Document:

SECURITIES PURCHASE AGREEMENT

      This Securities Purchase Agreement (this "AGREEMENT") is dated as of April
24,  2007,  among  Elite  Pharmaceuticals,  Inc.,  a Delaware  corporation  (the
"COMPANY"),  and each purchaser  identified on the signature pages hereto (each,
including  its  successors  and assigns,  a  "PURCHASER"  and  collectively  the
"PURCHASERS").

      WHEREAS,  subject to the terms and  conditions set forth in this Agreement
and  pursuant to Section  4(2) of the  Securities  Act of 1933,  as amended (the
"SECURITIES  ACT") and Rule 506 promulgated  thereunder,  the Company desires to
issue and sell to each Purchaser, and each Purchaser, severally and not jointly,
desires to purchase  from the Company,  securities  of the Company as more fully
described in this Agreement.

      NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement,  and for  other  good and  valuable  consideration  the  receipt  and
adequacy of which are hereby acknowledged,  the Company and each Purchaser agree
as follows:

                                    ARTICLE I
                                   DEFINITIONS

      1.1  DEFINITIONS.  In  addition  to the terms  defined  elsewhere  in this
Agreement:  (a) capitalized terms that are not otherwise defined herein have the
meanings  given to such terms in the  Certificate  of  Designation  (as  defined
herein), and (b) the following terms have the meanings indicated in this Section
1.1:

            "ACTION"  shall have the  meaning  ascribed  to such term in Section
      3.1(j).

            "ACTUAL MINIMUM" means, as of any date, the maximum aggregate number
      of shares of Common  Stock  then  issued or  potentially  issuable  in the
      future  pursuant to the  Transaction  Documents,  including any Underlying
      Shares  issuable  upon  exercise or conversion in full of all Warrants and
      shares of Series C Preferred  Stock,  ignoring any  conversion or exercise
      limits set forth  therein,  and assuming that any  previously  unconverted
      shares of Series C Preferred Stock are held until the fifth anniversary of
      the  Closing  Date and all  dividends  are paid in shares of Common  Stock
      until such fifth anniversary.

            "AFFILIATE"  means any Person that,  directly or indirectly  through
      one or more  intermediaries,  controls  or is  controlled  by or is  under
      common  control  with a Person,  as such  terms are used in and  construed
      under Rule 144 under the Securities Act. With respect to a Purchaser,  any
      investment  fund or managed  account  that is  managed on a  discretionary
      basis by the same  investment  manager as such Purchaser will be deemed to
      be an Affiliate of such Purchaser.

            "BUSINESS DAY" means any day except Saturday,  Sunday, any day which
      shall be a federal  legal holiday in the United States or any day on which
      banking  institutions  in the State of New York are authorized or required
      by law or other governmental action to

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      close.

            "CERTIFICATE OF DESIGNATION" means the Certificate of Designation of
      the  Series C  Preferred  Stock to be filed  prior to the  Closing  by the
      Company with the Secretary of State of Delaware,  in the form of EXHIBIT A
      attached hereto.

            "CLOSING"  means the closing or closings of the purchase and sale of
      the Securities pursuant to Section 2.1.

            "CLOSING  DATE" means the  Trading  Day when all of the  Transaction
      Documents  have been  executed  and  delivered by the  applicable  parties
      thereto, and all conditions  precedent to (i) the Purchasers'  obligations
      to pay the  Subscription  Amount  and (ii) the  Company's  obligations  to
      deliver the Securities have been satisfied or waived.

            "COMMISSION" means the Securities and Exchange Commission.

            "COMMON  STOCK"  means the common  stock of the  Company,  par value
      US$.01  per  share,  and any other  class of  securities  into  which such
      securities may hereafter be reclassified or changed into.

            "COMMON STOCK  EQUIVALENTS"  means any  securities of the Company or
      the Subsidiaries  which would entitle the holder thereof to acquire at any
      time Common Stock,  including,  without  limitation,  any debt,  preferred
      stock, rights,  options,  warrants or other instrument that is at any time
      convertible into or exercisable or exchangeable for, or otherwise entitles
      the holder thereof to receive, Common Stock.

            "COMPANY  COUNSEL"  means  Reitler,  Brown,  &  Rosenblatt  LLC with
      offices located at 800 Third Avenue, New York, NY 10022.

            "CONVERSION  PRICE" shall have the meaning  ascribed to such term in
      the Certificate of Designation.

            "DISCLOSURE  SCHEDULES" shall have the meaning ascribed to such term
      in Section 3.1.

            "DISCUSSION  TIME" shall have the  meaning  ascribed to such term in
      Section 3.2 (f).

            "EFFECTIVE  DATE"  means  the  date  that the  initial  Registration
      Statement  filed  by  the  Company  pursuant  to the  Registration  Rights
      Agreement is first declared effective by the Commission.

            "EVALUATION  DATE" shall have the  meaning  ascribed to such term in
      Section 3.1(r).

            "EXCHANGE  ACT"  means  the  Securities  Exchange  Act of  1934,  as
      amended, and the rules and regulations promulgated thereunder.

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<PAGE>

            "EXEMPT  ISSUANCE"  means the issuance of (a) shares of Common Stock
      or options to employees, consultants, officers or directors of the Company
      pursuant  to any stock or option  plan duly  adopted by a majority  of the
      non-employee  members  of the  Board  of  Directors  of the  Company  or a
      majority  of  the  members  of  a  committee  of  non-employee   directors
      established for such purpose, (b) securities upon the exercise or exchange
      of  or  conversion  of  any  Securities   issued  hereunder  and/or  other
      securities  exercisable or exchangeable  for or convertible into shares of
      Common  Stock  issued  and  outstanding  on the  date of  this  Agreement,
      provided that such securities have not been amended since the date of this
      Agreement  to increase  the number of such  securities  or to decrease the
      exercise,  exchange  or  conversion  price  of any  such  securities,  (c)
      securities  issued  pursuant to  acquisitions  or  strategic  transactions
      approved by a majority of the disinterested  directors,  provided any such
      issuance  shall  only be to a Person  which  is,  itself  or  through  its
      subsidiaries,  an operating company in, or an individual that operates,  a
      business  synergistic  with the  business  of the Company and in which the
      Company  receives  benefits in addition to the  investment  of funds,  but
      shall not include a transaction in which the Company is issuing securities
      primarily for the purpose of raising capital or to an entity whose primary
      business is  investing  in  securities,  (d) up to a maximum of  1,500,000
      shares of Common Stock or Common Stock Equivalents in any rolling 12 month
      period issued to consultants,  vendors,  financial institutions or lessors
      in  connection  with  services   (including  the  provision  of  Permitted
      Indebtedness (as defined in the Certificate of Designations))  provided by
      such  Persons  referred  to in this  clause  (d),  but shall not include a
      transaction in which the Company is issuing  securities  primarily for the
      purpose  of raising  capital or to an entity  whose  primary  business  is
      investing  in  securities,  and  provided  that none of such shares may be
      registered  for sale or  resale  by any of such  holders;  (e)  securities
      issued as a dividend or distribution any of the Securities pursuant to the
      terms of the Transaction Documents and (f) securities issued in connection
      with any stock split,  stock  dividend or  recapitalization  of the Common
      Stock.

            "GAAP"  shall  have the  meaning  ascribed  to such term in  Section
      3.1(h).

            "INDEBTEDNESS"  shall  have the  meaning  ascribed  to such  term in
      Section 3.1(aa).

            "INITIAL CONVERSION PRICE" means US$2.32.

            "INTELLECTUAL  PROPERTY  RIGHTS" shall have the meaning  ascribed to
      such term in Section 3.1(o).

            "LIENS" means a lien, charge, security interest,  encumbrance, right
      of first refusal, preemptive right or other restriction.

            "MATERIAL  ADVERSE  EFFECT" shall have the meaning  assigned to such
      term in Section 3.1(b).

            "MATERIAL  PERMITS" shall have the meaning  ascribed to such term in
      Section 3.1(m).

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<PAGE>

            "PERSON"  means an individual or  corporation,  partnership,  trust,
      incorporated  or  unincorporated   association,   joint  venture,  limited
      liability  company,  joint  stock  company,  government  (or an  agency or
      subdivision thereof) or other entity of any kind.

            "SERIES C  PREFERRED  STOCK"  means  the up to 20,000  shares of the
      Company's 8% Series C Convertible  Preferred Stock issued hereunder having
      the rights,  preferences  and privileges  set forth in the  Certificate of
      Designation, in the form of EXHIBIT A hereto.

            "PRE-NOTICE" shall have the meaning ascribed to such term in Section
      4.8(b).

            "PROCEEDING"  means  an  action,   claim,  suit,   investigation  or
      proceeding  (including,  without  limitation,  an investigation or partial
      proceeding, such as a deposition), whether commenced or threatened.

            "REGISTRATION   RIGHTS  AGREEMENT"  means  the  Registration  Rights
      Agreement, dated the date hereof, among the Company and the Purchasers, in
      the form of EXHIBIT B attached hereto.

            "REGISTRATION  STATEMENT" means a registration statement meeting the
      requirements set forth in the  Registration  Rights Agreement and covering
      the resale of the  Underlying  Shares by each Purchaser as provided for in
      the Registration Rights Agreement.

            "REQUIRED APPROVALS" shall have the meaning ascribed to such term in
      Section 3.1(e).

            "RULE 144" means Rule 144 promulgated by the Commission  pursuant to
      the Securities  Act, as such Rule may be amended from time to time, or any
      similar rule or  regulation  hereafter  adopted by the  Commission  having
      substantially the same effect as such Rule.

            "SEC  REPORTS"  shall  have the  meaning  ascribed  to such  term in
      Section 3.1(h).

            "SECURITIES"  means the Series C Preferred Stock, the Warrants,  the
      Warrant Shares and the Underlying Shares.

            "SECURITIES  ACT" means the Securities Act of 1933, as amended,  and
      the rules and regulations promulgated thereunder.

            "SERIES B PREFERRED STOCK" means the outstanding  shares of Series B
      Preferred Stock, par value $0.01 per share, of the Company.

            "SERIES  B  CONSENT"  means the  written  consent  of the  requisite
      holders of Series B Preferred  Stock to the  transactions  contemplated in
      the Transaction Documents.

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<PAGE>

            "SHAREHOLDER APPROVAL" means such approval as may be required by the
      applicable  rules and  regulations  of the American Stock Exchange (or any
      successor entity) from the shareholders of the Company with respect to the
      transactions  contemplated  by the  Transaction  Documents,  including the
      issuance of all of the Underlying Shares in excess of 19.99% of the issued
      and outstanding Common Stock on the Closing Date.

            "SHORT SALES" shall include all "short sales" as defined in Rule 200
      of Regulation SHO under the Exchange Act.

            "STATED VALUE" means US$1,000 per share of Series C Preferred Stock.

            "SUBSCRIPTION  AMOUNT"  shall  mean,  as  to  each  Purchaser,   the
      aggregate  amount to be paid for the Series C  Preferred  Stock  purchased
      hereunder as specified below such  Purchaser's  name on the signature page
      of this Agreement and next to the heading "Subscription Amount", in United
      States Dollars and in immediately available funds.

            "SUBSEQUENT  FINANCING" shall have the meaning ascribed to such term
      in Section 4.8(a).

            "SUBSEQUENT  FINANCING  NOTICE"  shall have the meaning  ascribed to
      such term in Section 4.8(b).

            "SUBSIDIARY"  means any entity in which the  Company  holds  greater
      than 50% of  voting  securities,  each of which is set  forth on  SCHEDULE
      3.1(A).

            "TRADING  DAY" means a day on which the Common  Stock is traded on a
      Trading Market.

            "TRADING  MARKET" means the following  markets or exchanges on which
      the Common  Stock is listed or quoted for trading on the date in question:
      the Nasdaq Capital Market, the American Stock Exchange, the New York Stock
      Exchange or the Nasdaq National Market.

            "TRANSACTION  DOCUMENTS"  means this  Agreement,  the Certificate of
      Designation, the Warrants and the Registration Rights Agreement.

            "UNDERLYING  SHARES"  means the  shares of Common  Stock  issued and
      issuable upon conversion of the Series C Preferred Stock, upon exercise of
      the  Warrants  and  issued  and  issuable  in lieu of the cash  payment of
      dividends on the Series C Preferred  Stock in accordance with the terms of
      the Certificate of Designation.

            "VWAP" means, for any date, the price determined by the first of the
      following clauses that applies:  (a) if the Common Stock is then listed or
      quoted on a Trading Market, the daily volume weighted average price of the
      Common Stock for such date (or

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<PAGE>

      the  nearest  preceding  date) on the  Trading  Market on which the Common
      Stock is then  listed or quoted  for  trading  as  reported  by  Bloomberg
      Financial L.P. (based on a Trading Day from 9:30 a.m. (New York City time)
      to 4:02 p.m. (New York City time);  (b) if the OTC Bulletin Board is not a
      Trading Market,  the volume weighted average price of the Common Stock for
      such date (or the nearest  preceding date) on the OTC Bulletin Board;  (c)
      if the Common  Stock is not then  quoted for  trading on the OTC  Bulletin
      Board and if prices for the Common  Stock are then  reported  in the "Pink
      Sheets" published by Pink Sheets, LLC (or a similar organization or agency
      succeeding  to its  functions  of reporting  prices),  the most recent bid
      price  per  share of the  Common  Stock so  reported;  or (d) in all other
      cases,  the fair market value of a share of Common Stock as  determined by
      an  independent  appraiser  selected  in  good  faith  by the  Holder  and
      reasonably acceptable to the Company.

            "WARRANTS" means collectively the Common Stock purchase warrants, in
      the form of  EXHIBIT C  delivered  to the  Purchasers  at the  Closing  in
      accordance  with  Section  2.2(a)(iii)  hereof,  which  Warrants  shall be
      exercisable immediately and have a term of exercise equal to 5 years.

            "WARRANT  SHARES"  means the shares of Common  Stock  issuable  upon
      exercise of the Warrants.

                                   ARTICLE II
                                PURCHASE AND SALE

      2.1  CLOSING.  On the  Closing  Date,  upon the terms and  subject  to the
conditions  set forth herein,  substantially  concurrent  with the execution and
delivery of this  Agreement by the parties  hereto,  the Company agrees to sell,
and each  Purchaser  agrees to  purchase  in the  aggregate,  severally  and not
jointly,  up to  US$20,000,000  of shares of Series C  Preferred  Stock  with an
aggregated  Stated  Value  equal to such  Purchaser's  Subscription  Amount  and
Warrants as determined by pursuant to Section  2.2(a).  The aggregate  number of
shares of Series C Preferred  Stock sold hereunder  shall be up to 20,000.  Each
Purchaser  shall deliver to American Stock Transfer and Trust Company  ("ASTTC")
as escrow agent, via wire transfer or a certified check of immediately available
funds equal to their  Subscription  Amount and the Company shall deliver to each
Purchaser  their  respective  shares of Series C Preferred Stock and Warrants as
determined  pursuant to Section  2.2(a) and the other items set forth in Section
2.2 issuable at the Closing.  Upon  satisfaction  of the conditions set forth in
Sections  2.2 and 2.3,  the  Closing  shall  occur at the offices of the Company
Counsel, or such other location as the parties shall mutually agree.

      2.2 DELIVERIES.

            (a) On the Closing  Date,  the Company  shall deliver or cause to be
      delivered to each Purchaser the following:

                  (i) this Agreement duly executed by the Company;

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                  (ii) a  certificate  evidencing a number of shares of Series C
            Preferred  Stock  equal  to  such  Purchaser's  Subscription  Amount
            divided  by the  Stated  Value,  registered  in  the  name  of  such
            Purchaser;

                  (iii) a Warrant  registered  in the name of such  Purchaser to
            purchase  up to a number of shares of Common  Stock  equal to 30% of
            such  Purchaser's   Subscription   Amount  divided  by  the  Initial
            Conversion Price, with an exercise price equal to US$3.00 per share,
            subject to adjustment therein;

                  (iv) the  Registration  Rights  Agreement duly executed by the
            Company;

                  (v) a  certificate,  duly  executed  by  its  Chief  Executive
            Officer,  certifying as to the  satisfaction  of the  conditions set
            forth in Section 2.3(b);

                  (vi) a certificate  executed by its Secretary  having attached
            thereto (i) the Company's Certificate of Incorporation, certified by
            the Secretary of State of the State of Delaware, as in effect at the
            Closing Date, (ii) the Company's By-Laws as in effect at the Closing
            Date,  (iii)  resolutions  approved by the Board of Directors of the
            Company authorizing the transactions  contemplated  hereby, and (iv)
            good  standing  certificates  with  respect to the Company  from the
            Secretary of State of the State of Delaware.

            (b) On the Closing Date, each Purchaser shall deliver or cause to be
      delivered to the Company the following:

                  (i) this Agreement duly executed by such Purchaser;

                  (ii) such Purchaser's  Subscription Amount by wire transfer to
            the ASTTC escrow account as specified in writing by ASTTC; and

                  (iii) the Registration  Rights Agreement duly executed by such
            Purchaser.

      2.3 CLOSING CONDITIONS.

            (a) The obligations of the Company  hereunder in connection with the
      Closing are subject to the following conditions being met:

                  (i) the accuracy in all material respects when made and on the
            Closing Date of the representations and warranties of the Purchasers
            contained herein,  other than representation and warranties that are
            qualified by "Material Adverse Affect" or "materiality"  which shall
            be true and correct in all respects;

                  (ii)  all   obligations,   covenants  and  agreements  of  the
            Purchasers  required to be performed at or prior to the Closing Date
            shall have been performed;

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                  (iii) the delivery by the Purchasers of the items set forth in
            Section 2.2(b) of this Agreement; and

                  (iv) the  delivery  by the  requisite  holders of the Series B
            Preferred Stock of the Series B Consent.

            (b)  The  respective  obligations  of the  Purchasers  hereunder  in
      connection with the Closing are subject to the following  conditions being
      met:

                  (i) the accuracy in all material  respects on the Closing Date
            of the  representations  and  warranties  of the  Company  contained
            herein,  other than representation and warranties that are qualified
            by "Material  Adverse Affect" or  "materiality"  which shall be true
            and correct in all respects;

                  (ii) all obligations,  covenants and agreements of the Company
            required to be  performed at or prior to the Closing Date shall have
            been performed;

                  (iii) the  delivery  by the  Company of the items set forth in
            Section 2.2(a) of this Agreement;

                  (iv) there  shall have been no  Material  Adverse  Effect with
            respect to the Company since the date hereof;

                  (v) the Company shall have obtained all requisite governmental
            approval,   if  any,   required  to  consummate   the   transactions
            contemplated herein; and

                  (vi) from the date hereof to the Closing Date,  trading in the
            Common Stock shall not have been  suspended by the Commission or the
            Company's  principal  Trading  Market  (except for any suspension of
            trading  of  limited  duration  agreed  to  by  the  Company,  which
            suspension  shall be terminated  prior to the Closing),  and, at any
            time prior to the Closing Date,  trading in securities  generally as
            reported  by  Bloomberg   Financial  Markets  shall  not  have  been
            suspended  or  limited,  or  minimum  prices  shall  not  have  been
            established on securities whose trades are reported by such service,
            or on any Trading Market,  nor shall a banking  moratorium have been
            declared  either by the United States or New York State  authorities
            nor shall there have occurred any material outbreak or escalation of
            hostilities  or other  national  or  international  calamity of such
            magnitude in its effect on, or any material  adverse  change in, any
            financial market which, in each case, in the reasonable  judgment of
            each Purchaser,  makes it  impracticable  or inadvisable to purchase
            the Series C Preferred Stock at the Closing.

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                                   ARTICLE III
                         REPRESENTATIONS AND WARRANTIES

      3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.  Except as set forth in
the disclosure schedules delivered to the Purchasers  concurrently herewith (the
"DISCLOSURE  SCHEDULES"),  which  Disclosure  Schedules  shall be  deemed a part
hereof and to qualify any  representation  or warranty  otherwise made herein to
the extent of such disclosure,  the Company hereby makes the representations and
warranties set forth below to each Purchaser:

            (a) SUBSIDIARIES. All of the direct and indirect Subsidiaries of the
      Company are set forth on SCHEDULE  3.1(A).  The Company owns,  directly or
      indirectly,  all of the capital  stock or other  equity  interests of each
      Subsidiary free and clear of any Liens, and all the issued and outstanding
      shares of capital  stock of each  Subsidiary  are  validly  issued and are
      fully paid,  non-assessable  and free of preemptive  and similar rights to
      subscribe for or purchase securities.  If the Company has no subsidiaries,
      then all other references in the Transaction Documents to the Subsidiaries
      or any of them will be disregarded.

            (b)  ORGANIZATION  AND  QUALIFICATION.  The  Company and each of the
      Subsidiaries  is an  entity  duly  incorporated  or  otherwise  organized,
      validly  existing and in good standing under the laws of the  jurisdiction
      of its  incorporation or organization (as applicable),  with the requisite
      power and authority to own and use its  properties and assets and to carry
      on its  business  as  currently  conducted.  Neither  the  Company nor any
      Subsidiary  is in  violation  or default of any of the  provisions  of its
      respective  certificate  or  articles  of  incorporation,  bylaws or other
      organizational  or  charter  documents.   Each  of  the  Company  and  the
      Subsidiaries is duly qualified to conduct business and is in good standing
      as a foreign corporation or other entity in each jurisdiction in which the
      nature  of the  business  conducted  or  property  owned by it makes  such
      qualification necessary, except where the failure to be so qualified or in
      good  standing,  as the  case may be,  could  not  have or  reasonably  be
      expected  to  result in (i) a  material  adverse  effect on the  legality,
      validity or  enforceability of any Transaction  Document,  (ii) a material
      adverse effect on the results of operations,  assets, business,  prospects
      or condition (financial or otherwise) of the Company and the Subsidiaries,
      taken as a whole,  or (iii) a  material  adverse  effect on the  Company's
      ability  to  perform  in  any  material  respect  on a  timely  basis  its
      obligations  under any Transaction  Document (any of (i), (ii) or (iii), a
      "MATERIAL  ADVERSE  EFFECT") and no Proceeding has been  instituted in any
      such jurisdiction  revoking,  limiting or curtailing or seeking to revoke,
      limit or curtail such power and authority or qualification.

            (c)  AUTHORIZATION;  ENFORCEMENT.  The  Company  has  the  requisite
      corporate  power  and  authority  to  enter  into  and to  consummate  the
      transactions  contemplated  by  each  of  the  Transaction  Documents  and
      otherwise  to carry out its  obligations  hereunder  and  thereunder.  The
      execution and delivery of each of the Transaction Documents by the Company
      and the  consummation by it of the  transactions  contemplated  hereby and
      thereby have been duly  authorized by all necessary  action on the part of
      the Company and no further action is required by the Company, its board of
      directors  or its  stockholders  in  connection  therewith  other  than in
      connection with the Required Approvals. Each Transaction Document has been
      (or upon  delivery  will have been) duly executed by the Company and, when
      delivered in accordance with the terms hereof and thereof, will constitute
      the valid and binding obligation of the Company enforceable

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      against the Company in accordance  with its terms except (i) as limited by
      general  equitable  principles  and  applicable  bankruptcy,   insolvency,
      reorganization, moratorium and other laws of general application affecting
      enforcement  of  creditors'  rights  generally,  (ii) as  limited  by laws
      relating to the availability of specific performance, injunctive relief or
      other  equitable  remedies  and  (iii)  insofar  as  indemnification   and
      contribution provisions may be limited by applicable law.

            (d) NO CONFLICTS.  The  execution,  delivery and  performance of the
      Transaction  Documents by the Company and the  consummation by the Company
      of the other transactions  contemplated hereby and thereby do not and will
      not: (i) conflict  with or violate any  provision of the  Company's or any
      Subsidiary's  certificate  or articles of  incorporation,  bylaws or other
      organizational or charter documents,  or (ii) conflict with, or constitute
      a default  (or an event  that with  notice or lapse of time or both  would
      become a default)  under,  result in the  creation of any Lien upon any of
      the  properties  or assets of the  Company or any  Subsidiary,  or give to
      others any rights of termination,  amendment, acceleration or cancellation
      (with or without notice, lapse of time or both) of, any agreement,  credit
      facility,  debt or other  instrument  (evidencing  a Company or Subsidiary
      debt or  otherwise)  or other  understanding  to which the  Company or any
      Subsidiary  is a party or by which any property or asset of the Company or
      any  Subsidiary  is bound or  affected,  or (iii)  subject to the Required
      Approvals,  conflict  with or  result  in a  violation  of any law,  rule,
      regulation,  order, judgment,  injunction,  decree or other restriction of
      any court or  governmental  authority to which the Company or a Subsidiary
      is subject  (including federal and state securities laws and regulations),
      or by which any property or asset of the Company or a Subsidiary  is bound
      or affected; except in the case of each of clauses (ii) and (iii), such as
      could not have or reasonably  be expected to result in a Material  Adverse
      Effect.

            (e) FILINGS,  CONSENTS AND APPROVALS. The Company is not required to
      obtain any consent, waiver, authorization or order of, give any notice to,
      or make any  filing or  registration  with,  any  court or other  federal,
      state, local or other governmental authority or other Person in connection
      with  the  execution,  delivery  and  performance  by the  Company  of the
      Transaction  Documents,  other  than (i) the  Series B  Consent,  (ii) the
      filings  required  pursuant  to Section  4.6,  (iii) the  filing  with the
      Commission  of  the  Registration   Statement,   (iv)  the  notice  and/or
      application(s) to each applicable Trading Market for the issuance and sale
      of the  Securities  and the listing of the  Underlying  Shares for trading
      thereon in the time and manner required thereby,  (v) the filing of Form D
      with the  Commission  and such  filings as are  required  to be made under
      applicable  state   securities   laws,  and  (vi)   Shareholder   Approval
      (collectively, the "REQUIRED APPROVALS").

            (f) ISSUANCE OF THE  SECURITIES.  The Securities are duly authorized
      and,  when  issued  and  paid  for  in  accordance   with  the  applicable
      Transaction  Documents,  will be duly and validly  issued,  fully paid and
      nonassessable,  free and clear of all Liens  imposed by the Company  other
      than restrictions on transfer  provided for in the Transaction  Documents.
      The  Underlying  Shares,  when issued in accordance  with the terms of the
      Transaction   Documents,   will  be   validly   issued,   fully  paid  and
      nonassessable,  free and clear of all Liens  imposed by the  Company.  The
      Company has reserved from its duly

                                       10
<PAGE>

      authorized  capital  stock a number of shares of Common Stock for issuance
      of the Underlying  Shares at least equal to the Actual Minimum on the date
      hereof.

            (g)  CAPITALIZATION.  The  capitalization  of the  Company is as set
      forth on  SCHEDULE  3.1(G).  Except as set forth in SCHEDULE  3.1(G),  the
      Company has not issued any capital  stock  since its most  recently  filed
      periodic  report  under the  Exchange  Act,  other  than  pursuant  to the
      exercise of employee stock options under the Company's stock option plans,
      the  issuance  of shares  of Common  Stock to  employees  pursuant  to the
      Company's  employee  stock purchase plan and pursuant to the conversion or
      exercise of Common  Stock  Equivalents  outstanding  as of the date of the
      most recently  filed periodic  report under the Exchange Act.  Except as a
      result  of the  purchase  and sale of the  Securities  or as set  forth on
      SCHEDULE 3.1(G), there are no outstanding options, warrants, script rights
      to subscribe to, calls or commitments of any character whatsoever relating
      to, or securities,  rights or obligations  convertible into or exercisable
      or  exchangeable  for, or giving any Person any right to subscribe  for or
      acquire,   any  shares  of  Common  Stock,   or  contracts,   commitments,
      understandings  or  arrangements by which the Company or any Subsidiary is
      or may become bound to issue  additional  shares of Common Stock or Common
      Stock  Equivalents.  Except as set forth in SCHEDULE 3.1(G),  the issuance
      and sale of the  Securities  will not obligate the Company to issue shares
      of  Common  Stock  or  other  securities  to any  Person  (other  than the
      Purchasers)  and  will not  result  in a right of any  holder  of  Company
      securities  to adjust the  exercise,  conversion,  exchange or reset price
      under any of such  securities.  All of the  outstanding  shares of capital
      stock of the  Company are validly  issued,  fully paid and  nonassessable,
      have been issued in compliance with all federal and state securities laws,
      and  none of such  outstanding  shares  was  issued  in  violation  of any
      preemptive   rights  or  similar  rights  to  subscribe  for  or  purchase
      securities.  No further approval or authorization of any stockholder,  the
      Board of  Directors  of the Company or others is required for the issuance
      and sale of the Securities.  Except as set forth in SCHEDULE 3.1(G), there
      are  no  stockholders  agreements,  voting  agreements  or  other  similar
      agreements  with  respect  to the  Company's  capital  stock to which  the
      Company is a party or, to the  knowledge of the Company,  between or among
      any of the Company's stockholders.

            (h) SEC  REPORTS;  FINANCIAL  STATEMENTS.  The Company has filed all
      reports,  schedules,  forms, statements and other documents required to be
      filed by it under  the  Securities  Act and the  Exchange  Act,  including
      pursuant to Section 13(a) or 15(d)  thereof,  for the two years  preceding
      the date hereof (or such shorter period as the Company was required by law
      or regulation to file such material) (the foregoing  materials,  including
      the exhibits  thereto and  documents  incorporated  by reference  therein,
      being  collectively  referred to herein as the "SEC  REPORTS") on a timely
      basis or has  received  a valid  extension  of such time of filing and has
      filed any such SEC Reports prior to the expiration of any such  extension.
      As of their  respective  dates,  the SEC Reports  complied in all material
      respects with the  requirements of the Securities Act and the Exchange Act
      and the rules and regulations of the Commission promulgated thereunder, as
      applicable,  and none of the SEC Reports, when filed, 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 therein,
      in the light of the circumstances under

                                       11
<PAGE>

      which they were made,  not  misleading.  The  financial  statements of the
      Company  included in the SEC Reports comply in all material  respects with
      applicable  accounting  requirements  and the rules and regulations of the
      Commission with respect  thereto as in effect at the time of filing.  Such
      financial  statements  have been prepared in accordance with United States
      generally  accepted  accounting  principles  applied on a consistent basis
      during the periods involved ("GAAP"), except as may be otherwise specified
      in  such  financial  statements  or the  notes  thereto  and  except  that
      unaudited  financial  statements may not contain all footnotes required by
      GAAP, and fairly present in all material  respects the financial  position
      of the Company and its  consolidated  subsidiaries as of and for the dates
      thereof and the results of operations  and cash flows for the periods then
      ended,  subject,  in  the  case  of  unaudited   statements,   to  normal,
      immaterial, year-end audit adjustments.

            (i)   MATERIAL   CHANGES;   UNDISCLOSED   EVENTS,   LIABILITIES   OR
      DEVELOPMENTS.  Since the date of the latest audited  financial  statements
      included  within the SEC Reports,  except as  specifically  disclosed in a
      subsequent SEC Report or as set forth in SCHEDULE 3.1(I) there has been no
      event,  occurrence or development that has had or that could reasonably be
      expected to result in a Material Adverse Effect,  (ii) the Company has not
      incurred any  liabilities  (contingent or otherwise)  other than (A) trade
      payables and accrued expenses  incurred in the ordinary course of business
      consistent  with past  practice  and (B)  liabilities  not  required to be
      reflected  in the  Company's  financial  statements  pursuant  to  GAAP or
      disclosed in filings made with the  Commission,  (iii) the Company has not
      altered its method of  accounting,  (iv) the  Company has not  declared or
      made  any  dividend  or  distribution  of cash or  other  property  to its
      stockholders or purchased,  redeemed or made any agreements to purchase or
      redeem any shares of its capital  stock and (v) the Company has not issued
      any equity  securities  to any  officer,  director  or  Affiliate,  except
      pursuant to existing Company stock option plans.

            (j)  LITIGATION.  There  is no  action,  suit,  inquiry,  notice  of
      violation, proceeding or investigation pending or, to the knowledge of the
      Company,  threatened  against or affecting the Company,  any Subsidiary or
      any of their  respective  properties  before or by any court,  arbitrator,
      governmental or administrative  agency or regulatory  authority  (federal,
      state,  county,  local or foreign)  (collectively,  an "ACTION") which (i)
      adversely  affects or challenges the legality,  validity or enforceability
      of any of the  Transaction  Documents or the Securities or (ii) could,  if
      there were an  unfavorable  decision,  have or  reasonably  be expected to
      result  in  a  Material  Adverse  Effect.  Neither  the  Company  nor  any
      Subsidiary,  nor any  director  or  officer  thereof,  is or has  been the
      subject of any Action involving a claim of violation of or liability under
      federal or state  securities  laws or a claim of breach of fiduciary duty.
      There has not been,  and to the  knowledge  of the  Company,  there is not
      pending or contemplated, any investigation by the Commission involving the
      Company or any current or former  director or officer of the Company.  The
      Commission  has not issued any stop order or other  order  suspending  the
      effectiveness  of any  registration  statement filed by the Company or any
      Subsidiary under the Exchange Act or the Securities Act.

                                       12
<PAGE>

            (k) LABOR RELATIONS. No labor dispute exists or, to the knowledge of
      the  Company,  is imminent  with  respect to any of the  employees  of the
      Company which could reasonably be expected to result in a Material Adverse
      Effect.  None of the Company's or its Subsidiaries'  employees is a member
      of a union that relates to such employee's  relationship with the Company,
      and  neither  the  Company  or any of its  Subsidiaries  is a  party  to a
      collective  bargaining  agreement,  and the Company  and its  Subsidiaries
      believe  that  their  relationships  with  their  employees  are good.  No
      executive officer, to the knowledge of the Company, is, or is now expected
      to be, in  violation  of any  material  term of any  employment  contract,
      confidentiality,   disclosure  or  proprietary  information  agreement  or
      non-competition  agreement,  or any other  contract  or  agreement  or any
      restrictive covenant,  and the continued employment of each such executive
      officer  does not subject the  Company or any of its  Subsidiaries  to any
      liability  with respect to any of the foregoing  matters.  The Company and
      its Subsidiaries are in compliance with all U.S. federal, state, local and
      foreign  laws  and  regulations  relating  to  employment  and  employment
      practices,  terms and conditions of employment and wages and hours, except
      where the failure to be in compliance  could not,  individually  or in the
      aggregate, reasonably be expected to have a Material Adverse Effect.

            (l)  COMPLIANCE.  Neither the Company nor any  Subsidiary  (i) is in
      default  under or in violation of (and no event has occurred  that has not
      been waived that, with notice or lapse of time or both,  would result in a
      default by the Company or any  Subsidiary  under),  nor has the Company or
      any Subsidiary  received  notice of a claim that it is in default under or
      that it is in violation of, any indenture, loan or credit agreement or any
      other agreement or instrument to which it is a party or by which it or any
      of its  properties is bound  (whether or not such default or violation has
      been waived),  (ii) is in violation of any order of any court,  arbitrator
      or governmental body, or (iii) is or has been in violation of any statute,
      rule  or  regulation  of any  governmental  authority,  including  without
      limitation all foreign,  federal,  state and local laws  applicable to its
      business  and all such laws that  affect the  environment,  except in each
      case as could not have or  reasonably  be expected to result in a Material
      Adverse Effect.

            (m) REGULATORY PERMITS. The Company and the Subsidiaries possess all
      certificates,   authorizations  and  permits  issued  by  the  appropriate
      federal,  state,  local or foreign  regulatory  authorities  necessary  to
      conduct  their  respective  businesses  as  described  in the SEC Reports,
      except  where  the  failure  to  possess  such  permits  could not have or
      reasonably be expected to result in a Material  Adverse Effect  ("MATERIAL
      PERMITS"),  and neither the Company nor any  Subsidiary  has  received any
      notice of proceedings  relating to the revocation or  modification  of any
      Material Permit.

            (n) TITLE TO ASSETS.  Except as set forth on  SCHEDULE  3.1(N),  the
      Company and the Subsidiaries  have good and marketable title in fee simple
      to all real property owned by them that is material to the business of the
      Company and the Subsidiaries and good and marketable title in all personal
      property owned by them that is material to the business of the Company and
      the  Subsidiaries,  in each case free and clear of all  Liens,  except for
      Liens as do not  materially  affect the value of such  property and do not
      materially  interfere  with the use made and  proposed  to be made of such
      property by the

                                       13
<PAGE>

      Company and the Subsidiaries  and Liens for the payment of federal,  state
      or other taxes, the payment of which is neither  delinquent nor subject to
      penalties.  Any real  property  and  facilities  held  under  lease by the
      Company and the Subsidiaries are held by them under valid,  subsisting and
      enforceable  leases  with which the Company  and the  Subsidiaries  are in
      compliance.

            (o) PATENTS AND TRADEMARKS.  The Company and the Subsidiaries  have,
      or have  rights to use,  all  patents,  patent  applications,  trademarks,
      trademark  applications,   service  marks,  trade  names,  trade  secrets,
      inventions,  copyrights,  licenses and other intellectual  property rights
      and similar rights  necessary or material for use in connection with their
      respective  businesses  as  described  in the SEC  Reports  and  which the
      failure to so have could have a Material Adverse Effect (collectively, the
      "INTELLECTUAL PROPERTY RIGHTS"). To the knowledge of the Company, all such
      Intellectual  Property  Rights are  enforceable  and there is no  existing
      infringement by another Person of any of the Intellectual Property Rights.
      The Company and its Subsidiaries  have taken reasonable  security measures
      to  protect  the  secrecy,  confidentiality  and  value  of all  of  their
      intellectual  properties,  except  where  failure  to  do  so  could  not,
      individually  or in  the  aggregate,  reasonably  be  expected  to  have a
      Material Adverse Effect. None of the Company's registered, or applied for,
      Intellectual  Property  Rights  have  expired or  terminated  or have been
      abandoned,  or are  expected  to expire or  terminate  or  expected  to be
      abandoned  within three years of the date of this  Agreement.  There is no
      claim,  action or proceeding being made or brought, or to the knowledge of
      the  Company,  being  threatened  against the Company or its  Subsidiaries
      regarding its Intellectual  Property Rights,  except for any claim, action
      or proceeding which, if determined  against the Company,  would not have a
      Material Adverse Effect.

            (p)  INSURANCE.  The  Company  and the  Subsidiaries  are insured by
      insurers of recognized  financial  responsibility  against such losses and
      risks and in such amounts as are prudent and  customary in the  businesses
      in which the Company and the Subsidiaries are engaged,  including, but not
      limited to,  directors  and  officers  insurance  coverage as set forth in
      SCHEDULE 3.1(P).  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  without a
      significant increase in cost.

            (q) TRANSACTIONS WITH AFFILIATES AND EMPLOYEES.  Except as set forth
      in the SEC Reports,  none of the officers or directors of the Company and,
      to the  knowledge of the Company,  none of the employees of the Company is
      presently a party to any  transaction  with the Company or any  Subsidiary
      (other than for services as employees, officers and directors),  including
      any contract,  agreement or other arrangement providing for the furnishing
      of services to or by, providing for rental of real or personal property to
      or from, or otherwise requiring payments to or from any officer,  director
      or such employee or, to the knowledge of the Company,  any entity in which
      any officer,  director, or any such employee has a substantial interest or
      is an officer,  director,  trustee or  partner,  in each case in excess of
      US$60,000  per annum  other than (i) for  payment of salary or  consulting
      fees for services rendered, (ii) reimbursement for expenses incurred

                                       14
<PAGE>

      on behalf of the Company and (iii) for other employee benefits,  including
      stock option agreements under any stock option plan of the Company.

            (r)  CERTAIN  FEES.  Except  as set  forth on  SCHEDULE  3.1(R),  no
      brokerage or finder's  fees or  commissions  are or will be payable by the
      Company to any broker, financial advisor or consultant,  finder, placement
      agent,  investment  banker,  bank or  other  Person  with  respect  to the
      transactions  contemplated  by the Transaction  Documents.  The Purchasers
      shall have no  obligation  with respect to any fees or with respect to any
      claims  made  by  or on  behalf  of  other  Persons  for  fees  of a  type
      contemplated  in this  Section  that  may be due in  connection  with  the
      transactions contemplated by the Transaction Documents.

            (s) PRIVATE  PLACEMENT.  Assuming  the  accuracy  of the  Purchasers
      representations  and warranties set forth in Section 3.2, no  registration
      under  the  Securities  Act is  required  for the  offer  and  sale of the
      Securities by the Company to the Purchasers as  contemplated  hereby.  The
      issuance and sale of the  Securities  hereunder  does not  contravene  the
      rules and regulations of the Trading Market.

            (t) INVESTMENT COMPANY.  The Company is not, and is not an Affiliate
      of, and immediately after receipt of payment for the Securities,  will not
      be or be an Affiliate of, an  "investment  company"  within the meaning of
      the Investment Company Act of 1940, as amended.  The Company shall conduct
      its  business  in a  manner  so that it will  not  become  subject  to the
      Investment Company Act.

            (u) LISTING AND MAINTENANCE REQUIREMENTS. The Company's Common Stock
      is registered  pursuant to Section 12(b) or 12(g) of the Exchange Act, and
      the Company has taken no action  designed to, or which to its knowledge is
      likely to have the effect of,  terminating the  registration of the Common
      Stock under the Exchange Act nor has the Company received any notification
      that the Commission is contemplating terminating such registration.

            (v) NO INTEGRATED OFFERING. Assuming the accuracy of the Purchasers'
      representations  and  warranties  set forth in Section  3.2,  neither  the
      Company, nor any of its affiliates,  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  to be  integrated  with
      prior  offerings by the Company for purposes of the  Securities Act or any
      applicable  shareholder approval provisions of any Trading Market on which
      any of the securities of the Company are listed or designated.

            (w) TAX STATUS.  Except for matters that would not,  individually or
      in the  aggregate,  have or reasonably be expected to result in a Material
      Adverse  Effect,  the Company and each  Subsidiary has filed all necessary
      federal,  state and foreign  income and franchise tax returns and has paid
      or  accrued  all  taxes  shown  as due  thereon,  and the  Company  has no
      knowledge  of a tax  deficiency  which  has been  asserted  or  threatened
      against the Company or any Subsidiary.

                                       15
<PAGE>

            (x) NO GENERAL  SOLICITATION.  Neither  the  Company  nor any person
      acting on behalf of the Company has offered or sold any of the  Securities
      by any form of general  solicitation or general  advertising.  The Company
      has offered the  Securities  for sale only to the  Purchasers  and certain
      other  "accredited  investors"  within  the  meaning of Rule 501 under the
      Securities Act.

            (y) FORM S-3  ELIGIBILITY.  The Company is eligible to register  the
      resale of the  Underlying  Shares for resale by the  Purchaser on Form S-3
      promulgated under the Securities Act.

      3.2  REPRESENTATIONS  AND  WARRANTIES OF THE  PURCHASERS.  Each  Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows:

            (a) ORGANIZATION;  AUTHORITY.  Such Purchaser, if an entity, is duly
      organized,  validly  existing and in good  standing  under the laws of the
      jurisdiction of its organization with full right, corporate or partnership
      power and  authority  to enter  into and to  consummate  the  transactions
      contemplated by the  Transaction  Documents and otherwise to carry out its
      obligations  hereunder and thereunder.  Such Purchaser,  if an individual,
      has  legal  capacity  and  authority  to  enter  into and  consummate  the
      transactions  contemplated by the  Transaction  Documents and otherwise to
      carry out his or her obligations hereunder and thereunder.  The execution,
      delivery  and   performance   by  such   Purchaser  of  the   transactions
      contemplated  by this Agreement have been duly authorized by all necessary
      corporate  or  similar  action  on  the  part  of  such  Purchaser.   Each
      Transaction Document to which it is a party has been duly executed by such
      Purchaser,  and when  delivered by such  Purchaser in accordance  with the
      terms hereof,  will constitute the valid and legally binding obligation of
      such  Purchaser,  enforceable  against  it in  accordance  with its terms,
      except  (i) as  limited by general  equitable  principles  and  applicable
      bankruptcy,  insolvency,  reorganization,  moratorium  and  other  laws of
      general application  affecting enforcement of creditors' rights generally,
      (ii)  as  limited  by  laws  relating  to  the  availability  of  specific
      performance,  injunctive  relief  or other  equitable  remedies  and (iii)
      insofar as indemnification  and contribution  provisions may be limited by
      applicable law.

            (b) OWN ACCOUNT.  Such Purchaser understands that the Securities are
      "restricted  securities" and have not been registered under the Securities
      Act or any applicable state securities law and is acquiring the Securities
      as  principal  for  its  own  account  and  not  with  a  view  to or  for
      distributing or reselling such Securities or any part thereof in violation
      of the  Securities  Act or any  applicable  state  securities  law, has no
      present  intention of distributing  any of such Securities in violation of
      the  Securities  Act or any  applicable  state  securities  law and has no
      direct or indirect arrangement or understandings with any other persons to
      distribute  or  regarding  the   distribution  of  such  Securities  (this
      representation  and warranty not limiting such  Purchaser's  right to sell
      the  Securities  pursuant to the  Registration  Statement  or otherwise in
      compliance with applicable federal and state securities laws) in violation
      of the Securities Act or any

                                       16
<PAGE>

      applicable   state   securities  law.  Such  Purchaser  is  acquiring  the
      Securities hereunder in the ordinary course of its business.

            (c)  PURCHASER  STATUS.  At the time such  Purchaser was offered the
      Securities,  it was,  and at the date  hereof  it is,  and on each date on
      which it converts any shares of Series C Preferred  Stock or exercises any
      Warrants,  it will be either:  (i) an "accredited  investor" as defined in
      Rule 501(a)(1),  (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act
      or (ii) a "qualified institutional buyer" as defined in Rule 144A(a) under
      the  Securities  Act. Such Purchaser is not required to be registered as a
      broker-dealer under Section 15 of the Exchange Act.

            (d) EXPERIENCE OF SUCH PURCHASER.  Such  Purchaser,  either alone or
      together with its representatives,  has such knowledge, sophistication and
      experience  in  business  and  financial  matters  so as to be  capable of
      evaluating  the  merits  and risks of the  prospective  investment  in the
      Securities,  and has so evaluated the merits and risks of such investment.
      Such  Purchaser is able to bear the economic  risk of an investment in the
      Securities  and, at the present time, is able to afford a complete loss of
      such  investment.  Such  Purchaser has been given the  opportunity  to ask
      questions of, and receive  answers from, the Company  concerning the terms
      and conditions of the offer of the Securities and other matters pertaining
      to such investment.

            (e)  GENERAL  SOLICITATION.   To  the  Purchaser's  knowledge,  such
      Purchaser  is  not   purchasing   the   Securities  as  a  result  of  any
      advertisement,  article,  notice  or  other  communication  regarding  the
      Securities  published  in any  newspaper,  magazine  or  similar  media or
      broadcast  over  television  or radio or  presented  at any seminar or any
      other general solicitation or general advertisement.

            (f) SHORT SALES AND CONFIDENTIALITY  PRIOR TO THE DATE HEREOF. Other
      than  the  transaction  contemplated  hereunder,  such  Purchaser  has not
      directly or indirectly, nor has any Person acting on behalf of or pursuant
      to any  understanding  with  such  Purchaser,  executed  any  disposition,
      including  Short Sales, in the securities of the Company during the period
      commencing  from the time that such Purchaser  first received a term sheet
      (written or oral) from the Company or any other Person  setting  forth the
      material terms of the transactions  contemplated hereunder until such time
      as the transactions  contemplated by this Agreement are publicly disclosed
      by  the  Company  as  described  in  Section  4.6   ("DISCUSSION   TIME").
      Notwithstanding  the  foregoing,  in the  case  of a  Purchaser  that is a
      multi-managed  investment  vehicle  whereby  separate  portfolio  managers
      manage  separate  portions of such  Purchaser's  assets and the  portfolio
      managers have no direct knowledge of the investment  decisions made by the
      portfolio managers managing other portions of such Purchaser's assets, the
      representation  set forth  above  shall  only  apply  with  respect to the
      portion  of  assets  managed  by  the  portfolio  manager  that  made  the
      investment  decision to purchase the Securities covered by this Agreement.
      Other than to other Persons party to this  Agreement,  such  Purchaser has
      maintained the confidentiality of all disclosures made to it in connection
      with  this  transaction   (including  the  existence  and  terms  of  this
      transaction).

                                       17
<PAGE>

            (g) MANIPULATION OF PRICE PRIOR TO CLOSING.  Such Purchaser has not,
      and to its knowledge no one acting on its behalf has, (i) taken,  directly
      or  indirectly,  any  action  designed  to  cause  or  to  result  in  the
      manipulation  of the price of any  security  of the Company at or prior to
      the Closing Date, (ii) sold, bid for, purchased,  or paid any compensation
      for soliciting purchases of, any security of the Company, or (iii) paid or
      agreed to pay to any Person any  compensation  for  soliciting  another to
      purchase any securities of the Company.

                                   ARTICLE IV
                         OTHER AGREEMENTS OF THE PARTIES

      4.1 TRANSFER RESTRICTIONS.

            (a) The Securities may only be disposed of in compliance  with state
      and federal securities laws. In connection with any transfer of Securities
      other than pursuant to an effective registration statement or Rule 144, to
      the Company or to an  affiliate  of a Purchaser  or in  connection  with a
      pledge as  contemplated  in Section  4.1(b),  the  Company may require the
      transferor  thereof  to  provide  to the  Company  an  opinion  of counsel
      selected by the transferor and reasonably  acceptable to the Company,  the
      form and substance of which opinion  shall be reasonably  satisfactory  to
      the  Company,   to  the  effect  that  such   transfer  does  not  require
      registration of such transferred Securities under the Securities Act. As a
      condition of transfer,  any such  transferee  shall agree in writing to be
      bound by the  terms of this  Agreement  and  shall  have the  rights  of a
      Purchaser under this Agreement and the Registration Rights Agreement.

            (b) The Purchasers  agree to the imprinting,  so long as is required
      by this  Section  4.1(b),  of a  legend  on any of the  Securities  in the
      following form:

            [NEITHER]  THESE  SECURITIES  [NOR THE  SECURITIES  INTO WHICH THESE
            SECURITIES ARE  [EXERCISABLE]  [CONVERTIBLE]]  HAVE BEEN  REGISTERED
            WITH  THE  SECURITIES  AND  EXCHANGE  COMMISSION  OR THE  SECURITIES
            COMMISSION  OF  ANY  STATE  IN  RELIANCE  UPON  AN  EXEMPTION   FROM
            REGISTRATION  UNDER THE  SECURITIES  ACT OF 1933,  AS  AMENDED  (THE
            "SECURITIES  ACT"),  AND,  ACCORDINGLY,  MAY NOT BE  OFFERED OR SOLD
            EXCEPT  PURSUANT TO AN EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE
            SECURITIES ACT OR PURSUANT TO AN AVAILABLE  EXEMPTION  FROM, OR IN A
            TRANSACTION  NOT SUBJECT TO, THE  REGISTRATION  REQUIREMENTS  OF THE
            SECURITIES ACT AND IN ACCORDANCE  WITH APPLICABLE  STATE  SECURITIES
            LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
            SUCH EFFECT,  THE SUBSTANCE OF WHICH SHALL BE REASONABLY  ACCEPTABLE
            TO THE COMPANY.  THESE  SECURITIES AND THE SECURITIES  ISSUABLE UPON
            [EXERCISE]  [CONVERSION]  OF  THESE  SECURITIES  MAY BE  PLEDGED  IN
            CONNECTION  WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY
            SUCH SECURITIES.

                                       18
<PAGE>

            (c) Certificates  evidencing the Underlying Shares shall not contain
      any legend (including the legend set forth in Section 4.1(b) hereof):  (i)
      while a  registration  statement  (including the  Registration  Statement)
      covering  the resale of such  security is effective  under the  Securities
      Act, or (ii) following any sale of such Underlying Shares pursuant to Rule
      144, or (iii) if such  Underlying  Shares are eligible for sale under Rule
      144(k),   or  (iv)  if  such  legend  is  not  required  under  applicable
      requirements of the Securities Act (including judicial interpretations and
      pronouncements  issued by the staff of the Commission).  The Company shall
      cause its counsel to issue a legal opinion to the Company's transfer agent
      promptly  after the Effective  Date if required by the Company's  transfer
      agent to effect the removal of the legend hereunder.  If all or any shares
      of Series C Preferred  Stock or any portion of a Warrant is  converted  or
      exercised  (as   applicable)   at  a  time  when  there  is  an  effective
      registration statement to cover the resale of the Underlying Shares, or if
      such Underlying  Shares may be sold under Rule 144(k) or if such legend is
      not otherwise required under applicable requirements of the Securities Act
      (including judicial interpretations and pronouncements issued by the staff
      of the Commission) then such Underlying Shares shall be issued free of all
      legends.  The Company  agrees that following the Effective Date or at such
      time as such legend is no longer  required under this Section  4.1(c),  it
      will,  following  the  delivery  by a  Purchaser  to  the  Company  or the
      Company's transfer agent of a certificate  representing Underlying Shares,
      as applicable,  issued with a restrictive  legend,  deliver or cause to be
      delivered to such Purchaser a certificate representing such shares that is
      free from all restrictive and other legends.  The Company may not make any
      notation on its records or give  instructions to any transfer agent of the
      Company  that  enlarge  the  restrictions  on  transfer  set forth in this
      Section.  Certificates  for  Underlying  Shares  subject to legend removal
      hereunder shall be transmitted by the transfer agent of the Company to the
      Purchasers by crediting the account of the  Purchaser's  prime broker with
      the Depository Trust Company System.

            (d)  Each  Purchaser,  severally  and not  jointly  with  the  other
      Purchasers,  agrees  that  the  removal  of the  restrictive  legend  from
      certificates  representing  Securities as set forth in this Section 4.1 is
      predicated  upon the Company's  reliance that the Purchaser  will sell any
      Securities  pursuant  to  either  the  registration  requirements  of  the
      Securities Act, including any applicable prospectus delivery requirements,
      or an exemption  therefrom,  and that if Securities are sold pursuant to a
      Registration  Statement,  they will be sold in compliance with the plan of
      distribution set forth therein.

      4.2 FURNISHING OF INFORMATION.

            (a) As long as any Purchaser owns Securities,  the Company covenants
      to timely file (or obtain  extensions  in respect  thereof and file within
      the  applicable  grace  period)  all  reports  required to be filed by the
      Company after the date hereof pursuant to the Exchange Act. As long as any
      Purchaser owns Securities,  if the Company is not required to file reports
      pursuant  to  the  Exchange  Act,  it  will  prepare  and  furnish  to the
      Purchasers and make publicly available in accordance with Rule 144(c) such
      information as is required for the Purchasers to sell the Securities under
      Rule 144.  The Company  further  covenants  that it will take such further
      action as any holder of Securities may

                                       19
<PAGE>

      reasonably  request,  to the extent  required  from time to time to enable
      such  Person  to sell  such  Securities  without  registration  under  the
      Securities Act within the  requirements of the exemption  provided by Rule
      144.

            (b) The  Company  agrees  to send the  following  to each  Purchaser
      during  the  Reporting  Period  (as  defined  in the  Registration  Rights
      Agreement),  unless the following are filed with the SEC through the EDGAR
      system and are available to the public through the EGDAR system within one
      (1) Business Day after the filing  thereof with the SEC, (i) a copy of its
      Annual and Quarterly  Reports on Form 10-K,  10-KSB,  10-Q or 10-QSB,  any
      interim report or any  consolidated  balance  sheets,  income  statements,
      stockholders' equity statements and/or cash flow statements for any period
      other than annual,  any Current  Reports on Form 8-K and any  registration
      statements  (other than Form S-8) or amendments filed pursuant to the 1933
      Act,  (ii)  all  press  releases  issued  by  the  Company  or  any of its
      Subsidiaries,  and (iii) copies of any notices and other  information made
      available or given to the stockholders of the Company generally.

      4.3  INTEGRATION.  The Company  shall not sell,  offer for sale or solicit
offers to buy or  otherwise  negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the  Securities  in a manner that would  require the  registration  under the
Securities  Act of the sale of the Securities to the Purchasers or that would be
integrated  with the offer or sale of the  Securities  for purposes of the rules
and regulations of any Trading Market.

      4.4  CONVERSION  AND EXERCISE  PROCEDURES.  The form of Notice of Exercise
included in the  Warrants and the form of Notice of  Conversion  included in the
Certificate of Designation set forth the totality of the procedures  required of
the  Purchasers  in order to  exercise  the  Warrants  or  convert  the Series C
Preferred   Stock.  No  additional   legal  opinion  or  other   information  or
instructions  shall be required of the  Purchasers to exercise their Warrants or
convert their Series C Preferred Stock. The Company shall honor exercises of the
Warrants  and  conversions  of the Series C  Preferred  Stock and shall  deliver
Underlying Shares in accordance with the terms,  conditions and time periods set
forth in the Transaction Documents.

      4.5 SECURITIES LAWS DISCLOSURE; PUBLICITY. The Company shall issue a press
release describing the material terms of the transactions  contemplated  hereby,
and a  Current  Report  on  Form  8-K  disclosing  the  material  terms  of  the
transactions  contemplated  hereby,  and shall attach the Transaction  Documents
thereto.  The Company  shall provide the  Purchasers  with a draft of such press
release prior to filing and provide an opportunity for comments.  Each Purchaser
shall consult with the Company prior to issuing any press  releases with respect
to the transactions  contemplated  hereby, and no Purchaser shall issue any such
press  release or  otherwise  make any such public  statement  without the prior
consent of the Company,  which  consent  shall not  unreasonably  be withheld or
delayed,  except  if such  disclosure  is  required  by law,  in which  case the
disclosing  party shall  promptly  provide the other party with prior  notice of
such public  statement or  communication.  Notwithstanding  the  foregoing,  the
Company shall not publicly  disclose the name of any  Purchaser,  or include the
name of any Purchaser in any filing with the Commission or any regulatory agency
or Trading Market,  without the prior written consent of such Purchaser,  except
(i) as required by federal securities law in connection with (A) any

                                       20
<PAGE>

registration statement contemplated by the Registration Rights Agreement and (B)
the filing of final Transaction  Documents  (including  signature pages thereto)
with the Commission and (ii) to the extent such disclosure is required by law or
Trading  Market  regulations,  in  which  case the  Company  shall  provide  the
Purchasers with prior notice of such  disclosure  permitted under this subclause
(ii).

      4.6 USE OF PROCEEDS.  Except as set forth on SCHEDULE 4.6 attached hereto,
the Company shall use the net proceeds from the sale of the Securities hereunder
for working capital  purposes and not for the satisfaction of any portion of the
Company's debt (other than payment of trade  payables in the ordinary  course of
the Company's  business and prior  practices),  to redeem Common Stock or Common
Stock Equivalents or to settle any outstanding litigation.

      4.7 RESERVATION AND LISTING OF SECURITIES.

            (a) The Company  shall  maintain a reserve from its duly  authorized
      shares of Common Stock for issuance pursuant to the Transaction  Documents
      in such amount as may be required to fulfill its obligations in full under
      the Transaction Documents.

            (b) If, on any date,  the number of  authorized  but  unissued  (and
      otherwise  unreserved) shares of Common Stock is less than 110% of (i) the
      Actual  Minimum  on such  date,  minus (ii) the number of shares of Common
      Stock previously  issued pursuant to the Transaction  Documents,  then the
      Board of  Directors  of the  Company  shall  use  commercially  reasonable
      efforts to amend the Company's certificate or articles of incorporation to
      increase the number of authorized  but unissued  shares of Common Stock to
      at least the Actual  Minimum  at such time  (minus the number of shares of
      Common Stock previously issued pursuant to the Transaction Documents),  as
      soon as  possible  and in any event not later than the 75th day after such
      date;  provided  that  the  Company  will not be  required  at any time to
      authorize  a number of shares of Common  Stock  greater  than the  maximum
      remaining  number of shares of Common Stock that could  possibly be issued
      after such time pursuant to the Transaction Documents.

            (c) The Company  shall,  if  applicable:  (i) in the time and manner
      required  by the  principal  Trading  Market,  prepare  and file with such
      Trading Market an additional shares listing application  covering a number
      of shares of Common Stock at least equal to the Actual Minimum on the date
      of such application, (ii) take all steps necessary to cause such shares of
      Common Stock to be approved for listing on such Trading  Market as soon as
      possible  thereafter,  (iii)  provide to the  Purchasers  evidence of such
      listing, and (iv) maintain the listing of such Common Stock on any date at
      least equal to the Actual  Minimum on such date on such Trading  Market or
      another  Trading  Market.  In addition,  the Company  shall hold a special
      meeting  of  shareholders  (which  may also be at the  annual  meeting  of
      shareholders) on or before September 30, 2007 for the purpose of obtaining
      Shareholder  Approval,  with the  recommendation of the Company's Board of
      Directors  that such  proposal be approved,  and the Company shall solicit
      proxies from its  shareholders in connection  therewith in the same manner
      as all  other  management  proposals  in  such  proxy  statement  and  all
      management-appointed  proxyholders  shall vote  their  proxies in favor of
      such proposal. If the Company does not obtain Shareholder

                                       21
<PAGE>

      Approval at the first meeting, the Company shall call a meeting every four
      months  thereafter to seek  Shareholder  Approval until the earlier of the
      date  Shareholder  Approval is obtained or the Series C Preferred Stock is
      no longer outstanding.

      4.8 PARTICIPATION IN FUTURE FINANCING.

            (a) From the date hereof  until the date that the Series C Preferred
      Stock is no longer outstanding, upon any issuance by the Company or any of
      its   Subsidiaries  of  Common  Stock  or  Common  Stock   Equivalents  (a
      "SUBSEQUENT  FINANCING"),  each Purchaser shall have the right to purchase
      its PRO RATA share of the Common Stock or Common Stock  Equivalents on the
      same terms, conditions and price provided for in the Subsequent Financing.
      Each Purchaser's PRO RATA share is equal to the ratio of (a) the number of
      shares of the Company's Common Stock (including all shares of Common Stock
      issued or issuable upon conversion of the Series C Preferred  Stock) which
      such Purchaser is deemed to hold immediately prior to the issuance of such
      Common Stock or Common Stock Equivalents to (b) the total number of shares
      of the Company's  outstanding Common Stock (including all shares of Common
      Stock issued or issuable upon conversion of the Series C Preferred  Stock)
      immediately  prior to the  issuance  of the Common  Stock or Common  Stock
      Equivalents.

            (b) At least 5 Trading  Days prior to the closing of the  Subsequent
      Financing, the Company shall deliver to each Purchaser a written notice of
      its  intention  to effect a  Subsequent  Financing  ("PRE-NOTICE"),  which
      Pre-Notice  shall ask such  Purchaser if it wants to review the details of
      such financing (such additional notice, a "SUBSEQUENT  FINANCING NOTICE").
      Upon  the  request  of a  Purchaser,  and  only  upon a  request  by  such
      Purchaser,  for a Subsequent Financing Notice, the Company shall promptly,
      but no later than 2 Trading Days after such request,  deliver a Subsequent
      Financing Notice to such Purchaser.  The Subsequent Financing Notice shall
      describe  in  reasonable  detail  the  proposed  terms of such  Subsequent
      Financing,  the amount of proceeds intended to be raised  thereunder,  the
      Person  or  Persons  through  or with whom such  Subsequent  Financing  is
      proposed to be  effected,  and  attached to which shall be a term sheet or
      similar  document  relating  thereto.  If requested  by a  Purchaser,  the
      Company shall  provide a copy of the then current  drafts of the documents
      relating to such  Subsequent  Financing.  This  Section  4.8(b)  shall not
      restrict  or limit the  ability  of the  Company  to  provide  information
      regarding a Subsequent  Financing if such delivery is in  connection  with
      the  solicitation  of  consents  or waivers  relating  to such  Subsequent
      Financing.

            (c)  Any  Purchaser  desiring  to  participate  in  such  Subsequent
      Financing  must  provide  written  notice to the Company by not later than
      5:30 p.m.  (New York City  time) on the 5th  Trading  Day after all of the
      Purchasers  have received the Pre-Notice  that the Purchaser is willing to
      purchase  its  PRO  RATA  share  of  the  Common  Stock  or  Common  Stock
      Equivalents  for the price and upon the terms and conditions  specified in
      the Subsequent  Financing  Notice and stating the quantity of Common Stock
      or Common Stock  Equivalents  to be purchased,  and that the Purchaser has
      such funds ready,  willing,  and  available for  investment.  Such written
      notice to the Company shall be a binding  obligation of such  Purchaser to
      participate in such Subsequent Financing upon terms

                                       22
<PAGE>

      substantially  similar  to those  set  forth in the  Subsequent  Financing
      Notice.  If the Company receives no notice from a Purchaser as of such 5th
      Trading Day, such  Purchaser  shall be deemed to have notified the Company
      that it does not elect to participate.

            (d) The Company may effect the remaining  portion of such Subsequent
      Financing  on the terms and with the Persons  set forth in the  Subsequent
      Financing Notice.

            (e) The Company must provide the Purchasers with a second Subsequent
      Financing  Notice,  and the  Purchasers  will  again  have  the  right  of
      participation  set forth  above in this  Section  4.8,  if the  Subsequent
      Financing  subject  to the  initial  Subsequent  Financing  Notice  is not
      consummated  for any  reason on the  terms  set  forth in such  Subsequent
      Financing  Notice  within 60 Trading  Days  after the date of the  initial
      Subsequent Financing Notice.

            (f) Notwithstanding the foregoing,  this Section 4.8 shall not apply
      in respect of an Exempt Issuance.

      4.9 EQUAL TREATMENT OF PURCHASERS.  No  consideration  shall be offered or
paid to any  Person  to amend or  consent  to a waiver  or  modification  of any
provision of any of the Transaction  Documents unless the same  consideration is
also  offered  to  all  of  the  parties  to  the  Transaction  Documents.   For
clarification  purposes,  this provision constitutes a separate right granted to
each Purchaser by the Company and negotiated  separately by each Purchaser,  and
is intended for the Company to treat the  Purchasers as a class and shall not in
any way be  construed  as the  Purchasers  acting in  concert or as a group with
respect to the purchase, disposition or voting of Securities or otherwise.

      4.10 SHORT SALES AND CONFIDENTIALITY AFTER THE DATE HEREOF. Each Purchaser
severally and not jointly with the other  Purchasers  covenants  that neither it
nor any Affiliate acting on its behalf or pursuant to any understanding  with it
will execute any Short Sales during the period commencing at the Discussion Time
and ending on the public announcement of the transactions contemplated hereby in
accordance with Section 4.6. Each Purchaser,  severally and not jointly with the
other   Purchasers,   covenants  that  until  such  time  as  the   transactions
contemplated  by  this  Agreement  are  publicly  disclosed  by the  Company  as
described in Section 4.6, such  Purchaser will maintain the  confidentiality  of
all disclosures  made to it in connection with this  transaction  (including the
existence  and  terms  of this  transaction).  Each  Purchaser  understands  and
acknowledges,  severally  and not  jointly  with any other  Purchaser,  that the
Commission  currently  takes the position that coverage of short sales of shares
of the  Common  Stock  "against  the  box"  prior to the  Effective  Date of the
Registration  Statement  with the  Securities is a violation of Section 5 of the
Securities  Act,  as set forth in Item 65,  Section A, of the Manual of Publicly
Available Telephone Interpretations,  dated July 1997, compiled by the Office of
Chief Counsel, Division of Corporation Finance.

      4.11 FORM D; BLUE SKY FILINGS.  The Company agrees to timely file a Form D
with respect to the Securities as required  under  Regulation D and to provide a
copy  thereof,  promptly upon request of any  Purchaser.  The Company shall take
such action as the Company shall

                                       23
<PAGE>

reasonably  determine is  necessary  in order to obtain an exemption  for, or to
qualify  the  Securities  for,  sale  to the  Purchasers  at the  Closing  under
applicable securities or "Blue Sky" laws of the states of the United States, and
shall provide evidence of such actions promptly upon request of any Purchaser.

      4.12 CONDUCT OF BUSINESS. The business of the Company and its Subsidiaries
shall not be conducted in violation of any law,  ordinance or  regulation of any
governmental  entity,  except  where such  violations  would not result,  either
individually or in the aggregate, in a Material Adverse Effect.

      4.13 VARIABLE RATE SECURITIES. For so long as any Series C Preferred Stock
or Warrants remain outstanding,  the Company shall not, in any manner,  issue or
sell any rights,  warrants or options to subscribe for or purchase  Common Stock
or directly or indirectly  convertible  into or  exchangeable or exercisable for
Common  Stock at a price which  varies or may vary with the market  price of the
Common Stock, including by way of one or more reset(s) to any fixed price unless
the  conversion,  exchange or exercise price of any such security cannot be less
than the then  applicable  Conversion  Price (as defined in the  Certificate  of
Designation)  with  respect  to the  Common  Stock  into  which any  Warrant  is
exercisable.

      4.14  LIMITATION  ON CERTAIN  ISSUANCES.  Until  Shareholder  Approval  is
obtained  and for so long as any Series C  Preferred  Stock or  Warrants  remain
outstanding,  the Company  shall not,  in any  manner,  enter into or affect any
Dilutive  Issuances (as defined in the Certificate of Designation) if the effect
of such  Dilutive  Issuance is to cause the Company to be required to issue upon
conversion of any shares of Series C Preferred  Stock or exercise of any Warrant
any shares of Common  Stock in excess of that  number of shares of Common  Stock
which the Company may issue upon  conversion of the Series C Preferred Stock and
exercise of the Warrants without breaching the Company's  obligations under Rule
713 of the AMEX  Company  Guide or any  successor  rule or  regulation  that may
replace Rule 713.

                                    ARTICLE V
                                  MISCELLANEOUS

      5.1 TERMINATION.  This Agreement may be terminated by any Purchaser, as to
such Purchaser's obligations hereunder only and without any effect whatsoever on
the obligations between the Company and the other Purchasers,  by written notice
to the other parties,  if the Closing has not been  consummated on or before May
1, 2007;  PROVIDED,  HOWEVER,  that no such termination will affect the right of
any party to sue for any breach by the other party (or parties).

      5.2 FEES AND  EXPENSES.  Each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party  incident  to the  negotiation,  preparation,  execution,
delivery and performance of this  Agreement.  The Company shall pay all transfer
agent fees, stamp taxes and other taxes and duties levied in connection with the
delivery of any Securities to the Purchasers.

      5.3  ENTIRE  AGREEMENT.  The  Transaction  Documents,  together  with  the
exhibits and schedules thereto,  contain the entire understanding of the parties
with respect to the subject

                                       24
<PAGE>

matter hereof and supersede all prior  agreements  and  understandings,  oral or
written,  with respect to such matters,  which the parties acknowledge have been
merged into such documents, exhibits and schedules.

      5.4 NOTICES.  Any and all notices or other  communications  or  deliveries
required or permitted to be provided  hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of  transmission,  if
such notice or  communication is delivered via facsimile at the facsimile number
set forth on the signature  pages  attached  hereto prior to 5:30 p.m. (New York
City  time)  on a  Trading  Day,  (b) the next  Trading  Day  after  the date of
transmission,  if such notice or communication is delivered via facsimile at the
facsimile  number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day,  (c) the 2nd Trading  Day  following  the date of mailing,  if sent by U.S.
nationally  recognized  overnight courier service, or (d) upon actual receipt by
the party to whom such  notice is  required  to be given.  The  address for such
notices and communications shall be as set forth on the signature pages attached
hereto.

      5.5  AMENDMENTS;  WAIVERS.  No provision of this  Agreement may be waived,
modified,  supplemented or amended except in a written instrument signed, in the
case of an  amendment,  by the Company and each  Purchaser  or, in the case of a
waiver,  by the party against whom  enforcement of any such waived  provision is
sought.  No waiver of any default  with respect to any  provision,  condition or
requirement of this Agreement  shall be deemed to be a continuing  waiver in the
future or a waiver of any subsequent default or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of any party to
exercise  any right  hereunder  in any manner  impair the  exercise  of any such
right.

      5.6  HEADINGS.  The  headings  herein  are for  convenience  only,  do not
constitute a part of this  Agreement  and shall not be deemed to limit or affect
any of the provisions hereof.

      5.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the parties and their  successors and permitted  assigns.  The
Company may not assign this  Agreement  or any rights or  obligations  hereunder
without the prior written consent of each Purchaser (other than by merger).  Any
Purchaser may assign any or all of its rights under this Agreement to any Person
to whom such Purchaser assigns or transfers any Securities in the minimum Stated
Value of  US$500,000,  provided such  transferee  agrees in writing to be bound,
with respect to the transferred Securities, by the provisions of the Transaction
Documents that apply to the "Purchasers"  (provided,  however, a Purchaser shall
not knowingly assign or transfer any of its Series C Preferred Stock or Warrants
to an entity whose primary  business  operations are in direct  competition with
the primary  business  operations  of the  Company,  without  the prior  written
consent of the Company).

      5.8 NO  THIRD-PARTY  BENEFICIARIES.  This  Agreement  is intended  for the
benefit of the parties  hereto and their  respective  successors  and  permitted
assigns and is not for the benefit of, nor may any provision  hereof be enforced
by, any other Person.

      5.9 GOVERNING LAW. All questions  concerning the  construction,  validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and

                                       25
<PAGE>

enforced in accordance with the internal laws of the State of New York,  without
regard to the principles of conflicts of law thereof. Each party agrees that all
legal proceedings concerning the interpretations, enforcement and defense of the
transactions  contemplated by this Agreement and any other Transaction Documents
(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 the City of New York.  Each party hereby
irrevocably  submits  to the  exclusive  jurisdiction  of the state and  federal
courts  sitting  in  the  City  of  New  York,  borough  of  Manhattan  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 of any of the  Transaction  Documents),  and hereby  irrevocably
waives,  and agrees not to assert in any suit,  action or proceeding,  any claim
that it is not personally  subject to the  jurisdiction of any such court,  that
such suit, action or proceeding is improper or is an inconvenient venue for such
proceeding. Each party 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  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 other
manner permitted by law. The parties hereby waive all rights to a trial by jury.
If either party shall commence an action or proceeding to enforce any provisions
of the  Transaction  Documents,  then the  prevailing  party in such  action  or
proceeding shall be reimbursed by the other party for its reasonable  attorneys'
fees and other costs and expenses incurred with the  investigation,  preparation
and prosecution of such action or proceeding.

      5.10  SURVIVAL.  The  representations,  warranties,  covenants  and  other
agreements contained herein shall survive the Closing and the delivery, exercise
and/or conversion of the Securities,  as applicable for the applicable statue of
limitations.

      5.11   EXECUTION.   This   Agreement  may  be  executed  in  two  or  more
counterparts,  all of which when taken  together shall be considered one and the
same agreement and shall become effective when  counterparts have been signed by
each party and  delivered  to the other  party,  it being  understood  that both
parties need not sign the same  counterpart.  In the event that any signature is
delivered by facsimile  transmission  or by e-mail  delivery of a ".pdf"  format
data file,  such  signature  shall create a valid and binding  obligation of the
party  executing (or on whose behalf such  signature is executed)  with the same
force and effect as if such facsimile or ".pdf"  signature page were an original
thereof.

      5.12 SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent  jurisdiction to be invalid,  illegal,
void or  unenforceable,  the remainder of the terms,  provisions,  covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected,  impaired or  invalidated,  and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially  the same result as that  contemplated by such
term, provision,  covenant or restriction.  It is hereby stipulated and declared
to be the  intention of the parties that they would have  executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.

                                       26
<PAGE>

      5.13  RESCISSION AND  WITHDRAWAL  RIGHT.  Notwithstanding  anything to the
contrary  contained in (and without  limiting any similar  provisions of) any of
the other  Transaction  Documents,  whenever  any  Purchaser  exercises a right,
election, demand or option under a Transaction Document and the Company does not
timely perform its related obligations within the periods therein provided, then
such Purchaser may rescind or withdraw, in its sole discretion from time to time
upon written notice to the Company,  any relevant notice,  demand or election in
whole or in part without  prejudice to its future actions and rights;  PROVIDED,
HOWEVER,  in the case of a rescission  of a conversion of the Series C Preferred
Stock or exercise of a Warrant,  the  Purchaser  shall be required to return any
shares of Common  Stock  subject to any such  rescinded  conversion  or exercise
notice.

      5.14   REPLACEMENT  OF  SECURITIES.   If  any  certificate  or  instrument
evidencing any Securities is mutilated,  lost, stolen or destroyed,  the Company
shall  issue or cause to be issued in  exchange  and  substitution  for and upon
cancellation thereof (in the case of mutilation), 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.  The
applicant for a new  certificate or instrument  under such  circumstances  shall
also  pay any  reasonable  third-party  costs  (including  customary  indemnity)
associated with the issuance of such replacement Securities.

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

      5.16 PAYMENT SET ASIDE.  To the extent that the Company makes a payment or
payments to any Purchaser  pursuant to any  Transaction  Document or a Purchaser
enforces or exercises its rights thereunder, 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.

      5.17  INDEPENDENT  NATURE  OF  PURCHASERS'  OBLIGATIONS  AND  RIGHTS.  The
obligations of each Purchaser under any Transaction Document are several and not
joint with the  obligations of any other  Purchaser,  and no Purchaser  shall be
responsible in any way for the performance or non-performance of the obligations
of any other Purchaser under any Transaction Document.  Nothing contained herein
or in any  other  Transaction  Document,  and no action  taken by any  Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
an  association,  a joint  venture  or any  other  kind of  entity,  or create a
presumption  that the  Purchasers are in any way acting in concert or as a group
with respect to such obligations or the

                                       27
<PAGE>

transactions  contemplated by the Transaction Documents. Each Purchaser shall be
entitled to  independently  protect and  enforce its rights,  including  without
limitation,  the  rights  arising  out of  this  Agreement  or out of the  other
Transaction Documents,  and it shall not be necessary for any other Purchaser to
be  joined as an  additional  party in any  proceeding  for such  purpose.  Each
Purchaser has been represented by its own separate legal counsel in their review
and negotiation of the Transaction Documents.

      5.18  CONSTRUCTION.  The  parties  agree  that each of them  and/or  their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved  against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto.

                            [SIGNATURE PAGE FOLLOWS]

                                       28
<PAGE>

      IN WITNESS  WHEREOF,  the  parties  hereto  have  caused  this  Securities
Purchase   Agreement  to  be  duly  executed  by  their  respective   authorized
signatories as of the date first indicated above.

ELITE PHARMACEUTICALS, INC.                   ADDRESS FOR NOTICE:

By:______________________________             Elite Pharmaceuticals, Inc.
   Name: Bernard J. Berk                      165 Ludlow Avenue
   Title: Chief Executive Officer             Northvale, New Jersey 07647
                                              Attention: Chief Executive Officer

With a copy to (which shall not constitute notice):

Reitler Brown & Rosenblatt LLC
800 Third Avenue
21st Floor
New York, New York 10022
Attention: Scott H. Rosenblatt

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                      SIGNATURE PAGE FOR PURCHASER FOLLOWS]

                                       29
<PAGE>

        [PURCHASER SIGNATURE PAGES TO ELI SECURITIES PURCHASE AGREEMENT]

      IN WITNESS WHEREOF,  the undersigned have caused this Securities  Purchase
Agreement to be duly executed by their respective  authorized  signatories as of
the date first indicated above.

Name of Purchaser: _____________________________________________________________

SIGNATURE OF AUTHORIZED SIGNATORY OF PURCHASER: ________________________________

Name of Authorized Signatory: __________________________________________________

Title of Authorized Signatory: _________________________________________________

Email Address of Purchaser: ____________________________________________________

Fax Number of Purchaser: _______________________________________________________

Address for Notice of Purchaser:

Address for Delivery of Securities for Purchaser (if not same as above):

Subscription Amount:
Shares of Series C Preferred Stock:
Warrant Shares:
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

                           [SIGNATURE PAGES CONTINUE]

                                       30
<PAGE>

                               DISCLOSURE SCHEDULE

      This  Disclosure  Schedule  (this  "DISCLOSURE  SCHEDULE")  is arranged in
schedules  corresponding to the numbered and lettered sections and subparagraphs
contained in the Securities Purchase Agreement (the "Agreement").

      No representation  or warranty  contained in the Agreement shall be deemed
to be inaccurate if the actual situation is explicitly  disclosed in any section
in this Disclosure  Schedule and would  reasonably  relate to another section of
this  Disclosure  Schedule  where the  context of such  disclosure  in a section
reasonably relates to such other section.

                                       31
<PAGE>

                                 SCHEDULE 3.1(A)

                                  SUBSIDIARIES

Elan Laboratories, Inc., a Delaware corporation

Elan Research, Inc., a Delaware corporation

                                       32
<PAGE>

                                 SCHEDULE 3.1(G)

                                 CAPITALIZATION

20,863,592 shares of common stock outstanding.

9,550 shares of Series B Preferred Stock outstanding, currently convertible into
4,244,440 shares of Common Stock.

3,846,500 options to purchase shares of common stock,  under the Company's stock
option plan.

2,805,000 options to purchase shares of common stock outside the Company's stock
option plan.

6,640,446  warrants to purchase shares of common stock outstanding with exercise
prices ranging from $1.50 to $4.20, subject to applicable vesting.

Contingent  with  the  closing  of the  transactions  contemplated  hereby,  the
expiration date of the warrants purchased by the holders of the Company's Series
B Preferred  Stock was extended from the fifth  anniversary of the grant date to
the sixth anniversary of the grant date of such warrants.

Commitment to issue options  during the term of a current  employment  agreement
upon the following  milestones  (which  commitments  terminate at the end of the
initial term of such employment agreement):

(a)   50,000  options upon the closing of each product  license or product sales
      transaction  in  which  the  Company  receives  an  aggregate  of at least
      $5,000,000 in net cash;

(b)   10,000  options  upon  filing with FDA of either an  abbreviated  new drug
      application (an "ANDA") or new drug application (an "NDA"); and

(c)   40,000  options upon  approval by the FDA of any ANDA or NDA for a product
      not previously approved by the FDA.

Commitment to issue options  during the term of a current  employment  agreement
upon the following  milestones  (which  commitments  terminate at the end of the
initial term of such employment agreement):

(a)   125,000 options upon commencement of Phase III clinical trials relating to
      the  Company  first  non-generic  opioid  drug,  to the extent  previously
      granted options have not vested upon the occurrence of such event;

(b)   125,000 options upon commencement of Phase III clinical trials relating to
      the Company second first non-generic opioid drug, to the extent previously
      granted options

                                       33
<PAGE>

      have not vested upon the occurrence of such event;

(c)   50,000 options upon the closing of each exclusive  product license for the
      US  market  or  product  sales  transaction,  excluding  certain  specific
      non-generic opioid drugs;

(d)   10,000  options  upon  filing with FDA of either an  abbreviated  new drug
      application (an "ANDA") or new drug application (an "NDA");

(e)   40,000  options upon  approval by the FDA of any ANDA or NDA for a product
      not previously approved by the FDA;

(f)   25,000 options upon filing of an application for a new US patent; and

(g)   25,000  upon  granting  of a new US patent by the US Patent and  Trademark
      Office.

Commitment to issue options  during the term of a current  employment  agreement
upon the following  milestones  (which  commitments  terminate at the end of the
initial term of such employment agreement):

(a)   125,000 options upon commencement of Phase III clinical trials relating to
      the  Company  first  non-generic  opioid  drug,  to the extent  previously
      granted options have not vested upon the occurrence of such event;

(b)   125,000 options upon commencement of Phase III clinical trials relating to
      the Company second first non-generic opioid drug, to the extent previously
      granted options have not vested upon the occurrence of such event;

(c)   50,000 options upon the closing of each exclusive  product license for the
      US  market  or  product  sales  transaction,  excluding  certain  specific
      non-generic opioid drugs;

(d)   10,000  options  upon  filing with FDA of either an  abbreviated  new drug
      application (an "ANDA") or new drug application (an "NDA");

(e)   40,000  options upon  approval by the FDA of any ANDA or NDA for a product
      not previously approved by the FDA;

(f)   25,000 options upon filing of an application for a new US patent; and

(g)   25,000  upon  granting  of a new US patent by the US Patent and  Trademark
      Office.

VOTING AGREEMENTS:

Pursuant  to  Section  3.1 of the  Strategic  Alliance  Agreement,  dated  as of
December 6, 2006, between the Company,  Veerappan S. Subramanian ("VS"), and VGS
Pharma, LLC, so long as

                                       34
<PAGE>

the Company  holders at least forty  percent  (40%) of the  outstanding  capital
stock of Novel  Laboratories,  Inc.,  the  Company  has  agreed  to use its best
efforts  to  include  VS in each  slate  of  directors  to be  presented  by the
Company's  board of directors  to the  Company's  stockholders  of Elite at each
annual  and  special  stockholder  meeting  for the  election  of the  Company's
directors.

So long as Midsummer Investment,  Ltd.  ("MIDSUMMER") and Bushido Capital Master
Fund, LP ("BUSHIDO" and  collectively  with Midsummer,  the "PRINCIPAL  SERIES B
INVESTORS"),  continue to hold as least 25% of the  Company's  then  outstanding
shares of the Series B Preferred Stock, in the event that the Company intends to
take an  action,  pursuant  to Section 4 or  Section  10 of the  Certificate  of
Designation of the Series B Preferred Stock, as amended, which would require the
affirmative  vote or written  consent of the Holders of at least 70% of the then
outstanding  shares  of the  Series B and  Series C  Preferred  Stock,  then the
Company shall not take such action unless both Principal Series B Investors vote
in favor of, or consent to, such action.

                                       35
<PAGE>

                                 SCHEDULE 3.1(I)

        MATERIAL CHANGES; UNDISCLOSED EVENTS, LIABILITIES OR DEVELOPMENTS

ISSUANCE OF EQUITY SECURITIES:

      o     Grant to  Veerappan S.  Subramanian  of options to purchase up to an
            aggregate number of 1,750,000 shares common stock  outstanding at an
            exercise price of $2.13, grant date December 6, 2006.

      o     Issuance  to  VGS  Pharma,   LLC,  an   affiliate  of  Veerappan  S.
            Subramanian, on December 6, 2006, for an aggregate purchase price of
            $2,000,000, 957,396 shares of common stock and a warrant to purchase
            478,698  shares of common  stock,  at a purchase  price per share of
            $3.00.

                                       36
<PAGE>

                                 SCHEDULE 3.1(N)

                                 TITLE TO ASSETS

      New Jersey Economic Development  Authority ("NJEDA"),  and The Bank of New
York, as Indenture  Trustee have security  interests in the following  assets of
Elite Pharmaceuticals, Inc. and Elite Laboratories, Inc.:

      o     Elite  Pharmaceuticals,  Inc.:  The  premises  located at 150 Ludlow
            Avenue, New Jersey and all fixtures and equipment acquired, or to be
            acquired, with the proceeds of the bond issued by NJEDA; and.

      o     Elite Laboratories,  Inc.: Certain laboratory  equipment acquired by
            Elite  Laboratories,  Inc.,  with the proceeds of the bond issued by
            NJEDA

                                       37
<PAGE>

                                 SCHEDULE 3.1(P)

                                    INSURANCE

The Company has Director's and Officer's  liability  coverage of $5,000,000 from
The Hartford Insurance.

                                       38
<PAGE>

                                 SCHEDULE 3.1(Q)

                   TRANSACTIONS WITH AFFILIATES AND EMPLOYEES

Up to 300,000 shares of common stock issuable upon exercise of a Warrant granted
to Indigo Ventures LLC, subject to vesting and exercisable,  at $3.00 per share.
Edward  Neugenboren,  a  director  of the  Company,  is an  affiliate  of Indigo
Ventures LLC.

                                       39
<PAGE>

                                 SCHEDULE 3.1(R)

                                  CERTAIN FEES

Oppenheimer & Co., Inc., the placement agent, is entitled to:

      (i)   Cash commissions equal to 7.0% of the gross proceeds  resulting from
            the sale of the Series C Preferred Stock in the offering;

      (ii)  A five year non-callable  warrant to purchase shares of Common Stock
            equal to 3.0% of the number of shares of Common Stock into which the
            Series C Preferred Stock sold in the offering may be converted; and

      (iii) An amount equal to Oppenheimer & Co.,  Inc.'s  aggregate  documented
            out-of-pocket expenses limited to $25,000.

      Additionally,   Oppenheimer   &  Co.,   Inc.,   may  engage  one  or  more
      sub-placement agents.

                                       40
<PAGE>

                                                                       EXHIBIT A

                           CERTIFICATE OF DESIGNATIONS
                                 (see attached)

                                       41
<PAGE>

                                                                       EXHIBIT B

                          REGISTRATION RIGHTS AGREEMENT
                                 (see attached)

                                       42
<PAGE>

                                                                       EXHIBIT C

                                 FORM OF WARRANT
                                 (see attached)

                                       43REGISTRATION RIGHTS AGREEMENT

      This Registration  Rights Agreement (this "AGREEMENT") is made and entered
into as of  April  24,  2007  among  Elite  Pharmaceuticals,  Inc.,  a  Delaware
corporation (the "COMPANY"),  and the several purchasers  signatory hereto (each
such purchaser is a "PURCHASER" and collectively, the "PURCHASERS").

            This  Agreement  is  made  pursuant  to  the   Securities   Purchase
Agreement,  dated as of the date hereof  between the Company and each  Purchaser
(the "PURCHASE AGREEMENT").

            The Company and each Purchaser hereby agrees as follows:

      1.  DEFINITIONS.  Capitalized  terms used and not otherwise defined herein
that are defined in the Purchase  Agreement  shall have the meanings  given such
terms in the Purchase Agreement. As used in this Agreement,  the following terms
shall have the following meanings:

            "ADVICE" shall have the meaning set forth in Section 6(c).

            "EFFECTIVENESS DATE" means, with respect to the Initial Registration
      Statement required to be filed hereunder, the 120th calendar day following
      the date hereof (the 150th  calendar day in the case of a "full review" by
      the Commission of the Initial Registration Statement), and with respect to
      any additional  Registration  Statements which may be required pursuant to
      Section  3(c),  the  60th  calendar  day  following  the  date on which an
      additional  Registration  Statement  is  required  to be filed  hereunder;
      PROVIDED,  HOWEVER, in the event the Company is notified by the Commission
      that one of the above  Registration  Statements will not be reviewed or is
      no longer subject to further review and comments,  the Effectiveness  Date
      as to such Registration Statement shall be the tenth Trading Day following
      the date on which the  Company is so notified  if such date  precedes  the
      dates required above.

            "EFFECTIVENESS  PERIOD"  shall have the meaning set forth in Section
      2(a).

            "EVENT" shall have the meaning set forth in Section 2(b).

            "EVENT DATE" shall have the meaning set forth in Section 2(b).

            "FILING  DATE"  means,  with  respect  to the  Initial  Registration
      Statement  required  hereunder,  the 30th  calendar day following the date
      hereof and, with respect to any additional  Registration  Statements which
      may be required  pursuant to Section 3(c), the 30th day following the date
      on which  the  Company  is  permitted  by the SEC  Guidance  to file  such
      additional Registration Statement related to the Registrable Securities.

            "HOLDER" or "HOLDERS"  means the holder or holders,  as the case may
      be, from time to time of Registrable Securities.

<PAGE>

            "INDEMNIFIED  PARTY"  shall  have the  meaning  set forth in Section
      5(c).

            "INDEMNIFYING  PARTY"  shall have the  meaning  set forth in Section
      5(c).

            "INITIAL  REGISTRATION  STATEMENT"  means the  initial  Registration
      Statement filed pursuant to this Agreement.

            "LOSSES" shall have the meaning set forth in Section 5(a).

            "PLAN OF  DISTRIBUTION"  shall have the meaning set forth in Section
      2(a).

            "PROSPECTUS"  means  the  prospectus   included  in  a  Registration
      Statement (including,  without limitation,  a prospectus that includes any
      information  previously  omitted  from a  prospectus  filed  as part of an
      effective  registration  statement in reliance upon Rule 430A  promulgated
      under the Securities  Act), as amended or  supplemented  by any prospectus
      supplement,  with  respect to the terms of the  offering of any portion of
      the Registrable  Securities covered by a Registration  Statement,  and all
      other   amendments   and   supplements   to  the   Prospectus,   including
      post-effective  amendments,  and all material incorporated by reference or
      deemed to be incorporated by reference in such Prospectus.

            "REGISTRABLE  SECURITIES" means, as of the date in question, (i) all
      of the shares of Common  Stock  issuable  upon  conversion  in full of the
      shares of Preferred  Stock,  (ii) all shares of Common  Stock  issuable as
      dividends on the Preferred  Stock assuming all dividend  payments are made
      in shares of Common Stock and the  Preferred  Stock is held for at least 5
      years,  (iii) all shares of Common Stock issuable upon the occurrence of a
      Non-Cash  Redemption  Triggering Event,  (iv) all Warrant Shares,  (v) any
      additional shares issuable in connection with any anti-dilution provisions
      associated  with the Preferred  Stock and Warrants (in each case,  without
      giving  effect  to  any   limitations  on  conversion  set  forth  in  the
      Certificate  of  Designation  or  limitations on exercise set forth in the
      Warrant) and (vi) any securities  issued or issuable upon any stock split,
      dividend or other  distribution,  recapitalization  or similar  event with
      respect  to the  foregoing.  Notwithstanding  the  foregoing,  Registrable
      Securities  shall not include any  securities (i) eligible to be sold into
      the public market under Rule 144(k)  promulgated  under the Securities Act
      (or any successor  rule),  (ii) sold by a person to the public pursuant to
      Rule 144 under the Securities Act (or any successor rule), (iii) sold by a
      person to the public  pursuant to a registration  statement  including the
      registration  statement  filed pursuant to the Agreement or (iv) sold in a
      transaction  in which the  registration  rights of this  Agreement are not
      transferred.

            "REGISTRATION  STATEMENT" means the registration statements required
      to  be  filed  hereunder  and  any  additional   registration   statements
      contemplated  by Section 3(c),  including  (in each case) the  Prospectus,
      amendments and supplements to such  registration  statement or Prospectus,
      including pre- and post-effective  amendments,  all exhibits thereto,  and
      all material  incorporated  by reference or deemed to be  incorporated  by
      reference in such registration statement.

                                       2
<PAGE>

            "RULE 415" means Rule 415 promulgated by the Commission  pursuant to
      the Securities  Act, as such Rule may be amended from time to time, or any
      similar rule or  regulation  hereafter  adopted by the  Commission  having
      substantially the same purpose and effect as such Rule.

            "RULE 424" means Rule 424 promulgated by the Commission  pursuant to
      the Securities  Act, as such Rule may be amended from time to time, or any
      similar rule or  regulation  hereafter  adopted by the  Commission  having
      substantially the same purpose and effect as such Rule.

            "SELLING SHAREHOLDER QUESTIONNAIRE" shall have the meaning set forth
      in Section 3(a).

            "SEC  GUIDANCE"  means (i) any  publicly-available  written  or oral
      guidance,  comments,  requirements or requests of the Commission staff and
      (ii) the Securities Act.

      2. SHELF REGISTRATION.

            (a) On or prior to each Filing Date,  the Company  shall prepare and
      file with the  Commission a "Shelf"  Registration  Statement  covering the
      resale of all or such portion as permitted by SEC Guidance (provided that,
      the Company shall use commercially reasonable efforts to advocate with the
      Commission for the  registration of all of the Registrable  Securities) of
      the  Registrable  Securities  on  such  Filing  Date  that  are  not  then
      registered  on an effective  Registration  Statement for an offering to be
      made  on a  continuous  basis  pursuant  to  Rule  415.  The  Registration
      Statement shall be on Form S-3 (except if the Company is not then eligible
      to register for resale the  Registrable  Securities  on Form S-3, in which
      case such registration shall be on another  appropriate form in accordance
      herewith)  and shall  contain  (unless  otherwise  directed  by at least a
      majority  in  interest  of  the  Holders)   substantially   the  "PLAN  OF
      DISTRIBUTION"  attached  hereto as ANNEX A (as modified by the Company and
      acceptable to the Holders as necessary to the respond to comments from the
      Commission). Subject to the terms of this Agreement, the Company shall use
      its commercially  reasonable efforts to cause a Registration  Statement to
      be declared  effective  under the  Securities  Act as promptly as possible
      after  the  filing  thereof,  but in any  event  prior  to the  applicable
      Effectiveness  Date, and shall use its commercially  reasonable efforts to
      keep  such  Registration   Statement   continuously  effective  under  the
      Securities  Act  until  all   Registrable   Securities   covered  by  such
      Registration  Statement  have been  sold,  or may be sold  without  volume
      restrictions  pursuant to Rule 144(k), as determined by the counsel to the
      Company pursuant to a written opinion letter to such effect, addressed and
      acceptable to the Company's  transfer agent and the affected  Holders (the
      "EFFECTIVENESS   PERIOD").  The  Company  shall  notify  the  Holders  via
      facsimile  or  e-mail of the  effectiveness  of a  Registration  Statement
      within one Trading Day of the time that the Company confirms effectiveness
      with the Commission,  which shall be the date requested for  effectiveness
      of a  Registration  Statement.  The Company shall file a final  Prospectus
      with the Commission as required by Rule 424.

                                       3
<PAGE>

            (b)  Notwithstanding  any other provision of this Agreement,  if any
      SEC  Guidance  sets  forth  a  limitation  of the  number  of  Registrable
      Securities to be registered on a particular  Registration  Statement  (and
      notwithstanding that that Company used commercially  reasonable efforts to
      advocate  with the  Commission  for the  registration  of all or a greater
      number of Registrable Securities), unless otherwise directed in writing by
      a Holder as to its  Registrable  Securities,  the  number  of  Registrable
      Securities to be registered on such  Registration  Statement will first be
      reduced by Registrable  Securities represented by Warrant Shares (applied,
      in the case that some Warrant Shares may be registered,  to the Holders on
      a pro rata basis based on the total number of unregistered  Warrant Shares
      held by such Holders on a fully diluted basis),  and second by Registrable
      Securities  represented  by shares of Common  Stock  into  which  Series C
      Preferred  Stock may be converted  ("SHARES")  (applied,  in the case that
      Shares may be registered,  to the Holders on a pro rata basis based on the
      total number of unregistered Shares held by such Holders).

            (c) If: (i) the Initial  Registration  Statement  is not filed on or
      prior to its  Filing  Date,  or (ii) as to,  in the  aggregate  among  all
      Holders  on a  pro-rata  basis  based on their  purchase  of the shares of
      Series C Preferred Stock pursuant to the Purchase Agreement,  7,000,000 of
      the Registrable  Securities,  subject to adjustment for reverse or forward
      stock splits and reclassifications of the Common Stock (collectively,  the
      "INITIAL SHARES"), a Registration  Statement registering for resale all of
      the Initial  Shares is not  declared  effective by the  Commission  by the
      Effectiveness Date of the Initial Registration  Statement, or (iii) all of
      the  Registrable  Securities,  other  than  the  Initial  Shares  are  not
      registered  for  resale  pursuant  to one or more  effective  Registration
      Statements  on or before  December 31,  2007,  (any such failure or breach
      being referred to as an "EVENT",  and the date on which such Event occurs,
      the "EVENT  DATE"),  then, in addition to any other rights the Holders may
      have  hereunder  or under  applicable  law, on each such Event Date and on
      each monthly  anniversary of each such Event Date (if the applicable Event
      shall not have been  cured by such  date)  until the  applicable  Event is
      cured,  the Company shall pay to each Holder an amount in cash, as partial
      liquidated  damages and not as a penalty,  equal to 1.5% of the  aggregate
      purchase price paid by such Holder pursuant to the Purchase  Agreement for
      any  unregistered   Registrable   Securities  then  held  by  such  Holder
      (calculated as if all  convertible  securities had been fully  converted).
      The parties agree that (1) the Company shall not be liable for  liquidated
      damages  under this  Agreement  with  respect to any  Warrants  or Warrant
      Shares, (2) in no event shall the Company be liable for liquidated damages
      under  this  Agreement  in  excess of 1.5% of the  aggregate  Subscription
      Amount of the Holders in any 30-day  period and (3) the maximum  aggregate
      liquidated  damages  payable to a Holder under this Agreement shall be 15%
      of the aggregate  Subscription  Amount paid by such Holder pursuant to the
      Purchase Agreement.

                                       4
<PAGE>

      3. REGISTRATION PROCEDURES.

      In connection with the Company's registration  obligations hereunder,  the
Company shall:

            (a) Not less  than five  Trading  Days  prior to the  filing of each
      Registration  Statement  and not less  than one  Trading  Day prior to the
      filing of any related  Prospectus or any  amendment or supplement  thereto
      (including  any  document  that  would be  incorporated  or  deemed  to be
      incorporated therein by reference), the Company shall, (i) furnish to each
      Holder that has requested,  in writing, such documents prior to the Filing
      Date, copies of all such documents  proposed to be filed,  which documents
      (other than those  incorporated or deemed to be incorporated by reference)
      will be subject to the review of such Holders, and (ii) cause its officers
      and directors,  counsel and independent  certified  public  accountants to
      respond to such inquiries as shall be necessary, in the reasonable opinion
      of respective counsel to each Holder to conduct a reasonable investigation
      within the meaning of the  Securities  Act.  The Company  shall not file a
      Registration  Statement  or  any  such  Prospectus  or any  amendments  or
      supplements  thereto  which the Holders of a majority  of the  Registrable
      Securities  shall  reasonably  object  in good  faith,  provided  that the
      Company  is  notified  of such  objection  in  writing no later than three
      Trading  Days  after  the  Holders  have  been so  furnished  copies  of a
      Registration  Statement  or one Trading Day after the Holders have been so
      furnished  copies of any related  Prospectus or amendments or  supplements
      thereto.  Each  Holder  agrees  to  furnish  to the  Company  a  completed
      Questionnaire  in the  form  attached  to  this  Agreement  as  Annex B (a
      "SELLING  SHAREHOLDER  QUESTIONNAIRE")  not less than three  Trading  Days
      prior to the Filing Date or by the end of the third  Trading Day following
      the date on which such Holder  receives draft materials in accordance with
      this Section.

            (b) (i)  Prepare  and file  with  the  Commission  such  amendments,
      including post-effective  amendments,  to a Registration Statement and the
      Prospectus  used in  connection  therewith  as may be  necessary to keep a
      Registration   Statement  continuously  effective  as  to  the  applicable
      Registrable  Securities for the Effectiveness  Period and prepare and file
      with the Commission  such additional  Registration  Statements in order to
      register  for  resale  under  the  Securities  Act all of the  Registrable
      Securities (subject to the permitted blackout periods set forth in Section
      2(b)); (ii) cause the related  Prospectus to be amended or supplemented by
      any  required  Prospectus   supplement  (subject  to  the  terms  of  this
      Agreement), and as so supplemented or amended to be filed pursuant to Rule
      424;  (iii)  respond as promptly as  reasonably  possible to any  comments
      received from the Commission  with respect to a Registration  Statement or
      any amendment thereto and as promptly as reasonably  possible provide true
      and  complete  copies  of all  correspondence  from and to the  Commission
      relating to a  Registration  Statement  to all  Holders  who request  such
      information  in  writing   (provided  that  the  Company  may  excise  any
      information  contained therein which would constitute  material non-public
      information  as to any Holder  which has not  executed  a  confidentiality
      agreement with the Company); and (iv) comply in all material respects with
      the  provisions of the Securities Act and the Exchange Act with respect to
      the  disposition of all Registrable  Securities  covered by a Registration
      Statement during the applicable period in accordance (subject to the terms
      of this Agreement) with the intended methods of disposition by the Holders

                                       5
<PAGE>

      thereof set forth in such Registration  Statement as so amended or in such
      Prospectus as so supplemented.

            (c) If during the  Effectiveness  Period,  the number of Registrable
      Securities  at any time  exceeds  100% of the  number  of shares of Common
      Stock then registered in a Registration Statement,  then the Company shall
      file as soon as  reasonably  practicable,  but in any  case  prior  to the
      applicable Filing Date, an additional  Registration Statement covering the
      resale  by the  Holders  of not less than the  number of such  Registrable
      Securities.

            (d) Notify the Holders of  Registrable  Securities to be sold (which
      notice  shall,   pursuant  to  clauses  (iii)  through  (vi)  hereof,   be
      accompanied by an  instruction to suspend the use of the Prospectus  until
      the requisite  changes have been made) as promptly as reasonably  possible
      (and, in the case of (i)(A) below,  not less than one Trading Day prior to
      such filing) and (if requested by any such Person)  confirm such notice in
      writing no later than one  Trading  Day  following  the day (i)(A)  when a
      Prospectus or any Prospectus  supplement or post-effective  amendment to a
      Registration  Statement is proposed to be filed;  (B) when the  Commission
      notifies the Company whether there will be a "review" of such Registration
      Statement  and  whenever  the  Commission  comments  in  writing  on  such
      Registration  Statement;  and (C) with respect to a Registration Statement
      or any post-effective  amendment, when the same has become effective; (ii)
      of  any  request  by  the   Commission  or  any  other  Federal  or  state
      governmental  authority for  amendments or  supplements  to a Registration
      Statement  or  Prospectus  or for  additional  information;  (iii)  of the
      issuance  by the  Commission  or any other  federal or state  governmental
      authority of any stop order suspending the effectiveness of a Registration
      Statement  covering  any  or  all of  the  Registrable  Securities  or the
      initiation of any Proceedings for that purpose; (iv) of the receipt by the
      Company  of  any  notification  with  respect  to  the  suspension  of the
      qualification  or exemption from  qualification  of any of the Registrable
      Securities for sale in any jurisdiction,  or the initiation or threatening
      of any Proceeding for such purpose;  (v) of the occurrence of any event or
      passage  of  time  that  makes  the  financial  statements  included  in a
      Registration  Statement  ineligible for inclusion therein or any statement
      made  in  a   Registration   Statement  or   Prospectus  or  any  document
      incorporated or deemed to be incorporated  therein by reference  untrue in
      any  material  respect or that  requires any  revisions to a  Registration
      Statement,  Prospectus  or  other  documents  so  that,  in the  case of a
      Registration Statement or the Prospectus,  as the case may be, it will not
      contain  any  untrue  statement  of a  material  fact or omit to state any
      material  fact  required  to be stated  therein or  necessary  to make the
      statements  therein,  in light of the circumstances  under which they were
      made, not misleading;  and (vi) the occurrence or existence of any pending
      corporate  development  with  respect  to the  Company  that  the  Company
      believes may be material and that,  in the  determination  of the Company,
      makes it not in the  best  interest  of the  Company  to  allow  continued
      availability of a Registration Statement or Prospectus;  provided that any
      and all of such information shall remain confidential to each Holder until
      such information  otherwise becomes public,  unless disclosure by a Holder
      is required  by law;  PROVIDED,  further,  notwithstanding  each  Holder's
      agreement  to keep such  information  confidential,  the  Holders  make no
      acknowledgement   that  any  such  information  is  material,   non-public
      information.

                                       6
<PAGE>

            (e) Use its  commercially  reasonable  efforts to avoid the issuance
      of, or, if issued,  obtain the withdrawal of (i) any order  suspending the
      effectiveness of a Registration  Statement,  or (ii) any suspension of the
      qualification (or exemption from  qualification) of any of the Registrable
      Securities  for  sale in any  jurisdiction,  at the  earliest  practicable
      moment.

            (f) Furnish to each Holder upon its written request, without charge,
      at least one conformed copy of each such  Registration  Statement and each
      amendment  thereto,  including  financial  statements and  schedules,  all
      documents  incorporated or deemed to be incorporated  therein by reference
      to the extent  requested  by such  Person,  and all exhibits to the extent
      requested  by  such  Person  (including  those  previously   furnished  or
      incorporated  by reference)  promptly  after the filing of such  documents
      with the Commission.

            (g)  Subject  to the terms of this  Agreement,  the  Company  hereby
      consents to the use of such  Prospectus  and each  amendment or supplement
      thereto by each of the selling Holders in connection with the offering and
      sale of the  Registrable  Securities  covered by such  Prospectus  and any
      amendment  or  supplement  thereto,  except after the giving of any notice
      pursuant to Section 3(d).

            (h) If NASDR Rule 2710 requires any  broker-dealer  to make a filing
      prior to  executing  a sale by a  Holder,  the  Company  shall (i) make an
      Issuer Filing with the NASDR, Inc. Corporate Financing Department pursuant
      to proposed NASDR Rule 2710(b)(10)(A)(i), (ii) respond within five Trading
      Days to any comments received from NASDR in connection  therewith,  unless
      compliance would require a longer period, then the end of such period, and
      (iii) pay the filing fee required in connection therewith.

            (i) Prior to any resale of Registrable  Securities by a Holder,  use
      its  commercially  reasonable  efforts to register or qualify or cooperate
      with  the  selling  Holders  in  connection   with  the   registration  or
      qualification  (or exemption from the  Registration or  qualification)  of
      such  Registrable  Securities  for the  resale  by the  Holder  under  the
      securities or Blue Sky laws of such jurisdictions within the United States
      as any Holder reasonably requests in writing, to keep each registration or
      qualification (or exemption  therefrom) effective during the Effectiveness
      Period and to do any and all other acts or things reasonably  necessary to
      enable the disposition in such jurisdictions of the Registrable Securities
      covered by each Registration  Statement;  provided, that the Company shall
      not be required to qualify  generally  to do business in any  jurisdiction
      where it is not then so qualified, subject the Company to any material tax
      in any such jurisdiction where it is not then so subject or file a general
      consent to service of process in any such jurisdiction.

            (j) If  requested  by the  Holders,  cooperate  with the  Holders to
      facilitate   the  timely   preparation   and   delivery  of   certificates
      representing  Registrable  Securities  to  be  delivered  to a  transferee
      pursuant to a Registration Statement, which certificates shall be free, to
      the  extent  permitted  by the  Purchase  Agreement,  of  all  restrictive
      legends, and to

                                       7
<PAGE>

      enable  such  Registrable  Securities  to be  in  such  denominations  and
      registered in such names as any such Holders may request.

            (k) Upon the occurrence of any event contemplated by this Section 3,
      as promptly as reasonably  possible  under the  circumstances  taking into
      account the Company's good faith assessment of any adverse consequences to
      the Company  and its  stockholders  of the  premature  disclosure  of such
      event,  prepare a  supplement  or  amendment,  including a  post-effective
      amendment,  to a  Registration  Statement or a  supplement  to the related
      Prospectus  or any  document  incorporated  or deemed  to be  incorporated
      therein by  reference,  and file any other  required  document so that, as
      thereafter delivered, neither a Registration Statement nor such Prospectus
      will  contain an untrue  statement  of a material  fact or omit to state a
      material  fact  required  to be stated  therein or  necessary  to make the
      statements  therein,  in light of the circumstances  under which they were
      made, not misleading.  Upon the Notification by the Company to the Holders
      in  accordance  with clauses  (iii)  through (vi) of Section 3(d) above to
      suspend  the use of any  Prospectus  until the  requisite  changes to such
      Prospectus  have  been  made,  the  Holders  shall  suspend  use  of  such
      Prospectus.  The Company will use its commercially  reasonable  efforts to
      ensure  that the use of the  Prospectus  may be resumed as  promptly as is
      practicable.  The Company  shall be  entitled to exercise  its right under
      this Section 3(k) to suspend the availability of a Registration  Statement
      and Prospectus for a period not to exceed 90 calendar days (which need not
      be consecutive days) in any 12 month period.

            (l)  Comply  with  all  applicable  rules  and  regulations  of  the
      Commission.

            (m) The Company may require  each  selling  Holder to furnish to the
      Company a certified  statement  as to the number of shares of Common Stock
      beneficially owned by such Holder and, if required by the Commission,  the
      natural persons thereof that have voting and dispositive  control over the
      Shares.  During  any  periods  that  the  Company  is  unable  to meet its
      obligations  hereunder with respect to the registration of the Registrable
      Securities  solely  because any Holder fails to furnish  such  information
      within three Trading Days of the Company's request, any liquidated damages
      that are  accruing at such time as to such Holder only shall be tolled and
      any Event that may otherwise  occur solely  because of such delay shall be
      suspended as to such Holder only,  until such  information is delivered to
      the Company. The Company may file or refile any Registration  Statement or
      amendment  thereto without  including the  Registrable  Securities of such
      Holder until and unless the Holder provides the required information.

            (n) If  requested  by a  Holder,  the  Company  shall (i) as soon as
      practicable  incorporate  in a  prospectus  supplement  or  post-effective
      amendment  such  information  as an  Investor  reasonably  requests  to be
      included  therein  relating to the sale and  distribution  of  Registrable
      Securities, including, without limitation, information with respect to the
      number of Registrable Securities being offered or sold, the purchase price
      being paid therefor and any other terms of the offering of the Registrable
      Securities to be sold in such offering;  (ii) as soon as practicable  make
      all  required  filings of such  prospectus  supplement  or  post-effective
      amendment  after being notified of the matters to be  incorporated in such
      prospectus supplement or post-effective amendment; and (iii) as

                                       8
<PAGE>

      soon as  practicable,  supplement or make  amendments to any  Registration
      Statement  if  reasonably  requested by a Holder  holding any  Registrable
      Securities.

      4.  REGISTRATION   EXPENSES.   All  fees  and  expenses  incident  to  the
performance  of or compliance  with this Agreement by the Company shall be borne
by the Company whether or not any Registrable  Securities are sold pursuant to a
Registration  Statement.  The fees and  expenses  referred  to in the  foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including,  without  limitation,  fees and expenses (A) with respect to filings
required  to be made with any Trading  Market on which the Common  Stock is then
listed for trading,  (B) in compliance with applicable  state securities or Blue
Sky laws  reasonably  agreed to by the  Company in writing  (including,  without
limitation, fees and disbursements of counsel for the Company in connection with
Blue Sky qualifications or exemptions of the Registrable  Securities) and (C) if
not previously  paid by the Company in connection  with an Issuer  Filing,  with
respect  to any filing  that may be  required  to be made by any broker  through
which a  Holder  intends  to make  sales of  Registrable  Securities  with  NASD
Regulation,  Inc.  pursuant  to the NASD  Rule  2710,  so long as the  broker is
receiving no more than a customary brokerage  commission in connection with such
sale,  (ii)  printing  expenses  (including,  without  limitation,  expenses  of
printing certificates for Registrable Securities and of printing prospectuses if
the  printing  of  prospectuses  is  reasonably  requested  by the  holders of a
majority of the Registrable  Securities  included in a Registration  Statement),
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company, (v) Securities Act liability insurance,  if the Company
so desires  such  insurance,  and (vi) fees and  expenses  of all other  Persons
retained by the Company in connection with the  consummation of the transactions
contemplated  by this Agreement.  In addition,  the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation of
the transactions contemplated by this Agreement (including,  without limitation,
all salaries and expenses of its  officers  and  employees  performing  legal or
accounting  duties),  the expense of any annual  audit and the fees and expenses
incurred in  connection  with the listing of the  Registrable  Securities on any
securities  exchange  as  required  hereunder.  In no event shall the Company be
responsible  for any broker or similar  commissions  of any Holder or, except to
the extent  provided for in the Transaction  Documents,  any legal fees or other
costs of the Holders.

      5. INDEMNIFICATION

            (a)   INDEMNIFICATION   BY   THE   COMPANY.   The   Company   shall,
      notwithstanding  any  termination  of this  Agreement,  indemnify and hold
      harmless each Holder, the officers,  directors, members, partners, agents,
      investment   advisors  and  employees   (and  any  other  Persons  with  a
      functionally   equivalent   role  of  a  Person   holding   such   titles,
      notwithstanding  a lack of such title or any other title) of each of them,
      each Person who controls any such Holder (within the meaning of Section 15
      of the Securities Act or Section 20 of the Exchange Act) and the officers,
      directors, members, shareholders,  partners, agents and employees (and any
      other Persons with a functionally equivalent role of a Person holding such
      titles,  notwithstanding  a lack of such title or any other title) of each
      such  controlling  Person,  to the fullest extent  permitted by applicable
      law, from and against any and all losses,  claims,  damages,  liabilities,
      costs  (including,  without  limitation,  reasonable  attorneys' fees) and
      expenses (collectively, "LOSSES"), as incurred,

                                       9
<PAGE>

      arising out of or relating to (1) any untrue or alleged  untrue  statement
      of a material fact contained in a Registration  Statement,  any Prospectus
      or any form of prospectus or in any amendment or supplement  thereto or in
      any preliminary prospectus,  or arising out of or relating to any omission
      or alleged  omission of a material fact  required to be stated  therein or
      necessary to make the statements therein (in the case of any Prospectus or
      form of prospectus or supplement  thereto,  in light of the  circumstances
      under  which  they were  made) not  misleading,  or (2) any  violation  or
      alleged  violation by the Company of the Securities  Act,  Exchange Act or
      any  state  securities  law,  or any  rule or  regulation  thereunder,  in
      connection with the  performance of its obligations  under this Agreement,
      except  to the  extent,  but only to the  extent,  that  (i)  such  untrue
      statements or omissions are based solely upon  information  regarding such
      Holder  furnished in writing to the Company by such Holder  expressly  for
      use therein, or to the extent that such information relates to such Holder
      or such Holder's proposed method of distribution of Registrable Securities
      and was  reviewed  and  expressly  approved  in  writing  by  such  Holder
      expressly for use in a  Registration  Statement,  such  Prospectus or such
      form of Prospectus  or in any  amendment or  supplement  thereto (it being
      understood  that the Holder has approved  Annex A hereto for this purpose)
      or (ii) in the case of an occurrence of an event of the type  specified in
      Section 3(d)(iii)-(vi), the use by such Holder of an outdated or defective
      Prospectus  after the Company has notified such Holder in writing that the
      Prospectus  is  outdated  or  defective  and prior to the  receipt by such
      Holder of the Advice  contemplated  in Section  6(c).  The  Company  shall
      notify the Holders promptly of the institution, threat or assertion of any
      Proceeding   arising  from  or  in   connection   with  the   transactions
      contemplated by this Agreement of which the Company is aware.

            (b) INDEMNIFICATION BY HOLDERS. Each Holder shall, severally and not
      jointly, indemnify and hold harmless the Company, its directors, officers,
      agents and  employees,  each Person who controls  the Company  (within the
      meaning of Section 15 of the Securities Act and Section 20 of the Exchange
      Act), and the directors, officers, agents or employees of such controlling
      Persons,  to the fullest  extent  permitted by  applicable  law,  from and
      against all Losses,  as  incurred,  to the extent  arising out of or based
      solely  upon:  (x) such  Holder's  failure to comply  with the  prospectus
      delivery  requirements  of the Securities Act or (y) any untrue or alleged
      untrue  statement  of  a  material  fact  contained  in  any  Registration
      Statement, any Prospectus,  or any form of prospectus, or in any amendment
      or supplement thereto or in any preliminary prospectus,  or arising out of
      or  relating  to any  omission  or alleged  omission  of a  material  fact
      required to be stated therein or necessary to make the statements  therein
      not misleading (i) to the extent, but only to the extent, that such untrue
      statement  or omission is  contained  in any  information  so furnished in
      writing by such Holder to the Company  specifically  for inclusion in such
      Registration  Statement or such Prospectus or (ii) to the extent that such
      information  relates to such Holder's  proposed  method of distribution of
      Registrable  Securities and was reviewed and expressly approved in writing
      by such Holder  expressly  for use in a  Registration  Statement (it being
      understood  that the Holder has approved Annex A hereto for this purpose),
      such  Prospectus  or  such  form  of  Prospectus  or in any  amendment  or
      supplement thereto or (ii) in the case of an occurrence of an event of the
      type  specified  in Section  3(d)(iii)-(vi),  the use by such Holder of an
      outdated or  defective  Prospectus  after the Company  has  notified  such
      Holder in writing that the Prospectus is outdated or

                                       10
<PAGE>

      defective  and  prior  to  the  receipt  by  such  Holder  of  the  Advice
      contemplated  in Section  6(c).  In no event  shall the  liability  of any
      selling  Holder  hereunder be greater in amount than the dollar  amount of
      the net proceeds  received by such Holder upon the sale of the Registrable
      Securities giving rise to such indemnification obligation.

            (c) CONDUCT OF INDEMNIFICATION  PROCEEDINGS. If any Proceeding shall
      be brought or asserted against any Person entitled to indemnity  hereunder
      (an "INDEMNIFIED PARTY"), such Indemnified Party shall promptly notify the
      Person  from  whom  indemnity  is sought  (the  "INDEMNIFYING  PARTY")  in
      writing,  and the  Indemnifying  Party  shall have the right to assume the
      defense   thereof,   including  the   employment  of  counsel   reasonably
      satisfactory  to the  Indemnified  Party and the  payment  of all fees and
      expenses incurred in connection with defense thereof;  provided,  that the
      failure of any Indemnified Party to give such notice shall not relieve the
      Indemnifying  Party of its  obligations  or  liabilities  pursuant to this
      Agreement,  except  (and  only) to the  extent  that it  shall be  finally
      determined by a court of competent  jurisdiction  (which  determination is
      not  subject to appeal or further  review)  that such  failure  shall have
      prejudiced the Indemnifying Party.

            An Indemnified Party shall have the right to employ separate counsel
      in any such Proceeding and to participate in the defense thereof,  but the
      fees  and  expenses  of  such  counsel  shall  be at the  expense  of such
      Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed
      in writing to pay such fees and expenses; (2) the Indemnifying Party shall
      have  failed  promptly  to assume the  defense of such  Proceeding  and to
      employ counsel  reasonably  satisfactory to such Indemnified  Party in any
      such  Proceeding;  or  (3)  the  named  parties  to  any  such  Proceeding
      (including any impleaded  parties) include both such Indemnified Party and
      the  Indemnifying  Party,  and the  opinion of counsel to the  Indemnified
      Party is that a material  conflict  of  interest is likely to exist if the
      same counsel were to represent such Indemnified Party and the Indemnifying
      Party (in which case, if such Indemnified  Party notifies the Indemnifying
      Party in writing that it elects to employ separate  counsel at the expense
      of the Indemnifying Party, the Indemnifying Party shall not have the right
      to assume the defense  thereof and the reasonable  fees and expenses of no
      more than one separate counsel shall be at the expense of the Indemnifying
      Party).  The Indemnifying  Party shall not be liable for any settlement of
      any such Proceeding  effected without its written  consent,  which consent
      shall not be  unreasonably  withheld or  delayed.  No  Indemnifying  Party
      shall,  without the prior written consent of the Indemnified Party, effect
      any  settlement  of  any  pending  Proceeding  in  respect  of  which  any
      Indemnified  Party  is  a  party,   unless  such  settlement  includes  an
      unconditional  release of such  Indemnified  Party from all  liability  on
      claims that are the subject matter of such Proceeding.

            Subject  to the terms of this  Agreement,  all  reasonable  fees and
      expenses of the Indemnified Party (including  reasonable fees and expenses
      to the extent  incurred in connection with  investigating  or preparing to
      defend such  Proceeding  in a manner not  inconsistent  with this Section)
      shall be paid to the Indemnified  Party,  as incurred,  within ten Trading
      Days of written notice thereof to the Indemnifying Party;  provided,  that
      the Indemnified Party shall promptly  reimburse the Indemnifying Party for
      that portion of

                                       11
<PAGE>

      such  fees  and  expenses  applicable  to  such  actions  for  which  such
      Indemnified  Party  is  judicially   determined  to  be  not  entitled  to
      indemnification hereunder.

            (d) CONTRIBUTION.  If the indemnification under Section 5(a) or 5(b)
      is  unavailable  to an  Indemnified  Party  or  insufficient  to  hold  an
      Indemnified Party harmless for any Losses,  then each  Indemnifying  Party
      shall contribute to the amount paid or payable by such Indemnified  Party,
      in such  proportion as is appropriate to reflect the relative fault of the
      Indemnifying  Party and Indemnified  Party in connection with the actions,
      statements or omissions  that resulted in such Losses as well as any other
      relevant equitable considerations. The relative fault of such Indemnifying
      Party and  Indemnified  Party shall be  determined  by reference to, among
      other  things,  whether any action in  question,  including  any untrue or
      alleged  untrue  statement  of a  material  fact or  omission  or  alleged
      omission  of a  material  fact,  has been  taken or made by, or relates to
      information supplied by, such Indemnifying Party or Indemnified Party, and
      the  parties'  relative  intent,  knowledge,  access  to  information  and
      opportunity to correct or prevent such action,  statement or omission. The
      amount  paid or  payable  by a party as a result  of any  Losses  shall be
      deemed to include, subject to the limitations set forth in this Agreement,
      any reasonable attorneys' or other fees or expenses incurred by such party
      in connection with any Proceeding to the extent such party would have been
      indemnified for such fees or expenses if the indemnification  provided for
      in this Section was available to such party in accordance with its terms.

            The parties  hereto agree that it would not be just and equitable if
      contribution  pursuant to this  Section 5(d) were  determined  by pro rata
      allocation  or by any other method of  allocation  that does not take into
      account  the  equitable  considerations  referred  to in  the  immediately
      preceding paragraph.  Notwithstanding the provisions of this Section 5(d),
      no Holder shall be required to contribute, in the aggregate, any amount in
      excess of the  amount  by which the  proceeds  actually  received  by such
      Holder  from  the  sale  of  the  Registrable  Securities  subject  to the
      Proceeding  exceeds  the  amount  of any  damages  that  such  Holder  has
      otherwise  been required to pay by reason of such untrue or alleged untrue
      statement or omission or alleged omission,  except in the case of fraud by
      such Holder.

            The indemnity and contribution  agreements contained in this Section
      are in addition to any liability that the Indemnifying Parties may have to
      the Indemnified Parties.

      6. MISCELLANEOUS

            (a)  REMEDIES.  In the  event of a  breach  by the  Company  or by a
      Holder, of any of their respective obligations under this Agreement,  each
      Holder or the Company,  as the case may be, in addition to being  entitled
      to exercise all rights granted by law and under this Agreement,  including
      recovery of damages,  will be  entitled  to  specific  performance  of its
      rights  under this  Agreement.  The  Company  and each  Holder  agree that
      monetary  damages may not  provide  adequate  compensation  for any losses
      incurred  by  reason of a breach  by it of any of the  provisions  of this
      Agreement and hereby further

                                       12
<PAGE>

      agrees  that,  in the event of any  action  for  specific  performance  in
      respect of such  breach,  it shall not assert or shall  waive the  defense
      that a remedy at law would be adequate.

            (b) COMPLIANCE. Each Holder covenants and agrees that it will comply
      with  the  prospectus  delivery  requirements  of  the  Securities  Act as
      applicable  to it in  connection  with  sales  of  Registrable  Securities
      pursuant to a Registration Statement.

            (c) DISCONTINUED DISPOSITION.  Each Holder agrees by its acquisition
      of Registrable  Securities that, upon receipt of a notice from the Company
      of the occurrence of any event of the kind described in Section  3(d)(iii)
      through (vi), such Holder will forthwith  discontinue  disposition of such
      Registrable  Securities under a Registration Statement until it is advised
      in writing (the  "ADVICE")  by the Company that the use of the  applicable
      Prospectus (as it may have been  supplemented  or amended) may be resumed.
      The Company will use its  commercially  reasonable  efforts to ensure that
      the use of the  Prospectus  may be resumed as promptly as it  practicable.
      The Company  agrees and  acknowledges  that any periods  during  which the
      Holder is required  to  discontinue  the  disposition  of the  Registrable
      Securities hereunder shall be subject to the provisions of Section 2(c).

            (d)  ADDITIONAL  REGISTRATION  STATEMENTS.Until  30 days  after  the
      Effective Date, the Company shall not file a registration  statement under
      the  Securities  Act relating to securities  that are not the  Securities,
      other than amendments or supplements to existing  registration  statements
      or pursuant to Section 6(f) hereof.

            (e)   PIGGY-BACK   REGISTRATIONS.   If  at  any  time   during   the
      Effectiveness  Period  there is not an  effective  Registration  Statement
      covering all of the Registrable Securities and the Company shall determine
      to prepare and file with the Commission a registration  statement relating
      to an  offering  for its own  account or the  account of others  under the
      Securities Act of any of its equity securities,  other than on Form S-4 or
      Form S-8 (each as  promulgated  under the  Securities  Act) or their  then
      equivalents   relating  to  equity  securities  to  be  issued  solely  in
      connection  with any  acquisition  of any  entity  or  business  or equity
      securities  issuable in connection with the stock option or other employee
      benefit plans, then the Company shall send to each Holder a written notice
      of such  determination  and, if within fifteen days after the date of such
      notice,  any such Holder  shall so request in writing,  the Company  shall
      include in such registration statement all or any part of such Registrable
      Securities such Holder requests to be registered; PROVIDED, HOWEVER, that,
      the Company shall not be required to register any  Registrable  Securities
      pursuant to this Section  6(d) that are  eligible  for resale  pursuant to
      Rule 144(k)  promulgated  under the Securities Act or that are the subject
      of a then effective Registration Statement.

            (f) NO PIGGYBACK ON  REGISTRATIONS.  Except as set forth on SCHEDULE
      6(F) attached hereto,  neither the Company nor any of its security holders
      (other  than the  Holders in such  capacity  pursuant  hereto) may include
      securities of the Company in the Initial Registration Statement other than
      the  Registrable  Securities.  Except as set forth on SCHEDULE  6(F),  the
      Company shall not file any other registration statements until the Initial
      Registration  Statement  required  hereunder is declared  effective by the
      Commission,

                                       13
<PAGE>

      provided that this Section 6(f) shall not prohibit the Company from filing
      amendments to registration statements already filed.

            (g)  AMENDMENTS  AND  WAIVERS.  The  provisions  of this  Agreement,
      including the provisions of this sentence, may not be amended, modified or
      supplemented,  and waivers or consents to departures  from the  provisions
      hereof may not be given, unless the same shall be in writing and signed by
      the Company  and the  Holders of 70% in  interest of the then  outstanding
      Registrable Securities. Notwithstanding the foregoing, a waiver or consent
      to depart from the provisions hereof with respect to a matter that relates
      exclusively  to the  rights  of  Holders  and that  does not  directly  or
      indirectly  affect the rights of other  Holders may be given by Holders of
      all of the Registrable Securities to which such waiver or consent relates;
      PROVIDED,  HOWEVER,  that  the  provisions  of  this  sentence  may not be
      amended,   modified,   or  supplemented  except  in  accordance  with  the
      provisions of the immediately preceding sentence.

            (h)  NOTICES.  Any  and  all  notices  or  other  communications  or
      deliveries  required  or  permitted  to be  provided  hereunder  shall  be
      delivered as set forth in the Purchase Agreement.

            (i)  SUCCESSORS  AND  ASSIGNS.  This  Agreement  shall  inure to the
      benefit of and be binding upon the  successors  and  permitted  assigns of
      each of the parties and shall  inure to the  benefit of each  Holder.  The
      Company  may not  assign  (except by  merger)  its  rights or  obligations
      hereunder  without the prior written  consent of all of the Holders of the
      then-outstanding  Registrable  Securities.  Each  Holder may assign  their
      respective  rights hereunder in the manner and to the Persons as permitted
      under the Purchase Agreement.

            (j) NO INCONSISTENT  AGREEMENTS.  Neither the Company nor any of its
      Subsidiaries has entered,  as of the date hereof, nor shall the Company or
      any of its  Subsidiaries,  on or after the date of this  Agreement,  enter
      into any  agreement  with respect to its  securities,  that would have the
      effect of impairing the rights granted to the Holders in this Agreement or
      otherwise conflicts with the provisions hereof.

            (k) EXECUTION AND  COUNTERPARTS.  This  Agreement may be executed in
      two or more  counterparts,  all of  which  when  taken  together  shall be
      considered  one and the same  agreement  and shall become  effective  when
      counterparts  have been  signed by each party and  delivered  to the other
      party,  it  being  understood  that  both  parties  need not sign the same
      counterpart.  In the event that any  signature  is  delivered by facsimile
      transmission  or by e-mail  delivery of a ".pdf"  format  data file,  such
      signature  shall  create  a valid  and  binding  obligation  of the  party
      executing  (or on whose behalf such  signature is executed)  with the same
      force and effect as if such  facsimile  or ".pdf"  signature  page were an
      original thereof.

            (l)  GOVERNING  LAW.  All  questions  concerning  the  construction,
      validity,  enforcement  and  interpretation  of this  Agreement  shall  be
      determined in accordance with the provisions of the Purchase Agreement.

                                       14
<PAGE>

            (m) CUMULATIVE REMEDIES. The remedies provided herein are cumulative
      and not exclusive of any other remedies provided by law.

            (n) SEVERABILITY. If any term, provision, covenant or restriction of
      this Agreement is held by a court of competent jurisdiction to be invalid,
      illegal,  void or unenforceable,  the remainder of the terms,  provisions,
      covenants and restrictions set forth herein shall remain in full force and
      effect and shall in no way be affected,  impaired or invalidated,  and the
      parties hereto shall use their commercially reasonable efforts to find and
      employ an alternative  means to achieve the same or substantially the same
      result  as  that  contemplated  by  such  term,  provision,   covenant  or
      restriction.  It is hereby  stipulated and declared to be the intention of
      the parties that they would have executed the remaining terms, provisions,
      covenants  and  restrictions  without  including  any of such  that may be
      hereafter declared invalid, illegal, void or unenforceable.

            (o) HEADINGS.  The headings in this  Agreement  are for  convenience
      only, do not  constitute a part of this  Agreement and shall not be deemed
      to limit or affect any of the provisions hereof.

            (p)  INDEPENDENT  NATURE OF HOLDERS'  OBLIGATIONS  AND  RIGHTS.  The
      obligations  of each Holder  hereunder  are several and not joint with the
      obligations  of any  other  Holder  hereunder,  and  no  Holder  shall  be
      responsible in any way for the performance of the obligations of any other
      Holder  hereunder.  Nothing  contained herein or in any other agreement or
      document  delivered  at any  closing,  and no action  taken by any  Holder
      pursuant hereto or thereto, shall be deemed to constitute the Holders as a
      partnership,  an association, a joint venture or any other kind of entity,
      or create a presumption  that the Holders are in any way acting in concert
      with respect to such obligations or the transactions  contemplated by this
      Agreement.  Each  Holder  shall be  entitled  to protect  and  enforce its
      rights,  including  without  limitation  the  rights  arising  out of this
      Agreement, and it shall not be necessary for any other Holder to be joined
      as an additional party in any proceeding for such purpose.

                              ********************

                                       15
<PAGE>

      IN WITNESS  WHEREOF,  the parties have executed this  Registration  Rights
Agreement as of the date first written above.

                                        ELITE PHARMACEUTICALS, INC.

                                        By:_____________________________________
                                           Name: Bernard Berk
                                           Title: Chief Executive Officer

                       [SIGNATURE PAGE OF HOLDERS FOLLOWS]

                                       16
<PAGE>

                     [SIGNATURE PAGE OF HOLDERS TO ELI RRA]

Name of Holder: ________________________________________________________________
SIGNATURE OF AUTHORIZED SIGNATORY OF HOLDER: ___________________________________
Name of Authorized Signatory: __________________________________________________
Title of Authorized Signatory: _________________________________________________

                           [SIGNATURE PAGES CONTINUE]

                                       17
<PAGE>

                                  SCHEDULE 6(F)

      Pursuant to a Registration Rights Agreement, dated as of December 6, 2006,
between the Company and VGS Pharma, a Delaware limited liability company ("VGS")
and Veerappan Subramanian ("VS" and together with VGS, the "VGS INVESTORS"), the
Company  granted the VGS Investors  certain  demand and  piggyback  registration
rights  with  respect  to (i)  957,396  shares  of the  Company's  Common  Stock
purchased by VGS,  (ii) 478,698  shares of the Company's  Common Stock  issuable
upon  exercise of certain  stock  purchase  warrants,  exercisable  at $3.00 per
share;  and (iii) up to 1,700,000  shares of the Company's Common Stock issuable
upon exercise of certain options, exercisable at $2.13 per share, subject to the
vesting of such options upon the achievement of certain milestones.

                                       18
<PAGE>

                                     ANNEX A

                              PLAN OF DISTRIBUTION

      Each Selling Stockholder (the "SELLING  STOCKHOLDERS") of the common stock
and any of their pledgees,  assignees and successors-in-interest  may, from time
to time,  sell any or all of their shares of common stock on the American  Stock
Exchange or any other stock  exchange,  market or trading  facility on which the
shares  are traded or in private  transactions.  These  sales may be at fixed or
negotiated  prices.  A  Selling  Stockholder  may  use  any  one or  more of the
following methods when selling shares:

            o     ordinary brokerage  transactions and transactions in which the
                  broker-dealer solicits purchasers;

            o     block trades in which the  broker-dealer  will attempt to sell
                  the shares as agent but may  position  and resell a portion of
                  the block as principal to facilitate the transaction;

            o     purchases by a  broker-dealer  as principal  and resale by the
                  broker-dealer for its account;

            o     an exchange  distribution  in accordance with the rules of the
                  applicable exchange;

            o     privately negotiated transactions;

            o     broker-dealers may agree with the Selling Stockholders to sell
                  a specified  number of such shares at a  stipulated  price per
                  share;

            o     through the writing or  settlement of options or other hedging
                  transactions,   whether   through  an  options   exchange   or
                  otherwise;

            o     a combination of any such methods of sale; or

            o     any other method permitted pursuant to applicable law.

      The Selling  Stockholders  may also sell  shares  under Rule 144 under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), if available,  rather
than under this prospectus.

      In connection  with sales of the shares of common stock or otherwise,  the
Selling  Stockholders may enter into hedging  transactions with  broker-dealers,
which may in turn  engage in short  sales of the  shares of common  stock in the
course of hedging in positions they assume.  The selling  stockholders  may also
sell shares of common stock short and deliver  shares of common stock covered by
this  prospectus to close out short  positions and to return  borrowed shares in
connection  with such short  sales.  The Selling  Stockholders  may also loan or
pledge  shares  of  common  stock to  broker-dealers  that in turn may sell such
shares.

                                       19
<PAGE>

      The Selling  Stockholders may pledge or grant a security  interest in some
or all of the  warrants  or shares of common  stock  owned by them and,  if they
default in the performance of their secured obligations, the pledgees or secured
parties may offer and sell the shares of common stock from time to time pursuant
to this prospectus or any amendment to this  prospectus  under Rule 424(b)(3) or
other applicable provision of the Securities Act of 1933, as amended,  amending,
if  necessary,  the  list  of  selling  stockholders  to  include  the  pledgee,
transferee or other  successors in interest as selling  stockholders  under this
prospectus.  The selling stockholders also may transfer and donate the shares of
common  stock in other  circumstances  in which  case the  transferees,  donees,
pledgees or other successors in interest will be the selling beneficial owners.

      Broker-dealers  engaged by the Selling  Stockholders may arrange for other
brokers-dealers to participate in sales.  Broker-dealers may receive commissions
or discounts from the Selling  Stockholders  (or, if any  broker-dealer  acts as
agent  for the  purchaser  of  shares,  from the  purchaser)  in  amounts  to be
negotiated,  but, except as set forth in a supplement to this Prospectus, in the
case of an agency transaction not in excess of a customary brokerage  commission
in compliance with NASDR Rule 2440; and in the case of a principal transaction a
markup or markdown in compliance with NASDR IM-2440.

      The  Selling  Stockholders  and any  broker-dealers  or  agents  that  are
involved  in selling  the shares may be deemed to be  "underwriters"  within the
meaning of the Securities Act in connection with such sales. In such event,  any
commissions  received  by such  broker-dealers  or agents  and any profit on the
resale  of the  shares  purchased  by  them  may be  deemed  to be  underwriting
commissions or discounts under the Securities Act. Each Selling  Stockholder has
informed  the  Company  that it does not have any written or oral  agreement  or
understanding,  directly or indirectly, with any person to distribute the Common
Stock. In no event shall any broker-dealer receive fees, commissions and markups
which, in the aggregate, would exceed eight percent (8%).

      The Company is required to pay certain fees and  expenses  incurred by the
Company  incident to the  registration of the shares.  The Company has agreed to
indemnify the Selling Stockholders against certain losses,  claims,  damages and
liabilities, including liabilities under the Securities Act.

      Because Selling Stockholders may be deemed to be "underwriters" within the
meaning of the Securities  Act, they will be subject to the prospectus  delivery
requirements of the Securities Act including Rule 172  thereunder.  In addition,
any  securities  covered by this  prospectus  which qualify for sale pursuant to
Rule 144 under the  Securities  Act may be sold under Rule 144 rather than under
this  prospectus.  There is no  underwriter  or  coordinating  broker  acting in
connection  with  the  proposed  sale  of  the  resale  shares  by  the  Selling
Stockholders.

      We agreed to keep this  prospectus  effective until the earlier of (i) the
date on which  the  shares  may be resold by the  Selling  Stockholders  without
registration  and  without  regard to any volume  limitations  by reason of Rule
144(k) under the  Securities Act or any other rule of similar effect or (ii) all
of the shares have been sold  pursuant to this  prospectus or Rule 144 under the
Securities  Act or any other rule of similar  effect.  The resale shares will be
sold only through  registered or licensed  brokers or dealers if required  under
applicable state securities laws. In

                                       20
<PAGE>

addition,  in certain states, the resale shares may not be sold unless they have
been  registered or qualified for sale in the  applicable  state or an exemption
from the registration or qualification  requirement is available and is complied
with.

      Under applicable rules and regulations  under the Exchange Act, any person
engaged in the distribution of the resale shares may not  simultaneously  engage
in market making  activities with respect to the common stock for the applicable
restricted  period, as defined in Regulation M, prior to the commencement of the
distribution.   In  addition,  the  Selling  Stockholders  will  be  subject  to
applicable  provisions  of the  Exchange  Act  and  the  rules  and  regulations
thereunder,  including Regulation M, which may limit the timing of purchases and
sales of shares of the common  stock by the  Selling  Stockholders  or any other
person.  We  will  make  copies  of this  prospectus  available  to the  Selling
Stockholders  and  have  informed  them of the  need to  deliver  a copy of this
prospectus to each  purchaser at or prior to the time of the sale  (including by
compliance with Rule 172 under the Securities Act).

                                       21
<PAGE>

                                     ANNEX B

                           ELITE PHARMACEUTICALS, INC.

                 SELLING SECURITYHOLDER NOTICE AND QUESTIONNAIRE

      The undersigned beneficial owner of common stock, par value $.01 per share
(the "COMMON STOCK"),  of Elite  Pharmaceuticals,  Inc., a Delaware  corporation
(the "COMPANY"), (the "REGISTRABLE SECURITIES") understands that the Company has
filed or  intends  to file with the  Securities  and  Exchange  Commission  (the
"COMMISSION")   a  registration   statement  on  Form  S-3  (the   "REGISTRATION
STATEMENT") for the registration and resale under Rule 415 of the Securities Act
of 1933, as amended (the "SECURITIES  ACT"), of the Registrable  Securities,  in
accordance  with the terms of the  Registration  Rights  Agreement,  dated as of
April 24, 2007 (the "REGISTRATION RIGHTS AGREEMENT"),  among the Company and the
Purchasers  named  therein.  A copy  of the  Registration  Rights  Agreement  is
available  from the Company  upon  request at the address set forth  below.  All
capitalized  terms not otherwise defined herein shall have the meanings ascribed
thereto in the Registration Rights Agreement.

      Certain   legal   consequences   arise  from  being  named  as  a  selling
securityholder  in  the  Registration  Statement  and  the  related  prospectus.
Accordingly, holders and beneficial owners of Registrable Securities are advised
to consult their own securities law counsel  regarding the consequences of being
named  or not  being  named  as a  selling  securityholder  in the  Registration
Statement and the related prospectus.

                                     NOTICE

      The  undersigned  beneficial  owner  (the  "SELLING   SECURITYHOLDER")  of
Registrable Securities hereby elects to include the Registrable Securities owned
by it and listed below in Item 3 (unless otherwise  specified under such Item 3)
in the Registration Statement.

                                       22
<PAGE>

The  undersigned  hereby  provides the following  information to the Company and
represents and warrants that such information is accurate:

                                  QUESTIONNAIRE

1.    NAME.

      (a)   Full Legal Name of Selling Securityholder

            ____________________________________________________________________

      (b)   Full Legal Name of Registered  Holder (if not the same as (a) above)
            through  which  Registrable  Securities  Listed  in Item 3 below are
            held:

            ____________________________________________________________________

      (c)   Full Legal Name of Natural  Control  Person  (which  means a natural
            person who directly or indirectly  alone or with others has power to
            vote or dispose of the securities covered by the questionnaire):

            ____________________________________________________________________

2. ADDRESS FOR NOTICES TO SELLING SECURITYHOLDER:

________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

Telephone:______________________________________________________________________
Fax:____________________________________________________________________________
Contact Person:_________________________________________________________________

3.  BENEFICIAL OWNERSHIP OF REGISTRABLE SECURITIES:

      (a)   Type and Number of Registrable  Securities  beneficially  owned (not
            including the Registrable  Securities that are issuable  pursuant to
            the Purchase Agreement):

            ____________________________________________________________________

            ____________________________________________________________________

            ____________________________________________________________________

                                       23
<PAGE>

4. BROKER-DEALER STATUS:

      (a)   Are you a broker-dealer?

                                 Yes |_|     No |_|

      (b)   If  "yes"  to  Section  4(a),  did  you  receive  your   Registrable
            Securities as compensation  for investment  banking  services to the
            Company.

                                 Yes |_|     No |_|

      Note: If no,  the  Commission's  staff has  indicated  that you  should be
            identified as an underwriter in the Registration Statement.

      (c)   Are you an affiliate of a broker-dealer?

                                 Yes |_|     No |_|

      (d)   If you are an affiliate of a broker-dealer,  do you certify that you
            bought  the  Registrable   Securities  in  the  ordinary  course  of
            business,  and  at  the  time  of the  purchase  of the  Registrable
            Securities to be resold,  you had no  agreements or  understandings,
            directly  or   indirectly,   with  any  person  to  distribute   the
            Registrable Securities?

                                 Yes |_|     No |_|

      Note: If no,  the  Commission's  staff has  indicated  that you  should be
            identified as an underwriter in the Registration Statement.

5. BENEFICIAL  OWNERSHIP OF OTHER SECURITIES OF THE COMPANY OWNED BY THE SELLING
      SECURITYHOLDER.

      EXCEPT  AS SET  FORTH  BELOW IN THIS  ITEM 5, THE  UNDERSIGNED  IS NOT THE
      BENEFICIAL OR REGISTERED OWNER OF ANY SECURITIES OF THE COMPANY OTHER THAN
      THE REGISTRABLE SECURITIES LISTED ABOVE IN ITEM 3.

      (a)   Type  and  Amount  of  Other  Securities  beneficially  owned by the
            Selling Securityholder:

            ____________________________________________________________________

            ____________________________________________________________________

                                       24
<PAGE>

6. RELATIONSHIPS WITH THE COMPANY:

      EXCEPT  AS  SET  FORTH  BELOW,  NEITHER  THE  UNDERSIGNED  NOR  ANY OF ITS
      AFFILIATES,  OFFICERS, DIRECTORS OR PRINCIPAL EQUITY HOLDERS (OWNERS OF 5%
      OF MORE OF THE EQUITY SECURITIES OF THE UNDERSIGNED) HAS HELD ANY POSITION
      OR OFFICE OR HAS HAD ANY OTHER MATERIAL  RELATIONSHIP WITH THE COMPANY (OR
      ITS PREDECESSORS OR AFFILIATES) DURING THE PAST THREE YEARS.

      State any exceptions here:

      __________________________________________________________________________

      __________________________________________________________________________

      The undersigned  agrees to promptly notify the Company of any inaccuracies
or changes in the information  provided herein that may occur  subsequent to the
date hereof at any time while the Registration Statement remains effective.

      By signing  below,  the  undersigned  consents  to the  disclosure  of the
information  contained  herein  in its  answers  to  Items 1  through  6 and the
inclusion of such  information  in the  Registration  Statement  and the related
prospectus  and  any  amendments  or  supplements   thereto.   The   undersigned
understands  that  such  information  will  be  relied  upon by the  Company  in
connection with the preparation or amendment of the  Registration  Statement and
the related prospectus.

      IN WITNESS WHEREOF the  undersigned,  by authority duly given,  has caused
this Notice and  Questionnaire  to be executed and delivered either in person or
by its duly authorized agent.

Dated:___________________________        Beneficial Owner:______________________

                                         By:____________________________________
                                            Name:
                                            Title:

PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED  NOTICE AND  QUESTIONNAIRE,  AND
RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:

                                       25

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