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                                                                    Exhibit 10.1

                            LONG TERM BONUS AGREEMENT

            THIS LONG TERM BONUS AGREEMENT (the "Agreement") is made and entered
into as of September 1, 2005,  (the "Grant Date") by and between SL  INDUSTRIES,
INC., a New Jersey  corporation (the "Company"),  with principal offices located
at 520 Fellowship Road, Suite A-114,  Mount Laurel,  New Jersey 08054, and JAMES
C. TAYLOR (the  "Executive"),  an  individual  with a residence  at 21 Mill Neck
Lane, Pittsford, NY 14534.

                              W I T N E S S E T H:
                              --------------------

            WHEREAS,  the Executive is the President and Chief Executive Officer
of the Company; and

            WHEREAS,  the Company  wishes to retain and encourage the productive
efforts of the Executive, which contributes toward the Company's success.

            NOW,  THEREFORE,  in  consideration  of the  premises and the mutual
agreements herein set forth and for other good and valuable  consideration,  the
parties hereto agree as follows:

            Section 1. BONUS.  The Executive shall be paid a Bonus in the amount
specified herein. The Bonus shall be paid upon the earlier of (a) the occurrence
of a Change of Control;  or (b) the delivery of a notice, in accordance with the
terms herein (the "Notice"). The Bonus described herein is separate and distinct
from any other bonus program the Executive may participate in or be entitled to.

            Section 2. PAYMENT OF BONUS. The Company shall pay the Executive the
Bonus within ten (10)  business  days  following  the  occurrence of a Change of
Control,  or the receipt of the Notice,  as the case may be. The total amount of
the Bonus owed to the  Executive  on any given date shall be equal to the vested
portion of the Bonus on such date, as determined  pursuant to Section 4(b).  The
Executive  shall be entitled to receive all or parts of the vested Bonus in such
increments as he shall direct upon delivery of the Notice thereof.

            Section 3.  TERMINATION.  Upon the  termination  of the  Executive's
employment  with the Company for any reason,  the Executive shall be entitled to
receive  the Bonus upon  deliverance  of the Notice for a period of thirty  (30)
days following the date of termination.  Immediately  after such thirty (30) day
period,  Executive  shall have no right to submit  the Notice or to receive  the
Bonus.

            Section 4. DEFINITIONS. All capitalized terms used herein shall have
the meanings set forth below.

            (a) "Base Price" shall mean $15.02.

            (b) "Bonus"  shall  mean  all  compensation  paid  to the  Executive
                pursuant to the terms of this Agreement. The amount of the Bonus
                shall be equal to the product of 50,000 multiplied by the amount
                the Stock Price exceeds the base price. The Bonus shall vest pro
                rata over a period of four (4)  years,  as  follows:  20% on the

                date hereof and 20% on each anniversary of the date hereof until
                fully vested.  Notwithstanding the foregoing, the full amount of
                the Bonus shall fully vest and be payable upon the occurrence of
                a Change in Control, as provided in Section 2.

            (c) "Change in Control" shall be deemed to have occurred if:

                        (i) a tender offer (or series of related  offers)  shall
                be made and  consummated for the ownership of 50% or more of the
                outstanding voting securities of the Company, unless as a result
                of such  tender  offer more than 50% of the  outstanding  voting
                securities  of the surviving or resulting  corporation  shall be
                owned in the aggregate by the shareholders of the Company (as of
                the time  immediately  prior to the commencement of such offer),
                any employee  benefit  plan of the Company or its  subsidiaries,
                and their affiliates;

                        (ii) the Company  shall be merged or  consolidated  with
                another  corporation,  unless  as a  result  of such  merger  or
                consolidation more than 50% of the outstanding voting securities
                of the surviving or resulting  corporation shall be owned in the
                aggregate  by the  shareholders  of the  Company (as of the time
                immediately  prior to such  transaction),  any employee  benefit
                plan of the Company or its subsidiaries, and their affiliates;

                        (iii) the Company  shall sell  substantially  all of its
                assets to another  corporation  that is not wholly  owned by the
                Company,  unless  as a result of such sale more than 50% of such
                assets shall be owned in the  aggregate by the  shareholders  of
                the  Company  (as  of  the  time   immediately   prior  to  such
                transaction),  any  employee  benefit plan of the Company or its
                subsidiaries and their affiliates; or

                        (iv) a Person (as defined  below)  shall  acquire 50% or
                more  of  the  outstanding  voting  securities  of  the  Company
                (whether  directly,  indirectly,  beneficially  or  of  record),
                unless  as a result  of such  acquisition  more  than 50% of the
                outstanding  voting  securities  of the  surviving  or resulting
                corporation  shall be owned in the aggregate by the shareholders
                of the  Company (as of the time  immediately  prior to the first
                acquisition  of such  securities by such  Person),  any employee
                benefit  plan of the  Company  or its  subsidiaries,  and  their
                affiliates.

                        For  purposes of this  definition,  ownership  of voting
                securities  shall take into account and shall include  ownership
                as determined by applying the provisions of Rule  13d-3(d)(I)(i)
                (as in effect on the date hereof) under the Securities  Exchange
                Act of 1934, as amended (the "Exchange  Act"). In addition,  for
                such purposes,  "Person" shall have the meaning given in Section
                3(a)(9) of the  Exchange  Act, as modified  and used in Sections
                13(d) and 14(d) thereof; however, a Person shall not include (A)
                the Company or any of its  subsidiaries;  (B) a trustee or other

                                       2

                fiduciary  holding  securities under an employee benefit plan of
                the  Company  or  any of its  subsidiaries;  (C) an  underwriter
                temporarily  holding securities  pursuant to an offering of such
                securities;  or (D) a corporation owned, directly or indirectly,
                by the  shareholders  of the Company in  substantially  the same
                proportion   as  their   ownership  of  stock  of  the  Company.
                Notwithstanding the foregoing,  a Change of Control shall not be
                deemed  to have  occurred  as a  result  of any  acquisition  of
                securities of the Company by any Person arising out of, relating
                to or as a result of a rights or similar offering by the Company
                to its stockholders.

            (d) "Common Stock" shall mean the Company's  common stock, par value
                $.20 per share.

            (e) "Notice" shall mean the notice attached hereto as EXHIBIT A.

            (f) "Stock Price" shall mean the average of the closing price of the
                Common Stock on the five trading days  commencing (i) on the day
                following the day a Change of Control  occurs or (ii) on the day
                preceding the day the Company  receives the Notice,  as the case
                may be, on the principal  securities exchange on which shares of
                Common  Stock are listed  (if the shares of Common  Stock are so
                listed),  or on the NASDAQ Stock Market (if the shares of Common
                Stock are regularly  quoted on the NASDAQ Stock Market),  or, if
                not so listed or regularly quoted,  the mean between the closing
                bid and asked prices of publicly  traded  shares of Common Stock
                in the over-the-counter market, or, if such bid and asked prices
                shall not be available, as reported by any nationally recognized
                quotation service selected by the Corporation,  or as determined
                by the Board of Directors of the Company.

            Section 5.  BONUS  REPLACEMENT.  At the  Company's  sole  option and
discretion,  it may deliver  options to purchase  shares of the Common Stock, or
similar  securities,  in an amount  and with such  terms  and  conditions  as to
provide Executive with the substantially  equivalent economic value as Executive
would receive under the terms and provisions of this Agreement (the "Replacement
Securities").  Upon the delivery to the Executive of the Replacement Securities,
this Agreement shall terminate and be of no further force and effect.

            Section 6. NO EMPLOYMENT  RIGHTS.  Nothing herein shall constitute a
contract  of  continuing  employment  or in any manner  obligate  the Company to
continue the service of the  Executive or obligate the  Executive to continue in
the service of the Company,  and nothing  herein shall be construed as fixing or
regulating the compensation paid to the Executive.

            Section  7.  NOTICES.  All  notices,  consents,  waivers  and  other
communication under this Agreement must be in writing and will be deemed to have
been  duly  given (a) when  delivered  by hand  (with  written  confirmation  of
receipt), (b) when sent by telecopier (with written confirmation of receipt) and
sent by nationally recognized overnight mail within 24 hours thereafter,  or (c)
one day  following  being sent by a  nationally  recognized  overnight  delivery
service (receipt  requested),  in each case to the appropriate  addresses as set
forth at the beginning of this Agreement.

                                       3

            Section  8.  CAPITAL  CHANGE  OF THE  COMPANY.  In the  event of any
merger,  reorganization,  consolidation,  recapitalization,  stock split,  stock
dividend, or other change in corporate structure affecting the Common Stock, the
Board of  Directors  of the  Company  shall make an  appropriate  and  equitable
adjustment to the formula for  calculating  the Bonus,  so that after such event
the value of the Bonus shall be maintained as immediately  before the occurrence
of such event.

            Section 9.  COUNTERPARTS.  This  Agreement may be executed in one or
more counterparts, each of which shall be deemed to be a duplicate original, but
all of which, taken together, shall be deemed to constitute a single instrument.

            Section 10. BINDING EFFECT;  BENEFITS. This Agreement shall inure to
the benefit  of, and be binding  upon,  the  parties to it and their  respective
successors and permitted assigns.  Nothing contained in this Agreement,  express
or implied,  is intended to confer upon any person  other than the parties to it
and their respective  successors and permitted  assigns,  any rights or remedies
under or by reason of this Agreement.

            Section 11.  ASSIGNMENTS.  This Agreement may not be assigned by any
party without the prior written consent of the other party;  provided,  however,
the  Company  may assign this  Agreement  and all of its rights and  obligations
under this Agreement to any Person succeeding to all or a substantial portion of
the business of the Company,  on the condition that such Person shall  expressly
assume (by contract or operation of law) the  Company's  obligations  under this
Agreement,  at which  point the Company  shall be  relieved  of its  obligations
hereunder.

            Section 12. CAPTIONS.  The captions  contained in this Agreement are
included only for convenience of reference and do not define,  limit, explain or
modify this Agreement or its interpretation,  construction or meaning and are in
no way to be construed as a part of this Agreement.

            Section 13.  AMENDMENTS.  Any  provision  of this  Agreement  may be
amended or waived if, and only if,  such  amendment  or waiver is in writing and
signed, in the case of an amendment,  by all parties hereto, or in the case of a
waiver, by the party against whom the waiver is to be effective.

            Section 14. WAIVER.  Failure to insist upon a strict compliance with
any of the terms,  covenants or conditions of this Agreement shall not be deemed
a waiver of any such term,  covenant or  condition,  and any such failure at any
one time or more  times  shall not be deemed a waiver or  relinquishment  at any
other  time or times of any  right  under the  terms,  covenants  or  conditions
hereof.

                                       4

            Section  15.  SEVERABILITY.  Except  as  otherwise  provided  to the
contrary herein,  each section,  paragraph,  part, term and/or provision of this
Agreement shall be considered  severable,  and if, for any reason,  any section,
paragraph,  part,  term and/or  provision  herein is determined to be invalid or
contrary to, or in conflict  with, any existing or future law or regulation of a
court or agency having valid jurisdiction, such invalidity or conflict shall not
impair the operation of, or otherwise  effect,  the other sections,  paragraphs,
parts,  terms and/or provisions of this Agreement as may remain otherwise valid,
and the  latter  will  continue  to be given  full force and effect and bind the
parties hereto.

            Section 16.  APPLICABLE LAW.  Jurisdiction over disputes with regard
to this Agreement shall be exclusively in the courts of the State of New Jersey,
and this  Agreement  shall be construed in  accordance  with and governed by the
laws of the State of New Jersey.

            IN WITNESS  WHEREOF,  the parties  have caused this  Agreement to be
executed as of the day and year first above written.

                                     SL INDUSTRIES, INC.

                                     By:
                                         ------------------------------
                                         Warren G. Lichtenstein

                                         ------------------------------
                                         James C. Taylor

                                       5

EXHIBIT A

                                                           [Date]

SL Industries, Inc.
520 Fellowship Road, Suite A-114
Mount Laurel, New Jersey 08054
Attn:       Corporate Secretary

Dear Sir:

            Reference is made to that certain Long-Term Bonus Agreement dated as
of September 1, 2005 by and between SL  Industries,  Inc.  (the  "Company")  and
James C. Taylor  (the  "Executive").  Capitalized  terms used herein are used as
defined in such Agreement.

            By this  Notice,  I hereby  elect to receive  the full amount of the
vested portion of the Long-Term  Bonus,  as of the date hereof.  Delivery of the
Bonus payment should be sent to my address set forth below.

            Please contact me if you require any additional information.

                                                 Sincerely yours,

                                                 -------------------
                                                 James C. Taylor

                                                 Address:

                                                 ----------------------------
                                                 ----------------------------
                                                 ----------------------------CONFIDENTIAL 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  COMERCIALIZATION  AGREEMENT (together with all exhibits
and schedules,  the  "AGREEMENT"),  made as of this 21th day of June,  2005 (the
"EFFECTIVE  DATE"),  by  and  between  ELITE  LABORATORIES,   INC.,  a  Delaware
corporation  having  its  principal  place of  business  at 165  Ludlow  Avenue,
Northvale,   NJ  07657  USA,  and  ELITE   PHARMACEUTICALS,   INC.,  a  Delaware
corporation,  having its  principal  place of  business  at 165  Ludlow  Avenue,
Northvale, NJ 07657 US (jointly and severally "ELITE") and  IntelliPharmaCeutics
Corp., a Nova Scotia  corporation,  having its principal place of business at 30
Worcester Road, Toronto Ontario, Canada M9W 5X2 ("IPC", and together with ELITE,
the "PARTIES" and each individually, a "PARTY").

                                    RECITALS:

         WHEREAS,   IPC   and   ELITE   specialize   in  the   development   and
commercialization  of time  release and other  technologies  for  pharmaceutical
providers;

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

         WHEREAS,   ELITE  and  IPC  desire  to  work   together   to   develop,
commercialize and license for manufacture and sale, the Product;

         WHEREAS,  the  Parties  desire to set  forth  herein  their  respective
agreements with respect to the Product.

         NOW, THEREFORE,  in consideration of the recitals and the covenants and
conditions herein contained, ELITE and IPC 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, as to either Party,  any Person
which owns or controls or which is owned or controlled by or the common  control
with such Party to the extent of at least fifty  percent  (50%) of the equity or
voting power of the owned or controlled entity.

                  1.2.  "ANDA"  shall  have the  meaning  set  forth in  Section
3.2(b).

<PAGE>

                  1.3. "CFR" shall mean the Code of Federal Regulations,  as may
be amended from time to time.

                  1.4.  "CONFIDENTIAL  INFORMATION"  shall mean any  information
pertaining to the Product or the Study from time to time  communicated  by or on
behalf  of  either  Party  or the  other or  developed  pursuant  to the  Study,
including,   without  limitation,   trade  secrets,  Know-How,  pricing,  costs,
suppliers,   Licensees,   customer  information,   patent  rights,   scientific,
technical, commercial and medical product development,  product formulations and
technical  specifications  including, but not limited to the Product, methods of
analysis and testing,  manufacturing  methods,  processes and production,  batch
records,   contractual  arrangements,   results,   discoveries  and  inventions,
procedures  and forms,  and all  information  related to the  Studies  including
without limitation, the Protocol, whether of a written, oral or visual nature.

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

                  1.6.  "COMMITTEE"  shall have the meaning set forth in Section
2.1 hereof.

                  1.7.  "CRO" shall have the meaning set forth in Section 3.2(f)
hereof.

                  1.8.  "DEVELOPMENT  PLAN" shall mean the  Product  Development
Activity Schedule annexed hereto as Exhibit A.

                  1.9. "FDA" shall mean the U.S. Food and Drug Administration.

                  1.10.  "IPC  INTELLECTUAL  PROPERTY  RIGHTS"  shall  have  the
meaning set forth in Section 5.2 hereof.

                  1.11. "KNOW-HOW" shall mean all technology, data, information,
formulations,  technical  specifications,  processes  and methods  necessary  or
useful  in the  manufacturing,  production,  testing  or  registration  of  drug
products, including but not limited to, the Product.

                  1.12.  "LICENSEE"  shall mean any Person  that holds a license
approved by the Parties and granted by the Parties to Commercialize  the Product
in the Territory pursuant to a License Agreement.

                  1.13. "LIEN" shall mean any lien, pledge,  mortgage,  security
interest,  claim, lease, charge,  option, right of first refusal or first offer,
easement,  transfer  restriction,  voting  requirement or any other encumbrance,
restriction or limitation.

                  1.14.  "LICENSE AGREEMENT" shall have the meaning set forth in
Section 6.1 hereof.

                  1.15. "MARKETING  AUTHORIZATION" shall mean the final approval
of all regulatory  authorities necessary to market the Product in the Territory,
including  as  applicable  pricing  and

                                       2
<PAGE>

reimbursement approval and all other approvals required in the Territory for the
marketing,  distribution  and  sale  of the  Product  in the  normal  course  of
business.

                  1.16.   "PERSON"  shall  mean  any  individual,   partnership,
limited-liability company, corporation, joint venture, trust, association or any
other entity, domestic or foreign.

                  1.17.  "PRODUCT"  shall mean [*] generic  [*] delayed  release
capsules, [*], or either of these.

                  1.18.  "PROTOCOL" shall mean the protocol  developed by IPC in
connection  with the  Studies  to be  conducted  for,  and as agreed to by,  the
Parties.

                  1.19.  "REGULATORY FILING" shall have the meaning set forth in
Section 3.2(h) hereof.

                  1.20.  "REPRESENTATIVE"  shall have the  meaning  set forth in
Section 2.1 hereof.

                  1.21.  "STUDIES"  shall  mean the  clinical  trials  needed to
qualify the Product for an ANDA.

                  1.22.  "TERRITORY"  shall  mean  the  United  States  and  its
territories, Canada and Mexico.

          2.      DEVELOPMENT AND COMERCIALIZATION COMMITTEES

                  2.1.  DEVELOPMENT  COMMITTEE  Within  ten (10) days  after the
Effective  Date,  ELITE and IPC shall  establish a  Development  Committee  (the
"D-COMMITTEE")  comprised of not less than two, and not more than three, persons
("Representatives")  selected by each Party.  ELITE and IPC shall each designate
an equal number of  Representatives  to the D-Committee,  with each Party having
the right to increase the number of  Representatives  at any time to the maximum
of three upon  written  notice to the other  Party;  PROVIDED,  HOWEVER,  in any
event,  IPC and ELITE shall  retain an equal  number of  Representatives  on the
Committee and equal voting rights.  The  D-Committee  shall carry out the duties
set forth below in Section 2.4.

                  2.2. The first meeting of the D-Committee shall be held within
fifteen (15) days from the Effective  Date, at which time the  procedures of the
D-Committee may be established.  Thereafter,  the D-Committee shall meet on such
schedule as deemed appropriate by the  Representatives,  but not less frequently
than each calendar quarter,  with any one Representative being empowered to call
a meeting of the  D-Committee  upon at least five (5) days' notice (which notice
shall  include  a  detailed  description  of all  matters  to  come  before  the
D-Committee at such meeting for consideration or action).

                  2.3. At  meetings,  each Party shall have the right to provide
information for consideration and the D-Committee shall consider all such input.
All  decisions  by the  D-Committee  shall  be  made  by  unanimous  vote of its
Representatives. For greater certainty, a vote is unanimous if, and only if, all
of the  Parties'  Representatives  in  actual  attendance  at any such

                                       3
<PAGE>

meeting,  irrespective of the Party they represent, vote for the same outcome of
any decision to be taken.  A quorum  required for any action by the  D-Committee
shall consist of at least one ELITE  Representative and one IPC  Representative.
Participation at a meeting may be in person, by telephone  conference call or by
video  conference,  so long as all  participants  can  hear  and be heard by one
another at all times  throughout  the meeting.  If the meeting is in person,  it
shall be held alternately at ELITE's and IPC's offices,  unless otherwise agreed
by the  Representatives.  All Representatives  serving on the D-Committee not in
attendance  shall be  notified  in writing  immediately  of any action  taken or
approved by the D-Committee.

                  2.4. The duties of the D-Committee shall be to:

                  (1) keep the Parties  apprised of any development  issues with
respect to the Product and effect a plan of action to resolve same;

                  (2) monitor the  performance  and progress of the  Development
Plan;

                  (3) such other matters relating to  sub-paragraphs  (1)and (2)
above as may be necessary or appropriate to consider.

                  2.5. If the D-Committee  cannot resolve any dispute within its
purview  after  fifteen  (15) days or such other  period as may be agreed by the
D-Committee, the dispute will be referred to a designated senior officer of each
of ELITE and IPC, and thereafter,  in the event of continued  deadlock,  will be
resolved pursuant to the deadlock provisions set forth in Section 14.

                  2.6.   COMMERCIALIZATION   COMMITTEE   At  such  time  as  the
D-Committee so  recommends,  ELITE and IPC shall  establish a  Commercialization
Committee (the "C-COMMITTEE")  comprised of not less than two, and not more than
three,  Representatives  selected  by  each  Party.  ELITE  and IPC  shall  each
designate an equal number of Representatives to the C-Committee, with each Party
having the right to increase  the number of  Representatives  at any time to the
maximum of three upon written notice to the other Party;  PROVIDED,  HOWEVER, in
any event, IPC and ELITE shall retain an equal number of  Representatives on the
C-Committee and equal voting rights.  The C-Committee shall carry out the duties
set forth below in Section 2.9.

                  2.7. The first meeting of the C-Committee shall be held within
fifteen (15) days from the date of  recommendation  for its establishment by the
D-Committee, at which time the procedures of the C-Committee may be established.
Thereafter, the C-Committee shall meet on such schedule as deemed appropriate by
the  Representatives,  but not less frequently than each calendar quarter,  with
any one Representative being empowered to call a meeting of the C-Committee upon
at  least  five  (5)  days'  notice  (which  notice  shall  include  a  detailed
description  of all matters to come before the  C-Committee  at such meeting for
consideration or action). Nothing herein precludes any Representative for either
the D-Committee or the C-Committee from being a  Representative  of the other or
both committees.  Where practical, the D-Committee and the C-Committee will hold
their meetings concurrently.

                  2.8. At  meetings,  each Party shall have the right to provide
information for consideration and the C-Committee shall consider all such input.
All  decisions  by the  C-

                                       4
<PAGE>

Committee  shall be made by unanimous vote of its  Representatives.  For greater
certainty,   a  vote  is  unanimous  if,  and  only  if,  all  of  the  Parties'
Representatives  in actual  attendance at any such meeting,  irrespective of the
Party they  represent,  vote for the same outcome of any decision to be taken. A
quorum required for any action by the C-Committee  shall consist of at least one
ELITE Representative and one IPC Representative.  Participation at a meeting may
be in person, by telephone  conference call or by video  conference,  so long as
all  participants  can hear and be heard by one another at all times  throughout
the  meeting.  If the  meeting is in  person,  it shall be held  alternately  at
ELITE's and IPC's offices,  unless otherwise agreed by the Representatives.  All
Representatives  of the  C-Committee  not in  attendance  shall be  notified  in
writing immediately of any action taken or approved by the C-Committee.

                  2.9. The duties of the C- Committee shall be to:

                  (1)   pursue  and   consider   license   agreements   for  the
Commercialization of the Product in the Territory,  or in any part thereof, with
any potential  Licensee  suggested for consideration by either Elite or IPC. The
criteria which the C-Committee  shall take into account in the  consideration of
any  such  license  agreements  shall  include,  but are  not  limited  to,  the
maximization  of  market  penetration  and  revenues  for  the  Product  in  the
Territory, or in any part thereof; and

                  (2) such other matters  relating to paragraph (1) above as may
be necessary or appropriate to consider.

                  2.10. If the C-Committee cannot resolve any dispute within its
purview  after  fifteen  (15) days or such other  period as may be agreed by the
C-Committee, the dispute will be referred to a designated senior officer of each
of ELITE and IPC, and thereafter,  in the event of continued  deadlock,  will be
resolved pursuant to the deadlock provisions set forth in Section 14.

         3.       RESPONSIBILITIES OF THE PARTIES

                  3.1. The Development Plan, with milestones listed, setting out
the specific  responsibilities of each of ELITE and IPC that will be required in
order to complete  development of the Product, and to secure regulatory approval
necessary  to the  manufacture  and sale of the  Product  in the  Territory,  is
annexed  hereto as  EXHIBIT  A.  Each of the  Parties  agrees to use  reasonable
efforts to perform each of the milestone  activities required to be performed by
such Party on or before the dates  required  for  performance  of such  activity
under the  Development  Plan.  Subject to all the terms and  conditions  of this
Agreement,  including  but not  limited to the  provisions  of Section 5, and in
order to achieve the milestones set forth in the Development Plan, IPC and ELITE
hereby agree to conduct and carry out the  activities  set forth in Section 3.2,
in the case of IPC and in Section 3.3, in the case of Elite.

                  3.2. IPC hereby represents and warrants that it has completed,
or agrees that it will complete in accordance with the Development Plan, certain
matters as follows:

                  (a)  IPC  has  developed  and  validated  all   pharmaceutical
analytical  methods  necessary  and  sufficient  for the  analysis  of the  drug
substance,  impurities, and degradation

                                       5
<PAGE>

products,  including  stability  indicating  methods,  and has  prepared or will
prepare all  necessary  written  documentation  and reports in relation to these
methods;

                  (b) IPC  has  developed  formulations  and  processes  for the
manufacture  of the Product as required  for pilot  clinical  studies.  IPC will
transfer the technology in relation to the formulations and the processes to the
Elite facility during the scale-up process at the Elite facility,  and will make
such  adjustments and  optimizations  of such  formulations and processes during
such scale-up and during the pivotal  clinical  studies phase of the development
program, with a view to filing an Abbreviated New Drug Application ("ANDA") with
the FDA with respect to the Product;

                  (c) IPC has managed and overseen the design and the conduct of
successful pilot clinical studies on the Product;

                  (d) IPC will transfer  pharmaceutical  analytical  methods and
operating  procedures  relating to the Product to the ELITE  facility,  and will
provide all reasonable technical and documentary  assistance in the transfer and
revalidation process of such methods;

                  (e)  IPC  will  provide  on-site   assistance  and  sufficient
information to designated  ELITE  personnel to allow ELITE personnel to scale up
the  process  developed  by IPC  and to  manufacture  Product  batches  for  the
additional pilot studies,  if any, and the pivotal clinical studies at the ELITE
facility.  IPC personnel  will be present at the Elite facility and, the Parties
agree, will take an active role in the manufacture of such product batches;

                  (f) IPC  (together  with  ELITE)  will  manage and oversee the
design and the conduct of additional pilot clinical studies, if any, and pivotal
clinical studies for the Products,  such studies to be done at the facilities of
such third party contract research  organization ("CRO") as may be acceptable to
both IPC and ELITE;

                  (g) IPC will prepare and file, in the name of IPC, such patent
application(s)  on the Product as may be possible,  based on IPC's  intellectual
property,  and take all  appropriate  steps to receive a grant of such patent(s)
and maintain such patent(s) if granted; and

                  (h)  IPC  shall  be  responsible  for the  preparation  of all
regulatory  filings  (which  shall be filed in IPC's sole name),  including  all
clinical   investigational   new  drug   applications  in  connection  with  the
applications for regulatory approval for the Product in each jurisdiction of the
Territory (each a "REGULATORY FILING"), all as required under applicable laws of
the Territory.

                  3.3.  ELITE hereby  agrees that it will complete in accordance
with the Development Plan, certain matters as follows

                  (a) ELITE will conduct all work  reasonably  necessary for the
transfer   of   fully   validated   pharmaceutical   analytical   methods   (and
implementation  thereof) and operating  procedures  transferred  from IPC to the
ELITE  facility  for the  manufacture  and  release of Product  batches  for the
Studies;

                                       6
<PAGE>

                  (b) ELITE will manufacture the Product batches for the Studies
at its  premises  (whereas,  commercial  manufacturing  shall be as set forth in
Section 6.2);

                  (c)  ELITE  will  be   responsible   for  conducting  the  CMC
(chemistry, manufacturing and controls) activities including production, quality
controls,  and  stability  studies with respect to the Product  (with input from
IPC, if necessary);

                  (d) ELITE  (together  with IPC) will  manage and  oversee  the
design and the conduct of additional  pilot  clinical  studies,  if any, and the
pivotal  clinical  studies  for  the  Product,  such  studies  to be done at the
facilities of such third party CRO as may be acceptable to both Parties;

                  (e) ELITE will  oversee  the  packaging  and  labeling  of the
Product at a mutually  agreed  upon  packaging  facility  for the purpose of the
pivotal clinical studies and the stability studies;

                  (f) ELITE will provide to IPC, for the purposes of  regulatory
filing,  all necessary  documentation and reports in respect of the manufacture,
release and packaging of the Product  batches for the pivotal  clinical  studies
and stability studies; and

                  (g) ELITE will provide to IPC, for the purposes of  regulatory
filing, all other reasonably necessary data, results,  documents and documentary
support.

                  3.4. The Parties shall jointly take the following actions:

                  (a) The Parties shall agree,  as required,  as to the identity
of the Party best able to prepare any aspect of any regulatory  filing, and each
Party  will  co-operate  with the other to  provide  such  assistance  as may be
requested  or  necessary  to complete  such  regulatory  filing at the  earliest
opportunity.

                  3.5. COSTS OF PERFORMING HEREUNDER.

                  (a)  IPC   alone   will  bear  the  costs  for  its  areas  of
responsibilities as set forth in Section 3.2 and ELITE alone will bear the costs
for its areas of responsibilities as set forth in Section 3.3;

                  (b) IPC and ELITE will share [*] the following costs:

                           (i)  the CRO  and  other  third  party  costs  of all
clinical studies  (including pilot studies already  completed or to be conducted
after  the date  hereof),  all  pivotal  studies  and all  bio-analytics  as may
reasonably be required; and

                           (ii) the cost of all  regulatory  filing fees for the
regulatory  applications to the FDA or to such other  regulatory  authorities to
whom applications are made.

                  (c)  It is the  intention  of the  Parties  that a  commercial
Licensee or Licensees should bear all litigation costs in relation to regulatory
filing  or  defense  of  the  Product   arising

                                       7
<PAGE>

after filing with regulatory authorities.  To the extent that such costs, as may
arise after the date of this Agreement and before or after filing, are not borne
by such  Licensee(s),  ELITE and IPC will  share [*] in the costs of such  legal
defense of the Product and/or defense against any litigation against the Parties
in respect of the Product.

                  3.6. STANDARD OF PERFORMANCE. The Parties must use reasonable,
timely efforts to fulfill their respective obligations set forth in this Section
3  hereof  and  elsewhere  in this  Agreement  to  pursue  the  development  and
Commercialization of the Products in accordance with the estimated timetables as
set forth in the Development  Plan. A Party's failure to fulfill its obligations
shall  provide the other Party with the right to  terminate  this  Agreement  in
accordance with the provisions of Section 13 hereof.

                  3.7.  COOPERATION.  Each Party shall use reasonable efforts to
cooperate  with the  other  Party in  connection  with the  preparation  of each
regulatory filing relating to the Product.  ELITE shall have the right to review
and  comment  upon  any and all  prepared  applications  and  filings  prior  to
submission to the relevant  governmental  authorities.  ELITE shall  manufacture
bio-batches as required for submission purposes.

          4.      CLINICAL STUDIES

                   4.1. IPC and ELITE shall  jointly  determine the identity of,
and thereafter  engage,  a reputable third party to conduct the clinical studies
for the Product in accordance with the Development Plan (the "STUDIES") and such
third party shall be  contractually  bound to fulfill its obligations to conduct
such Studies in accordance  with 21 CFR ss.312.52 and all applicable  laws. Each
of IPC and ELITE agrees that, during the Term (and any Renewal 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.

                  4.2.  ELITE and IPC shall  each have the right to  discontinue
the Studies at any time prior to  completion  of such Studies upon 3 days' prior
written  notice  to the  other  Party,  if  ELITE  or IPC,  as the  case may be,
reasonably believes that any serious adverse clinical event may arise.

          5.      PATENT  PROSECUTION,  MAINTENANCE  AND  DEFENSE;  OWNERSHIP OF
INTELLECTUAL PROPERTY

                  5.1.  PATENTS.  During the Term (including all Renewal Terms),
IPC shall have the sole and exclusive  right to file and  obligation to maintain
all patent rights  relating to the Product  throughout  the Territory and shall,
subject to the  provisions  set forth  herein,  use  reasonable  efforts to file
patent applications to protect the Product.

                  5.2. INTELLECTUAL PROPERTY.  All IPC proprietary  information,
Know-How,  materials,  methods and technology  related to the Products including
without   limitation,   manufacturing   information   and  any  related   patent
applications and patents owned or controlled by IPC to the extent they cover the
Products or any such information,  know-how,  materials or technology as applied
to the  Product  ("IPC  INTELLECTUAL  PROPERTY  RIGHTS")  are and shall,  in all

                                       8
<PAGE>

events, be the sole and exclusive property of IPC. ELITE and IPC shall take such
actions, and execute and deliver such documents,  as may be reasonably requested
from  time to time by IPC at IPC's  expense,  to  perfect  the IPC  Intellectual
Property Rights.

                  5.3.  IDENTIFICATION  OF IPC  TECHNOLOGY.  At such time as the
Product is commercialized,  the Parties agree, as between  themselves,  that the
Product  packaging shall be marked with wording  indicating IPC technology (such
as, for example,  "POWERED BY DRUG DELIVERY  ENGINE(TM)") subject to the consent
of each Licensee.

          6.      COMMERCIALIZATION OF PRODUCT

                  6.1. LICENSE.  As promptly as is practicable,  the C-Committee
shall consider and, where appropriate,  approve one or more Licensees  suggested
by ELITE or IPC for the Commercialization of the Product in the Territory,  such
C-Committee approval not to be unreasonably withheld by the Representatives. IPC
and ELITE  shall  jointly  negotiate  in good faith with such  Licensee(s)  upon
standard    industry   terms   for   an   exclusive   license   for   Licensee's
Commercialization  of the Product in all or a portion of the Territory ("LICENSE
AGREEMENT"),  the  terms of which  License  Agreement  shall  be  approved  by a
unanimous  decision of the  C-Committee,  such  approval not to be  unreasonably
withheld  by the  Representatives.  The  main  criterion  for the  grant of such
Licenses shall be the  maximization of the commercial  success of the Product in
the marketplace for any market in the Territory.

                  6.2.  COMMERCIAL  MANUFACTURE.  The  Parties  agree  that  the
Product  will  be  manufactured  by such  Person,  and at  such  location,  that
maximizes  the  commercial  success of the  Product in the  marketplace  for any
market in the  Territory.  Nothing  herein  precludes  either  IPC or ELITE from
bidding to become such manufacturer for any market, provided only that the issue
of selection of a manufacturing entity should not delay the entry of the Product
into that market.

                  6.3. ROYALTIES AND OTHER PROCEEDS.

                  (a) Subject to Section  6.3(b) below,  during the Term of this
Agreement  (including  all Renewal  Terms),  all license fees from each Licensee
(including,   without  limitation,   milestones,   royalties,   fees  and  other
consideration  paid by any  Licensee) and all other profits from the sale of the
Product  (including sale proceeds and other  consideration)  shall be divided by
the  Parties as follows:  [*] to IPC and [*] to ELITE.  Each  License  Agreement
shall  provide  that  all fees  payable  by each  Licensee  shall be paid to the
Parties directly. If the Product is sold to a third party in accordance with the
mutual agreement of the Parties,  the proceeds of the sale shall be divided on a
[*] basis as provided above.

                  (b) To the extent any litigation costs shall have been equally
shared by the Parties in accordance with the provisions of Sections 3.5(c),  7.2
or 7.3, all amounts  payable under  Section  6.3(a) above shall first be divided
between  the  Parties  on a [*] basis  until  such time as such  equally  shared
litigation costs have been fully recovered by the Parties,  and thereafter shall
be divided  between the Parties on a [*] basis in accordance with Section 6.3(a)
above.  The  provisions  of this Section  6.3(b) do not apply where any costs or
expenses are the

                                       9
<PAGE>

sole  obligation  of one of the Parties.  For  purposes of this Section  6.3(b),
"litigation  costs" shall include all litigation  costs relating to the Product,
including products liability  litigation,  patent or other intellectual property
litigation,  and  litigation  in  relation  to the  regulatory  approval  of the
Product.

         7.       INDEMNIFICATION

                  7.1. 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) negligent acts or omissions or
willful  misconduct,  (ii) any breach of any representation or warranty provided
by such Party to the other Party  hereunder,  and/or (iii) any  violation of the
terms of this Agreement.

                  (b) NOTWITHSTANDING ANY PROVISION TO THE CONTRARY CONTAINED IN
THIS  AGREEMENT,  IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR
ASSUME LIABILITY TO A LICENSEE FOR ANY  CONSEQUENTIAL,  INCIDENTAL,  OR PUNITIVE
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.

                  7.2.     Infringement

                  (a)  INFRINGEMENT  OPINION.  ELITE will,  at its sole expense,
within 30 days after  execution  hereof,  retain outside  intellectual  property
counsel  for the  purpose of  obtaining,  and will use  commercially  reasonable
efforts to obtain, a `freedom to operate' opinion from such outside counsel with
respect to the freedom of the Parties or a Licensee to manufacture, use and sell
the Product in each country in the Territory. The identity of such counsel shall
be  reasonably  satisfactory  to each Party.  It will be  reasonable  for IPC to
require as a  precondition  of its approval of such  counsel,  that such counsel
enter into a Confidentiality  Agreement with IPC,  including terms to the effect
that  certain  identified  IPC  Confidential   Information,   including  without
limitation  the  proposed   Product   formulation   and  the  proposed   Product
manufacturing  process, are for counsel's eyes only, and are not to be copied or
disclosed in any circumstances to ELITE, or its officers,  employees,  agents or
consultants  without the Order of a court of competent  jurisdiction;  PROVIDED,
HOWEVER,  the time  required for IPC and such outside  counsel to agree upon the
terms  of  such   confidentiality   agreement  shall  not  be  relevant  to  the
determination  of whether ELITE  retained such counsel with the requisite 30 day
period.  Forthwith  upon the  retention  of such  counsel,  IPC will  provide to
counsel,  for counsel's eyes only, the proposed Product formulation and proposed
Product  manufacturing  process in  sufficient  detail for the  purposes of such
opinion.  Such counsel will be instructed to deliver an original of such opinion
simultaneously  to both Parties.  In the event that the opinion  states that the
Product may not be manufactured, used or sold in any country in the Territory,

                                       10
<PAGE>

                  (i) ELITE may give notice to IPC of its intention to terminate
the  Agreement  in  accordance  with the  provisions  of  Section  11.2(b) as an
uncurable breach of this Agreement,

                  (ii) in such  event,  such  termination  will be  without  any
liability, cost, or expense to IPC, and

                  (iii) if the Agreement is then so  terminated,  the provisions
of Section 11.5 do not apply to such termination.

                  IPC may  withhold  disclosure  to  ELITE  of IPC  Confidential
Information,  including without limitation,  confidential methods and procedures
of  analysis  and  testing,  the  proposed  Product  formulation,  the  proposed
manufacturing Process and the batch records associated therewith until such time
as counsel have  provided  the Parties  with their  opinion that the Parties are
free to sell such Product in the Territory.

                  (b)   INFRINGEMENT   CLAIMS.   ELITE  and  IPC  shall  jointly
investigate  and defend any and all claims,  actions and  proceedings  resulting
from an  assertion  against  ELITE or IPC (or a  Licensee  if ELITE and IPC have
agreed to  indemnify  such  Licensee)  that the Product  infringes  upon a third
party's intellectual property rights ("Infringement  Claim").  Subject to claims
ELITE may  assert  due to a breach of  representation  or  warrant  by IPC under
Section 9 hereof,  ELITE and IPC shall share [*] in the cost and expenses of the
defense.  ELITE and IPC shall be entitled to share [*] all amounts  awarded,  if
any, in connection with any such enforcement proceeding.

                   7.3. ENFORCEMENT PROCEEDINGS. ELITE and IPC may jointly bring
enforcement  proceeding  against  any  third  party if ELITE  and IPC  determine
jointly that a third-Party is likely  materially  infringing  upon the rights of
ELITE,  IPC or a Licensee in the Product.  If such  enforcement  proceedings are
brought  jointly,  the  Parties  will share [*] in all costs or proceeds of such
litigation,  including  without  limitation all awards of damages and settlement
proceeds.  Subject to any agreement with any Licensee as may be licensed for the
commercialization  of the  Product,  either  Party  may in its sole  discretion,
decline to participate in such enforcement  proceeding as Complainant,  in which
case the other  Party may  proceed  with the  litigation,  bearing all costs and
receiving all proceeds of such litigation.

                   7.4  RESPONSIBILITY  FOR  LITIGATION.  For the  avoidance  of
doubt,  it is the intention of the Parties that a  commercialization  partner or
Licensee  shall  bear the  primary  responsibility  for all  products  liability
litigation,  patent or other intellectual property litigation,  or litigation in
relation  to the  regulatory  approval of the  Product.  To the extent that such
litigation expenses are not borne by such commercialization partner or Licensee,
or to the extent that either  Party is required by operation of law to take part
in such litigation in any way, it is the intention of the Parties that all costs
and proceeds of such  litigation are to be borne [*] by the Parties.  Subject to
any circumstance  under which a Party declines to participate in any enforcement
proceeding  as provided in Section 7.3 above,  IPC and ELITE shall  jointly have
control  of any such  litigation,  including  as regards  choice of counsel  and
settlement terms.

                                       11
<PAGE>

          8.      INSURANCE

                  8.1.  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 $1,000,000 per claim and $5,000,000 per  occurrence.  Prior
to commercialization,  those limits shall be reduced to $1,000,000 per claim and
$2,000,000 per  occurrence.  Each Party shall instruct its insurance  carrier to
notify the other Party of any change,  modification or cancellation of insurance
thirty  (30) days prior to such  change,  modification  or  cancellation  taking
effect.

          9.      REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PARTIES

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

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

                       (b)  the   Agreement   constitutes   valid  and   binding
obligations of IPC, enforceable against IPC 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;

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

                       (d) IPC has the right to disclose Know-How (and other IPC
Intellectual  Property  Rights) to ELITE as well as all other  information as is
necessary for ELITE to perform its obligations hereunder;

                       (e) there are no infringement proceedings pending, or, to
IPC's knowledge,  threatened,  against IPC in connection with the Product or the
IPC Intellectual Property Rights;

                       (f) IPC has good title to all IPC  Intellectual  Property
Rights, free and clear of all Liens;

                       (g) IPC has not received any notice of  infringement  of,
or conflict with, any license,  patent,  copyright,  trademark,  service mark or
other  intellectual  property right of any other Person and, to the knowledge of
IPC, there is no infringement  or  unauthorized  use by any Person of any of the
IPC Intellectual Property Rights.

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

                                       12
<PAGE>

                       (i) 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 IPC.

                  9.2. In respect of the Studies, IPC:

                       (a) shall, together with ELITE,  supervise the conduct of
the Studies in accordance  with the terms hereof,  to ensure that such CRO as is
selected to carry out the Studies is contractually  bound to do so, and does so,
including  by way of a transfer in writing  under 21 CFR 312.52,  in  accordance
with the Protocol,  generally  accepted  standards of good clinical practice and
all  applicable  local,  state and Federal laws and  regulations  governing  the
performance   of  clinical   investigations,   including   without   limitation,
regulations governing the protection of human subjects (e.g., 21 C.F.R. Part 50)
and  Institutional  Review Boards  (e.g.,  21 C.F.R.  Part 58), and  regulations
governing  the conduct of clinical  trials (21 C.F.R.  Part 312),  and financial
disclosure  by  clinical  investigators  (21  C.F.R.  Part 54),  and  privacy of
protected health information (45 C.F.R. Parts 160 and 164);

                       (b) represents to ELITE that its employees and agents are
not currently debarred by the FDA pursuant to 21 U.S.C. ss.335(a) or involved in
any investigation or proceedings which could lead to debarment;

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

                       (d) all laboratory,  scientific,  technical  and/or other
data submitted to ELITE or any regulatory health authority relating to the Study
shall be, to the best of its knowledge at the time of such submission, complete,
true,   accurate  and  correct  and  shall  not  contain  any  knowingly   false
information, misrepresentation and/or omission;

                       (e) shall,  with  notification  to ELITE,  ensure  that a
transfer in writing  under 21 CFR 312.52 is provided to any CRO for the Studies,
which CRO shall then be responsible for the identification,  documentation,  and
monitoring of adverse events in Patients in accordance with 21 C.F.R.  ss.312.32
and 21 C.F.R.  ss.314.80,  the  Protocol  and as  otherwise  required  under all
applicable  laws,  rules and  regulations,  and shall  promptly  report all such
adverse events in subjects to ELITE;

                                       13
<PAGE>

                       (f) will keep ELITE  advised of any  results of the Study
via a written report;

                       (g) shall, ensure that a transfer in writing under 21 CFR
312.52  is  provided  to any  CRO for  the  Studies,  which  CRO  shall  then be
responsible to perform  record  keeping and reporting  obligations in accordance
with 21 C.F.R. 312.62(b), 21 C.F.R. 312.57(c) and 21 C.F.R. 312.62(c); and

                       (h) each Party will notify the other of any  deficiencies
and other issues or inquiries  presented by the FDA or other  regulatory  agency
with respect to the Study and provide any  assistance  requested by the other to
satisfactorily respond to the FDA or such other regulatory agency.

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

                  9.3. If a Federal,  state or local  government  or  regulatory
authority  conducts,  or  gives  notice  to IPC of its  intent  to  conduct,  an
inspection  of the ELITE  facility  or takes any other  regulatory  action  with
respect to the conduct of the Studies, then IPC shall promptly give ELITE notice
both by telephone and facsimile and supply all  information  pertinent  thereto,
and ELITE shall have an obligation,  to be present at any such inspection of its
facilities

                  9.4 If a  Federal,  state or local  government  or  regulatory
authority  conducts,  or  gives  notice  to IPC of its  intent  to  conduct,  an
inspection of the facilities where the Studies are being conducted, or takes any
other  regulatory  action with respect to the conduct of the  Studies,  then IPC
shall  promptly give ELITE notice both by telephone and facsimile and supply all
information  pertinent  thereto,  and ELITE  shall have the  right,  but not the
obligation,  to be present at any such  inspection of the  facilities  where the
Studies are being conducted.

                  9.5. ELITE represents and warrants to IPC, as of the Effective
Date, as follows:

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

                       (b)  the   Agreement   constitutes   valid  and   binding
obligations of ELITE,  enforceable  against 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;

                                       14
<PAGE>

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

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

                       (e) 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

                  9.6. In respect of the  manufacture and release of the pivotal
clinical batches and the Studies, ELITE:

                       (a) will manufacture all materials according to generally
accepted  good  manufacturing   practices  and  good  laboratory   practices  in
accordance with all pertinent state and federal laws and regulations, including,
without limitation, in accordance with 21 CFR ss.210 and ss.211;

                       (b)  represents  to  IPC  that  it is not  enjoined  from
manufacturing  nor is ELITE  currently  sanctioned  by the FDA  pursuant  to any
issued 483 inspection reports;

                       (c)  represents  to IPC that its employees and agents are
not and have not been  debarred  by the FDA  pursuant  to 21 USC ss.  335(a)  or
involved in any investigation or proceeding which could lead to debarment;

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

                       (e) represents that all laboratory, scientific, technical
or commercial information that is submitted by ELITE to IPC or to any regulatory
health authority relating to the product should be complete,  true, accurate and
correct , to the best of its knowledge at the time of such submission, and shall
not contain any knowingly false information,  misrepresentation and/or omission;

                       (f) 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.

                  9.7. If a Federal,  State or local  government  or  regulatory
authority  conducts or gives notice of an inspection of the facilities of ELITE,
ELITE  will  promptly  inform  IPC and

                                       15
<PAGE>

IPC shall  have the  right,  but not the  obligation  to be  present to any such
inspection   or   regulatory   action.   ELITE  will  provide  all  records  and
correspondence  regarding such action within five (5) business days of a request
from IPC.

         10.      OBLIGATION OF CONFIDENTIALITY

                  10.1 The  Parties  are party to a  Confidentiality  Agreement,
dated as of July 14,  2003,  the term of which is hereby  extended to  co-incide
with the term of the obligations of confidentiality  herein set out, pursuant to
which each Party  agreed to  maintain  confidentiality  with  respect to certain
information to be disclosed by the other Party (the "Existing CDA"). In addition
to the obligations set forth in the CDA, 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,  and such  Confidential  Information shall not be used in whole or in
part by either Party, whether alone or in co-operation with any other person, to
formulate,  develop,  manufacture  or  commercialize  any  other  drug  product;
PROVIDED,  HOWEVER, that Confidential  Information shall not include information
that the Receiving Party can document as having been:

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

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

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

                  (d)  independently  developed by Receiving  Party's  employees
without access to Disclosing  Party's  Confidential  Information or knowledge of
the Development Agreement.

                  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 may
be no  adequate  remedy at law or in equity  for any such  breach or  threatened
breach  and,  in the

                                       16
<PAGE>

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,  agents,  prospective licensees and subcontractors on a
need-to-know  basis;  provided that in the case of  Confidential  Information of
IPC,   such   consultants,   licensees,   agents,   prospective   licensees  and
subcontractors  are named by ELITE,  and  approved  by IPC as to the  timing and
extent of such  disclosure,  in advance of such disclosure;  PROVIDED,  HOWEVER,
that (i) any such  disclosure  shall be  pursuant  to a written  confidentiality
agreement 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 by 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.

                  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, 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.

          11.     TERM AND TERMINATION

                  11.1.  Subject  to  Section  11.2  hereof,  the  term  of  the
Agreement  shall be the greater of (i) a fifteen  (15) year period from the date
the Product is first  commercially  sold in the  Territory to a third party,  or
(ii) the life of applicable patent(s), if any, whichever is longer (the "TERM").
This Agreement  shall  automatically  renew for 3-year  renewal  periods (each a
"RENEWAL  TERM") unless  terminated by either Party by providing the other Party
with twelve (12) months written notice prior to any renewal period.

                  11.2. This Agreement may be terminated by a Party prior to the
end of the Term (or any applicable Renewal Term):

                       (a) by mutual agreement of the Parties; or

                       (b) upon  breach of this  Agreement  by the  other  Party
(including,  without  limitation,  the failure to timely perform in a reasonable
manner any obligation  identified on the Development  Plan),  and the failure of
such  breaching  Party to cure such  breach  with thirty (30) days of receipt of
written notice to the breaching  Party of such breach (other than in the case of
a failure to obtain a  satisfactory  `freedom  to  operate'  pursuant to Section
7.2(a) in which case there shall be no opportunity to cure such breach).

                                       17
<PAGE>

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

                       (a)  ELITE's  and  IPC's  right to  receive  all  amounts
accrued and unpaid under Section 6 up to the date of such termination;

                       (b) 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, 7, 8, 9, 10,  11,  12,  14 and 16 and  solely  in the case of  Section  11.5,
Section 6.3, shall remain in full force and effect; and

                       (c) any other  remedies  which  either  Party may then or
thereafter have hereunder or otherwise.

                  11.4.  Subject to Section  11.5,  the Parties  agree that upon
termination of this  Agreement,  all rights in the Product,  the  formulation or
formulations  of the  Product,  the  methods  and  processes  applicable  to the
Product,  clinical data and documentation  associated with Product testing,  and
regulatory  documentation in relation to applications for approval to market the
Product,  remain  with or revert to IPC,  which may then use each or all of them
for its own purposes in its sole discretion.

                  11.5.  Upon the  termination  of this Agreement as a result of
the breach by IPC of any  provision of this  Agreement  (other than  pursuant to
Section  7.2(a) hereof) and the failure of IPC to cure such breach within thirty
(30) days of  receipt of written  notice by ELITE to IPC of such  breach,  ELITE
shall   continue  to  receive  a  [*]  share  of  all  license  fees  and  other
consideration resulting from the licensing of rights to, or sale of, the Product
in accordance with Section 6.3 hereof.

          12.     NOTICES

                  12.1.  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  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
                                         Facsimile: (201) 750-2755

                   If to IPC:
                                         30 Worcester Road
                                         Toronto, Ontario,
                                         Canada M9W 5X2
                                         Attention:  Chief Executive Officer
                                         Facsimile: (416)-798-3007

                                       18
<PAGE>

          13.     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.

          14.     DISPUTE RESOLUTION

                  14.1. Should any dispute or difference arise between ELITE and
IPC 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
IPC.

                  14.2. If designated  senior  officers of each of ELITE and IPC
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
10 business days of its being  referred to them  ("DEADLOCK"),  either Party may
request  in a written  notice  to the other  Party  that such  controversy  (the
Dispute) be resolved by binding  arbitration either (i) in Ontario in accordance
with the rules of the Arbitration Act (1991) as amended, or (ii) in the State of
New York in accordance with the rules of the American  Arbitration  Association,
as the Complainant may then choose.

                  14.3 Where such  arbitration is in Ontario,  the parties agree
that the Dispute  shall be  submitted to  arbitration  (an  "Arbitration")  by a
single arbitrator (the  "Arbitrator")  with the Arbitration to take place in the
City of  Toronto,  pursuant  to the  provisions  of the  ARBITRATION  ACT,  1991
(Ontario)  (the  "Arbitration  Act").  If the parties are unable to agree on the
identity  of an  Arbitrator  within  10  days  of  the  written  proposal  of an
Arbitrator  by one of them,  either party may, with 10 days' prior notice to the
other  party,  apply to the  Court to  appoint  an  Arbitrator  pursuant  to the
Arbitration Act. The Arbitration shall take place and be completed expeditiously
with  written  and verbal  submissions  by the Parties to the  Arbitrator  to be
completed  within  45  days of the  Arbitrator's  appointment.  Pending  a final
determination by the Arbitrator,  the costs of the Arbitration  shall be paid by
the parties  equally and the parties shall  separately  pay their own respective
costs.  The  determination of the Arbitrator with regard to any Dispute shall be
final and binding upon the parties and there shall be no appeal  therefrom.  The
Arbitrator  shall  have  jurisdiction  to award  the  costs of the  Arbitration,
including the fees of the  Arbitrator as between the parties,  and to direct the
payment of interest in respect of any amount, at such rates and from and to such
dates as are determined by the Arbitrator to be appropriate.

                  14.4  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 either the State of New  Jersey,  under the laws of the

                                       19
<PAGE>

State of New York, or in the Province of Ontario,  under the laws of Ontario, as
the complainant Party may then choose.

         15.      NON-COMPETITION

                  15.1 For so long as the Product to be developed herein remains
under active  development  or on sale in the  marketplace  in any country of the
Territory  under the  terms of the  Agreement  herein,  the  respective  Parties
covenant and agree that they will not, whether alone or in co-operation with any
other person,  develop,  formulate,  manufacture or commercialize any other drug
product which is a generic of [*].

          16.     MISCELLANEOUS

                  16.1. 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").

                  16.2.  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.

                  16.3.  This Agreement  shall be governed by and interpreted in
accordance  with the laws of the State of New  York,  United  States of  America
without  regard to their  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.

                  16.4.  The terms and provisions  contained in this  Agreement,
together  with  the  Existing  CDA as  amended  hereby,  constitute  the  entire
Agreement   between  the  Parties   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

                                       20
<PAGE>

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.

                  16.5.  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.

                  16.6.  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.

                  16.7. The  relationship  of ELITE and IPC 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.

                  16.8. 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.

                  16.9.  All  of  the  obligations,   undertakings,  agreements,
representations and warranties of ELITE, as set out herein, or in the referenced
CDA of July 14, 2003, are jointly and severally the obligations of each of Elite
Laboratories, Inc., and Elite Pharmaceuticals, Inc.

                                       21
<PAGE>

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

                                          ELITE LABORATORIES, INC.

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

                                           ELITE PHARMACEUTICALS, INC.

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

                                          INTELLI PHARMACEUTICS CORP.

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

                                       22
<PAGE>

                                    EXHIBIT A

                                DEVELOPMENT PLAN

Product  Development  Activity Schedule [*], [*] STRENGTHS.  The [*] strength is
RLD.

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
   #                   ACTIVITIES                    RESPONSIBILITY          COMMENTS
-------------------------------------------------------------------------------------------
                                                    ELITE       IPC
-------------------------------------------------------------------------------------------
<S>    <C>                                           <C>        <C>             <C>
   1   [*]
-------------------------------------------------------------------------------------------
       [*]                                           [*]        [*]
-------------------------------------------------------------------------------------------
       [*]                                           [*]        [*]
-------------------------------------------------------------------------------------------
       [*]                                           [*]        [*]
-------------------------------------------------------------------------------------------
       [*]                                           [*]        [*]
-------------------------------------------------------------------------------------------
   2   [*]                                           [*]        [*]
-------------------------------------------------------------------------------------------
   3   [*]                                           [*]        [*]
-------------------------------------------------------------------------------------------
       [*]                                           [*]        [*]
-------------------------------------------------------------------------------------------
       [*]                                           [*]        [*]             [*]
-------------------------------------------------------------------------------------------
       [*]                                           [*]        [*]             [*]
-------------------------------------------------------------------------------------------
   4   [*]                                           [*]        [*]
-------------------------------------------------------------------------------------------
   5   [*]                                           [*]        [*]             [*]
-------------------------------------------------------------------------------------------
   6   [*]                                           [*]        [*]
-------------------------------------------------------------------------------------------
   7   [*]                                           [*]        [*]             [*]
-------------------------------------------------------------------------------------------
</TABLE>

                                       23

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