Document:

Exhibit 4.3

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAVE  BEEN  REGISTERED  WITH  THE  SECURITIES  AND  EXCHANGE  COMMISSION  OR THE
SECURITIES   COMMISSION  OF  ANY  STATE  IN  RELIANCE  UPON  AN  EXEMPTION  FROM
REGISTRATION  UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED  (THE  "SECURITIES
ACT"),  AND,  ACCORDINGLY,  MAY NOT BE OFFERED  OR SOLD  EXCEPT  PURSUANT  TO AN
EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE  SECURITIES  ACT OR PURSUANT TO AN
AVAILABLE  EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE  REGISTRATION
REQUIREMENTS  OF THE  SECURITIES  ACT AND IN ACCORDANCE  WITH  APPLICABLE  STATE
SECURITIES  LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH  EFFECT,  THE  SUBSTANCE  OF WHICH SHALL BE  REASONABLY  ACCEPTABLE  TO THE
COMPANY.  THIS  SECURITY  AND THE  SECURITIES  ISSUABLE  UPON  EXERCISE  OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION  WITH A BONA FIDE MARGIN  ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.

                          COMMON STOCK PURCHASE WARRANT

                To Purchase __________ Shares of Common Stock of

                           ELITE PHARMACEUTICALS, INC.

     THIS COMMON STOCK  PURCHASE  WARRANT (the  "WARRANT")  certifies  that, for
value received,  _____________ (the "HOLDER"),  is entitled,  upon the terms and
subject to the limitations on exercise and the conditions hereinafter set forth,
at any time on or after the Initial  Exercise Date (as defined in Section 2) and
on or  prior  to the  close  of  business  on the  later  of the  five  (5) year
anniversary  of (a)  the  Initial  Exercise  Date  and (b) the  date  that  both
Shareholder  Approval  and  Authorized  Share  Approval  (both as defined in the
Purchase  Agreement) have been obtained and deemed effective if such date occurs
after January 31, 2009 (the "TERMINATION DATE") but not thereafter, to subscribe
for and purchase from Elite  Pharmaceuticals,  Inc., a Delaware corporation (the
"COMPANY"),  up to ______  shares (the "WARRANT  SHARES") of Common  Stock,  par
value $.01 per share, of the Company (the "COMMON STOCK"). The purchase price of
one share of Common  Stock  under this  Warrant  shall be equal to the  Exercise
Price, as defined in Section 2(b).

     SECTION 1.  DEFINITIONS.  Capitalized  terms used and not otherwise defined
herein shall have the meanings  set forth in that  certain  Securities  Purchase
Agreement  (the  "PURCHASE  AGREEMENT"),  dated  September  15, 2008,  among the
Company and the purchasers signatory thereto.

     SECTION 2. EXERCISE.

          (a) EXERCISE OF WARRANT.  Exercise of the purchase rights  represented
by this  Warrant  may be made,  in whole or in part,  at any time or times on or
after the date of issue of this Warrant (the "INITIAL  EXERCISE DATE") and on or
before the  Termination  Date by  delivery  to the  Company  of a duly  executed
facsimile  copy of the Notice of  Exercise  Form  annexed  hereto (or such other
office or agency of the Company as it may designate by notice in writing to the

<PAGE>

registered  Holder at the address of such Holder  appearing  on the books of the
Company); and, within three (3) Trading Days of the date said Notice of Exercise
is delivered to the Company,  the Holder shall have  surrendered this Warrant to
the  Company  and the  Company  shall have  received  payment  of the  aggregate
Exercise  Price of the shares  thereby  purchased by wire  transfer or cashier's
check drawn on a United  States  bank.  Notwithstanding  anything  herein to the
contrary,  the Holder shall not be required to physically surrender this Warrant
to the  Company  until  the  Holder  has  purchased  all of the  Warrant  Shares
available  hereunder and the Warrant has been  exercised in full, in which case,
the Holder shall surrender this Warrant to the Company for cancellation within 3
Trading  Days of the date the  final  Notice of  Exercise  is  delivered  to the
Company.  Partial  exercises of this Warrant resulting in purchases of a portion
of the total number of Warrant Shares available  hereunder shall have the effect
of lowering the outstanding number of Warrant Shares purchasable hereunder in an
amount equal to the applicable  number of Warrant Shares  purchased.  The Holder
and the Company  shall  maintain  records  showing the number of Warrant  Shares
purchased  and  the  date of such  purchases.  The  Company  shall  deliver  any
objection to any Notice of Exercise  Form within one (1) Business Day of receipt
of such notice.  In the event of any dispute or discrepancy,  the records of the
Holder shall be controlling and  determinative in the absence of manifest error.
THE HOLDER AND ANY ASSIGNEE,  BY ACCEPTANCE  OF THIS  WARRANT,  ACKNOWLEDGE  AND
AGREE  THAT,  BY REASON  OF THE  PROVISIONS  OF THIS  PARAGRAPH,  FOLLOWING  THE
PURCHASE OF A PORTION OF THE  WARRANT  SHARES  HEREUNDER,  THE NUMBER OF WARRANT
SHARES  AVAILABLE FOR PURCHASE  HEREUNDER AT ANY GIVEN TIME MAY BE LESS THAN THE
AMOUNT STATED ON THE FACE HEREOF.

          (b) EXERCISE  PRICE.  The exercise price per share of the Common Stock
under this  Warrant  shall be  US$0.25,  subject to  adjustment  hereunder  (the
"EXERCISE PRICE").

          (c) EXERCISE LIMITATIONS.

               (i)  HOLDER'S  RESTRICTIONS.  The  Company  shall not  effect any
exercise of this Warrant,  and a Holder shall not have the right to exercise any
portion of this Warrant, to the extent that after giving effect to such issuance
after  exercise as set forth on the  applicable  Notice of Exercise,  the Holder
(together with the Holder's Affiliates, and any other person or entity acting as
a group  together  with the Holder or any of the  Holder's  Affiliates),  as set
forth on the applicable Notice of Exercise,  would beneficially own in excess of
the  Beneficial  Ownership  Limitation (as defined  below).  For purposes of the
foregoing  sentence,  the number of shares of Common Stock beneficially owned by
the Holder and its Affiliates shall include the number of shares of Common Stock
issuable upon exercise of this Warrant with respect to which such  determination
is being  made,  but shall  exclude  the number of shares of Common  Stock which
would be issuable upon (A) exercise of the remaining,  non-exercised  portion of
this Warrant  beneficially  owned by the Holder or any of its Affiliates and (B)
exercise or conversion of the unexercised or non-converted  portion of any other
securities of the Company (including,  without  limitation,  any other preferred
stock or warrants)  subject to a limitation on conversion or exercise  analogous
to the limitation  contained herein  beneficially  owned by the Holder or any of
its affiliates.  Except as set forth in the preceding sentence,  for purposes of
this Section  2(c)(i),  beneficial  ownership  shall be calculated in accordance
with Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder,  it  being  acknowledged  by  a  Holder  that  the  Company  is  not
representing  to the Holder that such  calculation is in compliance with Section
13(d) of the Exchange Act and the Holder is solely responsible for any schedules

                                       2
<PAGE>

required to be filed in accordance therewith.  To the extent that the limitation
contained  in this  Section  2(c)  applies,  the  determination  of whether this
Warrant is  exercisable  (in  relation to other  securities  owned by the Holder
together  with  any  Affiliates)  and of  which a  portion  of this  Warrant  is
exercisable shall be in the sole discretion of a Holder, and the submission of a
Notice of Exercise shall be deemed to be each Holder's  determination of whether
this Warrant is exercisable (in relation to other securities owned by the Holder
together  with  any  Affiliates)  and  of  which  portion  of  this  Warrant  is
exercisable,  in each case subject to such aggregate percentage limitation,  and
the Company  shall have no  obligation to verify or confirm the accuracy of such
determination.   In  addition,  a  determination  as  to  any  group  status  as
contemplated  above shall be determined in accordance  with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder.  For purposes
of this Section 2(c), in determining the number of outstanding  shares of Common
Stock, a Holder may rely on the number of outstanding  shares of Common Stock as
reflected in (x) the  Company's  most recent Form 10-Q or Form 10-K, as the case
may be, (y) a more recent  public  announcement  by the Company or (z) any other
notice by the Company or the Company's  Transfer  Agent setting forth the number
of shares of Common  Stock  outstanding.  Upon the written or oral  request of a
Holder,  the Company  shall within two (2) Trading  Days  confirm  orally and in
writing to the Holder the number of shares of Common Stock then outstanding.  In
any case, the number of  outstanding  shares of Common Stock shall be determined
after giving effect to the  conversion or exercise of securities of the Company,
including  this Warrant,  by the Holder or its  Affiliates  since the date as of
which  such  number of  outstanding  shares of Common  Stock was  reported.  The
"BENEFICIAL  OWNERSHIP LIMITATION" shall be 4.99% of the number of shares of the
Common Stock  outstanding  immediately  after  giving  effect to the issuance of
shares of Common Stock  issuable upon exercise of this Warrant.  The  Beneficial
Ownership  Limitation  provisions  of this Section  2(c)(i) may be waived by the
Holder,  at the election of the Holder,  upon not less than sixty-one (61) days'
prior notice to the Company to change the  Beneficial  Ownership  Limitation  to
9.99% of the number of shares of the Common Stock outstanding  immediately after
giving  effect to the issuance of shares of Common  Stock upon  exercise of this
Warrant,  and the provisions of this Section 2(c) shall continue to apply.  Upon
such a change by a Holder of the Beneficial Ownership Limitation from such 4.99%
limitation to such 9.99% limitation, the Beneficial Ownership Limitation may not
be further  waived by the Holder.  The  provisions  of this  paragraph  shall be
construed and implemented in a manner  otherwise than in strict  conformity with
the terms of this  Section  2(c)(i) to correct  this  paragraph  (or any portion
hereof)  which may be defective  or  inconsistent  with the intended  Beneficial
Ownership  Limitation  herein  contained  or  to  make  changes  or  supplements
necessary  or  desirable  to  properly  give  effect  to  such  limitation.  The
limitations  contained in this  paragraph  shall apply to a successor  holder of
this Warrant.

               (ii) TRADING MARKET RESTRICTIONS. If the Company has not obtained
Shareholder  Approval,  then the  Company  may not issue upon  exercise  of this
Warrant a number of shares of Common  Stock,  which,  when  aggregated  with any
shares of Common Stock issued (A) upon  conversion of or as payment of dividends
on the Series D Preferred Stock issued pursuant to the Purchase  Agreement,  (B)
upon prior exercise of this or any other Warrant issued pursuant to the Purchase
Agreement   and  (C)  pursuant  to  any  warrants   issued  to  any   registered
broker-dealer  as a fee  in  connection  with  the  Securities  pursuant  to the
Purchase Agreement, would exceed 19.999% of the number of shares of Common Stock
outstanding  on the Trading Day  immediately  preceding  the Closing  Date (such
number of shares,  the "ISSUABLE  MAXIMUM")

                                       3
<PAGE>

If on any  attempted  exercise of this Warrant,  the issuance of Warrant  Shares
would  exceed the  Issuable  Maximum and the Company  shall not have  previously
obtained  Shareholder  Approval,  then the  Company  shall  issue to the  Holder
requesting  a Warrant  exercise  such number of Warrant  Shares as may be issued
below the Issuable  Maximum and,  with respect to the remainder of the aggregate
number of Warrant Shares, this Warrant shall not be exercisable until and unless
Shareholder  Approval  has been  obtained.  Each  Holder  shall be entitled to a
portion of the Issuable  Maximum equal to the quotient  obtained by dividing (x)
such the number of shares of Series D Preferred Stock initially purchased by the
Holder by (y) the  aggregate  number of shares  purchased by all  Holders.  Such
portion  shall be  adjusted  upward  ratably  in the event all of the  shares of
Series D Preferred Stock and Warrants  initially  purchased by any Holder are no
longer  outstanding.  If at any time (i) the  number of  shares of Common  Stock
which could,  notwithstanding  the limitation set forth herein, be issued to all
Holders  during the  following 12 months  (assuming  all  dividends  are paid in
shares of Common Stock during such period of  determination  based upon the VWAP
at the time of any such  determination)  equals or exceeds the Issuable  Maximum
and (ii)  Shareholder  Approval shall not have been  obtained,  then the Company
shall issue to the Holder  requesting  exercise a number of Warrant Shares equal
to the Holder's  pro-rata  portion  (which shall be  calculated  pursuant to the
terms hereof) of the Issuable Maximum, and with respect to the remainder of this
Warrant  then held by the Holder for which an  exercise in  accordance  with the
applicable  Exercise  Price  would  result in an  issuance  of shares of Warrant
Shares in excess of the Holder's  pro-rata  portion  (which shall be  calculated
pursuant to the terms hereof) of the Issuable  Maximum (the "EXCESS  WARRANTS"),
the Corporation  shall be prohibited from converting such Excess  Warrants,  and
shall promptly  notify the Holder of the reason  therefore.  The Excess Warrants
shall thereafter be  unexercisable  to such extent until and unless  Shareholder
Approval is subsequently obtained.

               (iii)  AUTHORIZED  SHARE  RESTRICTIONS.  If the  Company  has not
obtained Authorized Share Approval, then the Company may not issue upon exercise
of this Warrant, a number of shares of Common Stock, which, when aggregated with
any  shares of Common  Stock  issued  (A) upon  conversion  of or as  payment of
dividends  on the Series D  Preferred  Stock  issued  pursuant  to the  Purchase
Agreement  and (B) upon  prior  exercise  of this or any  other  Warrant  issued
pursuant to the  Purchase  Agreement,  would exceed  87,059,562  (such number of
shares,  the "SHARE  APPROVAL  MAXIMUM"),  subject to adjustment for reverse and
forward stock splits and the like (such number of shares,  the "AUTHORIZED SHARE
MAXIMUM"). If on any attempted exercise of this Warrant, the issuance of Warrant
Shares  would  exceed  the  Issuable  Maximum  and the  Company  shall  not have
previously obtained the Authorized Share Approval,  then the Company shall issue
to the Holder  requesting  the  exercise of the  Warrant  such number of Warrant
Shares as may be issued below the Authorized  Share Maximum and, with respect to
the remainder of the aggregate number of Warrant Shares,  this Warrant shall not
be exercisable until and unless Authorized Share Approval has been obtained. The
Holder shall be entitled to a portion of the  Authorized  Share Maximum equal to
the  quotient  obtained  by  dividing  (x) such the number of shares of Series D
Preferred Stock initially purchased by the Holder by (y) the aggregate number of
shares  purchased by all Holders.  Such portion shall be adjusted upward ratably
in the  event  all of the  shares  of  Series D  Preferred  Stock  and  Warrants
initially purchased by any Holder are no longer outstanding.  If at any time (i)
the number of shares of Common Stock which could, notwithstanding the limitation
set forth  herein,  be issued to all  Holders  during  the  following  12 months
(assuming all dividends are paid in shares of Common Stock during such period of
determination based upon the VWAP at the time of any such

                                       4
<PAGE>

determination)  equals or exceeds  the  Authorized  Share  Maximum  and (ii) the
Authorized  Share  Approval  shall not have been obtained and deemed  effective,
then the  Corporation  shall  issue to the  Holder a number  of shares of Common
Stock equal to the Holder's pro-rata portion (which shall be calculated pursuant
to the terms hereof) of the Authorized  Share  Maximum,  and with respect to the
remainder of the Series D Preferred Stock (including any accrued dividends) then
held by the Holder  for which an  exercise  in  accordance  with the  applicable
Exercise  Price would  result in an issuance of Warrant  Shares in excess of the
Holder's  pro-rata  portion  (which  shall be  calculated  pursuant to the terms
hereof) of the Authorized  Share Maximum (the "SHARE APPROVAL EXCESS  WARRANT"),
the  Corporation  shall be prohibited from converting such Share Approval Excess
Warrant, and shall promptly notify the Holder of the reason therefore. The Share
Approval Excess Warrant shall  thereafter be  unconvertible to such extent until
and unless Authorized Share Approval is subsequently obtained.

          (d) MECHANICS OF EXERCISE.

               (i)  AUTHORIZATION OF WARRANT SHARES.  The Company covenants that
all Warrant Shares which may be issued upon the exercise of the purchase  rights
represented  by  this  Warrant  will,  upon  exercise  of  the  purchase  rights
represented by this Warrant, be duly authorized,  validly issued, fully paid and
nonassessable and free from all taxes,  liens and charges created by the Company
in respect of the issue  thereof  (other  than taxes in respect of any  transfer
occurring contemporaneously with such issue).

               (ii) DELIVERY OF  CERTIFICATES  UPON EXERCISE.  Certificates  for
shares  purchased  hereunder  shall be  transmitted by the Transfer Agent to the
Holder by crediting the account of the Holder's prime broker with the Depository
Trust Company through its Deposit Withdrawal Agent Commission ("DWAC") system if
the  Company  is then a  participant  in such  system and either (A) there is an
effective  Registration Statement permitting the resale of the Warrant Shares by
the  Holder  or (B) the  shares  are  eligible  for  resale  without  volume  or
manner-of-sale  limitations  pursuant  to Rule 144,  and  otherwise  by physical
delivery to the address specified by the Holder in the Notice of Exercise within
3 Trading Days from the delivery to the Company of the Notice of Exercise  Form,
surrender of this  Warrant and payment of the  aggregate  Exercise  Price as set
forth above (the "WARRANT SHARE DELIVERY DATE"). This Warrant shall be deemed to
have been  exercised on the date the Exercise  Price is received by the Company.
The Warrant Shares shall be deemed to have been issued,  and Holder or any other
person so designated to be named therein shall be deemed to have become a holder
of record of such shares for all  purposes,  as of the date the Warrant has been
exercised by payment to the Company of the Exercise Price and all taxes required
to be paid by the  Holder,  if any,  pursuant to Section  2(e)(vi)  prior to the
issuance of such shares, have been paid.

               (iii)  DELIVERY OF NEW WARRANTS  UPON  EXERCISE.  If this Warrant
shall have been  exercised in part,  the Company  shall,  upon surrender of this
Warrant certificate,  at the time of delivery of the certificate or certificates
representing  Warrant  Shares,  deliver to Holder a new Warrant  evidencing  the
rights of Holder to purchase the  unpurchased  Warrant Shares called for by this
Warrant,  which new Warrant shall in all other  respects be identical  with this
Warrant.

               (iv)  RESCISSION  RIGHTS.  If the  Company  fails  to  cause  its
transfer  agent  to  transmit  to  the  Holder  a  certificate  or  certificates
representing  the Warrant  Shares  pursuant  to Section  2(e)(ii) by the Warrant
Share  Delivery  Date,  then the  Holder  will  have the right to  rescind  such
exercise.

                                       5
<PAGE>

               (v)   COMPENSATION  FOR  BUY-IN  ON  FAILURE  TO  TIMELY  DELIVER
CERTIFICATES  UPON  EXERCISE.  In addition to any other rights  available to the
Holder,  if the  Company  fails to cause its  transfer  agent to transmit to the
Holder a certificate or certificates representing the Warrant Shares pursuant to
an exercise on or before the Warrant Share Delivery Date, and if after such date
the Holder is required by its broker to purchase (in an open market  transaction
or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
Holder of the Warrant  Shares which the Holder  anticipated  receiving upon such
exercise (a "BUY-IN"),  then the Company shall (1) pay in cash to the Holder the
amount by which (x) the  Holder's  total  purchase  price  (including  brokerage
commissions, if any) for the shares of Common Stock so purchased exceeds (y) the
amount obtained by multiplying (A) the number of Warrant Shares that the Company
was required to deliver to the Holder in  connection  with the exercise at issue
times  (B) the  price  at which  the sell  order  giving  rise to such  purchase
obligation was executed,  and (2) at the option of the Holder,  either reinstate
the  portion of the Warrant and  equivalent  number of Warrant  Shares for which
such  exercise  was not honored or deliver to the Holder the number of shares of
Common Stock that would have been issued had the Company  timely  complied  with
its exercise  and delivery  obligations  hereunder.  For example,  if the Holder
purchases  Common  Stock  having a total  purchase  price of  $11,000 to cover a
Buy-In with respect to an  attempted  exercise of shares of Common Stock with an
aggregate sale price giving rise to such purchase  obligation of $10,000,  under
clause (1) of the immediately  preceding  sentence the Company shall be required
to pay the Holder  $1,000.  The Holder shall provide the Company  written notice
indicating the amounts  payable to the Holder in respect of the Buy-In and, upon
request of the  Company,  evidence  of the amount of such loss.  Nothing  herein
shall  limit a  Holder's  right to pursue  any other  remedies  available  to it
hereunder,  at law or in  equity  including,  without  limitation,  a decree  of
specific  performance  and/or  injunctive  relief with respect to the  Company's
failure to timely deliver certificates  representing shares of Common Stock upon
exercise of the Warrant as required pursuant to the terms hereof.

               (vi) NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip
representing  fractional  shares  shall  be  issued  upon the  exercise  of this
Warrant.  As to any fraction of a share which Holder would otherwise be entitled
to purchase upon such exercise, the Company shall at its election,  either pay a
cash  adjustment  in respect of such final  fraction in an amount  equal to such
fraction multiplied by the Exercise Price or round up to the next whole share.

               (vii) CHARGES,  TAXES AND EXPENSES.  Issuance of certificates for
Warrant  Shares  shall be made  without  charge to the  Holder  for any issue or
transfer  tax or other  incidental  expense in respect of the  issuance  of such
certificate,  all of which taxes and expenses shall be paid by the Company,  and
such  certificates  shall be issued in the name of the Holder or in such name or
names as may be  directed by the Holder;  PROVIDED,  HOWEVER,  that in the event
certificates  for Warrant  Shares are to be issued in a name other than the name
of the Holder,  this Warrant when  surrendered for exercise shall be accompanied
by the  Assignment  Form attached  hereto duly  executed by the Holder;  and the
Company may require, as a condition thereto,  the payment of a sum sufficient to
reimburse it for any transfer tax incidental thereto.

                                       6
<PAGE>

               (viii)  CLOSING  OF  BOOKS.   The  Company  will  not  close  its
stockholder books or records in any manner which prevents the timely exercise of
this Warrant, pursuant to the terms hereof.

     SECTION 3. CERTAIN ADJUSTMENTS.

          (a) STOCK DIVIDENDS AND SPLITS. If the Company, at any time while this
Warrant  is  outstanding:  (A)  pays  a  stock  dividend  or  otherwise  make  a
distribution or  distributions on shares of its Common Stock or any other equity
or equity equivalent  securities  payable in shares of Common Stock (which,  for
avoidance  of doubt,  shall not include any shares of Common Stock issued by the
Company upon exercise of this  Warrant),  (B) subdivides  outstanding  shares of
Common Stock into a larger number of shares,  (C) combines  (including by way of
reverse stock split) outstanding shares of Common Stock into a smaller number of
shares,  or (D) issues by  reclassification  of shares of the  Common  Stock any
shares of capital  stock of the Company,  then in each case the  Exercise  Price
shall be multiplied by a fraction of which the numerator  shall be the number of
shares  of  Common  Stock  (excluding   treasury  shares,  if  any)  outstanding
immediately  before such event and of which the denominator  shall be the number
of shares of Common  Stock  outstanding  immediately  after  such  event and the
number of shares issuable upon exercise of this Warrant shall be proportionately
adjusted  such that the  aggregate  Exercise  Price of this Warrant shall remain
unchanged.  Any  adjustment  made  pursuant to this  Section  3(a) shall  become
effective   immediately   after  the  record  date  for  the   determination  of
stockholders  entitled to receive such dividend or distribution and shall become
effective  immediately  after the effective  date in the case of a  subdivision,
combination or re-classification.

          (b) SUBSEQUENT EQUITY SALES. If the Company or any Subsidiary thereof,
as  applicable,  at any time while this  Warrant is  outstanding,  shall sell or
grant  any  option  to  purchase,  or sell or grant  any  right to  reprice,  or
otherwise dispose of or issue (or announce any offer,  sale, grant or any option
to purchase or other  disposition) any Common Stock or Common Stock  Equivalents
entitling any Person to acquire  shares of Common Stock,  at an effective  price
per  share  less  than the then  applicable  Conversion  Price  (as such term is
defined in the  Certificate of  Designation of the Series D Preferred  Stock) of
the Series D Preferred Stock (such lower price,  the "BASE SHARE PRICE" and such
issuances  collectively,  a  "DILUTIVE  ISSUANCE")  (if the holder of the Common
Stock or Common  Stock  Equivalents  so issued  shall at any  time,  whether  by
operation of purchase price adjustments, reset provisions,  floating conversion,
exercise or exchange prices or otherwise, or due to warrants,  options or rights
per share  which are issued in  connection  with such  issuance,  be entitled to
receive  shares of Common  Stock at an  effective  price per share which is less
than the Exercise Price, such issuance shall be deemed to have occurred for less
than the  Exercise  Price on such  date of the  Dilutive  Issuance),  then,  the
Exercise  Price shall be reduced and only reduced to equal the Base Share Price.
Notwithstanding  the  foregoing,  no adjustments  shall be made,  paid or issued
under this  Section  3(b) in respect of an Exempt  Issuance.  The Company  shall
notify the Holder,  in writing,  no later than the  Trading  Day  following  the
issuance of any Common Stock or Common Stock Equivalents subject to this Section
3(b),  indicating  therein the applicable  issuance price,  or applicable  reset
price,  exchange price,  conversion  price and other pricing terms (such notice,
the "DILUTIVE ISSUANCE NOTICE").  For purposes of clarification,  whether or not
the Company  provides a Dilutive  Issuance Notice pursuant to this Section 3(b),
upon the  occurrence of any Dilutive  Issuance,  after the date of such Dilutive
Issuance the Holder is entitled to receive a number of Warrant Shares based upon
the Base Share Price regardless of whether the Holder  accurately  refers to the
Base Share Price in the Notice of Exercise.

                                       7
<PAGE>

          (c) SUBSEQUENT RIGHTS OFFERINGS. If the Company, at any time while the
Warrant is outstanding,  shall issue rights,  options or warrants to all holders
of Common Stock (and not to Holders) entitling them to subscribe for or purchase
shares of Common  Stock at a price  per share  less than the VWAP at the  record
date mentioned below, then the Exercise Price shall be multiplied by a fraction,
of which the denominator  shall be the sum of the (i) number of shares of Common
Stock issued and outstanding on the date of issuance of such rights,  options or
warrants plus (ii) number of shares of Common Stock issuable upon  conversion or
exercise  of Common  Stock  Equivalents  issued and  outstanding  on the date of
issuance of such rights,  options or warrants  plus (iii)  number of  additional
shares of Common Stock offered for  subscription  or purchase,  and of which the
numerator  shall be the sum of the (x)  number  of shares  of the  Common  Stock
issued  and  outstanding  on the date of  issuance  of such  rights,  options or
warrants plus (y) number of shares of Common Stock  issuable upon  conversion or
exercise  of Common  Stock  Equivalents  issued and  outstanding  on the date of
issuance of such rights, options or warrants plus (z) number of shares which the
aggregate  offering  price of the total  number of shares so  offered  (assuming
receipt by the Company in full of all  consideration  payable  upon  exercise of
such rights,  options or warrants)  would purchase at such VWAP. Such adjustment
shall be made  whenever  such rights or warrants  are issued,  and shall  become
effective   immediately   after  the  record  date  for  the   determination  of
stockholders  entitled to receive such rights,  options or warrants. If any such
rights,  options or warrants expire without having been exercised,  the Exercise
Price as adjusted upon the issuance of such rights, options or warrants shall be
readjusted  to the  Exercise  Price  which  would  have  been in  effect  had an
adjustment been made on the basis that only additional shares of Common Stock so
issued were the additional  shares of Common Stock,  if any,  actually issued or
sold on the  exercise of such rights,  options or warrants  and such  additional
shares of  Common  Stock,  if any,  were  issued  or sold for the  consideration
actually received by the Corporation upon such exercise, plus the consideration,
if any,  actually  received  by the  Corporation  for the  granting  of all such
rights,  options or  warrants,  whether  or not  exercised,  provided  that such
readjustment shall not apply to prior exercises of the Warrant.

          (d) PRO RATA  DISTRIBUTIONS.  If the Company, at any time prior to the
Termination  Date,  shall  distribute to all holders of Common Stock (and not to
Holders of the Warrants) evidences of its indebtedness or assets (including cash
and cash  dividends)  or rights or warrants  to  subscribe  for or purchase  any
security  other than the Common Stock (which shall be subject to Section  3(b)),
then in each such case the Exercise Price shall be adjusted by  multiplying  the
Exercise  Price  in  effect  immediately  prior to the  record  date  fixed  for
determination  of  stockholders  entitled  to  receive  such  distribution  by a
fraction of which the denominator  shall be the VWAP determined as of the record
date  mentioned  above,  and of which the  numerator  shall be such VWAP on such
record date less the then per share fair market value at such record date of the
portion of such assets or evidence of indebtedness so distributed  applicable to
one  outstanding  share  of the  Common  Stock  as  determined  by the  Board of
Directors in good faith. In either case the adjustments  shall be described in a
statement  provided  to the  Holder of the  portion  of assets or  evidences  of
indebtedness so distributed or such subscription  rights applicable to one share
of Common Stock. Such adjustment shall be made whenever any such distribution is
made and shall  become  effective  immediately  after the record date  mentioned
above.

                                       8
<PAGE>

          (e)  FUNDAMENTAL  TRANSACTION.  If, at any time while this  Warrant is
outstanding,  (i) the Company effects any merger or consolidation of the Company
with or into  another  Person,  (ii)  the  Company  effects  any  sale of all or
substantially  all of its  assets  in one or a series of  related  transactions,
(iii) any tender  offer or  exchange  offer  (whether  by the Company or another
Person) is completed  pursuant to which holders of Common Stock are permitted to
tender or exchange their shares for other  securities,  cash or property or (iv)
the Company effects any  reclassification  of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is effectively  converted into
or  exchanged  for  other  securities,   cash  or  property  (each  "FUNDAMENTAL
Transaction"),  then, upon any subsequent  exercise of this Warrant,  the Holder
shall have the right to  receive,  for each  Warrant  Share that would have been
issuable  upon  such  exercise  immediately  prior  to the  occurrence  of  such
Fundamental  Transaction,  the number of shares of Common Stock of the successor
or acquiring corporation or of the Company, if it is the surviving  corporation,
and any additional consideration (the "ALTERNATE CONSIDERATION") receivable as a
result of such merger, consolidation or disposition of assets by a holder of the
number of  shares  of  Common  Stock  for  which  this  Warrant  is  exercisable
immediately  prior  to such  event.  For  purposes  of any  such  exercise,  the
determination of the Exercise Price shall be appropriately  adjusted to apply to
such  Alternate  Consideration  based on the amount of  Alternate  Consideration
issuable  in  respect  of  one  share  of  Common  Stock  in  such   Fundamental
Transaction,  and the  Company  shall  apportion  the  Exercise  Price among the
Alternate  Consideration in a reasonable manner reflecting the relative value of
any different  components of the Alternate  Consideration.  If holders of Common
Stock are given any choice as to the securities, cash or property to be received
in a Fundamental Transaction,  then the Holder shall be given the same choice as
to the  Alternate  Consideration  it receives  upon any exercise of this Warrant
following such  Fundamental  Transaction.  To the extent necessary to effectuate
the foregoing  provisions,  any successor to the Company or surviving  entity in
such Fundamental  Transaction shall issue to the Holder a new warrant consistent
with the foregoing provisions and evidencing the Holder's right to exercise such
warrant into  Alternate  Consideration.  The terms of any agreement  pursuant to
which a Fundamental  Transaction is effected  shall include terms  requiring any
such successor or surviving entity to comply with the provisions of this Section
3(e) and insuring that this Warrant (or any such  replacement  security) will be
similarly  adjusted upon any subsequent  transaction  analogous to a Fundamental
Transaction.  Notwithstanding  anything  to  the  contrary,  in the  event  of a
Fundamental  Transaction that is (1) an all cash transaction,  (2) a "Rule 13e-3
transaction"  as  defined  in  Rule  13e-3  under  the  Exchange  Act,  or (3) a
Fundamental  Transaction  involving  a person or entity not traded on a national
securities exchange,  the Nasdaq Global Select Market, the Nasdaq Global Market,
or the Nasdaq Capital Market,  the Company or any successor entity shall pay, at
the Holder's option, exercisable at any time concurrently with or within 30 days
after the consummation of the Fundamental  Transaction,  an amount of cash equal
to the value of this Warrant as determined in accordance  with the Black Scholes
Option Pricing Model obtained from the "OV" function on Bloomberg L.P. using (A)
a price per share of Common  Stock equal to the VWAP of the Common Stock for the
Trading Day  immediately  preceding the date of  consummation  of the applicable
Fundamental  Transaction,  (B) the risk-free  interest rate corresponding to the
U.S.  Treasury rate for a period equal to the remaining  term of this Warrant as
of the date of consummation of the applicable  Fundamental  Transaction,  (C) an
expected  volatility  equal to the 100 day  volatility

                                       9
<PAGE>

obtained from the "HVT" function on Bloomberg L.P.  determined as of the Trading
Day immediately following the public announcement of the applicable  Fundamental
Transaction  and (D) a remaining  option time equal to the time between the date
of the public announcement of such transaction and the Termination Date.

          (f) CALCULATIONS.  All calculations under this Section 3 shall be made
to the nearest cent or the nearest  1/100th of a share,  as the case may be. For
purposes of this  Section 3, the number of shares of Common  Stock  deemed to be
issued  and  outstanding  as of a given  date  shall be the sum of the number of
shares  of  Common  Stock  (excluding   treasury  shares,  if  any)  issued  and
outstanding.

          (g) NOTICE TO HOLDERS.

               (i) ADJUSTMENT TO EXERCISE PRICE.  Whenever the Exercise Price is
adjusted pursuant to any provision of this Section 3, the Company shall promptly
mail to each  Holder a notice  setting  forth  the  Exercise  Price  after  such
adjustment  and setting  forth a brief  statement  of the facts  requiring  such
adjustment.  If the  Company  issues  a  variable  rate  security,  despite  the
prohibition  thereon in the Purchase  Agreement,  the Company shall be deemed to
have issued  Common Stock or Common  Stock  Equivalents  at the lowest  possible
conversion  or  exercise  price at which such  securities  may be  converted  or
exercised in the case of a Variable Rate Transaction (as defined in the Purchase
Agreement).

               (ii) NOTICE TO ALLOW EXERCISE BY HOLDER. If (A) the Company shall
declare a dividend (or any other  distribution  in whatever  form) on the Common
Stock; (B) the Company shall declare a special  nonrecurring cash dividend on or
a redemption of the Common Stock;  (C) the Company shall  authorize the granting
to all  holders of the Common  Stock  rights or  warrants  to  subscribe  for or
purchase  any shares of  capital  stock of any class or of any  rights;  (D) the
approval of any stockholders of the Company shall be required in connection with
any  reclassification  of the Common Stock, any consolidation or merger to which
the Company is a party, any sale or transfer of all or substantially  all of the
assets of the Company, of any compulsory share exchange whereby the Common Stock
is converted  into other  securities,  cash or property;  (E) the Company  shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Company;  then,  in each case,  the Company shall cause to be
mailed to the Holder at its last  address as it shall  appear  upon the  Warrant
Register  of the  Company,  at least  twenty  (20)  calendar  days  prior to the
applicable record or effective date hereinafter  specified, a notice stating (x)
the date on which a record  is to be taken  for the  purpose  of such  dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of the Common Stock of record to be entitled to
such  dividend,  distributions,   redemption,  rights  or  warrants  are  to  be
determined  or (y)  the  date on  which  such  reclassification,  consolidation,
merger,  sale,  transfer or share  exchange is expected to become  effective  or
close,  and the date as of which it is expected that holders of the Common Stock
of record  shall be entitled to exchange  their  shares of the Common  Stock for
securities,  cash or other  property  deliverable  upon  such  reclassification,
consolidation,  merger,  sale,  transfer or share  exchange;  provided  that the
failure to mail such  notice or any defect  therein  or in the  mailing  thereof
shall not affect the validity of the corporate  action  required to be specified
in such  notice.  The Holder is  entitled to exercise  this  Warrant  during the
20-day period commencing on the date of such notice to the effective date of the
event triggering such notice.

                                       10
<PAGE>

     SECTION 4. TRANSFER OF WARRANT.

          (a)  TRANSFERABILITY.  The Warrant and the other  rights of the Holder
pursuant  to this  Warrant  certificate  are not  severable  from  this  Warrant
certificate,  and shall not be assignable or  transferable  except in connection
with a transfer or assignment of this Warrant certificate in accordance with the
terms  hereof.  Any  instrument  purporting  to make a transfer or assignment in
violation  of this  Section  4(a)  shall be void and of no  effect.  Subject  to
compliance  with any applicable  securities laws and the conditions set forth in
Section  4(d)  hereof  and to the  provisions  of  Section  4.1 of the  Purchase
Agreement, this Warrant and all rights hereunder (including, without limitation,
any registration  rights) are transferable,  in whole or in part, upon surrender
of this  Warrant  certificate  at the  principal  office of the  Company  or its
designated   agent,   together  with  a  written   assignment  of  this  Warrant
substantially  in the form  attached  hereto duly  executed by the Holder or its
agent or attorney and funds  sufficient  to pay any transfer  taxes payable upon
the  making  of such  transfer.  Upon  compliance  with the  foregoing  and such
surrender and, if required,  such payment, the Company shall execute and deliver
a new Warrant or Warrants in the name of the  assignee or  assignees  and in the
denomination or  denominations  specified in such instrument of assignment,  and
shall issue to the assignor a new Warrant evidencing the portion of this Warrant
not so assigned,  and this Warrant shall  promptly be cancelled.  A Warrant,  if
properly assigned,  may be exercised by a new holder for the purchase of Warrant
Shares without having a new Warrant issued.

          (b) NEW  WARRANTS.  This Warrant may be divided or combined with other
Warrants  upon  presentation  hereof at the  aforesaid  office  of the  Company,
together with a written notice  specifying the names and  denominations in which
new  Warrants  are to be issued,  signed by the Holder or its agent or attorney.
Subject  to  compliance  with  Section  4(a),  as to any  transfer  which may be
involved in such division or combination,  the Company shall execute and deliver
a new Warrant or Warrants in exchange  for the Warrant or Warrants to be divided
or combined in accordance with such notice.

          (c) WARRANT  REGISTER.  The Company shall register this Warrant,  upon
records  to be  maintained  by  the  Company  for  that  purpose  (the  "WARRANT
REGISTER"),  in the name of the  record  Holder  hereof  from time to time.  The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise  hereof or any  distribution to the
Holder, and for all other purposes, absent actual notice to the contrary.

          (d) TRANSFER  RESTRICTIONS.  If, at the time of the  surrender of this
Warrant in connection  with any transfer of this  Warrant,  the transfer of this
Warrant shall not be either (i) registered pursuant to an effective registration
statement under the Securities Act and under applicable state securities or blue
sky  laws  or  (ii)  eligible  for  resale  without  volume  or   manner-of-sale
restrictions  pursuant to Rule 144, the Company may  require,  as a condition of
allowing such transfer, the Company may require, as a condition of allowing such
transfer (i) that the Holder or transferee of this Warrant,  as the case may be,
furnish to the Company a written  opinion of counsel  (which opinion shall be in
form,  substance  and scope  customary  for  opinions  of counsel in  comparable
transactions) to the effect that such transfer may be made without  registration
under the Securities Act and under applicable state securities or blue sky laws,
(ii) that the  holder or  transferee  execute  and  deliver  to the  Company  an
investment letter in form and substance acceptable to the Company and (iii) that
the transferee be an "accredited investor" as defined in Rule 501(a)(1), (a)(2),
(a)(3),  (a)(7), or (a)(8)  promulgated under the Securities Act or a "qualified
institutional buyer" as defined in Rule 144A(a) under the Securities Act.

                                       11
<PAGE>

     SECTION 5. MISCELLANEOUS.

          (a) NO RIGHTS AS  SHAREHOLDER  UNTIL  EXERCISE.  This Warrant does not
entitle the Holder to any voting rights or other rights as a shareholder  of the
Company prior to the exercise hereof as set forth in Section 2(e)(ii).

          (b) LOSS,  THEFT,  DESTRUCTION  OR MUTILATION OF WARRANT.  The Company
covenants that upon receipt by the Company of evidence  reasonably  satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant or any stock
certificate  relating  to the  Warrant  Shares,  and in case of  loss,  theft or
destruction,  of indemnity or security reasonably  satisfactory to it (which, in
the case of the  Warrant,  shall not include the posting of any bond),  and upon
surrender and cancellation of such Warrant or stock  certificate,  if mutilated,
the Company  will make and deliver a new  Warrant or stock  certificate  of like
tenor  and  dated  as of such  cancellation,  in lieu of such  Warrant  or stock
certificate.

          (c) SATURDAYS,  SUNDAYS,  HOLIDAYS,  ETC. If the last or appointed day
for the taking of any action or the  expiration of any right required or granted
herein shall not be a Business  Day, then such action may be taken or such right
may be exercised on the next succeeding Business Day.

          (d) AUTHORIZED SHARES.

               (i) Subject to receiving  Authorized Share Approval,  the Company
covenants  that during the period the Warrant is  outstanding,  it will  reserve
from its authorized and unissued  Common Stock a sufficient  number of shares to
provide for the issuance of the Warrant Shares upon the exercise of any purchase
rights under this Warrant.  The Company  further  covenants that its issuance of
this Warrant  shall  constitute  full  authority to its officers who are charged
with the duty of executing stock certificates to execute and issue the necessary
certificates  for the Warrant  Shares upon the exercise of the  purchase  rights
under this Warrant.  The Company will take all such reasonable  action as may be
necessary  to assure that such Warrant  Shares may be issued as provided  herein
without violation of any applicable law or regulation, or of any requirements of
the Trading Market upon which the Common Stock may be listed.

               (ii)  Except and to the extent as waived or  consented  to by the
Holder,  the Company  shall not by any action,  including,  without  limitation,
amending  its  certificate  of  incorporation  or  through  any  reorganization,
transfer  of  assets,  consolidation,  merger,  dissolution,  issue  or  sale of
securities or any other voluntary action,  avoid or seek to avoid the observance
or  performance  of any of the terms of this  Warrant,  but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or  appropriate to protect the rights of Holder
as set forth in this Warrant against impairment. Without limiting the generality
of the foregoing, the Company will (a) not increase the par value of any Warrant
Shares above the amount payable therefor upon such exercise immediately prior to
such  increase  in par value,  (b) take all such action as may be  necessary  or

                                       12
<PAGE>

appropriate  in order that the Company may validly and legally  issue fully paid
and nonassessable  Warrant Shares upon the exercise of this Warrant, and (c) use
commercially reasonable efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having  jurisdiction  thereof as may be
necessary to enable the Company to perform its obligations under this Warrant.

               (iii)  Before   taking  any  action  which  would  result  in  an
adjustment in the number of Warrant Shares for which this Warrant is exercisable
or in the Exercise Price,  the Company shall obtain all such  authorizations  or
exemptions  thereof,  or consents  thereto,  as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.

          (e) JURISDICTION. All questions concerning the construction, validity,
enforcement and interpretation of this Warrant shall be determined in accordance
with the provisions of the Purchase Agreement.

          (f)  RESTRICTIONS.  The Holder  acknowledges  that the Warrant  Shares
acquired  upon the  exercise  of this  Warrant,  if not  registered,  will  have
restrictions upon resale imposed by state and federal securities laws.

          (g)  NONWAIVER  AND  EXPENSES.  No course of  dealing  or any delay or
failure to exercise any right hereunder on the part of Holder shall operate as a
waiver of such right or otherwise prejudice Holder's rights, powers or remedies,
notwithstanding  the fact that all rights hereunder terminate on the Termination
Date. If the Company  willfully and knowingly fails to comply with any provision
of this  Warrant,  which  results in any  material  damages to the  Holder,  the
Company  shall pay to Holder such  amounts as shall be  sufficient  to cover any
costs and expenses  including,  but not limited to, reasonable  attorneys' fees,
including those of appellate  proceedings,  incurred by Holder in collecting any
amounts due pursuant hereto or in otherwise enforcing any of its rights,  powers
or remedies hereunder.

          (h)  NOTICES.  Any  notice,  request  or other  document  required  or
permitted  to be  given or  delivered  to the  Holder  by the  Company  shall be
delivered in accordance with the notice provisions of the Purchase Agreement.

          (i) LIMITATION OF LIABILITY.  No provision  hereof,  in the absence of
any  affirmative  action by Holder to exercise this Warrant to purchase  Warrant
Shares, and no enumeration  herein of the rights or privileges of Holder,  shall
give rise to any liability of Holder for the purchase  price of any Common Stock
or as a stockholder  of the Company,  whether such  liability is asserted by the
Company or by creditors of the Company.

          (j) REMEDIES.  Holder,  in addition to being  entitled to exercise all
rights  granted by law,  including  recovery  of  damages,  will be  entitled to
specific  performance of its rights under this Warrant.  The Company agrees that
monetary  damages  would not be adequate  compensation  for any loss incurred by
reason of a breach by it of the  provisions of this Warrant and hereby agrees to
waive and not to assert the defense in any action for specific  performance that
a remedy at law would be adequate.

          (k) SUCCESSORS  AND ASSIGNS.  Subject to applicable  securities  laws,
this Warrant and the rights and obligations  evidenced hereby shall inure to the
benefit of and be

                                       13
<PAGE>

binding upon the  successors  of the Company and the  successors  and  permitted
assigns of Holder.  The  provisions  of this  Warrant are intended to be for the
benefit  of all  Holders  from  time  to  time  of this  Warrant  and  shall  be
enforceable by any such Holder or holder of Warrant Shares.

          (l)  AMENDMENT.  This  Warrant  may  be  modified  or  amended  or the
provisions hereof waived with the written consent of the Company and the Holder.

          (m) SEVERABILITY.  Wherever  possible,  each provision of this Warrant
shall  be  interpreted  in  such  manner  as to be  effective  and  valid  under
applicable  law, but if any  provision of this Warrant shall be prohibited by or
invalid under  applicable law, such provision shall be ineffective to the extent
of such  prohibition or invalidity,  without  invalidating the remainder of such
provisions or the remaining provisions of this Warrant.

          (n)  HEADINGS.   The  headings  used  in  this  Warrant  are  for  the
convenience of reference  only and shall not, for any purpose,  be deemed a part
of this Warrant.

                                       14
<PAGE>

                  IN WITNESS WHEREOF,  the Company has caused this Warrant to be
executed by its officer thereunto duly authorized.

Dated:  September __, 2008

                                     ELITE PHARMACEUTICALS, INC.

                                     By:
                                        ----------------------------------------
                                        Name:
                                        Title:

                                       15
<PAGE>

                               NOTICE OF EXERCISE

TO: ELITE PHARMACEUTICALS, INC.

          (1) The undersigned  hereby elects to purchase ________ Warrant Shares
of the Company  pursuant to the terms of the attached Warrant (only if exercised
in full),  and tenders herewith payment of the exercise price in lawful money of
the United States, in full, together with all applicable transfer taxes, if any.

          (2) Please  issue a  certificate  or  certificates  representing  said
Warrant  Shares  in the  name of the  undersigned  or in such  other  name as is
specified below:

                    ----------------------------------------

The Warrant Shares shall be delivered to the following DWAC Account Number or by
physical delivery of a certificate to:

                    ----------------------------------------

                    ----------------------------------------

                    ----------------------------------------

          (4) ACCREDITED INVESTOR.  The undersigned is an "accredited  investor"
as defined in  Regulation D  promulgated  under the  Securities  Act of 1933, as
amended.

[SIGNATURE OF HOLDER]

Name of Investing Entity: ______________________________________________________

SIGNATURE OF AUTHORIZED SIGNATORY OF INVESTING ENTITY: _________________________

Name of Authorized Signatory:  _________________________________________________

Title of Authorized Signatory: _________________________________________________

Date: __________________________________________________________________________

<PAGE>

                                 ASSIGNMENT FORM

                    (To assign the foregoing warrant, execute
                   this form and supply required information.
                 Do not use this form to exercise the warrant.)

          FOR VALUE RECEIVED, [____] all of or [_______] shares of the foregoing
Warrant and all rights evidenced thereby are hereby assigned to

_______________________________________________ whose address is

___________________________________________________________________ .

                                                 Dated:  ______________, _______

                               Holder's Signature: _____________________________

                                 Holder's Address: _____________________________

                                                   _____________________________

Signature Guaranteed:  ___________________________________________

NOTE: The signature to this  Assignment Form must correspond with the name as it
appears on the face of the Warrant,  without  alteration or  enlargement  or any
change whatsoever,  and must be guaranteed by a bank or trust company.  Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.Exhibit 10.1

                          SECURITIES PURCHASE AGREEMENT

         This Securities  Purchase  Agreement (this  "AGREEMENT") is dated as of
September 15, 2008, among Elite  Pharmaceuticals,  Inc., a Delaware  corporation
(the  "COMPANY"),  and each purchaser  identified on the signature  pages hereto
(each,  including its successors and assigns, a "PURCHASER" and collectively the
"PURCHASERS").

         WHEREAS,  subject  to the  terms  and  conditions  set  forth  in  this
Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the "SECURITIES ACT"), and Rule 506 promulgated thereunder, the Company desires
to issue  and sell to each  Purchaser,  and each  Purchaser,  severally  and not
jointly, desires to purchase from the Company, securities of the Company as more
fully described in this Agreement.

         NOW,  THEREFORE,  IN CONSIDERATION of the mutual covenants contained in
this Agreement,  and for other good and valuable  consideration  the receipt and
adequacy of which are hereby acknowledged,  the Company and each Purchaser agree
as follows:

                                    ARTICLE I
                                   DEFINITIONS

         1.1  DEFINITIONS.  In addition to the terms  defined  elsewhere in this
Agreement:  (a) capitalized terms that are not otherwise defined herein have the
meanings  given to such terms in the  Certificate  of  Designation  (as  defined
herein), and (b) the following terms have the meanings indicated in this Section
1.1:

                  "ACQUIRING  PERSON"  shall have the  meaning  ascribed to such
         term in Section 4.6.

                  "ACTION"  shall  have the  meaning  assigned  to such  term in
         Section 3.1(j).

                  "ACTION BY  SHAREHOLDERS"  means action by the shareholders of
         the Company  approving the  Authorized  Share Approval in a manner that
         complies with applicable Delaware General Corporation Law, as amended.

                  "ACTUAL MINIMUM" means, as of any date, the maximum  aggregate
         number of shares of Common Stock then issued or potentially issuable in
         the  future  pursuant  to  the  Transaction  Documents,  including  any
         Underlying  Shares  issuable upon exercise or conversion in full of all
         Warrants  and  shares  of  Series  D  Preferred  Stock,   ignoring  any
         conversion or exercise limits set forth therein,  and assuming that any
         previously  unconverted  shares  of Series D  Preferred  Stock are held
         until the 5th  anniversary  of the Closing Date and all  dividends  are
         paid in shares of Common Stock until such 5th anniversary.

                  "AFFILIATE"  means any Person  that,  directly  or  indirectly
         through one or more intermediaries,  controls or is controlled by or is
         under  common  control  with a  Person,  as such  terms are used in and
         construed  under Rule 405 under the  Securities  Act. With respect to a
         Purchaser, any investment fund or managed account that is managed on a

<PAGE>

         discretionary  basis by the same  investment  manager as such Purchaser
         will be deemed to be an Affiliate of such Purchaser.

                  "AMENDMENT"  means the amendment to the Company's  certificate
         of incorporation,  and a restatement thereof, that increases the number
         of  authorized  shares  of  Common  Stock  from  150,000,000  shares to
         200,000,000 shares.

                  "AUTHORIZED SHARE APPROVAL" means the vote by the shareholders
         of the Company to approve the  Amendment  and the filing by the Company
         of the Amendment  with the Secretary of State the State of Delaware and
         the  acceptance of the Amendment by the Secretary of State the State of
         Delaware.

                  "AUTHORIZED  SHARE  APPROVAL  DATE" means the date when all of
         the  actions  set  forth  in the  definition  of the  Authorized  Share
         Approval have been completed.

                  "BOARD  OF  DIRECTORS"  means the  board of  directors  of the
         Company.

                  "BUSHIDO"  shall  have the  meaning  ascribed  to such term in
         Section 5.2.

                  "BUSINESS DAY" means any day except Saturday,  Sunday, any day
         which shall be a federal  legal holiday in the United States or any day
         on which banking  institutions  in the State of New York are authorized
         or required by law or other governmental action to close.

                  "CERTIFICATE   OF   DESIGNATION"   means  the  Certificate  of
         Designation  of  Preferences,  Rights  and  Limitations  of Series D 8%
         Convertible  Preferred  Stock of the  Company to be filed  prior to the
         Closing by the Company with the Secretary of State of Delaware,  in the
         form of EXHIBIT A attached hereto.

                  "CLOSING"  means the closing of the  purchase  and sale of the
         Securities pursuant to Section 2.1.

                  "CLOSING   DATE"  means  the  Trading  Day  when  all  of  the
         Transaction   Documents   have  been  executed  and  delivered  by  the
         applicable  parties  thereto,  and all conditions  precedent to (i) the
         Purchasers'  obligations  to pay the  Subscription  Amount and (ii) the
         Company's  obligations to deliver the Securities have been satisfied or
         waived.

                  "COMMISSION"  means the United States  Securities and Exchange
         Commission.

                  "COMMON  STOCK"  means the common  stock of the  Company,  par
         value US$0.01 per share,  and any other class of securities  into which
         such securities may hereafter be reclassified or changed into.

                  "COMMON STOCK EQUIVALENTS" means any securities of the Company
         or the  Subsidiaries  which would entitle the holder thereof to acquire
         at any time Common  Stock,  including,  without  limitation,  any debt,
         preferred stock, rights, options,  warrants or other instrument that is
         at any time convertible into or exercisable or exchangeable for, or

                                       2
<PAGE>

         otherwise entitles the holder thereof to receive, Common Stock.

                  "COMPANY COUNSEL" means Reitler,  Brown, & Rosenblatt LLC with
         offices located at 800 Third Avenue, New York, NY 10022.

                  "CONVERSION  PRICE"  shall have the  meaning  assigned to such
         term in the Certificate of Designation.

                  "DISCLOSURE SCHEDULES" shall have the meaning assigned to such
         term in Section 3.1.

                  "DISCUSSION TIME" shall have the meaning assigned to such term
         in Section 3.2 (f).

                  "EFFECTIVE  DATE" means the earlier of (a) the effective  date
         of a  Registration  Statement  registering  the  resale  of  all of the
         Underlying  Shares  and (b) the date on  which  the  Underlying  Shares
         issuable  pursuant to the Transaction  Documents may be sold under Rule
         144 without (i) the  requirements  for the Company to be in  compliance
         with the current public information  required under Rule 144 as to such
         Underlying  Shares  and  (ii)  volume  or  manner-of-sale  restrictions
         (assuming for purposes of this clause (b) that all Warrant  Shares will
         be issued pursuant to the cashless  exercise  provision of Section 2(c)
         of the Warrants),  as determined by the counsel to the Company pursuant
         to a written  opinion letter to such effect,  if such opinion letter is
         required  by  the  Transfer  Agent,  addressed  and  acceptable  to the
         Transfer Agent and the Purchasers.

                  "ESCROW AGENT" shall have the meaning ascribed to such term in
         Section 2.1

                  "EXCHANGE ACT" means the  Securities  Exchange Act of 1934, as
         amended, and the rules and regulations promulgated thereunder.

                  "EXCHANGE  ELECTION   NOTIFICATION"  shall  have  the  meaning
         assigned to such term in Section 4.16.

                  "EXCHANGE  RIGHT" shall have the meaning assigned to such term
         in Section 4.16.

                  "EXCHANGE SHARES" shall have the meaning assigned to such term
         in Section 4.16.

                  "EXCHANGE  WARRANTS"  shall have the meaning  assigned to such
         term in Section 4.16.

                  "EXEMPT  ISSUANCE"  means the issuance of (a) shares of Common
         Stock or options to  employees,  officers or  directors  of the Company
         pursuant to any stock or option plan duly  adopted by a majority of the
         non-employee  members of the Board of  Directors  or a majority  of the
         members of a committee of non-employee  directors  established for such
         purpose,  (b) securities upon the exercise or exchange of or conversion
         of any Securities issued hereunder and/or other securities  exercisable
         or exchangeable for or convertible

                                       3
<PAGE>

         into shares of Common Stock issued and  outstanding on the date of this
         Agreement,  provided that such  securities  have not been amended since
         the date of this Agreement to increase the number of such securities or
         to decrease  the  exercise,  exchange or  conversion  price of any such
         securities, (c) securities issued pursuant to a "STRATEGIC TRANSACTION"
         defined  as  acquisitions  or  strategic  transactions  approved  by  a
         majority of the  disinterested  directors,  provided any such  issuance
         shall only be to a Person which is, itself or through its subsidiaries,
         an operating  company in, or an individual  that  operates,  a business
         synergistic  with the  business of the Company and in which the Company
         receives benefits in addition to the investment of funds, but shall not
         include  a  transaction  in which the  Company  is  issuing  securities
         primarily  for the  purpose  of raising  capital or to an entity  whose
         primary  business is  investing in  securities,  (d) up to a maximum of
         1,500,000 shares of Common Stock or Common Stock  Equivalents  (subject
         to  adjustment  for  reverse  and  forward  splits and the like) in any
         rolling  12 month  period  issued to  consultants,  vendors,  financial
         institutions  or lessors in  connection  with services  (including  the
         provision of Permitted  Indebtedness) provided by such Persons referred
         to in this clause (d) but shall not include a transaction  in which the
         Company  is issuing  securities  primarily  for the  purpose of raising
         capital  or to  an  entity  whose  primary  business  is  investing  in
         securities, and provided that none of such shares may be registered for
         sale or  resale  by any of such  holders;  (e)  securities  issued as a
         dividend or distribution any of the Securities pursuant to the terms of
         the Transaction  Documents and (f) securities issued in connection with
         any stock  split,  stock  dividend  or  recapitalization  of the Common
         Stock.

                  "EXISTING  PREFERRED  STOCK" means the issued and  outstanding
         shares of Series B Preferred Stock and Series C Preferred Stock.

                  "EXISTING  PREFERRED  STOCKHOLDER  CONSENT"  means the written
         consent  of the  holders  of at least 70% of the  outstanding  Existing
         Preferred Stock to (a) the transactions contemplated in the Transaction
         Documents;  (b) the exchange of the Existing Preferred Stock for Series
         D  Preferred  Stock at a rate equal to one share of Series D  Preferred
         Stock for each share of Existing Preferred Stock held by the Qualifying
         Purchasers;  (c) the  exchange of the  Original  Warrants  for Exchange
         Warrants,  exercisable, in the aggregate, for the same number of shares
         of  Common  Stock  as the  Original  Warrants  held  by the  Qualifying
         Purchasers;  (d) the waiver of the anti-dilution  protection provisions
         of the  holders  Existing  Preferred  Stock  pursuant  to the  Series B
         Certificate  and Series C  Certificate  with respect to the exchange of
         Existing  Preferred for Series D Preferred Stock and Original  Warrants
         for  Exchange  Warrants;   and  (e)  the  amendment  of  the  Series  B
         Certificate and the Series C Certificate,  respectively,  to (1) extend
         the date upon which the  dividend  rate  increases  from 8% to 15% from
         April 24,  2009 to the  third  anniversary  of the  Closing  Date,  (2)
         provide that the Series D Preferred Stock shall rank as to distribution
         of  assets  upon a  Liquidation  senior  to the  Company's  outstanding
         Existing Preferred Stock and Junior Securities,  (3) to the extent that
         the forced conversion price of the Existing Preferred Stock exceeds the
         then  applicable  conversion  price of the  Existing  Preferred  Stock,
         change the price at which the Company may force a conversion  of shares
         of the Series B  Preferred  Stock and Series C  Preferred  Stock to the
         conversion

                                       4
<PAGE>

         price of the Series D Preferred  Stock  pursuant to Section 8(a) of the
         Certificate of Designation,  (4) change the price at which the Existing
         Preferred  Stock may be redeemed  pursuant  to an  optional  redemption
         under each of the Series B Certificate  and the Series C Certificate to
         be consistent with the terms for an optional redemption of the Series D
         Preferred   Stock   pursuant  to  Section  8(b)  the   Certificate   of
         Designation,  (5) change the weighted average anti-dilution  protection
         of  the  Existing  Preferred  Stock  from  narrow-based   anti-dilution
         protection  to  broad-based  anti-dilution  protection,  (6) delete the
         automatic   redemption  of  the  Existing   Preferred  Stock  upon  the
         occurrence of certain Triggering Events (as such term is defined in the
         Series B  Certificate  and the Series C  Certificate),  (7) decease the
         affirmative  vote of the  holders  of the then  outstanding  shares  of
         Existing  Preferred Stock,  voting as a single class,  required to take
         certain  actions  delineated  in  Section  4 of  each of the  Series  B
         Certificate  and the Series C  Certificate  from 70% to 50% of the then
         outstanding  shares of Series B Preferred  Stock and Series C Preferred
         Stock,  and (8) decease the affirmative  written consent of the holders
         of the then outstanding shares of Existing Preferred Stock, voting as a
         single class, required to take certain actions delineated in Section 10
         of each of the Series B Certificate  and the Series C Certificate  from
         70% to 50% of the then  outstanding  shares of Series B Preferred Stock
         and Series C Preferred Stock.

                  "FDA" shall have the meaning  ascribed to such term in Section
         3.1(jj).

                  "FDCA" shall have the meaning ascribed to such term in Section
         3.1(jj).

                  "FWS" means Feldman Weinstein & Smith LLP with offices located
         at 420 Lexington Avenue, Suite 2620, New York, New York 10170-0002.

                  "GAAP" shall have the meaning assigned to such term in Section
         3.1(h).

                  "INITIAL CONVERSION PRICE" means US$0.20.

                  "INTELLECTUAL PROPERTY RIGHTS" shall have the meaning assigned
         to such term in Section 3.1(o).

                  "LEGEND REMOVAL DATE" shall have the meaning  ascribed to such
         term in Section 4.1(c).

                  "LIENS" means a lien, charge, security interest,  encumbrance,
         right of first refusal, preemptive right or other restriction.

                  "LOST SECURITIES INDEMNITY" shall have the meaning assigned to
         such term in Section 4.16.

                  "MATERIAL  ADVERSE EFFECT" shall have the meaning  assigned to
         such term in Section 3.1(b).

                                       5
<PAGE>

                  "MATERIAL  PERMITS"  shall have the  meaning  assigned to such
         term in Section 3.1(m).

                  "MIDSUMMER"  shall have the  meaning  ascribed to such term in
         Section 5.2.

                  "ORIGINAL  WARRANTS"  shall have the meaning  assigned to such
         term in Section 4.16.

                  "OUTSTANDING  PREFERRED STOCK" means the outstanding shares of
         Series  B  Preferred  Stock,  Series C  Preferred  Stock  and  Series D
         Preferred Stock collectively.

                  "PERSON"  means an  individual  or  corporation,  partnership,
         trust,  incorporated  or  unincorporated  association,  joint  venture,
         limited  liability  company,  joint stock  company,  government  (or an
         agency or subdivision thereof) or other entity of any kind.

                  "PHARMACEUTICAL  PRODUCT"  shall have the meaning  ascribed to
         such term in Section 3.1(jj).

                  "PRE-NOTICE"  shall have the meaning  assigned to such term in
         Section 4.11(b).

                  "PROCEEDING" means an action,  claim,  suit,  investigation or
         proceeding (including,  without limitation, an investigation or partial
         proceeding, such as a deposition), whether commenced or threatened.

                  "PUBLIC  INFORMATION  FAILURE" shall have the meaning ascribed
         to such term in Section 4.2(b).

                  "PUBLIC  INFORMATION  FAILURE PAYMENTS" shall have the meaning
         ascribed to such term in Section 4.2(b).

                  "PURCHASER PARTY" shall have the meaning ascribed to such term
         in Section 4.9.

                  "QUALIFYING  PURCHASER"  means  any  Purchaser  who (a)  holds
         shares of Series B Preferred  Stock and/or Series C Preferred Stock and
         (b)  purchases  shares of Series D  Preferred  Stock  pursuant  to this
         Agreement  with a stated value of at least the lesser of (x) US$400,000
         and (y) 20% of the  aggregate  stated  value of the  shares of Series B
         Preferred  Stock  and/or  Series C  Preferred  Stock  then held by such
         Purchaser.

                  "REGISTRATION  STATEMENT" means a registration statement filed
         pursuant to Section 4.19, registering the resale, by the Purchasers, of
         all of the Underlying Shares.

                  "REQUIRED  APPROVALS"  shall have the meaning assigned to such
         term in Section 3.1(e).

                  "RULE  144"  means  Rule  144  promulgated  by the  Commission
         pursuant to the  Securities  Act, as such Rule may be amended from time
         to time, or any similar rule or

                                       6
<PAGE>

         regulation hereafter adopted by the Commission having substantially the
         same effect as such Rule.

                  "SEC REPORTS" shall have the meaning  assigned to such term in
         Section 3.1(h).

                  "SECURITIES" means the Series D Preferred Stock, the Warrants,
         the Exchange Warrants, the Warrant Shares and the Underlying Shares.

                  "SECURITIES ACT" means the Securities Act of 1933, as amended,
         and the rules and regulations promulgated thereunder.

                  "SERIES B CERTIFICATE" means the Certificate of Designation of
         Preferences,   Rights  and  Limitations  of  Series  B  8%  Convertible
         Preferred  Stock of the Company filed by the Company with the Secretary
         of State of Delaware.

                  "SERIES B PREFERRED  STOCK"  means the issued and  outstanding
         shares of Series B Preferred  Stock,  par value $0.01 per share, of the
         Company.

                  "SERIES B PURCHASE  AGREEMENT"  means the Securities  Purchase
         Agreement, dated March 16, 2006, by and between the Company and each of
         the purchasers identified on the signature pages thereto.

                  "SERIES C CERTIFICATE" means the Certificate of Designation of
         Preferences,   Rights  and  Limitations  of  Series  C  8%  Convertible
         Preferred  Stock of the Company filed by the Company with the Secretary
         of State of Delaware.

                  "SERIES C PREFERRED  STOCK"  means the issued and  outstanding
         shares of Series C Preferred  Stock,  par value $0.01 per share, of the
         Company.

                  "SERIES C PURCHASE  AGREEMENT"  means the Securities  Purchase
         Agreement, dated April 24, 2007 or July 17, 2007, as applicable, by and
         between the Company and each of the of the purchasers identified on the
         signature pages thereto.

                  "SERIES D PREFERRED  STOCK"  means the up to 30,000  shares of
         the  Company's  Series  D  8%  Convertible   Preferred  Stock  issuable
         hereunder including the shares of the Company's Series D 8% Convertible
         Preferred  Stock issuable  pursuant to Section 4.16 hereof,  having the
         rights,  preferences  and  privileges  set forth in the  Certificate of
         Designation, in the form of EXHIBIT A hereto.

                  "SHAREHOLDER  APPROVAL" means such approval as may be required
         by the applicable  rules and regulations of the American Stock Exchange
         (or any  successor  entity) from the  shareholders  of the Company with
         respect to the transactions  contemplated by the Transaction Documents,
         including  the  issuance of all of the  Underlying  Shares in excess of
         19.99% of the issued and outstanding Common Stock on the Closing Date.

                                       7
<PAGE>

                  "SHORT  SALES" shall  include all "short  sales" as defined in
         Rule 200 of Regulation SHO under the Exchange Act.

                  "STATED  VALUE" means US$1,000 per share of Series D Preferred
         Stock.

                  "SUBSCRIPTION  AMOUNT" shall mean, as to each  Purchaser,  the
         aggregate amount to be paid for the Securities  purchased  hereunder as
         specified  below such  Purchaser's  name on the signature  page of this
         Agreement  and next to the  heading  "Subscription  Amount",  in United
         States Dollars and in immediately available funds.

                  "SUBSEQUENT FINANCING" shall have the meaning assigned to such
         term in Section 4.11(a).

                  "SUBSEQUENT  FINANCING NOTICE" shall have the meaning assigned
         to such term in Section 4.11(b).

                  "SUBSIDIARY"  means  any  entity in which  the  Company  holds
         greater  than 50% of voting  securities,  each of which is set forth on
         SCHEDULE 3.1(A) and shall, where applicable, also include any direct or
         indirect  subsidiary of the Company  formed or acquired  after the date
         hereof.

                  "SURRENDERED  SECURITIES"  shall have the meaning  assigned to
         such term in Section 4.16.

                  "TRADING  DAY" means a day on which the Common Stock is traded
         on a Trading Market.

                  "TRADING  MARKET" means the following  markets or exchanges on
         which the Common  Stock is listed or quoted for  trading on the date in
         question:  the American Stock Exchange,  the Nasdaq Capital Market, the
         New York Stock  Exchange,  the Nasdaq Global Market,  the Nasdaq Global
         Select Market or the OTC Bulletin Board.

                  "TRANSACTION DOCUMENTS" means this Agreement,  the Certificate
         of Designation, the Warrants and the Voting Agreements.

                  "TRANSFER AGENT" means Jersey Transfer and Trust Company.

                  "UNDERLYING  SHARES"  means the shares of Common  Stock issued
         and issuable  upon  conversion  of the Series D Preferred  Stock,  upon
         exercise of the Warrants,  upon  exercise of the Exchange  Warrants and
         issued and  issuable in lieu of the cash  payment of  dividends  on the
         Series  D  Preferred   Stock  in  accordance  with  the  terms  of  the
         Certificate of Designation.

                  "VARIABLE RATE TRANSACTION" shall have the meaning ascribed to
         such term in Section 4.18(b).

                                       8
<PAGE>

                  "VOTING  AGREEMENTS" means the written agreement,  in the form
         of EXHIBIT C attached  hereto,  of all of the  officers,  directors and
         stockholders holding more than 10% of the issued and outstanding shares
         of Common  Stock on the date hereof to vote all Common Stock over which
         such Persons have voting  control as of the record date for the meeting
         of  stockholders  of the Company in favor of Authorized  Share Approval
         and Shareholder Approval.

                  "VWAP" means,  for any date, the price determined by the first
         of the following clauses that applies:  (a) if the Common Stock is then
         listed or quoted on a Trading Market, the daily volume weighted average
         price of the Common Stock for such date (or the nearest preceding date)
         on the  Trading  Market on which  the  Common  Stock is then  listed or
         quoted for trading as reported by  Bloomberg  L.P.  (based on a Trading
         Day from 9:30 a.m.  (New  York City  time) to 4:02 p.m.  (New York City
         time);  (b) if the OTC  Bulletin  Board is not a  Trading  Market,  the
         volume weighted average price of the Common Stock for such date (or the
         nearest  preceding date) on the OTC Bulletin  Board;  (c) if the Common
         Stock is not then quoted for trading on the OTC  Bulletin  Board and if
         prices  for the Common  Stock are then  reported  in the "Pink  Sheets"
         published  by Pink OTC  Markets,  Inc.  (or a similar  organization  or
         agency  succeeding  to its  functions  of reporting  prices),  the most
         recent bid price per share of the Common Stock so  reported;  or (d) in
         all other  cases,  the fair market  value of a share of Common Stock as
         determined by an  independent  appraiser  selected in good faith by the
         Holder and reasonably acceptable to the Company.

                  "WARRANTS"  means   collectively  the  Common  Stock  purchase
         warrants,  in the form of EXHIBIT B, delivered to the Purchasers at the
         Closing in accordance with Section  2.2(a)(v) (and Section  2.2(a)(vi),
         if applicable) hereof along with the Exchange Warrants,  which Exchange
         Warrants shall be exercisable  immediately  and have a term of exercise
         equal to 5 years with an  exercise  price  equal to US$0.25  per share,
         subject to adjustment therein.

                  "WARRANT  SHARES"  means the shares of Common  Stock  issuable
         upon exercise of the Warrants and the Exchange Warrants.

                                   ARTICLE II
                                PURCHASE AND SALE

         2.1  CLOSING.  On the Closing  Date,  upon the terms and subject to the
conditions  set forth herein,  substantially  concurrent  with the execution and
delivery of this  Agreement by the parties  hereto,  the Company agrees to sell,
and Purchasers agree to purchase,  in the aggregate,  severally and not jointly,
up to  US$5,000,000  of shares of Series D  Preferred  Stock  with an  aggregate
Stated  Value  equal to such  Purchaser's  Subscription  Amount and  Warrants as
determined  by pursuant to Section  2.2(a).  The  aggregate  number of shares of
Series D Preferred  Stock sold  hereunder  shall be up to 5,000.  Each Purchaser
shall deliver to American Stock Transfer & Trust Company (the "ESCROW AGENT") as
escrow agent, via wire transfer or a certified

                                       9
<PAGE>

check of immediately  available funds equal to their Subscription Amount and the
Company  shall deliver to each  Purchaser  their  respective  shares of Series D
Preferred  Stock and Warrants as determined  pursuant to Section  2.2(a) and the
other items set forth in Section 2.2 issuable at the Closing.  Upon satisfaction
of the  conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at
the offices of the Company Counsel,  or such other location as the parties shall
mutually agree.

         2.2 DELIVERIES.

                  (a) On the Closing Date, the Company shall deliver or cause to
         be delivered to each Purchaser the following:

                           (i) this Agreement duly executed by the Company;

                           (ii) a legal opinion of Company Counsel,  in form and
                  substance reasonably acceptable to such Purchaser;

                           (iii) a certificate  evidencing a number of shares of
                  Series  D   Preferred   Stock   equal   to  such   Purchaser's
                  Subscription Amount divided by the Stated Value, registered in
                  the name of such Purchaser;

                           (iv) a  certificate  evidencing a number of shares of
                  Series D  Preferred  Stock,  if  required  pursuant to Section
                  4.16, registered in the name of such Purchaser;

                           (v)  a  Warrant   registered  in  the  name  of  such
                  Purchaser to purchase up to a number of shares of Common Stock
                  equal to 200% of such Purchaser's  Subscription Amount divided
                  by the initial Conversion Price;

                           (vi)  a  Warrant  registered  in  the  name  of  such
                  Purchaser, if required pursuant to Section 4.16;

                           (vii) the Voting Agreements;

                           (viii) a  certificate,  duly  executed  by its  Chief
                  Executive  Officer,  certifying as to the  satisfaction of the
                  conditions set forth in Section 2.3(b); and

                           (ix) a certificate  executed by its Secretary  having
                  attached   thereto   (i)   the   Company's    Certificate   of
                  Incorporation,  certified  by the  Secretary  of  State of the
                  State of Delaware,  as in effect at the Closing Date, (ii) the
                  Company's  By-Laws  as in effect at the  Closing  Date,  (iii)
                  resolutions approved by the Board of Directors authorizing the
                  transactions  contemplated  hereby,  and  (iv)  good  standing
                  certificate  with respect to the Company from the Secretary of
                  State of the State of Delaware.

                  (b) On the Closing Date, each Purchaser shall deliver or cause
         to be delivered to the Company the following:

                                       10
<PAGE>

                           (i) this Agreement  duly executed by such  Purchaser;
                  and

                           (ii)  such  Purchaser's  Subscription  Amount by wire
                  transfer to the Escrow  Agent  escrow  account as specified in
                  writing by the Escrow Agent.

                  (c) On the Closing Date, the Company shall deliver or cause to
         be delivered to each  Qualifying  Purchaser a certificate  representing
         the number of shares of Exchange  Shares and the Exchange  Warrants the
         Company is required to deliver pursuant to Section 4.16.

                  (d) On the  Closing  Date,  each  Qualifying  Purchaser  shall
         deliver or cause to be delivered to the Company the following:

                           (i) an Exchange Election Notification;

                           (ii) the  Surrendered  Securities  or, to the  extent
                  necessary, the Lost Securities Indemnity.

         2.3 CLOSING CONDITIONS.

                  (a) The  obligations  of the Company  hereunder in  connection
         with the Closing are subject to the following conditions being met:

                           (i) the accuracy in all material  respects  when made
                  and on the Closing Date of the  representations and warranties
                  of the Purchasers  contained herein, other than representation
                  and warranties that are qualified by "Material Adverse Affect"
                  or  "materiality"  which  shall  be true  and  correct  in all
                  respects;

                           (ii) all obligations, covenants and agreements of the
                  Purchasers and Qualifying  Purchasers required to be performed
                  at or prior to the Closing Date shall have been performed;

                           (iii) the delivery by the Purchasers of the items set
                  forth in Section 2.2(b) of this Agreement;

                           (iv)  in the  event  that  any  Qualifying  Purchaser
                  elects  to  exercise  his,  her or  its  Exchange  Right,  the
                  delivery by such Qualifying  Purchasers of the items set forth
                  in Section 2.2(d) of this Agreement; and

                           (v) the delivery by the requisite holders of Existing
                  Preferred Stock of the Existing Preferred Stockholder Consent.

(b)      The respective obligations of the Purchasers hereunder in connection
         with the Closing are subject to the following conditions being met:

                           (i) the  accuracy  in all  material  respects  on the
                  Closing  Date of the  representations  and  warranties  of the
                  Company contained herein, other than

                                       11
<PAGE>

                  representation  and warranties that are qualified by "Material
                  Adverse  Affect"  or  "materiality"  which  shall  be true and
                  correct in all respects;

                           (ii) all obligations, covenants and agreements of the
                  Company  required to be  performed  at or prior to the Closing
                  Date shall have been performed;

                           (iii) the  delivery  by the  Company of the items set
                  forth in Section 2.2(a) of this Agreement;

                           (iv)  in the  event  that  any  Qualifying  Purchaser
                  elects  to  exercise  his,  her or  its  Exchange  Right,  the
                  delivery  by the  Company  of the items  set forth in  Section
                  2.2(c) of this Agreement;

                           (v) there shall have been no Material  Adverse Effect
                  with respect to the Company since the date hereof;

                           (vi) the Company  shall have  obtained all  requisite
                  governmental  approval,  if any,  required to  consummate  the
                  transactions contemplated herein; and

                           (vii)  from  the date  hereof  to the  Closing  Date,
                  trading in the Common  Stock shall not have been  suspended by
                  the  Commission  or the  Company's  principal  Trading  Market
                  (except  for any  suspension  of trading  of limited  duration
                  agreed to by the Company, which suspension shall be terminated
                  prior to the  Closing),  and, at any time prior to the Closing
                  Date, trading in securities generally as reported by Bloomberg
                  L.P.  shall not have been  suspended  or  limited,  or minimum
                  prices shall not have been  established  on  securities  whose
                  trades are reported by such service, or on any Trading Market,
                  nor shall a banking  moratorium  have been declared  either by
                  the  United  States or New York  State  authorities  nor shall
                  there have  occurred any material  outbreak or  escalation  of
                  hostilities  or other  national or  international  calamity of
                  such  magnitude  in its  effect  on, or any  material  adverse
                  change in, any financial  market  which,  in each case, in the
                  reasonable judgment of each Purchaser,  makes it impracticable
                  or inadvisable to purchase the Series D Preferred Stock at the
                  Closing.

                                   ARTICLE III
                         REPRESENTATIONS AND WARRANTIES

         3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.  Except as set forth
in the disclosure  schedules delivered to the Purchasers  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,  the Company hereby makes the representations and
warranties set forth below to each Purchaser:

                  (a) SUBSIDIARIES.  All of the direct and indirect Subsidiaries
         of the  Company  are set forth on SCHEDULE  3.1(A).  The Company  owns,
         directly or indirectly, all of the capital stock

                                       12
<PAGE>

         or other  equity  interests  of each  Subsidiary  free and clear of any
         Liens,  and all the issued and  outstanding  shares of capital stock of
         each  Subsidiary are validly issued and are fully paid,  non-assessable
         and free of preemptive  and similar rights to subscribe for or purchase
         securities.  If  the  Company  has  no  subsidiaries,  then  all  other
         references in the Transaction  Documents to the  Subsidiaries or any of
         them will be disregarded.

                  (b)  ORGANIZATION AND  QUALIFICATION.  The Company and each of
         the Subsidiaries is an entity duly incorporated or otherwise organized,
         validly   existing  and  in  good  standing   under  the  laws  of  the
         jurisdiction of its incorporation or organization (as applicable), with
         the  requisite  power and authority to own and use its  properties  and
         assets and to carry on its business as currently conducted. Neither the
         Company nor any  Subsidiary  is in  violation  or default of any of the
         provisions of its respective  certificate or articles of incorporation,
         bylaws  or  other  organizational  or  charter  documents.  Each of the
         Company and the  Subsidiaries is duly qualified to conduct business and
         is in good  standing as a foreign  corporation  or other entity in each
         jurisdiction in which the nature of the business  conducted or property
         owned  by it makes  such  qualification  necessary,  except  where  the
         failure to be so  qualified  or in good  standing,  as the case may be,
         could not have or  reasonably  be  expected to result in (i) a material
         adverse  effect on the  legality,  validity  or  enforceability  of any
         Transaction Document,  (ii) a material adverse effect on the results of
         operations,  assets,  business,  prospects or condition  (financial  or
         otherwise) of the Company and the  Subsidiaries,  taken as a whole,  or
         (iii) a material adverse effect on the Company's  ability to perform in
         any  material  respect  on a timely  basis  its  obligations  under any
         Transaction  Document (any of (i), (ii) or (iii),  a "MATERIAL  ADVERSE
         EFFECT") and no Proceeding has been instituted in any such jurisdiction
         revoking, limiting or curtailing or seeking to revoke, limit or curtail
         such power and authority or qualification.

                  (c) AUTHORIZATION;  ENFORCEMENT. The Company has the requisite
         corporate  power and  authority  to enter  into and to  consummate  the
         transactions  contemplated  by each of the  Transaction  Documents  and
         otherwise to carry out its obligations  hereunder and  thereunder.  The
         execution  and  delivery of each of the  Transaction  Documents  by the
         Company and the  consummation  by it of the  transactions  contemplated
         hereby and thereby have been duly authorized by all necessary action on
         the part of the  Company  and no  further  action  is  required  by the
         Company,  the Board of  Directors  or its  stockholders  in  connection
         therewith  other than in connection with the Required  Approvals.  Each
         Transaction  Document has been (or upon  delivery  will have been) duly
         executed by the Company  and,  when  delivered in  accordance  with the
         terms  hereof  and  thereof,  will  constitute  the valid  and  binding
         obligation of the Company enforceable against the Company in accordance
         with its terms,  except (i) as limited by general equitable  principles
         and applicable bankruptcy, insolvency,  reorganization,  moratorium and
         other laws of general application  affecting  enforcement of creditors'
         rights generally,  (ii) as limited by laws relating to the availability
         of specific performance,  injunctive relief or other equitable remedies
         and (iii) insofar as indemnification and contribution provisions may be
         limited by applicable law.

                                       13
<PAGE>

                  (d) NO CONFLICTS.  The execution,  delivery and performance of
         the  Transaction  Documents by the Company and the  consummation by the
         Company of the other  transactions  contemplated  hereby and thereby do
         not and will not:  (i)  conflict  with or violate any  provision of the
         Company's or any Subsidiary's certificate or articles of incorporation,
         bylaws or other  organizational  or charter  documents,  subject to the
         Authorized  Share  Approval,  or (ii)  conflict  with,  or constitute a
         default  (or an event  that with  notice or lapse of time or both would
         become a default) under, result in the creation of any Lien upon any of
         the properties or assets of the Company or any  Subsidiary,  or give to
         others  any  rights  of   termination,   amendment,   acceleration   or
         cancellation  (with or without  notice,  lapse of time or both) of, any
         agreement,  credit  facility,  debt or other  instrument  (evidencing a
         Company or  Subsidiary  debt or otherwise)  or other  understanding  to
         which the Company or any Subsidiary is a party or by which any property
         or asset of the  Company or any  Subsidiary  is bound or  affected,  or
         (iii) subject to the Required  Approvals,  conflict with or result in a
         violation of any law, rule, regulation,  order,  judgment,  injunction,
         decree or other  restriction of any court or governmental  authority to
         which the Company or a  Subsidiary  is subject  (including  federal and
         state  securities  laws and  regulations),  or by which any property or
         asset of the Company or a Subsidiary  is bound or  affected;  except in
         the case of each of clauses  (ii) and (iii),  such as could not have or
         reasonably be expected to result in a Material Adverse Effect.

                  (e)  FILINGS,  CONSENTS  AND  APPROVALS.  The  Company  is not
         required to obtain any consent, waiver, authorization or order of, give
         any notice to, or make any filing or  registration  with,  any court or
         other federal,  state, local or other  governmental  authority or other
         Person in connection  with the execution,  delivery and  performance by
         the Company of the Transaction  Documents,  other than (i) the Existing
         Preferred  Stockholder  Consent,  (ii) the filings required pursuant to
         Section 4.5, (iii) the filing with the  Commission of the  Registration
         Statement,  (iv) the notice and/or  application(s)  to each  applicable
         Trading  Market for the  issuance  and sale of the  Securities  and the
         listing of the  Underlying  Shares for trading  thereon in the time and
         manner required  thereby,  (v) the filing of Form D with the Commission
         and such  filings as are  required  to be made under  applicable  state
         securities  laws,  and (vi)  Shareholder  Approval  (collectively,  the
         "REQUIRED APPROVALS").

                  (f)  ISSUANCE  OF THE  SECURITIES.  The  Securities  are  duly
         authorized  and,  when  issued  and  paid  for in  accordance  with the
         applicable  Transaction  Documents,  will be duly and  validly  issued,
         fully paid and  nonassessable,  free and clear of all Liens  imposed by
         the Company  other than  restrictions  on transfer  provided for in the
         Transaction  Documents.  Subject to the Authorized Share Approval,  the
         Underlying  Shares,  when  issued in  accordance  with the terms of the
         Transaction   Documents,   will  be  validly  issued,  fully  paid  and
         nonassessable,  free and clear of all  Liens  imposed  by the  Company.
         After the Authorized Share Approval,  the Company will reserve from its
         duly  authorized  capital  stock a number of shares of Common Stock for
         issuance of the Underlying  Shares at least equal to the Actual Minimum
         on the date hereof.

                                       14
<PAGE>

                  (g)  CAPITALIZATION.  The  capitalization of the Company is as
         set forth on SCHEDULE  3.1(g).  Except as set forth in SCHEDULE 3.1(g),
         the Company has not issued any  capital  stock since its most  recently
         filed  periodic  report under the Exchange Act,  other than pursuant to
         the exercise of employee stock options under the Company's stock option
         plans, the issuance of shares of Common Stock to employees  pursuant to
         the  Company's  employee  stock  purchase  plan  and  pursuant  to  the
         conversion or exercise of Common Stock  Equivalents  outstanding  as of
         the date of the most recently filed periodic  report under the Exchange
         Act. Except as set forth on SCHEDULE 3.1(g), no Person has any right of
         first refusal, preemptive right, right of participation, or any similar
         right to participate in the transaction contemplated by the Transaction
         Documents.  Except  as a  result  of  the  purchase  and  sale  of  the
         Securities or as set forth on SCHEDULE 3.1(g), there are no outstanding
         options,  warrants, script rights to subscribe to, calls or commitments
         of any  character  whatsoever  relating  to, or  securities,  rights or
         obligations  convertible  into or exercisable or  exchangeable  for, or
         giving any Person any right to subscribe for or acquire,  any shares of
         Common Stock, or contracts, commitments, understandings or arrangements
         by which the Company or any  Subsidiary is or may become bound to issue
         additional shares of Common Stock or Common Stock  Equivalents.  Except
         as  set  forth  in  SCHEDULE  3.1(g),  the  issuance  and  sale  of the
         Securities  will not  obligate  the  Company to issue  shares of Common
         Stock or other securities to any Person (other than the Purchasers) and
         will not  result in a right of any  holder  of  Company  securities  to
         adjust the exercise,  conversion,  exchange or reset price under any of
         such securities.  Subject to the Authorized Share Approval,  all of the
         outstanding  shares of capital stock of the Company are validly issued,
         fully paid and  nonassessable,  have been issued in compliance with all
         federal and state securities laws, and none of such outstanding  shares
         was issued in violation of any  preemptive  rights or similar rights to
         subscribe  for or  purchase  securities.  Other  than  the  Shareholder
         Approval,   Authorized  Share  Approval,  and  the  Existing  Preferred
         Stockholder  Consent,  no  further  approval  or  authorization  of any
         stockholder,  the Board of  Directors  or others  is  required  for the
         issuance  and sale of the  Securities.  Except as set forth in SCHEDULE
         3.1(g),  there are no  stockholders  agreements,  voting  agreements or
         other similar agreements with respect to the Company's capital stock to
         which  the  Company  is a party or, to the  knowledge  of the  Company,
         between or among any of the Company's stockholders.

                  (h) SEC REPORTS;  FINANCIAL STATEMENTS.  The Company has filed
         all reports,  schedules, forms, statements and other documents required
         to be  filed by it  under  the  Securities  Act and the  Exchange  Act,
         including pursuant to Section 13(a) or 15(d) thereof, for the two years
         preceding  the date hereof (or such  shorter  period as the Company was
         required by law or regulation  to file such  material)  (the  foregoing
         materials, including the exhibits thereto and documents incorporated by
         reference therein,  being  collectively  referred to herein as the "SEC
         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

                                       15
<PAGE>

         necessary in  order  to make  the statements  therein,  in the light of
         the  circumstances  under  which they were made,  not  misleading.  The
         financial  statements of the Company included in the SEC Reports comply
         in all material  respects with applicable  accounting  requirements and
         the rules and  regulations of the Commission with respect thereto as in
         effect  at the time of  filing.  Such  financial  statements  have been
         prepared in accordance with United States generally accepted accounting
         principles  applied on a consistent  basis during the periods  involved
         ("GAAP"),  except  as may be  otherwise  specified  in  such  financial
         statements  or the notes  thereto and except that  unaudited  financial
         statements  may not contain all footnotes  required by GAAP, and fairly
         present in all material respects the financial  position of the Company
         and its  consolidated  subsidiaries as of and for the dates thereof and
         the results of  operations  and cash flows for the periods  then ended,
         subject, in the case of unaudited  statements,  to normal,  immaterial,
         year-end audit adjustments.

                  (i)  MATERIAL  CHANGES;  UNDISCLOSED  EVENTS,  LIABILITIES  OR
         DEVELOPMENTS. Since the date of the latest audited financial statements
         included within the SEC Reports,  except as specifically disclosed in a
         subsequent SEC Report or as set forth in SCHEDULE 3.1(I) there has been
         no  event,  occurrence  or  development  that  has  had or  that  could
         reasonably be expected to result in a Material Adverse Effect, (ii) the
         Company has not  incurred any  liabilities  (contingent  or  otherwise)
         other than (A) trade  payables  and  accrued  expenses  incurred in the
         ordinary  course of  business  consistent  with past  practice  and (B)
         liabilities  not required to be reflected  in the  Company's  financial
         statements  pursuant  to GAAP or  disclosed  in  filings  made with the
         Commission, (iii) the Company has not altered its method of accounting,
         (iv) the Company has not declared or made any dividend or  distribution
         of cash or other property to its stockholders or purchased, redeemed or
         made any  agreements  to  purchase  or redeem any shares of its capital
         stock and (v) the Company has not issued any equity  securities  to any
         officer,  director or Affiliate,  except  pursuant to existing  Company
         stock option plans.

                  (j) LITIGATION.  Except as set forth in SCHEDULE 3.1(j), there
         is no  action,  suit,  inquiry,  notice  of  violation,  proceeding  or
         investigation  pending or, to the knowledge of the Company,  threatened
         against  or  affecting  the  Company,  any  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 Transaction Documents 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 the Company
         nor any Subsidiary,  nor, to the knowledge of the Company, 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. There has not been, and to
         the knowledge of the Company, there is not pending or contemplated, any
         investigation by the Commission involving the Company or any current or
         former  director  or officer of the  Company.  The  Commission  has not
         issued any stop order or other order  suspending the  effectiveness  of
         any registration statement filed by the Company or any Subsidiary under
         the Exchange Act or the Securities Act.

                                       16
<PAGE>

                  (k)  LABOR  RELATIONS.  No labor  dispute  exists  or,  to the
         knowledge  of the  Company,  is  imminent  with  respect  to any of the
         employees of the Company  which could  reasonably be expected to result
         in  a  Material   Adverse   Effect.   None  of  the  Company's  or  its
         Subsidiaries'  employees  is a member of a union  that  relates to such
         employee's  relationship  with the Company,  and neither the Company or
         any  of  its  Subsidiaries  is  a  party  to  a  collective  bargaining
         agreement,  and the Company  and its  Subsidiaries  believe  that their
         relationships with their employees are good. No executive  officer,  to
         the  knowledge  of the  Company,  is,  or is  now  expected  to be,  in
         violation   of  any   material   term  of  any   employment   contract,
         confidentiality,  disclosure or  proprietary  information  agreement or
         non-competition  agreement,  or any other  contract or agreement or any
         restrictive  covenant,  and  the  continued  employment  of  each  such
         executive   officer  does  not  subject  the  Company  or  any  of  its
         Subsidiaries  to any  liability  with  respect to any of the  foregoing
         matters.  The Company and its  Subsidiaries  are in compliance with all
         U.S. federal, state, local and foreign laws and regulations relating to
         employment and employment practices, terms and conditions of employment
         and wages and hours, except where the failure to be in compliance could
         not, individually or in the aggregate, reasonably be expected to have a
         Material Adverse Effect.

                  (l) COMPLIANCE.  Neither the Company nor any Subsidiary (i) is
         in default under or in violation of (and no event has occurred that has
         not been  waived  that,  with  notice  or lapse of time or both,  would
         result in a default by the Company or any  Subsidiary  under),  nor has
         the Company or any Subsidiary  received notice of a claim that it is in
         default  under or that it is in violation  of, any  indenture,  loan or
         credit  agreement or any other agreement or instrument to which it is a
         party or by which it or any of its  properties is bound (whether or not
         such default or violation has been waived), (ii) is in violation of any
         order of any court, arbitrator or governmental body, or (iii) is or has
         been  in  violation  of  any  statute,   rule  or   regulation  of  any
         governmental  authority,  including  without  limitation  all  foreign,
         federal,  state and local laws  applicable to its business and all such
         laws that affect the environment, except in each case as could not have
         or reasonably be expected to result in a Material Adverse Effect.

                  (m)  REGULATORY  PERMITS.  The  Company  and the  Subsidiaries
         possess all  certificates,  authorizations  and  permits  issued by the
         appropriate  federal,  state, local or foreign  regulatory  authorities
         necessary to conduct  their  respective  businesses as described in the
         SEC Reports, except where the failure to possess such permits could not
         have or reasonably be expected to result in a Material  Adverse  Effect
         ("MATERIAL  PERMITS"),  and neither the Company nor any  Subsidiary has
         received  any  notice of  proceedings  relating  to the  revocation  or
         modification of any Material Permit.

                  (n) TITLE TO ASSETS.  Except as set forth on SCHEDULE  3.1(n),
         the Company and the Subsidiaries  have good and marketable title in fee
         simple  to all real  property  owned by them  that is  material  to the
         business of the Company and the  Subsidiaries  and good and  marketable
         title in all  personal  property  owned by them that is material to the
         business  of the Company  and the  Subsidiaries,  in each case free and
         clear of all Liens,  except for Liens as do not  materially  affect the
         value of such  property and do not  materially  interfere  with the use
         made and  proposed  to be made of such  property by the Company and the
         Subsidiaries  and  Liens for the  payment  of  federal,  state or other
         taxes,  the  payment  of which is  neither  delinquent  nor  subject to
         penalties.  Any real  property and  facilities  held under lease by the
         Company

                                       17
<PAGE>

         and the  Subsidiaries  are held by them  under  valid,  subsisting  and
         enforceable  leases with which the Company and the  Subsidiaries are in
         compliance.

                  (o) PATENTS AND TRADEMARKS.  The Company and the  Subsidiaries
         have,  or  have  rights  to  use,  all  patents,  patent  applications,
         trademarks,  trademark applications,  service marks, trade names, trade
         secrets,  inventions,   copyrights,  licenses  and  other  intellectual
         property  rights and similar  rights  necessary  or material for use in
         connection  with their  respective  businesses  as described in the SEC
         Reports and which the failure to so have could have a Material  Adverse
         Effect  (collectively,  the  "INTELLECTUAL  PROPERTY  RIGHTS").  To the
         knowledge of the Company,  all such  Intellectual  Property  Rights are
         enforceable and there is no existing  infringement by another Person of
         any  of  the  Intellectual   Property  Rights.   The  Company  and  its
         Subsidiaries  have taken  reasonable  security  measures to protect the
         secrecy,  confidentiality  and  value  of  all  of  their  intellectual
         properties, except where failure to do so could not, individually or in
         the  aggregate,  reasonably  be  expected  to have a  Material  Adverse
         Effect. None of the Company's registered,  or applied for, Intellectual
         Property Rights have expired or terminated or have been  abandoned,  or
         are expected to expire or terminate or expected to be abandoned  within
         three years of the date of this Agreement. There is no claim, action or
         proceeding  being made or brought,  or to the knowledge of the Company,
         being threatened against the Company or its Subsidiaries  regarding its
         Intellectual   Property  Rights,   except  for  any  claim,  action  or
         proceeding which, if determined  against the Company,  would not have a
         Material Adverse Effect.

                  (p) INSURANCE. The Company and the Subsidiaries are insured by
         insurers of recognized financial responsibility against such losses and
         risks  and  in  such  amounts  as  are  prudent  and  customary  in the
         businesses  in which the  Company  and the  Subsidiaries  are  engaged,
         including,  but  not  limited  to,  directors  and  officers  insurance
         coverage as set forth in SCHEDULE  3.1(p).  Neither the Company nor any
         Subsidiary  has any reason to believe that it will not be able to renew
         its existing insurance coverage as and when such coverage expires or to
         obtain  similar  coverage from similar  insurers as may be necessary to
         continue its business without a significant increase in cost.

                  (q) TRANSACTIONS WITH AFFILIATES AND EMPLOYEES.  Except as set
         forth in the SEC  Reports,  none of the  officers or  directors  of the
         Company and, to the knowledge of the Company,  none of the employees of
         the Company is presently a party to any transaction with the Company or
         any  Subsidiary  (other than for  services as  employees,  officers and
         directors),  including  any  contract,  agreement or other  arrangement
         providing for the furnishing of services to or by, providing for rental
         of real  or  personal  property  to or  from,  or  otherwise  requiring
         payments to or from any officer,  director or such  employee or, to the
         knowledge of the Company, any entity in which any officer, director, or
         any  such  employee  has a  substantial  interest  or  is  an  officer,
         director,  trustee or partner,  in each case in excess of US$60,000 per
         annum  other  than (i) for  payment  of salary or  consulting  fees for
         services rendered, (ii) reimbursement for expenses incurred on behalf

                                       18
<PAGE>

         of the Company and (iii) for other employee  benefits,  including stock
         option agreements under any stock option plan of the Company.

                  (r) CERTAIN FEES.  Except as set forth on SCHEDULE 3.1(r),  no
         brokerage or finder's fees or commissions are or will be payable by the
         Company  to  any  broker,  financial  advisor  or  consultant,  finder,
         placement agent,  investment banker,  bank or other Person with respect
         to the  transactions  contemplated  by the Transaction  Documents.  The
         Purchasers  shall have no  obligation  with respect to any fees or with
         respect to any claims made by or on behalf of other Persons for fees of
         a type  contemplated in this Section that may be due in connection with
         the transactions contemplated by the Transaction Documents.

                  (s) PRIVATE PLACEMENT. Assuming the accuracy of the Purchasers
         representations   and   warranties   set  forth  in  Section   3.2,  no
         registration  under the  Securities  Act is required  for the offer and
         sale of the Securities by the Company to the Purchasers as contemplated
         hereby.  The issuance  and sale of the  Securities  hereunder  does not
         contravene the rules and regulations of the Trading Market.

                  (t)  INVESTMENT  COMPANY.  The  Company is not,  and is not an
         Affiliate  of,  and  immediately  after  receipt  of  payment  for  the
         Securities,  will not be or be an Affiliate of, an "investment company"
         within the meaning of the  Investment  Company Act of 1940, as amended.
         The Company  shall conduct its business in a manner so that it will not
         become subject to the Investment Company Act.

                  (u) LISTING AND MAINTENANCE REQUIREMENTS. The Company's Common
         Stock is registered  pursuant to Section 12(b) or 12(g) of the Exchange
         Act,  and the Company has taken no action  designed to, or which to its
         knowledge is likely to have the effect of, terminating the registration
         of the Common Stock under the Exchange Act nor has the Company received
         any notification that the Commission is contemplating  terminating such
         registration.

                  (v) NO  INTEGRATED  OFFERING.  Assuming  the  accuracy  of the
         Purchasers'  representations  and  warranties set forth in Section 3.2,
         neither the Company,  nor any of its affiliates,  nor any Person acting
         on its or their behalf has, directly or indirectly,  made any offers or
         sales of any  security  or  solicited  any offers to buy any  security,
         under circumstances that would cause this offering of the Securities to
         be integrated  with prior  offerings by the Company for purposes of the
         Securities Act or any applicable shareholder approval provisions of any
         Trading Market on which any of the securities of the Company are listed
         or designated.

                  (w)  TAX   STATUS.   Except  for   matters   that  would  not,
         individually  or in the  aggregate,  have or  reasonably be expected to
         result in a Material  Adverse  Effect,  the Company and each Subsidiary
         has filed all necessary federal, state and foreign income and franchise
         tax returns and has paid or accrued all taxes shown as due thereon, and
         the  Company  has no  knowledge  of a tax  deficiency  which  has  been
         asserted or threatened against the Company or any Subsidiary.

                                       19
<PAGE>

                  (x) NO  GENERAL  SOLICITATION.  Neither  the  Company  nor any
         person  acting on behalf of the  Company has offered or sold any of the
         Securities by any form of general  solicitation or general advertising.
         The Company has offered the  Securities for sale only to the Purchasers
         and certain other "accredited investors" within the meaning of Rule 501
         under the Securities Act.

                  (y) FORM S-3 ELIGIBILITY.  The Company is eligible to register
         the resale of the Underlying Shares for resale by the Purchaser on Form
         S-3 promulgated under the Securities Act.

                  (z) SARBANES-OXLEY;  INTERNAL ACCOUNTING CONTROLS. The Company
         is in material compliance with all provisions of the Sarbanes-Oxley Act
         of 2002 which are applicable to it as of the Closing Date.

                  (aa)  APPLICATION  OF  TAKEOVER  PROTECTIONS.   The  Company's
         certificate  of  incorporation  and by-laws,  copies of which have been
         provided to you,  contain no  provision  relating to any control  share
         acquisition,   business   combination,   poison  pill   (including  any
         distribution  under a rights agreement) or other similar  anti-takeover
         provision.  The Board of Directors has not taken any action in order to
         render   inapplicable   any   control   share   acquisition,   business
         combination,  poison pill  (including any  distribution  under a rights
         agreement) or other similar anti-takeover  provision under the Delaware
         General  Corporation  Law that is or  could  become  applicable  to the
         Purchasers  as a result of the  Purchasers  and the Company  fulfilling
         their  obligations  or  exercising  their rights under the  Transaction
         Documents,  including  without  limitation as a result of the Company's
         issuance  of  the  Securities  and  the  Purchasers'  ownership  of the
         Securities.

                  (bb)  DISCLOSURE.  Except as set forth on SCHEDULE 3.1(bb) and
         with respect to the material terms and  conditions of the  transactions
         contemplated by the Transaction  Documents,  the Company  confirms that
         neither it nor any other  Person  acting on its behalf has provided any
         of the Purchasers or their agents or counsel with any information  that
         it  believes  constitutes  or  might  constitute  material,  non-public
         information.  The Company  understands and confirms that the Purchasers
         will rely on the foregoing  representation in effecting transactions in
         securities of the Company.  All disclosure furnished by or on behalf of
         the Company to the Purchasers  regarding the Company,  its business and
         the  transactions   contemplated   hereby,   including  the  Disclosure
         Schedules  to this  Agreement,  is true  and  correct  in all  material
         respects and does not contain any untrue  statement of a material  fact
         or omit to  state  any  material  fact  necessary  in order to make the
         statements made therein, in light of the circumstances under which they
         were made, not misleading.  The Company acknowledges and agrees that no
         Purchaser  makes or has made any  representations  or  warranties  with
         respect  to the  transactions  contemplated  hereby  other  than  those
         specifically set forth in Section 3.2 hereof.

                  (cc) SOLVENCY.  Except as set forth on SCHEDULE 3.1(cc), based
         on  the  consolidated  financial  condition  of the  Company  as of the
         Closing Date,  after giving effect to the receipt by the Company of the
         proceeds from the sale of the Securities

                                       20
<PAGE>

         hereunder the Company's  assets do not  constitute  unreasonably  small
         capital to carry on its business as now conducted and as proposed to be
         conducted   including   its  capital  needs  taking  into  account  the
         particular  capital  requirements  of  the  business  conducted  by the
         Company,  and projected capital  requirements and capital  availability
         thereof.  Except as set forth on SCHEDULE 3.1(cc), the Company does not
         intend to incur  debts  beyond  its  ability  to pay such debts as they
         mature  (taking  into  account  the  timing  and  amounts of cash to be
         payable on or in respect of its debt).  Except as set forth on SCHEDULE
         3.1(cc),  the Company has no  knowledge  of any facts or  circumstances
         which  lead it to  believe  that it will  file  for  reorganization  or
         liquidation  under  the  bankruptcy  or  reorganization   laws  of  any
         jurisdiction  within one year from the Closing Date.  SCHEDULE  3.1(cc)
         sets forth as of the date hereof all outstanding  secured and unsecured
         Indebtedness of the Company or any Subsidiary, or for which the Company
         or any Subsidiary has commitments.  For the purposes of this Agreement,
         "INDEBTEDNESS"  means (x) any liabilities for borrowed money or amounts
         owed in excess of $50,000 (other than trade accounts  payable  incurred
         in the ordinary course of business),  (y) all guaranties,  endorsements
         and other contingent  obligations in respect of indebtedness of others,
         whether  or not the same are or should be  reflected  in the  Company's
         balance sheet (or the notes thereto),  except guaranties by endorsement
         of  negotiable   instruments  for  deposit  or  collection  or  similar
         transactions  in the ordinary  course of business;  and (z) the present
         value of any  lease  payments  in excess of  $50,000  due under  leases
         required to be capitalized in accordance with GAAP. Neither the Company
         nor any Subsidiary is in default with respect to any Indebtedness.

                  (dd) ACCOUNTANTS.  The Company's  accounting firm is set forth
         on SCHEDULE 3.1(ee) of the Disclosure  Schedules.  To the knowledge and
         belief of the Company, such accounting firm: (i) is a registered public
         accounting  firm as required by the Exchange Act and (ii) has expressed
         its opinion with respect to the financial  statements to be included in
         the Company's Annual Report for the year ended March 31, 2008.

                  (ee) SENIORITY. As of the Closing Date, except as set forth on
         SCHEDULE 3.1(ee), no Indebtedness or other claim against the Company is
         senior to the Preferred Stock in right of payment, whether with respect
         to interest or upon  liquidation or  dissolution,  or otherwise,  other
         than indebtedness  secured by purchase money security  interests (which
         is senior only as to  underlying  assets  covered  thereby) and capital
         lease  obligations  (which is senior  only as to the  property  covered
         thereby).

                  (ff) NO DISAGREEMENTS WITH ACCOUNTANTS AND LAWYERS.  There are
         no  disagreements  of  any  kind  presently  existing,   or  reasonably
         anticipated  by the  Company  to arise,  between  the  Company  and the
         accountants and lawyers  formerly or presently  employed by the Company
         and,  except as set forth on SCHEDULE  3.1(ff),  the Company is current
         with  respect to any fees owed to its  accountants  and  lawyers  which
         could affect the  Company's  ability to perform any of its  obligations
         under any of the Transaction Documents.

                  (gg)   ACKNOWLEDGMENT   REGARDING   PURCHASERS'   PURCHASE  OF
         SECURITIES.  The  Company  acknowledges  and  agrees  that  each of the
         Purchasers is acting solely in the

                                       21
<PAGE>

         capacity of an arm's length  purchaser with respect to the  Transaction
         Documents  and  the  transactions  contemplated  thereby.  The  Company
         further acknowledges that no Purchaser is acting as a financial advisor
         or fiduciary of the Company (or in any similar  capacity)  with respect
         to the Transaction Documents and the transactions  contemplated thereby
         and any  advice  given  by any  Purchaser  or any of  their  respective
         representatives or agents in connection with the Transaction  Documents
         and the transactions  contemplated  thereby is merely incidental to the
         Purchasers' purchase of the Securities.  The Company further represents
         to each  Purchaser  that the  Company's  decision  to enter  into  this
         Agreement and the other Transaction  Documents has been based solely on
         the independent  evaluation of the transactions  contemplated hereby by
         the Company and its representatives.

                  (hh)  ACKNOWLEDGMENT  REGARDING  PURCHASERS' TRADING ACTIVITY.
         Notwithstanding  anything in this Agreement or elsewhere  herein to the
         contrary (except for Sections 3.2(f) and 4.16 hereof), it is understood
         and  acknowledged  by the Company that:  (i) none of the Purchasers has
         been asked to agree by the Company,  nor has any Purchaser  agreed,  to
         desist from purchasing or selling, long and/or short, securities of the
         Company,  or "derivative"  securities based on securities issued by the
         Company or to hold the Securities for any specified  term, (ii) past or
         future open market or other transactions by any Purchaser, specifically
         including,    without   limitation,   Short   Sales   or   "derivative"
         transactions,  before or after the  closing  of this or future  private
         placement  transactions,  may negatively impact the market price of the
         Company's   publicly-traded   securities,   (iii)  any  Purchaser,  and
         counter-parties   in  "derivative"   transactions  to  which  any  such
         Purchaser is a party,  directly or  indirectly,  may  presently  have a
         "short"  position in the Common Stock and (iv) each Purchaser shall not
         be deemed to have any affiliation with or control over any arm's length
         counter-party  in any  "derivative"  transaction.  The Company  further
         understands and acknowledges that (y) one or more Purchasers may engage
         in hedging  activities  at  various  times  during the period  that the
         Securities are outstanding,  including, without limitation,  during the
         periods  that  the  value of the  Underlying  Shares  deliverable  with
         respect  to  Securities  are  being  determined,  and (z) such  hedging
         activities   (if  any)  could   reduce   the  value  of  the   existing
         stockholders'  equity  interests  in the  Company at and after the time
         that  the  hedging   activities  are  being   conducted.   The  Company
         acknowledges  that  such  aforementioned   hedging  activities  do  not
         constitute a breach of any of the Transaction Documents.

                  (ii) REGULATION M COMPLIANCE.  The Company has not, and to its
         knowledge  no one acting on its behalf  has,  (i)  taken,  directly  or
         indirectly,   any  action  designed  to  cause  or  to  result  in  the
         stabilization  or  manipulation  of the  price of any  security  of the
         Company to facilitate the sale or resale of any of the Securities, (ii)
         sold,  bid for,  purchased,  or paid any  compensation  for  soliciting
         purchases of, any of the Securities,  or (iii) paid or agreed to pay to
         any Person any  compensation  for  soliciting  another to purchase  any
         other  securities  of the Company,  other than,  in the case of clauses
         (ii) and (iii),  compensation paid to the Company's  placement agent in
         connection with the placement of the Securities.

                                       22
<PAGE>

                  (jj) FDA. For purposes of this SECTION 3.1(JJ), Pharmaceutical
         Product shall mean each product subject to the jurisdiction of the U.S.
         Food and Drug  Administration  ("FDA") under the Federal Food, Drug and
         Cosmetic Act, as amended, and the regulations  thereunder ("FDCA") that
         is manufactured,  packaged, labeled, tested, distributed,  sold, and/or
         marketed by the Company or any of its  Subsidiaries.  As of the Closing
         Date,  neither  the  Company  nor  any of its  Subsidiaries,  packages,
         labels,  tests,  distributes,  sells and/or markets any  Pharmaceutical
         Product.  As of the Closing Date,  the Company has two  Pharmaceuticals
         Products which it  manufactures  and such  Pharmaceutical  Products are
         being  manufactured  by the Company in compliance  with all  applicable
         requirements  under  FDCA  and  similar  laws,  rules  and  regulations
         relating to registration,  investigational  use,  premarket  clearance,
         licensure, or application approval, good manufacturing practices,  good
         laboratory practices, good clinical practices, product listing, quotas,
         labeling,  advertising,  record  keeping and filing of reports,  except
         where the failure to be in compliance would not have a Material Adverse
         Effect. There is no pending,  completed or, to the Company's knowledge,
         threatened,  action  (including any lawsuit,  arbitration,  or legal or
         administrative  or  regulatory  proceeding,   charge,   complaint,   or
         investigation) against the Company or any of its Subsidiaries, and none
         of the  Company or any of its  Subsidiaries  has  received  any notice,
         warning  letter  or  other  communication  from  the  FDA or any  other
         governmental  entity,  which  (i)  contests  the  premarket  clearance,
         licensure,  registration, or approval of, the uses of, the distribution
         of, the  manufacturing or packaging of, the testing of, the sale of, or
         the  labeling  and  promotion  of  any  Pharmaceutical   Product,  (ii)
         withdraws its approval of, requests the recall,  suspension, or seizure
         of, or  withdraws  or orders the  withdrawal  of  advertising  or sales
         promotional  materials relating to, any Pharmaceutical  Product,  (iii)
         imposes a clinical hold on any clinical investigation by the Company or
         any of its Subsidiaries, (iv) enjoins production at any facility of the
         Company or any of its  Subsidiaries,  (v) enters or  proposes  to enter
         into a consent decree of permanent  injunction  with the Company or any
         of its  Subsidiaries,  or (vi)  otherwise  alleges any violation of any
         laws,  rules or regulations by the Company or any of its  Subsidiaries,
         and  which,  either  individually  or in the  aggregate,  would  have a
         Material Adverse Effect. The properties, business and operations of the
         Company have been and are being  conducted in all material  respects in
         accordance with all applicable  laws, rules and regulations of the FDA.
         The Company has not been informed by the FDA that the FDA will prohibit
         the marketing, sale, license or use in the United States of any product
         proposed to be developed, produced or marketed by the Company.

                  (kk) STOCK  OPTION  PLANS.  Each stock  option  granted by the
         Company  under the  Company's  stock  option  plan was  granted  (i) in
         accordance  with the terms of the Company's  stock option plan and (ii)
         with an exercise  price at least equal to the fair market  value of the
         Common Stock on the date such stock option would be considered  granted
         under  GAAP and  applicable  law.  No stock  option  granted  under the
         Company's  stock  option plan has been  backdated.  The Company has not
         knowingly  granted,  and there is no and has been no Company  policy or
         practice to  knowingly  grant,  stock  options  prior to, or  otherwise
         knowingly  coordinate  the grant of stock options with,  the release or
         other public announcement of material information regarding the Company
         or its Subsidiaries or their financial results or prospects.

                                       23
<PAGE>

         3.2  REPRESENTATIONS  AND WARRANTIES OF THE PURCHASERS.  Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows:

                  (a) ORGANIZATION;  AUTHORITY. Such Purchaser, if an entity, is
         duly organized, validly existing and in good standing under the laws of
         the  jurisdiction  of its  organization  with full right,  corporate or
         partnership  power and  authority to enter into and to  consummate  the
         transactions contemplated by the Transaction Documents and otherwise to
         carry out its obligations hereunder and thereunder.  Such Purchaser, if
         an  individual,  has legal  capacity  and  authority  to enter into and
         consummate the transactions  contemplated by the Transaction  Documents
         and  otherwise  to  carry  out  his or her  obligations  hereunder  and
         thereunder.  The execution,  delivery and performance by such Purchaser
         of the  transactions  contemplated  by this  Agreement  have  been duly
         authorized by all necessary  corporate or similar action on the part of
         such Purchaser.  Each  Transaction  Document to which it is a party has
         been  duly  executed  by such  Purchaser,  and when  delivered  by such
         Purchaser in accordance  with the terms  hereof,  will  constitute  the
         valid and legally  binding  obligation of such  Purchaser,  enforceable
         against  it in  accordance  with its  terms,  except  (i) as limited by
         general  equitable  principles and applicable  bankruptcy,  insolvency,
         reorganization,  moratorium  and  other  laws  of  general  application
         affecting  enforcement of creditors' rights generally,  (ii) as limited
         by  laws  relating  to  the   availability  of  specific   performance,
         injunctive  relief or other  equitable  remedies  and (iii)  insofar as
         indemnification   and   contribution   provisions  may  be  limited  by
         applicable law.

                  (b)  OWN  ACCOUNT.   Such  Purchaser   understands   that  the
         Securities are  "restricted  securities"  and have not been  registered
         under the Securities Act or any applicable  state securities law and is
         acquiring the  Securities as principal for its own account and not with
         a view to or for  distributing or reselling such Securities or any part
         thereof in  violation of the  Securities  Act or any  applicable  state
         securities law, has no present  intention of  distributing  any of such
         Securities in violation of the Securities  Act or any applicable  state
         securities   law  and  has  no  direct  or  indirect   arrangement   or
         understandings  with any other  persons to  distribute or regarding the
         distribution of such Securities (this  representation  and warranty not
         limiting such Purchaser's right to sell the Securities  pursuant to the
         Registration  Statement  or  otherwise in  compliance  with  applicable
         federal and state  securities  laws) in violation of the Securities Act
         or any applicable state securities law. Such Purchaser is acquiring the
         Securities hereunder in the ordinary course of its business.

                  (c) PURCHASER  STATUS.  At the time such Purchaser was offered
         the Securities,  it was, and at the date hereof it is, and on each date
         on which  it  converts  any  shares  of  Series  D  Preferred  Stock or
         exercises any Warrants, it will be either: (i) an "accredited investor"
         as defined in Rule 501(a)(1),  (a)(2),  (a)(3),  (a)(7) or (a)(8) under
         the Securities Act or (ii) a "qualified institutional buyer" as defined
         in Rule  144A(a)  under  the  Securities  Act.  Such  Purchaser  is not
         required to be  registered as a  broker-dealer  under Section 15 of the
         Exchange Act.

                                       24
<PAGE>

                  (d) EXPERIENCE OF SUCH PURCHASER. Such Purchaser, either alone
         or   together   with   its   representatives,   has   such   knowledge,
         sophistication  and experience in business and financial  matters so as
         to be capable  of  evaluating  the merits and risks of the  prospective
         investment in the Securities, and has so evaluated the merits and risks
         of such investment. Such Purchaser is able to bear the economic risk of
         an  investment in the  Securities  and, at the present time, is able to
         afford a complete  loss of such  investment.  Such  Purchaser  has been
         given the  opportunity  to ask questions of, and receive  answers from,
         the Company  concerning  the terms and  conditions  of the offer of the
         Securities and other matters pertaining to such investment.

                  (e) GENERAL SOLICITATION.  To the Purchaser's knowledge,  such
         Purchaser  is  not  purchasing  the  Securities  as  a  result  of  any
         advertisement,  article,  notice or other  communication  regarding the
         Securities  published in any  newspaper,  magazine or similar  media or
         broadcast  over  television or radio or presented at any seminar or any
         other general solicitation or general advertisement.

                  (f) SHORT SALES AND CONFIDENTIALITY  PRIOR TO THE DATE HEREOF.
         Other than the transaction  contemplated hereunder,  such Purchaser has
         not directly or  indirectly,  nor has any Person acting on behalf of or
         pursuant  to  any  understanding  with  such  Purchaser,  executed  any
         disposition,  including  Short Sales,  in the securities of the Company
         during the period  commencing  from the time that such Purchaser  first
         received a term sheet  (written  or oral) from the Company or any other
         Person   setting   forth  the  material   terms  of  the   transactions
         contemplated hereunder until such time as the transactions contemplated
         by this Agreement are publicly disclosed by the Company as described in
         Section 4.5 ("DISCUSSION TIME").  Notwithstanding the foregoing, in the
         case of a Purchaser that is a multi-managed  investment vehicle whereby
         separate   portfolio   managers  manage   separate   portions  of  such
         Purchaser's  assets and the portfolio managers have no direct knowledge
         of the  investment  decisions made by the portfolio  managers  managing
         other portions of such Purchaser's assets, the representation set forth
         above shall only apply with respect to the portion of assets managed by
         the portfolio manager that made the investment decision to purchase the
         Securities covered by this Agreement. Other than to other Persons party
         to this Agreement, such Purchaser has maintained the confidentiality of
         all  disclosures  made  to  it  in  connection  with  this  transaction
         (including the existence and terms of this transaction).

                                   ARTICLE IV
                         OTHER AGREEMENTS OF THE PARTIES

         4.1 TRANSFER RESTRICTIONS.

                  (a) The Securities may only be disposed of in compliance  with
         state and federal  securities  laws. In connection with any transfer of
         Securities other than pursuant to an effective  registration  statement
         or Rule 144, to the  Company or to an  Affiliate  of a Purchaser  or in
         connection with a pledge as contemplated in Section 4.1(b), the Company
         may require the transferor thereof to provide to the Company an opinion
         of counsel selected by the transferor and reasonably  acceptable to the
         Company, the form and

                                       25
<PAGE>

         substance of which  opinion  shall be  reasonably  satisfactory  to the
         Company, to the effect that such transfer does not require registration
         of such transferred Securities under the Securities Act. As a condition
         of transfer,  any such transferee shall agree in writing to be bound by
         the terms of this  Agreement  and shall have the rights of a  Purchaser
         under this Agreement.

                  (b) The  Purchasers  agree  to the  imprinting,  so long as is
         required by this Section  4.1(b),  of a legend on any of the Securities
         in the following form:

                  [NEITHER]  THESE  SECURITIES  [NOR THE  SECURITIES  INTO WHICH
                  THESE SECURITIES ARE  [EXERCISABLE]  [CONVERTIBLE]]  HAVE BEEN
                  REGISTERED WITH THE SECURITIES AND EXCHANGE  COMMISSION OR THE
                  SECURITIES  COMMISSION  OF  ANY  STATE  IN  RELIANCE  UPON  AN
                  EXEMPTION FROM REGISTRATION  UNDER THE SECURITIES ACT OF 1933,
                  AS AMENDED (THE "SECURITIES ACT"), AND,  ACCORDINGLY,  MAY NOT
                  BE  OFFERED  OR  SOLD   EXCEPT   PURSUANT   TO  AN   EFFECTIVE
                  REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
                  AN AVAILABLE  EXEMPTION  FROM, OR IN A TRANSACTION NOT SUBJECT
                  TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
                  ACCORDANCE WITH APPLICABLE  STATE SECURITIES LAWS AS EVIDENCED
                  BY A  LEGAL  OPINION  OF  COUNSEL  TO THE  TRANSFEROR  TO SUCH
                  EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY  ACCEPTABLE
                  TO THE COMPANY.  THESE SECURITIES AND THE SECURITIES  ISSUABLE
                  UPON  [EXERCISE]  [CONVERSION]  OF  THESE  SECURITIES  MAY  BE
                  PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
                  LOAN SECURED BY SUCH SECURITIES.

                  The Company  acknowledges and agrees that a Purchaser may from
         time to time pledge  pursuant to a bona fide  margin  agreement  with a
         registered broker-dealer or grant a security interest in some or all of
         the  Securities  to a  financial  institution  that  is an  "accredited
         investor"  as defined in Rule 501(a) under the  Securities  Act and who
         agrees to be bound by the provisions of this Agreement and, if required
         under  the  terms of such  arrangement,  such  Purchaser  may  transfer
         pledged or secured Securities to the pledgees or secured parties.  Such
         a pledge or  transfer  would not be subject to  approval of the Company
         and no legal opinion of legal counsel of the pledgee,  secured party or
         pledgor shall be required in connection  therewith.  Further, no notice
         shall  be  required  of such  pledge.  At the  appropriate  Purchaser's
         expense,   the  Company  will  execute  and  deliver  such   reasonable
         documentation   as  a  pledgee  or  secured  party  of  Securities  may
         reasonably  request  in  connection  with a pledge or  transfer  of the
         Securities.

                  (c)  Certificates  evidencing the Underlying  Shares shall not
         contain any legend  (including  the legend set forth in Section  4.1(b)
         hereof): (i) while a registration statement (including the Registration
         Statement)  covering the resale of such security is effective under the
         Securities  Act, or (ii) following any sale of such  Underlying  Shares
         pursuant to Rule 144, or (iii) if such  Underlying  Shares are eligible
         for sale under Rule 144, without

                                       26
<PAGE>

         the  requirement  for the Company to be in compliance  with the current
         public information required under Rule 144 as to such Underlying Shares
         and  without  volume or  manner-of-sale  restrictions,  or (iv) if such
         legend is not required under applicable  requirements of the Securities
         Act (including judicial  interpretations  and pronouncements  issued by
         the staff of the  Commission).  The Company  shall cause its counsel to
         issue a legal opinion to the Company's  transfer  agent  promptly after
         the  Effective  Date if required  by the  Company's  transfer  agent to
         effect the  removal of the  legend  hereunder.  If all or any shares of
         Series D Preferred  Stock or any portion of a Warrant is  converted  or
         exercised  (as  applicable)  at a  time  when  there  is  an  effective
         registration statement to cover the resale of the Underlying Shares, or
         if such  Underlying  Shares  may be sold  under  Rule 144  without  the
         requirement for the Company to be in compliance with the current public
         information  required under Rule 144 as to such  Underlying  Shares and
         without volume or manner-of-sale  restrictions or if such legend is not
         otherwise required under applicable  requirements of the Securities Act
         (including judicial  interpretations  and pronouncements  issued by the
         staff of the Commission)  then such  Underlying  Shares shall be issued
         free of all legends.  The Company  agrees that  following the Effective
         Date or at such time as such  legend is no longer  required  under this
         Section 4.1(c), it will, no later than three Trading Days following the
         delivery by a Purchaser to the Company or the Company's  transfer agent
         of a certificate representing Underlying Shares, as applicable,  issued
         with a restrictive  legend (such third Trading Day, the "LEGEND REMOVAL
         DATE"),   deliver  or  cause  to  be  delivered  to  such  Purchaser  a
         certificate  representing such shares that is free from all restrictive
         and other legends. The Company may not make any notation on its records
         or give  instructions to any transfer agent of the Company that enlarge
         the  restrictions  on transfer set forth in this Section.  Certificates
         for  Underlying  Shares subject to legend  removal  hereunder  shall be
         transmitted  by the transfer  agent of the Company to the Purchasers by
         crediting  the  account  of  the  Purchaser's  prime  broker  with  the
         Depository Trust Company System.

                  (d) Each  Purchaser,  severally and not jointly with the other
         Purchasers,  agrees  that the  removal of the  restrictive  legend from
         certificates  representing  Securities as set forth in this Section 4.1
         is predicated upon the Company's  reliance that the Purchaser will sell
         any Securities pursuant to either the registration  requirements of the
         Securities   Act,   including  any   applicable   prospectus   delivery
         requirements,  or an exemption  therefrom,  and that if Securities  are
         sold  pursuant  to a  Registration  Statement,  they  will  be  sold in
         compliance with the plan of distribution set forth therein.

         4.2 FURNISHING OF INFORMATION.

                  (a) Until the earliest of the time that (i) no Purchaser  owns
         Securities or (ii) the Warrants have expired,  the Company covenants to
         maintain the  registration  of the Common Stock under  Section 12(b) or
         12(g) of the Exchange Act and to timely file (or obtain  extensions  in
         respect  thereof  and file  within the  applicable  grace  period)  all
         reports  required  to be filed by the  Company  after  the date  hereof
         pursuant to the Exchange Act. As long as any Purchaser owns Securities,
         if the Company is not required to file reports pursuant to the Exchange
         Act, it will prepare and furnish to the  Purchasers  and make  publicly
         available  in  accordance  with  Rule  144(c)  such  information  as is
         required for the

                                       27
<PAGE>

         Purchasers to sell the Securities  under Rule 144. The Company  further
         covenants  that it will  take  such  further  action  as any  holder of
         Securities may reasonably  request, to the extent required from time to
         time to enable such Person to sell such Securities without registration
         under the  Securities  Act within  the  requirements  of the  exemption
         provided by Rule 144.

                  (b) At any time during the period  commencing from the six (6)
         month  anniversary  of the date hereof and ending at such time that all
         of the Securities may be sold without the  requirement  for the Company
         to  be  in  compliance  with  Rule  144(c)(1)  and  otherwise   without
         restriction  or  limitation  pursuant to Rule 144, if the Company shall
         fail  for  any  reason  to  satisfy  the  current  public   information
         requirement under Rule 144(c) (a "PUBLIC INFORMATION FAILURE") then, in
         addition to such  Purchaser's  other  available  remedies,  the Company
         shall pay to a Purchaser,  in cash, as partial  liquidated  damages and
         not as a penalty,  by reason of any such delay in or  reduction  of its
         ability to sell the Securities,  an amount in cash equal to two percent
         (2.0%)  of  the  aggregate  Subscription  Amount  of  such  Purchaser's
         Securities  on the day of a  Public  Information  Failure  and on every
         thirtieth  (30th) day (pro rated for periods  totaling less than thirty
         days)  thereafter  until  the  earlier  of (a)  the  date  such  Public
         Information  Failure  is  cured  and (b) such  time  that  such  public
         information  is no longer  required for the  Purchasers to transfer the
         Underlying  Shares  pursuant  to Rule  144.  The  payments  to  which a
         Purchaser  shall  be  entitled  pursuant  to this  Section  4.3(b)  are
         referred to herein as "PUBLIC  INFORMATION  FAILURE  PAYMENTS."  Public
         Information  Failure  Payments  shall be paid on the earlier of (i) the
         last day of the calendar  month  during  which such Public  Information
         Failure  Payments are  incurred  and (ii) the third (3rd)  Business Day
         after  the  event or  failure  giving  rise to the  Public  Information
         Failure  Payments  is cured.  In the event  the  Company  fails to make
         Public  Information  Failure  Payments in a timely manner,  such Public
         Information  Failure  Payments  shall bear interest at the rate of 1.5%
         per month (prorated for partial months) until paid in full. The Company
         and each Purchaser agree that the maximum aggregate Public  Information
         Failure Payments payable to a Purchaser under this Section 4.2(b) shall
         be 15%  of the  aggregate  Subscription  Amount  paid  by  such  Holder
         pursuant to the  Purchase  Agreement.  Nothing  herein shall limit such
         Purchaser's  right to pursue actual damages for the Public  Information
         Failure, and such Purchaser shall have the right to pursue all remedies
         available to it at law or in equity including,  without  limitation,  a
         decree of specific performance and/or injunctive relief.

                  (c) The Company agrees to send the following to each Purchaser
         for  long so long  as  there  is an  effective  Registration  Statement
         covering the Underlying Shares, unless the following are filed with the
         SEC through the EDGAR system and are  available  to the public  through
         the EGDAR system  within one (1) Business Day after the filing  thereof
         with the SEC,  (i) a copy of its Annual and  Quarterly  Reports on Form
         10-K,  10-KSB,  10-Q or 10-QSB,  any interim report or any consolidated
         balance sheets,  income  statements,  stockholders'  equity  statements
         and/or  cash flow  statements  for any period  other than  annual,  any
         Current Reports on Form 8-K and any registration statements (other than
         Form S-8) or amendments  filed pursuant to the 1933 Act, (ii) all press
         releases  issued by the Company or any of its  Subsidiaries,  and (iii)
         copies of any notices

                                       28
<PAGE>

         and  other information made  available  or given to the stockholders of
         the Company generally.

         4.3 INTEGRATION.  The Company shall not sell, offer for sale or solicit
offers to buy or  otherwise  negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the  Securities  in a manner that would  require the  registration  under the
Securities  Act of the sale of the Securities to the Purchasers or that would be
integrated  with the offer or sale of the  Securities  for purposes of the rules
and regulations of any Trading Market.

         4.4 CONVERSION AND EXERCISE PROCEDURES.  The form of Notice of Exercise
included in the  Warrants and the form of Notice of  Conversion  included in the
Certificate of Designation set forth the totality of the procedures  required of
the  Purchasers  in order to  exercise  the  Warrants  or  convert  the Series D
Preferred   Stock.  No  additional   legal  opinion  or  other   information  or
instructions  shall be required of the  Purchasers to exercise their Warrants or
convert their Series D Preferred Stock. The Company shall honor exercises of the
Warrants  and  conversions  of the Series D  Preferred  Stock and shall  deliver
Underlying Shares in accordance with the terms,  conditions and time periods set
forth in the Transaction Documents.

         4.5 SECURITIES LAWS DISCLOSURE;  PUBLICITY. The Company shall, no later
than  twenty-four  hours  immediately  following the date hereof,  issue a press
release describing the material terms of the transactions  contemplated  hereby,
and a  Current  Report  on  Form  8-K  disclosing  the  material  terms  of  the
transactions  contemplated  hereby,  and shall attach the Transaction  Documents
thereto.  The Company  shall provide the  Purchasers  with a draft of such press
release prior to filing and provide an opportunity for comments.  Each Purchaser
shall consult with the Company prior to issuing any press  releases with respect
to the transactions  contemplated  hereby, and no Purchaser shall issue any such
press  release or  otherwise  make any such public  statement  without the prior
consent of the Company,  which  consent  shall not  unreasonably  be withheld or
delayed,  except  if such  disclosure  is  required  by law,  in which  case the
disclosing  party shall  promptly  provide the other party with prior  notice of
such public  statement or  communication.  Notwithstanding  the  foregoing,  the
Company shall not publicly  disclose the name of any  Purchaser,  or include the
name of any Purchaser in any filing with the Commission or any regulatory agency
or Trading Market,  without the prior written consent of such Purchaser,  except
(i) as required by federal securities law in connection with the filing of final
Transaction  Documents  (including  signature pages thereto) with the Commission
and (ii) to the extent such  disclosure  is  required  by law or Trading  Market
regulations,  in which case the Company shall provide the Purchasers  with prior
notice of such disclosure permitted under this subclause (ii).

         4.6  SHAREHOLDER  RIGHTS PLAN. No claim will be made or enforced by the
Company  or,  with the  consent  of the  Company,  any  other  Person,  that any
Purchaser is an "ACQUIRING PERSON" under any control share acquisition, business
combination,  poison pill (including any distribution  under a rights agreement)
or similar  anti-takeover  plan or arrangement in effect or hereafter adopted by
the Company,  or that any Purchaser could be deemed to trigger the provisions of
any such  plan or  arrangement,  by  virtue of  receiving  Securities  under the
Transaction Documents.

                                       29
<PAGE>

         4.7 NON-PUBLIC  INFORMATION.  Except with respect to the material terms
and conditions of the  transactions  contemplated by the Transaction  Documents,
the Company covenants and agrees that neither it, nor any other Person acting on
its  behalf,  will  provide  any  Purchaser  or its agents or  counsel  with any
information  that  the  Company   believes   constitutes   material   non-public
information,  unless prior thereto such Purchaser  shall have executed a written
agreement regarding the confidentiality and use of such information. The Company
understands  and confirms that each Purchaser  shall be relying on the foregoing
covenant in effecting transactions in securities of the Company.

         4.8 USE OF PROCEEDS.  The Company  shall use the net proceeds  from the
sale of the Securities  hereunder to fund  continuing  research and  development
activities  on its lead  pain  products  and for  working  capital  and  general
corporate  purposes and not for the satisfaction of any portion of the Company's
debt  (other  than  payment  of trade  payables  in the  ordinary  course of the
Company's business and prior practices),  to redeem Common Stock or Common Stock
Equivalents or to settle any outstanding litigation.

         4.9  INDEMNIFICATION  OF PURCHASERS.  Subject to the provisions of this
Section  4.9,  the  Company  will  indemnify  and hold  each  Purchaser  and its
directors, officers, shareholders,  members, partners, employees and agents (and
any other Persons with a functionally  equivalent  role of a Person holding such
titles notwithstanding a lack of such title or any other title), each Person who
controls such Purchaser  (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers,  shareholders,
agents,   members,   partners  or  employees  (and  any  other  Persons  with  a
functionally  equivalent role of a Person holding such titles  notwithstanding a
lack of such title or any other  title) of such  controlling  persons  (each,  a
"PURCHASER PARTY") harmless from any and all losses,  liabilities,  obligations,
claims,  contingencies,  damages,  costs and expenses,  including all judgments,
amounts paid in  settlements,  court costs and  reasonable  attorneys'  fees and
costs of  investigation  that any such Purchaser  Party may suffer or incur as a
result of or relating to any breach of any of the  representations,  warranties,
covenants or  agreements  made by the Company in this  Agreement or in the other
Transaction  Documents.  If any action  shall be brought  against any  Purchaser
Party in respect of which  indemnity may be sought  pursuant to this  Agreement,
such  Purchaser  Party shall  promptly  notify the  Company in writing,  and the
Company  shall have the right to assume the defense  thereof with counsel of its
own choosing  reasonably  acceptable to the Purchaser Party. Any Purchaser Party
shall  have  the  right to  employ  separate  counsel  in any  such  action  and
participate  in the defense  thereof,  but the fees and expenses of such counsel
shall be at the expense of such  Purchaser  Party  except to the extent that (i)
the  employment  thereof  has been  specifically  authorized  by the  Company in
writing, (ii) the Company has failed after a reasonable period of time to assume
such  defense  and to employ  counsel or (iii) in such  action  there is, in the
reasonable opinion of such separate counsel, a material conflict on any material
issue  between the  position of the Company and the  position of such  Purchaser
Party,  in which case the Company shall be responsible  for the reasonable  fees
and expenses of no more than one such separate counsel.  The Company will not be
liable to any Purchaser  Party under this  Agreement (y) for any settlement by a
Purchaser  Party effected  without the Company's  prior written  consent,  which
shall not be unreasonably withheld or delayed; or (z) to the extent, but only to
the extent  that a loss,  claim,  damage or  liability  is  attributable  to any
Purchaser Party's breach of any of the representations, warranties, covenants or
agreements made by such Purchaser Party in this

                                       30
<PAGE>

         Agreement or in the other Transaction Documents.

         4.10 RESERVATION AND LISTING OF SECURITIES.

                  (a) Prior to the  Authorized  Share Approval Date, the Company
         shall  maintain  a reserve  from its duly  authorized  shares of Common
         Stock for issuance  pursuant to the Transaction  Documents in an amount
         equal to  87,059,562,  subject to reverse and forward  stock splits and
         the like.  On the business day  immediately  following  the  Authorized
         Share Approval Date, the Company shall maintain a reserve from its duly
         authorized  shares  of  Common  Stock  for  issuance  pursuant  to  the
         Transaction  Documents in such amount as may be required to fulfill its
         obligations in full under the Transaction Documents.

                  (b) If, after the Authorized Share Approval Date, on any date,
         the number of authorized but unissued (and otherwise unreserved) shares
         of Common  Stock is less than 110% of (i) the  Actual  Minimum  on such
         date, minus (ii) the number of shares of Common Stock previously issued
         pursuant  to the  Transaction  Documents,  then the Board of  Directors
         shall  use  commercially  reasonable  efforts  to amend  the  Company's
         certificate  or articles  of  incorporation  to increase  the number of
         authorized  but unissued  shares of Common Stock to at least the Actual
         Minimum  at such time  (minus  the  number  of  shares of Common  Stock
         previously  issued pursuant to the Transaction  Documents),  as soon as
         possible  and in any event not later than the 75th day after such date;
         provided that the Company will not be required at any time to authorize
         a number of shares of Common Stock  greater than the maximum  remaining
         number of shares of Common  Stock that could  possibly be issued  after
         such time pursuant to the Transaction Documents.

                  (c) The  Company  shall,  if  applicable:  (i) in the time and
         manner required by the principal Trading Market,  prepare and file with
         such Trading Market an additional shares listing application covering a
         number of shares of Common  Stock at least equal to the Actual  Minimum
         on the date of such application, (ii) take all steps necessary to cause
         such shares of Common  Stock to be approved for listing on such Trading
         Market as soon as possible thereafter,  (iii) provide to the Purchasers
         evidence of such listing,  and (iv) maintain the listing of such Common
         Stock on any date at least equal to the Actual  Minimum on such date on
         such Trading Market or another Trading Market.

                  (d) In addition,  the Company shall hold a special  meeting of
         shareholders  (which may also be at the annual meeting of shareholders)
         on or before January 31, 2009 for the purpose of obtaining  Shareholder
         Approval and Authorized Share Approval,  with the recommendation of the
         Board of Directors  that such  proposals  be approved,  and the Company
         shall solicit proxies from its shareholders in connection  therewith in
         the  same  manner  as all  other  management  proposals  in such  proxy
         statement and all  management-appointed  proxyholders  shall vote their
         proxies  in favor of such  proposals.  If the  Company  does not obtain
         Shareholder  Approval  and  Authorized  Share  Approval  at  the  first
         meeting,  the Company shall call a meeting every four months thereafter
         to seek both  Shareholder  Approval and Authorized Share Approval until
         the  earlier  of the date that

                                       31
<PAGE>

         both the  Shareholder  Approval  and the Authorized  Share Approval are
         obtained  or the  Series D Preferred  Stock  and Warrants are no longer
         outstanding.

         4.11 PARTICIPATION IN FUTURE FINANCING.

                  (a) From the date  hereof  until  the date  that the  Series D
         Preferred  Stock is no longer  outstanding,  upon any  issuance  by the
         Company  or any of its  Subsidiaries  of Common  Stock or Common  Stock
         Equivalents (a "SUBSEQUENT  FINANCING"),  each Purchaser shall have the
         right to purchase up to an amount of the Subsequent  Financing equal to
         its PRO RATA  share of the  Common  Stock or Common  Stock  Equivalents
         multiplied by the gross aggregate  amount of the Subsequent  Financing,
         on the same terms,  conditions and price provided for in the Subsequent
         Financing. Each Purchaser's PRO RATA share is equal to the ratio of (a)
         the  number of shares of the  Company's  Common  Stock  (including  all
         shares of Common Stock issued or issuable upon conversion of the Series
         D  Preferred   Stock  and  Existing   Preferred   Stock  (ignoring  any
         limitations  therein for such purposes)  which such Purchaser is deemed
         to hold  immediately  prior to the  issuance  of such  Common  Stock or
         Common  Stock  Equivalents  to (b) the  total  number  of shares of the
         Company's  outstanding  Common  Stock  (including  all shares of Common
         Stock  issued or  issuable  upon  conversion  of the Series D Preferred
         Stock and Existing  Preferred Stock,  ignoring any limitations  therein
         for such  purposes)  immediately  prior to the  issuance  of the Common
         Stock or Common Stock Equivalents.

                  (b) At  least 5  Trading  Days  prior  to the  closing  of the
         Subsequent  Financing,  the Company shall  deliver to each  Purchaser a
         written  notice  of its  intention  to  effect a  Subsequent  Financing
         ("PRE-NOTICE"),  which  Pre-Notice shall ask such Purchaser if it wants
         to review the details of such  financing  (such  additional  notice,  a
         "SUBSEQUENT  FINANCING NOTICE").  Upon the request of a Purchaser,  and
         only upon a  request  by such  Purchaser,  for a  Subsequent  Financing
         Notice,  the Company shall  promptly,  but no later than 2 Trading Days
         after  such  request,  deliver a  Subsequent  Financing  Notice to such
         Purchaser. The Subsequent Financing Notice shall describe in reasonable
         detail the proposed terms of such Subsequent  Financing,  the amount of
         proceeds  intended  to be raised  thereunder,  the  Person  or  Persons
         through  or with whom  such  Subsequent  Financing  is  proposed  to be
         effected,  and  attached  to  which  shall be a term  sheet or  similar
         document  relating  thereto.  If requested by a Purchaser,  the Company
         shall  provide  a copy of the  then  current  drafts  of the  documents
         relating to such Subsequent  Financing.  This Section 4.11(b) shall not
         restrict  or limit the  ability of the  Company to provide  information
         regarding a Subsequent Financing if such delivery is in connection with
         the  solicitation  of consents or waivers  relating to such  Subsequent
         Financing.

                  (c) Any Purchaser  desiring to participate in such  Subsequent
         Financing must provide  written notice to the Company by not later than
         5:30 p.m.  (New York City time) on the 5th Trading Day after all of the
         Purchasers  have received the Pre-Notice  that the Purchaser is willing
         to  purchase  its PRO RATA  share of the Common  Stock or Common  Stock
         Equivalents  for the price and upon the terms and conditions  specified
         in the Subsequent  Financing  Notice and stating the quantity of Common
         Stock or Common

                                       32
<PAGE>

         Stock  Equivalents  to be  purchased,  and that the  Purchaser has such
         funds ready, willing, and available for investment. Such written notice
         to the  Company  shall be a binding  obligation  of such  Purchaser  to
         participate  in such  Subsequent  Financing  upon  terms  substantially
         similar to those set forth in the Subsequent Financing Notice,  subject
         to  approval by the  Purchaser,  in its sole  discretion,  of the final
         definitive  documents and schedules thereto. If the Company receives no
         notice from a  Purchaser  as of such 5th Trading  Day,  such  Purchaser
         shall be deemed to have  notified the Company that it does not elect to
         participate.

                  (d) The  Company  may  effect  the  remaining  portion of such
         Subsequent Financing on the terms and with the Persons set forth in the
         Subsequent Financing Notice.

                  (e) The  Company  must  provide the  Purchasers  with a second
         Subsequent  Financing  Notice,  and the Purchasers  will again have the
         right of  participation  set forth above in this Section  4.11,  if the
         Subsequent Financing subject to the initial Subsequent Financing Notice
         is not  consummated  for any  reason  on the  terms  set  forth in such
         Subsequent  Financing  Notice  within 60 Trading Days after the date of
         the initial Subsequent Financing Notice.

                  (f) Notwithstanding the foregoing, this Section 4.11 shall not
         apply in respect of an Exempt Issuance.

         4.12 EQUAL TREATMENT OF PURCHASERS.  No consideration  shall be offered
or paid to any  Person to amend or consent  to a waiver or  modification  of any
provision of any of the Transaction  Documents unless the same  consideration is
also  offered  to  all  of  the  parties  to  the  Transaction  Documents.   For
clarification  purposes,  this provision constitutes a separate right granted to
each Purchaser by the Company and negotiated  separately by each Purchaser,  and
is intended for the Company to treat the  Purchasers as a class and shall not in
any way be  construed  as the  Purchasers  acting in  concert or as a group with
respect to the purchase, disposition or voting of Securities or otherwise.

         4.13  SHORT  SALES  AND  CONFIDENTIALITY  AFTER THE DATE  HEREOF.  Each
Purchaser  severally and not jointly with the other  Purchasers  covenants  that
neither  it  nor  any  Affiliate  acting  on  its  behalf  or  pursuant  to  any
understanding  with it will execute any Short Sales during the period commencing
at the Discussion Time and ending on the public announcement of the transactions
contemplated  hereby in accordance with Section 4.5. Each  Purchaser,  severally
and not jointly with the other Purchasers, covenants that until such time as the
transactions  contemplated  by this  Agreement  are  publicly  disclosed  by the
Company  as  described  in  Section  4.5,  such   Purchaser  will  maintain  the
confidentiality   of  all  disclosures  made  to  it  in  connection  with  this
transaction   (including   the  existence   and  terms  of  this   transaction).
Notwithstanding the foregoing,  no Purchaser makes any representation,  warranty
or covenant  hereby that it will not engage in Short Sales in the  securities of
the Company after the time that the transactions  contemplated by this Agreement
are first publicly announced as required under this Agreement.

         4.14 FORM D; BLUE SKY FILINGS. The Company agrees to timely file a Form
D with

                                       33
<PAGE>

respect to the Securities as required  under  Regulation D and to provide a copy
thereof,  promptly  upon request of any  Purchaser.  The Company shall take such
action as the Company shall reasonably determine is necessary in order to obtain
an exemption  for, or to qualify the  Securities  for, sale to the Purchasers at
the Closing under applicable  securities or "Blue Sky" laws of the states of the
United States,  and shall provide evidence of such actions promptly upon request
of any Purchaser.

         4.15  CONDUCT  OF  BUSINESS.  The  business  of  the  Company  and  its
Subsidiaries  shall not be  conducted  in  violation  of any law,  ordinance  or
regulation of any  governmental  entity,  except where such violations would not
result, either individually or in the aggregate, in a Material Adverse Effect.

         4.16  EXCHANGE  RIGHT.  The  Company  shall  offer  to each  Qualifying
Purchaser  the right to exchange  (the  "EXCHANGE  RIGHT") (a) all, but not less
than all, of the Series B Preferred  Stock and Series C Preferred  Stock held by
such Qualifying Purchaser for shares of Series D Preferred Stock at a rate equal
to one (1)  share of  Series  D  Preferred  Stock  for  each  share of  Series B
Preferred  Stock and Series C Preferred  Stock so exchanged  by such  Qualifying
Purchaser,  and (b) the  warrants to purchase  shares of Common  Stock issued to
such  Qualifying  Purchaser in  connection  with the purchase of such  exchanged
Series  B  Preferred  Stock  and/or  Series C  Preferred  Stock  (the  "ORIGINAL
WARRANTS") for replacement  warrants (the "EXCHANGE  WARRANTS"),  in the form of
the Warrants,  which Exchange  Warrants  shall (i) be  exercisable  for the same
aggregate  number of shares of Common  Stock as the  Original  Warrants and (ii)
have a per share exercise price equal to US$0.25 (both (i) and (ii),  subject to
adjustment for certain events, including dividends,  stock splits,  combinations
and the sale of Common Stock and/or  Common  Stock  Equivalents  at a price less
than the then applicable Conversion Price). Except as described in clause (b) of
the  immediately  preceding  sentence,  the  Exchange  Warrants  issued  to  any
Qualifying  Purchasers  electing  to  exercise  this  Exchange  Right  shall  be
identical to the Warrants.  Any Qualifying Purchaser who elects to exercise this
Exchange  Right under this Section 4.16 shall deliver (i) written  notice to the
Company prior to the Closing Date (such written notice,  the "EXCHANGE  ELECTION
NOTIFICATION"),  and (ii) the certificate or certificates  representing his, her
or its (x) shares of Series B Preferred Stock and/or Series C Preferred Stock to
be exchanged for Series D Preferred  Stock  pursuant to the Exchange Right under
this Section  4.16,  and/or (y) Original  Warrants to be exchanged  for Exchange
Warrants  pursuant to the Exchange  Right under this Section 4.16  (collectively
such   surrendered   certificates  and  Original   Warrants,   the  "SURRENDERED
SECURITIES"),  or execute and deliver to the  Company,  on or before the Closing
Date,  an agreement  reasonably  satisfactory  to the Company and its counsel to
indemnify the Company from any loss incurred by it in connection  with any lost,
stolen or destroyed  certificate  or  certificates  representing  such shares of
Series B Preferred Stock,  Series C Preferred Stock and/or Original  Warrants to
be exchanged for Series D Preferred Stock or Exchange Warrants,  as the case may
be, pursuant to the Exchange Right under this Section 4.16 (such agreement,  the
"LOST  SECURITIES  INDEMNITY").  The  Company  shall  deliver,  or  cause  to be
delivered,  on the Closing  Date, to each  electing  Qualifying  Purchaser (1) a
certificate  or  certificates  representing  the  number  of  shares of Series D
Preferred  Stock  required to be delivered to such  Qualifying  Purchaser by the
Company under this Section 4.16 (such shares, the "EXCHANGE SHARES") and (2) the
Exchange Warrants.

                                       34
<PAGE>

         4.17  CAPITAL  CHANGES.  Until the third year  anniversary  of the date
hereof,  the Company  shall not  undertake  a reverse or forward  stock split or
reclassification  of the Common Stock without the prior  written  consent of the
holders of at least 50.1% of the then  outstanding  shares of Series D Preferred
Stock,  which such consent  shall  include the consent of Midsummer  Investment,
Ltd. (together with its Affiliates, "MIDSUMMER") and Bushido Capital Master Fund
LP (together with its  Affiliates,  "Bushido") (so long as Midsummer or Bushido,
as the case may be,  holds in excess of  $2,000,000,  in the  aggregate,  Stated
Value of Outstanding Preferred Stock).

         4.18 SUBSEQUENT EQUITY SALES.

                  (a) From the date  hereof  until 90 days  after the  Effective
         Date,  neither  the Company nor any  Subsidiary  shall issue  shares of
         Common Stock or Common Stock Equivalents.

                  (b) From the date hereof until such time as no Purchaser holds
         any of the  Securities,  the Company shall be prohibited from effecting
         or  entering  into an  agreement  to effect  any  Subsequent  Financing
         involving a Variable  Rate  Transaction.  "VARIABLE  RATE  TRANSACTION"
         means a  transaction  in which the Company (i) issues or sells any debt
         or  equity  securities  that  are  convertible  into,  exchangeable  or
         exercisable for, or include the right to receive,  additional shares of
         Common  Stock  either  (A) at a  conversion  price,  exercise  price or
         exchange  rate or other price that is based upon,  and/or  varies with,
         the trading  prices of or quotations  for the shares of Common Stock at
         any time after the initial  issuance of such debt or equity  securities
         or (B) with a conversion, exercise or exchange price that is subject to
         being reset at some future date after the initial issuance of such debt
         or equity  security or upon the  occurrence  of specified or contingent
         events directly or indirectly related to the business of the Company or
         the market  for the Common  Stock or (ii)  enters  into any  agreement,
         including,  but not limited  to, an equity line of credit,  whereby the
         Company may sell  securities at a future  determined  price,  provided,
         however, that any transaction involving a Common Stock Equivalent shall
         not be deemed a "Variable Rate  Transaction"  solely as a result of any
         anti-dilution adjustment provisions. Any Purchaser shall be entitled to
         obtain  injunctive  relief  against the  Company to  preclude  any such
         issuance,  which  remedy  shall be in  addition to any right to collect
         damages.

                  (c) Unless Shareholder  Approval and Authorized Share Approval
         have been  obtained and deemed  effective,  neither the Company nor any
         Subsidiary shall make any issuance whatsoever of Common Stock or Common
         Stock  Equivalents  which would cause any  adjustment of the Conversion
         Price  of the  Series  D  Preferred  Stock  or  Exercise  Price  of the
         Warrants,  to the extent the  holders  of Series D  Preferred  Stock or
         Warrants  would not be  permitted,  pursuant to of the  Certificate  of
         Designation  and  Warrants,  to convert  their  respective  outstanding
         Series D Preferred  Stock and  exercise  their  respective  Warrants in
         full, ignoring for such purposes the conversion or exercise limitations
         therein.  Any Purchaser shall be entitled to obtain  injunctive  relief
         against the Company to preclude any such  issuance,  which remedy shall
         be in addition to any right to collect damages.

                                       35
<PAGE>

                  (d) Notwithstanding the foregoing, this Section 4.18 shall not
         apply in respect of an Exempt  Issuance,  except that no Variable  Rate
         Transaction shall be an Exempt Issuance.

         4.19  REGISTRATION  RIGHTS.  If at any time after the date hereof,  the
Company shall  determine to prepare and file with the  Commission a Registration
Statement  relating to an offering  for its own account or the account of others
of any of its  equity  securities,  other  than on Form S-4 or Form S-8 (each as
promulgated  under the Securities Act), or their then  equivalents,  relating to
equity  securities to be issued solely in connection with any acquisition of any
entity or business or equity securities issuable in connection with stock option
or other employee benefit plans, then the Company shall send a written notice of
such  determination to each Purchaser and, if within ten calendar days after the
date of delivery of such notice, any such Purchaser shall so request in writing,
the Company shall include in such Registration  Statement all or any part of the
Underlying  Shares as the  Purchaser  requests to be  registered so long as such
Underlying  Shares  are  proposed  to be  disposed  in the same  manner as those
securities set forth in the Registration Statement; PROVIDED, HOWEVER, that such
Purchasers will not be entitled to such registration  rights with respect to the
registration of Underlying  Shares issuable upon exercise of the Warrants and/or
Exchange Warrants; PROVIDED FURTHER, HOWEVER, if the offering is an underwritten
offering and was  initiated  by the Company or at the request of a  shareholder,
and if the  managing  underwriters  advise the  Company  that the  inclusion  of
Underlying  Shares requested to be included in the Registration  Statement would
cause an adverse  effect on the  success of any such  offering,  based on market
conditions  or  otherwise  (an  "ADVERSE  EFFECT"),  then the  Company  shall be
required to include in such Registration  Statement, to the extent of the amount
of securities that the managing  underwriters advise may be sold without causing
such Adverse  Effect,  (a) first,  the securities of the Company and (b) second,
the shares, including the Underlying Shares, of all shareholders,  on a pro rata
basis,  requesting  registration  and whose  shares the Company is  obligated by
contract to include in the Registration Statement; PROVIDED FURTHER, HOWEVER, to
the extent  that all of the  Underlying  Shares are not  included in the initial
Registration  Statement,  the  Purchaser  shall  have the right to  request  the
inclusion of its Underlying Shares in subsequent  Registration  Statements until
all such  Underlying  Shares have been  registered in accordance  with the terms
hereof.  If the offering in which the  Underlying  Shares is being included in a
Registration  Statement  is a  firm  commitment  underwritten  offering,  unless
otherwise agreed by the Company,  the Purchaser shall sell its Underlying Shares
in such offering  using the same  underwriters  and,  subject to the  provisions
hereof,  on the same terms and  conditions  as the other  shares of Common Stock
that are  included in such  underwritten  offering.  The  Company  shall use its
commercially  reasonable  efforts  to cause  any  Registration  Statement  to be
declared  effective by the  Commission  as promptly as is possible  following it
being filed with the  Commission  and to remain  effective  until all Underlying
Shares  subject  thereto have been sold.  All fees and expenses  incident to the
performance  of or  compliance  with this Section  4.19 by the Company  shall be
borne by the Company  whether or not any Underlying  Shares are sold pursuant to
the  Registration  Statement.  The Company shall indemnify and hold harmless the
Purchaser,  the  officers,   directors,   members,  partners,  agents,  brokers,
investment  advisors and employees of each of them, each person who controls the
Purchaser  (within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act), and the officers, directors,

                                       36
<PAGE>

members,  shareholders,  partners, agents and employees of each such controlling
person,  to the fullest extent permitted by applicable law, from and against any
and  all  losses,  claims,  damages,  liabilities,   costs  (including,  without
limitation,   reasonable  attorneys'  fees)  and  expenses  (collectively,   the
"LOSSES"), as incurred,  arising out of or relating to (i) any untrue or alleged
untrue statement of a material fact contained in the Registration Statement, any
prospectus  included  therein or any form of  prospectus  or in any amendment or
supplement  thereto  or in any  preliminary  prospectus,  or  arising  out of or
relating to any omission or alleged  omission of a material  fact required to be
stated therein or necessary to make the  statements  therein (in the case of any
prospectus  or form  of  prospectus  or  supplement  thereto,  in  light  of the
circumstances  under which they were made) not  misleading or (ii) any violation
or alleged  violation by the Company of the Securities  Act, the Exchange Act or
any state  securities law, or any rule or regulation  thereunder,  in connection
with the performance of its obligations  under this Section 4.19,  except to the
extent,  but only to the  extent,  that  such  untrue  statements  or  omissions
referred  to in (i)  above are  based  solely  upon  information  regarding  the
Purchaser furnished in writing to the Company by the Purchaser expressly for use
therein,  or to the extent that such information relates to the Purchaser or the
Purchaser's  proposed  method  of  distribution  of  Underlying  Shares  and was
reviewed and expressly approved in writing by the Purchaser expressly for use in
the Registration Statement, such prospectus or such form of prospectus or in any
amendment or supplement thereto.  The rights of the Purchaser under this Section
4.19 shall survive until all Underlying Shares have been either registered under
a  Registration  Statement  or  been  sold  pursuant  to  an  exemption  to  the
registration  requirements  of the  Securities  Act.  The  Company  shall not be
required to maintain the effectiveness,  or file another Registration  Statement
pursuant to this Section 4.19,  with respect to any  Underlying  Shares that are
not subject to the current  public  information  requirement  under Rule 144 and
that are  eligible  for resale  without  volume or  manner-of-sale  restrictions
without  current  public  information  pursuant to Rule 144  promulgated  by the
Commission  pursuant  to a written  opinion  letter to such  effect,  addressed,
delivered and acceptable to the Transfer Agent and the affected Holders.

                                    ARTICLE V
                                  MISCELLANEOUS

         5.1 TERMINATION.  This Agreement may be terminated by any Purchaser, as
to such Purchaser's obligations hereunder only and without any effect whatsoever
on the  obligations  between the Company  and the other  Purchasers,  by written
notice to the other  parties,  if the  Closing  has not been  consummated  on or
before  September 30, 2008;  PROVIDED,  HOWEVER,  that no such  termination will
affect  the  right of any party to sue for any  breach  by the  other  party (or
parties).

         5.2 FEES AND  EXPENSES.  At the  Closing,  the  Company  has  agreed to
reimburse  Midsummer the  non-accountable  sum of $40,000 for its legal fees and
expenses,  $20,000  of which has been paid prior to the  Closing.  Except as set
forth  above,  each  party  shall  pay the fees and  expenses  of its  advisers,
counsel,  accountants and other experts, if any, and all other expenses incurred
by such party incident to the negotiation,  preparation, execution, delivery and
performance  of this  Agreement.  The Company shall pay all transfer agent fees,
stamp taxes and other taxes and duties levied in connection with the delivery of
any Securities to the Purchasers.

                                       37
<PAGE>

         5.3 ENTIRE  AGREEMENT.  The  Transaction  Documents,  together with the
exhibits and schedules thereto,  contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings,  oral or written, with respect to such matters,  including,  but
not limited to, that certain  letter  agreement,  dated April 2007, by and among
the Company,  Midsummer and Bushido  Capital  Master Fund, LP, which the parties
acknowledge have been merged into such documents, exhibits and schedules.

         5.4 NOTICES.  Any and all notices or other communications or deliveries
required or permitted to be provided  hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of  transmission,  if
such notice or  communication is delivered via facsimile at the facsimile number
set forth on the signature  pages  attached  hereto prior to 5:30 p.m. (New York
City  time)  on a  Trading  Day,  (b) the next  Trading  Day  after  the date of
transmission,  if such notice or communication is delivered via facsimile at the
facsimile  number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day,  (c) the 2nd Trading  Day  following  the date of mailing,  if sent by U.S.
nationally  recognized  overnight courier service, or (d) upon actual receipt by
the party to whom such  notice is  required  to be given.  The  address for such
notices and communications shall be as set forth on the signature pages attached
hereto.

         5.5 AMENDMENTS;  WAIVERS. No provision of this Agreement may be waived,
modified,  supplemented or amended except in a written instrument signed, in the
case of an amendment,  by the Company,  Midsummer  Investment and each Purchaser
then holding at least $250,000  Stated Value of Series D Preferred  Stock or, in
the case of a waiver,  by the party against whom  enforcement of any such waived
provision is sought.  No waiver of any default  with  respect to any  provision,
condition or requirement  of this  Agreement  shall be deemed to be a continuing
waiver in the  future or a waiver of any  subsequent  default or a waiver of any
other  provision,  condition  or  requirement  hereof,  nor  shall  any delay or
omission of any party to exercise any right  hereunder in any manner  impair the
exercise of any such right.

         5.6  HEADINGS.  The headings  herein are for  convenience  only, do not
constitute a part of this  Agreement  and shall not be deemed to limit or affect
any of the provisions hereof.

         5.7  SUCCESSORS AND ASSIGNS.  This Agreement  shall be binding upon and
inure to the benefit of the parties and their successors and permitted  assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser (other than by merger).  Any
Purchaser may assign any or all of its rights under this Agreement to any Person
to whom such Purchaser assigns or transfers any Securities in the minimum Stated
Value of  US$250,000,  provided such  transferee  agrees in writing to be bound,
with respect to the transferred Securities, by the provisions of the Transaction
Documents that apply to the "Purchasers"  (provided,  however, a Purchaser shall
not knowingly assign or transfer any of its Series D Preferred Stock or Warrants
to an entity whose primary  business  operations are in direct  competition with
the primary  business  operations  of the  Company,  without  the prior  written
consent of the Company).

                                       38
<PAGE>

         5.8 NO  THIRD-PARTY  BENEFICIARIES.  This Agreement is intended for the
benefit of the parties  hereto and their  respective  successors  and  permitted
assigns and is not for the benefit of, nor may any provision  hereof be enforced
by, any other Person.

         5.9 GOVERNING LAW. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance  with the internal laws of the State of
New York,  without  regard to the  principles of conflicts of law thereof.  Each
party  agrees  that  all  legal  proceedings   concerning  the  interpretations,
enforcement and defense of the  transactions  contemplated by this Agreement and
any other Transaction  Documents  (whether brought against a party hereto or its
respective affiliates,  directors, officers, shareholders,  employees or agents)
shall be commenced  exclusively  in the state and federal  courts sitting in the
City of New  York.  Each  party  hereby  irrevocably  submits  to the  exclusive
jurisdiction  of the state and federal  courts  sitting in the City of New York,
borough  of  Manhattan  for the  adjudication  of any  dispute  hereunder  or in
connection  herewith or with any  transaction  contemplated  hereby or discussed
herein  (including  with respect to the  enforcement  of any of the  Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action  or  proceeding,  any  claim  that it is not  personally  subject  to the
jurisdiction of any such court, that such suit, action or proceeding is improper
or is an inconvenient  venue for such proceeding.  Each party hereby irrevocably
waives  personal  service of process and consents to process being served in any
such suit,  action or  proceeding  by mailing a copy thereof via  registered  or
certified  mail or overnight  delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this  Agreement and agrees that
such service shall constitute good and sufficient  service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way any right
to serve process in any other manner  permitted by law. THE PARTIES HEREBY WAIVE
ALL  RIGHTS TO A TRIAL BY JURY.  If either  party  shall  commence  an action or
proceeding to enforce any  provisions  of the  Transaction  Documents,  then the
prevailing  party in such action or proceeding  shall be reimbursed by the other
party for its reasonable  attorneys' fees and other costs and expenses  incurred
with  the   investigation,   preparation  and  prosecution  of  such  action  or
proceeding.

         5.10 SURVIVAL.  The  representations,  warranties,  covenants and other
agreements contained herein shall survive the Closing and the delivery, exercise
and/or conversion of the Securities,  as applicable for the applicable statue of
limitations.

         5.11  EXECUTION.  This  Agreement  may  be  executed  in  two  or  more
counterparts,  all of which when taken  together shall be considered one and the
same agreement and shall become effective when  counterparts have been signed by
each party and  delivered  to the other  party,  it being  understood  that both
parties need not sign the same  counterpart.  In the event that any signature is
delivered by facsimile  transmission  or by e-mail  delivery of a ".pdf"  format
data file,  such  signature  shall create a valid and binding  obligation of the
party  executing (or on whose behalf such  signature is executed)  with the same
force and effect as if such facsimile or ".pdf"  signature page were an original
thereof.

         5.12 SEVERABILITY.  If any term, provision,  covenant or restriction of
this  Agreement  is held by a court of  competent  jurisdiction  to be  invalid,
illegal,  void  or  unenforceable,  the  remainder  of  the  terms,  provisions,
covenants and restrictions set forth herein shall remain in full

                                       39
<PAGE>

force and effect and shall in no way be affected,  impaired or invalidated,  and
the parties hereto shall use their  commercially  reasonable efforts to find and
employ an alternative means to achieve the same or substantially the same result
as that  contemplated by such term,  provision,  covenant or restriction.  It is
hereby  stipulated  and  declared to be the  intention  of the parties that they
would have executed the remaining terms, provisions,  covenants and restrictions
without including any of such that may be hereafter  declared invalid,  illegal,
void or unenforceable.

         5.13 RESCISSION AND WITHDRAWAL RIGHT.  Notwithstanding  anything to the
contrary  contained in (and without  limiting any similar  provisions of) any of
the other  Transaction  Documents,  whenever  any  Purchaser  exercises a right,
election, demand or option under a Transaction Document and the Company does not
timely perform its related obligations within the periods therein provided, then
such Purchaser may rescind or withdraw, in its sole discretion from time to time
upon written notice to the Company,  any relevant notice,  demand or election in
whole or in part without  prejudice to its future actions and rights;  PROVIDED,
HOWEVER,  in the case of a rescission  of a conversion of the Series D Preferred
Stock or exercise of a Warrant,  the  Purchaser  shall be required to return any
shares of Common  Stock  subject to any such  rescinded  conversion  or exercise
notice.

         5.14  REPLACEMENT  OF  SECURITIES.  If any  certificate  or  instrument
evidencing any Securities is mutilated,  lost, stolen or destroyed,  the Company
shall  issue or cause to be issued in  exchange  and  substitution  for and upon
cancellation thereof (in the case of mutilation), or in lieu of and substitution
therefor,  a new  certificate or  instrument,  but only upon receipt of evidence
reasonably  satisfactory to the Company of such loss, theft or destruction.  The
applicant for a new  certificate or instrument  under such  circumstances  shall
also  pay any  reasonable  third-party  costs  (including  customary  indemnity)
associated with the issuance of such replacement Securities.

         5.15  REMEDIES.  In addition to being  entitled to exercise  all rights
provided herein or granted by law,  including  recovery of damages,  each of the
Purchasers  and the Company will be entitled to specific  performance  under the
Transaction  Documents.  The  parties  agree that  monetary  damages  may not be
adequate  compensation  for  any  loss  incurred  by  reason  of any  breach  of
obligations described and hereby agrees to waive and not to assert in any action
for specific performance of any such obligation the defense that a remedy at law
would be adequate.

         5.16 PAYMENT SET ASIDE.  To the extent that the Company makes a payment
or payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such  enforcement  or exercise or any part thereof are  subsequently
invalidated,  declared to be fraudulent or  preferential,  set aside,  recovered
from, disgorged by or are required to be refunded,  repaid or otherwise restored
to the  Company,  a  trustee,  receiver  or  any  other  person  under  any  law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable  cause of action),  then to the extent of any such  restoration
the  obligation  or part thereof  originally  intended to be satisfied  shall be
revived and  continued  in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

                                       40
<PAGE>

         5.17  INDEPENDENT  NATURE OF PURCHASERS'  OBLIGATIONS  AND RIGHTS.  The
obligations of each Purchaser under any Transaction Document are several and not
joint with the  obligations of any other  Purchaser,  and no Purchaser  shall be
responsible in any way for the performance or non-performance of the obligations
of any other Purchaser under any Transaction Document.  Nothing contained herein
or in any  other  Transaction  Document,  and no action  taken by any  Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
an  association,  a joint  venture  or any  other  kind of  entity,  or create a
presumption  that the  Purchasers are in any way acting in concert or as a group
with  respect  to  such  obligations  or the  transactions  contemplated  by the
Transaction Documents. Each Purchaser shall be entitled to independently protect
and enforce its rights, including without limitation,  the rights arising out of
this Agreement or out of the other  Transaction  Documents,  and it shall not be
necessary  for any other  Purchaser to be joined as an  additional  party in any
proceeding  for such purpose.  Each  Purchaser has been  represented  by its own
separate  legal  counsel in their  review  and  negotiation  of the  Transaction
Documents. For reasons of administrative  convenience only, Purchasers and their
respective  counsel have chosen to communicate with the Company through FWS. FWS
does not represent all of the  Purchasers  but only  Midsummer.  The Company has
elected to provide all Purchasers with the same terms and Transaction  Documents
for the  convenience of the Company and not because it was required or requested
to do so by the Purchasers.

         5.18  CONSTRUCTION.  The parties  agree that each of them and/or  their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved  against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto.

                            [SIGNATURE PAGE FOLLOWS]

                                       41
<PAGE>

         IN WITNESS  WHEREOF,  the parties  hereto  have caused this  Securities
Purchase   Agreement  to  be  duly  executed  by  their  respective   authorized
signatories as of the date first indicated above.

ELITE PHARMACEUTICALS, INC.                  ADDRESS FOR NOTICE:
                                             -------------------

By:__________________________________        Elite Pharmaceuticals, Inc.
    Name: Bernard J. Berk                    165 Ludlow Avenue
    Title: Chief Executive Officer           Northvale, New Jersey 07647
                                             Attention: Chief Executive Officer

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

Reitler Brown & Rosenblatt LLC
800 Third Avenue
21st Floor
New York, New York 10022
Attention: Scott H. Rosenblatt

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                      SIGNATURE PAGE FOR PURCHASER FOLLOWS]

                                       42
<PAGE>

        [PURCHASER SIGNATURE PAGES TO ELI SECURITIES PURCHASE AGREEMENT]

         IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.

Name of Purchaser: __________________________

SIGNATURE OF AUTHORIZED SIGNATORY OF PURCHASER: __________________________

Name of Authorized Signatory: _________________________

Title of Authorized Signatory: __________________________

Email Address of Purchaser: ________________________________

Fax Number of Purchaser: ______________________________

Address for Notice of Purchaser:

Address for Delivery of Securities for Purchaser (if not same as above):

Subscription Amount:
Shares of Series D Preferred Stock:
Warrant Shares:
EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

                           [SIGNATURE PAGES CONTINUE]

                                       43
<PAGE>

                               DISCLOSURE SCHEDULE

                                       44
<PAGE>

                                                                       EXHIBIT A

                           CERTIFICATE OF DESIGNATIONS
                                 (see attached)

                                       45
<PAGE>

                                                                       EXHIBIT B

                                 FORM OF WARRANT
                                 (see attached)

                                       46

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00147-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00147-of-00352.parquet"}]]