Document:

Unassociated Document

    Execution
Version

     

    STIPULATION
OF SETTLEMENT AND RELEASE

     

     This Stipulation of
Settlement and Release (“Stipulation”),
entered into as of June 25, 2010 (the “Effective Date”), is
by and among Elite Pharmaceuticals, Inc., a Delaware corporation (“Elite”), and
Midsummer Investment, Ltd., a Bermuda corporation (“Midsummer”) and
Bushido Capital Master Fund, LP, a Cayman Islands limited partnership (“Bushido”, and
collectively with Midsummer, the “Plaintiffs”), BCMF
Trustees LLC (“BCMF”), Epic
Pharma,
LLC, a
Delaware limited liability company, and Epic
Investments, LLC, a Delaware limited
liability company (Epic Pharma and Epic Investments collectively,
“”Epic”).  Elite, the Plaintiffs, BCMF and Epic (the “Parties” and each a
“Party”)
intending to be legally bound, covenant, agree and represent as
follows:

    

    WHEREAS, the Plaintiffs filed an action
against Elite in the United States District Court, Southern District of New
York, Number 09 CV 8074 (SHS), seeking injunctive relief and monetary damages
relating to the issuance of the Series E Convertible Preferred Stock (the “Action”);

    

    WHEREAS, Elite denied all material
allegations asserted in the Action and asserted defenses;

    

    WHEREAS,
to avoid the delays, expense and risks inherent in litigation, the Parties
desire to resolve their dispute under the terms and conditions of this
Stipulation and the Amendment Agreement, dated as of June 25, 2010 among Elite
and the investors signatory thereto (“Amendment
Agreement”); and

    

    WHEREAS, the Parties believe that the
terms of this Stipulation are fair and were reached in good faith.

    

    NOW THEREFORE, in
consideration of the obligations and promises as set forth in this Stipulation,
the full sufficiency of which the Parties hereby acknowledge, and in full
settlement of the Parties’ claims, the Parties agree as follows:

    

    1.    Execution of the Amendment
Agreement.  This Stipulation will only become binding upon the
Parties upon both complete execution of the Amendment Agreement and satisfaction
or waiver of the conditions set forth in Sections 2.12 and 2.13 of the Amendment
Agreement.

    

    2.    Dismissal of
Action.  Concurrent with the execution of this Stipulation,
counsel for the Parties will execute a Stipulation of Discontinuance of the
Action, with prejudice and without costs, substantially in the form annexed
hereto as Exhibit A.  Counsel for Plaintiffs will file the Stipulation
of Discontinuance once this Stipulation becomes binding pursuant to the terms of
paragraph 1 herein, and send a stamped copy to counsel for Elite.

     

    3.    Elite
Release.  In exchange for the execution of this Agreement, and
the promises herein, and the execution of the Amendment Agreement, Elite and
Epic, individually and on behalf of each of their respective officers,
directors, agents, representatives, successors, affiliated entities,
subsidiaries, heirs, employees, administrators and assigns (the “Elite Releasors”)
hereby releases and forever discharges each of the Plaintiffs, BCMF, their
owners, officers, directors, investors, agents, representatives, successors,
affiliated entities, subsidiaries, heirs, employees, administrators and assigns
(the “Plaintiffs’
Releasees”) from any and all actions, causes of action, claims, liens,
suits, debts, accounts, liabilities, expenses, attorneys’ fees, agreements,
promises, charges, complaints and demands whatsoever, known or unknown, whether
in law or equity, which the Elite Releasors may now have or hereafter can have,
shall have, may have, or may have had for, upon, or by reason of any cause or
thing whatsoever including, but not limited to, claims that could have been
asserted in the Action or any other court action, based upon any conduct from
the beginning of the world up to and including the date of this Stipulation;
provided, however, that the
Elite Releasors do not release any claim of breach of the terms of this
Stipulation, breach of the terms of the Amendment Agreement, or any cause of
action arising from future conduct by the Plaintiffs’ Releasees.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    4.    Plaintiffs’
Release.  In exchange for the execution of this Agreement, the
promises herein, and the execution of the Amendment Agreement, Plaintiffs and
BCMF, individually and on behalf of each of their respective owners, officers,
directors, investors, agents, representatives, successors, affiliated entities,
subsidiaries, heirs, employees, administrators and assigns (the “Plaintiffs’
Releasors”) hereby release and forever discharge Elite and Epic and each
of their respective officers, directors, agents, representatives, successors,
affiliated entities, subsidiaries, heirs, employees, administrators and assigns
(the “Elite
Releasees”), from any and all actions, causes of action, claims, liens,
suits, debts, accounts, liabilities, expenses, attorneys’ fees, agreements,
promises, charges, complaints and demands whatsoever, known or unknown, whether
in law or equity, which the Plaintiffs’ Releasors may now have or hereafter can
have, shall have, may have, or may have had for, upon, or by reason of any cause
or thing whatsoever including, but not limited to, claims that could have been
asserted in the Action or any other court action, based upon any conduct from
the beginning of the world up to and including the date of this Stipulation;
provided, however, that the
Plaintiffs’ Releasors do not release any claim of breach of the terms of this
Stipulation, breach of the terms of the Amendment Agreement or any cause of
action arising from future conduct by the Elite Releasees.

     

    5.    Continued Rights and
Obligations.  It is expressly understood and agreed that
nothing herein affects any future rights or obligations of the Parties under the
Transaction Documents, as defined in the Amendment Agreement.

     

    6.    Non-Admission.  Each
of the Parties expressly denies any wrongdoing or liability and nothing in this
Stipulation shall be interpreted as an admission of liability by any of the
Parties to this Stipulation.

     

    7.    Enforceability.  The
Parties understand and acknowledge that this Stipulation is final and binding,
and the Parties agree not to challenge its enforceability.

     

    8.    Governing
Law.  The Parties further agree that this Stipulation will be
governed by the laws of the State of New York.

     

    
      
         

      

      
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    9.    Severability.  The
Parties further agree that if any of the provisions, terms, clauses, waivers and
releases of claims and rights contained in this Stipulation are declared
illegal, unenforceable, or ineffective in a legal forum of competent
jurisdiction, such provisions, terms, clauses, waivers and releases of claims or
rights shall be modified, if possible, in order to achieve, to the extent
possible, the intentions of the Parties, and, if necessary, such provisions,
terms, clauses, waivers and releases of claims and rights shall be deemed
severable, such that all other provisions, terms, clauses, waivers and releases
of claims and rights contained in this Stipulation shall remain valid and
binding upon all Parties.

     

    10.    Amendments. The
Parties further agree that this Stipulation may not be altered, amended,
modified, superseded, canceled or terminated except by an express written
agreement duly executed by all the Parties or their attorneys on their behalf,
which makes specific reference to this Stipulation.

     

    11.    Drafting.  The
Parties agree that this Stipulation has been jointly drafted and negotiated with
the assistance of counsel for each Party and that any ambiguity shall not be
construed against any Party as the drafter of the Stipulation.

     

    12.    Counsel.  The
Parties acknowledge and represent that each has been represented by the counsel
of his or its choosing in the negotiation and execution of this Stipulation,
that each Party has read the entire Stipulation, and is fully aware of its legal
effect.  Parties shall each pay their own legal fees and costs, except
as otherwise expressly set forth in this Stipulation.

     

    13.    Notices.  Any
notices or other communications to be given in accordance with this Stipulation
shall be made in accordance with the provisions of the Securities Purchase
Agreement, dated September 15, 2008, as amended.

     

    14.    Authority.  The
Parties represent and warrant that they have the power, authority and
authorization to enter into this Stipulation and that they have not transferred,
assigned or hypothecated to any third party any of their rights released in this
Stipulation.

     

    15.    Copies.  This
Stipulation may be executed in one or more counterpart originals, whether by
facsimile or otherwise, all of which, taken together, shall constitute one and
the same instrument.

     

    

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REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK]

     

    
      
         

      

      
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    To
signify their agreement to the terms of this Stipulation, the Parties have
executed this Stipulation on the date set forth opposite their signatures which
appear below.

     

    
      
        	Dated:      June
      25, 2010	 	 
	 	ELITE
      PHARMACEUTICALS, INC.	 
	 	 	 	 
	
              	
                By:
      

              	 	 
	 	 	Name:	 
	 	 	Title:	 

      

    

    

    
       

      
        
          	Dated:      June
      25, 2010	 	 
	 	MIDSUMMER
      INVESTMENT, LTD.	 
	 	 	 	 
	
                	
                  By:
      

                	 	 
	 	 	Name:	 
	 	 	Title:	 

        

    

    
      
        
          	Dated:      June
      25, 2010	 	 
	 	BUSHIDO
      CAPITAL MASTER FUND, LP	 
	 	 	 	 
	
                	
                  By:
      

                	 	 
	 	 	Name:	 
	 	 	Title:	 

        

    

    
      
        
          	Dated:      June
      25, 2010	 	 
	 	BCMF
      TRUSTEES LLC	 
	 	 	 	 
	
                	
                  By:
      

                	 	 
	 	 	Name:	 
	 	 	Title:	 

        

         

      

    

    
      
         

      

      
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          	Dated:      June
      25, 2010	 	 
	 	EPIC
      PHARMA, LLC	 
	 	 	 	 
	
                	
                  By:
      

                	 	 
	 	 	Name:	 
	 	 	Title:	 

        

    

    
      
        
          	Dated:      June
      25, 2010	 	 
	 	EPIC
      INVESTMENTS, LLC	 
	 	 	 	 
	
                	
                  By:
      

                	 	 
	 	 	Name:	 
	 	 	Title:	 

        

         

      

    

    
      
         

      

      
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    EXHIBIT
A

     

    
      	
              UNITED
      STATES DISTRICT COURT

              SOUTHERN
      DISTRICT OF NEW YORK

            	 	 
      	 
      
	
              x

            	 	 
      	 
      
	
               

              Midsummer
      Investment, Ltd., and

              Bushido
      Capital Master Fund, LP,

               

              Plaintiffs,

               

              -against-

               

              Elite
      Pharmaceuticals, Inc.,

               

              Defendant.

               

            	 	 
      	
              09
      CV 8074 (SHS)

               

               

              STIPULATION
      OF DISMISSAL WITH PREJUDICE

            
	
              x

            	 	 
      	 
      

    

    

    

    

    IT IS HEREBY STIPULATED AND AGREED
by and among the parties that the above-captioned action, be dismissed in
its entirety, with prejudice, with no award of counsel fees or costs by the
Court to either side.

     

    
      
        	
                Dated:

              	
                New
      York, New York

              

      

      
        	
                 
      

              	
                June
      ___, 2010

              

      

    
      
        
          	      
                  Law
      Offices of Kenneth A. Zitter

                	 	 	      
                  Richardson
      & Patel LLP

                	 
	 	 	 	 	 
	 	 	 	 	 
	
                  Kenneth
      A. Zitter (KAZ-3195) 

                	 	 	
                  David
      Gordon (DG-0010)

                	 
	
                  Attorney
      for Plaintiffs      

                	 	 	
                  Attorneys
      for Defendant

                	 
	260
      Madison Avenue, 18th
      floor         	 	 	750
      Third Avenue, 9th
      floor	 
	New
      York, New York 10016      	 	 	New
      York, New York 10017	 
	212-532-8000       	 	 	646-755-7315	 

        

         

      

    

    
      
         

      

      
        6Unassociated Document

    
       Execution
Version

    

     

    AMENDMENT
AGREEMENT

    

    This
Amendment Agreement (the “Agreement”), dated as
of June 25, 2010, is by and among Elite Pharmaceuticals, Inc., a Delaware
corporation (the “Company”) and the
investors signatory hereto (each, a “Purchaser” and
collectively, the “Purchasers”).

    

    WHEREAS,
pursuant to a Securities Purchase Agreement, dated September 15, 2008, as
amended (the “Purchase
Agreement”), among the Company and the investors signatory thereto, the
Company issued Series D 8% Convertible Preferred Stock (the “Series D Preferred
Stock”), pursuant to a Certificate of Designation of Preferences, Rights
and Limitations of Series D 8% Convertible Preferred Stock, filed with Secretary
of State of the State of Delaware on September 15, 2008 (the “COD”), and were
issued warrants (the “Warrants” and,
together with the Purchase Agreement and the COD, the “Transaction
Documents”) exercisable for shares of Common Stock of the
Company;

    

    WHEREAS,
the parties wish to amend certain terms of the Transaction
Documents.

    

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

    

    ARTICLE
I

    DEFINITIONS

    

    Section
1.1.    Definitions.  Capitalized
terms not defined in this Agreement shall have the meanings ascribed to such
terms in the Purchase Agreement.

    

    ARTICLE
II

    AMENDMENTS
AND OTHER AGREEMENTS

    

    Section
2.1.    Warrant
Amendments.

    

    (i)           Section
2(b) of the Warrants is hereby amended and restated in its entirety as follows
(for purposes of clarification, solely as a result of this adjustment, there
will be no corresponding increase in the number of Warrant Shares):

    

    “Exercise
Price.  The exercise price per share of the Common Stock under
this Warrant shall be US$0.125, subject to adjustment
hereunder (the “Exercise
Price”).”

     

    
      
        
        

      

      
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      (ii)           The
following is added as new Section 3(h) to each Warrant:

    

    
    

    

    
      “Other
Adjustment.  In addition to the
other adjustments herein, the Exercise Price shall be reduced as
follows:  (i) by 20% if on September 15, 2011 the Holder still
beneficially owns more than 50% of the Preferred Stock beneficially owned by it
as of the date of that certain Amendment Agreement, dated June 25, 2010,
pursuant to which this provision was amended to this Warrant (“Base
Ownership”) (excluding
for purposes of such calculation, shares of Preferred Stock issued on the date
hereof in lieu of dividend payments on the Preferred Stock, if any); and (ii) by
20% if (a) on September 15, 2011, the Holder then beneficially owns more than
25% of the Base Ownership and 50% or less of the Base Ownership and (b) on
September 15, 2012, the Holder then beneficially owns more than 25% of the Base
Ownership; provided that, under this Section 3(h), the reduction in Exercise
Price may only occur once.  Notwithstanding anything herein to the
contrary, in the event that on September 15, 2011 or, if the condition of clause
(ii)(a) above is met, on September 15, 2012, the Holder beneficially owns 25% or
less of the Base Ownership, then no adjustment shall occur
hereunder.  Additionally, solely as a result of this adjustment, there
will be no corresponding increase in the number of Warrant
Shares”

    

    

    Section
2.2    Amendment to Certificate of
Designation.  On or prior to the date hereof, the Company shall
deliver evidence of the filing of an Amendment to the Certificate of
Designation, in the form attached hereto as Exhibit A (the “Certificate of
Amendment”).  Each Purchaser hereby consents to terms and
filing of the Certificate of Amendment.

    

    Section
2.3    Amendment to Section 1.1 of
the Purchase Agreement.  The definition of “Exempt Issuance” in
Section 1.1 of the Purchase Agreement is hereby amended to add the following as
the last two sentences of such definition:

    

    “As
used herein, the term “Strategic Transaction” shall expressly include securities
issued to Epic Investments, LLC “Epic Investments”) and Epic Pharma, LLC (“Epic Pharma”)
pursuant to that certain Strategic Alliance Agreement, dated March 18, 2009, as
amended through the fourth amendment thereof dated June 25, 2010 (such agreement
through the fourth amendment thereof, the “Epic SAA”); provided
that the designation of  the transactions set forth in the Epic SAA as
a “Strategic Transaction” shall have no effect on whether (x) any future
transaction between the Company and either Epic Investments or Epic Pharma shall
constitute a “Strategic Transaction” (and any such future transaction shall be
evaluated on a stand-alone basis as to whether such transaction is, or is not, a
“Strategic Transaction”) or (y) any securities issued pursuant to an amendment
or modification to the Epic SAA made following the date of the fourth amendment
thereto or the above-referenced June 2010 amendment shall constitute an Exempt
Issuance).”

     

    
      
        
        

      

      
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    Section
2.4    SEC
Filings/Misc.  So long as the Purchasers beneficially own, in
the aggregate, at least 15% of the Series D Preferred Stock held by the
Purchasers as of the date hereof (including for purposes of such calculation,
shares of Preferred Stock issued on the date hereof in lieu of dividend payments
on the Preferred Stock), the Company hereby agrees:

    

    (i)           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;

    

    (ii)           not
to engage in a “going-private” transaction subject to Rule 13e-3 of the Exchange
Act; and

    

    (iii)           to
use commercially reasonable efforts to obtain analyst coverage from a FINRA
member firm and to have such analyst publish reports on the Company on at least
a semi-annual basis.

    

    Section 2.5    Increase in Authorized
Shares; Reverse Split.

    

    (i)           At
its next meeting of shareholders the Company shall seek shareholder approval 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 760 million
shares (the “Authorized Share
Increase”), subject to downward adjustment if the Company shall effect a
Reverse Split (as defined below), with the recommendation of the Company’s Board
of Directors that such proposal 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 proposal.

    

    (ii)           Each
Purchaser, severally, and not jointly, hereby agrees to vote all shares of
Common Stock beneficially owned by it on the applicable record date in favor of
(i) the Authorized Share Increase and (ii) a reverse stock split, in the ratio
of no greater than 50 to 1 (the “Reverse
Split”).  The Company represents, warrants and covenants that
all outstanding securities of the Company (including Common Stock and Common
Stock Equivalents) will proportionally adjust as to the number of shares
issuable and the conversion or exercise prices as a result of any reverse stock
split.

    

    Section 2.6    Future Agreements with other
Preferred Stock Holders.    In the event any holder
of the Company’s preferred stock that is not an Affiliate (as defined in the
Transaction Documents) of a Purchaser takes action against the Company with
respect to the transaction set forth in the Strategic Alliance Agreement, dated
March 18, 2009, between the Company, Epic Investments, LLC and Epic Pharma, LLC
as amended through the fourth amendment dated June 25, 2010 (such agreement
through the fourth amendment thereof, the “Epic SAA”), and if
the Company settles any such action, or is forced to settle, on terms more
favorable than the terms hereunder, each Purchaser may within twenty Trading
Days after disclosure of such settlement, cause the Company to amend the terms
of this transaction as to such Purchaser only so as to give such Purchaser the
benefit of such more favorable terms or conditions, on a proportionate
basis.

     

    
      
        
        

      

      
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    Section 2.7    Limitation on Consent
Consideration.  In the event that the Company is required to
seek consent from the holders of other classes of its preferred stock to approve
the transactions under this Agreement, the Company shall not offer any
consideration to such security holders without the prior written consent of the
Purchasers and, in the event such consideration is in the form of Common Stock
or Common Stock Equivalents, in no event, if in the form of an option or
warrant, on terms less favorable to the Company than the Warrants.

    

    Section
2.8    Limitation on Future
Security Acquisitions.  Each Purchaser, severally, and not
jointly with the other Purchasers, hereby agrees that it will not acquire
additional shares of Common Stock or preferred stock of the Company, other than
in connection with the conversion or exercise of Common Stock Equivalents held
by it or pursuant to hedging or covering transactions with respect to any Common
Stock Equivalents held by it.

    

    Section
2.9.    Series E Preferred
Stock.    The Purchasers hereby consent to, and the
Company agrees to cause as a condition to the effectiveness of this Agreement,
the Epic Amendments (as defined below) which amend to the terms of the Company’s
Series E Convertible Preferred Stock (the “Series E Preferred
Stock”) issued pursuant to a Certificate of Designation of Preferences,
Rights and Limitations of Series E Convertible Preferred Stock, filed with the
Secretary of State of the State of Delaware on June 3, 2009.

    

    Section
2.10    Effect on Purchase
Agreement. The
foregoing consents and waivers are given solely in respect of the transactions
described herein. Except as expressly set forth herein, all of the
terms and conditions of the Transaction Documents shall continue in full force
and effect after the execution of this Agreement, and shall not be in any way
changed, modified or superseded by the terms set forth herein.  This Agreement shall not
constitute a novation or
satisfaction and accord of any Transaction Document.

    

    Section
2.11    Filing of Form
8-K.  Within 2 Trading Days of the date hereof, the Company
shall issue a Current Report on Form 8-K, reasonably acceptable to each
Purchaser disclosing the material terms of the transactions contemplated hereby,
which shall include this Agreement as an attachment thereto.

    

    Section
2.12    Conditions to Purchasers’
Obligations.  The respective obligations of the Purchasers
hereunder in connection with the Closing are subject to the following conditions
being met:

     

    (a)    the
accuracy in all material respects on the date of the Closing of the
representations and warranties of the Company contained herein;

     

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

     

    (c)    the
execution and delivery of a settlement and release agreement, by and among the
Company, the Purchaser and the other parties thereto, in the form attached
hereto as Exhibit
B;

     

    
      
        
        

      

      
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     (d)    In
satisfaction of payment of all accrued but unpaid dividends as of March 31,
2010,  to the extent such issuance does not cause the Purchaser’s
beneficial ownership on the date of issuance to exceed 9.9% of the issued and
outstanding shares of Common Stock (any excess shares shall be issued to the
Purchaser upon written notice from such Purchaser when such Purchaser’s
beneficial ownership is below 9.9% to the extent that such issuance does not
cause the Purchaser to exceed such amount), the Company shall have issued the
following newly issued shares of Common Stock, without restrictive legends, on
account of all accrued but unpaid dividends on the Series D Preferred Stock owed
to such Purchaser as of the date hereof (the “Unpaid Series D
Dividends”), and delivered such shares to each Purchaser electronically
through the Depository Trust Company (“DTC”) to the DTC
account of such Purchaser set forth on the signature page hereto): (i) 543,143
shares of Common Stock to Midsummer Investment, Ltd.; (ii) 105,566 shares of
Common Stock to Bushido Capital Master Fund, LP and (iii) 172,426 shares of
Common Stock to BCMF Trustees LLC; provided that such issuance
and delivery shall be conditioned upon the delivery to the Company by each
Purchaser of a Rule 144 Rep Letter (as defined below) with respect to such
shares; and

    

    (e)           the
execution and delivery of an amendment to the transaction documents under the
Epic SAA (including the fourth amendment to the Epic SAA) (collectively, the
“Epic
Amendments”), in the form attached hereto as Exhibit
C.

    

    Section
2.13    Conditions to Company’s
Obligations.  The obligations of the Company hereunder in
connection with the Closing are subject to the following conditions being
met:

    

    (a)           the
accuracy in all material respects on the date of the Closing of the
representations and warranties of the Purchasers contained herein;

    

    (b)           all
obligations, covenants and agreements of each Purchaser required to be performed
at or prior to the Closing shall have been performed;

    

               
    (c)           the
execution and delivery of a settlement and release agreement, by and among the
Company, the Purchaser and the other parties thereto, in the form attached
hereto as Exhibit
B;

    

    (d)           any
consent or approval as may be required from the Company’s preferred stockholders
with respect to the transactions contemplated by this Agreement (the “Shareholder
Approval”) shall have been obtained;

    

    (e)           each
Purchaser shall have provided to the Company a customary Rule 144 representation
letter (a “Rule 144
Rep Letter”), in the form previously provided to the Purchasers, to
accompany the legal opinion to be provided by Company’s counsel to its transfer
agent in connection with the issuance of shares of Common Stock in payment of
the Unpaid Series D Dividends in accordance with Section 2.12(d) above;
and

    

               (f)           the
execution and delivery of the Epic Amendments.

     

    
      
        
        

      

      
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    Section
2.14    Consent.  Each
Purchaser hereby consents, as holders of Series D Preferred Stock, to the filing
with the Secretary of State of the State of Delaware of amendments to the
Company’s certificate of incorporation (including each application certificate
of designation) to effect the amendments set forth herein and in the Epic
Amendment.

    

    Section
2.15    144 Rep
Letters.  As a condition to the issuance by the Company via DTC
of any shares of Common Stock to be issued by the Company without restrictive
legends (including, without limitation, shares to be issued upon voluntary
and/or mandatory conversions of Series D Preferred Stock and upon payment of
dividends on Series D Preferred Stock), the Purchaser to receive such shares
shall provide to the Company a Rule 144 Rep Letter with respect to the issuance
of such shares without restrictive legends pursuant to Rule 144 promulgated
under the Securities Act of 1933, as amended.

    

    ARTICLE
III

    REPRESENTATIONS
AND WARRANTIES

    

    Section
3.1.    Representations and
Warranties of the Company.  The Company hereby make the
representations and warranties set forth below to the Purchasers that as of the
date of its execution of this Agreement:

    

    (a)    Authorization;
Enforcement.  The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by this
Agreement and otherwise to carry out its obligations hereunder and
thereunder.  The execution and delivery of this Agreement by the
Company and the consummation by it of the transactions contemplated hereby have
been duly authorized by all necessary action on the part of the Company and no
further action is required by the Company, its board of directors or its
stockholders in connection therewith the Shareholder Approval.  This
Agreement has been duly executed by the Company and, when delivered in
accordance with the terms hereof 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.

    

    (b)    No
Conflicts.  Subject to the Shareholder Approval, the execution,
delivery and performance of this Agreement by the Company and the consummation
by the Company of the transactions contemplated hereby do not and will not: (i)
conflict with or violate any provision of the Company’s certificate or articles
of incorporation, bylaws or other organizational or charter documents, 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 give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any material agreement, credit facility, debt
or other material instrument (evidencing Company debt or otherwise) or other
material understanding to which the Company is a party or by which any property
or asset of the Company is bound or affected, or (iii) 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
is subject (including federal and state securities laws and regulations), or by
which any property or asset of the Company is bound or affected.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    Section
3.2.    Representations and
Warranties of the Purchasers.  Each Purchaser, severally, and
not jointly, hereby make the representations and warranties set forth below to
the Company as of the date of its execution of this Agreement:

    

    (a)    Authorization;
Enforcement.  The Purchaser has the requisite corporate,
partnership and/or company power and authority to enter into and to consummate
the transactions contemplated by this Agreement and otherwise to carry out its
obligations hereunder and thereunder.  The execution and delivery of
this Agreement by the Purchaser and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary action on the
part of such Purchaser and no further action is required by such Purchaser, its
board of directors (or equivalent governing body) or its stockholders, member or
partner in connection therewith.  This Agreement has been duly
executed by the Purchaser and, when delivered in accordance with the terms
hereof will constitute the valid and binding obligation of the Purchaser
enforceable against the Purchaser 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)    Ownership of Series D
Preferred Stock.  Schedule I attached
hereto sets forth to aggregate number of shares of Series D Preferred Stock
owned by such Purchaser and each of its Affiliates as of the date of this
Agreement (and prior to the issuance of any shares of Series D Preferred Stock
as payment in kind dividends).   Other than the shares of Common
Stock issued on account of the Unpaid Series D Dividends, there are no accrued
and unpaid dividends owing upon the Series D Preferred Stock owned by such
Purchaser and each of its Affiliates as of the date of this Agreement (it being
understood that the next dividend payment date shall be with respect to the
dividends that accrue for the period of April 1, 2010 through June 30,
2010).

    

    ARTICLE
IV

    MISCELLANEOUS

    

    Section
4.1.    Notices.  Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be made in accordance with the provisions of the
Purchase Agreement.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    Section
4.2.    Survival. All
warranties and representations (as of the date such warranties and
representations were made) made herein or in any certificate or other instrument
delivered by it or on its behalf under this Agreement shall be considered to
have been relied upon by the parties hereto and shall survive the execution and
delivery hereof. This Agreement shall inure to the benefit of and be binding
upon the successors and permitted assigns of each of the parties; provided
however that no party may assign this Agreement or the obligations and rights of
such party hereunder without the prior written consent of the other parties
hereto.

    

    Section
4.3.    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, 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 signature page
were an original thereof.

    

    Section
4.4.    Severability.  If
any provision of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and the
parties will attempt to agree upon a valid and enforceable provision that is a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.

    

    Section
4.5.     Governing
Law.  All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be determined pursuant to
the Governing Law provision of the Purchase Agreement.

    

    Section
4.6.    Entire
Agreement.  The Agreement, 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, which the parties
acknowledge have been merged into such documents, exhibits and
schedules.

    

    Section
4.7.    Construction.  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.  The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party.

    

    Section
4.8    Independent Nature of
Purchasers’ Obligations and Rights.  The obligations of each
Purchaser hereunder are several and not joint with the obligations of any other
Purchasers hereunder, and no Purchaser shall be responsible in any way for the
performance of the obligations of any other Purchaser hereunder. Nothing
contained herein or in any other agreement or document delivered at any closing,
and no action taken by any Purchaser pursuant hereto, 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 with respect to such obligations or the transactions
contemplated by this Agreement. Each Purchaser shall be entitled to protect and
enforce its rights, including without limitation the rights arising out of this
Agreement, and it shall not be necessary for any other Purchaser to be joined as
an additional party in any proceeding for such purpose.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    Section
4.9    Waiver of Late Fees and
Trigger Events.  Each Purchaser, on its own behalf and on
behalf of any Affiliate holding shares of the Company’s preferred stock
(including, without limitation, shares of Series D Preferred Stock) hereby
irrevocably waives (i) any right it may have, as a holder of such preferred
stock, for any interest or late fee under any provision of the COD (including,
without limitation, Section 3(a)) which may have existed on or prior to the date
of this Agreement and (y) any Trigger Event (as defined in the COD) which may
have occurred or existed on or prior to the date of this Agreement.

    

    

    ***********************

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

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

     

     

    
      
        
          	 	ELITE PHARMACEUTICALS,
      INC.	 
	 	 	 	 
	
                	
                  By:
      

                	  	 
	 	 	Name:	 
	 	 	Title:	 

        

      

      

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

    

     

    [PURCHASER
SIGNATURE PAGES TO ELITE

    AMENDMENT
AGREEMENT]

    

    IN
WITNESS WHEREOF, the undersigned have caused this Amendment 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:

              	 

      

    

    

    Address
for Notice of Purchaser:

    

    

    

    DTC
Instructions of Purchaser:

    

    

    

    

    

    

    

    

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
I

    

    
      	
               

              Series
      D Holder

            	 	
              Number
      of Shares of Series D

              Preferred
      Stock held as of June 25, 2010

            	 
	
               

              Midsummer
      Investment LTD

            	 	 	
              3,956

            	 
	
              Bushido  Master
      Capital Fund LP

               

            	 	 	
              761.8

            	 
	
              BCMF
      Trustees LLC

               

            	 	 	
              1302.6

            	 

    

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
A

    FORM OF
CERTIFICATE OF AMENDMENT TO THE SERIES D CERTIFICATE OF DESIGNATION

    

    

    1.           The
following definitions included in Section 1 of the Certificate of Designation
are hereby amended in their entirety and replaced with the
following:

    

    “Change of Control
Transaction” means the occurrence after the date hereof of any of (i) an
acquisition after the date hereof by an individual, legal entity or “group” (as
described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective
control (whether through legal or beneficial ownership of capital stock of the
Corporation, by contract or otherwise) of in excess of 40% of the voting
securities of the Corporation (other than by means of conversion or exercise of
Preferred Stock and the Securities issued together with the Preferred Stock), or
(ii) the Corporation merges into or consolidates with any other Person, or any
Person merges into or consolidates with the Corporation and, after giving effect
to such transaction, the stockholders of the Corporation immediately prior to
such transaction own less than 60% of the aggregate voting power of the
Corporation or the successor entity of such transaction, or (iii) the
Corporation sells or transfers all or substantially all of its assets to another
Person and the stockholders of the Corporation immediately prior to such
transaction own less than 60% of the aggregate voting power of the acquiring
entity immediately after the transaction, or (iv) a replacement at one time or
within a one year period of more than one-half of the members of the
Corporation’s board of directors which is not approved by a majority of those
individuals who are members of the board of directors on the date hereof (or by
those individuals who are serving as members of the board of directors on any
date whose nomination to the board of directors was approved by a majority of
the members of the board of directors who are members on the date hereof), or
(v) the execution by the Corporation of an agreement to which the
Corporation  is a party or by which it is bound, providing for any of
the events set forth in clauses (i) through (iv) above; provided that any
transaction between the Corporation and Epic Pharma (as defined below) or any of
its Affiliates shall not constitute a “Change of Control Transaction” under
clause (i) above .

    

    “Equity Conditions”
means, during the period in question, as to a Holder, (i) after June 25, 2010, the Corporation shall have duly honored all
conversions scheduled to occur or occurring by virtue of one or more Notices of
Conversion of the applicable Holder on or prior to the dates so requested or
required, if any, (ii) the Corporation shall have paid all liquidated
damages and other amounts owing to such Holder in respect of the Series D
Preferred Stock, (iii) (a) there is an effective Conversion Shares
Registration Statement pursuant to which such Holder is permitted to utilize the
prospectus thereunder to resell all of the shares of Common Stock issuable to
such Holder pursuant to the Transaction Documents (and the Corporation believes,
in good faith, that such effectiveness will continue uninterrupted for the
foreseeable future) or (b) the Conversion Shares issuable to such Holder
pursuant to the Transaction Documents may be resold pursuant to Rule 144 without
volume or manner-of-sale restrictions as determined by the counsel to the
Corporation 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, (iv) the Common Stock is trading on a Trading Market and all of
the shares issuable pursuant to the Transaction Documents are listed for trading
on such Trading Market (and the Corporation believes, in good faith, that
trading of the Common Stock on a Trading Market will continue uninterrupted for
the foreseeable future), (v) there is a sufficient number of authorized, but
unissued and otherwise unreserved, shares of Common Stock for the issuance in
connection with the Company obligation to be satisfied by such issuance (such as
the payment in kind of dividends) for which Equity Conditions are required to
exist, (vi) after June 2010, there is no existing Triggering Event or no
existing event which, with the passage of time or the giving of notice, would
constitute a Triggering Event, (vii) the issuance of the shares in question (or,
in the event of an Optional Redemption, of the issuance of all the Conversion
Shares underlying the Series D Preferred Stock) to such Holder would not violate
the limitations set forth in Section 6(c) herein, (viii) except with respect to Section 8(b),
there has been no public announcement of a pending or proposed Fundamental Transaction or Change
of Control Transaction that has not been consummated, and (ix) such Holder is
not in possession of any information that constitutes material non-public information as a
result of the disclosure of such information to such Holder by the Corporation or any of its
Affiliates.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    “Exempt Issuance”
means the issuance of (a) shares of Common Stock or options to employees,
officers or directors of the Corporation pursuant to any stock or option plan
duly adopted by a majority of the non-employee members of the Board of Directors
of the Corporation or a majority of the members of a committee of non-employee
directors established for such purpose, (b) securities upon the exercise or
exchange of or conversion of any Securities issued pursuant to the Purchase
Agreement and/or other securities exercisable or exchangeable for or convertible
into shares of Common Stock issued and outstanding on the date of the Purchase
Agreement, provided that such securities have not been amended since the date of
the Purchase Agreement to increase the number of such securities or to decrease
the exercise, exchange or conversion price of any such securities, (c)
securities issued pursuant to acquisitions or strategic transactions approved by
a majority of the disinterested directors, provided any such issuance shall only
be to a Person which is, itself or through its subsidiaries, an operating
company in, or an individual that operates, a business synergistic with the
business of the Corporation and in which the Corporation receives benefits in
addition to the investment of funds, but shall not include a transaction in
which the Corporation is issuing securities primarily for the purpose of raising
capital or to an entity whose primary business is investing in securities (each
such transaction, a “Strategic
Transaction”), (d) up to a maximum of 1,500,000 shares of Common Stock or
Common Stock Equivalents (subject to adjustment for reverse and forward stock
splits and the like) in any rolling 12 month period issued to consultants,
vendors, financial institutions or lessors in connection with
services  provided by such Persons referred to in this clause (d), but
shall not include a transaction in which the Corporation is issuing securities
primarily for the purpose of raising capital or to an entity whose primary
business is investing in securities, and provided that none of such shares may
be registered for sale or resale by any of such holders; (e) securities issued
as a dividend or distribution any of the Securities pursuant to the terms of the
Transaction Documents; and (f) securities issued in connection with any stock
split, stock dividend or recapitalization of the Common Stock.  As
used herein, the term “Strategic Transaction” shall expressly include the
transactions set forth in, and the securities issued, or to be issued, to Epic
Investments, LLC “Epic Investments”) and Epic Pharma, LLC (“Epic Pharma”)
pursuant to, that certain Strategic Alliance Agreement, dated March 18, 2009, as
amended through the fourth amendment thereof dated June 25, 2009 (such agreement
through the fourth amendment thereof, the “Epic SAA”); provided
that the designation of  the transactions set forth in the Epic SAA as
a “Strategic Transaction” shall have no effect on whether (x) any future
transaction between the Corporation and either Epic Investments or Epic Pharma
shall constitute a “Strategic Transaction” (and any such future transaction
shall be evaluated on a stand-alone basis as to whether such transaction is, or
is not, a “Strategic Transaction”) or (y) any securities issued pursuant to an
amendment or modification to the Epic SAA made following the date of the fourth
amendment thereto or the above-referenced June 2010 amendment shall constitute
an Exempt Issuance).

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    2.           Section
3(a) of the Certificate of Designation is hereby amended in its entirety and
replaced with the following:

     

    
      a)           Dividends
in Cash or in Kind.
Other than in the case of shares of Dividend Payment Preferred Stock, the
Holders shall be entitled to receive, and the Corporation shall pay, cumulative
dividends at the rate per share (as a percentage of the Stated Value per share)
of 8% per annum, payable quarterly on January 1, April 1, July 1 and October 1,
beginning on the first such date after the Original Issue Date and on each
Conversion Date (except that, if such date is not a Trading Day, the payment
date shall be the next succeeding Trading Day) (each such date, a “Dividend
Payment Date”) in (i)
cash, (ii) duly authorized, validly issued, fully paid and non-assessable shares
of Common Stock as set forth in this Section 3(a) (the amount to be paid in
shares of Common Stock, the “Dividend
Share Amount”), (iii)
duly authorized, validly issued, fully paid and non-assessable shares of Series
D Preferred Stock (such shares of Series D Preferred Stock issued in
satisfaction of dividends hereunder, the “Dividend
Payment Preferred Stock”) or (iv) a combination of (i),
(ii) and (iii).  The form of dividend payments to
each Holder shall be determined in the following order of priority: (i) if funds
are legally available for the payment of dividends and the Equity Conditions
have not been met during the 20 consecutive Trading Days immediately prior to
the applicable Dividend Payment Date, in cash only; (ii) if funds are legally
available for the payment of dividends and the Equity Conditions have been met
during the 20 consecutive Trading Days immediately prior to the applicable
Dividend Payment Date, at the sole election of the Corporation, in cash or
shares of Common Stock which shall be valued solely for such purpose at 95% of
the average of the VWAPs for the 20 consecutive Trading Days ending on the
Trading Day that is immediately prior to the Dividend Payment Date; (iii) if
funds are not legally available for the payment of dividends and the Equity
Conditions have been met during the 20 consecutive Trading Days immediately
prior to the applicable Dividend Payment Date, in shares of Common Stock which
shall be valued solely for such purpose at 95% of the average of the VWAPs for
the 20 consecutive Trading Days ending on the Trading Day that is immediately
prior to the Dividend Payment Date; (iv) if funds are not legally available for
the payment of dividends and the Equity Conditions relating to an effective
Conversion Shares Registration Statement  has been waived by such
Holder, as to such Holder only, in unregistered shares of Common Stock which
shall be valued solely for such purpose at 95% of the average of the VWAPs for
the 20 consecutive Trading Days ending on the Trading Day that is immediately
prior to the Dividend Payment Date; (v) at the option of the Corporation,
regardless of whether or not the “Equity Conditions” are then satisfied, in
shares of Dividend Payment Preferred Stock having a Stated Value equal to the
aggregate cash value of such dividend payment; and (vi) if funds are not legally
available for the payment of dividends and the Equity Conditions have not been
met during the 20 consecutive Trading Days immediately prior to the applicable
Dividend Payment Date, then such dividends shall accrue to the next Dividend
Payment Date.  The Holders shall have the same rights and remedies
with respect to the delivery of any such shares as if such shares were being
issued pursuant to Section 6.  Upon the request of the Corporation,
each Holder shall provide to the Corporation, a customary Rule 144
representation letter relating to all shares of Common Stock to be issued as
payment in kind dividends.  On the Closing Date the Corporation shall
have notified the Holders whether or not it may legally pay cash dividends as of
the Closing Date.  Absent prior written notice from the Corporation as
provided for below and subject to the Equity Conditions being met, the default
method of payment shall be in shares of Common Stock.  In the event
the Corporation determines to pay in Dividend Payment Preferred Stock or cash or
the Corporation determines that the Equity Conditions are not met, the
Corporation shall provide at least 20 Trading Day’s prior notice to the Holder
of such its election to pay in Dividend Payment Preferred Stock or cash;
provided, that the failure to notify the Holders that the Equity Conditions are
not met shall not constitute a “Trigger Event” under Section 9(a) hereof.
Dividends on the Series D Preferred Stock shall be calculated on the basis of a
360-day year, shall accrue daily commencing on the Original Issue Date, and
shall be deemed to accrue from such date whether or not earned or declared and
whether or not there are profits, surplus or other funds of the Corporation
legally available for the payment of dividends.  Except as otherwise
provided herein, if at any time the Corporation pays dividends partially in cash
and partially in shares, then such payment shall be distributed ratably among
the Holders based upon the number of shares of Series D Preferred Stock held by
each Holder on such Dividend Payment Date.  Any dividends, whether
paid in cash, Dividend Payment Preferred Stock or shares of Common Stock, that
are not paid within five Trading Days following a Dividend Payment Date shall
continue to accrue and shall entail a late fee, which must be paid in cash, at
the rate of 18% per annum or the lesser rate permitted by applicable law (such
fees to accrue daily, from the Dividend Payment Date through and including the
date of payment); provided that any such late fee which may have accrued prior
to June 25, 2010 is irrevocably waived by all Holders.  Dividend
Payment Preferred Stock shall have the same rights, privileges, preferences as
the other Series D Preferred Stock, except that such Dividend Payment Preferred
Stock shall not be entitled to, nor accrue, any dividends pursuant to this
Section 3(a) and each certificate evidencing any shares of Dividend Payment
Preferred Stock shall bear a legend substantially to the following effect (in
addition to any other legends required by law or by
contract):

       

    

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    “THE
SHARES OF SERIES D PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE WERE ISSUED
AS “DIVIDEND PAYMENT PREFERRED STOCK” UNDER THE TERMS OF CERTIFICATE OF
DESIGNATION OF PREFERENCES, RIGHTS AND LIMITATIONS OF SERIES D 8% CONVERTIBLE
PREFERRED STOCK, FILED WITH SECRETARY OF STATE OF THE STATE OF DELAWARE ON
SEPTEMBER 15, 2008, AS MAY BE AMENDED (THE “CERTIFICATE OF DESIGNATION”) AND, AS
SUCH, DO NOT ENTITLE THE HOLDER HERETO TO ANY DIVIDENDS PURSUANT TO SECTION 3(A)
OF THE CERTIFICATE OF DESIGNATION.

     

    If
at any time, the Corporation determines that creation of a separate series of
Preferred Stock is necessary or advisable for purposes of issuing shares of
Dividend Payment Preferred Stock pursuant to this Section 3(a), the Corporation
shall be authorized, without any further consent or approval of the Holders, to
create such additional series of Preferred Stock (the “Series D-1 Preferred
Stock”) having the same rights, privileges, preferences as the Series D
Preferred Stock, except that such Series D-1 Preferred Stock shall not be
entitled to, nor accrue, any dividends pursuant to this Section
3(a).  Upon creation of such series of Series D-1 Preferred Stock, all
references herein to Dividend Payment Preferred Stock shall be deemed to refer
to such Series D-1 Preferred Stock and no shares of Series D-1 Preferred Stock
shall be issued by the Corporation for any purposes other than the payment of
dividends to the Holders, at the option of the Corporation, under this Section
3(a) in the form of Dividend Payment Preferred Stock.

    

     

    3.           The
first sentence of Section 5 of the Certificate of Designation is hereby amended
in its entirety and replaced with the following:

    

    “Liquidation. Upon any
liquidation, dissolution or winding-up of the Corporation, whether voluntary or
involuntary (a “Liquidation”), the
Holders shall be entitled to receive out of the assets, whether capital or
surplus, of the Corporation an amount equal to the Stated Value, plus any
accrued and unpaid dividends thereon (other than in the case of Dividend Payment
Preferred Stock), and any other fees or liquidated damages owing thereon for
each share of Series D Preferred Stock before any distribution or payment shall
be made to the holders of any Junior Securities, and if the assets of the
Corporation shall be insufficient to pay in full such amounts, then the entire
assets to be distributed to the Holders shall be ratably distributed among the
holders of all outstanding shares of Series D Preferred Stock in accordance with
the respective amounts that would be payable on such shares if all amounts
payable thereon were paid in full.”

    

    

    4.           Section
6(b) of the Certificate of Designation is hereby amended in its entirety and
replaced with the following:

    

    “Conversion
Price.  The conversion price for the Series D Preferred Stock
shall equal $0.07, subject to adjustment herein (the “Conversion
Price”).”

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    5.           The
last four sentences of Section 6(c) of the Certificate of Designation are hereby
amended in their entirety and replaced with the following three sentences:

    

    “The
“Beneficial Ownership
Limitation” shall be 9.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common
Stock issuable upon conversion of Series D Preferred Stock held 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 6(c) to correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Beneficial Ownership Limitation
herein contained or to make changes or supplements necessary or desirable to
properly give effect to such limitation. The limitations contained in this
paragraph shall apply to a successor holder of Series D Preferred
Stock.”

    

    6.           Section
6(d) of the Certificate of Designation is hereby amended in its entirety and
replaced with the following:

    

    “Reserved”

    

    7.           Section
6(e) of the Certificate of Designation is hereby amended in its entirety and
replaced with the following:

    

    “Reserved”

     

    8.           The
second sentence of Section 6(f)(i) of the Certificate of Designation is hereby
amended in its entirety and replaced with the following:

     

    
      “The Corporation shall deliver any
certificate or certificates required to be delivered by the Corporation under
this Section 6 electronically through the Depository Trust Company or another
established clearing corporation performing similar
functions.”

    

    
    

    

    9.           The
first sentence of Section 7(a) of the Certificate of Designation is hereby
amended in its entirety and replaced with the following:

     

    
      “Stock
Dividends and Stock Splits.  If the Corporation, at
any time while this Series D Preferred Stock is outstanding: (A) pays a stock
dividend or otherwise makes a distribution or distributions payable in shares of
Common Stock on shares of Common Stock or any other Common Stock Equivalents
(which, for avoidance of doubt, shall not include any shares of Common Stock or
Dividend Payment Preferred Stock issued by the Corporation upon conversion of,
or payment of a dividend on, the Preferred Stock); (B) subdivides outstanding
shares of Common Stock into a larger number of shares; (C) combines (including
by way of a reverse stock split) outstanding shares of Common Stock into a
smaller number of shares; or (D) issues, in the event of a reclassification of
shares of the Common Stock, any shares of capital stock of the Corporation, then
the Conversion Price shall be multiplied by a fraction of which the numerator
shall be the number of shares of Common Stock (excluding any treasury shares of
the Corporation) outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately after such event.”

    

    
    

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    10.           The
first sentence of the final paragraph of Section 8(a) of the Certificate of
Designation is hereby amended in its entirety and replaced with the
following:

    

    “then
the Corporation may, within two Trading Days after the end of any such Threshold
Period, deliver a written notice to all Holders (a “Forced Conversion Notice”
and the date such notice is delivered to all Holders, the “Forced Conversion
Notice Date”) to cause each Holder to convert all or part of such Holder’s
Series D Preferred Stock (as specified in such Forced Conversion Notice) plus
all accrued but unpaid dividends thereon  (other than in the case of
Dividend Payment Preferred Stock) and all liquidated damages and other amounts
due in respect of the Series D Preferred Stock pursuant to Section 6, it being
agreed that the “Conversion Date” for purposes of Section 6 shall be deemed to
occur on the third Trading Day following the Forced Conversion Notice Date (such
third Trading Day, the “Forced Conversion Date”).”

    

    11.           The
following is hereby added to the Certificate of Designation as new Section
8(c):

    

    “8(c)    Automatic
Monthly Conversions.  Subject to the terms
herein, on each Monthly Conversion Date (as defined below), a number of shares
of Series D Preferred Stock equal to each Holder’s pro-rata portion (based on
the shares of Series D Preferred Stock held by each Holder on June 25, 2010) of
the Monthly Conversion Amount (as defined below) shall automatically convert
into shares of Common Stock at the then-effective Conversion Price (each such
conversion, a (the “Monthly
Conversion”). Each
Holder may convert, pursuant to Section 6(a), all or a portion of its Series D
Preferred Stock subject to a Monthly Conversion at any time prior to a Monthly
Conversion Date.  Any Series  D Preferred Stock converted
(other than pursuant to a Monthly Conversion) during the calendar month
immediately prior to a Monthly Conversion Date shall be applied to such Holder’s
pro rata portion of such Monthly Conversion Amount (up to such Holder’s pro rata
portion for such month).  Notwithstanding anything to the contrary set
forth herein, the Corporation shall not be permitted to effect a Monthly
Conversion on a Monthly Conversion Date unless (i) the Common Stock shall be
listed or quoted for trading on a Trading Market, (ii) there is a sufficient
number of authorized shares of Common Stock for issuance of all Common Stock to
be issued upon such Monthly Conversion, (iii) as to any Holder, the issuance of
the shares shall not cause a breach of any provision of Section 6(c) herein,
(iv) if requested by the Holder and a Rule 144 Rep Letter (as defined below)
shall have been provided by such Holder after request from the Corporation, the
Conversion Shares are delivered electronically through the Depository Trust
Company or another established clearing corporation performing similar
functions, may be resold by the Holder pursuant to an exemption under the
Securities Act and are otherwise free of restrictive legends and trading
restrictions on the Holder, (v) there has been no
public announcement of a pending or proposed Fundamental Transaction or Change
of Control Transaction that has not been consummated, (vi) the applicable Holder
is not in possession of any information provided to the applicable Holder by the
Corporation that constitutes material non-public information, and (vii) the average VWAP for the 20
Trading Days immediately prior to the applicable Monthly Conversion Date equals
or exceeds the then-effective Conversion Price. Shares of the Series D Preferred
Stock issued to the Holders as Dividend Payment Preferred Stock shall be the
last shares of Series D Preferred Stock to be subject to Monthly Conversion. As
used herein, the following terms shall have the following meanings: (i)
“Monthly
Conversion Date” means
the first day of each month, commencing on August 1, 2010, and terminating on
the date the Series D Preferred Stock is no longer outstanding; (ii)
“Monthly
Conversion Amount”
means an aggregate Stated Value of Series D Preferred Stock among all Holders
that is equal to 25% of aggregate dollar trading volume of the Common Stock
during the 20 Trading Days immediately prior to the applicable Monthly
Conversion Date (such 20 Trading Day period, the “Measurement
Period”),
increasing  to 35% of the aggregate dollar trading volume during the
Measurement Period if the average VWAP during such Measurement Period equals or
exceeds $0.12 (subject to adjustment for forward and reverse stock splits and
the like that occur after June 25, 2010) and further increasing to 50% of the
aggregate dollar trading volume during such Measurement Period if the average
VWAP during such Measurement Period equals or exceeds $0.16 (subject to
adjustment for forward and reverse stock splits and the like that occur after
June 25, 2010).   All shares of Common Stock issued on a Monthly
Conversion Date shall be delivered otherwise in accordance with the procedures
and time frames set forth in Section 6 above. Upon the request of the
Corporation, each Holder shall provide to the Corporation, a customary Rule 144
representation letter relating to all shares of Common Stock to be issued upon
each Monthly Conversion (a “Rule 144
Rep Letter”).

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    12.           The
following is hereby added as the last sentence of Section 9(b) of the
Certificate of Designation:

     

    
      “Notwithstanding
anything herein the contrary, the term “Triggering Event” shall not include any
transactions contemplated under the Epic SAA”, including, without limitation,
the issuance of any shares of Common Stock or Common Stock
Equivalents.

       

      
        
          
          

        

        
          19

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