EXHIBIT F-2, duly executed by
      Novel;

                        (vi) a stock  certificate  of Novel  evidencing  Elite's
      ownership of the Elite Novel Shares, duly executed on behalf of Novel;

                        (vii) the Subscription  Agreement,  duly executed by VGS
      and Novel;

                        (viii) the Stockholders Agreement,  duly executed by VS,
      VGS and Novel; and

                        (ix) the Registration Rights Agreement, duly executed by
      VGS and VS.

                  (d) CONSENTS, PERMITS, AND WAIVERS. The VGS Parties shall have
obtained any and all consents,  permits and waivers necessary or appropriate for
consummation of the transactions contemplated hereby.

            1.6  TERMINATION.  Prior  to  the  Closing,  this  Agreement  may be
terminated  by (a) the  mutual  written  consent  of Elite and VS, or (b) either
Elite or VS in the event that the Closing does not occur on or prior to December
7, 2006.

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      2. REPRESENTATIONS AND WARRANTIES.

            2.1  CONSTRUCTION.  For  purposes  of this  Section  2, a Person (as
defined below) shall be deemed to have "knowledge" of a particular fact or other
matter if the Person is actually  aware of such fact or other  matter.  A Person
that is a corporation,  partnership or other business  entity shall be deemed to
have "knowledge" of a particular fact or other matter if any executive  officer,
a director (in the case of a corporation),  a manager or managing member (in the
case of a limited  liability  company),  or a general  partner (in the case of a
partnership)  of such  Person  has  knowledge  (as  described  in the  preceding
sentence) of such fact or other matter. For purposes of this Agreement, the term
"PERSON"  shall mean an individual,  corporation,  partnership,  trust,  limited
liability company,  unincorporated organization,  joint stock corporation, joint
venture,  association  or other  entity,  or any  government,  or any  agency or
political subdivision thereof or any branch of any legal entity.

            2.2 ELITE'S  REPRESENTATIONS AND WARRANTIES.  Except as set forth in
the SEC  Reports (as defined  below) or under the  corresponding  section of the
disclosure  schedules  delivered to the VGS Parties  concurrently  herewith (the
"DISCLOSURE  SCHEDULES"),  which  Disclosure  Schedules  shall be  deemed a part
hereof and to qualify any  representation  or warranty  otherwise made herein to
the extent of such disclosure,  Elite hereby makes the following representations
and warranties to the VGS Parties as of the date of this Agreement and as of the
time of the Closing.  For purposes of this Section 2.2, the SEC Reports shall be
deemed to have been "provided" to VS:

            (a)  ORGANIZATION,  GOOD  STANDING  AND  QUALIFICATION.  Elite  is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware.  Elite has all requisite corporate power and authority
to own and  operate  its  properties  and  assets,  to execute  and  deliver the
Strategic  Alliance  Documents  to  which it is a  party,  and to carry  out the
provisions  of the  Strategic  Alliance  Documents to which it is a party and to
carry on its business as  presently  conducted  and as presently  proposed to be
conducted.  Elite is duly  qualified  and is authorized to do business and is in
good standing as a foreign  corporation in all jurisdictions in which the nature
of its  activities  and of its properties  makes such  qualification  necessary,
except  for  those  jurisdictions  in which  failure  to do so would not have or
reasonably be expected to result in (i) a material adverse effect on the results
of operations, assets, business, prospects or condition (financial or otherwise)
of Elite, or (ii) a material  adverse effect on Elite's  ability to perform,  in
any material  respect,  on a timely basis its  obligations  under the  Strategic
Alliance Documents to which it is a party (a "MATERIAL ADVERSE EFFECT").

            (b) AUTHORIZATION;  VALID AND BINDING  AGREEMENT.  The execution and
delivery by Elite of the  Strategic  Alliance  Documents to which it is a party,
the  performance  by Elite of its  obligations  and  undertakings  hereunder and
thereunder,  and the  consummation  by  Elite of the  transactions  contemplated
hereby and  thereby,  have been duly and  validly  authorized  by all  necessary
action  on the part of Elite and no other  proceedings  on the part of Elite are
necessary  to  authorize  the  execution  or delivery by Elite of the  Strategic
Alliance  Documents  to  which it is a party,  the  performance  by Elite of its
obligations  and  undertakings  hereunder and thereunder or the  consummation by
Elite  of the  transactions  contemplated  hereby  and  thereby.  The  Strategic
Alliance  Documents to which it is a party have been duly executed and delivered
by Elite, and constitute the valid and binding obligations of Elite, enforceable
against Elite in

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accordance  with  their  terms  except  as  limited  by  applicable  bankruptcy,
insolvency,   reorganization,   moratorium  or  other  similar  laws   affecting
enforcement and by general principles of equity.

                  (c) CONFLICTS;  CONSENTS.  The execution and delivery by Elite
of the Strategic  Alliance  Documents to which it is a party, the performance by
Elite of its obligations and undertakings contemplated hereunder and thereunder,
and the  consummation  by  Elite of the  transactions  contemplated  hereby  and
thereby,  do not and will not conflict  with,  or result in any violation of, or
default  under  or  result  in the  creation  of  any  mortgage,  pledge,  lien,
encumbrance,  charge or adverse  claim  (each,  a "LIEN") on the  properties  or
assets of Elite under,  any provision of (i) the  certificate of  incorporation,
bylaws or other charter or governance  documents of Elite,  each as the same has
been amended to date, (ii) any contract, agreement, instrument or arrangement to
which  Elite is a party or by which any of  Elite's  properties  or  assets  are
bound, (iii) any license,  franchise, permit or other similar authorization held
by Elite,  or (iv) to the  knowledge of Elite,  any  judgment,  order or decree,
statute,  law,  ordinance,  rule or  regulation  applicable  to Elite or Elite's
properties or assets.

                  (d) ISSUANCE OF THE SECURITIES.  The Purchased Shares are duly
authorized  and,  when  issued  and paid for in  accordance  with the  terms and
conditions hereof, will be validly issued,  fully paid and  non-assessable,  and
free and clear of all Liens imposed by Elite other than restrictions on transfer
or other  dispositions  provided for in the Strategic  Alliance  Documents.  The
shares of Common  Stock  issuable  upon  exercise of the Warrant  (the  "WARRANT
SHARES"),  when issued in accordance with the terms of the Warrant, will be duly
authorized, validly issued, fully paid and non-assessable, and free and clear of
all  Liens  imposed  by Elite  other  than  restrictions  or  transfer  or other
dispositions  provided  for in  the  Strategic  Alliance  Documents.  Elite  has
reserved  from its duly  authorized  capital  stock a number of shares of Common
Stock for  issuance  upon the  exercise  of the Warrant  equal to the  aggregate
number of Warrant  Shares  issuable  upon  exercise of the  Warrant  immediately
following the Closing.

                  (e) CAPITALIZATION.  Except as set forth on SCHEDULE 2.2(E) of
the  Disclosure  Schedules  attached  hereto,  prior  to  giving  effect  to the
transaction  contemplated in the Strategic  Alliance  Documents,  the authorized
capital  stock  of  Elite  immediately  prior  to the  Closing  consists  of (i)
65,000,000  shares of Common Stock,  of which  19,599,325  shares are issued and
outstanding, and of which 7,000,000 shares are reserved for future issuance upon
exercise of options  granted to employees,  officers,  directors and consultants
pursuant to Elite's  2004 Stock  Option  Plan,  as amended,  and (ii)  5,000,000
shares of preferred  stock,  of which 10,000  shares are  designated as Series B
Preferred  Stock,  par value  U.S.$  0.01 per  share  (the  "SERIES B  PREFERRED
STOCK"),  9,695 of which are issued and  outstanding.  As of the Closing,  Elite
shall have  reserved a sufficient  number of shares of Common Stock for issuance
upon exercise of the Warrant. Other than in connection with the offering and the
sale by Elite of the Series B Preferred Stock and except as set forth in the SEC
Reports or as set forth on SCHEDULE 2.2(E) of the Disclosure  Schedules attached
hereto, there are no preemptive rights, voting agreements, rights of first offer
or refusal,  options,  warrants or other  conversion  or exchange  privileges or
rights presently outstanding to purchase, subscribe for or otherwise acquire any
of Elite's capital stock. The Warrant,  when issued against payment therefore in
accordance with this Agreement, will be duly authorized and validly issued.

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                  (f) LITIGATION.  Except as set forth on SCHEDULE 2.2(F), there
is no action,  suit, inquiry,  notice of violation,  proceeding or investigation
pending or, to the knowledge of Elite,  threatened  against or affecting  Elite,
any  subsidiary  of Elite  (each,  a  "SUBSIDIARY")  or any of their  respective
properties  before or by any court,  arbitrator,  governmental or administrative
agency or  regulatory  authority  (federal,  state,  county,  local or  foreign)
(collectively,  an  "ACTION")  which (i)  adversely  affects or  challenges  the
legality,  validity or enforceability of any of the Strategic Alliance Documents
to which Elite is a party or the  Securities,  or (ii)  could,  if there were an
unfavorable  decision,  have or  reasonably  be expected to result in a Material
Adverse Effect.  Neither Elite nor any  Subsidiary,  nor any director or officer
thereof, is or has been the subject of any Action involving a claim of violation
of or liability  under federal or state  securities laws or a claim of breach of
fiduciary duty.

                  (g) SEC  REPORTS;  FINANCIAL  STATEMENTS.  Elite has filed all
reports,  schedules,  forms, statements and other documents required to be filed
with the  Commission  by it under the  Securities  Act of 1933,  as amended (the
"SECURITIES  ACT") and the  Securities  Exchange  Act of 1934,  as amended  (the
"EXCHANGE  ACT"),  for the two years  preceding the date hereof (or such shorter
period as Elite was required by law or  regulation to file such  material)  (the
foregoing materials,  including the exhibits thereto and documents  incorporated
by  reference  therein,  being  collectively  referred  to  herein  as the  "SEC
REPORTS") on a timely  basis or has  received a valid  extension of such time of
filing and has filed any such SEC Reports  prior to the  expiration  of any such
extension.  As of  their  respective  dates,  the SEC  Reports  complied  in all
material  respects with the  requirements of the Securities Act and the Exchange
Act and the rules and regulations of the Commission promulgated  thereunder,  as
applicable,  and none of the SEC  Reports,  when  filed,  contained  any  untrue
statement of a material  fact or omitted to state a material fact required to be
stated  therein or necessary  in order to make the  statements  therein,  in the
light of the circumstances under which they were made, not misleading.

            2.3 PURCHASER'S REPRESENTATIONS,  WARRANTIES AND COVENANTS. Each VGS
Party, jointly and severally, hereby represents, warrants and covenants to Elite
as of the date of this Agreement and as of the time of Closing as follows:

                  (a) ORGANIZATION,  GOOD STANDING AND  QUALIFICATION.  VGS is a
limited liability company duly organized,  validly existing and in good standing
under the laws of the State of Delaware.  VGS has all requisite  corporate power
and  authority  to own and operate  its  properties  and assets,  to execute and
deliver the Strategic  Alliance  Documents to which it is a party,  and to carry
out the  provisions of the Strategic  Alliance  Documents to which it is a party
and to carry on its business as presently conducted and as presently proposed to
be  conducted.  VGS is duly  qualified  and is  authorized to do business in all
jurisdictions  in which the nature of its activities and of its properties makes
such qualification necessary, except for those jurisdictions in which failure to
do so would not have or reasonably  be expected to result in a Material  Adverse
Effect.

                  (b) VGS  OWNERSHIP.  Schedule  2.3(b)  set  forth  a true  and
complete list of the holders own all of the outstanding partnership interests in
VGS and each holder's type of partnership interest,  percentage of voting rights
as to actions to be taken by VGS and right to receive  allocations of profit and
losses from VGS. There are no preemptive rights,  voting  agreements,  rights of
first offer or refusal, options, warrants or other conversion or exchange

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privileges  or  rights  presently  outstanding  to  purchase,  subscribe  for or
otherwise acquire any of the partnership interests in VGS.

                  (c) AUTHORIZATION; VALID AND BINDING AGREEMENT. Such VGS Party
has all requisite legal capacity, power and authority to execute and deliver the
Strategic  Alliance  Documents  to which he or it is a party,  to perform  their
obligations and  undertakings  hereunder and  thereunder,  and to consummate the
transactions  contemplated hereby and thereby. The execution and delivery of the
Strategic  Alliance  Documents to which he or it is a party,  the performance of
his or its  obligations  and  undertakings  hereunder  and  thereunder,  and the
consummation of the transactions contemplated hereby and thereby, have been duly
and validly authorized by all necessary action on the part of such VGS Party and
no other  proceedings  on the part of,  or on  behalf  of,  such VGS  Party  are
necessary  to authorize  the  execution  or delivery of the  Strategic  Alliance
Documents to which he or it is a party,  the  performance of its obligations and
undertakings  hereunder and thereunder or the  consummation of the  transactions
contemplated hereby and thereby. The Strategic Alliance Documents to which he or
it is a party have been duly  executed  and  delivered  by such VGS  Party,  and
constitute  the valid and  binding  obligations  of such VGS Party,  enforceable
against him or it in accordance with their terms.

                  (d)  CONFLICTS;  CONSENTS.  The execution and delivery by such
VGS Party of the Strategic  Alliance Documents to which he or it is a party, the
performance  by  such  VGS  Party  of his or its  obligations  and  undertakings
contemplated hereunder and thereunder, and the consummation by such VGS Party of
the transactions  contemplated  hereby and thereby, do not and will not conflict
with,  or result in any violation of, or default under or result in the creation
of any Lien on the  properties or assets of such VGS Party under,  any provision
of (i) any contract, agreement, instrument or arrangement to which VS is a party
or by which any of such VGS  Party's  properties  or assets are bound,  (ii) any
license,  franchise,  permit  or other  similar  authorization  held by such VGS
Party,  or (iii) to the  knowledge  of such VGS Party,  any  judgment,  order or
decree, statute, law, ordinance, rule or regulation applicable to such VGS Party
or his or its properties or assets.

                  (e)  BROKERS.  No Person  acting  on  behalf  of, or under the
authority of, such VGS Party, is or will be entitled to any broker's or finder's
fee or any other  commission or similar fee directly or  indirectly  from any of
the parties in connection with any of the transactions contemplated hereby.

                  (f)   STRATEGIC   TRANSACTION.   Each  of  the   VGS   Parties
acknowledges  (i) the  existence  of  certain  covenants  provided  by  Elite to
purchasers  of Elite's  Series B Preferred  Stock and (ii) that Elite is relying
upon the  representations  and  warranties  of such VGS  Party set forth in this
Section  2.3  in  determining  the   applicability  of  such  covenants  to  the
transactions  contemplated  by  the  Strategic  Alliance  Documents.  As of  the
Closing, VS operates a pharmaceutical consulting and strategic advisory business
that  assists  drug   development   companies  in  the  planning,   development,
manufacturing  and/or regulatory  approval of  pharmaceutical  products and that
such  business  is, to the  knowledge  of VS,  synergistic  with the business of
Elite.  No VGS Party is in the primary  business of investing in securities.  VS
shall provide actual  services to Elite under the Advisory  Agreement and actual
services  to Novel  under  the  Employment  Agreement,  each of  which  shall be
beneficial to the business of Elite.

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                  (g)   INVESTMENT   REPRESENTATIONS.   VGS  is  acquiring   the
Securities and the Warrant  Shares  (collectively,  the "PURCHASED  SECURITIES")
solely for its own account for  investment  purposes only and not with a view to
resale or  distribution  within the  meaning  of  applicable  federal  and state
securities  laws.  Neither  any VGS Party nor any agent on his or its behalf has
solicited  or will  solicit  any  offers to sell or has  offered to sell or will
offer to sell all or any  part of the  Purchased  Securities  to any  Person  or
Persons so as to require the offer or sale of the Purchased  Securities pursuant
to this Agreement to be registered  under the Securities  Act, or any applicable
state securities  laws.  Likewise,  no VGS Party has a contract,  understanding,
agreement  or  arrangement  to sell or  otherwise  transfer  or  dispose  of the
Purchased   Securities  or  any  portion  thereof  to  any  other  Person.   VGS
acknowledges that, as a consequence  thereof,  it must bear the economic risk of
holding the Purchased  Securities  for an indefinite  period of time because the
Purchased   Securities  cannot  be  resold  or  otherwise   transferred   unless
subsequently  registered  under  the  Securities  Act and any  applicable  state
securities  laws (which  Elite is not  obligated to do other than as provided in
the Registration  Rights  Agreement),  or an exemption from such registration is
available.  In  addition,  VGS  and VS  each  hereby  represents,  warrants  and
covenants  to  Elite  as of the  date of this  Agreement  and as of the  time of
Closing as follows:

                        (i) He or it has received and reviewed Elite's Form 10-Q
      for the three (3) months ended June 30, 2006, filed with the Commission on
      August 11, 2006 and Elite's  Form 10-K for the fiscal year ended March 31,
      2006,  filed on June 29,  2006;  he or it has  received or  otherwise  had
      access to all other SEC Reports and is familiar with and  understands  the
      business and operations of Elite and the risks inherent therein.

                        (ii) Such VGS Party understands and acknowledges that no
      independent  investment  banking firm,  financial advisor or legal counsel
      has  passed  upon  or  assumed  any   responsibility   for  the  accuracy,
      completeness or fairness of the information contained in this Agreement or
      Elite's Disclosure  Schedule or rendered any fairness opinion with respect
      to the transactions contemplated hereby.

                        (iii) Such VGS Party acknowledges that he or it has been
      encouraged  to rely upon the  advice of his or its own  independent  legal
      counsel and  accountants or other  financial  advisers with respect to the
      financial,  tax and  other  considerations  relating  to the  transactions
      contemplated hereby and has been offered, during the course of discussions
      concerning the transactions  contemplated  hereby,  the opportunity to ask
      such questions and inspect such documents  concerning  Elite,  as the case
      may be, and its business and financial  affairs,  as such VGS Party or his
      or its  representatives  have requested so as to understand more fully the
      nature of the  investment  and to verify the  accuracy of the  information
      supplied.

                        (iv)  Such VGS  Party  is an  "Accredited  Investor"  as
      defined  in  Rule  501 of  Regulation  D  under  the  Securities  Act,  is
      experienced  in evaluating and investing in securities of companies in the
      development  stage and acknowledges  that he or it can fend for himself or
      itself,  can bear  the  economic  risk of the  purchase  of the  Purchased
      Securities  including  the total loss of his or its  investment,  and is a
      sophisticated  investor who has  sufficient  knowledge  and  experience in
      financial and

                                      -9-
<PAGE>

      business matters to evaluate the merits and risks of his or its investment
      in the Purchased  Securities as contemplated  hereby, and has the capacity
      to protect his or its own interests.

                        (v)  Such  VGS  Party  understands  that  the  Purchased
      Securities  have not  been  registered  under  the  Securities  Act or the
      securities  laws of any state and are subject to substantial  restrictions
      on resale or  transfer.  Such VGS Party agrees that he or it will not sell
      or  otherwise  transfer  or dispose  of the  Purchased  Securities  or any
      portion thereof unless the Purchased  Securities are registered  under the
      Securities Act and any applicable  state  securities  laws, or unless such
      VGS Party obtains an opinion of counsel  which is reasonably  satisfactory
      to Elite that such  Purchased  Securities  may be sold in  reliance  on an
      exemption from such registration requirements.

                        (vi) Such VGS Party  understands that Elite will place a
      legend  on  the  certificate(s)   representing  the  Purchased  Securities
      indicating that the Purchased  Securities may not be transferred except in
      accordance  with an  exemption  from the  Securities  Act;  Elite will not
      register a transfer  not made in  accordance  with an  exemption  from the
      Securities Act; and such VGS Party therefore may be precluded from selling
      or otherwise  transferring or disposing of any of the Purchased Securities
      or any  portion  thereof  for  an  indefinite  period  of  time  or at any
      particular time.

                        (vii)  Such VGS  Party  understands  that the  Purchased
      Securities  are being offered and sold in reliance on specific  exemptions
      or exclusions from the registration requirements of federal and state laws
      (including,  without  limitation,  the  Securities  Act) and that Elite is
      relying  upon the truth and accuracy of the  representations,  warranties,
      agreements,  acknowledgements and understandings set forth herein in order
      to determine  the  suitability  of such VGS Party to acquire the Purchased
      Securities.

      3. OTHER AGREEMENTS.

            3.1  ELECTION TO BOARD OF  DIRECTORS.  During such time as Elite and
recipients of Permitted  Transfers (as such term is defined in the Stockholders'
Agreement)  holds at least forty percent (40%) of the outstanding  capital stock
of Novel and VS is the  Chairman  and Chief  Executive  Officer of Novel,  Elite
shall use its best  efforts to cause the  members of the Board of  Directors  of
Elite (the  "BOARD")  to (a) vote in favor of the  election  of VS to serve as a
member of the Board and hold such office  until the next  annual  meeting of the
stockholders  of Elite or until his  respective  successor  shall have been duly
elected and qualified or as otherwise  provided in the By-Laws of Elite, and (b)
include  VS in each  slate of  directors  to be  presented  by the  Board to the
stockholders  of Elite at each  annual and special  stockholder  meeting for the
election of Elite directors.

      3.2 BUSINESS PLANS AND OPERATIONS.

            (a)  DELIVERY  OF  DRAFT  INITIAL  BUSINESS  PLAN.  Within  45  days
following  the  Closing,  VS shall  prepare  and  deliver  to Elite a draft of a
comprehensive  business  plan and  strategy  for Novel  (the  "INITIAL  BUSINESS
PLAN"), which Initial Business Plan shall include (i) a

                                      -10-
<PAGE>

selection of branded drug  products  currently on the market to serve as initial
targets of Novel for development and  commercialization  of generic alternatives
(collectively, the "PROSPECTIVE PRODUCTS"), which Prospective Products shall not
include products  currently under  development by, or, to knowledge of VS, under
active  consideration  for  development  by,  Elite  (a list of  which  shall be
supplied to VS promptly after the Closing), (ii) estimated market shares of such
Prospective  Products,  (iii)  estimated  time to  market  of  such  Prospective
Products,  (iv) estimated sales projections for such Prospective  Products,  (v)
future performance  milestones and requisite financing requirements with respect
to the development and  commercialization  of each Prospective Products and with
respect  to the  business  plan of Novel  generally  and (vi)  related  Funding,
facilities   and  personnel   requirements.   The  inclusion  of  the  foregoing
information in any Business Plan shall be a reasonable good faith  determination
based upon the VS's knowledge and understanding of the  pharmaceutical  industry
and reasonable assumptions and shall not be deemed to be a guarantee of outcome.
To the extent requested by VS, Elite shall provide VS with reasonable assistance
in the preparation of the Initial  Business Plan,  including  efforts of Elite's
legal counsel and accountants.

                  (b) REVIEW AND  APPROVAL OF INITIAL  BUSINESS  PLAN.  Promptly
upon receipt of the draft Initial Business Plan, Elite shall review the draft of
the Initial Business Plan and provide comments and suggested  modifications  and
additions to VS. VS and Elite agree to use  commercially  reasonable  efforts to
agree  upon  the  terms  of the  Initial  Business  Plan as soon as  practically
possible,  including, without limitation, the Performance Milestones (as defined
below) and the portion of the Remaining  Contributions  triggered by each agreed
upon  Performance  Milestones.  Elite  hereby  agrees  to act in good  faith and
reasonably in its review and approval of the draft Initial Business Plan.

                  (c) OPERATIONS OF NOVEL IN ACCORDANCE  WITH BUSINESS PLANS. VS
shall cause Novel to operate in accordance  with the Initial  Business Plan (and
all budgets set forth therein). At least 30 days prior to each subsequent fiscal
year,  VS shall prepare and deliver to the Board,  for review and  approval,  an
updated  business plan and budget for the next fiscal year. Upon receipt of each
updated  business  plan and  corresponding  budget,  the Board shall review such
document  and, once  acceptable  to all members of the Board,  approve such plan
(each approved plan, an "ANNUAL BUSINESS PLAN"); PROVIDED, HOWEVER, that, if the
Board  fails to approve  such  Annual  Business  Plan and/or the all budgets set
forth  therein,  Novel shall  continue to operate in accordance  with the Annual
Business Plan in place from the  immediately  preceding  year and all line items
from the budget for such  preceding  year shall be increased  by twenty  percent
(20%).

                  (d) OBLIGATION TO NEGOTIATE INITIAL BUSINESS PLAN.

                  Both parties  acknowledge  that the Initial Business Plan will
form the  cornerstone of Elite's  future fund raising  efforts to fund Novel and
that such plan must be acceptable  to both  parties.  Each of Elite and VS shall
agree to negotiate  the terms of the Initial  Business Plan in good faith and in
accordance with reasonable  business judgment to resolve any differences between
the parties.  During the period from the Closing until Elite and VS agree to the
Initial Business Plan, the use of the Initial Contribution (as defined below) by
Novel shall be limited to the initial development of drug products  specifically
approved by the Board, on an unanimous basis.

                                      -11-
<PAGE>

      3.3 ADDITIONAL FINANCING OF AND ASSISTANCE TO NOVEL.

                  (a) ADDITIONAL FINANCING BY ELITE. In addition to the purchase
price  paid by Elite  for the  Elite  Novel  Shares,  Elite  shall  provide  the
following   additional   financing   to   Novel   (collectively,    the   "ELITE
CONTRIBUTIONS"):

                        (i) US$2,000,000 at the Closing ("INITIAL CONTRIBUTION")
and

                        (ii) Up to an  additional  US$25,000,000  (collectively,
the "REMAINING CONTRIBUTIONS"),  to be funded in installments within thirty (30)
days of the achievement of certain performance  milestones to be mutually agreed
to by Elite and VS in the Initial  Business Plan, or as the same may be modified
in any subsequent  Annual  Business Plan,  (E.G.,  the initiation of development
programs for Prospective  Products,  commencement  and/or completion of clinical
and/or bio-equivalence studies for Prospective Products, filings with the United
States  Food  and  Drug  Administration  of new  drug or  abbreviated  new  drug
applications  related to  Prospective  Products),  to occur  during the  initial
thirty  (30)  months  following  the  Closing  (collectively,  the  "PERFORMANCE
MILESTONES"),  with such Remaining  Contributions  being subject to acceleration
with unanimous approval of the Board (a "BOARD ACCELERATION ELECTION").

Notwithstanding  anything  to  the  contrary  in  this  Section  3.3  or in  the
Stockholders  Agreement,  Elite  shall have no  obligation  to make a  Remaining
Contribution  tied to Novel's  achievement of a specific  Performance  Milestone
unless  and until  Novel has  achieved  such  Performance  Milestone  or a Board
Acceleration  Election  has been made with  respect  to the  relevant  Remaining
Contribution,  and Elite's  deferral of a Remaining  Contribution for failure to
fully  achieve a Performance  Milestone (in the absence of a Board  Acceleration
Election)  shall not trigger a right to purchase Novel  securities held by Elite
pursuant to Section 4.2 of the Stockholders Agreement.

                        (b)  ALTERNATIVE  ADDITIONAL  FINANCING OF NOVEL. In the
event that (i) Elite defers, for a period in excess of ninety (90) days, payment
of a Remaining  Contribution  for failure of Novel to timely or fully  achieve a
Performance  Milestone,  (ii)  Elite  fails  to  make  payment  of  a  Remaining
Contribution following Novel timely and fully achieving a Performance Milestone,
or (iii) Novel requires  additional  funding to take advantage of  opportunities
outside the scope of the Initial Business Plan or the then-operative  subsequent
Annual  Business  Plan,  as the case may be, or beyond the Elite  Contributions,
then, Novel shall seek the necessary  additional funding through additional cash
contributions   from  Novel's  existing   stockholders  in  proportion  to  each
stockholder's  relative  ownership  of Novel  Class A Voting  Common  Stock,  by
delivering  written notice  requesting such additional PRO RATA financing to all
stockholders of Novel.  Each Novel  stockholder shall have thirty (30) days from
the date of  receipt  of such  notice to elect to make  such cash  contribution;
PROVIDED,  HOWEVER;  in the event that any Novel stockholder  refuses to provide
its share of such PRO RATA funding,  subject to the approval of the Board, Novel
may instead seek additional financing from third parties and Novel stockholders,
and once  terms of such  sale to a third  party and the  Novel  stockholder  are
determined,   such  sale  shall  be  subject  to  the  rights  of  all  existing
stockholders  of Novel to participate  (up to and including  their full PRO RATA
portion, as such may be adjusted by exercise of the VGS Purchase

                                      -12-
<PAGE>

Right (as such term is defined in the  Stockholders'  Agreement)  in  accordance
with Section 6 of the Stockholders Agreement.

                  (c) SEGREGATION OF FUNDS FOR ADDITIONAL NOVEL  FINANCING.  All
financing  raised  by Elite  for the  specific  purpose  of  funding  the  Elite
Contributions will be segregated by Elite and held by Elite pending  achievement
by Novel of the pre-defined Performance  Milestones;  PROVIDED, that Elite shall
have no  obligation  to  segregate  funds  raised for  general  working  capital
purposes or generally for  operations of Elite (which may include the funding of
the Remaining Contributions),  although such funds may be used to fund the Elite
Contributions.

                  (d)  ADDITIONAL  ASSISTANCE  TO NOVEL BY  ELITE.  Elite  shall
provide Novel with  reasonable  access to and services  from Elite's  employees,
consultants,  materials,  supplies,  equipment  and  facilities  as necessary to
enable Novel to operate Novel until  permanent  employees and personnel,  supply
arrangements,  equipment and facilities are acquired or obtained.  To the extent
that Novel  requests  the use of and uses  Elite's  materials or supplies or the
services of Elite's non-managerial employees or consultants,  Elite shall submit
to Novel monthly  statements  reflecting  Elite's actual cost of such employees,
consultants,  materials or supplies (without any profit margin or overhead) and,
once  such  aggregate  amount  exceeds  US$700,000,  such  amounts  in excess of
US$700,000  shall be credited,  on a monthly basis, as payments of the Remaining
Contributions  (such credits for amounts above  US$700,000  shall be referred to
herein as "USE CREDITS").  For the avoidance of doubt, Novel shall not recognize
Use Credits for the time of Elite's managerial  employees or the use by Novel of
Elite's  non-consumable  equipment or facilities.  Novel shall utilize available
time of Elite's employees, rather than engage new employees, to the extent Elite
employees shall have adequate available time for service to Novel as required by
Novel in order to meet its  objectives on a timely basis and such employees have
the skills and abilities required by Novel at competitive rates.

            3.4 RESTRICTIONS ON CERTAIN COMPETITIVE ACTIVITIES.

                  (a) THIRD PARTY RESTRICTIONS ON VS. Elite acknowledges that it
has been informed of the  restrictions  on the  activities of VS pursuant to the
Separation and Release Agreement, between Par Pharmaceuticals,  Inc. and VS, and
the   Employment   Agreement,   between  Par   Pharmaceuticals,   Inc.   and  VS
(collectively,  the "PAR AGREEMENTS"),  and agrees that VS shall not be required
by Elite to engage in the development of any drug product that VS has covenanted
not to develop pursuant to the Par Agreements in connection with his performance
of the Advisory  Agreement or the  Employment  Agreement.  VS agrees that in the
course of performing  his  obligations  under the Strategic  Alliance  Documents
(including the  identification  of Prospective  Products in connection  with the
Initial  Business  Plan), VS shall not engage in any activity that would violate
the Par Agreements.

                  (b) VS  RESTRICTIONS.  During the term of VS's  employment  by
Novel and continuing for a period ending on the first anniversary of termination
of VS's  employment with Novel or VS's  resignation  from employment with Novel,
unless VS's employment with Novel is terminated without Cause (as defined below)
by the Company or by VS's resignation from employment with Novel for Good Reason
(as defined below):

                                      -13-
<PAGE>

                        (i)  VS  shall  not,  directly  or  indirectly,  manage,
control,  finance, consult with, or engage (as either an employee or consultant)
in any business or activity  anywhere in the world involving a drug product that
is Competitive  (as defined below) with any Designated Drug Products (as defined
below) of Novel or any of its  respective  subsidiaries  or  affiliates,  or any
related  inventions  or  other  intellectual  property  of  Novel  or any of its
respective subsidiaries or affiliates (collectively,  a "COMPETITIVE ACTIVITY");
and

                        (ii) Any investment  (whether  equity or debt) by VS, or
any  affiliate  of VS  (including  VGS),  in any Person  engaging,  or providing
services or financing  for, a Competitive  Activity (a  "COMPETITIVE  COMPANY"),
other than equity  investments  of not more than five percent (5%) of the equity
interests  of such  Person,  shall be wholly  conditioned  on and subject to the
prior written unanimous approval of the Board or the Board of Directors of Novel
(as  appropriate),  including  any  follow-on  investments  in any entity  that,
subsequent  to the time of the  initial  investment,  has  become a  Competitive
Company.

For the purposes hereof:

"Cause"  shall  have  the  meaning  assigned  to  such  term  in the  Employment
Agreement.

"COMPETITIVE"  shall mean a drug  product  that is based upon the same  chemical
molecule,  utilizes  the  same  route of  administration,  and  treats  the same
indications as a Designated Drug Product, regardless of dosage strength.

"GOOD  REASON"  shall have the meaning  assigned to such term in the  Employment
Agreement

"DESIGNATED  DRUG  PRODUCTS"  shall  mean (i) all  drug  products  currently  in
development,  marketed  or  commercialized  by  Novel,  Elite  or any  of  their
respective  subsidiaries  or affiliates,  (ii) all drug products  in-licensed by
Novel,  Elite or any of their respective  subsidiaries or affiliates,  and (iii)
all  prospective  drug  products  included in the Initial  Business  Plan or any
Annual Business Plan of Novel.

Notwithstanding  anything to the contrary in this Section 3.4(b),  following the
termination  of VS's  employment  with Novel,  VS shall not be  prohibited  from
engaging in Competitive Activities with respect to drug products included in the
Initial  Business Plan or any Annual  Business Plan that either (a) are included
on  the  Inactive  Products  List  (as  defined  below)  or  (b)  have  not  yet
successfully  completed  stability  testing  on  exhibit  batches  of such  drug
products.

"INACTIVE  PRODUCT LIST" means a list of drug  products  included in the Initial
Business Plan or any Annual  Business Plan of Novel that the Elite  Designee (as
such term is defined in the  Stockholders'  Agreement)  and the VGS Designee (as
such term is defined in the Stockholders'  Agreement) reasonably agree by mutual
written  consent will not be developed  (or prior  development  efforts shall be
terminated)  by or on  behalf of Novel  and  should  be  placed on the  Inactive
Products List. The parties agree to review and update the Inactive Products List
at least quarterly during the term of the Employment  Agreement and shall agree,
in good faith, on the

                                      -14-
<PAGE>

final  version of the  Inactive  Products  List  promptly  after the term of the
Employment Agreement.

                  (c)  ELITE   RESTRICTIONS.   Elite  shall  not,   directly  or
indirectly  compete  anywhere in the world with the Designated  Drug Products of
Novel or any related inventions or other intellectual  property of Novel for the
later of (x) the first  anniversary of the date upon which Elite holds less than
ten percent  (10%) of the  outstanding  common  shares of Novel (on an issued or
as-converted basis) and (y) the third anniversary of the Closing.

                  (d) RIGHT OF FIRST OFFER REGARDING ELITE ANDA PRODUCTS. During
such  time as Elite  and  recipients  of  Permitted  Transfers  (as such term is
defined in the  Stockholders'  Agreement) holds at least thirty percent (30%) of
the  outstanding  capital  stock  of  Novel,  prior  to the  development  of any
additional  generic  drug  product  ("FUTURE  GENERIC  PRODUCT")  subject  to an
abbreviated  new drug  application  (an "ANDA") with the United  States Food and
Drug Administration,  Elite shall offer to Novel the opportunity to develop such
Future Generic  Product in place of Elite by providing  notice to Novel in which
Elite shall  describe (i) the Future  Generic  Product,  (ii) Elite's good faith
estimate of the costs related to the development of such Future Generic Product,
and (iii)  Elite's good faith  estimate of the  potential  market share for such
Future  Generic  Product.  Novel  shall have  thirty  (30) days from the date of
receipt of such notice to elect to develop the Future  Generic  Product in place
of Elite.  If such  election  is not made by Novel  within  such thirty (30) day
period,  Novel shall have waived its right to develop such product and Elite may
pursue the  development  of the Future  Generic  Product,  independent of Novel.
Notwithstanding the foregoing,  this Right of First Offer shall not apply to any
generic drug product under development by Elite as of the Effective Date.

            3.5  RESTRICTION ON TRANSFER OF PURCHASED  SHARES OR WARRANT SHARES.
VGS  shall  not,  directly  or  indirectly,  sell,  assign,  transfer,  offer or
otherwise  dispose of any Purchased  Shares or Warrant Shares on or prior to the
first  anniversary of the Closing,  without the prior written  consent of Elite;
PROVIDED,  HOWEVER,  the  restrictions  set  forth  in this  Section  3.5  shall
terminate on the date which is one trading day after the daily  volume  weighted
average price of the Common Stock on the American Stock Exchange (as reported by
Bloomberg  Financial L.P.  (based on a Trading Day from 9:30 a.m. (New York City
time) to 4:02 p.m.  (New York City time)),  is less than 85% of the daily volume
weighted  average price of the Common Stock on the American Stock Exchange as of
the Closing.

      4. MISCELLANEOUS

            4.1 FURTHER  ASSURANCES.  Each of the parties  hereto shall,  at any
time and from time to time after the date hereof,  at the request and expense of
the other party, (i) promptly and duly execute and deliver,  or cause to be duly
executed and delivered to the requested  person,  all such further documents and
instruments,  and (ii)  take or cause to be taken  all such  other  and  further
actions,  in each case as may be  reasonably  requested  by the  other  party to
implement and effect the terms of this Agreement.

            4.2 BENEFITS OF AGREEMENT.  Except as otherwise  expressly  provided
herein,  the  provisions  hereof shall inure to the benefit of, be binding upon,
and be enforceable  by, the parties hereto and their  respective  successors and
assigns. Novel shall be a Third Party

                                      -15-
<PAGE>

beneficiary of, and shall be bound by and entitled to enforce,  Sections 3.2(c),
3.3(b), and 3.3(d) of this Agreement.

            4.3  ASSIGNMENT.  This  Agreement  and the  rights  and  obligations
hereunder  shall not be assignable or  transferable  by either party without the
prior written consent of the other party.  Any instrument  purporting to make an
assignment in violation of this Section 4.3 shall be void.

            4.4  ENTIRE  AGREEMENT.  This  Agreement,  together  with the  other
Strategic Alliance Documents,  constitute the full and entire  understanding and
agreement  between the parties  with  regard to the subject  matters  hereof and
thereof and, except as otherwise  specifically  provided therein, no party shall
be  liable or bound to any  other in any  manner  by any other  representations,
warranties, covenants or agreements with respect to such subject matters.

            4.5  SEVERABILITY.  In case  any  provision  of this  Agreement,  or
portion  hereof,  shall be  invalid,  illegal or  unenforceable,  the  validity,
legality and enforceability of the remaining  provisions shall not in any way be
affected or impaired thereby.

            4.6 AMENDMENT AND WAIVER. This Agreement and any provision hereof or
right or obligation  hereunder may be amended,  modified or waived only with the
prior  written  consent  of Elite and VS which  amendments,  modifications,  and
waivers shall be binding upon all other parties hereto).

            4.7 DELAYS OR  OMISSIONS;  REMEDIES.  It is agreed  that no delay or
omission to exercise any right,  power or remedy accruing to any party, upon any
breach,  default or  noncompliance  by any other  party,  shall  impair any such
right,  power or remedy,  nor shall it be  construed  to be a waiver of any such
breach,  default or noncompliance,  or any acquiescence therein, or of or in any
similar breach, default or noncompliance thereafter occurring.

            4.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed facsimile if sent during normal
business hours of the recipient, if not, then on the next business day, (c) five
(5) days after having been sent by registered or certified mail,  return receipt
requested,  postage prepaid,  or (d) one (1) day after deposit with a nationally
recognized  overnight  courier,  specifying  next  day  delivery,  with  written
verification of receipt.  All communications  shall be sent to Elite, VGS or VS,
as the case may be, at the  address  set forth for such  party on the  signature
page  hereof or at such other  address as such party may  designate  by ten (10)
days advance written notice to the other party hereto.

            4.9 TITLES AND SUBTITLES. The titles of the sections and subsections
of this  Agreement  are for  convenience  of  reference  only  and are not to be
considered in construing this Agreement.

            4.10  COUNTERPARTS.  This Agreement may be executed in any number of
counterparts,  each of which  shall be an  original,  but all of which  together
shall constitute one agreement.

                                      -16-
<PAGE>

            4.11 PRONOUNS.  All pronouns  contained  herein,  and any variations
thereof,  shall be  deemed  to  refer to the  masculine,  feminine  or  neutral,
singular or plural, as the identity of the parties may require.

            4.12  GOVERNING  LAW.  THIS  AGREEMENT  SHALL  BE  GOVERNED  BY  AND
CONSTRUED IN ACCORDANCE  WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT  GIVING
EFFECT TO ANY CHOICE OR CONFLICT OF LAWS PROVISIONS).

            4.13  CONSENT TO  JURISDICTION.  EACH OF THE PARTIES  HERETO  HEREBY
IRREVOCABLY AND  UNCONDITIONALLY  SUBMITS TO THE  JURISDICTION OF ANY FEDERAL OR
STATE COURT OF NEW YORK SITTING IN NEW YORK CITY AND IRREVOCABLY AGREES THAT ALL
ACTIONS OR  PROCEEDINGS  ARISING  OUT OF OR RELATING  TO THIS  AGREEMENT  OR THE
TRANSACTIONS  CONTEMPLATED HEREBY SHALL BE LITIGATED EXCLUSIVELY IN SUCH COURTS.
EACH OF THE PARTIES HERETO AGREES NOT TO COMMENCE ANY LEGAL  PROCEEDING  RELATED
HERETO EXCEPT IN SUCH COURT. EACH OF THE PARTIES HERETO  IRREVOCABLY  WAIVES ANY
OBJECTION  WHICH IT MAY NOW OR HEREAFTER  HAVE TO THE LAYING OF THE VENUE OF ANY
SUCH   PROCEEDING  IN  ANY  SUCH  COURT  AND  HEREBY  FURTHER   IRREVOCABLY  AND
UNCONDITIONALLY  WAIVES  AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT
ANY SUCH ACTION,  SUIT OR PROCEEDING  BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM.

            4.14 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY WAIVES,
TO THE FULLEST  EXTENT  PERMITTED BY APPLICABLE  LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY  LITIGATION  DIRECTLY OR INDIRECTLY  ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS  AGREEMENT.  EACH OF THE PARTIES HERETO (A)
CERTIFIES  THAT NO  REPRESENTATIVE,  AGENT OR  ATTORNEY  OF THE OTHER  PARTY HAS
REPRESENTED,  EXPRESSLY  OR  OTHERWISE,  THAT THE OTHER  PARTY WOULD NOT, IN THE
EVENT OF LITIGATION,  SEEK TO ENFORCE THE FOREGOING  WAIVER AND (B) ACKNOWLEDGES
THAT BOTH  PARTIES  HERETO HAVE BEEN INDUCED TO ENTER INTO THIS  AGREEMENT,  BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 4.14.

            4.15 GENERAL. All exhibits to this Agreement are hereby incorporated
by reference and made a part of this Agreement.

              [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                      -17-
<PAGE>

      IN WITNESS  WHEREOF,  each of the  undersigned  parties  has  caused  this
STRATEGIC  ALLIANCE  AGREEMENT to be duly  executed and delivered as of the date
first above written.

                                            ELITE PHARMACEUTICALS, INC.

                                            By: /s/ Bernard Berk
                                                --------------------------------
                                                Name:  Bernard Berk
                                                Title: Chief Executive Officer

                                            ADDRESS:

                                            Elite Pharmaceuticals, Inc.
                                            165 Ludlow Avenue
                                            Northvale, New Jersey 07647
                                            Attention: Chief Executive Officer
                                            Facsimile: (201) 391-7693

                                            /s/ Veerappan S. Subramanian, Ph.D.
                                            ------------------------------------
                                            Veerappan S. Subramanian, Ph.D.

                                            ADDRESS:

                                            475 Bernardsville Road
                                            Mendham, New Jersey 07945
                                            Facsimile:  (908) 766-4006

                                            VGS PHARMA, LLC

                                            By: /s/ Anu R. Subramanian
                                                --------------------------------
                                            Name:  Anu R. Subramanian
                                            Title: Member

                                            ADDRESS:

                                            475 Bernardsville Road
                                            Mendham, New Jersey 07945
                                            Facsimile: (908) 766-4006

Accepted and Agreed with respect to
Sections 3.2(c), 3.3(b), and 3.3(d) and 4.2:

NOVEL LABORATORIES, INC.

By: /s/ Veerappan S. Subramanian, Ph.D.
    ------------------------------------------
    Name:  Veerappan S. Subramanian, Ph.D.
    Title: Chairman and Chief Executive Officer

<PAGE>

                                                                       EXHIBIT A

                                 FORM OF WARRANT

                                 (See attached)

<PAGE>

                                                                       EXHIBIT B

                               WIRING INSTRUCTIONS

                                 (See attached)

<PAGE>

                                                                       EXHIBIT C

                               ADVISORY AGREEMENT

                                 (See Attached)

<PAGE>

                                                                       EXHIBIT D

                             STOCK OPTION AGREEMENT

                                 (See attached)

<PAGE>

                                                                       EXHIBIT E

                              EMPLOYMENT AGREEMENT

                                 (See attached)

<PAGE>

                                                                     EXHIBIT F-1

                        VGS SUBSCRIPTION FOR NOVEL SHARES

                                 (See attached)

<PAGE>

                                                                     EXHIBIT F-2

                       ELITE SUBSCRIPTION FOR NOVEL SHARES

                                 (See attached)

<PAGE>

                                                                       EXHIBIT G

                             STOCKHOLDERS' AGREEMENT

                                 (See attached)

<PAGE>

                                                                       EXHIBIT H

                          REGISTRATION RIGHTS AGREEMENT

                                 (See attached)EXHIBIT 10(b)

                                                               EXECUTION VERSION

            ADVISORY  AGREEMENT  (the  "AGREEMENT"),   dated  as  of
            December 6, 2006 (the "EFFECTIVE  DATE"), by and between
            Elite Pharmaceuticals, Inc., a Delaware corporation (the
            "COMPANY") and Veerappan S. Subramanian (the "ADVISOR").
            --------------------------------------------------------

                                  INTRODUCTION

      Pursuant  to  that  certain  Strategic  Alliance  Agreement,  dated  as of
December 6, 2006 (the  "STRATEGIC  ALLIANCE  AGREEMENT") the Company has entered
into a  strategic  relationship  with the  Advisor to assist the  Company in the
development  of new drug  products  and enhance the  development  efforts of the
Company with respect to current drug development projects.

      The Advisor has  substantial  experience  in the  development  of new drug
products  and  desires to  provide to the  Company  strategic  drug  development
services  in exchange  for,  INTER  ALIA,  options to purchase  shares of common
stock,  par value $0.01 (the "COMMON STOCK"),  of the Company,  which shall vest
upon the  occurrence of certain future events and the right to be granted to his
affiliate under the Strategic  Alliance Agreement to purchase an equity interest
in Novel Laboratories, Inc., a Delaware corporation ("NOVEL").

      The Company and the Advisor desire to enhance the current drug development
programs  of the  Company,  as well as  develop  additional  programs  and  drug
products.

                                    AGREEMENT

      NOW THEREFOR IT IS HEREBY AGREED THAT:

            1. SERVICES.  The Advisor agrees to perform the Services (as defined
herein) in a  professional  manner,  subject to the terms and conditions of this
Agreement.  Subject to the limitation set forth below in Section 6, the advisory
services (the  "SERVICES")  to be performed by the Advisor under this  Agreement
shall  include,  without  limitation:  (i)  reviewing  the current  drug product
development  efforts of the Company;  (ii) assisting with the  implementation of
current  and  new  drug  product  development  projects  of the  Company;  (iii)
reviewing  the current  scientific  projects of the  Company  and  advising  the
Company  on a course of action to  produce  greater  efficiencies  and  positive
outcomes with respect to such projects, (iv) assisting the Company in its future
fund  raising  efforts,   (v)  reviewing  the  Company's  current  research  and
development  staff (the "R&D STAFF");  (vi)  recommending  modifications  to the
current R&D Staff (including,  without limitation,  assisting the Company in its
recruitment of additional  members to the R&D Staff, as needed);  and (vii) such
additional  services  and  activities  in  support  of, and  incidental  to, the
Services  described  in clauses (i) through  (vi) above.  The Advisor  shall (x)
report to, and follow the  directions  of, the Board of Directors of the Company
(the "BOARD") and the Chief  Executive  Officer of the Company (the "CEO"),  (y)
perform  and carry out such  duties  and  responsibilities  that are  reasonably
consistent with the Advisor's position and  responsibilities and this Agreement,
and (z) perform and discharge such additional duties and responsibilities as may
be reasonably determined from time to time by the CEO and the Board,  consistent
with the description of the Services as set forth above.

<PAGE>

            2. COMPENSATION.

                  2.1. STOCK OPTIONS. The Company shall grant to the Advisor, as
an  inducement  material  to entering  into this  Agreement,  a stock  option to
purchase one million seven hundred fifty  thousand  (1,750,000) of Common Stock,
pursuant to the terms and  conditions  of that certain  Stock Option  Agreement,
dated as of the date hereof (the "STOCK OPTION  AGREEMENT"),  a copy of which is
attached hereto as EXHIBIT A.

                  2.2.  EXPENSES.  The  Company  shall  promptly  reimburse  the
Advisor for expenses he reasonably  incurs in connection with the performance of
the Services  (including  business travel and entertainment  expenses),  against
receipts or other appropriate  written evidence of such expenditures as required
by the  appropriate  Internal  Revenue  Service  regulations  or by the Company;
PROVIDED, HOWEVER, that, all expenses in excess of One Thousand Dollars ($1,000)
per month, individually or in the aggregate, shall be approved by the CEO of the
Company as a condition to reimbursement thereof.

                  2.3  BENEFITS.  Until  such time as Novel  shall  establish  a
medical  insurance  plan,  the Advisor shall be entitled to  participate  in the
Company's   medical   insurance   plans,   to  the  extent  that  the  Advisor's
participation is permitted under such medical insurance plans.

            3. TERM; TERMINATION.

                  3.1. TERM. Unless earlier terminated, the initial term of this
Agreement is one (1) year from the  Effective  Date (the  "INITIAL  TERM").  The
Initial  Term will  automatically  renew for an unlimited  number of  successive
one-year terms (each a "RENEWAL TERM"; the Renewal Term and the Initial Term are
sometimes  individually  referred to herein as the "TERM");  PROVIDED,  HOWEVER,
that in any Renewal Term, either party may terminate this Agreement by giving at
least thirty (30) days' advance  written notice of  termination  with or without
Cause (as defined below) for any reason or no reason.

                  3.2.  TERMINATION.   The  Company  shall  have  the  right  to
terminate this  Agreement upon (i) the death of the Advisor;  (ii) the Advisor's
inability to perform the  Services  hereunder  on account of his  disability  or
incapacity for a period of ninety (90) or more days, whether or not consecutive,
within any period of twelve  (12)  consecutive  months;  (iii) upon the  Company
giving written notice,  at any time, to the Advisor that this Agreement is being
terminated immediately for Cause; or (iv) for any reason or no reason.

For purposes of this  Agreement,  "CAUSE" means (i) the  Advisor's  breach of or
default  under the terms of this  Agreement,  which breach or default  continues
beyond thirty (30) days after a written demand for  performance or compliance is
delivered to the Advisor by the Company; (ii) violation of any securities law by
the Advisor;  (iii) gross  negligence or willful  misconduct by the Advisor,  in
each  case  that  has a  material  adverse  effect  upon the  Company;  (iv) the
Advisor's commission of, or pleading guilty or NOLO CONTENDERE to, a felony or a
crime involving moral turpitude,  fraud, or  embezzlement;  or (v) the Advisor's
breach of any provision of Sections 4 or 5 of this Agreement.

                                       2
<PAGE>

            4.  PROTECTION  OF  CONFIDENTIAL   INFORMATION  AND  TRADE  SECRETS;
ASSIGNMENT OF INTELLECTUAL PROPERTY; NON-SOLICITATION.

                  4.1. DEFINITIONS.

                        4.1.1. "CONFIDENTIAL INFORMATION" DEFINED. "CONFIDENTIAL
INFORMATION"  means any and all  information  (oral or written)  relating to the
Company or any entity  controlling,  controlled by, or under common control with
the Company,  including  information  relating to:  technology,  Inventions  (as
defined  in  Section  4.1.2.  below),  intellectual  property,   research,  test
procedures  and  results;  machinery  and  equipment;  manufacturing  processes;
financial  information;  products;  identity and  description  of materials  and
services used; purchasing; costs; pricing; customers and prospects; advertising,
promotion and marketing;  and selling,  servicing and information  pertaining to
any  governmental  investigation,  except such  information that becomes public,
other than as a result of a breach of the  provisions  of Section  4.2.  hereof.
Without limiting the foregoing,  Confidential Information shall also include all
information  related  to  products  targeted  for  development  by the  Company,
subjects of research and  development,  projected launch dates, the protocols of
the United States Food and Drug Administration (the "FDA"),  projected dates for
regulatory  filings,  consumer  studies,  market  research,  clinical  research,
business plans, planned expenditures, profit margins, strategic evaluation plans
and initiatives,  and those  commissioned by the Company through outside vendors
or consultants, and the content of all business and strategic planning conducted
with or through third parties. For purposes of this Agreement, "PERSON" means an
individual,   corporation,   partnership,   trust,  limited  liability  company,
unincorporated organization, joint stock corporation, joint venture, association
or other  entity,  or any  government,  or any agency or  political  subdivision
thereof or any branch of any legal entity.

                        4.1.2. "INVENTIONS" DEFINED.  "INVENTIONS" means any and
all inventions, discoveries, improvements, patent, copyrights, sales approaches,
sales materials, training material, and/or other property rights, whether or not
patented or patentable made, conceived,  created, developed or contributed to by
the Advisor during the Term which are (i) directly or indirectly  related to the
business,  operations or activities of the Company or any of its subsidiaries or
affiliates,  (ii) directly or indirectly related to the Advisor's performance of
the  Services  hereunder,  or  performance  of other  services  (including  as a
director, manager, officer, advisor, agent, representative,  consultant or other
independent  contractor)  for,  the  Company  or  any  of  its  subsidiaries  or
affiliates,  or (ii) based upon Confidential  Information.  For the avoidance of
doubt,  inventions,   discoveries,   improvements,  patents,  copyrights  and/or
property  rights not related to  "Designated  Drug  Products" of the Company (as
defined  below) shall not be considered  to be  Inventions  for purposes of this
Agreement.

                        4.1.3.  "WORK FOR HIRE"  DEFINED.  "WORK FOR HIRE" means
any and all  sales  approaches,  sales  material,  training  material,  computer
software,  documentation,  other  copyrightable  works or any other intellectual
property  (including,  but not limited  to,  materials  or  services  subject to
trademark  or  service  mark  registration,   but  excluding  Inventions)  made,
conceived,  created,  developed or contributed to by the Advisor during the Term
and which are (i) directly or indirectly related to the business,  operations or
activities  of  the  Company  or any of its  subsidiaries  or  affiliates,  (ii)
directly or indirectly related to the Advisor's performance of the

                                       3
<PAGE>

Services  hereunder  by,  or  performance  of  other  services  (including  as a
director, manager, officer, advisor, agent, representative,  consultant or other
independent  contractor)  for,  the  Company  or  any  of  its  subsidiaries  or
affiliates, or (iii) based upon Confidential  Information.  For the avoidance of
doubt, sales approaches,  sales material,  training material, computer software,
documentation,  other copyrightable works or any other intellectual property not
related to the business of Novel shall not be considered to be Work for Hire for
purposes of this Agreement.

                  4.2. NON-DISCLOSURE OF CONFIDENTIAL  INFORMATION.  The Advisor
agrees that he shall not use or disclose,  either during the Term or at any time
thereafter,  (except to the extent  necessary during the Term in connection with
the necessary and proper  performance  of the Advisor's  duties on behalf of the
Company and in good faith, or as required by law or governmental  authority) any
Confidential Information.

                  4.3. COVENANT NOT TO COMPETE AND NON-SOLICITATION.  During the
Term  and  continuing  for a  period  ending  on the  first  anniversary  of the
termination  of this  Agreement  by  either  party,  unless  this  Agreement  is
terminated  by the Company  without  Cause or by the Advisor for Good Reason (as
defined below):

                        4.3.1.  The Advisor shall not,  directly or  indirectly,
manage,  control,  consult with, or engage (as either an employee or consultant)
in any business or activity  anywhere in the world involving a drug product that
is Competitive  (as defined below) with any Designated Drug Products (as defined
below) of the Company or any of its respective  subsidiaries  or affiliates,  or
any related inventions or other  intellectual  property of the Company or any of
its  respective  subsidiaries  or  affiliates   (collectively,   a  "COMPETITIVE
ACTIVITY"); and

                        4.3.2.  Any investment  (whether  equity or debt) by the
Advisor,  any affiliate of the Advisor or VGS Pharma, LLC ("VGS"), in any Person
engaging,  or providing  services or financing  for, a  Competitive  Activity (a
"COMPETITIVE  COMPANY") shall be wholly  conditioned on and subject to the prior
written  unanimous  approval of the Board or the Board of Directors of Novel (as
appropriate), including any follow-on investments in any entity that, subsequent
to the time of the initial  investment,  has become a Competitive  Company.  The
foregoing  restriction  shall not apply to investments for equity  interests not
exceeding five percent (5%) of a Competitive  Company or financing provided to a
subsidiary or affiliate of a Competitive  Company which is not itself engaged in
a Competitive Activity.

For the purposes hereof:

An  "AFFILIATE"  of a  party  shall  have  the  meaning  ascribed  to  the  term
"affiliate"  in that  certain  Stockholders'  Agreement,  dated  as of the  date
hereof,  among Novel,  the Company,  the  Advisor,  and VGS (the  "STOCKHOLDERS'
AGREEMENT").

"COMPETITIVE"  shall mean a drug  product  that is based upon the same  chemical
entity by the same  route of  administration  and for the same  indication  as a
Designated Drug Product, regardless of dosage strength.

"DESIGNATED  DRUG  PRODUCTS"  shall  mean (i) all  drug  products  currently  in
development,   marketed  or   commercialized  by  the  Company  or  any  of  its
subsidiaries or affiliates (a list of which shall be

                                       4
<PAGE>

supplied to the Advisor promptly following the execution of this Agreement), and
(ii) all drug products  in-licensed by the Company or any of its subsidiaries or
affiliates.  For purposes of the definition of "Designated  Drug Products",  the
Company shall not be deemed an affiliate of Novel.

Notwithstanding  anything to the  contrary in this Section  4.3,  following  the
termination of the Advisor's  services under this  Agreement,  the Advisor shall
not be prohibited  from engaging in Competitive  Activities  with respect to any
drug products  described in clauses (i) or (ii) in the preceding  paragraph that
either (a) are included on the Inactive  Products List (as defined below) or (b)
have not yet successfully completed stability testing on exhibit batches of such
drug  products;   PROVIDED,   HOWEVER,   that  during  the  Term  and  post-Term
non-competition   period  the  Advisor  shall  not  engage  in  any  Competitive
Activities   with  respect  to  opioid   analgesics  that  are  currently  under
development,   marketed  or  commercialized  by  the  Company  (or  any  of  its
subsidiaries  or  affiliates)  or in the past have been  developed,  marketed or
commercialized  by the  Company  (or  any of its  subsidiaries  of  affiliates),
regardless of current status of such drug products.

"INACTIVE  PRODUCT  LIST" means a list of drug products that the Company and the
Advisor  reasonably  agree by mutual  written  consent will not be developed (or
prior  development  efforts shall be  terminated) by or on behalf of the Company
and should be placed on the Inactive  Products List. The parties agree to review
and update the Inactive Products List at least quarterly during the term of this
Agreement and shall agree,  in good faith,  on the final version of the Inactive
Products List promptly after the term of this Agreement.

"GOOD REASON" means a material breach by the Company of its obligations pursuant
to this Agreement or the Stock Option  Agreement  which breach the Company fails
to remedy within thirty (30) days of receipt of written  notice thereof from the
Advisor setting forth in reasonable detail the  circumstances  alleged to be the
basis for Good Reason termination.

                        4.3.3. Prior to the second anniversary of the end of the
Term, the Advisor shall not directly or indirectly solicit,  recruit, or induce,
or attempt to  solicit,  recruit,  or induce any  Persons  (i)  employed  by the
Company or (ii) retained as consultants or other independent  contractors by the
Company  and  dedicating  at  least  80% of  such  consultant's  or  independent
contractor's  work time to the Company,  or encourage any such Persons described
in clauses (i), or (ii) above to terminate or adversely alter their relationship
with the Company.

                  4.4. ASSIGNMENT OF INTELLECTUAL PROPERTY.

                        4.4.1.  The  Advisor  shall  promptly  disclose  to  the
Company any and all  Inventions.  The Advisor shall promptly  communicate to the
Company all  information,  details and data pertaining to any Inventions in such
form as the Company  reasonably  requests.  The Advisor agrees that  Inventions,
patents and patent applications are the property of the Company, and any and all
rights, titles or interests in and to Inventions, patents or patent applications
which the Advisor may have in any and every  jurisdiction are hereby assigned in
full. Whenever the Advisor is requested to do so by the Company, during or after
the Term, the Advisor shall, at the Company's sole expense, promptly execute and
deliver any and all

                                       5
<PAGE>

applications,  assignments or other documents or instruments  reasonably  deemed
necessary or advisable by the Company to apply for and obtain  Letters Patent of
the United  States or any foreign  country or to otherwise  protect,  confirm or
establish the  Company's  full and exclusive  interests in any  Inventions.  The
obligations  set  forth  in  this  Section  4.4.1  shall  be  binding  upon  the
successors,  assigns, executors,  administrators and other legal representatives
of the Advisor.

                        4.4.2.  Any and all Works for Hire  shall be  considered
"works made for hire" under the copyright  laws of the United States or property
of the Company under applicable federal, state, local and foreign trademark laws
(as appropriate).  The Advisor shall promptly communicate to the Company any and
all Works for Hire, and any and all information,  details and data pertaining to
any Works for Hire,  in such form as the  Company  requests.  To the extent that
Works for Hire fail to qualify as (A) "works made for hire" under the  copyright
laws of the  United  States or any other  jurisdiction  or (B)  property  of the
Company under applicable  federal,  state,  local or foreign trademark laws, the
Advisor  hereby  assigns  each Work for Hire and all right,  title and  interest
therein in any and every  jurisdiction  to the Company.  Whenever the Advisor is
requested to do so by the Company,  during or after the Term,  the Advisor shall
promptly  execute  and deliver any and all  applications,  assignments  or other
documents or instruments  deemed  necessary or advisable by the Company to apply
for and confirm and effectuate full and exclusive ownership of Works for Hire in
the Company,  including, but not limited to, ownership of any moral rights under
the  copyright  law of any nation,  or any other rights  under the  intellectual
property  laws of any nation.  The  obligations  set forth in this Section 4.4.2
shall be binding upon the successors,  assigns,  executors,  administrators  and
other legal representatives of the Advisor.

                  4.5. If a court  declares  that any term or  provision of this
Section 4 is invalid or unenforceable,  the parties to this Agreement agree that
the court making the determination of invalidity or unenforceability  shall have
the power to reduce the scope,  duration  or area of the term or  provision,  to
delete  specific  words or phrases,  or to replace any invalid or  unenforceable
term or provision  with a term or provision  that is valid and  enforceable  and
that comes closest to expressing  the intention of the invalid or  unenforceable
term or provision, and this Agreement shall be enforceable as so modified.

                  4.6. The Advisor hereby transfers,  assigns,  conveys,  grants
and sets over to the Company and its  successors  and assigns  forever,  and the
Company hereby accepts, assumes and acquires from the Advisor for itself and its
successors and assigns forever,  all of the Advisor's right,  title and interest
in and to the  Inventions  in any and every  jurisdiction.  The  Advisor  hereby
covenants  and  agrees  that,  at any time and from time to time  after the date
hereof, at the request of the Company or its successors or assigns,  he will (i)
promptly and duly execute and deliver,  or cause to be executed and delivered to
the Company, all such further documents and instruments,  and (ii) promptly take
all such other and further  action,  as may be  requested by the Company to more
effectively transfer,  assign,  convey, grant, set over, vest, protect,  confirm
and establish full and exclusive right,  title and interest in and to all of the
Inventions in and to the Company and its successors  and assigns  forever in any
and every jurisdiction, including, without limitation, any and all applications,
assignments or other documents or instruments  deemed  necessary or advisable by
the Company to apply for and obtain  Letters  Patent of the United States or any
foreign jurisdiction. The obligations set forth in

                                       6
<PAGE>

this  Section  4.6 shall be binding  upon the  successors,  assigns,  executors,
administrators  and other  legal  representatives  of the  Advisor.  The Advisor
hereby  represents  and  warrants  to the  Company  that  the  Advisor  has  not
transferred  any right,  title or interest in or to the  Inventions to any other
Person as of the date of the execution of this  Agreement and, as of the date of
the execution of this Agreement, has not entered into any agreement to do so.

                  4.7. The Advisor  acknowledges and admits that a breach of any
of the covenants  contained in this Section 4 will cause the Company irreparable
harm. The Advisor  further  acknowledges  and admits that the damages  resulting
from such a breach will be difficult or impossible to ascertain,  and will be of
the sort that  cannot be  compensated  by money or other  damages,  and that the
Company in addition to all other remedies  available at law or equity,  shall be
entitled to equitable  relief,  including  specific  performance  and injunctive
relief as remedies  for any such breach and that the  Advisor  further  agree to
waive any  requirement  for securing or posting of any bond in  connection  with
such remedy.  The Advisor  therefore waives (and is estopped from asserting in a
court of law or equity) any argument that the breach,  or threatened  breach, of
any of the covenants contained in this Section 4 does not constitute irreparable
harm for which an adequate  remedy at law is unavailable.  Nothing  contained in
this Section 4 or elsewhere in this Agreement  shall be construed as prohibiting
the Company from pursuing any other remedies available at law or in equity for a
breach, or threatened  breach, by the Advisor of any of the covenants  contained
in this Section 4.

                  4.8  The  parties  hereby   acknowledge  that  the  provisions
contained in this Section 4 are essential terms of this Agreement.

            5.  CONTINUED   COOPERATION;   RETURN  OF  DOCUMENTS  AND  PROPERTY;
INJUNCTIVE RELIEF; NON-EXCLUSIVITY AND SURVIVAL.

                  5.1.  CONTINUED  COOPERATION.  The Advisor  shall,  during and
after the expiration or  termination  of this  Agreement for any reason,  at the
Company's sole expense (including,  after the Term, compensation of Advisor at a
daily rate of Two Thousand Dollars ($2,000)), cooperate fully with the Company's
reasonable  requests  with respect to any  internal or external  agency or legal
investigation  (whether  conducted by the FDA, the United States  Securities and
Exchange Commission or otherwise),  lawsuits, financial reports, or with respect
to other matters within his knowledge,  responsibilities  or purview;  PROVIDED,
HOWEVER,  that such requests do not  unreasonably  interfere  with the Advisor's
business  activities.  The Advisor shall execute all lawful documents reasonably
necessary for the Company to secure or maintain any Confidential Information.

                  5.2.  RETURN OF DOCUMENTS  AND  PROPERTY.  Upon the end of the
Term, or upon the earlier  request of the Company,  the Advisor and his legal or
personal  representatives  will  promptly  return  to the  Company  any  and all
information, documents or other materials relating to or containing Confidential
Information  which are, and any and all other  property of the Company which is,
in the  Advisor's  possession,  care or  control,  regardless  of  whether  such
materials were created or prepared by the Advisor and regardless of the form of,
or medium containing, such information, documents, including without limitation,
all computers and hard

                                       7
<PAGE>

drives,  employee identification cards, Company credit cards, keys and any other
physical property of the Company.

                  5.3.  INJUNCTIVE  RELIEF.  The parties hereby  acknowledge and
agree that (a) the Company will be irreparably  injured in the event of a breach
by the  Advisor of any of his  obligations  under  Sections 4 and 5 hereof;  (b)
monetary  damages will not be an adequate  remedy for any such  breach;  (c) the
Company will be entitled to injunctive relief, in addition to any other remedies
that it may have, in the event of any such breach;  and (d) the existence of any
claims  that the  Advisor  may have  against  the  Company,  whether  under this
Agreement or otherwise,  will not be a defense to the enforcement by the Company
of any  of  its  rights  under  Sections  4 and 5  hereof.  All of the  parties'
covenants and the Company's rights to specific  enforcement,  injunctive  relief
and other remedies as set forth herein shall apply in the event of any breach or
threatened breach by the Advisor of any of the provisions of Sections 4 and/or 5
hereof.  The  parties  further  agree that any  action  concerning  any  alleged
breach(es)  of Sections 4 and/or 5 hereof  shall not be brought or  addressed in
arbitration,  and the existence of any demand for arbitration or pendency of any
dispute in  arbitration  under this  Agreement  shall not be a basis to delay or
defer adjudication by a court of any demand for specific performance, injunctive
relief or other  remedies in relation  to any alleged  breach(es)  of Sections 4
and/or 5 hereof.

                  5.4.  NON-EXCLUSIVITY  AND  SURVIVAL.  The  covenants  of  the
Advisor contained in Sections 4 and 5 hereof are in addition to, and not in lieu
of, any obligations that the Advisor may have with respect to the subject matter
hereof, whether by contract, as a matter of law or otherwise, and such covenants
and their enforceability shall survive any expiration or termination of the Term
by either party and any investigation made with respect to the breach thereof by
the Company at any time.

            6.  LIMITATION  ON  CERTAIN   DEVELOPMENT   PROJECTS.   The  Company
acknowledges  that it has been informed of the restrictions on the activities of
the  Advisor  pursuant to the  Separation  and  Release  Agreement,  between Par
Pharmaceuticals, Inc. and the Advisor, and the Employment Agreement, between Par
Pharmaceuticals,  Inc. and the Advisor (collectively, the "PAR AGREEMENTS"), and
agrees  that the  Advisor  shall not be required by the Company to engage in the
development  of any drug product that the Advisor has  covenanted not to develop
pursuant  to the Par  Agreements  in  connection  with  his  performance  of the
Services  hereunder.  The Advisor  agrees that in the course of  performing  his
obligations  hereunder,  the Advisor shall not engage in any activity that would
violate the Par Agreements.

            7. MISCELLANEOUS PROVISIONS.

                  7.1   ADVISOR NOT AN EMPLOYEE. The relationship of the Advisor
to the Company shall be that of an independent contractor and not as an employee
or  agent of the  Company  or any of its  affiliates.  Nothing  herein  shall be
construed  to  constitute  the  parties as partners  or joint  venturers,  or as
employees or agents of the other. Except as expressly set forth herein,  neither
party has any  express or  implied  right or  authority  to assume or create any
obligations on behalf or in the name of the other.  Personnel and subcontractors
supplied by the  Advisor  are not the  Company's  personnel  or agents,  and the
Advisor assumes full responsibility for their acts.

                                       8
<PAGE>

                  7.2.  CAPACITY,  ETC.  Each of the  Advisor  and  the  Company
hereby  represents and warrants to the other that, as the case may be: (a) he or
it has full power,  authority and capacity to execute and deliver this Agreement
and to perform his or its obligations  hereunder;  (b) such execution,  delivery
and  performance  shall not (and  with the  giving of notice or lapse of time or
both would not) result in the breach of any  agreements or other  obligations to
which he or it is a party or he or it is otherwise bound or violate any law; and
(c) this  Agreement is his or its valid and binding  obligation  enforceable  in
accordance with its terms.

                  7.3.  ADVICE OF COUNSEL.  The Advisor  represents and warrants
that  he  has  had  full  opportunity  to  seek  advice  and  representation  by
independent  counsel of his own choosing in connection with the  interpretation,
negotiation and execution of this Agreement.

                  7.4.  FURTHER ASSURANCES. Each of the parties hereto shall, at
any time and from time to time after the date hereof, at the request and expense
of the other party,  (i)  promptly and duly execute and deliver,  or cause to be
duly executed and delivered to the requested Person,  all such further documents
and  instruments,  and (ii) take or cause to be taken all such other and further
actions,  in each case as may be  reasonably  requested  by the  other  party to
implement and effect the terms of this Agreement.

                  7.5   BENEFITS  OF  AGREEMENT. Except as  otherwise  expressly
provided herein, the provisions hereof shall inure to the benefit of, be binding
upon, and be enforceable by, the parties hereto and their respective  successors
and assigns.

                  7.6   ASSIGNMENT.  This   Agreement   and   the   rights   and
obligations  hereunder  shall not be assignable or  transferable by either party
without the prior written consent of the other party. Any instrument  purporting
to make an assignment in violation of this Section 7.6 shall be void.

                  7.7.  SEVERABILITY.  Except as  otherwise  provided in Section
4.5, if, in any  jurisdiction,  any term or provision hereof is determined to be
invalid or unenforceable, (a) the remaining terms and provisions hereof shall be
unimpaired;  (b) any such  invalidity or  unenforceability  in any  jurisdiction
shall not invalidate or render unenforceable such term or provision in any other
jurisdiction;  and (c) the invalid or unenforceable term or provision shall, for
purposes of such jurisdiction, be deemed replaced by a term or provision that is
valid and  enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision.

                  7.8.  ENTIRE AGREEMENT.  This  Agreement,  together  with  the
other  Strategic  Alliance  Documents  (as such term is defined in that  certain
Strategic Alliance Agreement,  dated as of the date hereof, between the Company,
the Advisor, and VGS Capital,  LP), constitute the full and entire understanding
and agreement  between the parties with regard to the subject matters hereof and
thereof and, except as otherwise  specifically  provided therein, no party shall
be  liable or bound to any  other in any  manner  by any other  representations,
warranties, covenants or agreements with respect to such subject matters.

                                       9
<PAGE>

                  7.9.  AMENDMENT AND WAIVER.  This  Agreement and any provision
hereof or right or obligation hereunder may be amended,  modified or waived only
with the prior written consent of the Company and the Advisor which  amendments,
modifications, and waivers shall be binding upon all other parties hereto).

                  7.10. NOTICES.  All  notices,  requests,  demands  and   other
communications hereunder shall be in writing and shall be deemed duly given upon
receipt when delivered by hand,  overnight delivery or facsimile (with confirmed
delivery),  or  three  (3)  business  days  after  posting,  when  delivered  by
registered or certified mail or private courier service, postage prepaid, return
receipt requested, as follows:

         If to the Company, to:

                  Elite Pharmaceuticals, Inc.
                  165 Ludlow Avenue
                  Northvale, New Jersey
                  Facsimile No.: (201) 391-7693
                  Attn: Chief Executive Officer

          With a copy (which shall not constitute notice) to:

                  Reitler Brown & Rosenblatt LLC
                  800 Third Avenue
                  21st Floor
                  New York, NY 10022
                  Facsimile No.: (212) 371-5500
                  Attn: Scott H. Rosenblatt, Esq.

         If to the Advisor, to:

                  Veerappan S. Subramanian
                  475 Bernardsville Road
                  Mendham, NJ 07945

          With a copy (which shall not constitute notice) to:

                  Cohen Tauber Spievack & Wagner LLP
                  420 Lexington Avenue
                  New York, NY 10070
                  Facsimile No.: (212) 586-5095
                  Attn: Larry Tauber, Esq.

or to such other  address(es)  as a party hereto shall have  designated  by like
notice to the other parties hereto.

                                       10
<PAGE>

                  7.11.  DESCRIPTIVE  HEADINGS;  CERTAIN  INTERPRETATIONS.   (a)
Descriptive  headings are for  convenience  only and shall not control or affect
the meaning or construction of any term or provision of this Agreement.

            (b) The following rules of  interpretation  apply to this Agreement:
(i) wherever it appears appropriate from the context, each term stated in either
the singular or plural shall  include the singular and the plural,  and pronouns
stated in either the masculine,  feminine or neuter shall include the masculine,
feminine and neuter;  (ii) "or" and "any" are not  exclusive  and  "include" and
"including"  are not  limiting;  and (iii) a reference to any agreement or other
contract includes permitted supplements and amendments.

                  7.12.  EXECUTION  IN  COUNTERPARTS.   This  Agreement  may  be
executed in one or more counterparts,  and by the two parties hereto in separate
counterparts,  each of which shall be deemed to be an original  and all of which
taken together  shall  constitute one and the same agreement (and all signatures
need not  appear  on any one  counterpart),  and  this  Agreement  shall  become
effective when one or more  counterparts  has been signed by each of the parties
hereto and delivered to each of the other parties hereto.

                  7.13.  GOVERNING LAW. THIS AGREEMENT  SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW JERSEY (WITHOUT GIVING
EFFECT TO ANY CHOICE OR CONFLICT OF LAWS PROVISIONS).

                  7.14.  CONSENT TO  JURISDICTION.  EACH OF THE  PARTIES  HERETO
HEREBY  IRREVOCABLY  AND  UNCONDITIONALLY  SUBMITS  TO THE  JURISDICTION  OF ANY
FEDERAL  OR STATE  COURT OF NEW JERSEY  SITTING  IN NEW  JERSEY AND  IRREVOCABLY
AGREES  THAT ALL  ACTIONS OR  PROCEEDINGS  ARISING  OUT OF OR  RELATING  TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE LITIGATED EXCLUSIVELY
IN SUCH  COURTS.  EACH OF THE PARTIES  HERETO  AGREES NOT TO COMMENCE  ANY LEGAL
PROCEEDING  RELATED  HERETO  EXCEPT IN SUCH COURT.  EACH OF THE  PARTIES  HERETO
IRREVOCABLY  WAIVES  ANY  OBJECTION  WHICH IT MAY NOW OR  HEREAFTER  HAVE TO THE
LAYING OF THE VENUE OF ANY SUCH  PROCEEDING IN ANY SUCH COURT AND HEREBY FURTHER
IRREVOCABLY AND  UNCONDITIONALLY  WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY
SUCH COURT THAT ANY SUCH ACTION,  SUIT OR  PROCEEDING  BROUGHT IN ANY SUCH COURT
HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

                  7.15.  WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION  DIRECTLY OR INDIRECTLY  ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS  AGREEMENT.  EACH OF THE PARTIES HERETO
(A) CERTIFIES THAT NO  REPRESENTATIVE,  AGENT OR ATTORNEY OF THE OTHER PARTY HAS
REPRESENTED,  EXPRESSLY  OR  OTHERWISE,  THAT THE OTHER  PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING

                                       11
<PAGE>

WAIVER AND (B) ACKNOWLEDGES  THAT BOTH PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO  THIS   AGREEMENT,   BY,  AMONG  OTHER  THINGS,   THE  MUTUAL  WAIVERS  AND
CERTIFICATIONS IN THIS SECTION 7.15.

                  7.16.  GENERAL.  All  exhibits  to this  Agreement  are hereby
incorporated by reference and made part of this Agreement.

                            [SIGNATURE PAGE FOLLOWS]

                                       12
<PAGE>

            IN WITNESS  WHEREOF,  this Agreement has been executed and delivered
by the parties hereto as of the date first above written.

                                            COMPANY:

                                            Elite Pharmaceuticals, Inc.

                                            By: /s/ Bernard Berk
                                                --------------------------------
                                                Name:  Bernard Berk
                                                Title: Chief Executive Officer

                                            ADVISOR:

                                            /s/ Veerappan S. Subramanian
                                            ------------------------------------
                                            Veerappan S. Subramanian

                                       13
<PAGE>

                                    EXHIBIT A

                             STOCK OPTION AGREEMENT

                                       14

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