Document:

EX-4.8

THIS WARRANT AND THE UNDERLYING  SECURITIES HAVE NOT BEEN  REGISTERED  UNDER THE
SECURITIES  ACT OF  1933,  AS  AMENDED  (THE  "SECURITIES  ACT"),  OR ANY  OTHER
SECURITIES  LAWS,  HAVE  BEEN  TAKEN  FOR  INVESTMENT,  AND  MAY  NOT BE SOLD OR
TRANSFERRED  OR OFFERED FOR SALE OR  TRANSFER  UNLESS A  REGISTRATION  STATEMENT
UNDER THE SECURITIES ACT AND OTHER  APPLICABLE  SECURITIES  LAWS WITH RESPECT TO
SUCH  SECURITIES IS THEN IN EFFECT,  OR IN THE OPINION OF COUNSEL (WHICH OPINION
IS REASONABLY SATISFACTORY TO THE ISSUER OF THESE SECURITIES), SUCH REGISTRATION
UNDER THE SECURITIES ACT AND OTHER APPLICABLE SECURITIES LAWS IS NOT REQUIRED.

                                                              ------------
                                Date: ____, 2004              ------------
                                                              ------------

                  WARRANT FOR THE PURCHASE OF _______ SHARES OF

                   COMMON STOCK OF ELITE PHARMACEUTICALS, INC.

Exercise  Price:  $1.23 per share,  subject to adjustment as provided below (the
"Exercise Price")

         THIS IS TO CERTIFY that, for value  received,  ___________________  and
its  successors  and  assigns  (collectively,  the  "Holder"),  is  entitled  to
purchase,  subject to the terms and  conditions  hereinafter  set  forth,  up to
_______ shares (the "Warrant Shares") of the common stock ("Common  Stock"),  of
Elite  Pharmaceuticals,  Inc., a Delaware  corporation (the  "Company"),  and to
receive certificates for the Common Stock so purchased.

         1.  EXERCISE  PERIOD.  The period (the  "Exercise  Period") in which to
purchase  shares of Common  Stock is the period  beginning on the earlier of (i)
the  effectiveness  of a registration  statement  covering  shares of the Common
Stock issued upon  conversion of the Series A Preferred  Stock,  par value $0.01
per share, of the Company,  sold by the Company in a private placement  pursuant
to the Placement  Agent  Agreement  dated August 12, 2004,  and (ii) October __,
2005;  and end at 5:00  p.m.,  New York  time on the  earlier  of (x) the  fifth
anniversary of the effectiveness of such registration  statement and (y) October
__, 2010. This Warrant will terminate  automatically  and  immediately  upon the
expiration of the Exercise Period.

         2.  EXERCISE  OF  WARRANT;  CASHLESS  EXERCISE.  This  Warrant  may  be
exercised,  in whole or in part,  at any time and from time to time  during  the
Exercise Period. Such exercise shall be accomplished by tender to the Company of
Exercise  Price,  either (a) in cash, by wire transfer or by certified  check or
bank  cashier's  check,  payable  to  the  order  of  the  Company,  or  (b)  by
surrendering  all or a portion of the Warrant using the amount by which the Fair
Market  Value,  as defined,  exceeds the Exercise  Price to purchase a number of
shares of Common  Stock  without the payment of any cash as  illustrated  in the
formula  below  in  this  Section  2  (a  "Cashless  Exercise"),  together  with
presentation  and  surrender  to the  Company of this  Warrant  with an

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executed  subscription  in  substantially  the form attached hereto as EXHIBIT A
(the "Subscription"). Upon receipt of the foregoing, the Company will deliver to
the Holder,  as promptly  as possible  but in no event more than three  business
days, a certificate or certificates  representing  the shares of Common Stock so
purchased,  registered in the name of the Holder or its transferee (as permitted
under Section 3 below). With respect to any exercise of this Warrant, the Holder
will for all  purposes  be deemed  to have  become  the  holder of record of the
number of shares of Common Stock purchased hereunder on the date this Warrant is
delivered to the Company with a properly  executed  Subscription  and payment of
the Exercise Price (the "Exercise  Date"),  irrespective of the date of delivery
of the  certificate  evidencing  such shares,  except that,  if the date of such
receipt is a date on which the stock  transfer  books of the Company are closed,
such person will be deemed to have become the holder of such shares at the close
of business on the next  succeeding  date on which the stock  transfer books are
open.  Fractional shares of Common Stock will not be issued upon the exercise of
this Warrant.  In lieu of any fractional  shares that would have been issued but
for the immediately  preceding sentence,  the Holder will be entitled to receive
cash equal to the  current  Fair  Market  Value of such  fraction  of a share of
Common Stock on the trading day immediately  preceding the Exercise Date. In the
event this Warrant is exercised in part,  the Company  shall issue a new Warrant
to the Holder  covering  the  aggregate  number of shares of Common  Stock as to
which this Warrant remains exercisable for.

         If the Holder elects to conduct a Cashless Exercise,  the Company shall
cause to be delivered to the Holder a certificate or  certificates  representing
the number of shares of Common Stock computed using the following formula:

         X = Y (A-B)

                    A

         Where:

                    X    =   the number of shares of Common Stock to be issued
                             to Holder;

                    Y    =   the  portion of the  Warrant (in number of shares
                             of Common Stock) being  exercised by Holder (at the
                             date of such calculation) on a cashless basis;

                    A    =   the  Fair  Market  Value of one  share of  Common
                             Stock on the Exercise Date (as  calculated  below);
                             and

                    B    =   Exercise Price.

For purposes of the above calculation,  the fair market value of one share shall
mean:  (i) if the  principal  trading  market for such  securities is a national
securities exchange,  the Nasdaq Stock Market or the  Over-the-Counter  Bulletin
Board (OCBB) (or a similar  system then in use), the average last reported sales
or if only traded on the OCBB,  the average last closing  price on the principal
market for the five trading days immediately prior to the Exercise Date; or (ii)
if (i) is not applicable, and if bid and asked prices for shares of Common Stock
are reported by the National Quotation Bureau, Inc., the average of the high bid
and low asked prices so reported for the five trading days immediately  prior to
the Exercise Date.  Notwithstanding the foregoing,  if

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there is no last reported sales or closing price or bid and asked prices, as the
case may be, for the period in question, then the fair market value of one share
on the Exercise  Date shall be  determined  in good faith by, and reflected in a
formal resolution of, the board of directors of the Company.

         3. TRANSFERABILITY AND EXCHANGE.

                  (a) This  Warrant,  and the  Common  Stock  issuable  upon the
exercise hereof, may not be sold,  transferred,  pledged or hypothecated  unless
the  Company  shall have been  provided  with an opinion  of  counsel,  or other
evidence  reasonably  satisfactory to it, that such transfer is not in violation
of the Securities Act, and any applicable state securities laws.  Subject to the
satisfaction of the aforesaid condition,  this Warrant and the underlying shares
of Common  Stock  shall be  transferable  from time to time by the  Holder  upon
written notice to the Company.  If this Warrant is  transferred,  in whole or in
part, the Company shall, upon surrender of this Warrant to the Company,  deliver
to each  transferee  a  Warrant  evidencing  the  rights of such  transferee  to
purchase the number of shares of Common Stock that such  transferee  is entitled
to purchase pursuant to such transfer. The Company may place a legend similar to
the legend at the top of this  Warrant on any  replacement  Warrant  and on each
certificate  representing  shares  issuable upon exercise of this Warrant or any
replacement  Warrants.  Only a registered  Holder may enforce the  provisions of
this Warrant  against the Company.  No transfer of this Warrant may be effective
upon a failure  to  deliver  by the  Registered  Holder to the  Company  of this
Warrant and Assignment substantially in the form set forth in EXHIBIT B attached
hereto.

                  (b) This  Warrant is  exchangeable  upon its  surrender by the
registered  Holder  to the  Company  for  new  Warrants  in form  and  substance
representing  in the  aggregate  the  right to  purchase  the  number  of shares
purchasable hereunder.

         4.  ADJUSTMENTS  TO  EXERCISE  PRICE AND  NUMBER OF SHARES  SUBJECT  TO
WARRANT. The Exercise Price and the number of shares of Common Stock purchasable
upon the  exercise of this Warrant are subject to  adjustment  from time to time
upon the occurrence of any of the events specified in this Section 4.

                  (a) DIVIDENDS, ETC. In case the Company shall, with respect to
the  holders of its Common  Stock,  (i) pay a Common  Stock  dividend  or make a
distribution to its stockholders in shares of Common Stock or other  securities,
(ii) split or subdivide  its  outstanding  shares of Common Stock into a greater
number of shares, or (iii) combine its outstanding shares of Common Stock into a
smaller  number of shares,  then the Exercise Price in effect at the time of the
record  date  for  such  dividend  or on  the  effective  date  of  such  split,
subdivision or combination, and/or the number and kind of securities issuable on
such date, shall be  proportionately  adjusted so that the Holder of any Warrant
thereafter  exercised shall be entitled to receive the aggregate number and kind
of shares of Common Stock (or such other  securities other than Common Stock, as
the case may be) of the Company,  at the same aggregate Exercise Price, that, if
such Warrant had been exercised immediately prior to such date, the Holder would
have owned upon such  exercise  and been  entitled  to receive by virtue of such
dividend, distribution, split, subdivision or combination. Such adjustment shall
be made successively whenever any event listed above shall occur.

                  (b) MERGER,  ETC.  If at any time after the date hereof  there
shall be a merger or  consolidation of the Company with or into or a transfer of
all or  substantially  all of the assets of

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<PAGE>

the Company to another entity, then the Holder shall be entitled to receive upon
or after such transfer,  merger or consolidation  becoming  effective,  and upon
payment of the  Exercise  Price  then in  effect,  the number of shares or other
securities or property of the Company or of the successor  corporation resulting
from such merger or consolidation,  which would have been received by the Holder
for the shares of stock subject to this Warrant had this Warrant been  exercised
just prior to such transfer,  merger or consolidation  becoming  effective or to
the  applicable  record date  thereof,  as the case may be. The Company will not
merge or consolidate  with or into any other  corporation,  or sell or otherwise
transfer  its  property,  assets and  business  substantially  as an entirety to
another  corporation,  unless  the  corporation  resulting  from such  merger or
consolidation (if not the Company), or such transferee corporation,  as the case
may be, shall expressly  assume in writing the due and punctual  performance and
observance  of each and every  covenant  and  condition  of this  Warrant  to be
performed and observed by the Company.

                  (c)  RECLASSIFICATION,  ETC.  If at any  time  after  the date
hereof there shall be a reorganization or  reclassification of the securities as
to which  purchase  rights under this Warrant exist into the same or a different
number of  securities  of any other  class or  classes,  then the  Holder  shall
thereafter  be entitled to receive  upon  exercise of this  Warrant,  during the
period  specified  herein and upon payment of the Exercise Price then in effect,
the  number  of shares  or other  securities  or  property  resulting  from such
reorganization or reclassification, which would have been received by the Holder
for the shares of stock  subject to this  Warrant had this  Warrant at such time
been exercised.

                  (d) WEIGHTED AVERAGE ADJUSTMENT. If at any time after the date
hereof,  the Company  shall  issue  shares of Common  Stock or rights,  options,
warrants or other  securities  to subscribe  for or purchase  Common  Stock,  or
securities  convertible or  exercisable  into or  exchangeable  for Common Stock
("Common Stock Equivalents")  (excluding shares, rights,  options,  warrants, or
convertible  or  exchangeable  securities,  issued or issuable (i) in any of the
transactions  with  respect  to which an  adjustment  of the  Exercise  Price is
provided  pursuant  to  Sections  4(a) -(c)  above,  (ii) upon  exercise  of the
Warrants  or any  other  Common  Stock  Equivalents  outstanding  as of the date
hereof,  (iii) upon conversion of the Series A Preferred  Stock, par value $0.01
per share, of the Company,  (iv) pursuant to any stock option plans, stock bonus
plans or stock incentive plans, (v) in connection,  or as consideration for, any
merger,  consolidation,  acquisition  of a majority of the voting  equity of any
entity,  acquisition of any discrete  business unit of any entity or acquisition
of assets (in each case,  whether  directly  with,  by, or into the Company or a
direct or  indirect  subsidiary  of the  Company)  or (vi) with  respect  to any
issuance  or  transaction  as to which  holders of a majority  of the  Company's
Series A Preferred  Stock,  par value  $0.01 per share,  have  provided  written
consent), at a price per share lower than the Exercise Price per share of Common
Stock in effect  immediately  prior to such  issuance,  then the Exercise  Price
shall be  reduced on the date of such  issuance  to a price  (calculated  to the
nearest cent) determined by multiplying the Exercise Price in effect immediately
prior to such  issuance by a fraction,  (1) the  numerator  of which shall be an
amount  equal to the sum of (A) the number of shares of Common  Stock on a fully
diluted  basis  (assuming  conversion,  exchange or exercise of all Common Stock
Equivalents)  immediately  prior to such issuance plus (B) the quotient obtained
by dividing the consideration  received by the Company upon such issuance by the
Exercise  Price,  and (2) the  denominator of which shall be the total number of
shares of Common Stock on a fully diluted basis (assuming  conversion,  exchange
or exercise of all Common Stock  Equivalents)  immediately  after such issuance.
For the  purposes of such  adjustments,  the maximum  number of shares which the
holders of any such

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<PAGE>

Common  Stock  Equivalents  shall be  entitled to  subscribe  for or purchase or
convert  or  exchange  such  securities  into  shall be deemed to be issued  and
outstanding  as of the date of such  issuance  (whether or not such Common Stock
Equivalent  is  then  exercisable,   convertible  or   exchangeable),   and  the
consideration  received  by the  Company  therefor  shall  be  deemed  to be the
consideration  received by the Company for such Common Stock  Equivalents,  plus
the minimum  aggregate  consideration  or premiums  stated in such Common  Stock
Equivalents, to be paid for the shares covered thereby. No further adjustment of
the Exercise Price shall be made as a result of the actual issuance of shares of
Common Stock on exercise of such Common Stock Equivalents.  On the expiration or
the  termination of such Common Stock  Equivalents,  or the  termination of such
right to convert or exchange,  the Exercise Price shall  forthwith be readjusted
(but only with respect to that  portion of the  Warrants  which has not yet been
exercised)  to such Exercise  Price as would have  obtained had the  adjustments
made upon the  issuance of such  Common  Stock  Equivalents,  been made upon the
basis of the  delivery  of only the  number of shares of Common  Stock  actually
delivered upon the exercise of such Common Stock Equivalents;  and on any change
of the number of shares of Common  Stock  deliverable  upon the  exercise of any
such Common Stock Equivalents, or any change in the consideration to be received
by the Company upon such exercise,  conversion, or exchange,  including, but not
limited to, a change resulting from the anti-dilution  provisions  thereof,  the
Exercise Price, as then in effect,  shall forthwith be readjusted (but only with
respect to that  portion of the  Warrants  which has not yet been  exercised  or
converted  after such change) to such Exercise Price as would have been obtained
had an adjustment  been made upon the issuance of such Common Stock  Equivalents
not exercised  prior to such change,  or  securities  not converted or exchanged
prior to such  change,  on the basis of such change.  In case the Company  shall
issue  shares  of  Common  Stock or any such  Common  Stock  Equivalents,  for a
consideration  consisting,  in whole or in part, of property  other than cash or
its equivalent,  then the "price per share" and the  "consideration  received by
the Company" for purposes of the first sentence of this Section 4(d) shall be as
determined  in good faith by the Board of Directors  of the  Company.  Shares of
Common  Stock  owned  by  or  held  for  the  account  of  the  Company  or  any
majority-owned subsidiary shall not be deemed outstanding for the purpose of any
such computation.  In the event of any adjustment in the Exercise Price pursuant
to this Section  4(d),  the number of Warrant  Shares  issuable  hereunder  upon
exercise shall be inversely  proportionately  increased or decreased as the case
may be, such that aggregate purchase price for Warrant Shares upon full exercise
of this Warrant shall remain the same.

                  (e) Notwithstanding  any provision herein to the contrary,  no
adjustment in the Exercise Price shall be required unless such adjustment  would
require an increase or decrease of at least 1% in the Exercise Price;  provided,
however,  that any  adjustments  which by  reason of this  Section  4(e) are not
required  to be made shall be  carried  forward  and taken  into  account in any
subsequent  adjustment.  All calculations  under this Section 4 shall be made to
the nearest cent or the nearest one-hundredth of a share, as the case may be.

                  (f)  In  the  event  that  at  any  time,  as a  result  of an
adjustment made pursuant to Section 4(a) or (b) above, the Holder of any Warrant
thereafter  exercised  shall  become  entitled  to receive any shares of capital
stock of the Company other than shares of Common Stock, thereafter the number of
such other shares so receivable upon exercise of any Warrant shall be subject to
adjustment  from time to time in a manner and on terms as nearly  equivalent  as
practicable  to the  provisions  with  respect  to the  shares of  Common  Stock
contained in this

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Section 4, and the other provisions of this Warrant shall apply on like terms to
any such other shares.

                  (g) In case  any  event  shall  occur as to  which  the  other
provisions of this Section 4 are not strictly applicable but the failure to make
any adjustment would not fairly protect the purchase rights  represented by this
Warrant in accordance with the essential intent and principles hereof,  then, in
each such case, the Company shall effect such adjustment,  on a basis consistent
with the essential  intent and principles  established in this Section 4, as may
be necessary to preserve,  without dilution,  the purchase rights represented by
this  Warrant.  In no event shall any  adjustment be required or result from the
sale by the Company of securities or convertible securities or the grant or sale
of  options  or  warrants  to  purchase  shares  of its  Common  Stock  or other
securities.

         5. REGISTRATION RIGHTS. The Holder shall be entitled to the benefits of
the  Registration  Rights  Agreement  the form of which is  attached  hereto  as
EXHIBIT C.

         6.  RESERVATION  OF SHARES.  The Company agrees at all times to reserve
and hold available out of its authorized but unissued shares of Common Stock the
number of  shares  of  Common  Stock  issuable  upon the full  exercise  of this
Warrant.  The  Company  further  covenants  and agrees that all shares of Common
Stock that are delivered upon the exercise of this Warrant will,  upon delivery,
be fully paid and nonassessable and free from all taxes,  liens and charges with
respect to the purchase thereof hereunder.

         7. NOTICES TO HOLDER.  Upon any  adjustment  of the Exercise  Price (or
number of shares of Common Stock  purchasable upon the exercise of this Warrant)
pursuant to Section 4, the Company shall  promptly  thereafter,  but in no event
later than 10 days after the event causing the adjustment has occurred, cause to
be given to the Holder  written  notice of such  adjustment.  Such notice  shall
include  the  Exercise  Price  (and/or  the  number of  shares  of Common  Stock
purchasable upon the exercise of this Warrant) after such adjustment,  and shall
set forth in reasonable detail the Company's method of calculation and the facts
upon which such calculations were based. Where appropriate, such notice shall be
given in advance and included as a part of any notice required to be given under
the other provisions of this Section 7.

         In the event of (a) any  fixing by the  Company  of a record  date with
respect to the holders of any class of securities of the Company for the purpose
of  determining  which  of such  holders  are  entitled  to  dividends  or other
distributions, or any rights to subscribe for, purchase or otherwise acquire any
shares of capital stock of any class or any other securities or property,  or to
receive  any  other  right  or to give  effect  to any  split,  (b) any  capital
reorganization of the Company,  or  reclassification  or recapitalization of the
capital stock of the Company or any transfer of all or substantially  all of the
assets or business of the Company to, or  consolidation or merger of the Company
with or into,  any other entity or person,  or (c) any voluntary or  involuntary
dissolution  or  winding  up of the  Company,  then and in each  such  event the
Company will give the Holder a written notice specifying, as the case may be (i)
the record date for such split,  dividend,  distribution,  or right, and stating
the amount and character of such split,  dividend,  distribution,  or right;  or
(ii)   the   date  on   which   any   such   reorganization,   reclassification,
recapitalization,  transfer,  consolidation,  merger,  conveyance,  dissolution,
liquidation, or winding up is to take place and the time, if any is to be fixed,
as of which the  holders  of record of Common  Stock (or such  capital  stock or
securities  receivable  upon the exercise of this Warrant)

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shall be entitled to exchange  their shares of Common Stock (or such other stock
securities) for securities or other property  deliverable  upon such event.  Any
such notice shall be given at least 10 days prior to the  earliest  date therein
specified.

         8. NO RIGHTS AS A STOCKHOLDER. This Warrant does not entitle the Holder
to any voting rights,  distribution rights, dividend rights or other rights as a
stockholder of the Company, nor to any other rights whatsoever except the rights
herein set forth.

         9. ADDITIONAL  COVENANTS OF THE COMPANY.  If the Common Stock is listed
for trading on any national  securities  exchange or Nasdaq,  the Company shall,
upon  issuance  of any  shares for which this  Warrant  is  exercisable,  at its
expense, promptly obtain and maintain the listing of such shares.

         The Company shall comply with the reporting requirements of Sections 13
and  15(d)  of the  Exchange  Act  for so long as and to the  extent  that  such
requirements apply to the Company.

         The Company shall not, by amendment of its Certificate of Incorporation
or  through  any  reorganization,  transfer  of assets,  consolidation,  merger,
dissolution,  issue or sale of securities,  or any other voluntary action, avoid
or seek to avoid  the  observance  or  performance  of any of the  terms of this
Warrant.  Without limiting the generality of the foregoing, the Company (a) will
not  increase  the par value of any  shares of  capital  stock  receivable  upon
exercise of this Warrant above the amount  payable  therefor upon such exercise,
(b) will take all such actions as may be necessary or  appropriate in order that
the Company may validly and legally  issue fully paid and  nonassessable  stock,
and (c) the Company shall not, by amendment of its Certificate of  Incorporation
or Bylaws or  through  a  reorganization,  transfer  of  assets,  consolidation,
merger,  dissolution,  issuance,  or sale of securities  or any other  voluntary
action, avoid, circumvent, or seek to avoid the observance or performance of any
of the terms to be observed or performed under this Warrant by the Company,  but
shall at all times in good faith assist in carrying out of all the provisions of
this Warrant and in taking all such action as may be necessary or appropriate to
protect Holder's rights under this Warrant against impairment.

         10.  SUCCESSORS AND ASSIGNS.  This Agreement  shall be binding upon and
inure to the benefit of the Company, the Holder and their respective  successors
and permitted assigns.

         11.  NOTICES.  The Company agrees to maintain a ledger of the ownership
of this  Warrant  (the  "Ledger").  Any  notice  hereunder  shall  be  given  by
registered  or certified  mail if to the  Company,  at its  principal  executive
office and, if to the Holder, to its address shown in the Ledger of the Company;
provided,  however,  that the  Holder  may at any time on  three  business  days
written  notice to the Company  designate or substitute  one other address where
notice  is to be  given.  Notice  shall be  deemed  given  and  received  when a
certified or registered  letter,  properly  addressed with postage  prepaid,  is
deposited in the U.S. mail.

         12.  SEVERABILITY.  Every  provision  of this Warrant is intended to be
severable.  If any term or provision hereof is illegal or invalid for any reason
whatsoever, such illegality or invalidity shall not affect the remainder of this
Warrant.

         13.  GOVERNING  LAW. This Warrant shall be governed by and construed in
accordance  with the laws of the State of Delaware  without giving effect to the
principles of choice of laws thereof.

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<PAGE>

         14. ATTORNEYS' FEES. In any action or proceeding brought to enforce any
provision of this  Warrant,  the  prevailing  party shall be entitled to recover
reasonable  attorneys'  fees in addition to its costs and expenses and any other
available remedy.

         15. ENTIRE  AGREEMENT.  This Warrant  (including the Exhibits  attached
hereto) constitutes the entire understanding  between the Company and the Holder
with  respect  to  the  subject   matter   hereof,   and  supersedes  all  prior
negotiations,  discussions,  agreements  and  understandings  relating  to  such
subject matter.

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         IN WITNESS WHEREOF,  the Company has caused this Warrant to be executed
by its duly authorized officer as of the date first set forth above.

                                          Elite Pharmaceuticals, Inc.

                                      By:
                                          -------------------------------------
                                          Bernard Berk, Chief Executive Officer

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<PAGE>

                                    EXHIBIT A

                                SUBSCRIPTION FORM

(To be Executed by the Holder to Exercise  the Rights To Purchase  Common  Stock
Evidenced by the Within Warrant)

         The undersigned hereby irrevocably subscribes for _______ shares of the
Common  Stock of the Company  pursuant to and in  accordance  with the terms and
conditions of the Warrant to which this form is a part, and hereby makes payment
of $_______  therefor by  tendering  cash,  wire  transferring  or  delivering a
certified check or bank cashier's check, payable to the order of the Company (or
by electing a Cashless  Exercise as provided in Section 2 of the  Warrant).  The
undersigned  requests that a  certificate  for the Common Stock be issued in the
name of the  undersigned  and be  delivered  to the  undersigned  at the address
stated below.  If said  certificate for the Common Stock is less than all of the
shares purchasable  pursuant to the Warrant, the undersigned requests that a new
Warrant  of like  tenor for the  balance  of the  remaining  shares  purchasable
thereunder be delivered to the undersigned at the address stated below.

         In connection with the issuance of the Common Stock, I hereby represent
to the  Company  that I am  acquiring  the Common  Stock for my own  account for
investment  and  not  with a view  to,  or for  resale  in  connection  with,  a
distribution  of the shares within the meaning of the Securities Act of 1933, as
amended  (the  "Securities  Act")  except to the  extent,  the  Common  Stock is
registered under the Securities Act for distribution.

         I  understand  that  because the Common  Stock has not been  registered
under the Securities Act, I must hold such Common Stock indefinitely  unless the
Common Stock is  subsequently  registered and qualified under the Securities Act
or is exempt from such registration and qualification.  I shall make no transfer
or  disposition  of the  Common  Stock  unless  (a) in the  opinion  of  counsel
reasonably  satisfactory to the Company such transfer or disposition can be made
without  registration under the Securities Act by reason of a specific exemption
from such registration and such qualification,  or (b) a registration  statement
has been filed pursuant to the  Securities  Act and has been declared  effective
with respect to such disposition.

         I agree that each  certificate  representing the Common Stock delivered
to me shall bear substantially the same legend as set forth on the front page of
the Warrant.

         I  further  agree  that  the  Company  may  place  stop  orders  on the
certificates evidencing the Common Stock with the transfer agent, if any, to the
same effect as the above legend. The legend and stop transfer notice referred to
above shall be removed only upon my  furnishing  to the Company of an opinion of
counsel (reasonably  satisfactory to the Company) to the effect that such legend
may be removed.

                                       A-1

<PAGE>

Date:_______________________________     Signed:________________________________

                                         Address:_______________________________

                                      A-2
<PAGE>

                                    EXHIBIT B

                                   ASSIGNMENT

        (To be Executed by the Holder to Effect Transfer of the Warrant)

         For Value Received __________________________ hereby sells, assigns and
transfers  to  _________________________  the  Warrant  attached  hereto and the
rights  represented  thereby to  purchase  _________  shares of Common  Stock in
accordance  with the terms and conditions  hereof,  and does hereby  irrevocably
constitute  and appoint  _________________________  as attorney to transfer such
Warrant on the books of the Company with full power of substitution.

         The Assignor shall not transfer or dispose of the Warrant unless (a) in
the opinion of counsel reasonably  satisfactory to the Company, such transfer or
disposition can be made without  registration  under the Securities Act of 1933,
as amended (the "Securities  Act"), by reason of a specific  exemption from such
registration and such  qualification,  or (b) a registration  statement has been
filed  pursuant  to the  Securities  Act and has been  declared  effective  with
respect to such disposition.

Dated:________________________             Signed: _____________________________

Please print or typewrite                  Please insert Social Security
name and address of                        or other Tax Identification
assignee:                                  Number of Assignee:

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

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

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

                                       B-1

<PAGE>

                                    EXHIBIT C

                      FORM OF REGISTRATION RIGHTS AGREEMENT

                                       C-1EXHIBIT 10.11

                           ELITE PHARMACEUTICALS, INC.
                             SUBSCRIPTION AGREEMENT

         Name of Subscriber:        __________________________________________

1.       SUBSCRIPTION TERMS - SECURITIES

         1.1 SUBSCRIPTION.  The undersigned Investor,  hereby subscribes for and
agrees to purchase  ______ shares (the "Shares"),  of Series A Preferred  Stock,
par value $0.01 per share of the Company (the "Series A Preferred Stock"),  ____
short term  warrants to purchase  shares of Common Stock (the "ST  Warrant") and
________ long term warrants to purchase shares of Common Stock (the "LT Warrant"
and  together  with the ST Warrant and the Shares,  the  "Securities")  of Elite
Pharmaceuticals,  Inc. (the "Company") for a total investment of  $____________.
For purposes of this Subscription Agreement, the shares of Common Stock issuable
upon the  conversion  of the Series A Preferred  Stock are referred to herein as
the  "Conversion  Shares," the shares of Common Stock  issuable upon exercise of
the LT  Warrant  and the ST  Warrant  are  referred  to herein  as the  "Warrant
Shares," and the Conversion Shares and the Warrant Shares are referred to herein
collectively as the "Underlying Shares."

         1.2   SUBSCRIPTION   PAYMENT.   As  payment   for  this   subscription,
simultaneously  with the execution  hereof:  The Investor shall immediately wire
the  amount  specified  in  Section  1.1 above,  pursuant  to the wire  transfer
instructions  specified  on Exhibit A or shall send to the  address set forth on
Exhibit A, via overnight  courier,  a check  payable to "Elite  Pharmaceuticals,
Inc. Escrow Account."

         1.3  ACCEPTANCE OR REJECTION OF SUBSCRIPTION.

              (a) The Investor  understands and agrees that the Company reserves
the  right  to  reject  this  subscription  for the  Securities  in its sole and
absolute discretion, in whole or in part and at any time prior to the completion
of the  offering,  notwithstanding  prior  receipt by the  Investor of notice of
acceptance of the Investor's subscription; and

              (b) In the event of rejection of this subscription, the Investor's
subscription  payment  shall  be  promptly  returned  to  the  Investor  without
deduction or interest,  and this  Subscription  Agreement shall have no force or
effect.

2.       REPRESENTATIONS AND WARRANTIES.

         2.1 INVESTOR REPRESENTATIONS AND WARRANTIES. The Investor acknowledges,
represents and warrants to, and agrees with, the Company as follows:

              (a) The  Investor  is  aware  this is a  "best  efforts"  offering
subject to the sale of at least  $4,000,000 of the Securities which must be sold
and that the Investor's  investment  involves a high degree of risk as described
in the Confidential Term Sheet dated August 13, 2004 (the "Term Sheet")

<PAGE>

              (b) The  Investor  is aware that there is no  assurance  as to the
future performance of the Company;

              (c) The Investor is purchasing  the  Securities for the Investor's
own account for investment and not with a view to or for sale in connection with
the distribution of the Securities or the Underlying  Shares in violation of the
Securities Act of 1933, as amended (the  "Securities  Act"). The Investor agrees
that he, she or it must bear the economic risk of the Investor's  investment for
an indefinite period of time because,  among other reasons,  the Securities have
not been registered under the Securities Act or under the securities laws of any
states and, therefore, cannot be resold, pledged, assigned or otherwise disposed
of unless they are  subsequently  registered  under the Securities Act and under
applicable securities laws of such states or an exemption from such registration
is available.

              (d) The  Investor  hereby  authorizes  the  Company  to place  the
following  legend  denoting the restriction on the Securities and the Underlying
Shares:

         "THE SECURITIES  REPRESENTED BY THIS CERTIFICATE (AND/OR THE SECURITIES
ISSUABLE UPON CONVERSION OR EXERCISE  HEREOF) HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES  ACT OF 1933,  AS AMENDED  (THE  "SECURITIES  ACT") OR WITH ANY STATE
SECURITIES  COMMISSION,  AND MAY NOT BE TRANSFERRED OR DISPOSED OF BY THE HOLDER
IN THE  ABSENCE  OF A  REGISTRATION  STATEMENT  WHICH  IS  EFFECTIVE  UNDER  THE
SECURITIES ACT AND  APPLICABLE  STATE LAWS AND RULES,  OR,  UNLESS,  IMMEDIATELY
PRIOR  TO THE TIME SET FOR  TRANSFER,  SUCH  TRANSFER  MAY BE  EFFECTED  WITHOUT
VIOLATION  OF THE  SECURITIES  ACT AND OTHER  APPLICABLE  STATE  LAWS AND RULES.
NOTWITHSTANDING  THE FOREGOING,  THE SECURITIES (AND/OR THE SECURITIES  ISSUABLE
UPON  CONVERSION OR EXERCISE  HEREOF) MAY BE PLEDGED IN  CONNECTION  WITH A BONA
FIDE  MARGIN  ACCOUNT  OR OTHER  LOAN OR  FINANCING  ARRANGEMENT  SECURED BY THE
SECURITIES (AND/OR THE SECURITIES ISSUABLE UPON CONVERSION OR EXERCISE HEREOF)."

         In  addition,  the  Investor  agrees  that the  Company  may place stop
transfer  orders with its transfer  agent with respect to such  certificates  in
order to implement the  restrictions on transfer set forth in this  Subscription
Agreement.  The legend set forth above  shall be removed  and the Company  shall
issue a certificate  without such legend to the holder of the Securities and the
Underlying  Shares upon which it is stamped,  if, unless  otherwise  required by
state securities laws, (i) such Securities and Underlying  Shares are registered
for resale under the Securities  Act, (ii) such holder provides the Company with
an opinion of counsel,  in a form reasonably  acceptable to the Company,  to the
effect  that a sale,  assignment  or transfer of the  Securities  or  Underlying
Shares  may be  made  without  registration  under  the  Securities  Act and the
transferee  agrees to be bound by the terms and conditions of this  Subscription
Agreement, (iii) such holder provides the Company with reasonable assurances (in
the form of seller and broker  representation  letters)  that the  Securities or
Underlying  Shares, as the case may be, can be sold pursuant to Rule 144 or (iv)
such holder provides the Company with reasonable  assurances that the Securities
or  Underlying  Shares,  as the case may be, can be sold  pursuant  to Rule 144.
Following the date the  Registration  Statement (as defined in the  Registration
Rights Agreement) is declared  effective by the SEC or at such earlier time as a
legend is no longer  required,  the

                                       2
<PAGE>

Company will no later than five (5) business  days  following the receipt by the
Company's transfer agent of a legended certificate from such holder representing
such holder's  Securities or Underlying Shares (and an opinion of counsel to the
extent  required  hereby),  deliver or cause to be  delivered  to such  holder a
certificate  representing such Securities or Underlying Shares that is free from
all  restrictive  and other  legends.  If the  Company  shall  fail to deliver a
certificate  representing such Securities or Underlying Shares as required,  and
if such holder purchases (in an open market  transaction or otherwise) shares of
Common  Stock to deliver in  satisfaction  of a sale by such holder of shares of
Common  Stock that the  undersigned  anticipated  receiving  from the Company (a
"Buy-In"),  then the Company  shall,  within five (5)  business  days after such
holder's written request and in such holder's discretion, either (i) pay cash to
such holder in an amount equal to such holder's total purchase price  (including
reasonable  brokerage  commissions,  if any) for the  shares of Common  Stock so
purchased  (the "Buy-In  Price"),  at which point the  Company's  obligation  to
deliver such shares of Common Stock shall  terminate or (ii) promptly  honor its
obligation  to  deliver  to  the  Purchaser  a   certificate   or   certificates
representing  such  shares  of Common  Stock  and pay cash to such  holder in an
amount  equal to the excess (if any) of the Buy-In Price over the product of (A)
such number of shares of Common  Stock  multiplied  by (B) the Closing Bid Price
(as  defined  in  the  Warrants)  on  the  date  of  delivery  of  the  legended
certificate.

              (e) The  Investor has the  financial  ability to bear the economic
risk of the Investor's  investment in the Company  (including its possible total
loss),  has adequate  means for providing for the  Investor's  current needs and
personal  contingencies  and  have no need for  liquidity  with  respect  to the
Investor's investment in the Company;

              (f) The Investor has such  knowledge  and  experience in financial
and business  matters as to be capable of evaluating  the merits and risks of an
investment in the  Securities and have  obtained,  in the  Investor's  judgment,
sufficient  information  from the Company to evaluate the merits and risks of an
investment in the Company;

              (g) The Investor:

                        (1) Has carefully read this  Subscription  Agreement and
                        the Term Sheet,  understand and have evaluated the risks
                        of a purchase of the  Securities  and has relied  solely
                        (except as indicated in  subsections  (2) and (3) below)
                        on the information  contained in the Term Sheet and this
                        Subscription Agreement;

                        (2) Has not  relied  upon any  representations  or other
                        information  (whether oral or written) from the Company,
                        or any of its  agents  other  than as set  forth in this
                        Subscription  Agreement,  the Term Sheet,  the Company's
                        Proxy Statement filed May 19, 2004 with the SEC, and the
                        SEC Documents;

                        (3) Has been  provided  an  opportunity  to  obtain  any
                        additional  information  concerning  the  Offering,  the
                        Company  and all other  information  to the  extent  the
                        Company  possesses  such  information  or can acquire it
                        without  unreasonable  effort or expense and the Company
                        has

                                       3
<PAGE>

                        made   available  to  the  Investor  all  documents  and
                        information that the Investor has requested  relating to
                        an investment in the Company;

                        (4) Has been given the  opportunity to ask questions of,
                        and receive  answers from,  the Company  concerning  the
                        terms and  conditions  of the Offering and other matters
                        pertaining to this investment; and

                        (5) Has carefully  considered and have to the extent the
                        Investor believes such discussion  necessary,  discussed
                        with  the  Investor's   professional,   legal,  tax  and
                        financial  advisers the  suitability of an investment in
                        the  Company  for  the  Investor's  particular  tax  and
                        financial situation and the Investor has determined that
                        the  Securities  are  a  suitable   investment  for  the
                        Investor.

              (h) In making the  Investor's  decision to purchase the Securities
herein   subscribed  for,  the  Investor  has  relied  solely  upon  independent
investigations  made by the  Investor.  Neither  such  inquiries  nor any  other
investigation conducted by or on the undersigned's behalf or its representatives
or counsel shall modify,  amend or affect the undersigned's right to rely on the
truth,   accuracy  and  completeness  of  such  information  and  the  Company's
representations and warranties contained in this Subscription Agreement;

              (i) If  the  undersigned  is a  corporation,  trust,  partnership,
employee  benefit  plan,  individual  retirement  account,  Keogh Plan, or other
tax-exempt  entity,  it is authorized and qualified to become an investor in the
Company and the person  signing  this  Subscription  Agreement on behalf of such
entity has been duly authorized by such entity to do so;

              (j)  No  representations  or  warranties  have  been  made  to the
undersigned by the Placement Agent, or any of its officers,  employees,  agents,
affiliates or attorneys;

              (k) The information  contained in Section 2.2 of this Subscription
Agreement is true and correct  including any information  which the Investor has
furnished to the Company with respect to the Investor's  financial  position and
business experience, is correct and complete as of the date of this Subscription
Agreement and if there should be any material change in such  information  prior
to acceptance of the  Investor's  subscription,  the Investor shall furnish such
revised or corrected information to the Company;

              (l) Subject to Section 4 hereof, the Investor hereby  acknowledges
and the  Investor is aware that,  except for any  rescission  rights that may be
provided  under  applicable  state laws, the Investor is not entitled to cancel,
terminate or revoke this  subscription,  and any  agreements  made in connection
herewith shall survive his or her death or disability.

              (m) The Investor is aware that the offering of  Securities  for an
aggregate purchase price of up to $6,600,000 on substantially the same terms and
conditions  set forth in this  Subscription  Agreement  may occur in one or more
closings,  each upon the same terms and no longer than twenty (20) business days
between the first such closing and the final such closing;

                                       4
<PAGE>

         2.2 INVESTOR  REPRESENTATIONS  AND WARRANTIES  CONCERNING  SUITABILITY,
ACCREDITED  INVESTOR AND ELIGIBLE  CLIENT  STATUS.  The Investor  represents and
warrants the following information:

              (a) The  following  information  should be  provided by the person
making  the  investment  decision  whether  on his own behalf or on behalf of an
entity:

                        (1) Name of Investor:                       Age:
                                             ----------------------     ------
                        (2) Name of person making investment decision

                                                                   Age:
                        -----------------------------------------      ------
                        (Print)

                        (3) Principal  residence address and telephone number:
                            (____)

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

                        Email Address:
                                      ---------------------------------------
                        (4) Secondary  residence address and telephone number:
                            (____)

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

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

                        The  Investor  has no present  intention  of  becoming a
                        resident of any other state or jurisdiction.

                        (5) Name, address, telephone number and facsimile number
                        of employer or business:

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

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

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

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

                        (i)  Nature of business
                                               ------------------------------
                        (ii) Position and nature of responsibilities

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

                        (6) Length of employment or in current position

                        (7) Prior  employment,  positions or occupations  during
                        the past five  years (and the  inclusive  dates of each)
                        are as follows:

                        Nature of Employment,
                        or Occupation            Position/ Duties    From/To

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

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

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

                                       5
<PAGE>

                        Attach  additional  pages to  answer  any  questions  in
                        greater detail, if necessary.

                        Each  prospective  investor  should answer the following
                        questions, which pertain to income, tax rate, net worth,
                        liquid  assets,   and  non-liquid  assets  by  including
                        spousal contribution even though the investment shall be
                        held in single name.

                        (8) Business or professional education and the degree(s)
                        received are as follows:

                        School              Degree          Year Received

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

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

                  (b)   Accredited   Investor   Representations.   Initial   all
appropriate  spaces on the following  pages  indicating the basis upon which the
undersigned  qualifies  as an  accredited  investor  (please  initial only where
appropriate). [Must Initial One]

         For Individual Investors Only:

         (1)      I certify that I am an accredited  investor  because I have an
                  individual  net worth,  or my spouse and I have  combined  net
                  worth, in excess of $1,000,000. For purposes of this question,
                  "net  worth"  means the excess of total  assets at fair market
                  value, including home, home furnishings and automobiles,  over
                  total liabilities.

         (2a)     I  certify  that I am an  accredited  investor  because  I had
                  individual income (exclusive of any income  attributable to my
                  spouse)  of  more  than  $200,000  in  2002  and  2003  and  I
                  reasonably  expect to have an  individual  income in excess of
                  $200,000 this year.

         (2b)     Alternatively,  my spouse and I have joint income in excess of
                  $300,000 in each applicable year.

         (3)      I am a director or executive officer of the Company.

         Other Investors:

         (4)      ______The   undersigned  certifies  that  it  is  one  of  the
                  following:  any bank as  defined  in  Section  3(a)(2)  of the
                  Securities  Act whether  acting in its individual or fiduciary
                  capacity;  any broker or dealer registered pursuant to section
                  15 of the

                                       6
<PAGE>

                  Securities Exchange Act of 1934;  insurance company as defined
                  in Section 2(13) of the  Securities  Act;  investment  company
                  registered  under  the  Investment  Company  Act of  1940 or a
                  business development company as defined in Section 2(a)(48) of
                  that Act; Small Business  Investment  Company  licensed by the
                  U.S. Small Business Administration under Section 301(c) or (d)
                  of the  Small  Business  Investment  Act  of  1958;  any  plan
                  established   and   maintained  by  a  state,   its  political
                  subdivisions,  or any agency or  instrumentality of a state or
                  its political subdivisions,  for the benefit of its employees,
                  if such  plan  has  total  assets  in  excess  of  $5,000,000;
                  employee  benefit  plan  within the  meaning of Title I of the
                  Employee  Retirement  Income  Security  Act  of  1974,  if the
                  investment decision is made by a plan fiduciary, as defined in
                  Section 3(21) of such Act, which is either a bank, savings and
                  loan association,  insurance company, or registered investment
                  advisor,  or if the employee  benefit plan has total assets in
                  excess  of  $5,000,000,  or  if  a  self-directed  plan,  with
                  investment   decisions   made  solely  by  persons   that  are
                  accredited investors.

         (5)      ______The  undersigned certifies that it is a private business
                  development  company as defined in Section  202(a)(22)  of the
                  Investment Advisors Act of 1940.

         (6)      ______The  undersigned  certifies  that  it is a  organization
                  described in Section  501(c)(3) of the U.S.  Internal  Revenue
                  Code, corporation, limited liability company, Massachusetts or
                  similar  business  trust or  partnership,  not  formed for the
                  specific  purpose of acquiring the  securities  offered,  with
                  total assets in excess of $5,000,000.

         (7)      ______The undersigned certifies that it is a trust, with total
                  assets in excess of  $5,000,000,  not formed for the  specific
                  purpose of acquiring the securities offered, whose purchase is
                  directed  by a  sophisticated  person  as  described  in  Rule
                  506(b)(2)(ii) of the Securities Act.

         (8)      ______The  undersigned certifies that it is an entity in which
                  all of the equity owners are accredited investors.

         2.3 DISCLOSURE. In reliance upon exemptions contained in the Securities
Act and Rule 506 promulgated  thereunder and applicable  state  securities laws,
the Securities are being sold without registration under the Securities Act. The
Placement  Agent, on behalf of the Company,  has delivered the Term Sheet to the
Investor.  In addition,  the Company is offering the  Securities  utilizing this
Agreement  and the other  Subscription  Agreements,  the form of ST  Warrant  in
substantially  the form attached  hereto as EXHIBIT B, the form of LT Warrant in
substantially  the form attached  hereto as EXHIBIT C, the  Registration  Rights
Agreement  in  substantially  the form  attached  hereto  as  EXHIBIT  D and the
Certificate of Designations in substantially the form attached hereto as EXHIBIT
E and the  other  agreements,  instruments  and  documents  contemplated  hereby
(collectively  the  "Offering  Documents").  The  Investor  hereby  acknowledges
receipt  of the  foregoing  Offering  Documents  which are  delivered  with this
Subscription  Agreement and receipt of the Term Sheet. The Investor also has had
access to all SEC Documents and the opportunity to review them.

                                       7
<PAGE>

         2.4 PROHIBITION ON NET SHORT POSITIONS.  From and including the date of
this  Subscription  Agreement  until  the  effective  date  of the  Registration
Statement to be filed by the Company  pursuant to the terms of the  Registration
Rights Agreement,  the Investor agrees that the Investor will not maintain a Net
Short Position in the Company Stock.  "Net Short  Position"  shall mean that the
aggregate  number of shares of any Common  Stock held in a short  position  with
respect to the  Securities  by the  Investor  exceeds  the number of  Underlying
Shares issuable to the Investor at such time.

         2.5  REPRESENTATIONS  AND  WARRANTIES  OF  THE  COMPANY.   The  Company
represents  and  warrants  to each  investor  purchasing  the  Securities  which
representations  and warranties which are true and correct and shall be true and
correct as of the time of the Closing, as follows:

              2.5.1  SECURITIES LAW COMPLIANCE.  The Term Sheet and the Offering
Documents  shall not contain any untrue  statement of a material fact or omit to
state any material fact  necessary in order to make the statements  therein,  in
light of the  circumstances  in which they were made, not misleading.  If at any
time  prior to the  completion  of the  Offering  or other  termination  of this
Subscription  Agreement  any  event  shall  occur as a result  of which it might
become  necessary to amend or supplement the Offering  Documents so that they do
not  include  any untrue  statement  of any  material  fact or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances then existing,  not misleading,  the Company shall promptly notify
the  Placement  Agent and shall supply the  Placement  Agent with  amendments or
supplements  correcting  such  statement or omission  (provided that such notice
shall not be deemed to satisfy the condition in Section 4(a)). The Company shall
also  provide  the  Placement  Agent  for  delivery  to all  offerees  and their
representatives,  if any, any information,  documents and instruments  which the
Placement  Agent and the Company deem necessary to comply with state and federal
law applicable to the Offering.

              2.5.2  ORGANIZATION.  The Company is a corporation duly organized,
validly  existing and in good  standing  under the laws of the State of Delaware
and has all requisite  power and authority to own and lease its  properties,  to
carry on its  business as  currently  conducted,  to execute  and  deliver  this
Subscription  Agreement  and the other  Offering  Documents and to carry out the
transactions  contemplated by this Subscription Agreement and the other Offering
Documents,  as  appropriate.  The Company is duly  licensed or  qualified  to do
business as a foreign  corporation in each  jurisdiction in which the conduct of
its  business  or  ownership  or leasing of is  properties  requires it to be so
qualified, except where the failure to be so qualified would not have a Material
Adverse Effect.

              2.5.3  CAPITALIZATION.  The  authorized,  issued  and  outstanding
capital  stock of the  Company  prior to the  consummation  of the  transactions
contemplated  hereby is as set forth on Schedule  2.5.3  hereto.  All issued and
outstanding shares of Common Stock of the Company are validly issued, fully paid
and nonassessable and have not been issued in violation of the preemptive rights
of any  securityholder  of the  Company.  All prior sales of  securities  of the
Company were issued in compliance  with the Securities Act and applicable  state
securities laws.

              2.5.4  DERIVATIVE  SECURITIES;  RIGHTS.  Except  as  disclosed  in
SCHEDULE  2.5.4 or as set forth in the most  recent Form 10-Q or Form 10-K filed
by the  Company  prior to the date  hereof,  there are not,  nor shall  there be
immediately prior to the Closing, any outstanding

                                       8
<PAGE>

warrants,   options,   agreements,   convertible  or  exchangeable   securities,
preemptive  rights to subscribe for or other  commitments  pursuant to which the
Company or any of its  Subsidiaries  is, or may become,  obligated  to issue any
shares of its capital stock or other securities of the Company and this Offering
and the issuance of the Underlying  Shares shall not cause any  anti-dilution or
other  adjustments  to, or modified or incremental  rights with respect to, such
securities or commitments. Since the most recent Form 10-Q or Form 10-K filed by
the  Company  prior  to the date  hereof,  there  has not  been  any  additional
re-pricing  of any  outstanding  warrants,  options or other  securities  of the
Company.  There are no outstanding  stock  appreciation,  phantom stock,  profit
participation,  or similar  rights  with  respect to the  Company.  There are no
voting trusts,  proxies,  or other agreements or understandings  with respect to
the voting of any capital stock of the Company. The minute books (containing the
records  of  meetings  of the  stockholders,  the  board of  directors,  and any
committees of the board of  directors),  the stock  certificate  books,  and the
stock record books of the Company are correct and complete.

              2.5.5  SUBSIDIARIES AND INVESTMENTS.  SCHEDULE 2.5.5 sets forth as
of the  date  hereof  for  each  Subsidiary  of the  Company  (i) its  name  and
jurisdiction of incorporation;  (ii) the number of shares of authorized  capital
stock of each  class of its  capital  stock;  (iii) the  number  of  issued  and
outstanding shares of each class of its capital stock, all of which are owned by
the  Company;  and  (iv)  its  directors  and  officers.  Each  Subsidiary  is a
corporation  duly organized,  validly  existing,  and in good standing under the
laws  of  the  jurisdiction  of  its  incorporation.  Each  Subsidiary  is  duly
authorized to conduct  business and is in good  standing  under the laws of each
jurisdiction  where such  qualification  is  required,  except where the failure
shall not have a Material  Adverse  Effect.  Each  Subsidiary has full power and
authority and all licenses,  permits,  and authorizations  necessary to carry on
the  businesses  in which it is engaged  and in which it  presently  proposes to
engage and to own and use the properties  owned and used by it, except where the
failure shall not have a Material Adverse Effect. The Company has made available
to the Placement  Agent correct and complete copies of the charter and bylaws of
each Subsidiary (as amended to date).  All of the issued and outstanding  shares
of capital stock of each  Subsidiary  has been duly  authorized  and are validly
issued,  fully paid,  and  nonassessable.  The Company  holds of record and owns
beneficially all of the outstanding shares of each Subsidiary, free and clear of
any restrictions on transfer (other than  restrictions  under the Securities Act
and state  securities  laws),  taxes,  security  interests,  options,  warrants,
purchase rights, contracts,  commitments,  equities,  claims, and demands. There
are  no  outstanding  or  authorized   options,   warrants,   purchase   rights,
subscription rights,  conversion rights,  exchange rights, or other contracts or
commitments  that could  require any of the Company or any  Subsidiary  to sell,
transfer,  or otherwise  dispose of any capital  stock of any of a Subsidiary or
that could require any Subsidiary to issue,  sell, or otherwise  cause to become
outstanding  any of its  own  capital  stock.  There  are no  outstanding  stock
appreciation,  phantom  stock,  profit  participation,  or similar  rights  with
respect  to any  Subsidiary.  There  are no  voting  trusts,  proxies,  or other
agreements or understandings  with respect to the voting of any capital stock of
any  Subsidiary.  The minute  books  (containing  the records of meetings of the
stockholders,  the  board  of  directors,  and any  committees  of the  board of
directors),  the stock  certificate  books,  and the stock  record books of each
Subsidiary  are correct and complete.  None of the  Subsidiaries  are in default
under or in violation of any provision of their  respective  charters or bylaws.
Neither the Company nor any Subsidiary controls,  directly or indirectly, or has
any direct or indirect equity  participation  in any  corporation,  partnership,
trust, or other business association which is not a Subsidiary.

                                       9
<PAGE>

              2.5.6 FINANCIAL  STATEMENTS.  The Financial Statements included in
the Offering  Documents  and the SEC Documents  are: (i) in accordance  with all
books, records and accounts of the Company; (ii) are true, correct and complete;
and (iii) have been prepared in accordance  with generally  accepted  accounting
principles,  consistently  applied.  The Financial Statements fairly present, in
all material respects, the financial condition,  results of operations,  changes
in stockholders  equity and cash flow as of the applicable  dates and/or for the
periods  covered.  The  Company  has  no  material  liabilities,  contingent  or
otherwise,  other than:  (a)  liabilities  reflected on the Most Recent  Balance
Sheet; (b) liabilities incurred in the ordinary course of business subsequent to
the date of such Financial  Statements;  and (c) obligations under contracts and
commitments  incurred in the ordinary  course of business and not required under
generally  accepted  accounting  principles  to be reflected  in such  Financial
Statements.  The  Financial  Statements  complied  as to  form  in all  material
respects with the rules and regulations of the SEC.

              2.5.7 ABSENCE OF CHANGES.  Except as set forth on Schedule  2.5.7,
since the Most Recent Balance Sheet, neither the Company nor any Subsidiary has:

              (i) incurred any liabilities or obligations, direct or contingent,
       not in the ordinary course of business,

              (ii) entered into any  transaction  not in the ordinary  course of
       business,  which  is  material  to the  business  of the  Company  or any
       Subsidiary,

              (iii) incurred any adverse change or any development involving, so
       far as the Company or any  Subsidiary  can now  reasonably  foresee which
       would have a Material  Adverse  Effect,  and  neither the Company nor any
       Subsidiary  has  become a party to,  and  neither  the  business  nor the
       property of the Company or any  Subsidiary has become the subject of, any
       litigation,  whether or not in the  ordinary  course of their  respective
       businesses,

              (iv)   declared,   set  aside  or  paid  any   dividend  or  other
       distribution  of the assets of the Company  with respect to any shares of
       capital  stock of the  Company  or  repurchased,  redeemed  or  otherwise
       acquired any outstanding securities of Company,

              (v)  suffered  any damage,  destruction  or loss of the  Company's
       assets or  properties,  whether or not covered by  insurance,  except for
       such occurrences which, either individually or in the aggregate, have not
       had and would not have a Material Adverse Effect, or

              (vi) given any waiver of a  valuable  right or of a material  debt
       owed to it,  except  for  such  waivers,  either  individually  or in the
       aggregate,  that  have  not had and  would  not have a  Material  Adverse
       Effect, or

              (vii)  change  in  the  Company's  authorized  capital  stock,  or
       issuance of options,  warrants  or other  rights to purchase  the capital
       stock or other securities of the Company or any Subsidiary.

              2.5.8 TITLE. Except as disclosed in SCHEDULE 2.5.8 or as set forth
in the SEC  Documents,  each of the  Company and the  Subsidiaries  has good and
marketable  title to their

                                       10
<PAGE>

respective  properties  and  assets,  free  and  clear  of all  liens,  charges,
encumbrances  or  restrictions,  except  liens for the payment of current  taxes
which are not yet  delinquent  ad liens which arise in the  ordinary  course and
will not affect in any material respect the properties and assets of the Company
and its Subsidiaries; all of the leases and subleases under which the Company or
any Subsidiary is the lessor or sublessor of properties or assets or under which
the Company or any Subsidiary  holds properties or assets as lessee or sublessee
are in full force and effect, and neither the Company (nor any Subsidiary) is in
default in any material  respect with respect to any of the terms or  provisions
of any of such leases or subleases,  and no material  claim has been asserted by
anyone adverse to rights of the Company or any Subsidiary as lessor,  sublessor,
lessee or sublessee  under any of the leases or subleases  mentioned  above,  or
affecting or questioning the right of the Company or any Subsidiary to continued
possession of the leased or subleased premises or assets under any such lease or
sublease.  The Company and each Subsidiary owns or leases all such properties as
are necessary to their respective operations as now conducted.

              2.5.9 LITIGATION.  Except as set forth in the SEC Documents, there
is no action, suit,  investigation,  inquiry or similar governmental proceeding,
claim  or  proceeding  at  law  or  in  equity  by  or  before  any  arbitrator,
governmental instrumentality or other agency now pending or, to the Knowledge of
any of the Company or its  Subsidiaries,  threatened  against the Company or any
Subsidiary  or to the  Knowledge of the Company,  any officer or director of the
Company  or any  Subsidiary  (or  basis  therefor  known to the  Company  or any
Subsidiary) the adverse outcome of which would have a Material Adverse Effect or
that seeks to  prevent,  enjoin,  alter or delay the  transactions  contemplated
hereby or by the Offering  Documents.  Neither the Company nor any Subsidiary is
subject to any  judgment,  order,  writ,  injunction  or decree of any  federal,
state,  municipal  or other  governmental  instrumentality,  commission,  board,
bureau,  agency or  instrumentality,  domestic  or  foreign  or  self-regulatory
organization (including the American Stock Exchange).

              2.5.10 NON-DEFAULT; NON-CONTRAVENTION. Neither the Company nor any
of the  Subsidiaries is in breach of, or in default under, any term or provision
of any indenture, mortgage, deed of trust, lease, note, loan or credit agreement
or any other  agreement or  instrument  evidencing  an  obligation  for borrowed
money,  or any other  agreement or instrument to which it is a party or by which
it or any of its  properties  may be bound or affected.  Neither the Company nor
any of the  Subsidiaries  is in violation of (i) any provision of its charter or
Bylaws or (ii) any franchise, license, permit, judgment, decree or order, or any
statute,  rule or  regulation  that,  in the case of this  clause  (ii),  would,
individually or in the aggregate,  have a Material  Adverse Effect.  Neither the
execution and delivery of the Subscription  Agreements or the Related Documents,
nor  the  issuance  and  sale  or  delivery  of the  securities  comprising  the
Securities and the Placement Agent Warrants,  nor the issuance of the Underlying
Shares  nor the  consummation  of any of the  transactions  contemplated  in the
Subscription  Agreements or the other Offering Documents,  nor the compliance by
the Company with the terms and provisions hereof or thereof, has conflicted with
or will conflict  with, or has resulted in or will result in a breach of, any of
the material terms and provisions  of, or has  constituted or will  constitute a
default (or an event with notice or lapse of time or both will become a default)
under,  or has resulted in or will result in the creation or  imposition  of any
lien, charge or encumbrance upon any property or assets of the Company or any of
the  Subsidiaries or pursuant to the terms of any indenture,  mortgage,  deed of
trust, note, loan or credit agreement or any other agreement or

                                       11
<PAGE>

instrument  evidencing an obligation for borrowed  money, or any other agreement
or instrument to which the Company or any of the Subsidiaries may be bound or to
which any of the property or assets of the Company or any of the Subsidiaries is
subject;  nor will such action result in any violation of the  provisions of the
charter or the Bylaws of the Company or any of the  Subsidiaries  or any statute
or any  order,  rule  or  regulation  applicable  to the  Company  or any of the
Subsidiaries of any court or of any foreign,  federal, state or other regulatory
authority  (including  the American  Stock  Exchange) or other  government  body
having jurisdiction over the Company or any of the Subsidiaries.

              2.5.11 TAXES.  Each of the Company and its  Subsidiaries has filed
all U.S. federal,  state, local and foreign tax returns which are required to be
filed by each of them and all such  returns are true and correct in all material
respects.  The Company and each  Subsidiary  has paid all taxes pursuant to such
returns or pursuant to any  assessments  received by any of them or by which any
of them are obligated to withhold  from amounts owing to any employee,  creditor
or third party.  The Company and each Subsidiary has properly  accrued all taxes
required to be accrued  and/or paid,  except where the failure  would not have a
Material Adverse Effect. The tax returns of the Company and its Subsidiaries are
not currently being audited by any state, local or federal authorities.  Neither
the  Company  nor any  Subsidiary  has waived any  statute of  limitations  with
respect  to taxes or agreed to any  extension  of time with  respect  to any tax
assessment  or  deficiency.  The  Company  has set aside on its  books  adequate
provision for the payment of any unpaid taxes.

              2.5.12  COMPLIANCE WITH LAWS,  LICENSES,  ETC. Neither the Company
nor any Subsidiary has received notice of any violation of or noncompliance with
any federal,  state, local or foreign, laws, ordinances,  regulations and orders
applicable to its business (including but not limited to all applicable laws and
regulations  relating  to  the  protection  of  human  health  and  safety,  the
environment  or  hazardous  or  toxic   substances  or  wastes,   pollutants  or
contaminants), which has not been cured, the violation of, or noncompliance with
which would have a Material Adverse Effect.  The Company and each Subsidiary has
all Licenses required by every federal, state and local government or regulatory
body for the operation of its business as currently conducted and the use of its
properties,  except  where the failure to be licensed  would not have a Material
Adverse Effect.  The Licenses are in full force and effect and no violations are
or have been  recorded in respect of any License and no proceeding is pending or
threatened to revoke, modify or limit any thereof.

              2.5.13 AUTHORIZATION OF AGREEMENT, ETC. Each of this Agreement and
the other  Offering  Documents  have been duly  executed  and  delivered  by the
Company  and the  execution,  delivery  and  performance  by the Company of this
Subscription  Agreement,  the other Offering Documents,  and the Placement Agent
Agreement and the issuance of the Securities and the Underlying Shares have been
duly  authorized by the Company's  board of directors and no further  consent or
authorization  of its board of directors or its  stockholders is required by the
Company  (including by  application  of the American  Stock  Exchange  rules and
regulations)  and  constitute  the legal,  valid and binding  obligations of the
Company,  enforceable  in  accordance  with their  respective  terms,  except as
enforceability  may be  limited  by general  equitable  principles,  bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors' rights
generally.

                                       12
<PAGE>

              2.5.14  AUTHORIZATION OF SECURITIES.  The Securities,  when issued
and delivered in accordance with this Subscription Agreement, and the Underlying
Shares when issued and delivered upon  conversion or exercise of the Securities,
as appropriate, shall be validly issued, fully paid, and nonassessable and shall
not be issued in violation of any preemptive rights of securityholders  and will
not trigger any antidilution rights of securityholders.

              2.5.15 EXEMPTION FROM  REGISTRATION.  Assuming (i) the accuracy of
the  information  provided by the  respective  Subscribers  in the  Subscription
Documents,  and (ii) that the Placement  Agent shall comply in all respects with
the  provisions of Rule 506 Regulation D promulgated  under the Securities  Act,
the offer and sale of the Securities  pursuant to the terms of this Subscription
Agreement shall be exempt from the  registration  requirements of the Securities
Act and the rules and  regulations  promulgated  thereunder.  The Company is not
disqualified   from  the  exemption   under   Regulation  D  by  virtue  of  the
disqualifications contained in Rule 507 promulgated thereunder.

              2.5.16  BROKERS.  Neither  the  Company  nor any of its  officers,
directors,  employees  or  stockholders  has  employed  any  broker or finder in
connection  with  the  Offering  or  the   transactions   contemplated  by  this
Subscription Agreement other than the Placement Agent (whose fees are payable by
the Company).

              2.5.17 TITLE TO SECURITIES. When the certificates representing the
Securities have been duly delivered and payment shall have been made therefor by
the Holders the Subscribers  shall receive good title to the Securities (and the
Underlying  Shares).  All  such  title  shall be free  and  clear of all  liens,
security interests, pledges, charges, encumbrances, stockholders' agreement, and
voting trusts (with the  exception of claims  arising or through the acts of the
Holders and except as arising from applicable  federal and securities laws), and
the  Company  shall have paid all  taxes,  if any,  in  respect of the  original
issuance thereof.

              2.5.18 RIGHTS OF FIRST  REFUSAL.  Except for rights granted to the
Placement  Agent  pursuant to Section 3.5 of the PA Agreement,  no other person,
firm  or  other  business  entity  is a  party  to any  agreement,  contract  or
understanding,  written or oral entitling such party to a right of first refusal
with respect to securities to be issued by the Company.

              2.5.19 INTELLECTUAL  PROPERTY. The Company owns or possesses valid
and binding licenses or other rights to use,  whether or not registered,  all of
the Intellectual  Property.  Such Intellectual  Property  constitutes all of the
intellectual  property  necessary to operate the business of the Company and its
Subsidiaries as presently conducted.  Neither the Company nor any Subsidiary has
received any notice of any claims,  nor do any of them have any Knowledge of any
threatened claims, and none of them know of any facts which would form the basis
of any claim,  asserted  by any person to the effect that the sale or use of any
product or  process  now used or offered  by the  Company or any  Subsidiary  or
proposed to be used or offered by the Company or any Subsidiary  infringes upon,
or has  infringed  upon,  the use of any such patents,  trademarks,  copyrights,
technology,  know-how,  processes  or other  intellectual  property  of  another
person. To the best of the Company's Knowledge, no person is infringing upon the
Intellectual  Property.  The Company has taken reasonable  security  measures to
protect the secrecy,  confidentiality and value of the Intellectual Property. No
person, other than the Company, owns or has any

                                       13
<PAGE>

proprietary,  financial or other  interest,  direct or indirect,  in whole or in
part, in any Intellectual Property.

              2.5.20  FOREIGN  CORRUPT  PRACTICES.  Neither  the Company nor any
Subsidiary nor any of their respective directors, officers, agents, employees or
other persons acting on their behalf,  in the course of their actions for, or on
behalf  of the  Company  or any  Subsidiary,  used any  corporate  funds for any
unlawful contribution,  gift,  entertainment or other unlawful expenses relating
to  political  activity;  made any direct or  indirect  unlawful  payment to any
foreign or  domestic  government  official  or employee  from  corporate  funds;
violated or is in violation of any  provision of the Foreign  Corrupt  Practices
Act of 1977, as amended; or made any bribe, rebate,  payoff,  influence payment,
kickback  or other  unlawful  payment  to any  foreign  or  domestic  government
official or employee or made any payment or provided  any benefit to an employee
or agent of a customer  which  would  reasonably  be  expected  to violate  such
customer's  policies  or code of conduct  and  results in the  termination  or a
significant reduction in such customer's business with the Company.

              2.5.21 FILINGS WITH THE SEC. The Company has made all filings with
the SEC that it has been  required  to make  under  the  Securities  Act and the
Exchange Act of 1934, as amended (the "Exchange  Act"), all of which complied as
to form with such acts and the rules  thereunder.  All documents  required to be
filed as  exhibits to the SEC  Documents  have been so filed,  and all  material
contracts so filed as exhibits are in full force and effect,  except those which
have expired in accordance with their terms,  and neither the Company nor any of
its subsidiaries is in material default of these material contracts. Each of the
Company's  SEC  Documents  has  complied  in  all  material  respects  with  the
Securities  Act and the Exchange Act in effect as of their  respective  dates of
filing (or if amended,  as of the date of amendment).  None of the Company's SEC
Documents,  as of  their  respective  filing  dates  (or if  amended,  as of the
amendment  dates),  contained any untrue statement of a material fact or omitted
to state a material fact required to be stated  therein or necessary in order to
make the statements made therein,  in the light of the circumstances under which
they were made, not misleading.

              2.5.22  GOVERNMENTAL  CONSENTS.  No  consent,  approval,  order or
authorization of or  registration,  qualification,  designation,  declaration or
filing  with,  or notice  to, any court,  federal,  state or local  governmental
authority or regulatory or self  regulatory  agency or authority or other person
on the part of the Company or any Subsidiary is required in connection  with the
issuance of the Securities or the Underlying  Shares or the  consummation of the
other  transactions  contemplated  by the  Offering  Documents,  except (i) such
filings  as have  been  made  prior to the date  hereof,  (ii) the  filing  of a
notification  form  with  the  Amex  and  (iii)  such  additional   post-Closing
ministerial  filings as may be  required  to comply  with  applicable  state and
federal securities laws and the listing requirements of Amex.

              2.5.23  MATERIAL  NON-PUBLIC  INFORMATION.  The  Company  has  not
provided,  and will not provide,  to the  undersigned  any  material  non-public
information  other than  information  related to the  transactions  contemplated
hereby or by the Offering  Documents,  all of which  information  related to the
transactions  contemplated  hereby shall be disclosed by the Company pursuant to
Section 3.1.6 hereof.

                                       14
<PAGE>

              2.5.24  SARBANES-OXLEY.  The Chief Executive Officer and the Chief
Financial  Officer of the Company have signed,  and the Company has furnished to
the  SEC,  all   certifications   required  by  Sections  302  and  906  of  the
Sarbanes-Oxley  Act of 2002. Such  certifications  contain no  qualifications or
exceptions  to the  matters  certified  therein  and have not been  modified  or
withdrawn;  and neither the Company nor any of its officers has received  notice
from  any   governmental   entity   questioning  or  challenging  the  accuracy,
completeness, form or manner of filing or submission of such certifications.

              2.5.25 SOLVENCY.  Neither the Company nor any Subsidiary has taken
any steps to seek protection  pursuant to any bankruptcy or  reorganization  law
nor does the Company nor any Subsidiary  have any knowledge or reason to believe
that its creditors intend to initiate  involuntary  bankruptcy or reorganization
proceedings or any actual  knowledge of any fact which would  reasonably  lead a
creditor to do so.  Neither the  Company  nor any  Subsidiary  is as of the date
hereof, and after giving effect to the transactions contemplated hereby to occur
at the Closing,  will not be Insolvent.  "Insolvent"  means (i) the present fair
value of the Company's  consolidated  assets as calculated under U.S.  generally
accepted accounting principles ("GAAP") is less than the amount of the Company's
total consolidated  indebtedness as calculated in accordance with GAAP (less any
future lease  liabilities),  (ii) the Company is unable to pay its  consolidated
debts and liabilities (other than any future lease  liabilities),  subordinated,
contingent  or  otherwise,  as such debts and  liabilities  become  absolute and
matured or (iii) the  Company  intends to incur or  believes  that it will incur
consolidated  debts  (other  than any future  lease  liabilities)  that would be
beyond its ability to pay as such debts mature.

              2.5.26  REGISTRATION  RIGHTS.  Except  as set  forth  on  SCHEDULE
2.5.26,  effective upon the Closing, the Company is not currently subject to any
agreement  providing  any  person  or entity  any  rights  (including  piggyback
registration  rights) to have any securities of the Company  registered with the
SEC or registered or qualified with any other governmental authority.

              2.5.27  INSURANCE.  The  Company  and  its  Subsidiaries  maintain
insurance of the types and in the amounts that the Company  reasonably  believes
is prudent and  adequate  for its  business,  all of which  insurance is in full
force and effect.  Neither the Company nor any  Subsidiary  has been refused any
insurance  coverage  sought or  applied  for and  neither  the  Company  nor any
Subsidiary  has any  reason  to  believe  that it will not be able to renew  its
existing  insurance  coverage  as and when such  coverage  expires  or to obtain
similar  coverage  from  similar  insurers as may be  necessary  to continue its
business at a cost that would not have a Material Adverse Effect.

              2.5.28 LABOR  RELATIONS.  No material  labor dispute exists or, to
the knowledge of the Company, is threatened with respect to any of the employees
of the  Company or its  Subsidiaries.  No  executive  officer of the Company (as
defined in Rule 501(f) of the Securities Act) has notified the Company that such
officer  intends to leave the  Company or  otherwise  terminate  such  officer's
employment  with  the  Company.  No  executive  officer  of the  Company  or its
Subsidiaries,  to the knowledge of the Company,  is in violation of any material
term of any  employment  contract,  confidentiality,  disclosure or  proprietary
information  agreement,  non-competition  agreement  or any  other  contract  or
agreement or any  restrictive  covenant,  and, to the Company's  knowledge,  the
continued employment of each such executive officer does not

                                       15
<PAGE>

subject the Company or any of its  Subsidiaries to any liability with respect to
any of the foregoing matters.

              2.5.29  INTERNAL   ACCOUNTING   CONTROLS.   The  Company  and  the
Subsidiaries  maintain a system of internal  accounting  controls  sufficient to
provide  reasonable  assurance that (i)  transactions are executed in accordance
with  management's  general or specific  authorizations,  (ii)  transactions are
recorded  as  necessary  to  permit  preparation  of  financial   statements  in
conformity  with GAAP and to  maintain  asset  accountability,  (iii)  access to
assets is permitted  only in accordance  with  management's  general or specific
authorization,  and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.

              2.5.30  GENERAL  SOLICITATION.  Neither  the Company nor any other
person or entity  authorized  by the Company to act on its behalf has engaged in
any general  solicitation  (within the meaning of Regulation D of the Securities
Act) of, or general  advertising  (within  the  meaning of  Regulation  D of the
Securities Act) directed  towards,  investors with respect to offers or sales of
the Securities.

              2.5.31 REGISTRATION STATEMENT MATTERS. The Company currently meets
the eligibility  requirements for use of a Form S-3  Registration  Statement for
the resale of the  Securities and the  Underlying  Shares by the Investors.  The
Company is not aware of any facts or circumstances  that would prohibit or delay
the  preparation  and filing of a  registration  statement  with  respect to the
Securities and Underlying Shares.

              2.5.32  NO  INTEGRATED  OFFERING.  Neither  the  Company,  nor any
Affiliate (as hereafter defined) of the Company, nor any person acting on its or
their  behalf  has,  directly  or  indirectly,  made any  offers or sales of any
security or solicited any offers to buy any security,  under  circumstances that
would  cause this  offering of the  Securities  or the  Underlying  Shares to be
integrated  with prior  offerings by the Company for purposes of the  Securities
Act, any applicable state securities laws or any applicable stockholder approval
provisions,  including,  without limitation,  under the rules and regulations of
any national  securities  exchange or automated quotation system on which any of
the  securities  of the Company are listed or  designated,  nor will the Company
take any action or steps that would cause the offering of the  Securities or the
Underlying Shares to be integrated with other offerings.

              2.5.33 AMEX LISTING  MATTERS.  The Common Stock is registered  and
designated  for quotation on the American Stock Exchange under the ticker symbol
"ELI." The  Company  is not in  violation  of the  listing  requirements  of the
American Stock Exchange and has no knowledge of any facts which would reasonably
lead to delisting or suspension of the Common Stock in the  foreseeable  future.
The  issuance and sale of the  Securities  or the  Underlying  Shares under this
Subscription  Agreement and/or the other Offering  Documents does not contravene
the rules and  regulations  of the American Stock  Exchange.  Since December 31,
2002,  (i) trading in the Common Stock has not been  suspended by the SEC or the
American  Stock  Exchange and (iii) the Company has  received no  communication,
written or oral,  from the SEC or the  American  Stock  Exchange  regarding  the
suspension or delisting of the Common Stock from the American Stock Exchange.

                                       16
<PAGE>

              2.5.34 APPLICATION OF TAKEOVER PROTECTIONS;  RIGHTS AGREEMENT. The
Company and its board of directors have taken all necessary  action,  if any, in
order  to  render   inapplicable   any  control  share   acquisition,   business
combination,  poison pill (including any distribution  under a rights agreement)
or other similar anti-takeover  provision under the Certificate of Incorporation
or the laws of the  jurisdiction  of its  formation  which  is or  could  become
applicable to any Investor as a result of the  transactions  contemplated by the
Offering Documents, including, without limitation, the Company's issuance of the
Securities  and/or the  Underlying  Shares and any  Investor's  ownership of the
Securities or the Underlying Shares.

              2.5.35  INVESTMENT  COMPANY.  The Company is not, and after giving
effect to the offering and sale of the  Securities  and the  application  of the
proceeds  thereof will not be, required to register as, an "investment  company"
as such term is defined in the Investment Company Act of 1940, as amended.

              2.5.36  TRANSACTIONS  WITH AFFILIATES.  Except as set forth in the
SEC Documents, none of the officers or directors of the Company has entered into
any transaction  with the Company or any Subsidiary that would be required to be
disclosed pursuant to Item 404(a), (b) or (c) of Regulation S-K of the SEC.

              2.5.37 NO  MANIPULATION.  The  Company has not taken any action in
violation of applicable law designed to or that might  reasonably be expected to
cause or result in  stabilization  or  manipulation  of the price of the  Common
Stock to facilitate the sale of the Securities or the Underlying Shares.

              2.5.38 DISCLOSURE.  The Company  understands and confirms that the
Investor will rely on the foregoing  representations  and covenants in effecting
transactions  in  securities  of the  Company.  All  disclosure  provided to the
Investor regarding the Company,  its business and the transactions  contemplated
hereby,  furnished  by or on  behalf of the  Company  (including  the  Company's
representations  and warranties set forth in this Agreement) is true and correct
and does not contain any untrue  statement  of a material  fact or omit to state
any material fact  necessary in order to make the  statements  made therein,  in
light of the circumstances under which they were made, not misleading.

              2.5.39   DEFINITIONS.   For  the  purposes  of  this  Subscription
Agreement, the following terms shall have the meanings set forth below:

         "Affiliate"  of the  undersigned  Investor  means any  other  person or
entity  directly or  indirectly  controlling,  controlled  by or under direct or
indirect  common  control with the  undersigned  Investor.  For purposes of this
definition,  "control"  means the power to direct the management and policies of
such person or firm,  directly or indirectly,  whether  through the ownership of
voting securities, by contract or otherwise.

         "Certificate of  Designations"  means the Certificate of  Designations,
Preferences   and  Rights  of  Series  A  Preferred  Stock  of  the  Company  in
substantially the form attached hereto as EXHIBIT E.

         "Closing" shall refer to that event which,  subject to the terms of the
PA Agreement,  occurs when the Placement Agent has received and delivered to the
Company  subscriptions

                                       17
<PAGE>

which the Company has agreed to accept for at least a minimum of gross  proceeds
from Subscribers on or prior to the Termination  Date. Upon the prior consent of
the  Company,  one or  more  additional  Closings  may be  held  for  additional
subscriptions  accepted by the Company no later than the Termination Date of the
Offering.

         "Closing Date" means the date of the Closing.

         "Common  Stock" means the Company's  Common Stock,  par value $0.01 per
share.

         "Financial   Statements"  means  the  audited  consolidated   financial
statements  of the Company  for the fiscal  years ended March 31, 2004 and 2003,
including balance sheets and related statements of income,  stockholders' equity
and cash  flows,  together  with the  related  notes,  audited by the  Company's
independent  certified  public  accountants as the same have been filed with the
SEC as part of the  SEC  Documents  and  the  unaudited  consolidated  financial
statements  of the  Company  for the  quarters  ended  June 30,  2004 and  2003,
including balance sheets and related statements of income,  stockholders' equity
and cash  flows  as the same  have  been  filed  with the SEC as part of the SEC
Documents.

         "Holder" or  "Holders"  means the holder of any  Securities  and/or any
Placement  Agent Warrant,  and the securities  contained in, and underlying each
of, the foregoing securities.

         "Intellectual  Property" means trademarks,  trade names, service marks,
service mark registrations,  service names, patents, patent rights,  copyrights,
inventions, licenses and trade secrets.

         "Investor" means the undersigned investor.

         "Investors"  means the  Investor  and the other  investors to the other
Subscription  Agreements  pursuant to which such  investors  shall  purchase the
Securities from the Company in connection with the Offering.

         "Knowledge" shall mean the knowledge,  after reasonable  investigation,
of the Chief Executive  Officer,  the Financial  Officer and the other executive
officers of the Company.

         "License"  or  "Licenses"   means  all  licenses,   permits  and  other
governmental  and  self-regulatory   (including  the  American  Stock  Exchange)
certificates,  authorizations  and permits,  and approvals of the Company or any
Subsidiary.

         "Material Adverse Effect" means any change or effect that is materially
adverse to (i) the business, results of operations,  financial condition, assets
or  liabilities  of the  Company  or any  Subsidiary  or (ii)  the  transactions
contemplated hereby or by the Offering Documents.

         "Most Recent  Balance  Sheet" shall refer to the  consolidated  balance
sheet of the  Company  dated as of June 30, 2004 as the same has been filed with
the SEC as part of the SEC Documents.

         "Offering" means the solicitation by the Placement Agent of Subscribers
for the purchase of  Securities  pursuant to this  Subscription  Agreement,  and
applicable law.

                                       18
<PAGE>

         "PA Agreement"  shall mean the Placement  Agent  Agreement  dated as of
August 12, 2004 by and between the Company and the Placement Agent.

         "Placement Agent" shall mean Indigo Securities, LLC.

         "Placement  Agent  Warrants"  shall refer to the warrants issued to the
Placement Agent as part of its compensation  for services  rendered under the PA
Agreement.

         "Registration  Rights  Agreement"  shall refer to that agreement by and
between  the  Company,  on one hand and the  Placement  Agent and Holders on the
other hand.

         "SEC" refers to the Securities and Exchange Commission.

         "SEC Documents" means any registration statement, reports and documents
filed with the SEC by the Company.

         "Securities Act" means the U.S. Securities Act of 1933, as amended.

         "Subscriber"  or  "Subscribers"  means  an  "accredited  investor,"  as
defined  under  Rule  501  of  the  Securities  Act,   subscribing  to  purchase
Securities.

         "Termination  Date"  means the date set forth in Section  3.1 of the PA
Agreement.

         2.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties  of the Company and the  Subscribers  contained in this  Subscription
Agreement shall survive the Closing and remain in full force and effect.

3.       COVENANTS.

              3.1.1 RULE 144  INFORMATION.  For five (5) years after the date of
this  Subscription  Agreement,  the Company shall use its best efforts file in a
timely manner all reports  required to be filed by it under the  Securities  Act
and the Exchange Act and the rules and  regulations  promulgated  thereunder and
shall take such further action to the extent  required to enable the Investor to
sell the  Securities and the  Underlying  Shares  pursuant to Rule 144 under the
Securities Act (as such rule may be amended from time to time).

              3.1.2 REPORTING STATUS. Until the date on which the Investor shall
have sold all the Securities and the Underlying  Shares and none of the Warrants
are  outstanding,  the Company shall file all reports  required to be filed with
the SEC pursuant to the Exchange  Act, and the Company  shall not  terminate its
status as an issuer  required to file reports under the Exchange Act even if the
Exchange Act or the rules and regulations thereunder would otherwise permit such
termination.

              3.1.3  LISTING.  The Company shall  maintain the  eligibility  for
quotation  of the  Common  Stock on the  American  Stock  Exchange.  Subject  to
applicable law, neither the Company nor any of its  Subsidiaries  shall take any
action  which  would be  reasonably  expected  to  result  in the  delisting  or
suspension of the Common Stock on the American Stock Exchange. The Company shall
pay all fees and expenses in connection with  satisfying its  obligations  under

                                       19
<PAGE>

this section.  The Company shall maintain  Jersey  Transfer and Trust Company as
its transfer agent (or other transfer agent of equivalent recognition).

              3.1.4 PLEDGE OF SECURITIES.  The Company  acknowledges  and agrees
that the Securities and the Underlying  Shares may be pledged by the Investor in
connection  with a bona  fide  margin  agreement  or  other  loan  or  financing
arrangement  that is secured by the  Securities or the  Underlying  Shares.  The
pledge  of  Securities  or the  Underlying  Shares  shall  not be deemed to be a
transfer,  sale  or  assignment  of  the  Securities  or the  Underlying  Shares
hereunder,  and the  Investor  shall not be required to provide the Company with
any notice  thereof or otherwise  make any  delivery to the Company  pursuant to
this Subscription  Agreement or any other Offering Document.  The Company hereby
agrees to execute and deliver such  documentation as a pledgee of the Securities
or the Underlying  Shares may reasonably  request in connection with a pledge of
the Securities or the Underlying Securities to such pledgee by the Investor (but
without the obligation to incur any cost or expense in connection therewith).

              3.1.5 DISCLOSURE OF TRANSACTIONS  AND OTHER MATERIAL  INFORMATION.
On or before 9:00 a.m.,  New York time, on the first  business day following the
Closing Date, the Company shall file a Current Report on Form 8-K describing the
terms of the  transactions  contemplated  by the Offering  Documents in the form
required by the  Exchange Act and  attaching  the  material  Offering  Documents
(including,  without limitation, this Subscription Agreement, the Certificate of
Designations and the forms of Warrant) as exhibits to such filing (including all
attachments,  the "8-K Filing"). From the Closing, the Company shall not provide
the Investor with any material,  nonpublic  information from the Company, any of
its  Subsidiaries  or any of its respective  officers,  directors,  employees or
agents,  that is not  disclosed  in the 8-K Filing.  The Company  shall not, and
shall  cause  each of its  Subsidiaries  and its and  each of  their  respective
officers, directors, employees and agents, not to, provide the Investor with any
material, nonpublic information regarding the Company or any of its Subsidiaries
from and after the filing of the 8-K Filing  with the SEC  without  the  express
written  consent of the  Investor.  Neither the Company nor the  Investor  shall
issue any press  releases or any other  public  statements  with  respect to the
transactions  contemplated hereby; PROVIDED,  HOWEVER, that the Company shall be
entitled,  without the prior approval of the Investor, to make any press release
or other public  disclosure with respect to such transactions (i) in substantial
conformity  with the 8-K Filing or (ii) as may be  required by  applicable  law,
rule or  regulation  (provided  that in the case of clause (i) the  Investor (so
long  as  such  Investor  has  invested  more  than  $850,000  pursuant  to this
Subscription Agreement) shall be consulted by the Company in connection with any
such  press  release  or  other  public   disclosure   prior  to  its  release).
Notwithstanding the foregoing,  the Company shall not publicly disclose the name
of the Investor,  or include the name of the Investor in any filing with the SEC
or any  regulatory  agency or Amex,  without  the prior  written  consent of the
Investor,  except (i) for disclosure thereof which is required in the 8-K Filing
or Registration  Statement or (ii) as required by law or Amex regulations or any
order of any court or other governmental agency, in which case the Company shall
provide the Investor with prior notice of such disclosure.

              3.1.6  RESERVATION  OF SHARES.  The Company  shall take all action
necessary  to at all times have  authorized,  and  reserved  for the  purpose of
issuance,  after the Closing Date,  100% of the number of shares of Common Stock
issuable upon  conversion  of the Series A Preferred  Stock and upon exercise of
the Warrants.

                                       20
<PAGE>

              3.1.7 USE OF PROCEEDS.  The Company will use the proceeds from the
sale of the Securities for working  capital  purposes and not for the redemption
or repurchase of any of its equity securities.

              3.1.8  LISTING.  The  Company  shall  secure  the  listing  of all
Registrable  Securities (as defined in the Registration  Rights  Agreement) upon
each national  securities  exchange and automated quotation system, if any, upon
which  shares of Common  Stock are then listed  (subject  to official  notice of
issuance) and shall maintain,  so long as any other shares of Common Stock shall
be so listed,  such  listing  of all  Registrable  Securities  from time to time
issuable  under the terms of the Offering  Documents.  The Company shall use its
best efforts to maintain  the Common  Stock's  authorization  for listing on the
American Stock Exchange . Neither the Company nor any of its Subsidiaries  shall
take any action which would be reasonably expected to result in the delisting or
suspension of the Common Stock on the American Stock Exchange. The Company shall
pay all fees and expenses in connection with  satisfying its  obligations  under
this Section 3.1.8.

              3.1.9 TRANSFER AGENT  CERTIFICATION.  The Company shall deliver to
the Investor a letter from the Company's transfer agent certifying the number of
shares of Common Stock  outstanding  as of a date within five (5) business  days
prior to the Closing Date.

         3.2 CERTAIN PRE-FUNDING  COVENANTS.  The Company agrees as follows with
respect to the period between the execution of this Agreement and the Closing:

              (a)  GENERAL.  The Company  will use its  commercially  reasonable
efforts to take all action and to do all things necessary,  proper, or advisable
in order to consummate and make effective the transactions  contemplated by this
Subscription  Agreement  (including   satisfaction,   but  not  waiver,  of  the
conditions to set forth in SECTION 4;  provided,  however,  that nothing in this
SECTION  3.2(a)  shall be  deemed  to  require  the  Investor  to  purchase  the
Securities  unless and until the conditions set forth in SECTION 4 are satisfied
or, in the sole discretion of the Investor, waived.

              (b) OPERATION OF BUSINESS.  The Company and its Subsidiaries shall
not  engage  in any  practice,  take  any  action,  or enter  into any  material
transaction  which is outside the ordinary course of business.  Without limiting
the generality of the  foregoing,  the Company shall not engage in any practice,
take any action,  or enter into any transaction of the sort described in SECTION
2.5.25 above.

              (c) FULL ACCESS.  The Company will permit  representatives  of the
Investor  to  have  reasonable  access  at  reasonable  times  to its  premises,
properties,  personnel,  and to the books and  documents of or pertaining to the
Company.

              (d) NOTICE OF  DEVELOPMENTS.  The Company will give prompt written
notice  to the  Investor  of any  development  causing  a  breach  of any of the
representations  and  warranties  in SECTION  2.5.  No  disclosure  by any party
pursuant to this SECTION 3.2(d), however, shall be deemed to amend or supplement
the  schedules  hereto or to  prevent or cure any  misrepresentation,  breach of
warranty,   or  breach  of  covenant,   unless  the  Investor  consents  to  the
incorporation  of such amendment or supplement or disclosure by consummating the
transactions contemplated hereby.

                                       21
<PAGE>

         3.3 TRANSFER AGENT INSTRUCTIONS. As of the date hereof, and conditioned
only upon the issuance of the Securities at the Closing, the Company shall issue
irrevocable  instructions  to its transfer agent in the form attached  hereto as
EXHIBIT E (the "Irrevocable  Transfer Agent  Instructions"),  and any subsequent
transfer  agent, to promptly issue  certificates,  registered in the name of the
Investor or its respective nominee(s), for the Underlying Shares in such amounts
as specified from time to time by the Investor to the Company upon conversion of
the Series A Preferred Stock or upon exercise of the Warrants.

4.       CONDITIONS TO THE INVESTOR'S OBLIGATIONS AT CLOSING. The obligations of
the Investor under Section 1(b) of this Agreement are subject to the fulfillment
or waiver, on or before the Closing, of each of the following conditions:

              (a)   REPRESENTATIONS   AND   WARRANTIES   TRUE.   Each   of   the
representations  and  warranties of the Company  contained in Section 3 shall be
true and  correct in all  material  respects on and as of the date hereof and on
and as of the  date  of  the  Closing  with  the  same  effect  as  though  such
representations and warranties had been made as of the Closing.

              (b) PERFORMANCE.  The Company shall have performed and complied in
all respects with all agreements,  obligations and conditions  contained in this
Subscription  Agreement that are required to be performed or complied with by it
on or before the Closing and shall have  obtained  all  approvals,  consents and
qualifications  necessary to complete the  purchase and sale  described  herein;
PROVIDED,  however,  that the Company  may furnish to each  Investor a facsimile
copy of a form of warrant representing the Warrants and of the stock certificate
representing  the  Series A  Preferred  Stock,  with the  original  warrant  and
original  stock  certificate  held in trust by  counsel  for the  Company  until
delivery thereof on the fourth (4th) business day following the Closing.

              (c) COMPLIANCE CERTIFICATE. The Company will have delivered to the
Investors a certificate  signed on its behalf by its Chief Executive  Officer or
Chief Financial  Officer  certifying  that the conditions  specified in Sections
4(a) and 4(b) hereof have been fulfilled.

              (d)  AGREEMENT.  The Company  shall have executed and delivered to
the Investors this Subscription Agreement.

              (e) SECURITIES EXEMPTIONS. The offer and sale of the Securities to
the Investors  pursuant to this Subscription  Agreement shall be exempt from the
registration  requirements  of the  Securities Act and the  registration  and/or
qualification requirements of all applicable state securities laws.

              (f) NO SUSPENSION  OF TRADING OR LISTING OF THE COMMON STOCK.  The
Common  Stock (i) shall be  designated  for  quotation or listed on the American
Stock Exchange and (ii) shall not have been suspended from trading by the SEC or
on the American Stock  Exchange nor shall  suspension by the SEC or the American
Stock  Exchange  have been  threatened,  as of the Closing  Date,  either (A) in
writing by the SEC or the American  Stock  Exchange or (B) because the price per
share of the  Common  Stock has fallen  below the  minimum  listing  maintenance
requirements of the American Stock Exchange.

                                       22
<PAGE>

              (g) GOOD STANDING  CERTIFICATES.  The Company shall have delivered
to the  Investors  a  certificate  of the  Secretary  of State  of the  State of
Delaware,  dated as of a date within ten (10)  business  days of the date of the
Closing, with respect to the good standing of the Company.

              (h) SECRETARY'S  CERTIFICATE.  The Company shall have delivered to
the  Investors a  certificate  of the Company  executed by the  Secretary of the
Company  attaching  and  certifying  to the  truth  and  correctness  of (1) the
Certificate of Incorporation,  (2) the Bylaws and (3) the resolutions adopted by
the Board of Directors in connection with the  transactions  contemplated by the
Offering Documents.

              (i) OPINION OF COMPANY  COUNSEL.  The Investors will have received
an opinion on behalf of the Company,  dated as of the date of the Closing,  from
Reitler Brown & Rosenblatt LLC, counsel to the Company.

              (j) NO STATUTE OR RULE CHALLENGING TRANSACTION.  No statute, rule,
regulation,  executive order, decree, ruling, injunction,  action, proceeding or
interpretation  shall  have been  enacted,  entered,  promulgated,  endorsed  or
adopted by any court or governmental  authority of competent jurisdiction or any
self-regulatory  organization  (including  the American  Stock  Exchange) or the
staff of any of the foregoing  having  authority  over the matters  contemplated
hereby  which  questions  the  validity  of,  or  challenges  or  prohibits  the
consummation of, any of the transactions contemplated by the Offering Documents.

              (k)  AMOUNT   INVESTED.   The  Investors  under  the  Subscription
Agreements  shall have  tendered  at  closing  not less than  $4,000,000  in the
aggregate for the Securities.

              (l)  OTHER   ACTIONS.   The  Company   shall  have  executed  such
certificates,  agreements, instruments and other documents, and taken such other
actions  as shall be  customary  or  reasonably  requested  by the  Investor  in
connection with the transactions contemplated hereby.

              (m)  IRREVOCABLE  TRANSFER AGENT  INSTRUCTIONS.  The Company shall
have delivered the Irrevocable Transfer Agent Instructions,  executed by each of
the Company and its transfer agent.

              (n) CERTIFICATE OF  DESIGNATIONS.  The Certificate of Designations
shall have been filed with the Secretary of State of the State of Delaware,  and
copies  thereof shall have been  certified by such  Secretary of State and shall
have been delivered to the Investor.

5.       TERMINATION.

              (a) The Investor and the Company may terminate  this  Subscription
Agreement by mutual written consent at any time prior to the Closing;

              (b) The  Investor may  terminate  this  Subscription  Agreement by
giving written notice to the Company at any time prior to the Closing:

                  (i)  in  the  event  that  the   Company  has   breached   any
              representation,   warranty,   or   agreement   contained  in  this
              Subscription  Agreement or in any other

                                       23
<PAGE>

              Offering  Document in any  material  respect,  the Investor or any
              other  Investor has  notified  the Company of the breach,  and the
              breach has  continued  without  cure for a period of fifteen  (15)
              days after the notice of breach,

                  (ii) if the  Closing  shall  not have  occurred  on or  before
              October  31,  2004,  by reason  of the  failure  of any  condition
              precedent  under SECTION 4 hereof or if  satisfaction  of any such
              condition  by  such  date is or  becomes  impossible  (unless  the
              failure results  primarily from any Investor itself  breaching any
              representation,   warranty,   or   covenant   contained   in   the
              Subscription Agreements or any other Offering Document).

              (c) The Company may  terminate  this  Agreement by giving  written
notice to the  Investor  at any time prior to the  Closing in the event that the
Investor has breached any  representation,  warranty,  or covenant  contained in
this Subscription  Agreement in any material  respect,  the Company has notified
the  Investor of the breach,  and the breach has  continued  without  cure for a
period of fifteen (15) days after the notice of breach.

              (c) EFFECT OF TERMINATION. Each party's right of termination under
SECTION  5(A)  is in  addition  to any  other  rights  it may  have  under  this
Subscription  Agreement  or  otherwise,  and  the  exercise  of  such  right  of
termination  will not be an  election of  remedies.  Upon any  termination,  the
amount deposited in escrow shall be immediately wired to the Investor.

6.       INDEMNIFICATION.

              (a) The Investor  hereby agrees to indemnify and hold harmless the
Company and its officers, directors, managers, members, partners,  shareholders,
employees,  agents and  attorneys  and any control  persons  against any and all
losses, claims, demands, liabilities,  actions or causes of action, encumbrances
and expenses  (including  reasonable  legal or other expenses)  incurred by each
such person in connection  with  defending or  investigating  any such claims or
liabilities,  whether or not resulting in any liability to such person) to which
any such  indemnified  party may become subject under the Securities  Act, under
any other statute, at common law or otherwise,  insofar as such losses,  claims,
demands,  liabilities  and expenses arise out of or are based upon any breach by
the Investor of any representation,  warranty, covenant, obligation or agreement
contained herein.

              (b) The Company  hereby  agrees to indemnify and hold harmless the
Investors   and  its   officers,   directors,   managers,   members,   partners,
shareholders,  employees,  agents and attorneys and any control  persons against
any and all losses, claims, demands,  liabilities,  actions or causes of action,
encumbrances  and  expenses  (including  reasonable  legal  or  other  expenses)
incurred by each such person in connection with defending or  investigating  any
such claims or  liabilities,  whether or not  resulting in any liability to such
person)  to which  any such  indemnified  party  may  become  subject  under the
Securities Act, under any other statute, at common law or otherwise,  insofar as
such losses, claims,  demands,  liabilities and expenses (a) arise out of or are
based upon any untrue  statement or alleged untrue  statement of a material fact
made by the Company and  contained  in this  Subscription  Agreement,  the other
Offering Documents,  the Term Sheet or the SEC Documents, or (b) arise out of or
are based upon any breach of any representation,  warranty, covenant, obligation
or agreement contained herein or therein. The

                                       24
<PAGE>

Company  hereby  agrees  to  indemnify  the  Investor  for  expenses  (including
reasonable legal or other expenses)  incurred by the Investor in connection with
any claims made by the Investor against the Company arising out of or based upon
any breach of any representation, warranty, covenant, obligation or agreement of
the Company contained herein.

7.       CONSENT TO JURISDICTION.  Each party agrees that all legal  proceedings
concerning  the  interpretations,  enforcement  and defense of the  transactions
contemplated by this  Subscription  Agreement  (whether  brought against a party
hereto  or  its  respective  affiliates,   directors,  officers,   shareholders,
employees  or agents)  shall be commenced  exclusively  in the state and federal
courts  sitting in Manhattan,  New York.  Each party hereto  hereby  irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
Manhattan,  New  York  for  the  adjudication  of any  dispute  hereunder  or in
connection  herewith or with any  transaction  contemplated  hereby or discussed
herein (including with respect to the enforcement hereof). Each party agrees not
to commence a claim or proceeding  hereunder in a court other than a state court
or federal  court sitting in  Manhattan,  New York,  except (i) if required as a
mandatory counterclaim or cross-claim in a proceeding commenced by a Person in a
different  jurisdiction  or (ii) if such party has first  brought  such claim or
proceeding  in such  court  sitting  in  Manhattan,  New York and both the state
courts  and the  federal  courts  sitting  in  Manhattan,  New York have  denied
jurisdiction over such claim or proceeding. Each party hereto hereby irrevocably
waives  personal  service of process and consents to process being served in any
such suit,  action or  proceeding  by mailing a copy thereof via  registered  or
certified  mail or overnight  delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Subscription Agreement and
agrees that such service shall constitute good and sufficient service of process
and notice thereof. Nothing contained herein shall be deemed to limit in any way
any right to serve  process in any manner  permitted  by law.  Each party hereto
(including its affiliates,  agents,  officers,  directors and employees)  hereby
irrevocably  waives,  to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Subscription Agreement or the transactions contemplated hereby.

8.       SEVERABILITY. In the event any parts of this Subscription Agreement are
found to be void, the remaining provisions of this Subscription  Agreement shall
nevertheless  be  binding  with the same  effect as though  the void  parts were
deleted.

9.       COUNTERPARTS.  This  Subscription  Agreement  may be executed in one or
more  counterparts,  each of which shall be deemed an original  but all of which
together  shall  constitute one and the same  instrument.  The execution of this
Subscription Agreement may be by actual or facsimile signature.

10.      BENEFIT. This Subscription Agreement shall be binding upon and inure to
the benefit of the parties' hereto and their legal  representatives,  successors
and assigns.

                                       25
<PAGE>

11.      NOTICES AND ADDRESSES.  All notices,  offers,  acceptance and any other
acts under this Subscription Agreement (except payment) shall be in writing, and
shall be sufficiently given if delivered to the addressees in person, by Federal
Express or  similar  receipted  next  business  day  delivery  followed  by next
business day delivery, or by facsimile delivery, as follows:

         Investor:            At the address  designated  in Section 2.2 of this
                              Subscription Agreement

         The Company:         Elite Pharmaceuticals, Inc.
                              165 Ludlow Avenue
                              Northvale, New Jersey 07647
                              Facsimile: (201) 750-2755
                              Attention: Mr. Bernard Berk,
                                           Chairman and Chief Executive Office

         With a copy to:      Reitler Brown & Rosenblatt LLC
                              800 Third Avenue, 21st Floor
                              New York, NY 10021
                              Facsimile: (212) 371-5500
                              Attention: Scott H. Rosenblatt

or to such other address as either of them, by notice to the other may designate
from time to time.  The  transmission  confirmation  receipt  from the  sender's
facsimile machine shall be evidence of successful facsimile delivery. Time shall
be  counted  to,  or from,  as the case may be,  the  delivery  in  person or by
mailing.

12.      GOVERNING   LAW.   This   Subscription   Agreement   and  any  dispute,
disagreement,  or issue of  construction  or  interpretation  arising  hereunder
whether  relating to its  execution,  its  validity,  the  obligations  provided
therein or performance shall be governed or interpreted according to the laws of
the State of New York.

13.      ENTIRE AGREEMENT.  This Subscription  Agreement  constitutes the entire
Subscription  Agreement  between the parties and  supersedes  all prior oral and
written agreements between the parties hereto with respect to the subject matter
hereof.  Neither this  Subscription  Agreement nor any  provision  hereof may be
amended,  waived,  discharged  or  terminated,  except by a statement in writing
signed by the party or parties against which enforcement or the change,  waiver,
discharge or termination is sought; provided,  however, that any amendment which
creates  superior rights or preferences  for the Investor  relative to any other
Investor  shall be  approved  by  holders of at least  66-2/3% of the  aggregate
number of Series A Preferred Stock purchased under the Subscription Agreements.

14.      SECTION  HEADINGS.  Section  headings  herein  have been  inserted  for
referenceonly  and  shall not be deemed  to limit or  otherwise  affect,  in any
matter,  or be  deemed  to  interpret  in whole  or in part any of the  terms or
provisions of this Subscription Agreement.

15.      SURVIVAL   OF   REPRESENTATIONS,   WARRANTIES   AND   AGREEMENTS.   The
representations,  warranties and agreements  contained  herein shall survive the
delivery of and payment for the Securities.

                                       26
<PAGE>

16.      REMEDIES. In addition to being entitled to exercise all rights provided
herein or granted by law,  including  recovery of damages,  the Investor and the
Company  will be  entitled  to  specific  performance  under  this  Subscription
Agreement.  The  parties  agree  that  monetary  damages  may  not  be  adequate
compensation  for any loss  incurred  by  reason of any  breach  of  obligations
described in the foregoing  sentence and hereby agree to waive in any action for
specific  performance  of any such  obligation  the defense that a remedy at law
would be adequate.

17.      INDEPENDENT  NATURE OF INVESTORS'  OBLIGATIONS.  The obligations of the
Investor  under this  Subscription  Agreement are several and not joint with the
obligations of any other Investor under any other  Subscription  Agreement,  and
the Investor  shall not be  responsible  in any way for the  performance  of the
obligations  of  any  other  Investor  under  any  of  the  other   Subscription
Agreements.  The decision of the Investor to purchase the Securities pursuant to
this Subscription  Agreement has been made by such Investor independently of any
other Investor.  Nothing  contained  herein or in any of the other  Subscription
Agreements,  and no action  taken by any  Investor  pursuant  thereto,  shall be
deemed to constitute the Investors as a  partnership,  an  association,  a joint
venture or any other kind of entity,  or create a presumption that the Investors
are in any way acting in concert or as a group with respect to such  obligations
or the transactions  contemplated by the Agreements.  The Investor  acknowledges
that no other Investor has acted as agent for Investor in connection with making
its  investment  hereunder and that no other Investor will be acting as agent of
the Investor in connection  with  monitoring its investment in the Securities or
enforcing its rights under this  Subscription  Agreement.  The Investor shall be
entitled to  independently  protect and  enforce its rights,  including  without
limitation the rights arising out of this Subscription  Agreement,  and it shall
not be necessary for any other  Investor to be joined as an additional  party in
any proceeding for such purpose.

18.      REPLACEMENT OF SECURITIES AND UNDERLYING  SHARES. If any certificate or
instrument  evidencing  any  Securities or any  Underlying  Shares is mutilated,
lost,  stolen or  destroyed,  the Company  shall  promptly  issue or cause to be
issued in exchange and substitution  for and upon  cancellation  thereof,  or in
lieu of and  substitution  therefor,  a new certificate or instrument,  but only
upon receipt of evidence  reasonably  satisfactory  to the Company of such loss,
theft or destruction and customary and reasonable indemnity,  if requested.  The
applicants for a new certificate or instrument  under such  circumstances  shall
also pay any reasonable  third-party  costs associated with the issuance of such
replacement Securities or Underlying Shares.

19.      PAYMENT SET ASIDE.  To the extent  that the Company  makes a payment or
payments to the Investor pursuant to this Subscription Agreement or the Investor
enforces or exercises its rights hereunder,  and such payment or payments or the
proceeds of such  enforcement  or exercise or any part thereof are  subsequently
invalidated,  declared to be fraudulent or  preferential,  set aside,  recovered
from, disgorged by or are required to be refunded,  repaid or otherwise restored
to the  Company,  a  trustee,  receiver  or  any  other  person  under  any  law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable  cause of action),  then to the extent of any such  restoration
the  obligation  or part thereof  originally  intended to be satisfied  shall be
revived and  continued  in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

                                       27
<PAGE>

Individual Investors:

---------------------------------------------------------------------
Social Security Number     Print Name of Investor No. 1

                           ------------------------------------------
                           Signature of Investor No. 1

---------------------------------------------------------------------
Social Security Number     Print Name of Investor No. 2

                           ------------------------------------------
                           Signature of Investor No. 2

Manner in which Securities are to be held:

_____ Individual Ownership                         _____ Partnership

_____ Tenants-in-Common                            _____ Trust

_____ Joint Tenant With Right of Survivorship      _____ Corporation

_____ Community Property                           _____ Employee Benefit Plan

_____ Separate Property                            _____ Other (please indicate)

Corporate or Other Entity:

----------------------------------                       -----------------------
Federal ID Number                                        Print Name of Entity

                                                         By:
                                                            --------------------
                                                             Signature, Title
DATED: _______________, 2004

                                       28
<PAGE>

By signing below, the undersigned accepts the foregoing  subscription and agrees
to be bound by its terms.

Elite Pharmaceuticals, Inc.

By:   ___________________________                 Dated:  October 6, 2004
      Bernard Berk,
      Chief Executive Officer

                                       29
<PAGE>

                                    EXHIBIT A

                           WIRE TRANSFER INSTRUCTIONS

           Bank of NYC
           ABA No. 021000018
           GLA 111-565
           Cust A/C # 106148
           A/C Name: Elite Pharmaceuticals Series A Preferred Placement - Escrow

<PAGE>

                                    EXHIBIT B

                           FORM OF SHORT TERM WARRANT

<PAGE>

                                    EXHIBIT C

                            FORM OF LONG TERM WARRANT

<PAGE>

                                    EXHIBIT D

                      FORM OF REGISTRATION RIGHTS AGREEMENT

<PAGE>

                                    EXHIBIT E

                       FORM OF CERTIFICATE OF DESIGNATIONS

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