Document:

EX-10.42

                                                                         ANNEX I
                                                           BRIDGE LOAN AGREEMENT

                                  FORM OF NOTE

       THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
       OF 1933, AS AMENDED,  OR THE SECURITIES  LAWS OF ANY STATE AND MAY
       NOT BE SOLD OR OFFERED  FOR SALE IN THE  ABSENCE  OF AN  EFFECTIVE
       REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL
       OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION
       IS NOT REQUIRED.

US $275,000
-----------

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

                 10% SECURED PROMISSORY NOTE DUE MARCH 28, 2007

       FOR VALUE  RECEIVED,  Sonoma College,  Inc., a corporation  organized and
existing under the laws of the State of California (the "Company"),  promises to
pay to HARBORVIEW  MASTER FUND LP, the registered  holder hereof (the "Holder"),
the principal sum of Two Hundred  Seventy-Five  Thousand and 00/100  Dollars (US
$275,000)  on the  Maturity  Date (as defined  below) and to pay interest on the
principal  sum  outstanding  from time to time in arrears at the rate of 10% per
annum  (computed on the basis of the actual number of days elapsed and a year of
360 days),  accruing from  September 28, 2006,  the date of initial  issuance of
this Note (the "Issue  Date"),  to the date of payment.  Such interest  shall be
payable on the date which is the earlier of (i) the Maturity  Date,  or (ii) the
date of any prepayment of principal  permitted  hereunder;  except that interest
for month in advance shall be paid on the Issue Date.  Accrual of interest shall
commence  on the Issue Date and shall  continue to accrue on a daily basis until
payment in full of the principal sum has been made or duly provided for (whether
before or after the Maturity Date).

       This  Note is being  issued  pursuant  to the  terms of the  Bridge  Loan
Agreement,  dated as of September 28, 2006 (the "Loan Agreement"),  to which the
Company and the Holder (or the Holder's  predecessor  in interest)  are parties.
Capitalized  terms not otherwise defined herein shall have the meanings ascribed
to them in the Loan Agreement.

       This Note is subject to the following additional provisions:

       1.     The term  "Maturity  Date" means the earlier of (x) March 28, 2007
or (y) the date on which the Company  consummates an equity financing or funding
transaction in excess of

<PAGE>

$1,500,000,  whether or not such  transaction is effected in connection with the
current or future issuance of securities.

       2.     (i)    This  Note may be  prepaid  in whole or in part at any time
prior to the Maturity  Date,  without  penalty.  Any payment shall be applied as
provided in Section 3.

              (ii)   TIME IS OF THE  ESSENCE  WITH  RESPECT TO ANY  PAYMENT  DUE
HEREUNDER.  The Company shall be in default hereunder if any payment is not made
in a timely  manner,  without  any right to cure  unless  such  right to cure is
granted by the Holder in each  instance;  provided,  however,  that the grant of
such right is in the sole  discretion  of the Holder and may be withheld for any
reason or for no reason whatsoever.

              (iii)  If, at the end of any Trading Day, the value of the Pledged
Shares  (using the closing  price of the stock on such day) is less than 400% of
the aggregate  principal amount  outstanding on the Note, then the Company shall
within two  Trading  Days either (i) pay to the Lender an amount  sufficient  to
reduce the outstanding principal amount on the Note or (ii) provide the Lender a
first priority perfected  security interest in additional  collateral (which may
include  additional  shares of common  stock of the Company or other  collateral
acceptable to Lender in its sole  discretion) such that the value of the Pledged
Shares (plus the value of any additional  collateral delivered to the Lender) is
at least 400% of the aggregate principal amount outstanding on the Note.

       3.     Any  payment  made on  account of the Note shall be applied in the
following order of priority:  (i) first, to any amounts due hereunder other than
principal  and accrued  interest,  (ii) then,  to accrued  interest  through and
including the date of payment, and (iii) then, to principal of this Note.

       4.     All  payments  contemplated  hereby to be made "in cash"  shall be
made in immediately available good funds of United States of America currency by
wire  transfer to an account  designated in writing by the Holder to the Company
(which account may be changed by notice similarly  given).  For purposes of this
Note, the phrase "date of payment" means the date good funds are received in the
account designated by the notice which is then currently effective.

       5.     Subject to the terms of the Loan  Agreement,  no provision of this
Note shall alter or impair the obligation of the Company,  which is absolute and
unconditional,  to pay the principal of, and interest on, this Note at the time,
place, and rate, and in the coin or currency, as herein prescribed. This Note is
direct  obligations  of the Company.  Any  payments  received by the Holder with
respect to this Note shall be applied in the  following  order of priority:  (i)
first, to any amounts due to the Holder under any of the Transaction  Agreements
other than interest and principal on the Note,  (ii) then, to accrued but unpaid
interest on the Note, and (iii) then, to principal on the Note.

       6.     The  obligations  of the Company  under this Note are secured by a
mortgage  executed  by the  Pledgors in favor of the Holder in  connection  with
certain real estate (the "Real  Estate").  If the Holder  forecloses on the Real
Estate, the obligations of the Company will be reduced only to the extent of the
proceeds actually realized from such foreclosure,  in the priority  specified in
Section 5 hereof.
<PAGE>

       7.     CONVERSION.

              a)     VOLUNTARY CONVERSION.  At any time after the Original Issue
Date until this Note is no longer  outstanding,  this Note shall be  convertible
into shares of Common Stock at the option of the Holder,  in whole or in part at
any time and from time to time (subject to the  limitations  on  conversion  set
forth in Section 7(d) hereof). The Holder shall effect conversions by delivering
to the Company the form of Notice of  Conversion  attached  hereto (a "Notice of
Conversion"),  specifying  therein the principal amount of Notes to be converted
and the date on which such  conversion is to be effected (a "Conversion  Date").
If no Conversion  Date is specified in a Notice of  Conversion,  the  Conversion
Date shall be the date that such Notice of Conversion is provided hereunder.  To
effect  conversions  hereunder,  the Holder shall not be required to  physically
surrender Notes to the Company unless the entire  principal  amount of this Note
plus all accrued and unpaid interest thereon has been so converted.  Conversions
hereunder shall have the effect of lowering the outstanding  principal amount of
this Note in an amount equal to the  applicable  conversion.  The Holder and the
Company shall maintain  records showing the principal  amount  converted and the
date of such conversions.  The Company shall deliver any objection to any Notice
of Conversion  within 3 Business Days of receipt of such notice. In the event of
any dispute or  discrepancy,  the records of the Holder shall be controlling and
determinative in the absence of manifest error. The Holder and any assignee,  by
acceptance of this Note, acknowledge and agree that, by reason of the provisions
of this  paragraph,  following  conversion of a portion of this Note, the unpaid
and unconverted principal amount of this Note may be less than the amount stated
on the  face  hereof.  However,  at the  Company's  request,  the  Holder  shall
surrender the Note to the Company  within five (5) Trading Days  following  such
request so that a new Note reflecting the correct principal amount may be issued
to Holder.

              b)     CONVERSION  PRICE.  Subject  to the  provisions  of Section
8(b), the initial  conversion  price in effect on any  Conversion  Date shall be
$0.90.

              c)     RESERVED.

              d)     CONVERSION LIMITATIONS; HOLDER'S RESTRICTION ON CONVERSION.
The Company shall not effect any  conversion of this Note,  and the Holder shall
not have the right to convert any portion of this Note, pursuant to Section 7(a)
or  otherwise,  to the extent that after giving effect to such  conversion,  the
Holder (together with the Holder's  affiliates),  as set forth on the applicable
Notice of Conversion, would beneficially own in excess of 4.99% of the number of
shares of the Common Stock  outstanding  immediately after giving effect to such
conversion.  For  purposes of the  foregoing  sentence,  the number of shares of
Common Stock  beneficially  owned by the Holder and its affiliates shall include
the number of shares of Common Stock issuable upon  conversion of this Note with
respect to which the  determination  of such  sentence is being made,  but shall
exclude the number of shares of Common  Stock  which would be issuable  upon (A)
conversion  of the  remaining,  nonconverted  portion of this Note  beneficially
owned by the Holder or any of its  affiliates  and (B) exercise or conversion of
the unexercised or nonconverted  portion of any other  securities of the Company
(including,  without  limitation,  any other Notes or the Warrants) subject to a
limitation on

<PAGE>

conversion or exercise analogous to the limitation contained herein beneficially
owned  by the  Holder  or any of its  affiliates.  Except  as set  forth  in the
preceding  sentence,  for purposes of this Section  7(d),  beneficial  ownership
shall be calculated in accordance with Section 13(d) of the Exchange Act. To the
extent that the limitation  contained in this section applies, the determination
of whether this Note is convertible  (in relation to other  securities  owned by
the Holder) and of which a portion of this Note is  convertible  shall be in the
sole discretion of such Holder. To ensure compliance with this restriction,  the
Holder will be deemed to represent to the Company each time it delivers a Notice
of Conversion  that such Notice of Conversion has not violated the  restrictions
set forth in this  paragraph  and the Company shall have no obligation to verify
or confirm the  accuracy of such  determination.  For  purposes of this  Section
7(d), in  determining  the number of  outstanding  shares of Common  Stock,  the
Holder may rely on the number of outstanding shares of Common Stock as reflected
in (x) the  Company's  most recent  Form 10-QSB or Form 10-KSB (or such  related
form), as the case may be, (y) a more recent public  announcement by the Company
or (z) any other notice by the Company or the Company's  Transfer  Agent setting
forth the number of shares of Common Stock outstanding. Upon the written or oral
request of the Holder,  the Company shall within two Trading Days confirm orally
and in  writing  to the  Holder  the  number  of shares  of  Common  Stock  then
outstanding. In any case, the number of outstanding shares of Common Stock shall
be determined after giving effect to the conversion or exercise of securities of
the Company, including this Note, by the Holder or its affiliates since the date
as of which such number of outstanding shares of Common Stock was reported.  The
provisions  of this  Section  7(d) may be  waived  by the  Holder  upon,  at the
election of the Holder, not less than 61 days' prior notice to the Company,  and
the  provisions of this Section 7(d) shall continue to apply until such 61st day
(or such later date, as  determined  by the Holder,  as may be specified in such
notice of waiver).

              e)     MECHANICS OF CONVERSION

                     i.     CONVERSION   SHARES   ISSUABLE  UPON  CONVERSION  OF
PRINCIPAL  AMOUNT.  The  number  of  shares  of  Common  Stock  issuable  upon a
conversion  hereunder  shall be determined by the quotient  obtained by dividing
(x) the  outstanding  principal  amount of this Note to be  converted by (y) the
Conversion Price.

                     ii.    DELIVERY OF CERTIFICATE UPON  CONVERSION.  Not later
than three Trading Days after any  Conversion  Date, the Company will deliver to
the Holder (A) a certificate or certificates  representing the Conversion Shares
which shall be free of restrictive legends and trading  restrictions (other than
those required by the Purchase  Agreement)  representing the number of shares of
Common Stock being  acquired  upon the  conversion  of Notes  (including,  if so
timely elected by the Company,  shares of Common Stock  representing the payment
of accrued  interest)  and (B) a bank check in the amount of accrued  and unpaid
interest  (if the  Company is required  to pay  accrued  interest in cash).  The
Company shall, if available and if allowed under applicable securities laws, use
its best  efforts to deliver  any  certificate  or  certificates  required to be
delivered  by  the  Company  under  this  Section   electronically  through  the
Depository  Trust  Corporation  or  another  established   clearing  corporation
performing similar functions.
<PAGE>

                     iii.   FAILURE TO DELIVER  CERTIFICATES.  If in the case of
any Notice of Conversion such  certificate or certificates  are not delivered to
or as  directed  by the  applicable  Holder  by the  fifth  Trading  Day after a
Conversion  Date,  the Holder shall be entitled by written notice to the Company
at any  time on or  before  its  receipt  of such  certificate  or  certificates
thereafter,  to  rescind  such  conversion,  in which  event the  Company  shall
immediately  return the certificates  representing the principal amount of Notes
tendered for conversion.

                     iv.    OBLIGATION ABSOLUTE;  PARTIAL LIQUIDATED DAMAGES. If
the Company  fails for any reason to deliver to the Holder such  certificate  or
certificates  pursuant to Section  7(d)(ii)  by the fifth  Trading Day after the
Conversion  Date,  the Company shall pay to such Holder,  in cash, as liquidated
damages  and not as a  penalty,  for  each  $1,000  of  principal  amount  being
converted,  $10 per  Trading  Day  (increasing  to $20 per  Trading  Day after 5
Trading Days after such damages begin to accrue) for each Trading Day after such
fifth  Trading  Day  until  such  certificates  are  delivered.   The  Company's
obligations to issue and deliver the Conversion  Shares upon  conversion of this
Note in  accordance  with the  terms  hereof  are  absolute  and  unconditional,
irrespective  of any action or inaction  by the Holder to enforce the same,  any
waiver or consent  with  respect to any  provision  hereof,  the recovery of any
judgment  against any Person or any action to enforce  the same,  or any setoff,
counterclaim,  recoupment,  limitation or termination,  or any breach or alleged
breach by the Holder or any other Person of any obligation to the Company or any
violation  or alleged  violation of law by the Holder or any other  person,  and
irrespective  of  any  other  circumstance  which  might  otherwise  limit  such
obligation of the Company to the Holder in connection  with the issuance of such
Conversion  Shares;  PROVIDED,  HOWEVER,  such  delivery  shall not operate as a
waiver by the  Company  of any such  action the  Company  may have  against  the
Holder.  In the event a Holder of this Note shall elect to convert any or all of
the outstanding  principal amount hereof,  the Company may not refuse conversion
based on any claim that the Holder or any one associated or affiliated  with the
Holder of has been engaged in any  violation of law,  agreement or for any other
reason,  unless,  an  injunction  from a court,  on notice,  restraining  and or
enjoining  conversion  of all or part of this Note  shall  have been  sought and
obtained  and the  Company  posts a surety bond for the benefit of the Holder in
the amount of 150% of the principal  amount of this Note  outstanding,  which is
subject  to the  injunction,  which  bond  shall  remain  in  effect  until  the
completion  of  arbitration/litigation  of the dispute and the proceeds of which
shall be  payable  to such  Holder to the  extent it  obtains  judgment.  In the
absence of an injunction precluding the same, the Company shall issue Conversion
Shares or, if applicable,  cash,  upon a properly  noticed  conversion.  Nothing
herein shall limit a Holder's right to pursue actual damages or declare an Event
of Default  pursuant  to Section 9 herein for the  Company's  failure to deliver
Conversion  Shares within the period specified herein and such Holder shall have
the right to pursue all remedies  available to it at law or in equity including,
without limitation,  a decree of specific  performance and/or injunctive relief.
The  exercise of any such rights  shall not prohibit the Holders from seeking to
enforce damages pursuant to any other Section hereof or under applicable law.

                     v.     COMPENSATION FOR BUY-IN ON FAILURE TO TIMELY DELIVER
CERTIFICATES  UPON CONVERSION.  In addition to any other rights available to the
Holder,  if the  Company  fails for any reason to  deliver  to the  Holder  such
certificate or  certificates  pursuant to Section  7(d)(ii) by the fifth Trading
Day after the Conversion Date, and if after such fifth Trading Day the Holder is

<PAGE>

required by its  brokerage  firm to purchase (in an open market  transaction  or
otherwise)  Common Stock to deliver in  satisfaction of a sale by such Holder of
the  Conversion  Shares  which  the  Holder  anticipated   receiving  upon  such
conversion  (a  "Buy-In"),  then the Company shall (A) pay in cash to the Holder
(in addition to any  remedies  available to or elected by the Holder) the amount
by which (x) the Holder's total purchase price (including brokerage commissions,
if any) for the Common  Stock so  purchased  exceeds  (y) the product of (1) the
aggregate  number  of  shares  of Common  Stock  that  such  Holder  anticipated
receiving from the  conversion at issue  multiplied by (2) the actual sale price
of the Common Stock at the time of the sale (including brokerage commissions, if
any)  giving  rise to such  purchase  obligation  and (B) at the  option  of the
Holder,  either reissue Notes in principal  amount equal to the principal amount
of the  attempted  conversion  or  deliver to the Holder the number of shares of
Common Stock that would have been issued had the Company  timely  complied  with
its delivery  requirements  under Section 7(e)(ii).  For example,  if the Holder
purchases  Common  Stock  having a total  purchase  price of  $11,000 to cover a
Buy-In with  respect to an attempted  conversion  of Notes with respect to which
the  actual  sale  price  of the  Conversion  Shares  at the  time  of the  sale
(including  brokerage  commissions,   if  any)  giving  rise  to  such  purchase
obligation was a total of $10,000 under clause (A) of the immediately  preceding
sentence,  the Company  shall be required to pay the Holder  $1,000.  The Holder
shall provide the Company  written notice  indicating the amounts payable to the
Holder in respect of the Buy-In.  Notwithstanding  anything  contained herein to
the contrary,  if a Holder  requires the Company to make payment in respect of a
Buy-In for the failure to timely deliver certificates  hereunder and the Company
timely pays in full such payment,  the Company shall not be required to pay such
Holder liquidated  damages under Section 7(d)(iv) in respect of the certificates
resulting in such Buy-In.

                     vi.    RESERVATION OF SHARES ISSUABLE UPON CONVERSION.  The
Company  covenants  that it will at all times reserve and keep  available out of
its  authorized  and  unissued  shares of Common Stock solely for the purpose of
issuance upon  conversion of the Notes and payment of interest on the Note, each
as herein provided,  free from preemptive  rights or any other actual contingent
purchase rights of persons other than the Holders,  not less than such number of
shares of the Common Stock as shall (subject to any additional  requirements  of
the  Company  as to  reservation  of  such  shares  set  forth  in the  Purchase
Agreement) be issuable  (taking into account the adjustments and restrictions of
Section 8) upon the conversion of the outstanding  principal amount of the Notes
and payment of interest  hereunder.  The  Company  covenants  that all shares of
Common Stock that shall be so issuable  shall,  upon issue,  be duly and validly
authorized,  issued  and fully  paid,  nonassessable  and,  if the  Registration
Statement is then effective under the Securities Act, registered for public sale
in accordance with such Registration Statement.

                     vii.   FRACTIONAL SHARES.  Upon a conversion  hereunder the
Company shall not be required to issue stock certificates representing fractions
of shares of the  Common  Stock,  but may if  otherwise  permitted,  make a cash
payment in respect of any final  fraction  of a share  based on the VWAP at such
time. If the Company elects not, or is unable, to make such a cash payment,  the
Holder shall be entitled to receive,  in lieu of the final  fraction of a share,
one whole share of Common Stock.

                     TRANSFER TAXES.  The issuance of certificates for shares of
the Common Stock

<PAGE>

on conversion of the Notes shall be made without  charge to the Holders  thereof
for any documentary stamp or similar taxes that may be payable in respect of the
issue or delivery of such  certificate,  provided  that the Company shall not be
required to pay any tax that may be payable in respect of any transfer  involved
in the issuance and delivery of any such  certificate  upon conversion in a name
other than that of the Holder of such Notes so converted  and the Company  shall
not be required to issue or deliver such certificates unless or until the person
or persons  requesting  the issuance  thereof shall have paid to the Company the
amount of such tax or shall have  established to the satisfaction of the Company
that such tax has been paid.

       8.     Certain Adjustments.

              a)     STOCK  DIVIDENDS AND STOCK SPLITS.  If the Company,  at any
time  while the  Notes  are  outstanding:  (A)  shall  pay a stock  dividend  or
otherwise make a distribution or  distributions on shares of its Common Stock or
any other  equity or equity  equivalent  securities  payable in shares of Common
Stock  (which,  for  avoidance of doubt,  shall not include any shares of Common
Stock  issued by the  Company  pursuant  to this  Note,  including  as  interest
thereon),  (B) subdivide outstanding shares of Common Stock into a larger number
of shares,  (C) combine  (including by way of reverse  stock split)  outstanding
shares  of  Common  Stock  into a  smaller  number  of  shares,  or (D) issue by
reclassification  of shares of the Common  Stock any shares of capital  stock of
the Company,  then the  Conversion  Price shall be  multiplied  by a fraction of
which the  numerator  shall be the number of shares of Common  Stock  (excluding
treasury  shares,  if any)  outstanding  before  such  event  and of  which  the
denominator shall be the number of shares of Common Stock outstanding after such
event.  Any  adjustment  made  pursuant to this Section  shall become  effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective  immediately
after  the  effective  date  in  the  case  of  a  subdivision,  combination  or
re-classification.

              b)     SUBSEQUENT EQUITY SALES.  Notwithstanding the provisions of
Section 7(b), if the Company or any Subsidiary  thereof,  as applicable,  at any
time while this Note is  outstanding,  shall  offer,  sell,  grant any option to
purchase  or offer,  sell or grant  any  right to  reprice  its  securities,  or
otherwise dispose of or issue (or announce any offer,  sale, grant or any option
to purchase or other  disposition) any Common Stock or Common Stock  Equivalents
entitling any Person to acquire  shares of Common Stock,  at an effective  price
per share less than the then Conversion Price (such lower price, the "Base Share
Price" and such  issuances  collectively,  a "Dilutive  Issuance"),  as adjusted
hereunder  (if the holder of the Common  Stock or Common  Stock  Equivalents  so
issued shall at any time,  whether by operation of purchase  price  adjustments,
reset provisions, floating conversion, exercise or exchange prices or otherwise,
or due to  warrants,  options or rights per share which is issued in  connection
with such  issuance,  be  entitled  to  receive  shares  of  Common  Stock at an
effective price per share which is less than the Conversion Price, such issuance
shall be deemed to have occurred for less than the Conversion Price),  then, the
Conversion  Price  shall be reduced to equal the Base Share Price and the number
of Conversion  Shares  issuable  hereunder  shall be increased.  Such adjustment
shall be made whenever such Common Stock or Common Stock Equivalents are issued.
The Company  shall  notify the Holder in writing,  no later than the Trading Day
following the issuance of any Common Stock or Common Stock  Equivalents  subject
to this

<PAGE>

section,  indicating  therein the applicable  issuance  price,  or of applicable
reset price,  exchange  price,  conversion  price and other  pricing terms (such
notice the "Dilutive Issuance Notice").  For purposes of clarification,  whether
or not the Company provides a Dilutive  Issuance Notice pursuant to this Section
8(b),  upon the  occurrence  of any  Dilutive  Issuance,  after the date of such
Dilutive  Issuance  the Holder is  entitled  to  receive a number of  Conversion
Shares  based  upon the Base  Share  Price  regardless  of  whether  the  Holder
accurately refers to the Base Share Price in the Notice of Conversion.

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

              d)     CALCULATIONS.  All calculations  under this Section 8 shall
be made to the nearest cent or the nearest  1/100th of a share,  as the case may
be. The number of shares of Common Stock outstanding at any given time shall not
includes  shares  of Common  Stock  owned or held by or for the  account  of the
Company,  and the  description  of any such  shares  of  Common  Stock  shall be
considered on issue or sale of Common Stock. For purposes of this Section 8, the
number of shares of Common  Stock  deemed to be issued and  outstanding  as of a
given date shall be the sum of the number of shares of Common  Stock  (excluding
treasury shares, if any) issued and outstanding.

              e)     NOTICE TO HOLDERS.

                     i.     ADJUSTMENT   TO  CONVERSION   PRICE.   Whenever  the
Conversion  Price is  adjusted  pursuant  to any of this  Section 8, the Company
shall promptly mail to each Holder a notice  setting forth the Conversion  Price
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment.

                     ii.    NOTICE TO ALLOW  CONVERSION  BY  HOLDER.  If (A) the
Company  shall  declare a  dividend  (or any other  distribution)  on the Common
Stock; (B) the Company shall declare a special  nonrecurring cash dividend on or
a redemption of the Common Stock;  (C) the Company shall  authorize the granting
to all  holders of the Common  Stock  rights or  warrants  to  subscribe  for or
purchase  any shares of  capital  stock of any class or of any  rights;  (D) the
approval of any stockholders of the Company shall be required in connection with
any  reclassification  of the Common Stock, any consolidation or merger to which
the Company is a party, any sale or transfer of

<PAGE>

all or substantially  all of the assets of the Company,  of any compulsory share
exchange  whereby the Common Stock is converted into other  securities,  cash or
property;   (E)  the  Company  shall  authorize  the  voluntary  or  involuntary
dissolution,  liquidation or winding up of the affairs of the Company;  then, in
each  case,  the  Company  shall  cause  to be filed at each  office  or  agency
maintained  for the purpose of  conversion  of the Notes,  and shall cause to be
mailed to the  Holders at their last  addresses  as they shall  appear  upon the
stock books of the Company,  at least 20 calendar  days prior to the  applicable
record or effective date hereinafter specified, a notice stating (x) the date on
which a record is to be taken for the  purpose of such  dividend,  distribution,
redemption,  rights or warrants,  or if a record is not to be taken, the date as
of which the  holders  of the  Common  Stock of record  to be  entitled  to such
dividend, distributions,  redemption, rights or warrants are to be determined or
(y) the  date on  which  such  reclassification,  consolidation,  merger,  sale,
transfer or share  exchange is expected to become  effective  or close,  and the
date as of which it is expected that holders of the Common Stock of record shall
be entitled to exchange their shares of the Common Stock for securities, cash or
other property deliverable upon such  reclassification,  consolidation,  merger,
sale, transfer or share exchange; PROVIDED, that the failure to mail such notice
or any defect therein or in the mailing thereof shall not affect the validity of
the  corporate  action  required to be  specified  in such  notice.  Holders are
entitled to convert Notes during the 20-day period  commencing  the date of such
notice to the effective date of the event triggering such notice.

                     iii.   FUNDAMENTAL TRANSACTION.  If, at any time while this
Note is outstanding,  (A) the Company effects any merger or consolidation of the
Company with or into another Person,  (B) the Company effects any sale of all or
substantially all of its assets in one or a series of related transactions,  (C)
any tender offer or exchange offer (whether by the Company or another Person) is
completed  pursuant to which  holders of Common Stock are permitted to tender or
exchange their shares for other securities, cash or property, or (D) the Company
effects  any  reclassification  of the  Common  Stock  or any  compulsory  share
exchange  pursuant to which the Common Stock is  effectively  converted  into or
exchanged  for  other  securities,  cash  or  property  (in  any  such  case,  a
"Fundamental  Transaction"),  then upon any subsequent  conversion of this Note,
the Holder shall have the right to receive, for each Conversion Share that would
have been issuable upon such conversion absent such Fundamental Transaction, the
same kind and  amount of  securities,  cash or  property  as it would  have been
entitled to receive upon the  occurrence of such  Fundamental  Transaction if it
had been, immediately prior to such Fundamental  Transaction,  the holder of one
share of Common Stock (the "Alternate Consideration").  For purposes of any such
conversion,  the  determination  of the Conversion  Price shall be appropriately
adjusted  to apply  to such  Alternate  Consideration  based  on the  amount  of
Alternate Consideration issuable in respect of one share of Common Stock in such
Fundamental  Transaction,  and the Company shall apportion the Conversion  Price
among the Alternate Consideration in a reasonable manner reflecting the relative
value of any different components of the Alternate Consideration.  If holders of
Common Stock are given any choice as to the  securities,  cash or property to be
received in a Fundamental  Transaction,  then the Holder shall be given the same
choice as to the Alternate Consideration it receives upon any conversion of this
Note  following  such  Fundamental  Transaction.  To  the  extent  necessary  to
effectuate the foregoing  provisions,  any successor to the Company or surviving
entity in such  Fundamental  Transaction  shall  issue to the  Holder a new note
consistent  with the foregoing  provisions  and evidencing the Holder's right to
convert such note into Alternate Consideration.  The

<PAGE>

terms of any agreement  pursuant to which a Fundamental  Transaction is effected
shall include terms  requiring any such successor or surviving  entity to comply
with the  provisions  of this  paragraph (c) and insuring that this Note (or any
such  replacement  security)  will be  similarly  adjusted  upon any  subsequent
transaction analogous to a Fundamental Transaction.

                     EXEMPT   ISSUANCE.   Notwithstanding   the  foregoing,   no
adjustment will be made under this Section 8 in respect of an Exempt Issuance.

       9.     The Holder of the Note,  by  acceptance  hereof,  agrees that this
Note is being acquired for investment and that such Holder will not offer,  sell
or  otherwise  dispose of this Note except  under  circumstances  which will not
result  in a  violation  of the  Securities  Act of  1933,  as  amended,  or any
applicable  state Blue Sky or foreign laws or similar laws  relating to the sale
of securities.

       10.    Any notice  given by any party to the other  with  respect to this
Note  shall be given in the manner  contemplated  by the Loan  Agreement  in the
section entitled "Notices."

       11.    This Note shall be governed by and  construed in  accordance  with
the laws of the State of New York. Each of the parties consents to the exclusive
jurisdiction  of the federal  courts whose  districts  encompass any part of the
County of New York or the state  courts of the State of New York  sitting in the
County of New York in connection  with any dispute  arising under this Agreement
and hereby  waives,  to the maximum  extent  permitted  by law,  any  objection,
including any  objection  based on FORUM NON  COVENIENS,  to the bringing of any
such proceeding in such  jurisdictions.  To the extent determined by such court,
the  Company  shall  reimburse  the  Holder  for any  reasonable  legal fees and
disbursements  incurred by the Holder in  enforcement of or protection of any of
its rights under any of this Note.

       12.    JURY TRIAL WAIVER. The Company and the Holder hereby waive a trial
by jury in any  action,  proceeding  or  counterclaim  brought  by either of the
Parties  hereto  against the other in respect of any matter arising out of or in
connection with this Note.

       13.    The following shall constitute an "Event of Default":

              a.     The Company  shall default in the payment of any amount due
                     on  this  Note,  time  being  of the  essence,  whether  by
                     maturity, pursuant to Section 2 or otherwise; or

              b.     Any  of  the  representations  or  warranties  made  by the
                     Company  herein,  in the Loan Agreement or any of the other
                     Transaction  Agreements shall be false or misleading in any
                     material respect at the time made; or

              c.     The Company shall (1) make an assignment for the benefit of
                     creditors or commence  proceedings for its dissolution;  or
                     (2) apply for or consent to the  appointment  of a trustee,
                     liquidator or receiver for its or for a substantial part of
                     its property or business; or
<PAGE>

              d.     A trustee,  liquidator  or receiver  shall be appointed for
                     the Company or for a  substantial  part of its  property or
                     business without its consent; or

              e.     Any   governmental   agency  or  any  court  of   competent
                     jurisdiction  at the  instance of any  governmental  agency
                     shall  assume  custody  or  control  of  the  whole  or any
                     substantial  portion  of the  properties  or  assets of the
                     Company; or

              f.     Any Pledgor shall default on any of its  obligations  under
                     the Pledge Agreements; or

              g.     The  Company  shall enter into,  create,  incur,  assume or
                     suffer  to exist any  indebtedness  for  borrowed  money or
                     liens  of  any  kind,  on or  with  respect  to  any of its
                     property or assets now owned or  hereafter  acquired or any
                     interest therein or any income or profits therefrom that is
                     senior to or pari passu with, in any respect, the Company's
                     obligations  under this Note, other than as provided in the
                     Disclosure Annex to the Loan Agreement; or

              h.     Bankruptcy,   reorganization,   insolvency  or  liquidation
                     proceedings  or other  proceedings  for  relief  under  any
                     bankruptcy  law or any law for the relief of debtors  shall
                     be  instituted  by or  against  the  Company  or any of the
                     Pledgors.

If an Event of Default shall have occurred, then, or at any time thereafter, and
in each and every such case, unless such Event of Default shall have been waived
in writing by the Holder (which waiver shall not be deemed to be a waiver of any
subsequent  default)  at the  option  of the  Holder  and in the  Holder's  sole
discretion,  the Holder may consider this Note  immediately due and payable (and
the  Maturity  Date  shall be  accelerated  accordingly),  without  presentment,
demand,  protest  or notice of any  kinds,  all of which  are  hereby  expressly
waived,  anything  herein or in any note or other  instruments  contained to the
contrary notwithstanding, and interest shall accrue on the total amount due (the
"Default  Amount") on the date of the Event of Default (the  "Default  Date") at
the rate of 110% per annum or the  maximum  rate  allowed by law,  whichever  is
lower,  from the Default Date until the date payment is made, and the Holder may
immediately  enforce any and all of the Holder's  rights and  remedies  provided
herein or any other rights or remedies afforded by law.

       14.    In the event for any reason,  any payment by or act of the Company
or the Holder shall  result in payment of interest  which would exceed the limit
authorized  by or be in violation of the law of the  jurisdiction  applicable to
this Note,  then IPSO FACTO the  obligation  of the  Company to pay  interest or
perform such act or requirement  shall be reduced to the limit  authorized under
such law,  so that in no event shall the  Company be  obligated  to pay any such
interest, perform any such act or be bound by any requirement which would result
in the payment of interest  in excess of the limit so  authorized.  In the event
any payment by or act of the Company shall result in the extraction of a rate of
interest in excess of a sum which is lawfully collectible as interest, then such
amount (to the extent of such excess not returned to the Company) shall, without
further agreement or notice between or by

<PAGE>

the Company or the Holder,  be deemed  applied to the payment of  principal,  if
any, hereunder immediately upon receipt of such excess funds by the Holder, with
the same force and effect as though the Company had specifically designated such
sums to be so applied to principal and the Holder had agreed to accept such sums
as an interest-free  prepayment of this Note. If any part of such excess remains
after the  principal  has been paid in full,  whether by the  provisions  of the
preceding sentences of this Section or otherwise, such excess shall be deemed to
be an  interest-free  loan from the Company to the  Holder,  which loan shall be
payable  immediately upon demand by the Company.  The provisions of this Section
shall control every other provision of this Note.

                   [Balance of page intentionally left blank]
<PAGE>

       IN WITNESS  WHEREOF,  the Company has caused this  instrument  to be duly
executed by an officer  thereunto  duly  authorized  this 28th day of September,
2006.

                                        SONOMA COLLEGE, INC.

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

                                        ----------------------------------------
                                        (Print Name)

                                        ----------------------------------------
                                        (Title)Exhibit 10.1

                       SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT

        This   SECOND   AMENDED  AND   RESTATED   EMPLOYMENT   AGREEMENT   (this
"AGREEMENT"),  dated  November 13, 2006, by and between  Elite  Pharmaceuticals,
Inc.,  a  Delaware   corporation   (the   "COMPANY"),   and  Bernard  Berk  (the
"EXECUTIVE").

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

        WHEREAS,  on July 23, 2003 the Company and the Executive entered into an
employment  agreement (the "ORIGINAL  EMPLOYMENT  AGREEMENT") which memorialized
the terms and conditions  under which the Executive would serve as the Company's
Chief Executive Officer;

        WHEREAS,  the Company and the  Executive  amended and restated the terms
and  conditions  under which the  Executive  continued to serve as the Company's
Chief Executive  Officer and served as Chairman of the Board of Directors of the
Company  pursuant to an Amended and Restated  Employment  Agreement  dated as of
September 2, 2005 (the "FIRST AMENDED AND RESTATED EMPLOYMENT AGREEMENT");

        WHEREAS, the Company and the Executive wish to further amend and restate
the terms and conditions under which the Executive will continue to serve as the
Company's Chief Executive  Officer and Chairman of the Board of Directors of the
Company;

        NOW,  THEREFORE,  in  consideration  of the mutual  covenants  contained
herein, the parties hereto agree as follows:

        Section 1. TERM OF  EMPLOYMENT;  REPRESENTATIONS  AND  WARRANTIES OF THE
EXECUTIVE.  This  Agreement  shall be effective as of the date of this Agreement
(the "EFFECTIVE DATE") and, subject to earlier  termination as specified herein,
shall continue  until the third  anniversary of the Effective Date (the "INITIAL
TERM", and together with any extensions,  the "TERM"),  provided,  however, that
unless the Company or the Executive  gives written  notice to the other party at
least sixty (60) days prior to the expiration of the then-current  Term that the
Company  or the  Executive,  as the  case  may  be,  elects  not to  renew  this
Agreement,  the then-current Term shall be automatically extended for additional
one-year  periods.  The Executive hereby represents and warrants that (i) he has
the legal capacity to execute and perform this Agreement, (ii) this Agreement is
a valid and  binding  obligation  of the  Executive  enforceable  against him in
accordance  with its terms,  (iii) the  Executive's  service  hereunder will not
conflict  with, or result in a breach of, any agreement,  understanding,  order,
judgment or other  obligation  to which the Executive is presently a party or by
which he may be bound,  and (iv) the  Executive  is not subject to, or bound by,
any  covenant  against  competition,  confidentiality  obligation  or any  other
agreement,  order, or judgment which would conflict with,  restrict or limit the
performance of the services to be provided by him hereunder.

<PAGE>

        Section 2. POSITION AND DUTIES.  During the Term,  the  Executive  shall
serve as the Chief  Executive  Officer of the  Company  and the  Chairman of the
Board of  Directors  of the Company (the "BOARD OF  DIRECTORS").  The  Executive
shall have such powers and duties as are commensurate  with such position and as
may be  conferred  upon him by the Board of  Directors.  During  the  Term,  the
Executive  shall devote all of his business time,  attention,  skill and efforts
exclusively to the business and affairs of the Company.

        Section 3.  COMPENSATION.  For all services rendered by the Executive in
any capacity  during the Term,  including,  without  limitation,  services as an
executive officer, director, or member of any committee of the Company or any of
its  subsidiaries,  affiliates  or divisions  thereof,  the  Executive  shall be
compensated as follows:

        (a) Effective as of the Effective  Date,  the Company shall be obligated
to pay the  Executive a fixed salary at a rate per annum equal to Three  Hundred
Thirty Thousand One Hundred Forty Dollars  ($330,140)  (the "BASE SALARY").  The
Base  Salary  shall  be  subject  to such  periodic  increases  as the  Board of
Directors  shall  deem  appropriate  in  light  of,  among  other  factors,  the
then-existing  financial condition of the Company and the Executive's success in
implementing the Company's business plan and achieving its strategic objectives.
Except as  otherwise  provided in this  Section  3(a),  the Base Salary shall be
payable in accordance with the customary payroll practices of the Company.

        (b) The Executive  shall be eligible to receive an annual bonus of up to
fifty percent (50%) of the Executive's then Base Salary (initially,  One Hundred
and Sixty Five Thousand and Seventy Dollars ($165,070)),  payable (at the option
of the Company) in cash or in shares of Common Stock (as defined  below)  valued
at the closing price of the Common Stock on the  immediately  preceding  trading
day, for the  relevant  Fiscal Year  (pro-rated  for periods of less than a full
Fiscal Year).  The  Compensation  Committee of the Board of Directors  will give
good faith  consideration,  in exercising its discretion to determine the annual
bonus  of the  Executive,  to  any  commercialization  of  products,  merger  or
acquisition,  business  combination  or  collaboration,  growth in  revenue  and
earnings,  additional  financings or other strategic or business  transaction or
combination that inures to the benefit of the stockholders of the Company.

        (c) The  Executive  shall be  entitled  to four (4) weeks of vacation in
each calendar year during the Term; provided,  however, that the Executive shall
not be entitled to carryover  vacation from one year to any other year or to any
payment in respect of any unused or accrued vacation.

        (d) PREVIOUSLY GRANTED OPTIONS.

               (i) The  Company  previously  granted  the  Executive  options to
purchase up to 800,000 shares of the Company's  Common Stock, par value $.01 per
share  (the  "COMMON  STOCK")  which  to  the  maximum  extent  permitted  under
applicable law, are intended to qualify as "incentive  stock options" within the
meaning  of  Section  422 of the  Internal  Revenue  Code  ("PREVIOUSLY  GRANTED
OPTIONS") and which except as set forth in Section  3(d)(ii)(3)  below, have all
previously vested.

                                       2
<PAGE>

               (ii) Of the Previously  Granted Options,  (1) options to purchase
up to 300,000  shares of Common  Stock,  granted  under the Original  Employment
Agreement and vested as of June 3, 2003,  have a per share  exercise price equal
to $2.01 and are  subject  to the terms and  conditions  of the  Company's  1997
Employee  Stock  Option  Plan  ("1997  Plan")  and the  stock  option  agreement
previously entered into by the Company and Executive; (2) options to purchase up
to 300,000 shares of Common Stock of which Executive waived and released any and
all rights to receive or  exercise  such  options as to 75,000  shares of Common
Stock and with respect to the remaining  options  exercisable  for up to 225,000
shares of  Common  Stock,  vested  as of  September  2,  2005,  have a per share
exercise price of $2.15 and are subject to the terms and conditions set forth in
the Stock Option Agreement dated as of July 23, 2003, by and between the Company
and the Executive, as amended by an amendment dated as of September 2, 2005; (3)
options to purchase up to 200,000  shares of Common Stock,  of which options for
100,000  vested on September 2, 2006 and options for the remaining  100,000 vest
on September  2, 2007,  have a per share  exercise  price equal to $2.69 and are
subject to the Company's  2004  Employee  Stock Option Plan (the "PLAN") and the
Incentive Stock Option Letter Agreement  between the Company and Executive dated
September 2, 2005.

         (e) OPIOID PRODUCT  OPTIONS.  In addition to the other grants set forth
in this  Section 3,  effective on the date  hereof,  the Company  shall grant to
Executive options (the "OPIOID PRODUCT OPTIONS") to purchase up to three hundred
thousand  (300,000)  shares of Common  Stock,  pursuant to the Plan.  The Opioid
Product Options (i) shall, to the maximum extent permitted under applicable law,
qualify as "incentive  stock  options"  within the meaning of Section 422 of the
Internal  Revenue  Code;  (ii) have a per share  exercise  price equal to $3.00;
(iii)  have one  hundred  fifty  thousand  (150,000)  options  vest  and  become
immediately  exercisable  in full only upon the closing of an exclusive  product
license for the first of the United States national market,  the entire European
Union  market or the Japan  market or  product  sale  transaction  of all of the
Company's  ownership  rights in the United States (only once for each individual
product) for the Company's first Non-Generic  Opioid Drug; (iv) have one hundred
fifty thousand (150,000) options vest and become immediately exercisable in full
only upon the closing of an  exclusive  product  license  for the United  States
national market, the entire European Union market or the Japan market or product
sale  transaction of all of the Company's  ownership rights in the United States
(only once for each  individual  product) for the Company's  second  Non-Generic
Opioid  Drug;  and (v) be subject to the terms and  conditions  set forth in the
Plan and the Incentive  Stock Option Letter  Agreement to be entered into by the
Company and the Executive, simultaneously herewith.

        The shares of Common Stock  issuable upon exercise of the Opioid Product
Options are subject to an effective  registration  statement filed with the SEC.
For  purposes  of this  Section  3(e),  "Non-Generic  Opioid  Drug" means a drug
developed  by the  Company  for which FDA  approval  will be sought  under a NDA
(including   under  a  505(b)(2)   application)   for  oxycodone,   hydrocodone,
hydromorphone, oyxmorphone or morphine.

        (f) MILESTONE OPTIONS.  On September 2, 2005, the Company granted to the
Executive  options to purchase up to four hundred  thousand  (400,000) shares of
Common Stock (the  "MILESTONE  OPTIONS"),  pursuant to the Plan.  The  Milestone
Options  (ii) shall,  to the maximum  extent  permitted  under  applicable  law,
qualify as "incentive  stock  options"  within the meaning of

                                       3
<PAGE>

Section 422 of the Internal  Revenue Code,  (ii) shall have a per share exercise
price equal to $2.69, the closing price of a share of Common Stock, as listed on
the American  Stock  Exchange,  on  September 1, 2005,  (iii) are subject to the
terms and conditions set forth in the Plan and the Incentive Stock Option Letter
Agreement  entered into by the Company and Executive dated September 2, 2005, as
amended simultaneously  herewith and (iv) shall vest and become exercisable only
upon the occurrence of the following  events which occur during the Initial Term
(up to a maximum of 400,000 shares of Common Stock in the aggregate):

               (1) Milestone  Options  exercisable  for one hundred  twenty-five
        thousand  (125,000)  shares  of  Common  Stock  shall  vest  and  become
        immediately exercisable in full upon the commencement of the first Phase
        III  clinical  trial  relating  to the  first  Non-Generic  Opioid  Drug
        developed by the Company;

               (2)  Milestone  Options  exercisable  for  seventy-five  thousand
        (75,000)  shares of  Common  Stock  shall  vest and  become  immediately
        exercisable  in full  upon  the  commencement  of the  first  Phase  III
        clinical trial relating to the second  Non-Generic Opioid Drug developed
        by the Company;

               (3) Milestone  Options  exercisable  for fifty thousand  (50,000)
        shares of Common Stock shall vest and become immediately  exercisable in
        full only upon the  closing  of an  exclusive  product  license  for the
        United States national market or product sale  transaction of all of the
        Company's  ownership rights (on a product by product basis and only once
        for each individual  product) for each Company drug product,  other than
        the  Non-Generic  Opioid  Drugs for which  Opioid  Product  Options were
        granted under Section 3(e) above;

               (4)  Milestone  Options  exercisable  for ten  thousand  (10,000)
        shares of Common Stock shall vest and become immediately  exercisable in
        full upon the filing by the  Company  (in the  Company's  name) with the
        United  States  Food and Drug  Administration  (the  "FDA") of either an
        abbreviated new drug  application (an "ANDA") or a new drug  application
        (including  a NDA filed  with the FDA  under  Section  505(b)(2)  of the
        Federal Food, Drug, and Cosmetic Act, 21 U.S.C.  Section 301 ET SEQ.) (a
        "NDA"), for a product not covered by a previous FDA application;

               (5) Milestone  Options  exercisable  for forty thousand  (40,000)
        shares of Common Stock shall vest and become immediately  exercisable in
        full  upon  the  approval  by the FDA of any ANDA or NDA  (filed  in the
        Company's name) for a product not previously approved by the FDA;

               (6) Milestone Options exercisable for twenty-five (25,000) shares
        of Common Stock shall vest and become  immediately  exercisable  in full
        upon filing of an application  for U.S.  patent by the Company (filed in
        the Company's name); and

               (7) Milestone Options exercisable for twenty-five (25,000) shares
        of Common stock shall vest and become  immediately  exercisable  in full
        upon the  granting  by U.S.  Patent and  Trademark  Office  ("PTO") of a
        patent to the Company (filed in the Company's name).

                                       4
<PAGE>

        Upon the earlier to occur of the  expiration of the Initial Term of this
Agreement or the termination of Executive's  employment hereunder,  all unvested
Milestone  Options  granted  shall  automatically  terminate  and all vested but
unexercised  Milestone  Options shall  terminate in accordance with the terms of
the stock  option  agreement by and between the  Executive  and the Company with
respect to the Milestone Options and the Plan; provided that, in the case of any
Milestone  Options  that may be vested  pursuant  to clause (5) or clause (7) of
Section 3(f)(iv) above, if (x) the applicable filing with the FDA or PTO, as the
case may be,  was made by the  Company  during  the  Initial  Term but  prior to
Without Cause Termination (as defined below),  (y) the approval relating to such
filing  (either from the FDA or the PTO) occurs  within five hundred forty (540)
days of such  filing  and (x) such  approval  occurring  within  the three  year
Initial  Term,  the  Milestone  Options  relating to such  filing  shall vest in
accordance  with  clause  (5) or clause  (7),  as the case may be. The shares of
Common Stock  issuable upon exercise of the Milestone  Options are subject to an
effective registration statement filed with the SEC.

        (g)  ADDITIONAL  MILESTONE  OPTIONS.  If the maximum number of Milestone
Options shall have vested during the Initial Term of this Agreement, the Company
shall grant to the  Executive  additional  options to purchase  shares of Common
Stock (the "ADDITIONAL MILESTONE OPTIONS"), pursuant to the Plan. The Additional
Milestone  Options (i) shall, to the maximum extent  permitted under  applicable
law,  qualify as "incentive  stock options" within the meaning of Section 422 of
the Internal  Revenue Code,  (ii) shall have a per share exercise price equal to
the closing  price of a share of Common Stock,  as listed on the American  Stock
Exchange,  on the  date of  grant,  (iii)  shall be  subject  to the  terms  and
conditions  set forth in the Plan and the stock  option  agreement to be entered
into by the Company and the Executive on the date of grant,  (iv) shall be fully
vested and  exercisable in full upon grant,  and (v) shall be granted at the end
of the then current  Fiscal Year in which any of the follows  triggering  events
shall occur (and, in the case of grants  related to events  occurring  after the
end of the last fiscal year during the Initial  Term,  such grants shall be made
at the end of the first Fiscal Year after the Initial Term):

               (1)  Additional  Milestone  Options for one  hundred  twenty-five
        thousand (125,000) shares of Common Stock shall be granted at the end of
        the then current  Fiscal Year (and  immediately  vested  exercisable  in
        full) upon the  commencement  of first Phase III clinical trial relating
        to the first  Non-Generic  Opioid Drug  developed by the Company only to
        the extent that such  Milestone  Options did not  previously  vest under
        clause  (f)(iv)(1)  of Section 3, it being  understood  that in no event
        shall the total of  Milestone  Options  vesting  under  3(f)(iv)(1)  and
        Additional  Milestone  Options  granted  under this  Section  3(g)(v)(1)
        exceed options for 125,000 shares of Common Stock in the aggregate;

               (2) Additional  Milestone Options for one hundred and twenty five
        thousand (125,000) shares of Common Stock shall be granted at the end of
        the then current  Fiscal Year upon the  commencement  of the first Phase
        III  clinical  trial  relating  to the second  Non-Generic  Opioid  Drug
        developed  by the Company only to the extent  Milestone  Options did not
        previously vest under clause (f)(iv)(2) of Section 3 it being understood
        that (i) in no event shall the total of Milestone  Options vesting under
        3 (f)(iv)(2) and the  Additional  Milestone  Options  granted under this
        Section  3  (g)(v)(2)  exceed  125,000  shares  of  Common  Stock in the
        aggregate,  and (ii) in no event shall the options vested

                                       5
<PAGE>

        and/or granted under Sections 3(f)(iv)(1),  3(f)(iv)(2),  3(g)(v)(1) and
        3(g)(v)(2)  exceed  options  for 250,000  shares of Common  Stock in the
        aggregate.

               (3)  Additional  Milestone  Options for fifty  thousand  (50,000)
        shares of Common  Stock shall be granted at the end of the then  current
        Fiscal Year upon the  closing of an  exclusive  product  license for the
        United  States  national  market  or  product  sale  transaction  of all
        ownership  rights (on a product by product  basis and only once for each
        individual  product)  for each  Company  drug  product,  other  than the
        Non-Generic  Opioid  Drugs for which any  Opioid  Product  Options  were
        granted under Section 3(e) above;

               (4) Additional  Milestone  Options  exercisable  for ten thousand
        (10,000)  shares of Common Stock shall be granted at the end of the then
        current Fiscal Year (and  immediately  vested  exercisable in full) upon
        the filing by the Company (in the Company's name) with the FDA of either
        an ANDA or NDA for a product not covered by a previous FDA application;

                (5) Additional  Milestone Options exercisable for forty thousand
        (40,000)  shares of Common  Stock shall be granted  upon the approval by
        the FDA of any ANDA, NDA or 505(b)(2)  application of the Company (filed
        in the Company's name) for a product not previously approved by the FDA;

               (6) Additional  Milestone Options for twenty-five (25,000) shares
        of Common Stock shall be granted at the end of the then  current  Fiscal
        Year (and  immediately  vested  exercisable  in full) upon  filing of an
        application  for an additional  U.S. patent by the Company (filed in the
        Company's name); and

               (7) Additional  Milestone Options for twenty-five (25,000) shares
        of  Common  Stock  shall be  granted  as of the end of the then  current
        Fiscal  Year  (and  immediately  vested  exercisable  in full)  upon the
        granting by U.S. Patent and Trademark  Office of such additional  patent
        to the Company (filed in the Company's name).

        Upon the earlier to occur of the  expiration of the Initial Term of this
Agreement or the termination of Executive's employment hereunder, all Additional
Milestone  Options shall  automatically  terminate in accordance  the applicable
stock option  agreement to be entered into by and between the  Executive and the
Company with respect to such Additional Milestone Options (which agreement shall
be substantially similar to the other stock option agreements by and between the
Executive and the Company) and the Plan.  For the avoidance of doubt,  (i) under
no circumstances  shall Additional  Milestone  Options be granted as a result of
the occurrence of an event which had  previously  triggered,  or  simultaneously
therewith  will  trigger,  the vesting of any  Milestone  Options  granted under
Section  3(f) above and (ii) no Opioid  Product  Options,  Milestone  Options or
Additional  Milestone Options shall be granted or vest under this Agreement as a
result of any transaction  entered into, or any FDA or PTO application or filing
made,  by, or in the name of, any person or entity in which the  Company  has an
equity interest but which is not a wholly-owned subsidiary of the Company.

        (h)  ADDITIONAL  OPTIONS.  In addition to the other  grants set forth in
this Section 3, the

                                       6
<PAGE>

Company, in its sole discretion,  may grant to Executive additional options (the
"ADDITIONAL  OPTIONS") to purchase shares of Common Stock, pursuant to the Plan.
The  Additional  Options  shall  (i)  to  the  maximum  extent  permitted  under
applicable  law,  qualify as  "incentive  stock  options"  within the meaning of
Section 422 of the Internal  Revenue Code,  (ii) have a per share exercise price
equal the then fair market  value of a share of Common  Stock,  (iii)  vest,  as
determined by the Board, in its sole discretion and (iv) be subject to the terms
and  conditions  set  forth in the Plan and the  stock  option  agreement  to be
entered  into by the Company and the  Executive  on the date of grant.  All such
options shall vest and be  exercisable,  as determined by the Board, in its sole
discretion.

        (i)   LIMITATION   UPON   DUPLICATIVE   GRANTING/VESTING   OF   OPTIONS.
Notwithstanding  anything set forth in this Section 3 of this Agreement,  in the
event that Opioid Product Options are vested under Section 3(e) as result of the
sale transaction  involving  Non-Generic  Opioid Drug, (x) no Milestone  Options
shall  vest  under  clauses  (f)(iv)(1)  or  (f)(iv)(2)  of Section 3 and (y) no
Additional  Milestone  Options  shall  be  granted  and/or  vest  under  clauses
(g)(v)(1) or (g)(v)(2) of Section 3, in each case,  as a result of any Phase III
clinical trials relating to the same drug product.  The limitations set forth in
this  Section  3(i) shall not affect the  granting  and/or  vesting of Milestone
Options or  Additional  Milestone  Options as a result of any Phase III clinical
trials  relating  to a  Non-Generic  Opioid  Drug  which  is the  subject  of an
exclusive license.

        (j) PLEDGE OF COMMON STOCK  UNDERLYING  THE OPTIONS.  Executive may not,
directly or indirectly, sell, assign, transfer, offer, grant a participation in,
mortgage,  pledge,  hypothecate,  create a  security  interest  in or lien upon,
encumber,  donate,  contribute,  place in trust, enter into any voting agreement
with respect to, the shares of Common Stock  underlying the  Previously  Granted
Options, Opioid Product Options, Milestone Options, Additional Milestone Options
or Additional  Options without the prior written consent of the Company.  During
the Term,  Executive  shall not,  directly or  indirectly,  enter into any short
sales or "derivative" or "hedging" transactions or strategies,  nor maintain any
"short" positions, with respect to the Common Stock.

        (k) PIGGBACK  REGISTRATION  RIGHTS. (i) If at any time after the Initial
Term, (x) the Company shall propose to register shares of Common Stock under the
Securities  Act of 1933  (other  than in a  registration  statement  on Form S-3
relating  to  sales  of  securities  to  participants  in  a  Company   dividend
reinvestment  plan,  or Form S-4 or S-8 or any  successor  form or in connection
with an acquisition or exchange offer or an offering of securities solely to the
existing  shareholders  or employees  of the  Company),  and (y) any  Additional
Milestone  Options that may be granted under Section 3(g) hereof shall have been
granted to, and are  exercisable  by, the  Executive,  the Company (1) will give
prompt  written  notice to the  Executive  of its  intention  to  effect  such a
registration  and (2) subject to Section  3(k)(ii)  below,  will include in such
registration all shares of Common Stock issued or issuable upon exercise of such
granted and vested Additional  Milestone Options (the "REGISTRABLE  SECURITIES")
which are permitted under applicable  securities laws to be included in the form
of registration  statement selected by the Company and with respect to which the
Company has received written requests for inclusion therein within 30 days after
the receipt of the Company's  notice  (each,  a "PIGGYBACK  REGISTRATION").  The
Executive  will be  permitted  to  withdraw  all or any part of the  Registrable
Securities from a Piggyback Registration at any time prior to the effective date
of such Piggyback Registration.

                                       7
<PAGE>

        (ii) If a Piggyback  Registration is to be an underwritten offering, and
the managing  underwriters  advise the Company in writing that in their  opinion
the number of securities  requested to be included in such registration  exceeds
the number which can be sold in such offering  without  adversely  affecting the
marketability of the offering, the Company will include in such registration:

                      (1) first, the securities the Company proposes to sell;

                      (2)  second,   securities   held  by  holders  other  than
               Executive, directors, officers or employees of the Company;

                      (3) third,  the  Registrable  Securities  requested  to be
               included in such registration by the Executive and any securities
               requested to be included in such registration by any other person
               or entity other than persons or entities  having a lower priority
               of registration than the Executive,  PRO RATA among Executive and
               such  other  persons or  entities,  on the basis of the number of
               securities  requested to be included in such registration by each
               of such holders and such other persons or entities; and

                      (4) thereafter,  other securities requested to be included
               in such registration, as determined by the Company.

        As a condition to the  inclusion of his  Registrable  Securities in such
registration,  the Executive will execute an underwriting agreement in customary
form and in form and substance satisfactory to the managing underwriters.

        (iii) If at any time after  giving  written  notice of its  intention to
register any of its securities as set forth in Section  3(k)(i) and prior to the
effective  date of the  registration  statement  filed in  connection  with such
registration,  the Company  shall  determine for any reason not to register such
securities,  the  Company  may, at its  election,  give  written  notice of such
determination  to the Executive  and thereupon be relieved of its  obligation to
register any Registrable Securities in connection with such registration.

         (l) During the Term,  the  Company  shall pay the  Executive  a monthly
automobile allowance in the amount of Eight Hundred Dollars ($800).

        (m) The Executive  shall be entitled to participate in all  compensation
and employee benefit plans or programs, and to receive all benefits, perquisites
and  emoluments,  for which any  salaried  employees of the Company are eligible
under any plan or program now or hereafter  established  and  maintained for the
employees of the Company,  to the fullest extent  permissible  under the general
terms and  provisions  of such  plans or  programs  and in  accordance  with the
provisions  thereof.  The  Executive  will be  entitled  to  participate  in the
Company's  qualified  401(k) plan and the Company  will make the maximum  annual
matching  contributions  to the  Executive's  account  thereunder  as  shall  be
permitted  by law for an  employee,  of the  Executive's  position  and  salary.
Notwithstanding  the  foregoing,  nothing in this  Agreement  shall preclude the
amendment  or  termination  of any such plan or program;  provided,  that,  such
amendment or

                                       8
<PAGE>

termination is applicable generally to the senior officers of the Company or any
subsidiary or affiliate.

        (n) During the Term, the Executive shall be covered under the directors'
and officers' insurance policy maintained by the Company.

        Section 4.  BUSINESS  EXPENSES.  The Company  shall pay or reimburse the
Executive for all reasonable  travel or other expenses incurred by the Executive
in connection  with the  performance  of his duties and  obligations  under this
Agreement,  subject to the Executive's  presentation of appropriate  vouchers in
accordance  with such  procedures as are  applicable  to senior  officers of the
Company and to preserve any deductions for Federal income  taxation  purposes to
which the Company may be entitled.

        Section 5. TERMINATION OF EMPLOYMENT;  EFFECTS THEREOF.  (a) The Company
shall have the right,  upon  delivery  of written  notice to the  Executive,  to
terminate the  Executive's  employment  hereunder prior to the expiration of the
Term (i) pursuant to a Termination for Cause (as defined in Section 5(h)),  (ii)
upon the Executive's Permanent Disability (as defined in Section 5(h)), or (iii)
pursuant  to a Without  Cause  Termination  (as  defined in Section  5(h)).  The
Executive shall have the right,  upon delivery of written notice to the Company,
to terminate the Executive's employment hereunder prior to the expiration of the
Term in the Executive's sole discretion;  provided,  however,  that, without the
Company's written consent, no termination of the Executive's employment pursuant
to this sentence shall be effective  until thirty (30) days after receipt by the
Company of written notice of termination from the Executive. Notwithstanding the
foregoing,  the Executive shall have the right,  upon delivery of written notice
to the Company, to immediately terminate the Executive's employment hereunder in
the event that the Company (w) breaches this  Agreement by  materially  reducing
the  nature  or  scope  of  the  authorities,   powers,  functions,   duties  or
responsibilities  of the Executive  set forth in Section 2 of this  Agreement or
fails to pay the  Executive's  Base  Salary  when due and  such  failure  is not
remedied  within five (5) days of receipt of written notice of such failure from
the Executive,  (x) otherwise  materially  breaches its obligations  pursuant to
this  Agreement  and the Company fails to remedy such other breach within thirty
(30) days of receipt of written  notice of such breach from the  Executive,  (y)
relocates its principal  executive  offices outside of New Jersey or New York or
(z)  consummates  a Change of Control Event (as defined in Section 5(h)) with an
entity and the  Executive  elects to  terminate  his  employment  for any reason
within  ninety (90) days  following the  consummation  of such Change of Control
Event (a "TERMINATION FOR GOOD REASON").  The Executive's  employment  hereunder
shall  terminate  automatically  without  action  by any party  hereto  upon the
Executive's death.

        (b) In lieu of any  severance  that  may  otherwise  be  payable  to the
Executive pursuant to this Section 5 or any other provision of this Agreement or
any  policies of the Company,  whether  existing on the date hereof or in effect
from  time to time  hereafter,  in the event  that the  Company  terminates  the
Executive's  employment pursuant to a Without Cause Termination or the Executive
terminates the Executive's  employment pursuant to a Termination for Good Reason
(other than in connection with a Change of Control Event specified in clause (z)
of the  definition of  Termination  for Good Reason,  which shall be governed by
Sections 5(c) and 5(d)),  the Company shall (i) pay the Executive any earned but
unpaid Base Salary plus any unpaid

                                       9
<PAGE>

reimbursable expenses as of the effective date of termination of his employment,
(ii) continue to pay the  Executive's  then-current  Base Salary (in  accordance
with the Company's  standard payroll  practices) and reimburse the Executive for
the cost to replace the life and disability  insurance coverages afforded to the
Executive  under  the  Company's  benefit  plans  with   substantially   similar
coverages,  following the effective date of termination of his employment, for a
period equal to the greater of (x) the  remainder of the  then-current  Term, or
(y) two years  following the  effective  date of  termination  and (iii) pay the
premiums for the Executive's  Company  provided health  insurance for the period
during which the Executive is entitled to continued health insurance coverage as
specified in the Comprehensive  Omnibus Budget Reconciliation Act. Other than as
required by law, no other payments shall be made, or benefits  provided,  by the
Company under this Agreement.

        (c) In lieu of any  severance  that  may  otherwise  be  payable  to the
Executive pursuant to this Section 5 or any other provision of this Agreement or
any  policies of the Company,  whether  existing on the date hereof or in effect
from time to time hereafter,  in the event that the Company consummates a Change
of Control  Event (as defined in Section  5(h)) with an entity and the Executive
elects to  terminate  his  employment  for any reason  within  ninety  (90) days
following the  consummation  of such Change of Control Event,  the Company shall
(i) pay the  Executive  any  earned  but  unpaid  Base  Salary  plus any  unpaid
reimbursable expenses as of the effective date of termination of his employment,
(ii)  pay  the  Executive,   in  twenty-four  (24)  equal  monthly  installments
commencing  on the  first  day of the  month  following  the  effective  date of
termination  of his  employment,  the sum of One Million  Dollars  ($1,000,000),
(iii) pay the  Executive's  then-current  Base  Salary (in  accordance  with the
Company's  standard  payroll  practices)  for a period  of  twelve  (12)  months
following the effective date of  termination,  (iv) following the effective date
of  termination of his  employment,  reimburse the Executive for the cost, for a
period  equal  to the  twelve  (12)  months  following  the  effective  date  of
termination,  of replacing the life and disability  insurance coverages afforded
to the Executive under the Company's  benefit plans with  substantially  similar
coverages and (v) pay the premiums for the Executive's  Company  provided health
insurance  for the period  during  which the  Executive is entitled to continued
health  insurance  coverage as specified  in the  Comprehensive  Omnibus  Budget
Reconciliation  Act.  Other than as required by law, no other  payments shall be
made, or benefits provided, by the Company under this Agreement.

        (d) In lieu of any  severance  that  may  otherwise  be  payable  to the
Executive pursuant to this Section 5 or any other provision of this Agreement or
any  policies of the Company,  whether  existing on the date hereof or in effect
from time to time hereafter,  in the event that the Company consummates a Change
of Control  Event (as defined in Section  5(h)) and the Company  terminates  the
Executive's  employment as Chief Executive  Officer of the Company in connection
with, or within one hundred eighty (180) days  following,  the  consummation  of
such Change of Control Event and other than a Termination for Cause, the Company
shall (i) pay the  Executive  any earned but unpaid  Base Salary plus any unpaid
reimbursable expenses as of the effective date of termination of his employment,
(ii)  pay  the  Executive,   in  twenty-four  (24)  equal  monthly  installments
commencing  on the  first  day of the  month  following  the  effective  date of
termination  of his  employment,  the sum of One Million  Dollars  ($1,000,000),
(iii) pay the  Executive's  then-current  Base  Salary (in  accordance  with the
Company's  standard  payroll  practices)  for a period  of  twelve  (12)  months
following the effective date of  termination, (iv)

                                       10
<PAGE>

following the effective  date of termination  of his  employment,  reimburse the
Executive for the cost,  for a period equal to the twelve (12) months  following
the  effective  date of  termination,  of  replacing  the  life  and  disability
insurance  coverages afforded to the Executive under the Company's benefit plans
with  substantially   similar  coverages  and  (v)  pay  the  premiums  for  the
Executive's  Company  provided health  insurance for the period during which the
Executive is entitled to continued health insurance coverage as specified in the
Comprehensive  Omnibus Budget Reconciliation Act. Other than as required by law,
no other payments shall be made, or benefits provided, by the Company under this
Agreement.

        (e) In the event that the Company terminates the Executive's  employment
pursuant to a Permanent Disability, the Company shall pay the Executive the same
amounts  that  would be payable to the  Executive  in the case of a  termination
under Section 5(b) less any amounts actually received by the Executive under any
Company provided and paid for disability insurance coverage. Other than pursuant
to the  terms of any  benefit  plan  then-maintained  by the  Company,  no other
payments  shall be  made,  or  benefits  provided,  by the  Company  under  this
Agreement except as otherwise required by law.

        (f) In the event that the Company terminates the Executive's  employment
hereunder due to a Termination  for Cause or, except as provided in Section 5(b)
or Section 5(c) above, the Executive  terminates his employment with the Company
(including,  without limitation,  pursuant to any retirement plan or policy then
maintained by the  Company),  the Company shall pay the Executive any earned but
unpaid  Base Salary plus any unpaid  reimbursable  expenses as of the  effective
date of termination of his  employment.  Other than as required by law, no other
payments  shall be  made,  or  benefits  provided,  by the  Company  under  this
Agreement.

        (g) The Company will obtain and maintain a life insurance  policy in the
amount of $1,000,000  on the life of the Executive  payable to the estate of the
Executive in the event of the Executive's death.

        (h) For  purposes  of this  Agreement,  the  following  terms  have  the
following meanings:

               (i)  "CHANGE OF  CONTROL  EVENT"  means,  in any one or series of
related  transactions,  (i)  a  merger  or  consolidation  in  which  securities
possessing  more than fifty percent (50%) of the total combined  voting power of
the Company's  outstanding  securities  are  transferred  to a person or persons
different from the persons holding those  securities  immediately  prior to such
transaction;   (ii)  the  sale,   transfer  or  other   disposition  of  all  or
substantially all of the Company's  assets;  (iii) the sale of securities by the
Company to a third party which  securities  constitute  more than fifty  percent
(50%) of the total combined voting power of the Company's outstanding securities
immediately  following such  transaction or (iv) the consummation of a strategic
combination  as a result of which new  directors to the Board of  Directors  are
appointed by stockholders  who are not  stockholders of the Company prior to the
consummation  of  such  Change  of  Control  Event,   such  that  the  directors
immediately  prior to the  consummation  of such  transaction  and the directors
appointed  by them  constitute  less  than 50% of the  members  of the  Board of
Directors immediately following such transaction.

                                       11
<PAGE>

               (ii) "PERMANENT  DISABILITY" means permanently  disabled so as to
qualify for full benefits under the Company's then-existing disability insurance
policy; provided, however, that if the Company does not maintain any such policy
on the date of determination, "Permanent Disability" shall mean the inability of
the  Executive to work for a period of six (6) full  calendar  months during any
eight (8) consecutive  calendar months due to illness or injury of a physical or
mental  nature,  supported  by  the  completion  by  the  Executive's  attending
physician  of  a  medical   certification  form  outlining  the  disability  and
treatment.

               (iii)  "TERMINATION  FOR  CAUSE"  means,  to the  maximum  extent
permitted by applicable law, a termination of the Executive's  employment by the
Company  because the  Executive has (a) breached or failed to perform his duties
under  applicable  law  and  such  breach  or  failure  to  perform  constitutes
self-dealing,  willful  misconduct  or  recklessness,  (b)  committed  an act of
dishonesty in the performance of his duties hereunder,  (c) willfully engaged in
conduct that is detrimental  to the business of the Company,  (d) been convicted
of a felony or a misdemeanor  involving moral  turpitude,  (e) excessively  used
alcohol  or  illegal  drugs  so as to  interfere  with  the  performance  of the
Executive's obligations under this Agreement,  (f) breached or failed to perform
his  obligations  and duties  hereunder,  which breach or failure the  Executive
shall fail to remedy  within  thirty  (30) days after  written  demand  from the
Company  specifying in reasonable  detail such breach or failure,  (g) failed to
follow lawful,  written directives of the Board of Directors that are consistent
with the duties and obligations of the Executive  under this Agreement,  and the
Executive  shall  fail to remedy  such  failure  within  thirty  (30) days after
written  demand from the Board of  Directors,  or (h)  violated in any  material
respect  the  representations  made  in  Section  1 of  this  Agreement  or  the
provisions of Section 6 of this Agreement.

               (iv)  "WITHOUT  CAUSE  TERMINATION"  means a  termination  of the
Executive's  employment by the Company  other than due to Permanent  Disability,
death,  retirement or expiration (or  non-renewal)  of the Term and other than a
Termination for Cause.

        (e) Any  payments  to be made or  benefits to be provided by the Company
pursuant to this Section 5 (other than in the event of the Executive's  death or
Permanent  Disability) are subject to the receipt by the Company of an effective
general release and agreement not to sue, in a form  reasonably  satisfactory to
the  Company  (the  "RELEASE"),  pursuant to which the  Executive  agrees (i) to
release all claims against the Company and certain  related  parties  (excluding
claims for (x) indemnification under the Company's Certificate of Incorporation,
by-laws or any Company provided  insurance policy or (y) any severance  benefits
payable hereunder),  (ii) not to maintain any action,  suit, claim or proceeding
against the Company, its subsidiaries and affiliates and certain related parties
relating to this Agreement, and (iii) to be bound by certain confidentiality and
non-disparagement  covenants  specified  therein.  The Company  shall  deliver a
general  release  and  agreement  not  to  sue  to  the  Executive,  in  a  form
substantially  similar to the  Release,  upon the  Executive's  delivery  of the
Release to the Company; provided, that, the general release and agreement not to
sue the Executive  shall not be effective  until following the expiration of any
revocation period applicable to the Release. Notwithstanding the due date of any
post-employment payment, the Company shall not be obligated to make any payments
under  this  Section  5 until  after the  expiration  of any  revocation  period
applicable to the Release under  applicable  law, as may be amended from time to
time (which revocation period is presently

                                       12
<PAGE>

seven (7) days under the Age Discrimination Act).

        Section 6. OTHER  DUTIES OF  EXECUTIVE  DURING AND AFTER  TERM.  (a) The
Executive  recognizes and  acknowledges  that all information  pertaining to the
affairs,  business,  clients,  or  customers  of  the  Company  or  any  of  its
subsidiaries  or  affiliates  (any or all of  such  entities  being  hereinafter
referred to as the "BUSINESS"), as such information may exist from time to time,
other than information that the Company has previously made publicly  available,
is confidential  information and is a unique and valuable asset of the Business,
access  to and  knowledge  of which  are  essential  to the  performance  of the
Executive's  duties under this Agreement.  In consideration of the payments made
to him  hereunder,  the  Executive  shall not,  except to the extent  reasonably
necessary in the performance of his duties under this Agreement,  divulge to any
person, firm, association,  corporation, or governmental agency, any information
concerning  the  affairs,  businesses,  clients,  or  customers  of the Business
(except  such  information  as is required by law to be divulged to a government
agency or pursuant to lawful  process),  or make use of any such information for
his  own  purposes  or for the  benefit  of any  person,  firm,  association  or
corporation  (except the Business) and shall use his reasonable  best efforts to
prevent  the  disclosure  of  any  such  information  by  others.  All  records,
memoranda,  letters,  books, papers, reports,  accountings,  experience or other
data, and other records and documents relating to the Business,  whether made by
the  Executive  or  otherwise  coming  into  his  possession,  are  confidential
information and are, shall be, and shall remain the property of the Business. No
copies  thereof  shall be made which are not retained by the  Business,  and the
Executive  agrees, on termination of his employment or on demand of the Company,
to deliver the same to the Company.

        (b) The Executive recognizes and acknowledges that the Company shall own
all Work Product created or contributed to by the Executive  during the Term and
all Work Product  created or  contributed  to by the Executive as an employee or
consultant  of the  Company (or its  subsidiaries  or  affiliates)  prior to the
Effective Date (including,  without limitation,  during the term of the Original
Employment  Agreement and the First Amended and Restated Employment  Agreement).
As used herein, "Work Product" includes, but is not limited to, all intellectual
property  rights,  US  and  international  copyrights,   patentable  inventions,
creations,  discoveries and improvements, works of authorship and ideas, whether
or not  patentable  or  copyrightable  and  regardless of their form or state of
development.  All Work Product or contributed to by the Executive as an employee
or  consultant  of the  Company (or its  subsidiaries  or  affiliates)  shall be
considered  work  made  for  hire by the  Executive  and  shall  be owned by the
Company.

               (i) If any of the Work Product  created or  contributed to by the
Executive as an employee or  consultant of the Company (or its  subsidiaries  or
affiliates)  may not, by operation of law, be considered a work made for hire by
the Executive for the Company,  or if ownership of all right, title and interest
of the intellectual property rights therein shall not otherwise vest exclusively
in the  Company,  the  Executive  shall  assign,  and upon  creation  thereof or
contribution  thereto shall be deemed to have  automatically  assigned,  without
further consideration, the ownership of all such Work Product to the Company and
its successors and assigns.  The Company,  its successors and assigns shall have
the  right to  obtain  and hold in its or their  own name  copyrights,  patents,
registrations and other protections available to the Work Product. The Executive
shall  assist  the  Company,  during  and  after  the  Term,  in  obtaining  and

                                       13
<PAGE>

maintaining patent,  copyright,  trademark and other appropriate  protection for
all Work Product in all countries and  jurisdictions,  at the Company's expense.
The Executive  hereby  irrevocably  relinquishes for the benefit of the Company,
its successors and assigns any moral rights in the Work Product recognized under
applicable law.

               (ii) The  Executive  shall  disclose all Work Product  created or
contributed  to by the  Executive as an employee or consultant of the Company or
its subsidiaries or affiliates  (before,  during and after the Term) promptly to
the  Company  and shall not  disclose  the Work  Product  to anyone  other  than
authorized  Company personnel  without the Company's prior written consent.  The
Executive  shall not  disclose  to the  Company or induce the Company to use any
secret or confidential information or material belonging to others.

               (iii) The  provisions  of this Section 6(b) cover Work Product of
any kind that is  conceived,  created,  contributed  to or made by the Executive
during the term of this  Agreement (and during the period prior to the Effective
Date that the  Executive  provided  employment  or  consulting  services  to the
Company or its subsidiaries or affiliates) that (i) relates  specifically to the
business of the Company or its  subsidiaries  and affiliates,  (ii) results from
tasks  assigned  to  the  Executive  by the  Company  or  its  subsidiaries  and
affiliates,  or  (iii)  are  conceived  or made  with the use of  facilities  or
materials, or confidential or proprietary information or trade secrets, provided
by the Company or its subsidiaries and affiliates.

        (c) In consideration of the payments to be made to him hereunder, during
the period (the  "RESTRICTIVE  PERIOD")  commencing on the effective date of the
termination of his employment for any reason and ending one (1) year thereafter,
the Executive shall not,  without express prior written approval of the Company,
directly or indirectly,  (i) solicit or assist any third party in soliciting for
employment  any person  then  currently  employed  by the  Company or any of its
subsidiaries  and  affiliates  or who was  employed by the Company or any of its
subsidiaries and affiliates during the three-month period immediately  preceding
the termination of the Executive's employment (collectively,  "EMPLOYEES"), (ii)
employ,  attempt to employ or materially  assist any third party in employing or
attempting  to employ  any  Employee,  or (iii)  otherwise  act on behalf of any
competitor to interfere with the relationship  between the Company or any of its
subsidiaries and affiliates and their respective Employees.

        (d) The Executive  acknowledges that the restrictions  contained in this
Section 6 are reasonable  and necessary to protect the  legitimate  interests of
the Company and that any breach by the Executive of any  provision  contained in
this  Section 6 will  result in  irreparable  injury to the  Company for which a
remedy at law would be inadequate.  Accordingly, the Executive acknowledges that
the Company shall be entitled to temporary, preliminary and permanent injunctive
relief against the Executive in the event of any breach or threatened  breach by
the  Executive  of the  provisions  of this  Section 6, in addition to any other
remedy that may be  available to the Company  whether at law or in equity.  With
respect to any  provision  of this  Section 6 finally  determined  by a court of
competent  jurisdiction to be  unenforceable,  such court shall be authorized to
reform this  Agreement or any provision  hereof so that it is enforceable to the
maximum extent  permitted by law. The parties hereto shall abide by such court's
determination.  If the covenants of Section 6(c) are  determined to be wholly or
partially  unenforceable in any jurisdiction,  such determination shall not be a
bar to or in any way diminish

                                       14
<PAGE>

the Company's right to enforce such covenants in any other jurisdiction.

        (e) The  Company's  obligation  to make  payments,  or  provide  for any
benefits  under this  Agreement  (except to the extent  vested or  exercisable),
shall cease upon a violation by the Executive of the  provisions of this Section
6. The  provisions  of this  Section  6 shall  survive  any  termination  of the
Executive's  employment  with the Company.  The Company shall not be required to
post any bond or other security in connection with any proceeding to enforce the
provisions of this Section 6.

        Section 7.  INDEMNIFICATION.  Prior to the Effective Date, the Executive
rendered  consulting  services to the Company pursuant to the terms of a certain
Consulting Agreement,  dated as of April 15, 2003 (the "CONSULTING  AGREEMENT"),
by and between the Company and Michael Andrews  Corporation (the  "CONSULTANT").
For  purposes  of the  Delaware  General  Corporation  Law (the  "DGCL") and the
provisions  of the  Company's  Certificate  of  Incorporation  and By-laws,  the
Executive,  the  Consultant  and  the  Consultant's   shareholders,   employees,
permitted agents and representatives shall each have the status of an "agent" of
the  Company  and,   accordingly,   (i)  the  Executive  shall  be  entitled  to
indemnification  and advancement of expenses from the Company in connection with
the performance of the Executive's  duties hereunder and (ii) the Consultant and
its  shareholders,  employees,  permitted  agents and  representatives  shall be
entitled to  indemnification  and  advancement  of expenses  from the Company in
connection  with the  performance of the Consulting  Services (as defined in the
Consulting  Agreement)  previously  rendered  to  the  Company  pursuant  to the
Consulting  Agreement,  in the case of clause (i) or (ii), to the fullest extent
permitted  by the  DGCL  and the  provisions  of the  Company's  Certificate  of
Incorporation  and By-laws.  In  addition,  to the maximum  extent  permitted by
applicable  law  (including  the DGCL),  the Company  shall  indemnify  and hold
harmless (i) the Executive against and in respect of any and all claims,  costs,
expenses,  damages,  liabilities,  losses or  deficiencies  (including,  without
limitation,  counsel's  fees and other costs and expenses  incident to any suit,
action or proceeding)  (collectively,  "DAMAGES") arising out of, resulting from
or  incurred  in  connection  with the  Executive's  performance  of his  duties
hereunder,  except to the extent that any such  Damages  result from a breach of
this Agreement by the Executive and (ii) the  Consultant  and its  shareholders,
employees,  agents or  representatives  against  and in  respect  of any and all
Damages  arising  out of,  resulting  from or incurred  in  connection  with the
provision of the  Consulting  Services by the  Consultant,  except to the extent
that any such Damages result from (A) the gross negligence or willful misconduct
of the Consultant and/or its shareholders,  employees agents or representatives;
provided,  however,  any such gross  negligence or willful  misconduct shall not
limit  the   Consultant   and/or   its   shareholders,   employees,   agents  or
representatives  right to indemnification  arising out of any claims by Dr. Atul
M. Mehta,  the former chief  executive  officer of the Company,  surrounding his
resignation as the chief executive officer of the Company or (B) a breach of the
Consulting Agreement by the Consultant.

        Section 8. WITHHOLDINGS. The Company may directly or indirectly withhold
from any payments made under this  Agreement all Federal,  state,  city or other
taxes and all  other  deductions  as shall be  required  pursuant  to any law or
governmental  regulation or ruling or pursuant to any contributory  benefit plan
maintained by or on behalf of the Company.

                                       15
<PAGE>

        Section 9.  CONSOLIDATION,  MERGER,  OR SALE OF ASSETS.  Nothing in this
Agreement shall preclude the Company from consolidating or merging into or with,
or transferring  all or  substantially  all of its assets to, or engaging in any
other business  combination  with, any other person or entity which assumes this
Agreement and all obligations and  undertakings of the Company  hereunder.  Upon
such a consolidation,  merger,  transfer of assets or other business combination
and  assumption,  the term "Company" as used herein shall mean such other person
or entity and this Agreement shall continue in full force and effect.

        Section 10.  NOTICES.  All notices and other  communications  under this
Agreement shall be in writing and, unless otherwise  provided  herein,  shall be
deemed duly given if delivered personally, by facsimile transmission (receipt of
which is confirmed) or upon receipt by the receiving party of any notice sent by
registered or certified mail (first-class mail, postage pre-paid, return receipt
requested) or by overnight courier or similar courier service, addressed, in the
case of the Executive,  at the address for the Executive  first set forth above,
or, in the case of the Company, at the address set forth below:

                             Elite Pharmaceuticals, Inc.
                             165 Ludlow Ave
                             Northvale, New Jersey  07647
                             Attention:  Board of Directors
                             Facsimile No.:  (201) 750-2401

or to such other  address as either  party shall have  previously  specified  in
writing to the other.

        Section  11. NO  ATTACHMENT.  Except  as  required  by law,  no right to
receive  payments  under  this  Agreement  shall  be  subject  to  anticipation,
commutation,  alienation,  sale,  assignment,  encumbrance,  charge,  pledge, or
hypothecation  or  to  execution,   attachment,  levy,  or  similar  process  or
assignment by operation of law, and any attempt,  voluntary or  involuntary,  to
effect any such action shall be null, void and of no effect; provided,  however,
that nothing in this Section 11 shall  preclude the assumption of such rights by
executors, administrators or other legal representatives of the Executive or his
estate  and their  assigning  any  rights  hereunder  to the  person or  persons
entitled thereto.

        Section 12.  SOURCE OF PAYMENT.  All  payments  provided  for under this
Agreement  shall be paid in cash  from the  general  funds of the  Company.  The
Company  shall not be required to establish a special or separate  fund or other
segregation  of assets to assure such  payments,  and, if the Company shall make
any  investments to aid it in meeting its obligations  hereunder,  the Executive
shall have no right,  title or interest  whatever in or to any such  investments
except as may otherwise be expressly  provided in a separate written  instrument
relating to such investments. Nothing contained in this Agreement, and no action
taken pursuant to its provisions, shall create or be construed to create a trust
of any kind, or a fiduciary relationship,  between the Company and the Executive
or any other person.  To the extent that any person  acquires a right to receive
payments from the Company  hereunder,  such right,  without  prejudice to rights
which  employees  may have,  shall be no greater  than the right of an unsecured
creditor of the Company.

                                       16
<PAGE>

        Section 13. BINDING  AGREEMENT;  NO ASSIGNMENT.  This Agreement shall be
binding  upon,  and shall inure to the benefit of, the Executive and the Company
and their respective permitted  successors,  assigns,  heirs,  beneficiaries and
representatives.  This  Agreement  is personal to the  Executive  and may not be
assigned by him without the prior written consent of the Company.  Any attempted
assignment in violation of this Section 13 shall be null and void.

        Section 14.  EXPENSES.  Except as set forth  herein,  each party  hereto
shall  pay  its  own  expenses   incident  to  the   preparation,   negotiation,
administration   and   enforcement  of  this  Agreement  and  the   transactions
contemplated herein.

        Section 15.  GOVERNING  LAW.  This  Agreement  shall be governed by, and
construed in  accordance  with,  the  internal  laws of the State of New Jersey,
without reference to the choice of law principles thereof.

        Section 16. DISPUTE  RESOLUTION.  At the option of either the Company or
the Executive,  any dispute,  controversy or question  arising under,  out of or
relating to this Agreement or the breach thereof, other than pursuant to Section
6 hereof,  shall be referred  for  decision by  arbitration  in the State of New
Jersey by a neutral  arbitrator  mutually  selected by the parties  hereto.  Any
arbitration   proceeding  shall  be  governed  by  the  Rules  of  the  American
Arbitration  Association  then in effect or such  rules  last in effect  (in the
event such Association is no longer in existence).  If the parties are unable to
agree upon such a neutral  arbitrator  within  twenty one (21) days after either
party has given the other  written  notice of the desire to submit the  dispute,
controversy  or question for decision as aforesaid,  then either party may apply
to the American Arbitration Association for a final and binding appointment of a
neutral  arbitrator,  however,  if such  Association is not then in existence or
does not act in the matter within forty five (45) days of any such  application,
either  party  may apply to the  presiding  judge of the  Superior  Court of any
county in New Jersey for the  appointment  of a neutral  arbitrator  to hear the
parties and such judge is hereby  authorized  to make such  appointment.  In the
event that either party exercises the right to submit a dispute,  controversy or
question  arising  hereunder  to  arbitration,   the  decision  of  the  neutral
arbitrator shall be final,  conclusive and binding on all interested persons and
no action at law or in equity shall be  instituted  or, if  instituted,  further
prosecuted  by either  party  other  than to  enforce  the award of the  neutral
arbitrator. The award of the neutral arbitrator may be entered in any court that
has  jurisdiction.  The  Executive and the Company shall each bear all their own
costs (including the fees and  disbursements of counsel)  incurred in connection
with any such  arbitration  and  shall  each pay  one-half  of the  costs of any
arbitrator appointed hereunder.

        Section 17. ENTIRE AGREEMENT. This Agreement shall constitute the entire
agreement among the parties with respect to the matters covered hereby and shall
supersede  all  previous  written,  oral or  implied  understandings  among them
(including  the  Consulting  Agreement,  the  Original  Agreement  and the First
Amended and Restated Employment Agreement) with respect to such matters.

        Section 18.  SEVERABILITY.  The invalidity of any provision hereof shall
not affect the validity,  force or effect of the remaining provisions hereof. In
the event that an arbitrator designated pursuant to the provisions of Section 16
or a court of competent  jurisdiction  determines  that any provision  contained
herein is not  enforceable as written because of the

                                       17
<PAGE>

breadth or duration of such  provision,  such arbitrator or court shall have the
authority to modify the terms of such  provision so that,  as so modified,  such
provision  shall be enforceable  to the maximum  extent  permitted by applicable
law.

        Section 19. AMENDMENTS.  This Agreement may only be amended or otherwise
modified,  and  compliance  with any provision  hereof may only be waived,  by a
writing executed by all of the parties hereto. The provisions of this Section 19
may only be amended or otherwise modified by such a writing.

        Section 20.  COUNTERPARTS.  This Agreement may be executed in any number
of  counterparts,  each of which shall be deemed to be an  original,  and all of
which shall together be deemed to constitute one and the same instrument.

                            (Signature Page Follows)

                                       18
<PAGE>

        IN WITNESS  WHEREOF,  the Company has caused this  Amended and  Restated
Employment  Agreement to be duly  executed by the  undersigned,  thereunto  duly
authorized,  and the Executive  has signed this Amended and Restated  Employment
Agreement, all as of the date first written above.

                                           ELITE PHARMACEUTICALS, INC.

                                           By: /s/ Edward Neugeboren
                                              ----------------------------------
                                              Name:  Edward Neugeboren
                                              Title: Director

                                           /s/ Bernard Berk
                                           -----------------------
                                           Bernard Berk

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