Document:

CONFIDENTIAL TREATMENT
                                                                REDACTED VERSION

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).

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

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                  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  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.

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                  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  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,

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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-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

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

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                  (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;

                  (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);

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                  (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  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

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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
events, be the sole and exclusive property of IPC. ELITE and IPC shall take such
actions, and

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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, [*]) 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 sole  obligation of one of the Parties.  For
purposes of this Section 6.3(b), "litigation costs" shall

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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)   [*]

                                       10
<PAGE>

                  (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,

                                       18
<PAGE>

                                        Canada M9W 5X2
                                        Attention:  Chief Executive Officer
                                        Facsimile: (416)-798-3007

          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 [*]

  [*]

                                       23SYPRIS SOLUTIONS, INC.
INCENTIVE
BONUS PLAN 
JULY 1, 2005 – DECEMBER 31, 2005 

     1.    
          ESTABLISHMENT OF PLAN. 

        Sypris
Solutions, Inc., a Delaware corporation, on behalf of itself and its key subsidiaries (the
“Company”), established this corporate bonus plan effective as of July 1, 2005
(the “Plan”), to provide a financial incentive for employees of the Company to
advance the growth and prosperity of the Company. 

     2.    
          ELIGIBILITY. 

        Employees
of the Company who are specifically designated by the Compensation Committee of the Board
of Directors of the Company (the “Compensation Committee”) for participation
during the current year shall be eligible to participate in the Plan. 

     3.    
          PARTICIPANT’S PERCENTAGE SHARE. 

        The
bonus target for each participant will be established and approved by the Compensation
Committee. Each participant will be provided with a copy of this Plan, and with the participant’s
salary, bonus potential based upon the current operating budget, and his or her objectives for the
current year. In general, unless modified by the Committee in order to comply
with any applicable Rules or as otherwise determined to be in the Company’s best
interests, Bonus Awards shall be allocated as follows among (a) cash awards and (b)
restricted shares of the Company’s common stock, valued as of the date of grant,
vesting on the second anniversary of such grant date and issued under the 2004 Sypris
Equity Plan on Terms established by the Committee, subject to any such Rules
(“Restricted Shares”): 

			
	 	Executive Officers	Other Participants
	 	 	 
	        Restricted Shares:	70%	30%
	        Cash Awards:	30%	70%

     4.    
          Financial Performance Goals. 

        No
Bonus Awards shall be payable for any subsidiary employee or any corporate employee,
unless such subsidiary or the Company on a consolidated basis, has achieved 100% of its,
respective, 2005 target for profit before tax (before bonus accrual) (“PBT”). 

     5.    
          Bonus Award. 

        Each
qualified participant will be eligible for a Bonus Award that is equal to his or her bonus
target, subject to the provisions of Sections 8.1, 8.2, 8.3 and the following: 

        5.1 Management
Objectives.  Each participant will have at least three Management Objectives for 2005, each
of which will be specific with regard to (i) the expected outcome, (ii) the expected financial
impact on the Company and (iii) the date or dates by which the objective must be achieved.
Each objective will receive a weighting, the total of which for all objectives will be
equal to 100%. The Chief Executive Officer of the Company will have the responsibility 

to
review and determine each participant’s performance to objectives and to assign each
individual a percentage that will be used as a factor to determine the actual amount of
the awards to be distributed. 

        5.2 Discretionary
Review.  The Chief Executive Officer of the Company will have the discretion to increase the actual
amount of any Bonus Award to be distributed by up to 20% of the participant’s bonus
target, based upon the participant’s specific performance and contribution to the
Company. Such discretion will be used sparingly and will generally be limited to the
recognition of extenuating circumstances and/or exceptional accomplishments that may or
may not have been captured by the Management Objectives. 

        5.3 Approval
and Discretion of the Compensation Committee. The Bonus Award for each participant will be subject
to the review of and final approval by the Compensation Committee. Any Pool or Award may be
reduced in the sole discretion of the Committee, in light of the Company’s other
compensation programs or other relevant factors. 

        5.4 Qualification.
 Awards will
be payable to each eligible participant as soon as administratively practicable after
release of the audited annual financial statements of the Company for 2005 and the
approval of the Compensation Committee; provided, however, that the Plan shall be in
effect as of the date of payment and such employee shall be employed by the Company as of
the date of payment. NO EMPLOYEE SHALL HAVE ANY RIGHT TO PAYMENT OF AN AWARD UNLESS THE
PLAN IS IN EFFECT AND THE EMPLOYEE IS EMPLOYED BY THE COMPANY AS OF THE DATE OF PAYMENT. 

     6.    
          METHOD OF DISTRIBUTION. 

        Cash
awards shall be payable by check in lump sum. All such payments will be subject to
withholding for income, social security or other such payroll taxes as may be appropriate
in accordance with applicable Rules. All Awards of Restricted Shares shall be made solely
under the 2004 Sypris Equity Plan, in accordance with Terms established by the Committee,
subject to any applicable Rules. 

7.     
ADMINISTRATION. 

        The
Compensation Committee shall administer this Plan. The Compensation Committee shall have
complete authority to interpret the Plan or any Award, to prescribe, amend and rescind
rules and regulations relating thereto, and to make all other determinations necessary or
advisable for the administration of the Plan or any Award Agreements (including to
establish or amend any rules regarding the Plan that are necessary or advisable to comply
with, or qualify under, any applicable law, listing requirement, regulation or policy of
any entity, agency, organization, governmental entity, or the Company, in the Compensation
Committee’s sole discretion (“Rule”)). The decisions of the Compensation
Committee in interpreting and applying the Plan shall be final. 

     8.    
          MISCELLANEOUS. 

        8.1 Employment
Rights.  Participation in the Plan shall not be construed as giving an employee any future right of
employment with the Company or any irrevocable right to receive any Bonus Award or other
benefit from the Company. Subject to applicable Rules, acceptance of any Award shall
constitute acceptance of the Company’s right to terminate employment at will, and
acceptance of all provisions of the Plan. 

			
	 	2	06/27/05

        8.2 Acquisitions
and Divestitures.  The variables to be used in the calculation of PBT will be prorated for
any acquisition and/or divestiture to reflect the timing of such event or events during
the current Plan year at the time of such acquisition or divestiture. 

        8.3 Amendment
and Termination.  The Company may, without the consent of any employee or beneficiary, amend or terminate
the Plan at any time and from time-to-time. 

        8.4 Governing
Law.  This Plan shall be governed by and  construed in accordance  with the laws of the State
of Delaware. 

        8.5 Construction.
 The headings
and subheadings of this Plan have been inserted for convenience for reference only and are
to be ignored in any construction of the provisions hereof. The masculine shall be deemed
to include the feminine, the singular shall include the plural, and the plural shall
include the singular unless the context otherwise requires. The invalidity or
unenforceability of any provision hereunder shall not affect the validity or
enforceability of the balance hereof. This Plan represents the entire undertaking by the
Company concerning its subject matter and supersedes all prior undertakings with respect
thereto. No provision hereof may be waived or discharged except by a written document
approved by the Compensation Committee and signed by a duly authorized representative of
the Company. 

        The
parties indicate their acknowledgement of the terms and conditions of this Plan as of the
date first written above. 

					
	 	SYPRIS SOLUTIONS, INC.	 	PARTICIPANT	 
	 	 	 	 	 
	 	________________________________
Robert E. Gill
Chairman	 	________________________________	 
	 	 	 	 	 
	 	________________________________
Jeffrey T. Gill
President and CEO	 	 	 
					

			
	 	3	06/27/05

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