Document:

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

                                    INDENTURE

                                     BETWEEN

                    NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY

                                       AND

                        THE BANK OF NEW YORK, AS TRUSTEE

                           DATED AS OF AUGUST 15, 2005

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

<PAGE>

                                TABLE OF CONTENTS

                                    ARTICLE I

                         DEFINITIONS AND INTERPRETATIONS
<TABLE>
<CAPTION>
                                                                                        PAGE
                                                                                        ----
<S>             <C>                                                                      <C>
Section 1.01    Definitions................................................................5

                                                  ARTICLE II

                                  AUTHORIZATION, TERMS AND EXECUTION OF BONDS

Section 2.01    Issuance of Bonds in One or More Series...................................11
Section 2.02    Particular Terms of the Initial Bonds.....................................11
Section 2.03    General Terms of Bonds....................................................11
Section 2.04    Execution of Bonds........................................................14
Section 2.05    Authentication of Bonds...................................................14
Section 2.06    Interchangeability of Bonds...............................................15
Section 2.07    Transfer and Registry of Bonds and Agency Therefor........................15
Section 2.08    Transfer of Bonds.........................................................15
Section 2.09    Ownership of Bonds and Effect of Registration.............................15
Section 2.10    Mutilated, Destroyed, Stolen or Lost Bonds................................15
Section 2.11    Regulations with Respect to Registration, Exchanges and Transfers.........16
Section 2.12    Cancellation and Destruction of Surrendered Bonds.........................16

                                                  ARTICLE III

                                     AUTHENTICATION AND DELIVERY OF BONDS

Section 3.01    Authorization of Bonds....................................................17
Section 3.02    Issuance of Initial Bonds.................................................17
Section 3.03    Disposition of Proceeds of Bonds..........................................17
Section 3.04    Issuance of Additional Bonds..............................................17
</TABLE>

                                        i

<PAGE>

                                                  ARTICLE IV

                                               CREATION OF FUNDS
<TABLE>
<S>             <C>                                                                      <C>
Section 4.01    Establishment of Funds and Accounts.......................................20
Section 4.02    Payments into the Bond Fund...............................................20
Section 4.03    Application of the Bond Fund..............................................20
Section 4.04    Moneys to be Held in Trust................................................21
Section 4.05    No Further Payments Needed................................................21
Section 4.06    Funds Held for Bonds......................................................21
Section 4.07    Rebate Fund...............................................................22
Section 4.08    Payments into the Project Fund; Disbursements.............................22
Section 4.09    Completion of the Project.................................................22
Section 4.10    Debt Service Reserve Fund.................................................23

                                                   ARTICLE V

                                       INVESTMENT AND DEPOSIT OF MONIES

Section 5.01    Deposits..................................................................24
Section 5.02    Investments...............................................................24

                                                  ARTICLE VI

                                              REDEMPTION OF BONDS

Section 6.01    Bonds Subject to Redemption...............................................26
Section 6.02    Bonds Subject to Redemption; Selection of Bonds to be
                Called for Redemption.....................................................26
Section 6.03    Special Mandatory Redemption - Breach of Certain Public
                 Purpose Covenants........................................................27
Section 6.04    Procedure for Redemption .................................................28
Section 6.05    Payment of Redemption Price...............................................29

                                                  ARTICLE VII

                                          COVENANTS OF THE AUTHORITY

Section 7.01    Payment of Principal of and Interest on Bonds.............................30
Section 7.02    Corporate Existence; Compliance with Laws.................................30
Section 7.03    Enforcement of Agreement; Notice of Default...............................30
Section 7.04    Further Assurances........................................................30
Section 7.05    Financing Statements......................................................30
Section 7.06    Intentionally Omitted.....................................................31
</TABLE>

                                                      ii

<PAGE>

<TABLE>
<S>             <C>                                                                      <C>
Section 7.07    Creation of Liens.........................................................31
Section 7.08    Exclusion of Interest on the Bonds from Gross Income......................31
Section 7.09    Continuing Disclosure.....................................................31
Section 7.10    Event of Default..........................................................31
Section 7.11    Immunity of Authority.....................................................31
Section 7.12    Authority and Trustee Entitled to Indemnity...............................32
Section 7.13    Neither Authority Nor Trustee Responsible for Insurance,
                Taxes, Execution of Indenture, Acts of the Authority or Application
                of Moneys Applied in Accordance with this Indenture.......................32
Section 7.14    Authority and Trustee May Rely on Certificates............................33
Section 7.15    Further Assurances........................................................33

                                                 ARTICLE VIII

                                             DEFAULTS AND REMEDIES

Section 8.01    Events of Default.........................................................34
Section 8.02    Enforcement of Agreement..................................................35
Section 8.03    Judicial Proceedings by Trustee...........................................35
Section 8.04    Discontinuance or Abandonment of Proceedings..............................36
Section 8.05    Bondholders May Direct Proceedings........................................36
Section 8.06    Limitations on Actions by Bondholders.....................................36
Section 8.07    Trustee May Enforce Rights Without Possession of Bonds....................37
Section 8.08    Remedies Not Exclusive....................................................37
Section 8.09    Delays and Omissions Not to Impair Rights.................................37
Section 8.10    Application of Moneys in Event of Default.................................37
Section 8.11    Trustee's Right to Receiver; Compliance with Act..........................38
Section 8.12    Trustee and Bondholders Entitled to All Remedies Under Act................38

                                                  ARTICLE IX

                                                  THE TRUSTEE

Section 9.01    Acceptance of Trust.......................................................39
Section 9.02    No Responsibility, Etc....................................................39
Section 9.03    Trustee May Act Through Agents; Answerable Only for Willful
                Misconduct or Negligence..................................................39
Section 9.04    Compensation..............................................................39
Section 9.05    Notice of Default; Right to Investigate...................................39
Section 9.06    Obligation to Act on Defaults.............................................40
Section 9.07    Reliance on Requisition, Etc..............................................40
</TABLE>

                                                      iii

<PAGE>

<TABLE>
<S>             <C>                                                                      <C>
Section 9.08    Trustee May Deal in Bonds; Other Financial Transactions...................40
Section 9.09    No Duty to Renew Insurance................................................40
Section 9.10    Intentionally Omitted.....................................................40
Section 9.11    Resignation of Trustee....................................................40
Section 9.12    Removal of Trustee........................................................40
Section 9.13    Appointment of Successor Trustee..........................................41
Section 9.14    Qualification of Successor................................................41
Section 9.15    Instruments of Succession.................................................41
Section 9.16    Merger of Trustee.........................................................41

                                                     ARTICLE X

                                      EXECUTION OF INSTRUMENTS BY BONDHOLDERS
                                          AND PROOF OF OWNERSHIP OF BONDS

Section 10.01     Ownership of Bonds......................................................43

                                                    ARTICLE XI

                                            AMENDMENTS AND SUPPLEMENTS

Section 11.01     Amendments and Supplements Without Bondholders' Consent.................44
Section 11.02     Amendments with Bondholders' Consent....................................44
Section 11.03     Company Consent Required................................................44
Section 11.04     Amendment of Agreement..................................................44
Section 11.05     Trustee Authorized to Join in Amendments and Supplements;
                  Reliance on Counsel.....................................................45

                                                    ARTICLE XII

                                                    DEFEASANCE

Section 12.01     Defeasance..............................................................46
                                                   ARTICLE XIII

                                                   MISCELLANEOUS

Section 13.01     Dissolution.............................................................47
Section 13.02     No Rights Conferred on Others...........................................47
Section 13.03     Deposit of Funds for Payment of Bonds...................................47
Section 13.04     Severability of Invalid Provisions......................................47
</TABLE>

                                       iv
<PAGE>

<TABLE>
<S>             <C>                                                                      <C>
Section 13.05     No Personal Recourse....................................................48
Section 13.06     Notice..................................................................48
Section 13.07     Execution in Several Counterparts.......................................48
Section 13.08     Laws Governing Indenture................................................49
Section 13.09     Successors and Assigns..................................................49
Section 13.10     Headings for Convenience Only...........................................49
Section 13.11     Credits on the Notes....................................................49
Section 13.12     Payments Due on Saturdays, Sundays and Holidays.........................49

Section 13.13     Form of Bonds...........................................................49

EXHIBIT A - FORM OF SERIES A BOND
EXHIBIT B - FORM OF SERIES B BOND
</TABLE>

                                        v
<PAGE>

                                    INDENTURE

         THIS  INDENTURE,  dated as of August 15,  2005,  between the NEW JERSEY
ECONOMIC  DEVELOPMENT  AUTHORITY (the "Authority"),  a public body corporate and
politic constituting an instrumentality of the State of New Jersey, and THE BANK
OF NEW YORK, as Trustee (the "Trustee"),  a state banking corporation  organized
and  existing  under  the laws of the  State of New  York,  with  fiduciary  and
corporate trust powers in New Jersey,  having a corporate trust office and place
of business in West Paterson, New Jersey.

                              W I T N E S S E T H:

         WHEREAS,   The  New  Jersey   Economic   Development   Authority   Act,
constituting  Chapter 80 of the Pamphlet Laws of 1974 of the State of New Jersey
(the  "State"),  approved  on August 7, 1974 as amended and  supplemented,  (the
"Act")  declares  it to be in the  public  interest  and to be the policy of the
State to foster and promote the economy of the State, increase opportunities for
gainful  employment  and  improve  living  conditions,  assist  in the  economic
development or  redevelopment  of political  subdivisions  within the State, and
otherwise contribute to the prosperity,  health and general welfare of the State
and  its  inhabitants  by  inducing   manufacturing,   industrial,   commercial,
recreational,  retail,  service and other  employment  promoting  enterprises by
making available financial  assistance,  to locate,  remain or expand within the
State; and

         WHEREAS,  the  Authority  was created to aid in remedying the aforesaid
conditions and further to implement the purposes of the Act, and the Legislature
has  determined  and declared as a matter of express  legislative  determination
that the authority and powers conferred upon the Authority under the Act and the
expenditure of moneys pursuant  thereto  constitutes a serving of a valid public
purpose and that the enactment of the  provisions set forth in the Act is in the
public interest and for the public benefit and good; and

         WHEREAS,  the  Authority,  to  accomplish  the  purposes of the Act, is
empowered to extend credit to such employment promoting  enterprises in the name
of the Authority, on such terms and conditions and in such manner as it may deem
proper  for such  consideration  and  upon  such  terms  and  conditions  as the
Authority may determine to be reasonable; and

         WHEREAS,  on  September  2, 1999,  the  Authority  issued its  Economic
Development Bonds (Elite Pharmaceuticals,  Inc. - 1999 Project) in the aggregate
principal  amount of  $3,000,000  (the  "1999  Bonds")  for the  purpose  of the
acquisition of land and an existing  approximately  15,000 sq. ft.  building and
the acquisition of equipment,  to be used in the manufacturing of pharmaceutical
products to be located in the municipality of Northvale, County of Bergen, State
of New Jersey (the "Project Site"); and

         WHEREAS, Elite Pharmaceuticals, Inc. (the "Company") has requested, and
the Authority has  determined to issue,  its Economic  Development  Bonds

<PAGE>

(Elite  Pharmaceuticals,  Inc. - 2005 Project) in the aggregate principal amount
of $3,660,000 (the "Series A Bonds") for the purpose of currently  refunding and
redeeming the 1999 Bonds and to finance the acquisition of additional  equipment
to be used in the manufacturing of  pharmaceutical  products at the Project Site
(the "Project") and its Economic Development Bonds (Elite Pharmaceuticals,  Inc.
- 2005 Project),  Federally Taxable Series B, in the aggregate  principal amount
of  $495,000  (the  "Series  B Bonds";  together  with the  Series A Bonds,  the
"Initial  Bonds") for the purpose of refinancing  the purchase of equipment used
at the Project Site and to finance costs of issuance incurred in connection with
the  issuance of the Initial  Bonds,  all  pursuant to a Loan  Agreement  by and
between  the  Authority  and the  Company  dated  as of  August  15,  2005  (the
"Agreement"); and

         WHEREAS,  the Authority at a meeting  thereof duly convened and held on
July 12, 2005, has duly  authorized the execution and delivery of this Indenture
and the issuance  thereunder  of the Initial Bonds upon and subject to the terms
and conditions hereinafter set forth; and

         WHEREAS,  all acts and things have been done and  performed,  which are
necessary to make the Initial Bonds,  when executed and issued by the Authority,
authenticated  by the  Trustee  and  delivered,  the  valid  and  binding  legal
obligations  of the  Authority in  accordance  with their terms and to make this
Indenture  a  valid  and  binding  agreement  for  the  security  of  the  Bonds
authenticated and delivered under this Indenture.

         NOW  THEREFORE,  THIS  INDENTURE  WITNESSETH:  That, to provide for the
payment of principal  or  Redemption  Price,  as the case may be and interest in
respect of the Bonds, issued and outstanding under this Indenture, together with
interest  thereon,  the rights of the  bondholders  and the  performance  of the
covenants  contained  in said Bonds and  herein,  the  Authority  has caused the
Company to deliver the Agreement, the Mortgage, the Assignment of Leases and the
Notes (as  hereinafter  defined) and as otherwise set forth in the Agreement and
does hereby sell, assign,  transfer,  set over and pledge unto the Trustee,  its
successors  in the trust  and its  assigns  forever,  all the  right,  title and
interest  of the  Authority  in and to,  and  remedies  under,  the  Notes,  the
Mortgage,  the  Assignment of Leases and the Agreement and all the right,  title
and  interest of the  Authority  in and to the  Revenues,  the  Collateral,  the
Project,  the  Project  Fund,  the Bond  Fund and all  other  funds  under  this
Indenture  (other than the Rebate Fund) (as such terms are hereinafter  defined)
(hereafter referred to as the "Trust Estate").

         TO HAVE  AND TO HOLD  all and  singular  said  Trust  Estate;  granted,
bargained, sold, assigned,  transferred,  conveyed, mortgaged, pledged, aliened,
remised,  released,  confirmed  and set over by the  Authority  as  aforesaid or
intended so to be, unto the said Trustee, its successors and assigns, forever.

         IN TRUST,  NEVERTHELESS,  under and subject to the terms and conditions
hereinafter  set forth,  for the equal  benefit,  protection and security of the
Holders  of any and all of the  Bonds,  all of which  regardless

                                       2
<PAGE>

of the time or times of their  issuance  or  maturity,  shall be of equal  rank,
without  preference,  priority or distinction of any of the Bonds over any other
thereof, except as otherwise provided in or pursuant to this Indenture,  and for
securing  the  observance  and  performance  of all the  conditions,  covenants,
promises,  stipulations,  agreements  and terms and provisions of this Indenture
and the uses and purposes herein expressed and declared.

         EXPRESSLY RESERVING to the Authority the concurrent right:

                  (a) to receive notices under this Indenture and the Agreement;

                  (b) to consent to any amendments, modifications or supplements
to the Agreement and this Indenture;

                  (c) to  receive  payments  under and to  enforce  pursuant  to
Article VII of the Agreement all provisions or covenants in the Agreement  under
and in accordance with the terms of the following sections:

                  Section 3.02 relating to disbursements from the Project Fund;

                  Section 3.03 relating to the  limitations  of the  Authority's
liability;

                  Section   4.01   relating  to  certain   representations   and
warranties of the Company;

                  Section 4.11 relating to untrue statements of the Company;

                  Section 6.01 relating to the  preservation of property and the
Collateral;

                  Section 6.02 relating to insurance;

                  Section 6.04 relating to the Project;

                  Section  6.05  relating  to  compliance   with  the  Code  and
arbitrage regulations;

                  Section 6.07  relating to  compliance  with the  Department of
Environmental Protection;

                  Section 6.08 relating to financial statements;

                  Section 6.10 relating to indemnification;

                  Section 6.12 relating to reporting the number of employees;

                  Section 6.14 relating to inspection of the Project;

                                       3
<PAGE>

                  Section 6.20 relating to a Project sign;

                  Section 6.21 relating to brokerage fees;

                  Section 6.24 relating to compliance with the Indenture;

                  Section 7.05  relating to the payment of  attorneys'  fees and
expenses;

                  Section 7.07 relating to certain remedies of the Authority;

                  Section 8.03 relating to the payment of fees and expenses;

                  Section   8.06   relating   to   modifications,   waivers  and
amendments;

                  Section 8.08 relating to the Authority's assignment;

                  Section 8.09  relating to further  assurances  and  corrective
instruments; and

                  Section 8.13 relating to the special,  limited  obligations of
the Authority;

                  (d) the  concurrent  right  to  receive  any and all  reports,
notices,  surveys,  certificates and evidences of performance  which the Company
may be required to furnish  pursuant to the terms of the Agreement and the right
to exercise any rights of inspection  granted to it pursuant to the terms of the
Agreement,  whether  or not the  Trustee  shall  have  exercised  or shall  have
purported to exercise such rights and remedies,  without limiting the obligation
of the Trustee to do so;

                  (e) to receive  indemnification and to be held harmless by the
Company;

                  (f) to  redeem  or cancel  the  Bonds in  accordance  with the
Agreement and this Indenture;

whether or not the  Trustee  shall have  exercised  or shall have  purported  to
exercise  such rights and  remedies,  without  limiting  the  obligation  of the
Trustee  to do so (the  foregoing  rights  being  referred  to as the  "Reserved
Rights").

                                       4
<PAGE>

                                    ARTICLE I

                         DEFINITIONS AND INTERPRETATIONS

         SECTION 1.01.  DEFINITIONS.  As used or referred to in this  Indenture,
unless a different meaning clearly appears from the context:

         "Act" shall have the meaning given in the recitals hereto;

         "Additional  Bonds" shall mean any series of Bonds  issued  pursuant to
Section 3.04 hereof subsequent to the Initial Bonds;

         "Additional  Notice"  shall mean the notice of  redemption  required by
Section 6.03;

         "Agreement" shall have such meaning given in the recitals hereto;

         Articles and  Sections  mentioned by number are the respective Articles
and Sections of this Indenture so numbered;

         "Assignment of Leases" means the assignment dated the Closing Date from
the Company to the  Authority,  which is made part of the record of  proceedings
and assigning to the Authority the benefits of existing and future leases on the
Project;

         "Authority" shall have the meaning given in the recitals hereto;

         "Authorized  Authority  Representative"  shall mean any  individual  or
individuals duly authorized by the Authority to act on its behalf;

         "Authorized   Denominations"  means  denominations  of  $5,000  or  any
integral multiple thereof;

         "Bond" or "Bonds" means any of the bonds of the Authority authenticated
and delivered under and pursuant to this Indenture,  including the Initial Bonds
and  Additional  Bonds,  if any.  Such Bonds may be Taxable  Bonds or Tax-exempt
Bonds;

         "Bondholder"  or the term "Holder" or any similar term,  when used with
reference to a Bond or Bonds, means any person who shall be the registered owner
of any Bond or Bonds;

                                       5
<PAGE>

         "Bond Counsel" means  McManimon & Scotland,  L.L.C.,  or an attorney or
firm of attorneys of nationally  recognized standing on the subject of municipal
bonds;

         "Bond  Fund"  means the fund so  designated  which is  established  and
created by Section 4.01 hereof;

         "Bond Year" shall have the same meaning as that in the Agreement;

         "Certified  Resolution"  means  a copy of one or  more  resolutions  or
amending  resolutions  certified by the Secretary or Assistant  Secretary of the
Authority under its seal to have been duly adopted by the Authority and to be in
effect on the date of such certification;

         "Closing Date" means August 31, 2005;

         "Collateral"  shall  mean  the  land,  building,   fixtures  and  other
facilities in which the  Authority is granted a lien by the Mortgage,  the lease
and revenues  assigned by the  Assignment of Leases,  the assets  subject to the
security  interest created by the Security  Agreement and the security  interest
under Section 2.07 of the Agreement;

         "Company" shall have the meaning given in the recitals hereto;

         "Cost" or "Costs"shall have the same meaning as that in the Agreement;

         "Counsel"  means an attorney at law or law firm  serving as counsel for
the Authority, the Trustee or the Company;

         "Debt Service Reserve Fund" shall mean the Fund  established by Section
4.10 hereof;

         "Event of Default"  means any of the events  specified  in Section 8.01
hereof to be an Event of Default;

         "Government  Obligations"  means (a) direct  obligations  of the United
States for which its full faith and credit are  pledged  for the full and timely
payment  thereof,  (b)  obligations of a person  controlled or supervised by and
acting as an agency or  instrumentality  of the United  States,  the  payment of
which is unconditionally guaranteed as a full faith and credit obligation of the
United  States for the full and timely  payment  thereof  or (c)  securities  or
receipts  evidencing  ownership  interests in obligations or specified  portions
(such as principal or interest) of obligations described in (a) or (b).

         "Guarantor"  shall  mean Elite  Laboratories,  Inc.  and any  successor
guarantor of the Loans;

         "Indenture"  means this Trust  Indenture as amended or  supplemented at
the time in question;

                                       6
<PAGE>

         "Initial Bonds" shall have the meaning given in the recitals hereto;

         "Interest Account" means the account so designated which is established
and created by Section 4.01 hereof;

         "Interest  Payment  Date"  means  March 1 and  September 1 of each Bond
Year, commencing March 1, 2006;

         "Investment  Obligations"  means,  to the extent  permitted  by law (i)
Government Obligations,  (ii) obligations rated in one of the two highest rating
categories by Moody's Investors Service, Inc. or Standard & Poor's Rating Group,
a division of McGraw Hill,  Inc., the interest on which is excludable from gross
income  under  Section  103 of the Code,  (iii)  money  market  funds  investing
exclusively in the  obligations  listed in (i) or (ii) or repurchase  agreements
secured by such  obligations  rated AAA or better which may include  funds as to
which  the  Trustee  or  any  affiliate  of  the  Trustee   provides  and  earns
compensation  for  managerial,   investment  and/or  custodial  services,   (iv)
repurchase  agreements secured exclusively by obligations listed in (i) or (ii),
(v)  commercial  paper of a quality rated either A-1 or P-1 by Standard & Poor's
Rating  Group,  a division of McGraw Hill,  Inc. or Moody's  Investors  Service,
Inc.,  (vi) shares of an  Investment  Company,  organized  under the  Investment
Company Act of 1940, as amended,  including an Investment  Company for which the
Trustee or any affiliate provides and is compensated for managerial,  investment
and/or custodial services, which invests its assets substantially in obligations
of the type described in clauses (i) and (ii) or repurchase  agreements  secured
by such obligations rated AAA or better, (vii) bank deposits or certificates, if
such  deposits or  certificates  are insured by FDIC or FSLIC,  (viii)  banker's
acceptances of any bank (including the Trustee)  organized under the laws of the
State or the United  States or any foreign  bank having a branch  organized  and
existing  under  the laws of the  State or of the  State of New York  rated A or
higher by Standard & Poor's  Rating  Group,  a division of McGraw Hill,  Inc. or
Moody's Investors Service, Inc., and (ix) guaranteed investment contracts (GICs)
rated BBB or higher by  Standard & Poor's  Rating  Group,  a division  of McGraw
Hill, Inc. or Moody's Investors Service, Inc.;

         "Loans" shall mean the Series A Loan and the Series B Loan;

         "Majority of Owners" means collectively,  the owners of more than fifty
percent (50%) of the Bonds Outstanding;

         "Mortgage" shall mean the first lien mortgage on the Premises,  subject
only to Permitted Encumbrances, which is made part of the record of proceedings,
executed by the Company, as Mortgagor and given to the Authority, as Mortgagee;

         "Notes" shall mean the Series A Note and the Series B Note;

         "1999 Bonds" shall have the meaning given in the recitals hereto;

                                       7
<PAGE>

         "Outstanding",  when  used  with  reference  to  Bonds  and  as of  any
particular   date,   describes  all  Bonds   theretofore   and  thereupon  being
authenticated  and  delivered  except (a) any Bond canceled by the Trustee at or
before  said date,  (b) any Bond for the  payment or  redemption  of which cash,
equal to the principal amount or Redemption  Price thereof,  as the case may be,
with interest to the date of maturity or redemption date, shall have theretofore
been  deposited  with the Trustee in trust  whether upon or prior to maturity or
the redemption  date of such Bonds and,  except in the case of a Bond to be paid
at maturity, of which notice of redemption shall have been given or provided for
in  accordance  with Article VI, and (c) any Bond in lieu of or in  substitution
for which another Bond shall have been  authenticated and delivered  pursuant to
the provisions of this Indenture;

         "Paying  Agent"  means any  paying  agent  appointed  pursuant  to this
Indenture,  and  its  successor  or  successors  of  any  other  corporation  or
association  which may at any time be  substituted in its place pursuant to this
Indenture;

         "Placement Agent" means Ryan Beck & Co., Shrewsbury, New Jersey;

         "Premises" shall mean the premises and all improvements thereon located
in the municipality of Northvale,  County of Bergen,  in the State, as described
in Schedule A to the Mortgage;

         "Principal   Account"   means  the  account  so  designated   which  is
established and created by Section 4.01 hereof;

         "Principal  Installment  Date" means any date on which the principal of
any Bonds shall mature;

         "Project" shall have the meaning given in the recitals hereto;

         "Project Site" shall have the meaning given in the recitals hereto;

         "Rebatable  Arbitrage" shall have the meaning given to such term in the
Agreement;

         "Rebate  Fund"  shall  mean  the  fund so  designated  and  established
pursuant to Section 4.07;

         "Redemption  Price",  when  used  with  respect  to a Bond,  means  the
principal amount of such Bond plus the applicable  premium,  if any, and accrued
interest  payable  upon  redemption  thereof  in  the  manner   contemplated  in
accordance with its terms pursuant to this Indenture;

         "Reserved Rights" shall have the meaning given in the recitals hereto;

         "Revenues"  means (i) all amounts payable in respect of the Notes which
may in the future be delivered to the Trustee, (ii) investment income in respect

                                       8
<PAGE>

of any money  held by the  Trustee,  and (iii)  any  other  amounts  paid by the
Company to the  Trustee  pursuant to the  Agreement  (subject,  however,  to the
Reserved Rights of the Authority);

         "Security  Agreement"  shall mean the  Security  Agreement  dated as of
August 15, 2005 by and  between the  Guarantor  and the  Authority  in which the
Guarantor grants a security interest in certain assets described therein;

         "Series A Bonds" shall have the meaning given in the recitals hereto;

         "Series A Loan" shall mean the loan from the  Authority  to the Company
of the proceeds of the Series A Bonds;

         "Series A Note" shall mean the promissory  note dated the Closing Date,
executed and delivered by the Company to the Authority  evidencing  the Series A
Loan;

         "Series B Bonds" shall have the meaning given in the recitals hereto;

         "Series B Loan" shall mean the loan from the  Authority  to the Company
of the proceeds of the Series B Bonds;

         "Series B Note" shall mean the promissory  note dated the Closing Date,
executed and delivered by the Company to the Authority  evidencing  the Series B
Loan;

         "Significant  Bondholder" means any bond fund or bondholder which owns,
manages,  controls or the like more than One  Million  Dollars  ($1,000,000)  of
Bonds Outstanding;

         "State" shall have the meaning given in the recitals hereto;

         "Supplemental  Indenture"  means any Indenture  amending,  modifying or
supplementing  this Indenture made, signed and becoming  effective in accordance
with the terms of Article XI hereof;

         "Taxable  Bonds" shall mean Bonds,  including  the Series B Bonds,  the
interest on which is includable  in the gross income of the holders  thereof for
federal income tax purposes;

         "Tax-exempt Bonds" shall mean Bonds,  including the Series A Bonds, the
interest on which is not  includable in the gross income of the holders  thereof
for federal income tax purposes;

         "Trust Estate" shall have the meaning given in the recitals hereto;

         "Trustee"shall have the meaning given in the recitals hereto;

                                       9
<PAGE>

         The  words  "hereof",  "herein",  "hereto",  "hereby"  and  "hereunder"
(except in the form of Bonds) refer to this entire Indenture.

         Terms  defined  in the  Agreement  are  hereby  incorporated  herein by
reference as though set forth in full.

                                       10
<PAGE>

                                   ARTICLE II

                   AUTHORIZATION, TERMS AND EXECUTION OF BONDS

         SECTION 2.01.  ISSUANCE OF BONDS IN ONE OR MORE SERIES.  The Bonds may,
at the election of the Authority, be issued in one or more series and, except as
hereinafter  provided,  shall be designated  generally as "Economic  Development
Bonds  (Elite   Pharmaceuticals,   Inc.  -  2005  Project)"  with  such  further
appropriate  particular  designations added to or incorporated in such title for
the Bonds of any  particular  series as the Authority may  determine.  Each Bond
shall bear upon the face thereof the  designation  so selected for the series to
which it belongs.

         SECTION 2.02.  PARTICULAR  TERMS OF THE INITIAL  BONDS.  There shall be
issued under and secured by this  Indenture a series of Bonds for the purpose of
financing  the  Project to be  designated  "Economic  Development  Bonds  (Elite
Pharmaceuticals,  Inc. - 2005  Project),  Series A" in the  aggregate  principal
amount of $3,660,000  and a series of Bonds for the purpose of  refinancing  the
purchase of equipment  used at the Project Site and to finance costs of issuance
incurred in  connection  with the issuance of the Initial Bonds to be designated
"Economic  Development  Bonds  (Elite  Pharmaceuticals,  Inc.  - 2005  Project),
Federally Taxable Series B" in the aggregate  principal amount of $495,000,  and
shall  contain  substantially  the  terms  recited  in the form of the  Bonds in
Section  13.13  hereof.  The  Initial  Bonds shall  provide  that  principal  or
Redemption Price, and interest in respect thereof,  shall be payable only out of
Revenues.

         SECTION  2.03.  GENERAL  TERMS OF BONDS.  Every  Bond  shall  bear such
designation or title,  including the words  "Economic  Development  Bond" with a
series designation as may be fixed herein or by Supplemental  Indenture prior to
its  authentication  on original  issuance by the  Trustee.  Every Bond shall be
payable,  with respect to principal or Redemption  Price,  and interest,  in any
coin or currency of the United States of America which, at the respective  dates
of payment  thereof,  is legal  tender for payment of public and private  debts.
Every Bond shall be issued as fully registered bonds in the form of a Bond or in
the  form of book  entry  and  payable  to Cede & Co.  or to a named  person  or
registered  assigns,  shall be  substantially  in the form as  provided  in this
Indenture,  with such  omissions,  insertions  and  variations  as are  properly
required  and as  specified  in a  Supplemental  Indenture.  The Bonds  shall be
authenticated  on or after the date of this  Indenture,  but may be dated a date
preceding  the date of this  Indenture for the purposes of  calculating  accrued
interest and the interest payable on the Initial Interest Payment Date. Interest
on the Bonds shall be calculated on the basis of a 360-day year of twelve thirty
day months.  Interest on each  Initial  Bond shall be payable from and after its
date  first on  March  1,  2006  and on  March 1 and  September  1 in each  year
thereafter to any Holder of Bonds as of the close of business on the record date
next preceding such Interest Payment Date until the Authority's  obligation with
respect to the payment of the principal  sum thereof shall be paid.  Payments of
principal,  Redemption Price or interest due on the Bonds may

                                       11
<PAGE>

also be  payable  by  electronic  funds  transfer  to any Holder of Bonds in the
aggregate  principal amount of $1,000,000 or more; provided such Holder requests
such  electronic  funds transfer and delivers to the Trustee in writing,  in the
case of an  interest  payment,  not  later  than the  close of  business  on the
December15 or June 15 (each a "Record  Date")  preceding such transfer or in the
case of a payment of principal or Redemption Price, and not later than the close
of business on June 15 preceding such transfer, the following information needed
to make such  transfer:  the name of the bank to receive such  transfer,  wiring
code of said  bank,  ABA  number,  account  number of the  Holder  and name of a
contact  person at the bank.  Any interest on any Bond which is payable,  but is
not punctually paid or provided for, on any Interest Payment Date (herein called
"Defaulted  Interest")  shall  forthwith  cease to be payable to the  registered
owner on the relevant Record Date by virtue of having been such owner,  and such
Defaulted  Interest shall be paid to the registered owner in whose name the Bond
is  registered  at the close of business on a special  Record Date (the "Special
Record  Date") to be fixed by the Trustee,  such  Special  Record Date to be not
more than fifteen (15) nor less than ten (10) days prior to the date of proposed
payment.  The  Trustee  shall  cause  notice  of the  proposed  payment  of such
Defaulted  Interest  and the Special  Record Date  therefor to be mailed,  first
class postage prepaid,  to each Bondholder,  at such Bondholder's  address as it
appears in the Bond Register,  not less than ten (10) days prior to such Special
Record Date.

         All Initial Bonds shall each be of the minimum  denomination  of $5,000
or any integral  multiple of $5,000 and shall each be in substantially  the form
provided  for in Section  13.13.  The Bonds of any  series  may  contain or have
endorsed thereon such provisions,  specifications  and descriptive  words as are
(a) not  inconsistent  with the provisions of this  Indenture,  (b) necessary or
desirable  to comply  with  custom or the rules of any  securities  exchange  or
commission or brokerage board,  and (c) authorized by a supplemental  resolution
adopted by the Authority prior to the authentication and delivery thereof by the
Trustee. The Initial Bonds shall be dated August 15, 2005. Thereafter, each Bond
shall be dated as of the date six (6)months  preceding the interest payment date
next following the date of delivery  thereof by the Trustee,  except that (a) if
such date of such delivery shall be an interest payment date, said Bond shall be
dated as of such date of  delivery,  or (b) if  interest  on such Bond shall not
have been paid in full in accordance with its terms, then,  notwithstanding  any
of the foregoing provisions of this Section,  such Bond shall be dated as of the
date to which  interest has been paid in full on such Bond.  Temporary  Bonds in
denominations  specified by the  Placement  Agent are  authorized  to be issued,
authenticated  and delivered to the Placement Agent thereof in lieu of and until
such time as Bonds in  definitive  form are  available  for  authentication  and
delivery.  The Initial Bonds shall be in the  principal  amounts set forth below
and shall  mature on the dates set forth  below and shall bear  interest  at the
rate of interest set forth below.

                                       12
<PAGE>

SERIES A BONDS:

         MATURITY                      AMOUNT               INTEREST RATE
         --------                      ------               -------------

         September 1, 2030             $3,660,000               6.50%

         The Series A Bonds are subject to the following sinking fund redemption
payments:

                           YEAR                              AMOUNT
                           ----                              ------

                           2006                            $120,000
                           2007                             125,000
                           2008                             135,000
                           2009                             140,000
                           2010                             150,000
                           2011                             165,000
                           2012                             170,000
                           2013                             185,000
                           2014                             195,000
                           2015                             210,000
                           2016                             220,000
                           2017                              85,000
                           2018                              90,000
                           2019                              95,000
                           2020                             105,000
                           2021                             110,000
                           2022                             115,000
                           2023                             125,000
                           2024                             130,000
                           2025                             140,000
                           2026                             150,000
                           2027                             160,000
                           2028                             170,000
                           2029                             180,000
                           2030*                            190,000

         *Final Maturity

SERIES B BONDS:

         MATURITY                    AMOUNT               INTEREST RATE
         --------                    ------               -------------

         September 1, 2012           $495,000                 9.00%

                                       13
<PAGE>

         The Series B Bonds are subject to the following sinking fund redemption
payments:

                           YEAR                         AMOUNT
                           ----                         ------

                           2006                        $55,000
                           2007                         60,000
                           2008                         65,000
                           2009                         70,000
                           2010                         75,000
                           2011                         80,000
                           2012*                        90,000

         *Final Maturity

         In lieu of the  mandatory  sinking fund  redemption of the Bonds in any
year, the Company may deliver to the Trustee for cancellation Bonds in an amount
up to but not exceeding the principal amount of Bonds scheduled for sinking fund
redemption in such year, a notice of such forthcoming delivery to be provided by
the  Company to the  Trustee  in  writing at least  sixty (60) days prior to the
redemption  date.  The Trustee shall reduce the  principal  amount of such Bonds
subject to mandatory  sinking fund redemption on the next succeeding  redemption
date by the principal amount of the Bonds so presented for cancellation.

         SECTION  2.04.  EXECUTION OF BONDS.  Each Bond shall be executed in the
name of the Authority by the manual or facsimile signature of its Chairman, Vice
Chairman,  Chief Executive  Officer or Chief Financial Officer and its corporate
seal shall be thereunto affixed,  imprinted or otherwise reproduced and attested
by the manual or facsimile signature of the Secretary or Assistant Secretary. In
case any officer  who shall have  signed,  sealed or  attested  any of the Bonds
shall  cease to be such  officer  of the  Authority  before the Bonds so signed,
sealed or attested shall have been  authenticated  and delivered by the Trustee,
such Bonds may nevertheless be authenticated and delivered as herein provided as
if the person who so signed,  sealed or attested such Bonds had not ceased to be
such  officer.  Any Bond may be  signed,  sealed  or  attested  on behalf of the
Authority  by any  person  who,  at the date of such act,  shall hold the proper
office,  notwithstanding  that at the date of such Bond such person may not have
held such office.

         SECTION 2.05.  AUTHENTICATION  OF BONDS. The Bonds shall bear thereon a
certificate of  authentication,  substantially in the form set forth hereinafter
in this  Indenture,  duly  executed  by the  Trustee.  Only such Bonds  shall be
entitled to any right or benefit under this Indenture. No Bond shall be valid or
obligatory for any purpose unless such certificate of  authentication  upon such
Bond shall have been duly  executed  by the  Trustee,  and such  certificate  of
authentication  by the Trustee upon any Bond executed on behalf of the Authority
shall be conclusive  and the only evidence  that the Bond so  authenticated  has
been duly  authenticated  and delivered under this

                                       14
<PAGE>

Indenture  and that the  holder  thereof  is  entitled  to the  benefit  of this
Indenture.

         SECTION  2.06.  INTERCHANGEABILITY  OF  BONDS.  Bonds,  upon  surrender
thereof at the corporate  trust office of the Trustee with a written  instrument
or  instruments  of transfer  satisfactory  to the Trustee duly  executed by the
registered  owner or owners thereof or his attorney duly  authorized in writing,
may, at the option and expense of such  registered  owner,  be exchanged  for an
equal  aggregate  principal  amount  of Bonds of the same  series,  designation,
maturity and interest rate of any other authorized denominations.

         SECTION 2.07.  TRANSFER AND REGISTRY OF BONDS AND AGENCY THEREFOR.  The
Authority  shall cause the Trustee to maintain and keep  registry  books for the
registration and transfer of Bonds (the "Bond Register"), and, upon presentation
thereof for such purpose at the  designated  office of the Trustee,  the Trustee
shall register or cause to be registered  therein,  and permit to be transferred
thereon or to be exchanged,  under such reasonable  regulations as the Authority
or the Trustee may  prescribe,  any Bond entitled to  registration,  transfer or
exchange.  The Trustee is hereby  appointed  the agent of the Authority for such
registration, transfer and exchange of Bonds.

         SECTION 2.08.  TRANSFER OF BONDS.  Each Bond shall be transferable only
upon the books of the Authority at the designated office of the Trustee,  by the
registered  owner  thereof  in  person or by his  attorney  duly  authorized  in
writing,  upon surrender thereof together with a written  instrument of transfer
satisfactory  to the Trustee duly executed by the registered  owner or such duly
authorized  attorney.  Upon the transfer of any such Bond,  the Authority  shall
execute,  and the Trustee shall  authenticate  and deliver,  a new Bond or Bonds
registered in the name of the transferee of the same aggregate  principal amount
and series, designation, maturity and interest rate as the surrendered Bond.

         SECTION  2.09.  OWNERSHIP  OF BONDS  AND  EFFECT OF  REGISTRATION.  The
Authority, the Trustee and any Paying Agent may treat and consider the person in
whose  name any Bond  shall be  registered  as the  holder  and  absolute  owner
thereof, whether such Bond shall be overdue or not, for the purpose of receiving
payment of the principal or Redemption Price thereof or interest thereon and for
all other purposes  whatsoever;  and payment of, or on account of, the principal
or  Redemption  Price of or interest on such Bond shall be made only to, or upon
the order of,  such  registered  owner  thereof,  but such  registration  may be
changed or discharged as herein  provided.  All payments made as in this Section
provided  shall be valid and  effectual to satisfy and  discharge  the liability
upon the several Bonds to the extent of the sum or sums so paid.

         SECTION 2.10. MUTILATED,  DESTROYED,  STOLEN OR LOST BONDS. In case any
Outstanding  Bond shall become mutilated or be destroyed,  stolen,  or lost, the
Trustee  shall  authenticate  and deliver a new Bond of like  tenor,  number

                                       15
<PAGE>

and amount as the Bond so mutilated,  destroyed, stolen or lost, in exchange and
substitution  for such  mutilated Bond and upon surrender of such mutilated Bond
or, in lieu of and  substitution  for the Bond  destroyed,  stolen or lost, upon
filing with the Trustee  evidence  satisfactory to the Authority and the Trustee
that  such  Bond has been  destroyed,  stolen  or lost  and  proof of  ownership
thereof,  and upon  furnishing  the  Authority  and the Trustee  with  indemnity
satisfactory to them and complying with such other reasonable regulations as the
Authority and the Trustee may prescribe in connection therewith and upon payment
to the Trustee of any charge,  fee or expense  incurred by the  Authority or the
Trustee  with  respect  to  such   authentication  and  delivery.   In  lieu  of
authenticating  and  delivering  a new  Bond in  substitution  for a  mutilated,
destroyed, lost or stolen Bond which is due and payable, the Trustee may pay the
amount due on such Bond to the owner or Holder  thereof,  provided all the other
requirements of this Section have been met.

         SECTION 2.11.  REGULATIONS WITH RESPECT TO REGISTRATION,  EXCHANGES AND
TRANSFERS.  In all  cases  in  which  the  privilege  of  transferring  Bonds is
exercised,  the Authority shall execute and the Trustee shall authenticate Bonds
in accordance  with the  provisions  of this  Indenture.  For every  transfer of
Bonds,  the Authority  and the Trustee may charge a sum  sufficient to reimburse
them for any tax, fee or other  governmental  charge required to be paid and any
mailing,  delivery or insurance  expense incurred with respect to such transfer,
which sum shall be paid by the person  requesting  such  transfer as a condition
precedent to the exercise of the privilege of effecting such  transfer.  Neither
the Authority nor the Trustee shall be required to exchange or transfer any Bond
after the close of  business  on the Record  Date next  preceding  any  Interest
Payment Date and will not be required to exchange or transfer any Bond  selected
for redemption in whole or in part after the mailing of notice calling such Bond
or portion  thereof  for  redemption  nor during the  fifteen  (15) days  before
mailing of notice of redemption.

         SECTION 2.12.  CANCELLATION AND DESTRUCTION OF SURRENDERED BONDS. Bonds
surrendered  for payment,  redemption or transfer and Bonds  purchased  from any
moneys  held by the  Trustee  hereunder  or  surrendered  to the  Trustee by the
Authority or by the Company  shall be canceled  and  destroyed by the Trustee or
delivered  to the  Authority  for  destruction.  No such  Bonds  shall be deemed
Outstanding  under this  Indenture  and no Bonds shall be issued in lieu thereof
(except for a Bond transferred pursuant to Section 2.08 hereof).

                                       16
<PAGE>

                                   ARTICLE III

                      AUTHENTICATION AND DELIVERY OF BONDS

         SECTION 3.01. AUTHORIZATION OF BONDS. The aggregate principal amount of
Bonds which may be executed by the  Authority and  authenticated  by the Trustee
and delivered and secured by this Indenture is not limited,  except as is or may
hereafter be provided in this Indenture or the Agreement or as may be limited by
law.  This  Indenture   creates  and  shall  be  and  constitute  a  continuing,
irrevocable and exclusive lien upon, and pledge of, the Revenues, and the income
earned by the investment of funds under this Indenture to the extent provided in
this Indenture.  All Bonds issued and to be issued hereunder are, and are to be,
to the extent  provided in this  Indenture,  equally and ratably secured by this
Indenture without  preference,  priority or distinction on account of the actual
time or times of the  authentication or delivery or maturity of the Bonds or any
of them,  so that  subject  as  aforesaid,  all  Bonds  at any time  outstanding
hereunder shall have the same right,  lien and preference under and by virtue of
this  Indenture  and shall all be equally and ratably  secured  hereby with like
effect  as  if  they  had  all  been  executed,   authenticated   and  delivered
simultaneously  on the  date  hereof,  whether  the  same or any of  them  shall
actually be disposed of at such date, or whether they, or any of them,  shall be
disposed of at some future date.

         SECTION 3.02. ISSUANCE OF INITIAL BONDS.  Initial Bonds,  consisting of
Series A Bonds in the  aggregate  principal  amount of  $3,660,000  and Series B
Bonds in the aggregate  principal  amount of $495,000,  being Bonds issued under
this  Indenture,  shall  forthwith be executed by the Authority and delivered to
the Trustee for  authentication,  together with a statement as to the amount and
disposition of the proceeds of the sale of such principal  amount of said Bonds,
and thereupon the Initial Bonds shall be  authenticated by the Trustee and shall
be  delivered  to  or  upon  the  written  order  of  an  Authorized   Authority
Representative.  Prior  to  authentication  and  delivery  of the  Bonds  by the
Trustee, the Trustee shall also have received the documents described in Section
5.03 of the Agreement.

         SECTION 3.03. DISPOSITION OF PROCEEDS OF BONDS. Simultaneously with the
delivery of the Initial  Bonds by the  Trustee,  the amount  received as accrued
interest  on the  Series A Bonds  shall be  deposited  in the  Series A Interest
Account of the Bond Fund and the amount  received  as  accrued  interest  on the
Series B Bonds shall be deposited  in the Series B Interest  Account of the Bond
Fund.  The  remaining  proceeds of the Series A Bonds shall be  deposited by the
Trustee in the Series A Account of the Project Fund and the  remaining  proceeds
of the Series B Bonds shall be  deposited by the Trustee in the Series B Account
of the Project  Fund,  to be  disbursed in  accordance  with Section 3.02 of the
Agreement.

         SECTION 3.04. ISSUANCE OF ADDITIONAL BONDS. So long as the Agreement is
in effect and no Event of Default shall have occurred thereunder and there is no
Event of  Default  hereunder,  one or more  series  of  Additional  Bonds may be
authorized  by  resolution  of the  Authority to pay Costs or for the

                                       17
<PAGE>

purpose of refunding any prior issue of Bonds.  Such  Additional  Bonds shall be
issued in such series and principal  amounts,  shall be subject to redemption at
such times and at such prices,  shall bear interest at such rate or rates, shall
mature in such amounts as the  Supplemental  Indenture  authorizing the issuance
thereof and the  resolution of the Authority in connection  therewith  shall fix
and determine not inconsistent with this Indenture.  Such Supplemental Indenture
shall specify and determine the purpose for which such  Additional  Bonds are to
be issued (but no purpose  shall be  authorized  other than paying  Costs of the
Project,  including any addition to the Project) or for the purpose of refunding
any prior  issue of Bonds,  and such other  matters  and things as may be deemed
necessary or  appropriate by the Authority or as may be required by the Act, the
Agreement or this Indenture for  authorization  and issuance of such  Additional
Bonds not inconsistent with this Indenture.  Prior to the issuance of Additional
Bonds and the execution and delivery of a  Supplemental  Indenture in connection
therewith,  the  Authority  and the Company shall enter into an amendment to the
Agreement  pursuant to Article XI hereof  which shall  provide that the payments
due under the  Agreement  shall be  increased  and computed so as to provide for
payments  sufficient  to pay in  full  the  principal  of and  interest  on such
Additional Bonds and any other costs in connection therewith.

         For the issuance of  Additional  Bonds to pay for Costs of the Project,
the Company is also required to deliver to the Trustee the following:

         (a) a  cost  estimate  of  the  Costs  of the  Project  proposed  to be
constructed  from the proceeds of such Additional Bonds prepared by an architect
or engineering  firm or a list of equipment with cost estimates  prepared by the
Company and substantiated by estimates from vendors;

         (b) a  feasibility  report  prepared  in  accordance  with  GAAP  by an
independent  certified  public  accountant  certifying that monies available for
debt service for the Company,  upon  completion of the proposed  addition to the
Project,  is equal to 125% of the debt  service  necessary  for the  Bonds.  For
purposes  hereof,  monies  available  for debt  service  means  cash flow of the
Company from operations less operating expenses (minus depreciation); and

         (c) an MAI (Member,  Appraisal Institute) appraisal certifying that the
fair market value of the bond financed facility, including additions thereto and
equipment  financed with the Additional Bonds, is equal to 125% of the principal
amount of the Bonds Outstanding, after the issue of the Additional Bonds.

         Each series of  Additional  Bonds shall be equally and ratably  secured
under the  Indenture  with the Initial  Bonds and all other series of Additional
Bonds, if any, without  preference,  priority or a distinction of any Bonds over
any other thereof except as expressly  provided in or permitted by the Indenture
or any Supplemental Indenture.

         The Additional  Bonds shall be deposited with the Trustee and thereupon
shall be  authenticated  by the  Trustee.  Upon  payment  to the  Trustee of the

                                       18
<PAGE>

proceeds of sale of Additional  Bonds, they shall be delivered by the Trustee to
or upon the  order of the  purchasers  thereof,  but only  upon  receipt  by the
Trustee of:

         (a) A copy of the  resolution,  duly  certified by the Secretary or the
Assistant Secretary of the Authority,  authorizing the execution and delivery of
the Supplemental Indenture and authorizing and awarding the Additional Bonds and
providing the terms thereof; and

         (b)  Original  executed  counterparts  of the  Supplemental  Indenture,
together with an original executed  counterpart  amendment of, or supplement to,
the  Agreement,  and the other Loan  Documents  reflecting  the  increase in the
amount of Bonds Outstanding in the amount of the Loans; and

         (c) A written opinion by an attorney or firm of attorneys of recognized
standing on the subject of municipal  bonds,  to the effect that the issuance of
the  Additional  Bonds and the execution  thereof have been duly  authorized and
that all conditions precedent to the delivery thereof as required hereunder have
been fulfilled and that the Additional Bonds constitute legal, valid and binding
obligations of the Authority enforceable in accordance with their terms and that
the issuance of the Additional  Bonds will not adversely affect the exclusion of
interest  on the Tax-  exempt  Bonds from gross  income for  federal  income tax
purposes and with a reliance letter to the Trustee confirming the above; and

         (d) A written order to the Trustee executed by an Authorized  Authority
Representative to authenticate and deliver the Additional Bonds to the purchaser
or purchasers therein identified upon payment to the Trustee of a specified sum;
and

         (e) All other  documents  reasonably  required by the Authority and the
Trustee.

                                       19

<PAGE>

                                   ARTICLE IV

                                CREATION OF FUNDS

         SECTION 4.01. ESTABLISHMENT OF FUNDS AND ACCOUNTS. The Authority hereby
establishes the following funds and accounts within such funds:

                  BOND FUND AND WITHIN THE BOND FUND,
                           THE SERIES A PRINCIPAL ACCOUNT,
                           THE SERIES B PRINCIPAL ACCOUNT,
                           THE SERIES A INTEREST ACCOUNT AND
                           THE SERIES B INTEREST ACCOUNT;

                  DEBT SERVICE RESERVE FUND;
                  REBATE FUND; AND
                  PROJECT FUND AND WITHIN THE PROJECT FUND,
                           THE SERIES A ACCOUNT AND
                           THE SERIES B ACCOUNT

         SECTION 4.02.  PAYMENTS INTO THE BOND FUND. There shall be deposited in
the Series A Interest Account all accrued  interest  received from the Placement
Agent at the time of the  issuance  and  delivery  of the Series A Bonds.  There
shall be  deposited  in the  Series B  Interest  Account  all  accrued  interest
received  from the  Placement  Agent at the time of the issuance and delivery of
the Series B Bonds.  In addition,  there shall be deposited  into the applicable
Account of the Bond Fund on a pro rata basis based on the Outstanding  principal
amount of each series of Bonds,  as and when  received,  (a) all  payments  made
under the applicable Note and as specified in Section 2.01 of the Agreement, (b)
moneys  transferred  from the Debt Service Reserve Fund pursuant to Section 5.02
hereof,  and (c) all other  moneys,  including any  prepayments  received by the
Trustee under and pursuant to any of the provisions of the Agreement,  which are
required or which are  accompanied by directions that such moneys are to be paid
into a specific  Account in the Bond Fund.  The Authority  hereby  covenants and
agrees that, so long as any of the Bonds issued  hereunder are  Outstanding,  it
will  deposit,  or cause to be paid to the  Trustee for deposit in the Bond Fund
for its account,  sufficient  sums from Revenues and other moneys derived and to
be derived from the Loans to the Company, promptly to meet and pay the principal
or  Redemption  Price of, or  interest  on the Bonds as the same  become due and
payable.  Nothing  herein shall be construed as requiring  the  Authority or the
Trustee to operate the  Project or to use any funds or revenues  from any source
other than funds and Revenues derived from the Trust Estate.

         SECTION  4.03.  APPLICATION  OF THE BOND FUND.  Except as  provided  in
Section  4.06  hereof,  moneys in the Bond  Fund  shall be used  solely  for the
payment of the  principal or  Redemption  Price of and interest on the Bonds and
for the redemption of the Bonds prior to maturity;  provided,  investment income
earned on any such  amount  may be applied to the  payment  of  interest  on the
Bonds.  Any moneys in the Bond Fund in excess of the moneys required for payment
of the Bonds  theretofore  matured,  called at maturity or called for redemption
and past due interest shall be used, upon the written request of

                                       20
<PAGE>

the Company,  to the extent  permitted by this Indenture to redeem a part of the
Bonds Outstanding  (except for Bonds matured or called for redemption which have
not yet been  presented  for  payment)  so long as the Company is not in default
with respect to any payments under Section 2.01 of the Agreement or the Notes.

         The Trustee, without further authorization than is in this Section 4.03
contained,  shall pay to the Paying Agent from the moneys in the Bond Fund,  (i)
the  interest on the Bonds as and when the same shall  become due,  and (ii) the
principal of or Redemption  Price of the Bonds as and when the same shall mature
or are called for redemption,  as the case may be, provided that such payment of
principal or Redemption Price shall be made only upon presentation and surrender
of such Bonds as they severally mature or on or after the redemption date.

         SECTION  4.04.  MONEYS TO BE HELD IN TRUST.  All moneys  required to be
deposited with or paid to the Trustee for the account of any fund (except moneys
in the Rebate Fund) under any provision of this  Indenture  shall be held by the
Trustee in trust,  and except for moneys  deposited  with or paid to the Trustee
for the  redemption  of Bonds,  notice of the  redemption of which has been duly
given, shall, while held by the Trustee, constitute part of the Trust Estate and
be subject to the lien or security interest created hereby. The Trustee shall be
required  to  render a  monthly  statement  of  account  to the  Authority,  any
Significant  Bondholder  and the  Company of the funds held in the Bond Fund and
the Project Fund, so long as there are any funds therein.

         SECTION 4.05. NO FURTHER PAYMENTS NEEDED.  For so long as the aggregate
of the amounts then on deposit in the Bond Fund is  sufficient  to redeem all of
the Bonds then  Outstanding,  together  with accrued  interest  thereon,  or the
Redemption  Price,  as  applicable  and  all  expenses  of the  Trustee  and the
Authority have been paid, the Company shall notify the Trustee and the Authority
in  writing  that no  additional  or  further  payments  need be made under this
Indenture  and the  Authority,  at the written  direction of the Company,  shall
instruct  the  Trustee in  writing to apply the moneys  then in said fund to the
payment of the  principal of and interest and  Redemption  Price (if any) on the
Bonds on the next succeeding  redemption date for which the required  redemption
notice  may be given and to the  payments  of the  amounts,  if any,  payable to
itself as Trustee and to the Authority.

         SECTION 4.06.  FUNDS HELD FOR BONDS. The amounts held or applied by the
Trustee or Paying  Agent for the payment of interest,  principal  or  Redemption
Price,  due on any date with respect to  particular  Bonds  shall,  pending such
payment,  be set aside and held in trust for the  Holders of the Bonds,  and for
the purposes of this Indenture  such  principal,  interest or Redemption  Price,
after the due date  thereof,  shall no longer be  considered  to be unpaid.  Any
amounts remaining in the Bond Fund after payment in full of the Bonds, the fees,
charges and  expenses of the Trustee and all other  amounts  required to be paid
hereunder  and  under  the  Agreement  shall  be paid to the  Company  upon  the
expiration  or  sooner  termination  of the term of the  Agreement  as  provided
therein.

                                       21
<PAGE>

         SECTION 4.07. REBATE FUND. There is hereby established with the Trustee
a Rebate  Fund  which  shall be held  separate  and apart  from all other  funds
established  under this Indenture.  The Company shall comply with the provisions
of  Sections  4.01(j)  and 6.05 of the  Agreement  and  instruct  the Trustee in
writing to transfer  from the Bond Fund to the Rebate Fund,  or shall  otherwise
pay to the Trustee for deposit  into the Rebate  Fund,  such amounts as shall be
necessary to cause the aggregate amount transferred to or otherwise deposited in
the  Rebate  Fund  to  equal  the  Rebatable  Arbitrage;  provided  that no such
transfers  or deposits  shall be  necessary  if the Gross  Proceeds  (within the
meaning of Section  148(f)(4)(B) of the Code) of the Tax-exempt Bonds, are fully
expended  within  six months of the date of issue.  Withdrawals  from the Rebate
Fund may be made only  pursuant to written  directions  of the Company  given in
accordance with Sections  4.01(j) and 6.05 of the Agreement.  All amounts in the
Rebate Fund,  including  income earned from investment of the Rebate Fund, shall
be held by the  Trustee  free and clear of the lien of this  Indenture,  and the
Trustee  shall pay said amounts  over to the United  States from time to time as
the Trustee  shall be  instructed  in writing by the Company,  provided that the
Trustee  shall so pay over to the United  States not less  frequently  than once
each five Bond Years  after the date of  original  delivery  and payment for the
Tax-exempt  Bonds,  an amount  sufficient to assure that at least ninety percent
(90%) of the sum of the amount of the  Rebatable  Arbitrage  with respect to the
Tax-exempt Bonds plus all previous rebate payments as of the close of the period
ending on the most  recent  Computation  Date is paid not later  than sixty (60)
days  after  such  Computation  Date.  Not later  than sixty (60) days after the
retirement of the last  obligation of the  Tax-exempt  Bonds,  the Company shall
direct the Trustee in writing to pay to the United States of America one hundred
percent  (100%) of the Rebatable  Arbitrage (as  calculated by the Company) with
respect to the Tax-exempt Bonds.

         The Trustee agrees to furnish the Company and the Authority with notice
of the Company's obligation to file a written certification to the Authority and
the Trustee  indicating  whether the Company has complied with the six (6) month
exception to the arbitrage rebate requirement.  In addition,  the Trustee agrees
to furnish the Company and the Authority with notice of the Company's obligation
to prepare its rebate  calculation and make its rebate  payment,  if any, to the
Internal Revenue Service. Such reminder notice shall be furnished to the Company
and the  Authority  at least  ninety (90) days prior to each fifth Bond Year and
within  thirty  (30) days  following  the  redemption  or final  payment  of the
Tax-exempt Bonds.

         Moneys  held in the  Rebate  Fund  shall be held by the  Trustee  for a
period of not less than seventy-five (75) days following the redemption or final
maturity of the Tax-exempt Bonds.

         SECTION 4.08.  PAYMENTS INTO THE PROJECT FUND; DISBURSEMENTS.

         (a) The balance of the  proceeds of the  issuance  and  delivery of the
Series A Bonds and Series B Bonds remaining after the deductions provided by the
first  sentence of Section  4.02 hereof and the first  paragraph of Section

                                       22
<PAGE>

4.10  hereof have been made shall be  deposited  in the Series A Account and the
Series B Account of the Project Fund, respectively.

         (B) The  Trustee  is  hereby  authorized  and  directed  to  make  each
disbursement required by the provisions of the Agreement and to issue its checks
therefor. The Trustee shall keep and maintain adequate records pertaining to the
Project  Fund and all such  payments  therefrom,  and after the Project has been
completed  and a  certificate  of  payment  of all costs is or has been filed as
provided  in  Section  4.09  hereof,  the  Trustee  shall  file a final  monthly
statement of account thereof with the Authority,  any Significant Bondholder and
the Company as required by Section 4.04 hereof.

         SECTION 4.09.  COMPLETION OF THE PROJECT. The completion of the Project
and payment or provision made for payment of all Costs shall be evidenced by the
filing with the Trustee of the Company's Completion  Certificate required by the
provisions of Section 3.04 of the Agreement.  As soon as practicable  and in any
event not more than sixty  (60) days from the date of  receipt of the  Company's
Completion  Certificate,  any  balance  remaining  in the Project  Fund  (except
amounts the Company shall have directed the Trustee in writing to retain for any
Costs of the  Project  not then due or payable or not then paid)  shall,  at the
written  direction  of  the  Company,  be  deposited  in the  applicable  series
Principal  Account  in the Bond Fund by the  Trustee  and,  in  accordance  with
written direction  provided to the Trustee by the Company as provided in Section
3.04,  used to pay principal on the applicable  series of Bonds or in any manner
requested  by the  Company  which  preserves  the  exclusion  of interest on the
Tax-exempt  Bonds from federal income  taxation,  provided there is delivered to
the  Trustee  an  opinion of Counsel  by an  attorney  or firm of  attorneys  of
nationally  recognized  standing on the subject of municipal bonds to the effect
that the use  requested  by the Company of such monies is  permitted  by law and
will not adversely affect the exclusion from federal income taxation of interest
on the Tax-exempt  Bonds.  The Trustee may rely  conclusively on such opinion in
any  disbursement  of funds  pursuant to this Section 4.09.  Such balance of the
proceeds of Tax-exempt  Bonds after the Completion Date shall not be invested at
a yield  materially  higher than the yield on the  Tax-exempt  Bonds  beyond any
applicable  temporary  period or otherwise in  contravention of Sections 103 and
148 of the Code.  The Company shall provide  written  instruction to the Trustee
regarding such investment.

         SECTION 4.10.  DEBT SERVICE RESERVE FUND.  There is hereby  established
with the Trustee a Debt Service  Reserve Fund which shall be  maintained  by the
Company at a level of $388,990  (the "Reserve  Requirement").  $339,490 from the
proceeds of the issuance and delivery of the Series A Bonds and $49,500 from the
proceeds of the Series B Bonds shall be deposited into the Debt Service  Reserve
Fund.

         On the  Business  Day prior to an Interest  Payment  Date,  the Trustee
shall withdraw from the Debt Service  Reserve Fund for deposit in the Bond Fund,
the amount necessary to meet the deficiency, if any, in the applicable Principal
Account or Interest Account, in order to provide the moneys necessary to pay the
principal of and interest on the Bonds. Such amount shall be deposited in

                                       23
<PAGE>

the applicable Bond Fund Principal Account and/or Interest Account,  as the case
may be.  Beginning on the fifteenth  day of the month of such  Interest  Payment
Date,  the Company is required to promptly  deposit an amount equal to one-sixth
(1/6th) of the amount  withdrawn  from the Debt  Service  Reserve  Fund with the
Trustee and a similar amount on the fifteenth day of each month thereafter until
the amount in the Debt  Service  Reserve  Fund equals the  Reserve  Requirement.
Within  fifteen  (15) days after notice from the Trustee to the Company that the
amount in the Debt  Service  Reserve  Fund is less than the Reserve  Requirement
pursuant to a valuation  under  Section 5.02 hereof,  the Company is required to
deposit the amount of such deficiency with the Trustee.

                                    ARTICLE V

                        INVESTMENT AND DEPOSIT OF MONEYS

         SECTION 5.01.  DEPOSITS.  All moneys received by the Trustee under this
Indenture shall, except as hereinafter  provided, be deposited with the Trustee,
until or unless  invested as provided in Section  5.02  hereof.  The Trustee may
deposit such moneys with any other  depository  which is  authorized  to receive
them and is subject to supervision by public banking authorities.

         SECTION  5.02.  INVESTMENTS.  The Trustee,  at the written  request and
written  direction  of the  Company,  shall invest any moneys held by it and not
needed for  immediate  application  in  Investment  Obligations;  provided  that
specified amounts of Investment  Obligations shall mature no later than required
to apply such amounts for purposes of this Indenture.  The Trustee shall have no
liability with respect to making, holding,  redeeming or selling any investments
made in accordance with such written directions.

         Any  such  investments  shall be held by or under  the  control  of the
Trustee and, except as provided below shall be deemed at all times a part of the
fund for which they were made. The interest thereon and any profit realized from
such  investments  shall be credited to such fund,  and any loss  resulting from
such  investments  shall be  charged to such fund.  The  Trustee  shall sell and
reduce to cash a  sufficient  amount  of such  investments  whenever  (i) at the
written  direction  of the  Company,  the cash  balance in the  Project  Fund is
insufficient  to pay a  requisition  when  presented  or (ii)  whenever the cash
balance in the Bond Fund is insufficient  to pay the principal of,  premium,  if
any, and interest on the Bonds when due.

         On the Business Day  following the September 1st principal and interest
payment on the Bonds,  the Trustee shall withdraw from the Debt Service  Reserve
Fund, after  determining the amount  necessary to meet the Reserve  Requirement,
the  amount  of  investment  earnings  in the Fund and  deposit  the same in the
applicable  Interest Account in the Bond Fund. In making its determination as to
the value of the Investment  Obligations  in the Debt Service  Reserve Fund, the
Trustee shall value the investments  marked to market value.  Should the Trustee
determine  that the  amount in the Debt  Service  Reserve  Fund is less than the
Reserve  Requirement  pursuant to a valuation  described in this paragraph,  the
Trustee shall promptly notify the

                                       24
<PAGE>

Company  in  writing  of the amount of such  deficiency  and the  Company  shall
deposit  the  amount of such  deficiency  with the  Trustee in  accordance  with
Section 4.10 hereof.  Should the Trustee  determine  that the amount in the Debt
Service Reserve Fund exceeds the Reserve Requirement, the Trustee shall transfer
such excess to the Bond Fund.

         In the absence of written  instructions  from the Company,  the Trustee
shall  invest  any moneys  held by it under the  Indenture  in the money  market
mutual funds customarily utilized by the Trustee's corporate trust department in
the ordinary course of its corporate trust duties.

                                       25
<PAGE>

                                   ARTICLE VI

                               REDEMPTION OF BONDS

         SECTION  6.01.  BONDS  SUBJECT TO  REDEMPTION.  The  Initial  Bonds are
subject to redemption prior to maturity as provided in the form of Initial Bonds
in EXHIBIT A and EXHIBIT B.

         SECTION  6.02.  BONDS SUBJECT TO  REDEMPTION;  SELECTION OF BONDS TO BE
CALLED FOR REDEMPTION.

         (a) The Series A Bonds are subject to optional redemption,  in whole at
any time or in part on any  Interest  Payment  Date,  at the  redemption  prices
(expressed as a percentage of the principal  amount to be redeemed) as set forth
below:

                           DATE                                 REDEMPTION PRICE
                           ----                                 ----------------

         September 1, 2015 to August 31, 2016                          102%
         September 1, 2016 to August 31, 2017                          101%
         Thereafter                                                    100%

         If less than all the  Series A Bonds are to be  redeemed,  the Series A
Bonds shall be  selected  by the Trustee by lot, or in such other  manner as the
Trustee may determine, for redemption.

         The Authority  shall direct the Trustee in writing to call the Series A
Bonds for optional  redemption when and only when and to the extent that (a) the
Company  has itself  notified  the  Trustee  and the  Authority  in writing of a
corresponding  prepayment made or proposed to be made by redemption or otherwise
on the  Series A Note,  or (b) the  Series A Note held by the  Trustee  has been
surrendered to the Company  pursuant to Article XII hereof.  The Authority shall
furnish the Company with a copy of the written direction to the Trustee.

         The Series B Bonds are not subject to optional redemption.

         (b) The Series A Bonds are subject to mandatory sinking fund redemption
prior to maturity,  at a redemption  price equal to 100% of the principal amount
thereof on September 1 of the years and in the amounts set forth below:

                       YEAR                         AMOUNT
                       ----                         ------

                       2006                        $120,000
                       2007                         125,000
                       2008                         135,000
                       2009                         140,000
                       2010                         150,000

                                       26
<PAGE>

                           2011                          165,000
                           2012                          170,000
                           2013                          185,000
                           2014                          195,000
                           2015                          210,000
                           2016                          220,000
                           2017                           85,000
                           2018                           90,000
                           2019                           95,000
                           2020                          105,000
                           2021                          110,000
                           2022                          115,000
                           2023                          125,000
                           2024                          130,000
                           2025                          140,000
                           2026                          150,000
                           2027                          160,000
                           2028                          170,000
                           2029                          180,000
                           2030*                         190,000

         *Final Maturity

         The Series B Bonds are subject to  mandatory  sinking  fund  redemption
prior to maturity,  at a redemption  price equal to 100% of the principal amount
thereof on September 1 of the years and in the amounts set forth below:

                           YEAR                           AMOUNT
                           ----                           ------

                           2006                          $55,000
                           2007                           60,000
                           2008                           65,000
                           2009                           70,000
                           2010                           75,000
                           2011                           80,000
                           2012*                          90,000

         *Final Maturity

         SECTION 6.03.  SPECIAL MANDATORY  REDEMPTION - BREACH OF CERTAIN PUBLIC
PURPOSE  COVENANTS.  The Bonds are subject to special  mandatory  redemption  in
whole as soon as  practicable  but no later  than  the  90th day  following  the
Authority's  written  notice to the Trustee and the Company that (i) the Company
has ceased to operate  the Project or ceased to cause the Project to be operated
as an  authorized  project  under the Act for twelve  (12)  consecutive  months,
without first  obtaining the prior written  consent of the Authority or (ii) any
representation  or warranty of the Company  contained in the Agreement or in any
other document furnished to the Authority in connection with the Bonds proves to
have been false or  misleading  in any  material  respect  when  made.  Upon the
occurrence of any such event,  the Bonds

                                       27
<PAGE>

shall be redeemed by the  Authority at a  redemption  price equal to 100% of the
principal amount thereof plus interest accrued thereon to the redemption date.

         SECTION  6.04.  PROCEDURE  FOR  REDEMPTION.  When the Trustee  shall be
required or authorized to redeem Bonds,  upon sixty (60) days written  notice by
the Authority or the Company (or such shorter  period  agreeable to the Trustee)
the Trustee shall,  in accordance with the terms and provisions of the Bonds and
of this Indenture, select the Bonds to be redeemed and shall give notice, in the
name of the Authority or the Company,  as the case may be, of the  redemption of
Bonds, which notice shall specify the series, CUSIP numbers (if any), maturities
of and the interest rate borne by the Bonds to be redeemed,  the redemption date
and the place or places where amounts due upon such  redemption  will be payable
and,  if less than all of the Bonds of any like  series and  maturity  are to be
redeemed, the letters and numbers or other distinguishing marks of such Bonds so
to be  redeemed,  and, in the case of a Bond to be  redeemed in part only,  such
notice  shall also  specify the portion of the  principal  amount  thereof to be
redeemed.  Such notice shall  further state that on such date there shall become
due and payable upon each Bond to be redeemed the Redemption  Price thereof,  or
the Redemption  Price of the specified  portion of the principal  thereof in the
case of a Bond to be redeemed in part only,  together with  interest  accrued to
such date,  and that from and after such date,  if the  aggregate of the amounts
then on  deposit  in the Bond Fund is  sufficient  to pay the  Redemption  Price
together with  interest  accrued to such date,  interest  thereon shall cease to
accrue and be payable.  Such  notice  shall be given by the Trustee by mailing a
copy of such notice,  postage prepaid, by first class mail, not less than thirty
(30) days nor more than forty-five (45) days before such redemption date, to the
registered owner of any Bond all or a portion of which is to be redeemed, at his
last address,  if any, appearing upon the registry books, but such mailing shall
not be a condition  precedent to such redemption and failure so to mail any such
notice shall not affect the validity of any  proceedings  for the  redemption of
Bonds.  Any  notice  mailed  pursuant  to this  paragraph  will be  conclusively
presumed to have been given whether or not actually received by the addressee.

         If, at the time of mailing of notice of any  optional  redemption,  the
Company shall not have deposited  with the Trustee  moneys  sufficient to redeem
all the Bonds called for redemption,  the redemption notice may state that it is
conditional on the deposit of the  redemption  moneys with the Trustee not later
than the  redemption  date,  and such notice  shall be of no effect  unless such
moneys are so deposited.

         If there shall be so called for redemption less than all of a Bond, the
Authority  shall  execute and the  Trustee  shall  authenticate  and cause to be
delivered, upon the surrender of such Bond, without charge to the owner thereof,
for the unredeemed  balance of the principal  amount of the Bond so surrendered,
Bonds of like series,  designation,  interest rates and maturities in any of the
authorized denominations.

                                       28
<PAGE>

         On the Business Day  preceding  the  redemption  date  specified in the
notice above  provided  for, the Company or the  Authority,  as the case may be,
shall, and it hereby covenants that it will,  deposit with the Trustee an amount
of cash  sufficient  to effect the  redemption  of the Bonds  specified  in such
notice,  except  that such  amount may be reduced to the extent that moneys then
held by the Trustee under any of the  provisions of this Indenture are available
for such  redemption.  All moneys deposited by the Authority or the Company with
the Trustee or set apart by the Trustee under the  provisions of this  Indenture
for the  redemption  of  Bonds  shall be held in trust  for the  account  of the
respective  registered  owners  of the  Bonds  to be  redeemed  and  applied  in
accordance with the provisions of Section 13.03 hereof.

         On the redemption date designated in such notice,  the principal amount
of each Bond so to be redeemed,  together with the accrued  interest  thereon to
such date,  and such  premium,  if any,  as is due and payable on such Bond upon
such  redemption,  shall  become due and  payable;  and from and after such date
(such notice having been given in accordance with the provisions of this Section
6.04 and such deposit having been made or moneys set apart as aforesaid),  then,
notwithstanding  that any Bonds so  called  for  redemption  shall not have been
surrendered,  no  further  interest  shall  accrue  on any such  Bond (or on the
portion thereof so to be redeemed). From and after such date of redemption (such
notice having been given in accordance  with the provisions of this Section 6.04
and such deposit having been made or moneys set apart as aforesaid), or from and
after the date upon which such notice is mailed, if such notice shall state that
moneys to effect such  redemption  have been  deposited with or set apart by the
Trustee, all such Bonds or such portions thereof, as the case may be, insofar as
such  deposit  shall have been made or moneys set apart as  aforesaid,  shall be
deemed to have been paid in full as between the Authority or the Company and the
respective  Bondholders  and  shall  no  longer  be  deemed  to  be  Outstanding
hereunder,  and the Authority or the Company shall be under no further liability
in respect thereof.

         The Trustee  agrees to provide timely notice to the Authority that some
or all of the Bonds have been redeemed or paid.

         SECTION 6.05.  PAYMENT OF REDEMPTION PRICE. If notice of redemption has
been  duly  mailed  or duly  waived  by the  Holders  of all  Bonds  called  for
redemption and the redemption  moneys have been duly deposited with the Trustee,
then in either such case the Bonds called for redemption shall be payable on the
redemption date at the applicable  Redemption  Price.  Payment of the Redemption
Price  together  with  accrued  interest  shall be made by the  Trustee,  out of
Revenues or other funds  deposited for the purpose,  to or upon the order of the
Holders  of the Bonds  called for  redemption  upon  surrender  of such Bonds if
redeemed in full.

         Upon the payment of the redemption price of Bonds being redeemed,  each
check or other  transfer of funds issued by the Trustee for such  purpose  shall
bear a  description  of the issue and maturity of the Bonds being  redeemed with
the proceeds of such check or other transfer.

                                       29
<PAGE>

                                   ARTICLE VII

                           COVENANTS OF THE AUTHORITY

         SECTION  7.01.  PAYMENT OF  PRINCIPAL  OF AND  INTEREST  ON BONDS.  The
Authority  shall  promptly pay or cause to be paid the  principal or  Redemption
Price of, and the  interest  on,  every Bond issued  hereunder  according to the
terms thereof,  but shall be required to make such payment or cause such payment
to be made only out of Revenues.  The Authority shall appoint one or more paying
agents for such purpose, each such agent to be a national banking association, a
state bank, a bank and trust company or a trust  company.  The Authority  hereby
appoints  The Bank of New York as Paying  Agent,  which  shall from time to time
designate a corporate  trust office of such agent as the place of payment,  such
appointment  and designation to remain in effect until notice of change is filed
with the Trustee.

         SECTION 7.02. CORPORATE EXISTENCE;  COMPLIANCE WITH LAWS. The Authority
shall maintain its corporate  existence;  shall use its best efforts to maintain
and renew all its rights,  powers,  privileges and franchises;  and shall comply
with all valid and applicable laws, acts, rules,  regulations,  permits, orders,
requirements and directions of any  legislative,  executive,  administrative  or
judicial body.

         SECTION  7.03.  ENFORCEMENT  OF  AGREEMENT;   NOTICE  OF  DEFAULT.  The
Authority  shall give prompt  written notice to the Trustee of any default known
to the Authority under the Agreement or any amendment or supplement thereto.

         SECTION  7.04.  FURTHER  ASSURANCES.  Except  to the  extent  otherwise
provided in this  Indenture,  the Authority shall not enter into any contract or
take any action by which the rights of the  Trustee  or the  Bondholders  may be
impaired  and  shall,  from  time to time,  execute  and  deliver  such  further
instruments  and take such  further  action as may be  required to carry out the
purposes of this Indenture.

         SECTION 7.05.  FINANCING  STATEMENTS.  The  Authority  shall cause this
Indenture or a financing  statement relating thereto to be filed, in such manner
and at such places as may be  required  by law fully to protect the  security of
the Holders of the Bonds and the right, title and interest of the Trustee in and
to the Trust Estate or any part  thereof.  The Company shall execute or cause to
be  executed,  recorded  and filed any and all  further  instruments,  including
continuation  statements,  as may be required by law for such  protection of the
interests of the  Bondholders,  and shall furnish  satisfactory  evidence to the
Trustee of filing  and  refiling  of such  instruments  and of every  additional
instrument  which shall be necessary to preserve the lien of this Indenture upon
the Trust Estate or any part thereof until the principal, redemption premium, if
any,  and  interest  on the Bonds  issued  hereunder  shall have been paid.  The
Trustee shall  cooperate with the Company  regarding the filing of  continuation
statements  and shall provide notice to the Company of the necessity to file, in
order to preserve  and protect the  security of the

                                       30
<PAGE>

owners of the Bonds, within thirty (30) days of the date by which a continuation
statement must be so filed for such purposes but the Trustee shall not be liable
for any failure to provide such notice.

         SECTION 7.06.  INTENTIONALLY OMITTED

         SECTION  7.07.  CREATION  OF LIENS.  The  Authority  will not create or
suffer  to be  created  any lien or  charge  upon the  Trust  Estate or any part
thereof, except the lien, charge and pledge created by this Indenture.

         SECTION 7.08. EXCLUSION OF INTEREST ON THE BONDS FROM GROSS INCOME. The
Authority agrees that it will not take any action,  nor omit to make any action,
which  may  cause  the  interest  payable  on the  Tax-exempt  Bonds  to  become
includable  in the gross  income of the Holders  thereof for federal  income tax
purposes.

         SECTION  7.09.  CONTINUING  DISCLOSURE.  The Company has  covenanted in
Section  6.25 of the  Agreement  to deliver to the Trustee  and the  Authority a
written  undertaking  (the  "Continuing  Disclosure   Agreement"),   in  a  form
acceptable to the Trustee and the Authority and satisfying the  requirements  of
Rule 15c2-12(b)(5) (codified at 17 C.F.R. Section 240.15c2-12),  as the same may
be further amended,  supplemented and officially  interpreted from time to time,
or  any  successor  provision  thereto  ("Rule  15c2-12"),  promulgated  by  the
Securities and Exchange  Commission  pursuant to the Securities  Exchange Act of
1934, as amended and  supplemented  (codified as of the date hereof at 15 U.S.C.
77 ET SEQ.) in the event that Rule 15c2-12  requires  such an  undertaking.  The
Trustee  hereby  covenants  that it will  execute  and  deliver  the  Continuing
Disclosure Agreement to the Company and the Authority. Neither the Authority nor
the Trustee shall have any duty to determine the  sufficiency  of the Continuing
Disclosure  Agreement  under Rule  15c2-12  and neither  the  Authority  nor the
Trustee shall incur any liability arising out of their acceptance of the form of
the Continuing Disclosure Agreement.

         SECTION  7.10.  EVENT  OF  DEFAULT.  Notwithstanding  anything  in this
Indenture  or in any of the other  documents  executed  in  connection  with the
issuance of the Bonds to the  contrary,  neither the Trustee nor the  registered
owners  shall  have the  right to waive  an Event of  Default  under  any of the
documents executed in connection with the issuance of the Bonds which arises out
of a violation  of a Reserved  Right  without the prior  written  consent of the
Authority,   which  it  shall  give  in  its  sole  and   complete   discretion.
Notwithstanding  anything  herein  or  in  any  of  the  documents  executed  in
connection with the issuance of the Bonds to the contrary,  nothing herein shall
affect the Authority's  unconditional right to specifically enforce its Reserved
Rights.

         SECTION 7.11.  IMMUNITY OF AUTHORITY.  In the exercise of the powers of
the  Authority  and its  members,  officers,  employees  or  agents  under  this
Indenture and the Agreement, and including without limitation the application of
moneys,  the  investment of funds,  the  assignment or other  disposition of the
Trust Estate in the event of default by the Company,  neither the  Authority nor

                                       31
<PAGE>

its members, officers employees or agents shall be accountable to the registered
owners of the Bonds,  the Trustee or the Company for any action taken or omitted
by it or them in good  faith  and  believed  by it or them to be  authorized  or
within the  discretion  or rights or powers  conferred.  The  Authority  and its
members,  officers,  employees  and agents  shall be  protected  in its or their
acting upon any paper or document  believed by it or them to be genuine,  and it
and they may conclusively rely upon the advice of counsel and may (but need not)
require further evidence of any fact or matter before taking any action.

         SECTION 7.12. AUTHORITY AND TRUSTEE ENTITLED TO INDEMNITY. (a) Pursuant
to Section  6.10 of the  Agreement,  the  Company  has agreed to  indemnify  the
Authority, any person who "controls" the Authority within the meaning of Section
15 of the  Securities  Act of 1933, as amended,  or Section 20 of the Securities
Exchange Act of 1934, as amended and any member,  director,  officer,  official,
agent, attorney and employee of the Authority,  the Trustee or the State (herein
the "Indemnified Parties").

         (b) The Company  shall not be obligated to reimburse  any expense or to
indemnify against any loss or liability incurred by an Indemnified Party through
its own gross negligence or willful misconduct.

         (c) To secure the Company's  indemnification  payment  obligation,  the
Indemnified  Parties  shall  have a lien  prior  to the  lien  created  by  this
Indenture  for the  benefit of the owners of the Bonds on all money or  property
held or collected  by the Trustee  other than money in the Rebate Fund and money
held for the payment of the  principal  or  redemption  price of any Bonds,  and
interest on any Bonds previously  matured or called for redemption in accordance
with this  Indenture,  which  shall be held for the  benefit  of the  registered
owners of such Bonds only. Such  obligations  shall survive the satisfaction and
discharge of this Indenture.

         (d) When an Indemnified Party incurs expenses or renders services after
an Event of Default, the expenses and compensation for the services are intended
to constitute expenses of administration under any applicable bankruptcy law.

         SECTION 7.13. NEITHER AUTHORITY NOR TRUSTEE  RESPONSIBLE FOR INSURANCE,
TAXES,  EXECUTION OF INDENTURE,  ACTS OF THE AUTHORITY OR  APPLICATION OF MONEYS
APPLIED IN  ACCORDANCE  WITH THIS  INDENTURE.  (a) Neither the Authority nor the
Trustee  shall be under any  obligation  to effect or maintain  insurance  or to
renew any  policies  of  insurance  or to inquire as to the  sufficiency  of any
policies of  insurance  carried by the  Company,  or to report,  or make or file
claims or proof of loss for,  any loss or damage  insured  against  or which may
occur,  or to keep itself  informed or advised as to the payment of any taxes or
assessments,  or to require any such payment to be made.  Neither the  Authority
nor the Trustee shall have  responsibility  in respect of the sufficiency of the
security provided by this Indenture. Neither the Authority nor the Trustee shall
be under any  obligation  to see that any duties  herein  imposed upon any party
other than itself, or any covenants herein

                                       32
<PAGE>

contained on the part of any party other than itself to be  performed,  shall be
done or performed,  and neither the Authority nor the Trustee shall be under any
liability  for failure to see that any such duties or  covenants  are so done or
performed.

         (b)  Neither  the   Authority  nor  the  Trustee  shall  be  liable  or
responsible  because of the failure of the  Authority or of any of its employees
or agents to make any  collections  or  deposits  or to  perform  any act herein
required of the Authority or because of the loss of any moneys  arising  through
the  insolvency  or the act or default or  omission of any other  depositary  in
which  such  moneys  shall  have been  deposited  under the  provisions  of this
Indenture.  Neither the Authority nor the Trustee shall be  responsible  for the
application  of any of the proceeds of the Bonds or any other  moneys  deposited
with it and paid out,  withdrawn or transferred  hereunder if such  application,
payment,  withdrawal or transfer shall be made in accordance with the provisions
of this Indenture.

         (c) The immunities  and exemptions  from liability of the Authority and
the Trustee  hereunder  shall  extend to their  respective  directors,  members,
attorneys, officers, employees and agents.

         SECTION  7.14.  AUTHORITY  AND  TRUSTEE MAY RELY ON  CERTIFICATES.  The
Authority  and the Trustee  shall be  protected  and shall incur no liability in
acting or proceeding,  or in not acting or not proceeding,  in good faith and in
accordance with the terms of this Indenture, upon any resolution,  order, notice
request, consent, waiver, certificate,  statement, affidavit,  requisition, bond
or other  paper or document  which it shall in good faith  believe to be genuine
and to have been adopted or signed by the proper board or person or to have been
prepared and  furnished  pursuant to any of the  provisions  of the Agreement or
this  Indenture,  or  upon  the  written  opinion  of  any  attorney,  engineer,
accountant  or other  expert  believed by it to be  qualified in relation to the
subject  matter,  and neither the  Authority  nor the Trustee shall be under any
duty to make any  investigation  or inquiry as to any  statements  contained  or
matters referred to in any such instrument.

         SECTION 7.15. FURTHER  ASSURANCES.  At the expense of the Company,  the
Authority  and the  Trustee  will make,  execute  and  deliver  any and all such
further indentures, instruments and assurances as may be reasonably necessary or
proper to carry out the  intention  or to  facilitate  the  performance  of this
Indenture  and for the better  assuring and  confirming  unto the Holders of the
Bonds of the rights and benefits provided in this Indenture.

                                       33
<PAGE>

                                  ARTICLE VIII

                              DEFAULTS AND REMEDIES

         SECTION  8.01.  EVENTS  OF  DEFAULT.  Each of the  following  shall  be
considered an Event of Default hereunder:

         (a) payment of the  principal of the Bonds and  Redemption  Price shall
not be made when the same shall  become due and  payable,  whether at  maturity,
upon redemption or otherwise; or

         (b)  payment of an  installment  of  interest on any Bonds shall not be
made when the same shall become due and payable; or

         (c)  the  occurrence  of an  "Event  of  Default"  under  a Note or the
Agreement  or  Mortgage,  which  shall  continue  uncured  for the period of any
applicable  notice and cure period or has not otherwise been waived or rescinded
by the  Trustee,  unless the  Company is  diligently  attempting  to remedy such
default,  in which case the Company shall be entitled to such additional time to
do so as set forth in a written  direction of the Authority to the Trustee,  but
in no event exceeding ninety (90) additional days; or

         (d) the Authority  shall default (other than an Event of Default listed
as (a),(b) or (c) above) in the due and punctual  performance  of any  covenant,
condition, agreement or provision contained in the Bonds or in this Indenture on
the part of the Authority to be performed,  and such default shall  continue for
thirty (30) days after written notice by registered mail specifying such default
and requiring the same to be remedied shall have been given to the Authority and
the Company by the Trustee.  The Significant  Bondholders shall be provided with
copies of any such notice (of events of which the  Trustee is aware)  within ten
(10) days.

If any of the foregoing shall occur or be continuing, the Trustee

         (a) may, and upon written  request of the Holders of at least fifty per
cent  (50%) of the  aggregate  principal  amount of all Bonds  then  Outstanding
shall,  by written  notice given to the  Authority  and the Company and provided
that the default has not theretofore  been cured,  declare the principal of, and
all  accrued  interest  on, all Bonds  then  Outstanding  to be due and  payable
immediately,  and upon such  declaration  the same shall  become due and payable
immediately  at the place of payment  provided in the said  notice,  anything in
this Indenture or in said Bonds to the contrary  notwithstanding.  Upon an Event
of Default under Section 7.01(g) of the Agreement, the Bonds shall automatically
be deemed to have been  accelerated  without further notice from or action taken
by the Trustee.

         The above  provisions,  however,  are subject to the condition that if,
after the principal of all Bonds then Outstanding shall have been so declared to
be due and  payable,  all arrears of interest  upon such Bonds,  and interest on
overdue installments of interest (to the extent permitted by law) at the rate

                                       34
<PAGE>

per annum borne by the Bonds and the principal and redemption  premium,  if any,
on all Bonds then Outstanding  which shall have become due and payable otherwise
than by  acceleration,  and all other sums payable under this Indenture,  except
the  principal  of, and interest on, the Bonds which by such  declaration  shall
have  become  due and  payable,  shall  have  been  paid by or on  behalf of the
Authority,  all other Events of Default hereunder shall have been cured, and the
Authority  also shall have performed all other things in respect of which it may
have been in default under this  Indenture,  and shall have paid the  reasonable
fees and  expenses of the  Trustee  and of the Holders of such Bonds,  including
reasonable  attorneys'  fees paid or incurred,  then and in every such case, the
Holders of at least fifty per cent (50%) in  aggregate  principal  amount of the
Bonds then Outstanding,  by written notice to the Trustee, may rescind and annul
such declaration, whereupon the Trustee shall give written notice thereof to the
Authority and the Company by registered  mail. Any such rescission and annulment
shall be binding upon all  Bondholders,  but no such  rescission  and  annulment
shall extend to or affect any  subsequent  default or impair any right or remedy
consequent thereon.  Immediately upon such annulment,  the Trustee shall cancel,
by notice to the Company, any demand for redemption made by the Trustee pursuant
to Section 8.03;

         (b) may, and upon written  request of the Holders of at least fifty per
cent  (50%) of the  aggregate  principal  amount of all Bonds  then  Outstanding
shall, transfer any balance remaining in the Project Fund into the Bond Fund.

         SECTION 8.02.  ENFORCEMENT OF AGREEMENT.  The Authority agrees that the
Trustee, subject to the provisions of the Agreement and this Indenture reserving
the Reserved  Rights to the Authority and  respecting  actions by the Trustee in
its name or where necessary to validly assert the rights of the Bondholders,  AS
ASSIGNEE OF THE AUTHORITY,(but NOT in the name of the Authority) may enforce all
rights of the Authority and all obligations of the Company under and pursuant to
the  Agreement  for and on behalf of the  registered  owners  whether or not the
Authority is in default hereunder.

         SECTION 8.03. JUDICIAL  PROCEEDINGS BY TRUSTEE.  Upon the happening and
continuance of any Event of Default,  then and in every such case the Trustee in
its  discretion  may,  and upon the  written  request of the Holders of at least
fifty per  centum  (50%) of the  aggregate  principal  amount of the Bonds  then
Outstanding and receipt of indemnity to its satisfaction shall, and upon written
request of the  Authority  if an Event of  Default  occurs  pursuant  to Section
8.01(c) of this Indenture shall:

         (a)  exercise  any and all  rights or powers  permitted  to be taken or
exercised by it or by the Authority  under this  Indenture,  the Agreement,  the
Bonds, the Notes, and any agreements related thereto;

         (b) by  mandamus,  or other  suit,  action or  proceeding  at law or in
equity,  enforce all rights of the  Bondholders and require the Company to carry
out any agreements with or for the benefit of the Bondholders and to perform its
or their duties  under the Act, the Bonds,  the Notes,  the  Agreement  and this
Indenture;

                                       35
<PAGE>

         (c) bring suit upon the Bonds;

         (d) by action or suit in equity  require the Authority to account as if
it were the trustee of an express trust for the Bondholders;

         (e) by action or suit in equity  enjoin any acts or things which may be
unlawful or in violation of the rights of the Bondholders;

         (f)  exercise  such  rights  as it may  have as  holder  of the  Notes,
including the right to accelerate payment of the Notes;

         (g)  exercise  such rights as it may have as holder of the Mortgage and
Assignment of Leases,  including the right to seek the appointment of a receiver
for the Project; or

         (h) exercise,  with respect to the security interest granted hereunder,
all of the  rights  and  remedies  of a secured  party  under the State  Uniform
Commercial Code.

         SECTION 8.04. DISCONTINUANCE OR ABANDONMENT OF PROCEEDINGS. In case any
proceeding  taken by the  Trustee  on  account  of any  default  shall have been
discontinued  or  abandoned  for any  reason,  or  shall  have  been  determined
adversely to the Trustee, then and in every such case the Authority, the Trustee
and the Bondholders shall be restored to their former positions and rights under
this Indenture, respectively, and all rights, remedies and powers of the Trustee
shall continue as though no such proceeding had been taken.

         SECTION  8.05.  BONDHOLDERS  MAY DIRECT  PROCEEDINGS.  The Holders of a
majority in principal amount of the Bonds  Outstanding  hereunder shall have the
right,  after furnishing  indemnity  satisfactory to the Trustee,  to direct the
method  and  place  of  conducting  all  remedial  proceedings  by  the  Trustee
hereunder,  provided that such direction  shall not be in conflict with any rule
of law or with  this  Indenture  or unduly  prejudice  the  rights  of  minority
Bondholders.

         SECTION  8.06.  LIMITATIONS  ON ACTIONS BY  BONDHOLDERS.  No Bondholder
shall have any right to pursue any remedy hereunder unless:

         (a) the  Trustee  shall have been given  written  notice of an Event of
Default;

         (b) the Holders of at least fifty per cent (50%) in aggregate principal
amount of all Bonds  then  Outstanding  shall have  requested  the  Trustee,  in
writing,  to exercise the powers hereinabove granted or to pursue such remedy in
its or their name or names;

         (c) the Trustee shall have been offered  indemnity  satisfactory  to it
against costs, expenses and liabilities; and

                                       36
<PAGE>

         (d) the Trustee shall have failed to comply with such request  within a
reasonable time.

         Notwithstanding  the  foregoing  provisions of this Section 8.06 or any
other  provision of this  Indenture,  the  obligation of the Authority  shall be
absolute and  unconditional  to pay hereunder,  but solely from the Revenues and
other funds pledged under this Indenture,  the principal or Redemption Price of,
and interest on, the Bonds to the respective  Holders  thereof on the respective
due dates  thereof,  and  nothing  herein  shall  affect or impair  the right of
action,  which is absolute  and  unconditional,  of such Holders to enforce such
payment.

         SECTION 8.07.  TRUSTEE MAY ENFORCE RIGHTS WITHOUT  POSSESSION OF BONDS.
All rights  under this  Indenture  and the Bonds may be  enforced by the Trustee
without the possession of any Bonds at the trial or other  proceedings  relative
thereto,  and any  proceeding  instituted by the Trustee shall be brought in its
name for the ratable benefit of the Holders of the Bonds.

         SECTION 8.08.  REMEDIES NOT  EXCLUSIVE.  No remedy herein  conferred is
intended to be exclusive of any other remedy or remedies,  and each remedy is in
addition to every other remedy given  hereunder or now or hereafter  existing at
law or in equity or by statute.

         SECTION 8.09.  DELAYS AND OMISSIONS NOT TO IMPAIR RIGHTS.  No delays or
omission in respect of exercising  any right or power  accruing upon any default
shall  impair  such  right or power or be a waiver  of such  default,  and every
remedy  given by this  Article  VIII may be  exercised  from time to time and as
often as may be deemed expedient.

         SECTION  8.10.  APPLICATION  OF MONEYS IN EVENT OF DEFAULT.  Any moneys
received by the Trustee under this Article VIII shall be applied:

                  First:  to the payment of the costs of the Trustee,  including
         Counsel  fees,  any  disbursements  of the Trustee  and its  reasonable
         compensation; and

                  Second:  to the payment of principal or  Redemption  Price (as
         the case may be) and interest then owing on the Bonds, and in case such
         moneys shall be  insufficient  to pay same in full, then to the payment
         of principal and interest ratably without preference or priority of any
         installment  of principal  or interest  over any other  installment  of
         principal or interest; and

                  Third:  to the payment of costs and expenses of the Authority,
         including  counsel  fees,  incurred  in  connection  with the  Event of
         Default; and

                  Fourth:  to the payment of any other  amounts due  under  this
         Indenture or the Agreement.

                                       37
<PAGE>

         The  surplus,  if  any,  shall  be paid to the  Company  or the  person
lawfully  entitled to receive the same as a court of competent  jurisdiction may
direct.

         SECTION  8.11.  TRUSTEE'S  RIGHT TO RECEIVER;  COMPLIANCE  WITH ACT. As
provided  by  the  Act,  the  Trustee  shall  be  entitled  as of  right  to the
appointment of a receiver;  and the Trustee, the Bondholders and any receiver so
appointed  shall have such rights and powers and be subject to such  limitations
and restrictions as are contained in the Act.

         SECTION 8.12.  TRUSTEE AND  BONDHOLDERS  ENTITLED TO ALL REMEDIES UNDER
ACT. It is the purpose of this Article to provide  such  remedies to the Trustee
and  Bondholders  as may be lawfully  granted under the provisions of the Act or
any applicable  statute or available at law or in equity;  but should any remedy
herein  granted  be  held  unlawful,  the  Trustee  and  the  Bondholders  shall
nevertheless  be  entitled  to every  remedy  provided by the Act. It is further
intended  that,  insofar as lawfully  possible,  the  provisions of this Article
shall apply to and be binding upon any trustee or receiver  appointed  under the
Act.

                                       38
<PAGE>

                                   ARTICLE IX

                                   THE TRUSTEE

         SECTION 9.01.  ACCEPTANCE OF TRUST.  The Trustee  accepts and agrees to
execute the trusts hereby created,  but only upon the additional terms set forth
in this Article, to all of which the parties hereto and the Bondholders agree.

         SECTION 9.02. NO  RESPONSIBILITY,  ETC. The  recitals,  statements  and
representations  in this  Indenture  or in the  Bonds,  save only the  Trustee's
certificate of  authentication  upon the Bonds,  have been made by the Authority
and not by the Trustee; and the Trustee shall be under no responsibility for the
correctness thereof.

         SECTION  9.03.  TRUSTEE MAY ACT  THROUGH  AGENTS;  ANSWERABLE  ONLY FOR
WILLFUL MISCONDUCT OR NEGLIGENCE.  The Trustee may exercise any powers hereunder
and perform any duties  required of it through  attorneys,  agents,  officers or
employees,  and shall be entitled to rely upon the advice of Counsel  concerning
all questions hereunder.  The Trustee shall not be answerable for the default or
misconduct of any attorney or agent selected by it with reasonable care.  Except
as  otherwise  provided  herein,  the Trustee  shall not be  answerable  for the
exercise  of any  discretion  or power  under this  Indenture  nor for  anything
whatever in  connection  with the trust  hereunder,  except only its own willful
misconduct or negligence.

         SECTION 9.04. COMPENSATION. In the Agreement, the Company has agreed to
pay the Trustee reasonable compensation for its services hereunder, and also all
its reasonable expenses and disbursements, including reasonable attorneys' fees.
Such  obligations  of the  Company  pursuant  to  Sections  7.05 and 8.04 of the
Agreement  are secured by a first lien  security  interest  in the Trust  Estate
superior  to  the  interests  of  the  Holders  hereunder.  With  regard  to its
compensation,  however,  except when an Event of Default exists  hereunder,  the
Trustee  agrees to exercise any rights  pursuant to the preceding  sentence only
upon forty-five (45) days notice to the Company that such amounts are owed.

         SECTION  9.05.  NOTICE OF DEFAULT;  RIGHT TO  INVESTIGATE.  The Trustee
shall,  within ten (10) days for Significant  Bondholders and within ninety (90)
days for all Bondholders  after the occurrence  thereof,  give written notice by
first class mail to  registered  Holders of Bonds of all  defaults  known to the
Trustee,  unless such  defaults  have been  remedied  (the term  "defaults"  for
purposes of this  Section and Section  9.06 being  defined to include the events
specified in clauses (a) through (d) of Section 8.01).  The Trustee shall not be
deemed to have  notice of any  default  other than under  clauses (a) and (b) of
Section  8.01,  unless it has actual notice or it is notified in writing of such
default by any of the Holders of the Bonds then Outstanding or by the Authority.
The Trustee may, however,  at any time request that the Authority provide to the
Trustee full  information of which the Authority has actual  knowledge  (without
undertaking an investigation)  as to the performance of any covenant  hereunder;
and, if information satisfactory to it is not forthcoming,

                                       39
<PAGE>

the Trustee  may make or cause to be made,  at the  expense of the  Company,  an
investigation into the affairs of the Company related to this Indenture.

         SECTION 9.06.  OBLIGATION  TO ACT ON DEFAULTS.  If any Event of Default
shall have occurred and be  continuing,  the Trustee shall  exercise such of the
rights and remedies vested in it by this Indenture and shall use the same degree
of care in their  exercise  as a prudent  person  would  exercise  or use in the
circumstances in the conduct of his or her own affairs; provided, that if in the
opinion of the Trustee such action may tend to involve expense or liability,  it
shall not be obligated to take such action unless it is furnished with indemnity
satisfactory to it.

         SECTION  9.07.  RELIANCE  ON  REQUISITION,  ETC.  In  addition  to  the
provisions of Section 9.03 with respect to the  Trustee's  ability to rely on an
opinion of counsel, the Trustee may act on any requisition,  resolution, notice,
telegram, request, consent, waiver, certificate,  statement, affidavit, voucher,
bond, or other paper or document  which it in good faith  believes to be genuine
and to have been passed or signed by the proper persons or to have been prepared
and  furnished  pursuant to any of the  provisions  of this  Indenture;  and the
Trustee  shall be under no duty to make any  investigation  as to any  statement
contained in any such instrument, but may accept the same as conclusive evidence
of the accuracy of such statement.

         SECTION 9.08. TRUSTEE MAY DEAL IN BONDS; OTHER FINANCIAL  TRANSACTIONS.
The Trustee may in good faith buy, sell,  own, hold and deal in any of the Bonds
and may join in any action  which any  Bondholders  may be entitled to take with
like effect as if the Trustee  were not a party to this  Indenture.  The Trustee
may also engage in or be interested in any financial or other  transaction  with
the Authority or the Company;  provided that if the Trustee  determines that any
such  relation is in conflict  with its duties  under this  Indenture,  it shall
eliminate the conflict or resign as Trustee.

         SECTION 9.09. NO DUTY TO RENEW INSURANCE. The Trustee shall be under no
duty to effect or to renew any insurance policy nor shall it incur any liability
for the failure of the Company to effect or renew insurance or to report or file
claims of loss thereunder.

         SECTION 9.10.  INTENTIONALLY OMITTED.

         SECTION  9.11.  RESIGNATION  OF TRUSTEE.  The Trustee may resign and be
discharged of the trusts created by this Indenture by written  resignation filed
with the  Authority  (and a copy to the  Company)  not less than sixty (60) days
before the date when it is to take effect. The Trustee shall also mail a copy of
such written resignation, when filed with the Authority, to the registered owner
of  any  Bond  at  his  last  address  appearing  on the  registry  books.  Such
resignation  shall take effect only upon the appointment of a successor  trustee
and the transfer of the Collateral to such successor.

         SECTION 9.12. REMOVAL OF TRUSTEE.  Any Trustee hereunder may be removed
at any time by an instrument appointing a successor to the Trustee so

                                       40
<PAGE>

removed,  (a) executed by the Holders of a majority in  principal  amount of the
Bonds then  Outstanding  and filed with the  Trustee  and the  Authority  or (b)
provided no uncured Event of Default has  occurred,  executed by the Company and
filed with the Trustee and the Authority.

         SECTION 9.13.  APPOINTMENT OF SUCCESSOR TRUSTEE.  If the Trustee or any
successor  trustee  resigns or is removed or  dissolved,  or if its  property or
business  is  taken  under  the  control  of  any  state  or  federal  court  or
administrative  body,  a  vacancy  shall  forthwith  exist in the  office of the
Trustee, and the Authority at direction of the Company shall appoint a successor
and such successor shall mail notice of such appointment to the registered owner
of any Bond by first class mail at his last  address  appearing  on the registry
books. If the Authority fails to make such appointment promptly,  the holders of
a majority in principal  amount of the Bonds then  Outstanding may do so. If the
holders of a majority in  principal  amount of Bonds fail to appoint a successor
trustee  within  thirty (30) days,  the  Trustee  may seek a court of  competent
jurisdiction to have a successor trustee appointed.

         SECTION 9.14.  QUALIFICATION OF SUCCESSOR. A successor trustee shall be
a national  banking  association  with trust powers,  a state bank or a bank and
trust company or a trust company or if there be no bank or trust company willing
to accept the trust on reasonable  and customary  terms then such Trustee as may
be appointed by a Court of competent  jurisdiction,  such  successor  trustee to
have a minimum capital and surplus requirement of $50,000,000.

         SECTION 9.15.  INSTRUMENTS  OF SUCCESSION.  Any such successor  trustee
shall execute,  acknowledge and deliver to the Authority an instrument accepting
such appointment  hereunder;  and thereupon such successor trustee,  without any
further act, deed or conveyance, shall become fully vested with all the estates,
properties, rights, powers, trusts, duties and obligations of its predecessor in
the trust hereunder, with like effect as if originally named Trustee herein. The
Trustee  ceasing to act hereunder  shall pay over to the  successor  trustee all
moneys held by it hereunder;  and, upon request of the  successor  trustee,  the
Trustee ceasing to act and the Authority shall execute and deliver an instrument
transferring  to the  successor  trustee all the  estates,  properties,  rights,
powers and trusts hereunder of the Trustee ceasing to act.

         SECTION 9.16. MERGER OF TRUSTEE. Any corporation into which any Trustee
hereunder may be converted or merged or with which it or any successor to it may
be  consolidated  or to which it may sell or transfer  its assets and  corporate
trust  business  as a  whole  or  substantially  as a whole  or any  corporation
resulting from any such conversion,  sale, merger,  consolidation or transfer to
which any Trustee hereunder shall be a party, IPSO FACTO, shall be the successor
trustee under this Indenture, and vested with all of the trusts, powers, duties,
discretions,  immunities,  privileges and other matters as was its  predecessor,
without the  execution  or filing of any paper or any

                                       41
<PAGE>

further act on the part of the parties  hereto,  anything herein to the contrary
notwithstanding.

                                       42
<PAGE>

                                    ARTICLE X

                     EXECUTION OF INSTRUMENTS BY BONDHOLDERS
                         AND PROOF OF OWNERSHIP OF BONDS

         SECTION 10.01. OWNERSHIP OF BONDS. Any request,  direction,  consent or
other instrument in writing required or permitted by this Indenture to be signed
or executed by  Bondholders  may be in any number of concurrent  instruments  of
similar tenor and may be signed or executed by such  Bondholders in person or by
agent appointed by an instrument in writing.  Proof of the execution of any such
instrument  and of the ownership of Bonds shall be sufficient for any purpose of
this  Indenture  and shall be  conclusive in favor of the Trustee and any Paying
Agent with regard to any action taken,  suffered or omitted by any of them under
such instrument if made in the following manner:

         (a) The  fact  and  date of the  execution  by any  person  of any such
instrument may be proved by the  certificate of any officer in any  jurisdiction
who,  by the  laws  thereof,  has  power  to take  acknowledgments  within  such
jurisdiction, to the effect that the person signing such instrument acknowledged
before  him the  execution  thereof,  or by an  affidavit  of a witness  to such
execution; and

         (b) The ownership of the Bonds shall be proved by the Bond Register.

         Nothing  contained in this Article X shall be construed as limiting the
Trustee to such proof,  it being  intended that the Trustee may accept any other
evidence  of the  matters  in  this  Article  X  stated  which  to it  may  seem
sufficient.  Any  request  or consent of the Holder of any Bond shall bind every
future  Holder of the same  Bond and any Bond or Bonds  issued  in  exchange  or
substitution therefor or upon the registration of transfer thereof in respect of
anything done by the Trustee in pursuance of such request or consent.

                                       43
<PAGE>

                                   ARTICLE XI

                           AMENDMENTS AND SUPPLEMENTS

         SECTION 11.01. AMENDMENTS AND SUPPLEMENTS WITHOUT BONDHOLDERS' CONSENT.
This Indenture may be amended or supplemented at any time and from time to time,
without the consent of the Bondholders,  by a Supplemental Indenture executed by
the Authority and the Trustee, for one or more of the following purposes:

                  (a) to add additional covenants of the Authority; and

                  (b) for any  purpose not  inconsistent  with the terms of this
         Indenture,  including,  without limitation,  the issuance of Additional
         Bonds,  or to cure  any  ambiguity  or to  correct  or  supplement  any
         provision  contained herein or in any Supplemental  Indenture which may
         be defective or inconsistent with any other provision  contained herein
         or in any Supplemental  Indenture,  or to make such other provisions in
         regard to matters or questions arising under this Indenture which shall
         not be  inconsistent  with the  provisions of this  Indenture and which
         shall not adversely affect the interests of the Holders of the Bonds.

         SECTION 11.02. AMENDMENTS WITH BONDHOLDERS' CONSENT. This Indenture may
be  amended  from  time to  time,  except  with  respect  to (a) the  principal,
Redemption  Price, or interest  payable upon any Bonds, (b) the Interest Payment
Dates,  the date of  maturity or the  redemption  provisions  of any Bonds,  (c)
provisions  relating to the  aggregate  principal  amount of Bonds  required for
consent to such Supplemental  Indenture,  and (d) the security interest and lien
granted  under this  Indenture,  (except  as  provided  in  Section  6.16 of the
Agreement and except to add additional security) by a Supplemental Indenture and
approved  by the Holders of at least  fifty-one  per centum  (51%) in  aggregate
principal  amount of the Bonds then  Outstanding;  provided that any dilution of
the  security  for the Loans shall  require the consent of  one-hundred  percent
(100%) of the Holders.  This  Indenture  may be amended from time to time in any
manner by a Supplemental  Indenture  consented to by the Company and approved by
the Holders of all the Bonds then Outstanding. It shall not be necessary for the
consent of the Holders under this Section 11.02 to approve the  particular  form
of any  proposed  Supplemental  Indenture  but it  shall be  sufficient  if such
consent shall approve the substance thereof.

         SECTION 11.03. COMPANY CONSENT REQUIRED. A Supplemental Indenture shall
not become  effective  unless the  Company  delivers  to the Trustee its written
consent to the  amendment or supplement or unless the Company fails to deliver a
written  objection to the Trustee  within fifteen (15) days after receipt by the
Company of a proposed form of such amendment or supplement.

         SECTION 11.04. AMENDMENT OF AGREEMENT.  The Agreement may be amended or
supplemented  from time to time,  without the consent of the  Bondholders,  by a
supplemental  Agreement  executed by the Authority  and the Company,  for one or
more of the following purposes:

                                       44
<PAGE>

                  (a) to add additional covenants of the Company; and

                  (b) for any  purpose  not  inconsistent  with the terms of the
         Agreement,  including,  without limitation,  the issuance of Additional
         Bonds,  or to cure  any  ambiguity  or to  correct  or  supplement  any
         provision contained therein or in any supplemental  agreement which may
         be defective or inconsistent with any other provision contained therein
         or in any supplemental  agreement,  or to make such other provisions in
         regard to matters or questions  arising under the Agreement which shall
         not be  inconsistent  with the  provisions  of the  Agreement and which
         shall not adversely affect the interests of the Holders of the Bonds.

         If the Authority and the Company propose to amend the Agreement in such
a way as would affect the interests of Bondholders and, therefore, would require
the  consent of the Trustee as provided in this  Section  11.04,  the  Authority
shall file with the Trustee a copy of the proposed amendment.  The Trustee shall
notify  Bondholders of the proposed  amendment and may consent  thereto with the
consent of at least fifty-one per centum (51%) in aggregate  principal amount of
the Bonds then Outstanding and each Significant  Bondholder;  provided, that the
Trustee  shall not,  without the  unanimous  consent of the Holders of all Bonds
then Outstanding,  consent to any amendment which would (a) decrease the amounts
payable on the Notes, (b) change the maturity date or the date of payment of any
installment of interest under the Notes or change any of the payment  provisions
of the Notes, or (c) provisions  relating to the aggregate  principal  amount of
the Bonds required for consent to such amendment.

         SECTION   11.05.   TRUSTEE   AUTHORIZED  TO  JOIN  IN  AMENDMENTS   AND
SUPPLEMENTS;  RELIANCE ON COUNSEL.  The Trustee is  authorized  to join with the
Authority  in the  execution  and  delivery  of any  Supplemental  Indenture  or
amendment  permitted by this Article XI and in so doing shall be fully protected
by an opinion of Counsel  that such  Supplemental  Indenture  or amendment is so
permitted  and has been duly  authorized by the Authority and does not adversely
affect the  interests of the Holders of the Bonds and that all things  necessary
to make it a valid and binding agreement have been done. The Authority agrees to
deliver to the Trustee,  prior to the execution of a Supplemental Indenture or a
supplemental  Agreement,  an  opinion of Bond  Counsel  to the effect  that such
amendment  or  supplement  will not have an adverse  effect on the  exemption of
interest on the Bonds from inclusion in gross income of the Holders.

         Notwithstanding  anything contained herein to the contrary, there shall
be no amendments or supplements to this Indenture or any Supplemental  Indenture
which  increase  the  duties or  responsibilities  of any  fiduciary  under this
Indenture  or any  Supplemental  Indenture,  without the express  prior  written
consent of such fiduciary.

                                       45
<PAGE>

                                   ARTICLE XII

                                   DEFEASANCE

         SECTION 12.01.  DEFEASANCE.  (a) When principal or Redemption Price (as
the case may be) of, and interest on, all Bonds issued hereunder have been paid,
or  provision  has been  made for  payment  of the same  when due in the  manner
described  in this  Section  12.01,  whether  at  maturity  or upon  redemption,
acceleration,  or otherwise,  together with all other sums payable  hereunder or
under  the  Agreement,  the  right,  title and  interest  of the  Trustee  shall
thereupon cease (except with respect to moneys or securities held by the Trustee
hereunder for the payment of the principal or Redemption  Price (as the case may
be) of,  and  interest  on, the Bonds and other  amounts)  and the  Trustee,  on
written  demand of the  Authority,  shall release the lien of this Indenture and
shall execute  documents to evidence such release as may be reasonably  required
by the Authority,  shall  surrender the Notes to the Company and shall turn over
to the  Company or to such  person,  body or  authority  as may be  entitled  to
receive the same all balances then held by it hereunder.

         (b)  Provision  for the  payment of Bonds  shall be deemed to have been
made upon the delivery to the Trustee of (i) cash in an amount which, when added
to any other moneys held by the Trustee and available for such payment, would be
sufficient to make all payments specified above, or (ii) Government  Obligations
which are  non-callable  prior to the stated maturity  thereof and having stated
maturities  arranged so that the  principal  of and  interest  becoming  due and
payable on such Government  Obligations  will,  under any and all  circumstances
(and without further  investment or reinvestment of either the principal  amount
thereof or the  interest  earned  thereon),  be  sufficient  (as  confirmed by a
nationally  recognized firm of public accountants) to make all such payments, or
(iii) any combination of such cash and such  Government  Obligations the amounts
of which  and  interest  thereon,  when due,  are or will be, in the  aggregate,
sufficient  to make all such  payments,  and in each case,  the  delivery to the
Trustee of (a) an opinion of Bond Counsel to the effect that such  defeasance is
permitted under this Section 12.01 and (b) an opinion of Counsel selected by the
Trustee and reasonably acceptable to the Company as to such other matters as the
Trustee or the Holders of at least a majority in aggregate  principal  amount of
the Outstanding Bonds may reasonably request. Neither the obligations nor moneys
deposited  with the Trustee  pursuant to this Section shall be withdrawn or used
for any purpose other than,  and shall be  segregated  and held in trust for the
payment of the principal of, Redemption Price and interest on said Bonds.

         (c) The release of the  obligations of the Authority under this Section
12.01 shall not affect the obligations of the Company to make direct payments to
the Authority, the Trustee or any Holder of the Bonds pursuant to the Agreement.

                                       46
<PAGE>

                                  ARTICLE XIII

                                  MISCELLANEOUS

         SECTION  13.01.  DISSOLUTION.  In the event of the  dissolution  of the
Authority,  all the  covenants,  stipulations,  promises and  agreements in this
Indenture  contained,  by or on behalf of, or for the benefit of, the Authority,
shall bind or inure to the benefit of the  successors of the Authority from time
to time and any officer, board, commission, agency or instrumentality to whom or
to which any power or duty of the Authority shall be transferred.

         SECTION  13.02.  NO  RIGHTS  CONFERRED  ON  OTHERS.  Except  as in this
Indenture otherwise specifically  provided,  nothing in this Indenture expressed
or implied is intended  or shall be  construed  to confer upon any person  other
than the Company, the Authority, the Trustee and the Holders of the Bonds issued
under  this  Indenture,  any right,  remedy or claim  under or by reason of this
Indenture,  this  Indenture  being  intended  to be for the sole  and  exclusive
benefit of the Company, the Authority,  the Trustee and the Holders of the Bonds
issued under this Indenture.

         SECTION 13.03.  DEPOSIT OF FUNDS FOR PAYMENT OF BONDS. If the Authority
deposits  with the Trustee  funds  sufficient to pay the principal or Redemption
Price of any Bonds becoming due, either at maturity or by call for redemption or
otherwise,  together  with all interest  accruing  thereon to the due date,  all
interest on such Bonds  shall cease to accrue on the due date and all  liability
of the  Authority  with respect to such Bonds shall  likewise  cease,  except as
hereinafter  provided.  Thereafter the Holders of such Bonds shall be restricted
exclusively  to the funds so deposited for any claim of  whatsoever  nature with
respect  to such  Bonds,  provided  that such  restriction  shall not affect the
obligations  of the Company to make direct  payments to the Holders of the Bonds
pursuant to this Indenture or the Agreement,  and the Trustee shall deposit such
moneys with the Paying Agent to be held in trust for such Holders.

         If any Bond or evidence of beneficial  ownership of such Bond shall not
be presented  for payment  when the  principal  thereof  becomes due (whether at
maturity,  by  acceleration,   upon  call  for  redemption,   upon  purchase  or
otherwise),  all liability of the Authority to the registered  owner thereof for
the payment of such Bond,  shall  forthwith  cease,  terminate and be completely
discharged  if funds  sufficient  to pay such Bond and interest due thereon,  if
any, are held by the Trustee  uninvested for the benefit of the registered owner
thereof.  Thereupon  it shall  be the duty of the  Trustee  to  comply  with the
Uniform Unclaimed  Property Act, N.J.S.A.  46:30B-1 ET SEQ. with respect to such
funds. The registered  owner shall thereafter be restricted  exclusively to such
funds for any claim of whatever  nature on his part under this  Indenture or on,
or with respect to, such Bond.

         SECTION 13.04.  SEVERABILITY OF INVALID PROVISIONS.  In case any one or
more of the  provisions  of this  Indenture  or of the Bonds  issued  under this
Indenture  shall,  for any  reason,  be  held to be  illegal  or  invalid,  such

                                       47
<PAGE>

illegality or invalidity shall not affect any other provisions of this Indenture
or of said  Bonds,  and this  Indenture  and the Bonds  shall be  construed  and
enforced as if such illegal or invalid  provisions had not been contained herein
or therein.

         SECTION 13.05. NO PERSONAL RECOURSE. No covenant or agreement contained
in the  Bonds  or in this  Indenture  shall  be  deemed  to be the  covenant  or
agreement of any member,  agent,  or employee of the Authority in his individual
capacity,  and neither the members of the Authority  nor any official  executing
the Bonds shall be liable  personally on the Bonds or be subject to any personal
liability or accountability by reason of the issuance thereof.

         SECTION 13.06.  NOTICE.

         (a)  Any  notice,  demand,  direction,   request  or  other  instrument
authorized  or  required  by this  Indenture  to be given  to or filed  with the
persons named below shall be deemed to have been sufficiently given or filed for
all  purposes  of this  Indenture  if and when sent by  registered  mail  return
receipt requested:

                  (i) To the  Authority at 36 West State  Street,  P.O. Box 990,
         Trenton, New Jersey, 08625, Attention:  Director of Program Services or
         at such other  address as may be designated in writing by the Authority
         to the Trustee,  copy to McManimon & Scotland,  L.L.C.,  One Riverfront
         Plaza, Newark, New Jersey 07102, Attention: John V. Cavaliere, Esq.;

                  (ii) To the Trustee at 385 Rifle Camp Road, West Paterson, New
         Jersey 07424, Attn: Corporate Trust Department;

                  (iii) To the  Company at 165  Ludlow  Avenue,  Northvale,  New
         Jersey 07647, Attention: Mark Gittelman,  Chief Financial Officer, with
         a copy to Gallo Geffner  Fenster,  P.C.,  Country Club Plaza,  West 115
         Century Road, Paramus, New Jersey 07652, Attention:  Michael L. Messer,
         Esq.; and

                  (iv)  To the  Placement  Agent,  Ryan  Beck & Co.,  740  Broad
         Street,  Shrewsbury,  New Jersey 07702, copy to DeCotiis,  FitzPatrick,
         Cole & Wisler,  LLP, 500 Frank W. Burr Boulevard,  Teaneck,  New Jersey
         08607, Attention: Isabel Miranda, Esq.

         (b) Upon the  written  request of either the  Company or the  Placement
Agent, the Trustee shall promptly provide a list of all Bondholders.

         SECTION 13.07. EXECUTION IN SEVERAL COUNTERPARTS.  This Indenture shall
be simultaneously  executed in several identical  counterparts,  and all of said
counterparts executed and delivered, each as an original and complete in itself,
shall constitute but one and the same instrument and any such counterpart may be
introduced  in evidence,  proved,  recorded or used for any purpose  without the
production of any other counterpart.

                                       48
<PAGE>

         SECTION 13.08. LAWS GOVERNING INDENTURE. The effect and meaning of this
Indenture  and the rights of all parties  hereunder  shall be  governed  by, and
construed according to, the laws of the State.

         SECTION 13.09. SUCCESSORS AND ASSIGNS. All the covenants,  promises and
agreements in this Indenture  contained by or on behalf of the Authority,  or by
or on behalf  of the  Trustee,  shall  bind and  inure to the  benefit  of their
respective successors and assigns, whether so expressed or not.

         SECTION 13.10.  HEADINGS FOR CONVENIENCE ONLY. The descriptive headings
in this  Indenture  are inserted for  convenience  only and shall not control or
affect the meaning or construction of any of the provisions hereof.

         SECTION 13.11. CREDITS ON THE NOTES. In addition to any credit, payment
or satisfaction expressly provided for under the provisions of this Indenture in
respect of payments due under the Notes,  the Trustee shall make credits against
amounts  otherwise  payable  in  respect  of the  applicable  Note in an  amount
corresponding to (a) the principal amount of any Bond surrendered to the Trustee
by the Company or the Authority,  or purchased by the Trustee,  for cancellation
and (b) the amount of money held by the Trustee and available and designated for
the payment of  principal  or  Redemption  Price of, or interest  on, the Bonds,
regardless  of the source of payment to the Trustee of such moneys.  The Trustee
shall promptly notify the Company when such credits arise.

         SECTION 13.12. PAYMENTS DUE ON SATURDAYS,  SUNDAYS AND HOLIDAYS. In any
case where the date of maturity of interest on or  principal of the Bonds or the
date fixed for  redemption of any Bonds shall be a Saturday or Sunday or a legal
holiday or a day on which banking  institutions  in the  municipality of payment
are  authorized  by law to close,  then  payment of  interest  or  principal  or
Redemption  Price  need  not be made on such  date  but may be made on the  next
succeeding business day with the same force and effect as if made on the date of
maturity or the date fixed for redemption, and no interest on such payment shall
accrue for the period after such date.

         SECTION 13.13.  FORM OF BONDS. The Initial Bonds to be issued under and
secured by this Indenture and the Trustee's certificate of authentication are to
be in  substantially  the form  attached  hereto as EXHIBIT A and EXHIBIT B with
necessary and appropriate  variations,  omissions and insertions as permitted or
required by this Indenture.

                                       49
<PAGE>

         IN WITNESS  WHEREOF,  The  Authority  and the Trustee have caused their
respective  corporate  seals to be  hereunto  affixed  and  attested  and  these
presents to be signed by their respective officers thereunto duly authorized and
this Indenture to be dated as of the day and year first above written.

{SEAL}
ATTEST                                  NEW JERSEY ECONOMIC DEVELOPMENT
                                         AUTHORITY

/s/ Lawrence G. Cier                    By: /s/ Gregory Ritz
---------------------------------           ------------------------------------
Lawrence G. Cier                                Gregory Ritz
Assistant Secretary                             Chief Financial Officer

                                       50
<PAGE>

                  (COUNTERPART SIGNATURE PAGE TO THE INDENTURE)

                                         THE BANK OF NEW YORK, as Trustee

                                         By: /s/ Susan M. Pszonek
                                            -------------------------------
                                                 Susan M. Pszonek
                                                 Vice President

                                       51
<PAGE>

                                    EXHIBIT A
                             (FORM OF SERIES A BOND)

THE STATE OF NEW  JERSEY IS NOT  OBLIGATED  TO PAY,  AND  NEITHER  THE FAITH AND
CREDIT NOR TAXING POWER OF THE STATE OF NEW JERSEY IS PLEDGED TO THE PAYMENT OF,
THE PRINCIPAL OR  REDEMPTION  PRICE,  IF ANY, OF OR INTEREST ON THIS BOND.  THIS
BOND IS A SPECIAL,  LIMITED  OBLIGATION OF THE AUTHORITY,  PAYABLE SOLELY OUT OF
THE REVENUES OR OTHER RECEIPTS,  FUNDS OR MONEYS OF THE AUTHORITY  PLEDGED UNDER
THE INDENTURE AND FROM ANY AMOUNTS  OTHERWISE  AVAILABLE UNDER THE INDENTURE FOR
THE PAYMENT OF THIS BOND.  THIS BOND DOES NOT NOW AND SHALL NEVER  CONSTITUTE  A
CHARGE AGAINST THE GENERAL CREDIT OF THE AUTHORITY.  THE AUTHORITY HAS NO TAXING
POWER.

THIS  BOND IS NOT  RATED  AND NO  APPLICATION  WILL BE MADE TO  OBTAIN  A RATING
HEREON.  PURCHASE OF THIS BOND  SHOULD  ONLY BE MADE BY AN INVESTOR  WHO (A) CAN
BEAR THE ECONOMIC RISK OF THIS BOND,  (B) HAS SUCH  KNOWLEDGE AND  EXPERIENCE IN
BUSINESS  AND  FINANCIAL  MATTERS AS TO BE CAPABLE OF  EVALUATING  THE RISKS AND
MERITS OF THIS BOND, (C)  ACKNOWLEDGES  THAT THIS BOND SHOULD ONLY BE CONSIDERED
FOR  PURCHASE  AS PART OF A  DIVERSIFIED  PORTFOLIO  OF HIGH  YIELD,  HIGH  RISK
SECURITIES,  AND  (D)  HAS  UNDERTAKEN  THE  RESPONSIBILITY  FOR  OBTAINING  ALL
INFORMATION  THAT IS  DEEMED  NECESSARY  AND  DESIRABLE  TO FORM A  DECISION  TO
PURCHASE THIS BOND.

                    NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY
                           ECONOMIC DEVELOPMENT BONDS
             (ELITE PHARMACEUTICALS, INC. - 2005 PROJECT), SERIES A

                    MATURITY                                    DATED
NUMBER RA - 1       DATE                                DATE
                    ----                                ----
                    September 1, 2030                   August 15, 2005

CUSIP NUMBER:       ________________

REGISTERED OWNER:   CEDE & CO.

PRINCIPAL AMOUNT:   THREE MILLION SIX HUNDRED SIXTY THOUSAND
                    AND 00/100 DOLLARS ($3,660,000.00)

INTEREST RATE:      SIX AND ONE HALF PER CENT (6.50%)

         THE NEW JERSEY  ECONOMIC  DEVELOPMENT  AUTHORITY (the  "Authority"),  a
public body corporate and politic, constituting an instrumentality of the

                                A-1

<PAGE>

State of New Jersey duly  organized and existing  under the laws of the State of
New Jersey and, in particular,  The New Jersey  Economic  Development  Authority
Act, constituting  N.J.S.A.  34:1B.1 ET SEQ., as may be amended and supplemented
(the "Act"), for value received, hereby promises to pay, but only from the funds
provided  therefor as hereinafter set forth,  to the registered  owner specified
hereinabove,  or  registered  assigns on the maturity  date  (specified  above),
unless this Bond shall be  redeemed  and shall have been  previously  called for
redemption  and  payment of the  redemption  price  shall have been duly made or
provided for, upon surrender  hereof,  the principal sum specified  above and to
pay  interest  thereon (but only out of said  amounts) at the interest  rate per
annum specified above from the most recent Interest Payment Date (as hereinafter
defined) to which interest has been paid or provided for or on March 1, 2006 and
semiannually  thereafter  on  March 1 and  September  1 in each  year  (each  an
"Interest  Payment  Date") until payment of said  principal sum has been made or
provided  for.  Interest  on the  Bonds  shall be  calculated  on the basis of a
360-day year  consisting  of twelve 30-day  months.  The interest so payable and
punctually  paid or duly  provided  for,  on any  Interest  Payment  Date  will,
pursuant to the Indenture  (as  hereinafter  defined) be paid to the  registered
owner  hereof at the  close of  business  on the  regular  record  date for such
interest,  which date shall be the  fifteenth  (15th) day (whether such day is a
business day) of the calendar month immediately  preceding such Interest Payment
Date (the "Regular Record Date"). Any interest on any Bond which is payable, but
is not  punctually  paid or provided  for, on any Interest  Payment Date (herein
called  "Defaulted  Interest")  shall  forthwith  cease  to be  payable  to  the
Registered  Owner on the  relevant  Record  Date by virtue  of having  been such
owner,  and such Defaulted  Interest  shall be paid to the  Registered  Owner in
whose name the Bond is registered  at the close of business on a special  Record
Date (the "Special Record Date") to be fixed by the Trustee, such Special Record
Date to be not more than  fifteen  (15) nor less than ten (10) days prior to the
date of proposed payment. The Trustee shall cause notice of the proposed payment
of such  Defaulted  Interest and the Special  Record Date therefor to be mailed,
first class  postage  prepaid,  to each  registered  owner,  at such  registered
owner's address as it appears in the Bond Register (as hereinafter defined), not
less than ten (10) days prior to such Special Record Date. Interest on this Bond
shall be payable by check mailed to the Registered  Owner hereof on the Interest
Payment Date.  Payments of principal,  Redemption  Price or interest due on this
Bond may also be payable by electronic funds transfer to the Registered Owner of
$1,000,000 or more;  provided such  Registered  Owner  requests such  electronic
funds transfer and delivers to the Trustee in writing,  not later than the close
of business on the applicable  Record Date preceding such transfer the following
information  needed to make such transfer:  the name of the bank to receive such
transfer, wiring code of said bank, ABA number, account number of the Registered
Owner and name of a contact person at the bank. The principal of and interest on
this Bond shall be paid in any coin or currency of the United  States of America
which,  at the time of  payment,  is legal  tender for the payment of public and
private debts.

         This Bond is issued under and pursuant to the  Constitution and Laws of
the State of New Jersey,  and under and pursuant to a resolution duly adopted by
the Authority on July 12, 2005. This Bond and the Bonds of the issue of

                                       A-2

<PAGE>

which it forms a part are special,  limited obligations of the Authority payable
solely from the revenues and assets constituting the Trust Estate (as defined in
the  Indenture)  pledged  under the  Indenture.  THE STATE OF NEW  JERSEY IS NOT
OBLIGATED TO PAY, AND NEITHER THE FAITH AND CREDIT NOR TAXING POWER OF THE STATE
OF NEW JERSEY IS PLEDGED TO THE PAYMENT OF, THE PRINCIPAL OR  REDEMPTION  PRICE,
IF ANY, OF OR INTEREST ON THIS BOND. THIS BOND IS A SPECIAL,  LIMITED OBLIGATION
OF THE AUTHORITY, PAYABLE SOLELY OUT OF THE REVENUES OR OTHER RECEIPTS, FUNDS OR
MONEYS  OF THE  AUTHORITY  PLEDGED  UNDER  THE  INDENTURE  AND FROM ANY  AMOUNTS
OTHERWISE  AVAILABLE UNDER THE INDENTURE FOR THE PAYMENT OF THIS BOND. THIS BOND
DOES NOT NOW AND SHALL NEVER  CONSTITUTE A CHARGE  AGAINST THE GENERAL CREDIT OF
THE AUTHORITY. THE AUTHORITY HAS NO TAXING POWER.

         This Bond is one of the Bonds of a duly  authorized  issue of  economic
development  bonds  of  the  Authority  in the  aggregate  principal  amount  of
$3,660,000 and is known as "New Jersey Economic Development Authority,  Economic
Development Bonds (Elite Pharmaceuticals,  Inc. - 2005 Project),  Series A" (the
"Bonds").

         The Bonds are issued for the  purpose  of  financing  a project as more
fully defined in the Agreement (as hereinafter defined).  Elite Pharmaceuticals,
Inc. (the  "Company") and the Authority have entered into a Loan Agreement dated
as of August  15,  2005  (which  Loan  Agreement  as it may from time to time be
amended is hereinafter  called the  "Agreement")  pursuant to the terms of which
the  Authority  has agreed to issue and sell the Bonds and to lend the  proceeds
thereof to the Company,  and in consideration  thereof the Company has agreed to
make  payments to the Authority  sufficient to pay the principal of,  redemption
premium (if any) and interest on the Bonds as the same become due and payable.

         This Bond is issued  under and  pursuant  to an  Indenture  dated as of
August  15,  2005  (said  Indenture  together  with  all  such  supplements  and
amendments  thereto as therein permitted,  the "Indenture"),  by and between the
Authority and The Bank of New York, as trustee (said banking institution and any
successor trustee under the Indenture,  the "Trustee").  An executed counterpart
of the  Indenture  is on file at the  principal  corporate  trust  office of the
Trustee.  Reference is hereby made to the  Indenture for the  provisions,  among
others,  with  respect to the custody  and  application  of the  proceeds of the
Bonds,  the collection and  disposition of revenues,  a description of the funds
pledged to the payment of the principal of and interest on the Bonds, the nature
and extent of the security,  the rights, duties and obligations of the Authority
and the  Trustee  and the  rights  of the  holders  of the  Bonds,  and,  by the
acceptance of this Bond,  the holder hereof  assents to all of the provisions of
the Indenture.

I. REDEMPTION OF BONDS

         (a) OPTIONAL REDEMPTION.  The Bonds are subject to optional redemption,
in whole at any time or in part on any Interest  Payment Date, at the

                                      A-3
<PAGE>

redemption  prices  (expressed  as a percentage  of the  principal  amount to be
redeemed) as set forth below:

                           DATE                        REDEMPTION PRICE
                           ----                        ----------------

         September 1, 2015 to August 31, 2016                102%
         September 1, 2016 to August 31, 2017                101%
         Thereafter                                          100%

         If less  than all the  Bonds are to be  redeemed,  the  Bonds  shall be
selected  by the  Trustee by lot,  or in such other  manner as the  Trustee  may
determine, for redemption.

         (b)  MANDATORY  SINKING  FUND  REDEMPTION.  The  Bonds are  subject  to
mandatory sinking fund redemption prior to maturity, at a redemption price equal
to 100% of the principal  amount  thereof on September 1 of the years and in the
amounts set forth below:

                           YEAR                          AMOUNT
                           ----                          ------

                           2006                         $120,000
                           2007                          125,000
                           2008                          135,000
                           2009                          140,000
                           2010                          150,000
                           2011                          165,000
                           2012                          170,000
                           2013                          185,000
                           2014                          195,000
                           2015                          210,000
                           2016                          220,000
                           2017                           85,000
                           2018                           90,000
                           2019                           95,000
                           2020                          105,000
                           2021                          110,000
                           2022                          115,000
                           2023                          125,000
                           2024                          130,000
                           2025                          140,000
                           2026                          150,000
                           2027                          160,000
                           2028                          170,000
                           2029                          180,000
                           2030*                         190,000

         *Final Maturity

         (c) MANDATORY  REDEMPTION - FUNDS  REMAINING IN PROJECT FUND. The Bonds
are  subject to  mandatory  redemption  in part on the  earlier of (a) the third

                                       A-4
<PAGE>

anniversary  date of the  issuance  of the  Bonds or (b) a date not  later  than
forty-five (45) days after the Completion Date (as defined in the Indenture), to
the  extent  of moneys  remaining  in the  Project  Fund  established  under and
pursuant to the  Indenture as of such date,  at a redemption  price equal to one
hundred  percent  (100%) of the  principal  amount of Bonds to be redeemed  plus
interest  accrued thereon to the redemption  date;  provided,  however that such
redemption shall not be made if the Company obtains at its expense an opinion of
bond  counsel  acceptable  to the Trustee to the effect that the failure to make
such redemption will not adversely affect the exemption of interest on the Bonds
for either federal or State income tax purposes.

         (d) EXTRAORDINARY  MANDATORY  REDEMPTION - DETERMINATION OF TAXABILITY.
The Bonds are subject to mandatory redemption in whole not later than sixty (60)
days after the  occurrence of a  Determination  of Taxability (as defined in the
Agreement) at a redemption price equal to one hundred and five percent (105%) of
the principal  amount of Bonds to be redeemed plus interest  accrued  thereon to
such redemption date.

         (e)  EXTRAORDINARY  MANDATORY  REDEMPTION - CASUALTY  AND  CONDEMNATION
PROCEEDS.  The Bonds are subject to mandatory  redemption by the Authority prior
to maturity,  in whole at any time,  or in part on any Interest  Payment Date to
the extent  proceeds of  insurance  or  condemnation  awards are  received  with
respect  to the  Project  and are not used to  repair  or  restore  the  Project
Facilities pursuant to the Loan Agreement at a redemption price equal to 100% of
the  principal  amount to be  redeemed,  plus  interest  accrued  thereon to the
redemption date.

         (f) SPECIAL  MANDATORY  REDEMPTION - BREACH OF CERTAIN  PUBLIC  PURPOSE
COVENANTS.  The Bonds are subject to special  mandatory  redemption  in whole as
soon as  practicable  but no later than the 90th day following  the  Authority's
written notice to the Trustee and the Company that (i) the Company has ceased to
operate  the  Project  or ceased  to cause  the  Project  to be  operated  as an
authorized  project under the Act for twelve (12)  consecutive  months,  without
first  obtaining  the  prior  written  consent  of the  Authority  or  (ii)  any
representation  or warranty of the Company  contained in the Agreement or in any
other document furnished to the Authority in connection with the Bonds proves to
have been false or  misleading  in any  material  respect  when  made.  Upon the
occurrence of any such event,  the Bonds shall be redeemed by the Authority at a
redemption  price equal to 100% of the  principal  amount  thereof plus interest
accrued thereon to the redemption date.

         Notice of any redemption pursuant to the preceding  paragraphs shall be
given by the  Trustee by first  class mail  postage  prepaid to each  registered
owner of the  Bonds at his  address  as it  appears  on the  Bond  Register  (as
hereinafter defined).  Such notice shall be mailed not less than thirty (30) nor
more than forty-five (45) days prior to the redemption date (except with respect
to redemptions  made pursuant to paragraphs (d) and (f),  mailed within the time
period  specified for such  redemption).  Failure to mail such notice or defects
therein  or in  the  mailing  thereof  shall  not  affect  the  validity  of the
redemption.  In connection with any such notice, the "CUSIP" numbers assigned

                                       A-5
<PAGE>

to the Bonds being called for  redemption may be used but reliance may be placed
only on the  identification  number printed hereon.  In the event that less than
the full  principal  amount  hereof shall have been called for  redemption,  the
registered  owner hereof may surrender this Bond in exchange for one or more new
Bonds  in  aggregate  principal  amount  equal  to  the  unredeemed  portion  of
principal, as provided in the Indenture.

         After notice of redemption  shall have been given as  aforesaid,  then,
from and after the date fixed for redemption, the Bonds so called for redemption
shall cease to bear interest and such Bonds shall no longer constitute a lien on
the Trust Estate and shall not be considered Outstanding under the Indenture.

II.      GENERAL PROVISIONS

         Pursuant to the  Indenture,  the Authority  has, for the benefit of the
holders of the Bonds,  assigned to the Trustee the Authority's  right, title and
interest  under the  Agreement  and the  Notes,  subject to the  reservation  of
certain  rights  by the  Authority  under the  Agreement  to  exercise  remedies
thereunder under certain  circumstances,  to receive certain fees,  expenses and
notices, to render consents and approvals and to receive indemnification.

         The holder of this Bond shall have no right to enforce  the  provisions
of the  Indenture or the  Agreement  or to  institute  any action to enforce the
covenants  therein,  or to take any action with  respect to any event of default
under the Indenture or the Agreement,  or to institute,  appear in or defend any
suit or other  proceeding  with  respect  thereto,  except  as  provided  in the
Indenture.

         In certain events, on the conditions, in the manner and with the effect
set forth in the  Indenture,  the  principal  of the Bonds may  become or may be
declared due and payable before the stated  maturity  hereof,  together with the
interest accrued hereon.

         Modifications or alterations of the Agreement and the Indenture and any
supplement  or  amendment  thereto  may be made  only to the  extent  and in the
circumstances  permitted  by the  Indenture  and may be made  in  certain  cases
without the consent of the holders of the Bonds.

         This  Bond is  registered  as to both  principal  and  interest  on the
registration  books of the Trustee to be kept for that purpose at the  corporate
trust office of the Trustee,  and both  principal and interest  shall be payable
only to the registered  owner hereof.  No transfer  hereof shall be valid unless
made at said office by the registered  owner in person or by his duly authorized
attorney  and  noted  hereon.  The  Authority  and the  Trustee  may  treat  the
registered owner of this Bond as the absolute owner hereof for all purposes, and
payment of or on account of either principal or interest made to such registered
owner shall be valid and effectual to satisfy and  discharge the liability  upon
this Bond to the extent of the sum or sums so paid and neither

                                      A-6
<PAGE>

the Authority nor the Trustee shall be affected by any notice to the contrary.

         At the written  request (in form  satisfactory  to the  Trustee) of the
registered  owner,  this  Bond  shall,  except  during  the  fifteen  (15)  days
immediately  prior to the mailing of notice of such  redemption  of the Bonds or
after  Bonds  have been  selected  for  redemption,  be  exchanged  for an equal
aggregate principal amount of Bonds in fully-registered  form by the preparation
and substitution of a new Bond or Bonds,  signed or executed by such officers of
the Authority as are then in office,  of like date,  maturity and interest rate,
in minimum denominations of $5,000 and any $5,000 integral multiple thereof.

         This  Bond  is  not  valid   unless  the   Trustee's   Certificate   of
Authentication endorsed hereon is duly executed.

         This Bond shall be governed by and  construed  in  accordance  with the
laws of the State of New Jersey.

         The Act  provides  that  no  member  of the  Authority  nor any  person
executing  bonds for the  Authority  shall be liable  personally on the Bonds by
reason of the issuance thereof.

         All acts,  conditions  and  things  required  to  happen,  exist and be
performed precedent to and in the issuance of this Bond and the execution of the
Indenture have happened, exist and have been performed as so required.

            {THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK}

                                       A-7

<PAGE>

         IN WITNESS WHEREOF, the New Jersey Economic  Development  Authority has
caused  this Bond to be  executed by the manual or  facsimile  signature  of its
Chief  Financial  Officer and its  official  seal or a  facsimile  thereof to be
impressed,  imprinted  or  reproduced  hereon  and  attested  by the  manual  or
facsimile signature of its Assistant Secretary.

SEAL
ATTEST                                       NEW JERSEY ECONOMIC DEVELOPMENT
                                              AUTHORITY

                                             By:
--------------------------------                --------------------------------

                                       A-8
<PAGE>

                          CERTIFICATE OF AUTHENTICATION

         This Bond is one the Bonds described in the within mentioned Indenture.

                                          THE BANK OF NEW YORK,
                                           as Trustee and as Bond Registrar

                                          By:
                                             -----------------------------------
                                             Authorized Signatory
Authentication Date:

                                      A-9
<PAGE>

                                    EXHIBIT B
                             (FORM OF SERIES B BOND)

THE STATE OF NEW  JERSEY IS NOT  OBLIGATED  TO PAY,  AND  NEITHER  THE FAITH AND
CREDIT NOR TAXING POWER OF THE STATE OF NEW JERSEY IS PLEDGED TO THE PAYMENT OF,
THE PRINCIPAL OR  REDEMPTION  PRICE,  IF ANY, OF OR INTEREST ON THIS BOND.  THIS
BOND IS A SPECIAL,  LIMITED  OBLIGATION OF THE AUTHORITY,  PAYABLE SOLELY OUT OF
THE REVENUES OR OTHER RECEIPTS,  FUNDS OR MONEYS OF THE AUTHORITY  PLEDGED UNDER
THE INDENTURE AND FROM ANY AMOUNTS  OTHERWISE  AVAILABLE UNDER THE INDENTURE FOR
THE PAYMENT OF THIS BOND.  THIS BOND DOES NOT NOW AND SHALL NEVER  CONSTITUTE  A
CHARGE AGAINST THE GENERAL CREDIT OF THE AUTHORITY.  THE AUTHORITY HAS NO TAXING
POWER.

THIS  BOND IS NOT  RATED  AND NO  APPLICATION  WILL BE MADE TO  OBTAIN  A RATING
HEREON.  PURCHASE OF THIS BOND  SHOULD  ONLY BE MADE BY AN INVESTOR  WHO (A) CAN
BEAR THE ECONOMIC RISK OF THIS BOND,  (B) HAS SUCH  KNOWLEDGE AND  EXPERIENCE IN
BUSINESS  AND  FINANCIAL  MATTERS AS TO BE CAPABLE OF  EVALUATING  THE RISKS AND
MERITS OF THIS BOND, (C)  ACKNOWLEDGES  THAT THIS BOND SHOULD ONLY BE CONSIDERED
FOR  PURCHASE  AS PART OF A  DIVERSIFIED  PORTFOLIO  OF HIGH  YIELD,  HIGH  RISK
SECURITIES,  AND  (D)  HAS  UNDERTAKEN  THE  RESPONSIBILITY  FOR  OBTAINING  ALL
INFORMATION  THAT IS  DEEMED  NECESSARY  AND  DESIRABLE  TO FORM A  DECISION  TO
PURCHASE THIS BOND.

                    NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY
                           ECONOMIC DEVELOPMENT BONDS
                  (ELITE PHARMACEUTICALS, INC. - 2005 PROJECT),
                           FEDERALLY TAXABLE SERIES B

                     MATURITY                                    DATED
NUMBER RB - 1        DATE                                DATE
                     ----                                ----
                     September 1, 2012                   August 15, 2005

CUSIP NUMBER:        ________________

REGISTERED OWNER:    CEDE & CO.

PRINCIPAL AMOUNT:    FOUR HUNDRED NINETY FIVE THOUSAND AND
                     00/100 DOLLARS ($495,000.00)

INTEREST RATE:       NINE PER CENT (9.00%)

         THE NEW JERSEY  ECONOMIC  DEVELOPMENT  AUTHORITY (the  "Authority"),  a
public body corporate and politic, constituting an instrumentality of the

                                 B-1

<PAGE>

State of New Jersey duly  organized and existing  under the laws of the State of
New Jersey and, in particular,  The New Jersey  Economic  Development  Authority
Act, constituting  N.J.S.A.  34:1B.1 ET SEQ., as may be amended and supplemented
(the "Act"), for value received, hereby promises to pay, but only from the funds
provided  therefor as hereinafter set forth,  to the registered  owner specified
hereinabove,  or  registered  assigns on the maturity  date  (specified  above),
unless this Bond shall be  redeemed  and shall have been  previously  called for
redemption  and  payment of the  redemption  price  shall have been duly made or
provided for, upon surrender  hereof,  the principal sum specified  above and to
pay  interest  thereon (but only out of said  amounts) at the interest  rate per
annum specified above from the most recent Interest Payment Date (as hereinafter
defined) to which interest has been paid or provided for or on March 1, 2006 and
semiannually  thereafter  on  March 1 and  September  1 in each  year  (each  an
"Interest  Payment  Date") until payment of said  principal sum has been made or
provided  for.  Interest  on the  Bonds  shall be  calculated  on the basis of a
360-day year  consisting  of twelve 30-day  months.  The interest so payable and
punctually  paid or duly  provided  for,  on any  Interest  Payment  Date  will,
pursuant to the Indenture  (as  hereinafter  defined) be paid to the  registered
owner  hereof at the  close of  business  on the  regular  record  date for such
interest,  which date shall be the  fifteenth  (15th) day (whether such day is a
business day) of the calendar month immediately  preceding such Interest Payment
Date (the "Regular Record Date"). Any interest on any Bond which is payable, but
is not  punctually  paid or provided  for, on any Interest  Payment Date (herein
called  "Defaulted  Interest")  shall  forthwith  cease  to be  payable  to  the
Registered  Owner on the  relevant  Record  Date by virtue  of having  been such
owner,  and such Defaulted  Interest  shall be paid to the  Registered  Owner in
whose name the Bond is registered  at the close of business on a special  Record
Date (the "Special Record Date") to be fixed by the Trustee, such Special Record
Date to be not more than  fifteen  (15) nor less than ten (10) days prior to the
date of proposed payment. The Trustee shall cause notice of the proposed payment
of such  Defaulted  Interest and the Special  Record Date therefor to be mailed,
first class  postage  prepaid,  to each  registered  owner,  at such  registered
owner's address as it appears in the Bond Register (as hereinafter defined), not
less than ten (10) days prior to such Special Record Date. Interest on this Bond
shall be payable by check mailed to the Registered  Owner hereof on the Interest
Payment Date.  Payments of principal,  Redemption  Price or interest due on this
Bond may also be payable by electronic funds transfer to the Registered Owner of
$1,000,000 or more;  provided such  Registered  Owner  requests such  electronic
funds transfer and delivers to the Trustee in writing,  not later than the close
of business on the applicable  Record Date preceding such transfer the following
information  needed to make such transfer:  the name of the bank to receive such
transfer, wiring code of said bank, ABA number, account number of the Registered
Owner and name of a contact person at the bank. The principal of and interest on
this Bond shall be paid in any coin or currency of the United  States of America
which,  at the time of  payment,  is legal  tender for the payment of public and
private debts.

         This Bond is issued under and pursuant to the  Constitution and Laws of
the State of New Jersey,  and under and pursuant to a resolution duly adopted by
the Authority on July 12, 2005. This Bond and the Bonds of the issue of

                                      B-2
<PAGE>

which it forms a part are special,  limited obligations of the Authority payable
solely from the revenues and assets constituting the Trust Estate (as defined in
the  Indenture)  pledged  under the  Indenture.  THE STATE OF NEW  JERSEY IS NOT
OBLIGATED TO PAY, AND NEITHER THE FAITH AND CREDIT NOR TAXING POWER OF THE STATE
OF NEW JERSEY IS PLEDGED TO THE PAYMENT OF, THE PRINCIPAL OR  REDEMPTION  PRICE,
IF ANY, OF OR INTEREST ON THIS BOND. THIS BOND IS A SPECIAL,  LIMITED OBLIGATION
OF THE AUTHORITY, PAYABLE SOLELY OUT OF THE REVENUES OR OTHER RECEIPTS, FUNDS OR
MONEYS  OF THE  AUTHORITY  PLEDGED  UNDER  THE  INDENTURE  AND FROM ANY  AMOUNTS
OTHERWISE  AVAILABLE UNDER THE INDENTURE FOR THE PAYMENT OF THIS BOND. THIS BOND
DOES NOT NOW AND SHALL NEVER  CONSTITUTE A CHARGE  AGAINST THE GENERAL CREDIT OF
THE AUTHORITY. THE AUTHORITY HAS NO TAXING POWER.

         This Bond is one of the Bonds of a duly  authorized  issue of  economic
development bonds of the Authority in the aggregate principal amount of $495,000
and is known as "New Jersey Economic Development Authority, Economic Development
Bonds (Elite Pharmaceuticals,  Inc. - 2005 Project), Federally Taxable Series B"
(the "Bonds").

         The Bonds are issued for the  purpose  of  financing  a project as more
fully defined in the Agreement (as hereinafter defined).  Elite Pharmaceuticals,
Inc. (the  "Company") and the Authority have entered into a Loan Agreement dated
as of August  15,  2005  (which  Loan  Agreement  as it may from time to time be
amended is hereinafter  called the  "Agreement")  pursuant to the terms of which
the  Authority  has agreed to issue and sell the Bonds and to lend the  proceeds
thereof to the Company,  and in consideration  thereof the Company has agreed to
make  payments to the Authority  sufficient to pay the principal of,  redemption
premium (if any) and interest on the Bonds as the same become due and payable.

         This Bond is issued  under and  pursuant  to an  Indenture  dated as of
August  15,  2005  (said  Indenture  together  with  all  such  supplements  and
amendments  thereto as therein permitted,  the "Indenture"),  by and between the
Authority and The Bank of New York, as trustee (said banking institution and any
successor trustee under the Indenture,  the "Trustee").  An executed counterpart
of the  Indenture  is on file at the  principal  corporate  trust  office of the
Trustee.  Reference is hereby made to the  Indenture for the  provisions,  among
others,  with  respect to the custody  and  application  of the  proceeds of the
Bonds,  the collection and  disposition of revenues,  a description of the funds
pledged to the payment of the principal of and interest on the Bonds, the nature
and extent of the security,  the rights, duties and obligations of the Authority
and the  Trustee  and the  rights  of the  holders  of the  Bonds,  and,  by the
acceptance of this Bond,  the holder hereof  assents to all of the provisions of
the Indenture.

I. REDEMPTION OF BONDS

         (a)  OPTIONAL  REDEMPTION.  The  Bonds  are  not  subject  to  optional
redemption.

                                      B-3
<PAGE>

         (b)  MANDATORY  SINKING  FUND  REDEMPTION.  The  Bonds are  subject  to
mandatory sinking fund redemption prior to maturity, at a redemption price equal
to 100% of the principal  amount  thereof on September 1 of the years and in the
amounts set forth below:

                           YEAR                         AMOUNT
                           ----                         ------

                           2006                        $55,000
                           2007                         60,000
                           2008                         65,000
                           2009                         70,000
                           2010                         75,000
                           2011                         80,000
                           2012*                        90,000

         *Final Maturity

         (c) MANDATORY  REDEMPTION - FUNDS  REMAINING IN PROJECT FUND. The Bonds
are  subject to  mandatory  redemption  in part on the  earlier of (a) the third
anniversary  date of the  issuance  of the  Bonds or (b) a date not  later  than
forty-five (45) days after the Completion Date (as defined in the Indenture), to
the  extent  of moneys  remaining  in the  Project  Fund  established  under and
pursuant to the  Indenture as of such date,  at a redemption  price equal to one
hundred  percent  (100%) of the  principal  amount of Bonds to be redeemed  plus
interest accrued thereon to the redemption date.

         (d)  EXTRAORDINARY  MANDATORY  REDEMPTION - CASUALTY  AND  CONDEMNATION
PROCEEDS.  The Bonds are subject to mandatory  redemption by the Authority prior
to maturity,  in whole at any time,  or in part on any Interest  Payment Date to
the extent  proceeds of  insurance  or  condemnation  awards are  received  with
respect  to the  Project  and are not used to  repair  or  restore  the  Project
Facilities pursuant to the Loan Agreement at a redemption price equal to 100% of
the  principal  amount to be  redeemed,  plus  interest  accrued  thereon to the
redemption date.

         (e) SPECIAL  MANDATORY  REDEMPTION - BREACH OF CERTAIN  PUBLIC  PURPOSE
COVENANTS.  The Bonds are subject to special  mandatory  redemption  in whole as
soon as  practicable  but no later than the 90th day following  the  Authority's
written notice to the Trustee and the Company that (i) the Company has ceased to
operate  the  Project  or ceased  to cause  the  Project  to be  operated  as an
authorized  project under the Act for twelve (12)  consecutive  months,  without
first  obtaining  the  prior  written  consent  of the  Authority  or  (ii)  any
representation  or warranty of the Company  contained in the Agreement or in any
other document furnished to the Authority in connection with the Bonds proves to
have been false or  misleading  in any  material  respect  when  made.  Upon the
occurrence of any such event,  the Bonds shall be redeemed by the Authority at a
redemption  price equal to 100% of the  principal  amount  thereof plus interest
accrued thereon to the redemption date.

                                      B-4
<PAGE>

         Notice of any redemption pursuant to the preceding  paragraphs shall be
given by the  Trustee by first  class mail  postage  prepaid to each  registered
owner of the  Bonds at his  address  as it  appears  on the  Bond  Register  (as
hereinafter defined).  Such notice shall be mailed not less than thirty (30) nor
more than forty-five (45) days prior to the redemption date (except with respect
to  redemptions  made pursuant to paragraph  (e),  mailed within the time period
specified for such  redemption).  Failure to mail such notice or defects therein
or in the mailing  thereof shall not affect the validity of the  redemption.  In
connection with any such notice, the "CUSIP" numbers assigned to the Bonds being
called  for  redemption  may be used  but  reliance  may be  placed  only on the
identification  number  printed  hereon.  In the  event  that less than the full
principal  amount hereof shall have been called for  redemption,  the registered
owner  hereof may  surrender  this Bond in exchange for one or more new Bonds in
aggregate  principal  amount equal to the  unredeemed  portion of principal,  as
provided in the Indenture.

         After notice of redemption  shall have been given as  aforesaid,  then,
from and after the date fixed for redemption, the Bonds so called for redemption
shall cease to bear interest and such Bonds shall no longer constitute a lien on
the Trust Estate and shall not be considered Outstanding under the Indenture.

II.      GENERAL PROVISIONS

         Pursuant to the  Indenture,  the Authority  has, for the benefit of the
holders of the Bonds,  assigned to the Trustee the Authority's  right, title and
interest  under the  Agreement  and the  Notes,  subject to the  reservation  of
certain  rights  by the  Authority  under the  Agreement  to  exercise  remedies
thereunder under certain  circumstances,  to receive certain fees,  expenses and
notices, to render consents and approvals and to receive indemnification.

         The holder of this Bond shall have no right to enforce  the  provisions
of the  Indenture or the  Agreement  or to  institute  any action to enforce the
covenants  therein,  or to take any action with  respect to any event of default
under the Indenture or the Agreement,  or to institute,  appear in or defend any
suit or other  proceeding  with  respect  thereto,  except  as  provided  in the
Indenture.

         In certain events, on the conditions, in the manner and with the effect
set forth in the  Indenture,  the  principal  of the Bonds may  become or may be
declared due and payable before the stated  maturity  hereof,  together with the
interest accrued hereon.

         Modifications or alterations of the Agreement and the Indenture and any
supplement  or  amendment  thereto  may be made  only to the  extent  and in the
circumstances  permitted  by the  Indenture  and may be made  in  certain  cases
without the consent of the holders of the Bonds.

         This  Bond is  registered  as to both  principal  and  interest  on the
registration books of the Trustee to be kept for that purpose at the

                                      B-5
<PAGE>

corporate trust office of the Trustee,  and both principal and interest shall be
payable only to the registered  owner hereof.  No transfer hereof shall be valid
unless  made at said  office  by the  registered  owner in person or by his duly
authorized  attorney and noted  hereon.  The Authority and the Trustee may treat
the registered owner of this Bond as the absolute owner hereof for all purposes,
and  payment of or on  account  of either  principal  or  interest  made to such
registered  owner  shall be valid and  effectual  to satisfy and  discharge  the
liability  upon this Bond to the  extent of the sum or sums so paid and  neither
the Authority nor the Trustee shall be affected by any notice to the contrary.

         At the written  request (in form  satisfactory  to the  Trustee) of the
registered  owner,  this  Bond  shall,  except  during  the  fifteen  (15)  days
immediately  prior to the mailing of notice of such  redemption  of the Bonds or
after  Bonds  have been  selected  for  redemption,  be  exchanged  for an equal
aggregate principal amount of Bonds in fully-registered  form by the preparation
and substitution of a new Bond or Bonds,  signed or executed by such officers of
the Authority as are then in office,  of like date,  maturity and interest rate,
in minimum denominations of $5,000 and any $5,000 integral multiple thereof.

         This  Bond  is  not  valid   unless  the   Trustee's   Certificate   of
Authentication endorsed hereon is duly executed.

         This Bond shall be governed by and  construed  in  accordance  with the
laws of the State of New Jersey.

         The Act  provides  that  no  member  of the  Authority  nor any  person
executing  bonds for the  Authority  shall be liable  personally on the Bonds by
reason of the issuance thereof.

         All acts,  conditions  and  things  required  to  happen,  exist and be
performed precedent to and in the issuance of this Bond and the execution of the
Indenture have happened, exist and have been performed as so required.

            {THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK}

                                       B-6
<PAGE>

         IN WITNESS WHEREOF, the New Jersey Economic  Development  Authority has
caused  this Bond to be  executed by the manual or  facsimile  signature  of its
Chief  Financial  Officer and its  official  seal or a  facsimile  thereof to be
impressed,  imprinted  or  reproduced  hereon  and  attested  by the  manual  or
facsimile signature of its Assistant Secretary.

SEAL
ATTEST                                    NEW JERSEY ECONOMIC DEVELOPMENT
                                           AUTHORITY

                                          By:
-----------------------------------          -----------------------------------

                                             B-7

<PAGE>

                          CERTIFICATE OF AUTHENTICATION

         This Bond is one the Bonds described in the within mentioned Indenture.

                                        THE BANK OF NEW YORK,
                                         as Trustee and as Bond Registrar

                                        By:
                                           ------------------------------
                                           Authorized Signatory
Authentication Date:

                                       B-8CONFIDENTIAL TREATMENT REQUEST
                                            [ * ] INDICATES INFORMATION THAT HAS
                                                      BEEN OMITTED PURSUANT TO A
                                              CONFIDENTIAL TREATMENT REQUEST AND
                                           THIS INFORMATION HAS BEEN FILED UNDER
                                              SEPARATE COVER WITH THE COMMISSION

                    PRODUCT DEVELOPMENT AND LICENSE AGREEMENT

THIS PRODUCT  DEVELOPMENT AND LICENSE AGREEMENT  (together with all exhibits and
schedules,  the "Agreement"),  dated as of June 22, 2005 ( the "Effective Date")
by and between ELITE  LABORATORIES,  INC., a corporation  organized and existing
under the laws of Delaware,  and having its  principal  place of business at 165
Ludlow  Avenue,  Northvale,  NJ 07647  ("ELITE") and PLIVA,  INC., a corporation
organized  and existing  under the laws of New Jersey,  and having its principal
place of business at 72 Eagle Rock Avenue, East Hanover, NJ 07936 ("PLIVA").

                                    RECITALS:

PLIVA is engaged in the development,  manufacturing,  marketing and distribution
of generic  pharmaceutical  products in the  Territory  (as  defined  below) and
possesses  qualified  marketing and  distribution  systems and  organizations to
enable it to effectively promote, market and distribute such products throughout
the Territory;

ELITE is the  owner  of  Know-How  (as  defined  below)  and  other  proprietary
technology relative to the Product (as defined below);

ELITE and PLIVA desire to further develop and market the Product in the
Territory; and

Elite desires to grant to PLIVA the exclusive right to purchase, market, promote
and  distribute  the Product in the  Territory  under PLIVA's  label,  and PLIVA
desires to accept and exercise the right,  all upon such terms and conditions as
are set forth in this agreement.

ELITE and PLIVA agree as follows:

1.   DEFINITIONS

     The following terms as used in this Agreement shall have the meanings set
     forth in this Article:

     1.1.   "AFFILIATE" shall mean any corporation, firm, partnership or other
            entity, which owns or controls, is owned or controlled by, or is
            under common control with, PLIVA or ELITE, as the case may be. The
            term "control"
<PAGE>

            means the] ownership, directly or indirectly, of at least fifty
            percent (50%) of the equity or voting power of the owned or
            controlled entity.

     1.2.   "APPLICABLE LAW" shall mean the United States Food, Drug and
            Cosmetic Act of 1938, as may be amended from time to time, and the
            regulations and guidelines promulgated pursuant thereto, as amended
            from time to time, and all other laws, regulations, rules and
            guidelines of any governmental authority in the Territory pertaining
            to the development, manufacture, packaging, labeling, storage,
            distribution, marketing, sale or intended use of the Product.

     1.3.   "CGMP" shall mean all applicable good manufacturing practices,
            including but not limited to current "good manufacturing practices"
            and any other methods used for the manufacturing, testing,
            validation, labeling, packaging, storage, shipment and installation
            of any and all pharmaceutical products, equipment and related
            materials to ensure that such products and materials meet the legal
            requirements for safety and effectiveness as established by the
            United States Food and Drug Administration ("FDA") or comparable
            governmental authority in any country outside the United States
            where the Product is distributed under this Agreement, including,
            specifically, without limitation, Title 21, Part 211 of the United
            States Code of Federal Regulations.

     1.4.   "CONFIDENTIAL INFORMATION" shall mean any information pertaining to
            the Product from time to time communicated by or on behalf of the
            disclosing party, including, without limitation, trade secrets,
            Know-How, pricing, costs, suppliers, licensees, customer
            information, patent rights, scientific, technical, commercial and
            medical product development information, manufacturing, methods,
            processes and production, contractual arrangements, results,
            discoveries and inventions, procedures and forms, financial and
            other business information, forecasts, strategies and other data,
            whether of a written, oral or visual nature.

     1.5.   "COST OF GOODS" shall mean (i) ELITE's fully absorbed direct and
            indirect cost of manufacturing, labeling and packaging the Product,
            including without limitation the cost of all active pharmaceutical
            ingredients, materials, and components included in the Product, plus
            (ii) [*]

     1.6.   "COMMERCIALIZATION", "COMMERCIALIZING", or "COMMERCIALIZE" shall
            mean all activities relating to manufacture, promotion,
            distribution, marketing and sale of the Product in the Territory.

     1.7.   "ED-COSTS" shall mean the fees, costs and expenses incurred by Elite
            in meeting its obligations pursuant to Section 2.1 and Section
            2.2(a) plus any amount paid to outside counsel by ELITE in procuring
            the freedom to operate opinion provided for in Section 4.2.

                                       2
<PAGE>

     1.8.   "FIELD" shall mean treatment of [*].

     1.9.   "KNOW-HOW" shall mean all technology, data, information, processes
            and methods necessary or useful in the production, testing,
            registration or marketing of the Product.

     1.10.  "LICENSEE" shall mean the recipient of a license granted by ELITE to
            Commercialize the Product in the Territory. PLIVA shall be the
            designated and exclusive Licensee hereunder for the Territory.

     1.11.  "MARKETING AUTHORIZATION" shall mean the final approval of all
            regulatory authorities necessary to market the Product in a
            particular country in the Territory, including as applicable pricing
            and reimbursement approval and all other approvals required in a
            particular country in the Territory for the marketing, distribution
            and sale of the Product in the Field in the normal course of
            business.

     1.12.  "NET PROFIT" shall mean the Price LESS the Cost of Goods.

     1.13.  "PD-COSTS" shall mean the fees, costs and expenses incurred by PLIVA
            in connection with the Studies plus the milestones actually paid to
            ELITE pursuant to Section 5.2 plus any amount paid to outside
            counsel by PLIVA in procuring the freedom to operate opinion
            provided for in Section 4.2.

     1.14.  "PRICE" shall mean the sales price paid by third parties to PLIVA
            for Product, less only the following deductions to the extent
            actually incurred, all determined in accordance with generally
            accepted accounting principles:

            (1)   customs and excise duties or other sales taxes (but, for the
                  avoidance of doubt not income or corporation tax), directly
                  related to the sale of the Product;

            (2)   costs incurred by PLIVA in respect of transport, shipping and
                  insurance costs; and industry standard or mandatory discounts
                  or rebates related to the sale of the Product, including,
                  without limitation, any credit in respect of any Federal or
                  state Medicaid, Medicare or similar program; and

            (3)   amounts repaid or credited by PLIVA, consistent with its
                  ordinary or customary business practices for similar products,
                  by reason of the rejection or return of goods and allowances,
                  including trade, quantity and cash discounts and any other
                  adjustments, including those granted on account of price or
                  shelf stock adjustments, billing errors, rejected goods,
                  damaged goods, recalls, returns, rebates,

                                       3
<PAGE>

            chargebacks, reimbursements, similar payments granted or given to
            wholesalers or other distributors, buying groups, health care
            insurance carriers or other institutions.

     1.15.  "PRODUCT" shall mean [*] that is approved by FDA as AB rated as
            bioequivalent to [*], a product sold commercially by [*] (the
            "REFERENCED DRUG"), for use in the Field and which meets the
            specifications set forth in the ANDA to be filed pursuant to this
            Agreement (the "SPECIFICATIONS").

     1.16.  "TERM" shall have the meaning set forth in Section 12 hereof.

      1.17. "TERRITORY" shall mean the United States of America and its
            territories and possessions, including the Commonwealth of Puerto
            Rico.

2.   PRODUCT DEVELOPMENT

     2.1.   ELITE shall be responsible for Product formulation, methods
            development and validation.

     2.2.   ELITE shall obtain and submit to PLIVA, for PLIVA's review and
            approval (such approval not to be unreasonably withheld, conditioned
            or delayed), a proposal or proposals, including costs, from a third
            party to conduct pilot and pivotal bioequivalence studies for the
            Product to evidence bioequivalence to the Referenced Drug in
            accordance with study plan protocols to be agreed to by ELITE and
            PLIVA (the "STUDIES"). Following its approval, PLIVA shall engage
            such third party to conduct the Studies, and the cost of all Studies
            shall be borne by PLIVA.

            (a)   ELITE shall complete any additional formulation work, if
                  necessary, complete process development and scale-up,
                  including in-process controls and all necessary stability
                  studies with respect to the Product, and manufacture Product
                  biobatches reasonably required to conduct such Studies.

     2.3.   Each of ELITE and PLIVA agrees that, during the Term, except for the
            Studies contemplated hereunder, neither it nor any of its Affiliates
            will conduct clinical studies for any other generic version of [*],
            whether for itself or any third party, for distribution or sale in
            the Territory.

     2.4.   ELITE and PLIVA shall each have the right to discontinue the Studies
            at any time prior to completion of such Studies upon three (3) days'
            prior written notice to the other party, if ELITE or PLIVA, as the
            case may be, reasonably believes that health and safety issues may
            arise.

                                       4
<PAGE>

     2.5.   ELITE shall inform PLIVA of any changes in the Product development
            plan. ELITE shall use commercially reasonable efforts to assure
            PLIVA that the Product shall be available to PLIVA to market at the
            time agreed to by ELITE and PLIVA in writing pursuant to this
            Agreement.

     2.6.   ELITE shall perform its obligations in this Section 2 in accordance
            with Applicable Laws.

3.   REGULATORY FILINGS

            Following successful completion of the pivotal biostudy for the
            Product, ELITE shall be responsible for the preparation, filing and
            prosecution with the FDA of an abbreviated New Drug Application
            ("ANDA") for the Product. The ANDA shall be in the name of ELITE.
            ELITE shall bear the cost of the ANDA preparation, filing and
            prosecution. Each party shall reasonably cooperate with the other
            party in connection with the preparation of the ANDA. Each party
            shall have the right to review and comment upon any and all prepared
            applications and filings prior to submission to the relevant
            governmental authorities.

4.   INTELLECTUAL PROPERTY OWNERSHIP, MAINTENANCE AND DEFENSE

      4.1.  INTELLECTUAL PROPERTY. All rights, title and interest in and to all
            intellectual property rights relating to the Product, including
            without limitation, inventions, discoveries, creations, information,
            data, reports, results, and/or improvements to any Confidential
            Information, Know-How, study inventions, regulatory filings, patent
            rights, processes, techniques, and any improvements, modifications,
            alterations thereto and patents issuing thereon made during the Term
            hereof whether in connection with the Study or otherwise
            ("Intellectual Property Rights") are and shall, in all events, be
            the sole and exclusive property of ELITE. PLIVA shall take such
            actions, and execute and deliver such documents, as may be
            reasonably requested from time to time by ELITE, at ELITE's expense,
            to perfect ELITE's Intellectual Property Rights. ELITE grants to
            PLIVA and PLIVA accepts, during the Term, an exclusive,
            non-transferable license to ELITE's Intellectual Property Rights to
            allow PLIVA to offer for sale the Product in the Territory. PLIVA
            may not grant any sublicense to ELITE's Intellectual Property Rights
            without ELITE's prior written consent, which consent may be granted
            or withheld in ELITE's sole discretion.

      4.2.  FREEDOM TO OPERATE. PLIVA and ELITE shall, under a joint defense
            agreement, obtain, within 120 days of the effective date, a "freedom
            to operate" opinion from outside counsel with respect to the
            manufacture, use and sale of the Product in each country in the
            Territory. Either party shall have the right to terminate this
            Agreement with respect to a country if

                                       5
<PAGE>

            not satisfied with the opinion(s) for such country by notifying the
            other party in writing within 30 days of receipt of the opinion. The
            obligations of each party accrued to through the Effective Date of
            any such notice, including the obligation to reimburse for costs
            incurred, shall survive termination of this Agreement.

      4.3.  DEFENSE OF PRODUCT. PLIVA and ELITE shall be responsible for, and
            shall share equally the cost of, defending the Product and the
            parties hereto against any lawsuits in accordance with the terms and
            conditions of Article 7.

5.   FINANCIAL TERMS

      5.1.  PAYMENTS. For all Product supplied to PLIVA under this Agreement
            ELITE shall invoice PLIVA, referencing in each invoice the purchase
            order(s), if any, to which the invoice relates, the Cost of Goods
            and the quantity of units of Product shipped. PLIVA shall pay each
            invoice within forty five (45) days of the invoice date. Any late
            payments or underpayments under this Agreement shall bear interest
            at the prime rate from the initial due date until payment in full.

      5.2.  MILESTONES. PLIVA shall pay to Elite the following milestones
            payments:

            a)    [*] simultaneously with the execution and delivery of this
                  Agreement, or, if later, on the thirtieth day following
                  delivery by ELITE of the legal opinion described in Section
                  4.2 of this Agreement (unless the Agreement has theretofore
                  been terminated under Section 4.2).

            b)    [*] upon (i) completion of a successful pivotal bioequivalence
                  study where the Product meets the FDA guidelines for
                  bioequivalence, and (ii) submission to and acceptance by the
                  FDA of the ANDA for the Product .

            c)    [*] upon FDA approval of the Product.

      5.3   PROFIT SHARE.

      (a)   Within forty five (45) days following the end of each calendar
            quarter during the Term following the first commercial sale of the
            Product hereunder, PLIVA shall provide ELITE with a detailed
            statement for such period showing for all Product sold by PLIVA
            during such period the number of units sold, the Price for those
            units, and the Net Profit for such period. PLIVA shall pay to ELITE
            a percentage of the Net Profit for such period within fifteen (15)
            days of delivery to ELITE of the statement showing such calculation.

      (b)   The percentage payable to ELITE shall be determined as follows.

                                       6
<PAGE>

      (1)   Within thirty (30) days of FDA approval of the Product, ELITE shall
            provide to PLIVA a detailed statement of the ED-Costs and PLIVA
            shall provide to ELITE a detailed statement of the PD-Costs.

      (2)   If the ED-Costs exceed the PD-Costs, then ELITE shall be entitled to
            recover the amount by which the ED-Costs exceed the PD-Costs.

      (3)   If the PD-Costs exceed the ED-Costs, then PLIVA shall be entitled to
            recover the amount by which the PD-Costs exceed the PD-Costs.

      (4)   The Party entitled to recover the amount of the difference shall
            receive or retain, as the case may be, [*] of the Net Profit until
            such amount is recovered. Thereafter, the Parties shall [*].

      5.4 AUDIT; INSPECTION. Within one hundred eighty (180) days following the
close of each calendar year during the Term and for a period of twenty four
months following expiration or earlier termination of this Agreement, upon the
request of a party ("Requesting Party") the other party shall provide the
Requesting Party's accountants, at Requesting Party's sole cost and expense,
with access, during regular business hours and upon reasonable prior written
notice, and subject to the confidentiality undertakings contained in Section 10
of this Agreement, to the other party's books and records relating to the
Product in the Field in the Territory solely for purposes of verifying costs and
expenses and Net Profit in connection with this Agreement, and for verifying the
accuracy of the calculations hereunder for the calendar year then ended and for
the two calendar years prior thereto. If any such verification shows any
underpayment or overpayment, a correcting payment or a refund shall be made
within thirty (30) days of completion of such verification and submission of the
results thereof, with details of the calculations included therein. In the event
such verification shows an underpayment of more than [*] was made by the
Requesting Party to the other party, the other party will be required to pay for
the costs reasonably incurred by Requesting Party in connection with its
inspection.

6.    MANUFACTURE, SUPPLY AND COMMERCIALIZATION OF PRODUCT

      6.1 During the Term, and on and subject to the terms and conditions of
      this Agreement, ELITE shall manufacture and supply or, with PLIVA's prior
      written consent (such consent not to be unreasonably withheld, conditioned
      or delayed), subcontract the manufacture and supply of, the Product in the
      Territory exclusively to PLIVA for resale by PLIVA in the Territory, in
      such quantities and at such times as are specified in the purchase orders
      placed by PLIVA pursuant to this Agreement. PLIVA shall purchase its
      requirements of Product for resale in the Territory exclusively from
      ELITE.

                                      7
<PAGE>

      6.2 ELITE will supply the Product to PLIVA in finished form, labeled in
      accordance with the ANDA, and packaged ready for resale in accordance with
      Section 6.5 (d) hereof. ELITE shall manufacture, store and ship the
      PRODUCT to PLIVA, and PLIVA shall store, ship, market and distribute the
      PRODUCT in the Territory, in accordance with cGMPs, Applicable Laws, the
      Specifications, and the terms and conditions of this Agreement.

      6.3 The Product to be supplied by ELITE to PLIVA hereunder shall bear
      PLIVA's label. ELITE shall provide to PLIVA a sample of the printed
      labeling and packaging for the Product for PLIVA's approval. ELITE shall
      label and package all Product in accordance with the ANDA, cGMPs, and the
      applicable requirements of the FDA. PLIVA grants to ELITE a limited
      license to use PLIVA's trademarks for purposes of packaging and labeling
      Product as described in this section.

      6.4 PLIVA shall diligently market and promote the Product in the
      Territory, using such commercially reasonable efforts to maximize Product
      sales and Net Manufacturing Profits. PLIVA shall devote such marketing
      efforts to the Product as it would exert for products of its own with
      comparable market size and profit potential under comparable competitive
      conditions. At least once per calendar quarter PLIVA shall provide to
      ELITE, in writing, an outline of PLIVA's sales expectations for the
      Product for the upcoming three calendar quarters.

      6.5 (a) At least one hundred twenty (120) days prior to the anticipated
      launch date of the Product in the Territory, and thereafter at least
      thirty days prior to each calendar quarter during the Term, PLIVA shall
      provide ELITE with a written forecast of PLIVA's estimated Product
      requirements for each of the following four calendar quarters. The
      forecasts will be non-binding, except as provided below.

            (b) PLIVA shall make all Product purchases hereunder by submitting
      firm purchase orders to ELITE. Each such purchase order shall be in
      writing and shall specify the quantity of Product ordered (which shall be
      in batch size, or multiples thereof) and the requested delivery date(s).
      Purchase orders shall be placed at least ninety days before the desired
      delivery date. Each purchase order shall be subject to ELITE's acceptance,
      in whole or in part. In the event of a conflict between the terms and
      conditions of any purchase order and this Agreement, the terms and
      conditions of this Agreement shall prevail.

            (c) In each calendar quarter, PLIVA shall be obligated to place
      purchase orders for a quantity of Product constituting at least seventy
      five percent of the estimated quantity for that quarter as contained in
      the forecast provided in the previous quarter.

            (d) All Product supplied under this Agreement shall be delivered FOB
      ELITE's manufacturing site. PLIVA shall pay all freight, insurance and
      other charges applicable to the sale and transport of the Product to
      PLIVA's facilities.

                                       8
<PAGE>

      Title and risk of loss and damages to Product shall pass to PLIVA upon
      delivery to PLIVA's designated carrier.

            (e) If a shipment of Product of any portion thereof fails to conform
      to the applicable Specifications, then PLIVA shall have the right to
      reject such nonconforming shipment of Product or the nonconforming portion
      thereof, as the case may be. PLIVA shall give written notice to ELITE of
      its rejection within fifteen days of PLIVA's receipt of the Product,
      specifying the grounds for such rejection. The nonconforming Product shall
      be held for ELITE's disposition, or shall be returned to ELITE, as
      directed by ELITE in writing. Nonconforming Product shall be returned to
      ELITE within ten (10) business days of ELITE's so directing. ELITE shall
      replace each nonconforming shipment of Product, or the nonconforming
      portion thereof, with conforming Product as soon as reasonably practicable
      after receipt of notice or rejection thereof. If ELITE disputes any claim
      of nonconforming Product and the parties cannot resolve the dispute within
      thirty days, then the dispute shall be subject to the dispute resolution
      provisions of Section 17 hereof.

            (f) ELITE and PLIVA each agree to notify the other within
      twenty-four (24) hours of any serious and unexpected adverse reactions
      reported to either of them resulting from the use of the Product (whether
      inside or outside of the Territory). ELITE and PLIVA shall each notify the
      other promptly of any other complaints or adverse reactions from third
      parties reported to either of them resulting from use of the Product sold
      under PLIVA's label.

            (g) (i) In the event either party believes it may be necessary to
      conduct a recall, field correction, market withdrawal, stock recovery, or
      other similar action with respect to any Product sold by ELITE to PLIVA
      under this Agreement (a "RECALL"), ELITE and PLIVA shall consult with each
      other as to how best to proceed, it being understood and agreed that the
      final decision as to any Recall of any Product shall be made by ELITE;
      provided, however, that PLIVA shall not be prohibited hereunder from
      taking any action that it is required to take by applicable law. (ii) In
      the event the Recall of the Product is solely as a result of (1) the
      manufacture, supply, storage, or distribution by ELITE of Product; (2) a
      breach by ELITE of its representations, warranties or obligations under
      this Agreement; or (3) the grossly negligent or intentionally wrongful act
      of ELITE or its representatives, then ELITE shall bear all costs and
      expenses of such Recall, including, without limitation expenses related to
      communications and meetings with all required regulatory agencies,
      expenses of replacement stock (not including backorder reimbursement), the
      cost of notifying customers and costs associated with shipment of Product
      being recalled from customers and shipment of an equal amount of
      replacement Product to those customers (collectively, "RECALL COSTS"). In
      all other events, PLIVA shall bear all of the Recall Costs.

                                       9
<PAGE>

7.       INDEMNIFICATION

         7.1 INFRINGEMENT  CLAIMS.  ELITE and PLIVA shall be jointly responsible
         for searching, reviewing and evaluating any patents or published patent
         applications pertaining to the manufacture,  use and sale of Product in
         each country in the Territory,  including without limitation,  relating
         to active pharmaceutical ingredients and Product formulation. PLIVA and
         ELITE jointly shall investigate and defend any and all claims,  actions
         and proceedings  resulting from an assertion against ELITE or PLIVA (or
         a Licensee if ELITE and PLIVA have agreed to indemnify  such  Licensee)
         that the Product infringes upon a third party's  intellectual  property
         rights  ("INFRINGEMENT  CLAIM").  PLIVA  and  ELITE  shall  be  jointly
         responsible for the cost and expenses of the defense, including without
         limitation  damages,  awards,  and settlement  costs. The parties shall
         provide  such  assistance  as the  other  party  may from  time to time
         reasonably request in connection with the evaluation and defense of any
         potential or actual Infringement Claim.

         7.2  ENFORCEMENT  PROCEEDINGS.  ELITE and  PLIVA  shall  jointly  bring
         enforcement  proceeding  against  any  third  party if ELITE  and PLIVA
         determine  jointly that a  third-party  is likely  infringing  upon the
         rights of ELITE,  PLIVA or a Licensee of the  Product.  PLIVA and ELITE
         shall be jointly  responsible  for the cost and  expenses  arising from
         such enforcement  proceeding,  including  without  limitation  damages,
         awards,  and  settlement  costs.  All such costs and expenses  shall be
         allocated equally between ELITE and PLIVA.  ELITE and PLIVA shall share
         equally all amounts  awarded in  connection  with any such  enforcement
         proceeding.

         7.3 INDEMNIFICATION OBLIGATIONS OF THE PARTIES.

                  (a) Each party shall  indemnify,  defend and hold harmless the
                  other  party and its  Affiliates  from and against any and all
                  losses,  costs,  expenses,   liabilities,   claims,   actions,
                  damages,  personal injury, or loss of life,  including without
                  limitation,    reasonable   attorney's   fees   (collectively,
                  "Losses"),  arising  directly  from such  party's  (i) grossly
                  negligent acts or omissions or willful misconduct; and/or (ii)
                  breach of this Agreement.

                  (b) ELITE and PLIVA shall  jointly  defend any and all claims,
                  actions and proceedings brought by any third party relating to
                  the Product.  PLIVA and ELITE shall be jointly responsible for
                  the cost and expenses of defense, including without limitation
                  damages,  awards and settlement  costs,  except for Losses for
                  which one party is entitled to indemnification  from the other
                  party  under  Section  7.3 (a)  above.  ELITE and PLIVA  shall
                  jointly  select   counsel  for  any  such  claim,   action  or
                  proceeding. Neither party may settle or consent to judgment in
                  any such  action  without  the other  party's  consent if such
                  settlement or judgment would impose any obligation,  financial
                  or  otherwise,  on the  non-settling  party  that would not be
                  fully covered by the settling  party's  indemnification  under
                  this Agreement.

                                       10
<PAGE>

7.4  NOTWITHSTANDING  ANY PROVISION TO THE CONTRARY CONTAINED IN THIS AGREEMENT,
IN NO EVENT SHALL  EITHER  PARTY BE LIABLE TO THE OTHER PARTY OR A LICENSEE  FOR
ANY CONSEQUENTIAL, INCIDENTAL, OR PUNITATIVE DAMAGES (INCLUDING LOSS OF PROFITS,
LOSS OF ENTERPRISE,  AND LOSS OF OPPORTUNITY) , REGARDLESS OF WHETHER FOR BREACH
OF  WARRANTY,  CONTRACT,  TORT  (INCLUDING  NEGLIGENCE),   STRICT  LIABILITY  OR
OTHERWISE, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

8.    INSURANCE

      Each party agrees to maintain in force, during the Term and for a period
      of 24 months thereafter, product liability insurance coverage in minimum
      limits of $5,000,000 each. Each party shall instruct its insurance carrier
      to notify the other party of any change, modification or cancellation of
      insurance thirty days prior to such change, modification or cancellation
      taking effect.

9.    REPRESENTATIONS AND WARRANTIES

      9.1 ELITE represents and warrants to PLIVA, as of the Effective Date, as
      follows:

            (1)   ELITE has the legal right and full corporate power and
                  authority to enter into this Agreement and to perform the
                  same;

            (2)   the Agreement constitutes valid and binding obligations on
                  ELITE in accordance with its terms except as limited by
                  applicable bankruptcy, insolvency, reorganization and other
                  laws of general application affecting the enforcement of
                  creditors' rights generally, and except as enforcement of
                  rights to indemnity and contribution hereunder may be limited
                  by principles of public policy;

            (3)   ELITE has taken all corporate action required by it to
                  authorize it to enter into and to perform the Agreement;

            (4)   ELITE has the right to disclose Know-How to PLIVA as is
                  necessary for PLIVA to perform its obligations hereunder;

            (5)   to ELITE's knowledge, there are no infringement proceedings
                  pending against ELITE in connection with the Product;

            (6)   there are no agreements between ELITE and any third party that
                  conflict with this Agreement;

            (7)   no consent or approval of any third party, court or
                  governmental agency is required in connection with the
                  execution and performance of this Agreement by ELITE;

                                       11
<PAGE>

            (8)   ELITE will manufacture all Product in accordance with cGMPs
                  and all Applicable Laws;

            (9)   ELITE is not enjoined from manufacturing nor is ELITE
                  currently sanctioned by the FDA pursuant to any issued 483
                  inspection reports;

            (10)  ELITE's employees and agents are not and have not been
                  debarred by FDA pursuant to 21 USC Section 335(a) or involved
                  in any investigation or proceeding which could lead to
                  debarment;

            (11)  ELITE does not and will not knowingly employ or use the
                  services of any individual or entity that has been debarred or
                  convicted of a felony or who is currently under investigation
                  for such conviction;

            (12)  all laboratory, scientific, technical or commercial
                  information that is submitted by ELITE to PLIVA or to any
                  regulatory health authority relating to the Product should be
                  complete, true, accurate and correct and shall not contain any
                  knowingly false information, misrepresentation and/or
                  omission; and

            (13)  ELITE will perform all necessary record keeping as required
                  under applicable federal and state laws regarding the
                  manufacture of the Product, environmental impact of the
                  manufacturing and all potential or adverse product defects.

         ELITE MAKES NO OTHER WARRANTY OF ANY KIND,  EXPRESS OR IMPLIED,  EXCEPT
         THOSE  EXPRESSLY MADE HEREIN.  ELITE  SPECIFICALLY  DISCLAIMS ALL OTHER
         WARRANTIES,  EXPRESS OR IMPLIED,  INCLUDING,  WITHOUT  LIMITATION,  ANY
         WARRANTY  OF  MERCHANTABILITY,   NON-INFRINGEMENT,  OR  FITNESS  FOR  A
         PARTICULAR PURPOSE.

9.2   PLIVA represents and warrants to ELITE, as of the Effective Date, as
      follows:

            (1)   PLIVA has the legal right and full corporate power and
                  authority to enter into this Agreement and to perform the
                  same;

            (2)   the Agreement constitutes valid and binding obligations on
                  PLIVA in accordance with its terms except as limited by
                  applicable bankruptcy, insolvency, reorganization and other
                  laws of general application affecting the enforcement of
                  creditors' rights generally, and except as enforcement of
                  rights to indemnity and contribution hereunder may be limited
                  by principles of public policy;

                                       12
<PAGE>

            (3)   PLIVA has taken or will have taken all corporate action
                  required by it to authorize it to enter into and to perform
                  the Agreement;

            (4)   there are no agreements between PLIVA and any third party that
                  conflict with this Agreement;

            (5)   no consent or approval of any third party, court or
                  governmental agency is required in connection with the
                  execution and performance of this Agreement by PLIVA;

            (6)   PLIVA will transport, store, handle, distribute, market and
                  sell all Product in accordance with cGMPs and all Applicable
                  Laws;

            (7)   PLIVA's employees and agents are not and have not been
                  debarred by the FDA pursuant to 21 U.S.C. Section 335(a) or
                  involved in any investigation or proceedings which could lead
                  to debarment;

            (8)   in the performance of its obligations under this Agreement,
                  PLIVA does not and will not knowingly employ or use the
                  services of any individual or entity that has been debarred,
                  convicted of a felony or who is currently under investigation
                  for such conviction; and

            (9)   PLIVA will perform all necessary record keeping as required
                  under applicable federal and state laws regarding the
                  transport, handling, storage and distribution of the Product,
                  environmental impact of the manufacturing and all potential or
                  adverse product defects.

         PLIVA MAKES NO OTHER WARRANTY OF ANY KIND,  EXPRESS OR IMPLIED,  EXCEPT
         THOSE  EXPRESSLY MADE HEREIN.  PLIVA  SPECIFICALLY  DISCLAIMS ALL OTHER
         WARRANTIES,  EXPRESS OR IMPLIED,  INCLUDING,  WITHOUT  LIMITATION,  ANY
         WARRANTY  OF  MERCHANTABILITY,   NON-INFRINGEMENT,  OR  FITNESS  FOR  A
         PARTICULAR PURPOSE.

10.    OBLIGATION OF CONFIDENTIALITY

      10.1 All Confidential Information disclosed by a party ("Disclosing
      Party") shall be treated by the other party ("Receiving Party") as
      confidential and shall not be disclosed or revealed to any third party and
      shall be used solely in connection with the performance of this Agreement;
      provided, however, that Confidential Information shall not include
      information that the Receiving Party can document as having been:

                                       13
<PAGE>

            (1) public knowledge prior to the disclosure, or which hereafter
            becomes public knowledge through no fault of the Receiving Party;

            (2) lawfully in the Receiving Party's possession prior to the time
            of disclosure by Receiving Party;

            (3) received, after the time of disclosure, from a third party not
            under a similar obligation of confidentiality to Disclosing Party;
            or

            (4) independently developed by Receiving Party's employees without
            access to Disclosing Party's Confidential Information.

      10.2 The Receiving Party shall take all such precautions as it normally
      takes with its own Confidential Information, but in no event less than
      reasonable precautions, to prevent improper disclosure; provided, however,
      that Confidential Information may be disclosed within the limits required
      (A) to obtain any authorization from the FDA or any other United States or
      foreign governmental or regulatory agency or, with the prior written
      consent of the Disclosing Party; (B) to be disclosed pursuant to (i) any
      order of any court having jurisdiction and power to order such information
      to be released or made public; or (ii) any lawful action of a governmental
      or regulatory agency.

      10.3 In addition to and without limiting any other remedies available to a
      Receiving Party at law or in equity, the Receiving Party shall also be
      entitled to seek immediate injunctive relief in any court to restrain any
      breach or threatened breach of a Receiving Party and to enforce the
      provisions of this Section 10. Each party acknowledges and agrees that
      there is may be no adequate remedy at law or in equity for any such breach
      or threatened breach and, in the event that any proceeding is brought
      seeking injunctive relief, the Receiving Party shall not use as a defense
      thereto that there is an adequate remedy at law.

      10.4 The Receiving Party may disclose Confidential Information of the
      Disclosing Party to the Receiving Party's employees, consultants,
      licensees, prospective licensees and subcontractors on a need-to-know
      basis; provided, however, that (i) any such disclosure shall be pursuant
      to confidentiality undertakings with terms at least as restrictive as
      those specified herein; and (ii) any violation of this Agreement by such
      persons shall be deemed a breach of the Receiving Party. Any of the
      persons mentioned above who are provided with access to Confidential
      Information shall be informed by the Receiving Party of the Receiving
      Party's obligations hereunder.

      10.5 The confidentiality obligations of each party under this Section 10
      shall survive the expiration or earlier termination of this Agreement,
      howsoever terminated.

                                       14
<PAGE>

      10.6 The parties shall cooperate and agree upon any public statement
      concerning the existence, subject matter or any term of this Agreement by
      or on behalf of any Party prior to any issuance, dissemination or release.
      Subject to Section 10.2, neither party may issue, disseminate or release
      any such public statement without the prior written approval of the other
      parties, which consent shall not be unreasonably withheld or delayed.

      10.7 The confidentiality obligations contained in this Article 10 are in
      addition to and not in substitution for any confidentiality obligations of
      the parties undertaken pursuant to the Non-Disclosure Agreement between
      ELITE and PLIVA dated June 22, 2004 (which agreement shall continue in
      full force and effect as therein provided).

11.   TERM OF AGREEMENT

      This Agreement shall become Effective Date and shall continue in force, in
      with respect to any particular country in the Territory, for a ten (10)
      year period from the date the Product is first commercially sold in that
      country by PLIVA ("Initial Term"), unless terminated earlier under Article
      12. Upon expiration of the Initial Term, and any extension term as
      hereafter provided ("Renewal Term" and together with the Initial Term, the
      "Term"), the Term shall automatically be renewed for additional periods of
      three (3) years each, unless written notice is given by either party to
      the other at least one (1) year prior to the end of the Initial Term or
      any of the Renewal Term of such party's decision not to extend the term of
      the Agreement upon expiration of the then existing term.

12.   TERMINATION

      12.1 This Agreement may be terminated by a party:

            (1)   upon breach of this Agreement by the other party (including,
                  without limitation, the failure to timely perform any
                  obligation under this Agreement), and after sixty (60) days
                  prior written notice to the breaching party, the notice to
                  become effective at the end of the sixty (60) day period
                  unless the breach is sooner cured by the breaching party;

            (2)   if a successful pivotal biostudy demonstrating the Product
                  meets FDA guidelines for bioequivalence is not completed
                  within one (1) year from the Effective Date, or if the parties
                  are unable to obtain Marketing Authorization from FDA within
                  the later of (i) two (2) years from the completion of the
                  Studies or (ii) five (5) years of the Effective Date;

            (3)   if there are no patents which present a risk of infringement
                  in the Territory and the first commercial launch of the
                  Product in the

                                       15
<PAGE>

                  Territory under this Agreement does not occur within sixty
                  (60) days of the date a Marketing Authorization for the
                  Territory is obtained;

            (4)   upon the other party's insolvency or voluntary filing of a
                  petition for bankruptcy, or the placing of the business of the
                  other party in the hand of a receiver; or

            (5)   if the Net Profit received by that party in respect of the
                  Product is less than [*] for any calendar year after the first
                  full calendar year of commercial sales hereunder.

      12.2 EFFECT OF TERMINATION. Termination of this Agreement for any reason
      shall be without prejudice to:

            (1)   ELITE's and PLIVA's right to receive all amounts accrued and
                  unpaid under Sections 2, 3 or 5 up to the date of such
                  termination;

            (2)   any provisions clearly meant to survive termination or
                  expiration of this Agreement, including without limitation
                  representations, warranties, indemnification and
                  confidentiality obligations as well as Sections 1, 4, 7, 8, 9,
                  10, 12, and 14, shall remain in full force and effect.

            (3)   the rights of inspection and audit set out in Section 5.4
                  shall continue in force as required under the terms of this
                  Agreement; and

            (4)   any other remedies which either party may then or thereafter
                  have hereunder or otherwise.

      12.3 RIGHTS TO ANDAs. Without limiting any other right or remedy available
      to PLIVA, on ELITE's breach of this Agreement (if such breach is not cured
      within the time period provided in Section 12.1 (1) above), then at
      PLIVA's request ELITE shall, within the Territory, transfer to PLIVA, at
      no charge, the ANDA (or comparable Marketing Authorization outside of the
      United States) for the Product, and ELITE promptly shall take such other
      actions as reasonably requested by PLIVA from time to time to evidence
      PLIVA's exclusive rights to the ANDA or comparable Marketing Authorization
      and all information contained therein, subject to PLIVA having theretofore
      reimbursed ELITE in full for the Elite Product Development Costs.

13.   NOTICES

      13.1 Any notice provided for herein shall be in writing and is effective
      upon receipt: (i) when delivered by hand with proof of delivery; (ii) when
      sent by facsimile with fax confirmation, provided same is sent all by
      regular mail within

                                       16
<PAGE>

      forty-eight (48) hours; (iii) three (3) days following deposit for mailing
      by first class registered or certified mail, return receipt requested; one
      day following deposit for mail with an overnight carrier; or (iv) when
      received by the addressee, by delivery service (return receipt requested).
      Notices shall be delivered to the addresses set forth below:

                   If to ELITE:            165 Ludlow Avenue
                                           Northvale, New Jersey 07647
                                           Attention:  Chief Executive Officer
                                           Telephone: (201) 750-2646
                                           Facsimile: (201) 750-2755

                   If to PLIVA:            72 Eagle Rock Avenue
                                           East Hanover, NJ 07936
                                           Attention: General Counsel
                                           Telephone: 973-599-4181
                                           Facsimile: 973-599-4164

14.   MISCELLANEOUS

      14.1 Neither party shall be liable for any failure to deliver or receive
      or any delay to perform its obligations hereunder when such failure or
      delay shall be caused (directly or indirectly) by fire; flood; accident;
      explosion; equipment or machinery breakdown; sabotage; strike, or any
      labor disturbance (regardless of the reasonableness of the demands of
      labor); civil commotions; riots; invasions; wars (present or future);
      acts, restraints, requisitions, regulations, or directions of any
      governmental entity; voluntary or mandatory compliance with any request of
      any governmental entity; facility shut down; voluntary or mandatory
      compliance with any request for material represented to be for purposes of
      (directly or indirectly) producing articles for national defense or
      national defense facilities; shortage of labor, fuel, power or raw
      materials; inability to obtain raw materials or supplies; failures of
      normal sources of supplies; inability to obtain or delays of
      transportation facilities; any act of God; any act of the other party; or
      any cause (whether similar or dissimilar to the foregoing) beyond the
      reasonable control of such party (each cause a "Force Majeure Event").

      14.2 Either party hereto may assign this Agreement in whole or in part to
      any Affiliate or Affiliates who shall be substituted directly in whole or
      in part for it hereunder, provided, however, that the assignor shall
      guarantee the performance of its Affiliate assignee hereunder. This
      Agreement shall not otherwise be assignable by either party without the
      prior written consent of the other party, which consent shall not be
      unreasonably withheld, conditioned or delayed.

                                       17
<PAGE>

      14.3 This Agreement shall be governed by and interpreted in accordance
      with the laws of the State of New Jersey, United States of America without
      regard to its conflict of laws principles, and should legal action become
      necessary to enforce its terms, the prevailing party shall be entitled to
      reasonable costs and attorneys' fees.

      14.4 In connection with any litigation out of or relating to the subject
      matter of this Agreement, each of the parties hereto (a) irrevocably
      consents and submits to the exclusive jurisdiction of the state and
      federal courts located in New Jersey, and (b) agrees that service of
      process may be effected, in addition to any other means permitted by the
      applicable rules of court, by mailing such process certified mail, return
      receipt requested or by reputable overnight courier provided a receipt
      against delivery at their respective addresses set forth above is
      obtained.

      14.5 The terms and provisions contained in this Agreement constitute the
      entire Agreement between the parties and, except as provided in Section
      11.7 hereof, shall supersede all previous communications, representations,
      agreements or understandings, either oral or written, between the parties
      hereto with respect to the subject matter hereof and no agreement or
      understanding varying or extending these Agreements shall be binding upon
      either party hereto, unless in writing which specifically refers to the
      Agreement, signed by fully authorized officers or representatives of the
      respective parties and the provisions of these Agreements not specifically
      amended thereby shall remain in full force and effect.

      14.6 Any waiver must be explicit and in writing. The waiver by either of
      the parties to this Agreement of any breach of any provision hereof by the
      other party shall not be construed to be a waiver of any succeeding breach
      of such provision or a waiver of the provision itself.

      14.7 If and to the extent that any court or tribunal of competent
      jurisdiction holds any of the terms, provisions or conditions or part
      thereof of this Agreement, or the application hereof of any circumstances,
      to be invalid or to be unenforceable in a final non-appealable order, the
      remainder of this Agreement and the application of such term, provision or
      condition or part thereof to circumstances other than those as to which it
      is held invalid or unenforceable shall not be affected thereof, and each
      of the other terms, provisions and conditions of this Agreement shall be
      valid and enforceable to the fullest extent of the laws.

      14.8 The relationship of ELITE and PLIVA under this Agreement is that of
      independent contractors. Neither party shall be deemed to be the agent of
      the other nor authorized to take any action binding upon the other.

      14.9 This Agreement may be executed in counterparts, each of which shall
      be deemed to be an original and all together shall be deemed to be one and
      the same Agreement. All headings in this Agreement are inserted for
      convenience of reference only and shall not affect its meaning or
      interpretation.

                                       18
<PAGE>

15.   AGREEMENT TO PERFORM NECESSARY ACTS

      Each party to this Agreement agrees to perform any further acts and
      execute and deliver any documents that may be reasonably necessary to
      carry out the provisions of this Agreement.

16.   DISPUTE RESOLUTION

      16.1 Should any dispute or difference arise between ELITE and PLIVA or the
      Committee during the Term of this Agreement, then either party may
      forthwith give notice to the other party that it wishes such dispute or
      difference to be referred to a designated senior officer of each of ELITE
      and PLIVA.

      16.2 If designated senior officers of each of ELITE and PLIVA agree upon a
      resolution or disposition of the matter, they shall each sign a statement
      which sets out the terms of their agreement. If, however, the parties'
      designated senior officers are still unable to resolve their differences
      within 60 days of its being referred to them, either party may pursue any
      legal remedy available to it. Nothing contained herein shall be deemed to
      limit or restrict a party from seeking equitable remedies, such as a
      preliminary or permanent injunction, if necessary, from a court of
      competent jurisdiction located in the State of New Jersey.

17.   QUALITY AGREEMENT

      17.1 PLIVA and ELITE shall enter into an agreement with respect to quality
      and regulatory issues (the "Quality Agreement") substantially in the form
      attached hereto as Exhibit A.

      17.2 If any term in this agreement is inconsistent with any term in the
      Quality Agreement, the term in the Quality agreement shall control.

                                       19
<PAGE>

IN WITNESS WHEREOF, ELITE and PLIVA have executed this Agreement in duplicate as
of the day and year first above written.

                                    ELITE LABORATORIES, INC.

                                    By:
                                        ----------------------------------------

                                    Its
                                        ----------------------------------------

                                    PLIVA, INC.

                                    By:
                                        ----------------------------------------

                                    Its
                                        ----------------------------------------

                                       20

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00090-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00090-of-00352.parquet"}]]