WARRANT EXERCISE AGREEMENT

THIS AGREEMENT, dated as of December 14, 2005 (this "AGREEMENT") is entered into by and between the Elite Pharmaceuticals, Inc., a Delaware corporation (the "COMPANY") and the holder (the "WARRANT HOLDER") of that certain "LTW" warrant (the "LT WARRANT") and that certain "STW" warrant (the "ST WARRANT"; and together with the LT Warrant the "INITIAL WARRANTS"), each issued by the Company to the Warrant Holder pursuant to Subscription Agreements, dated as of October 6, 2004, October 12, 2004 or October 26, 2004, each for the purchase of up to such number of shares of the common stock, $0.01 par value per share, of the Company (the "COMMON STOCK") as is set forth beside the Warrant Holder's name on SCHEDULE 1 attached hereto (the "WARRANT SHARES").

WHEREAS, the Company is entering into a series of agreements on or within thirty days of the date hereof in a form substantially identical to this Agreement with other holders of warrants to purchase shares of the Company's Common Stock (the "OTHER HOLDERS");

WHEREAS, the Company desires to induce the Warrant Holder to exercise, by payment of cash, the LT Warrant and/or the ST Warrant with respect to the shares of Common Stock purchasable thereunder;

WHEREAS, in consideration for such in cash exercise, the Company shall issue to the Warrant Holder a new warrant substantially in the form attached hereto as EXHIBIT A (the "REPLACEMENT WARRANT") to purchase additional shares of Common Stock (the "REPLACEMENT WARRANT SHARES") as set forth herein;

WHEREAS, as further consideration for such exercise by payment of cash, the Company is granting to the Warrant Holder certain registration rights with respect to the Replacement Warrant Shares pursuant to a Registration Rights Agreement by and among the Company and each Other Holder, which shall be substantially in the form attached hereto as EXHIBIT B.

NOW, THEREFORE, in consideration of the mutual premises and of the respective covenants contained in this Agreement and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, intending to be legally bound hereby, the parties hereto agree as follows:

1. INDUCEMENT TO EXERCISE. The Company hereby agrees upon acceptance by the Company to issue to the Warrant Holder a Replacement Warrant exercisable for that number Replacement Warrant Shares as is equal to thirty percent (30%) the aggregate number of LT Warrant Shares and ST Warrant Shares purchased by payment of cash by the Warrant Holder, if any, upon exercise of the LT Warrant and/or the ST Warrant, each during the period beginning on the date hereof and continuing until 5:30 p.m. EST on December 14, 2005 (the "EXERCISE PERIOD"). The Company shall deliver the Replacement Warrant, if applicable, dated as of the Closing Date (as defined below), to the Warrant Holder at the address provided on the signature page hereto not more than ten (10) business days after the expiration of the Exercise Period (the "CLOSING DATE").

2. DELIVERIES. The parties shall make the following deliveries:

(a) On or prior to the expiration of the Exercise Period, the Warrant Holder shall deliver to the Company (i) an executed signature page of this Agreement, (ii) the executed Warrant Exercise Notice(s) reflecting the exercise of LT Warrant and/or the ST Warrant by payment of cash, (iii) the aggregate exercise price for the Warrant Shares, by check payable to the Company or wire transfer of immediately available funds to the Company's account in accordance with the wire instructions attached hereto as EXHIBIT C; and (iv) the LT Warrant and/or the ST Warrant for cancellation or, to the extent not fully exercised or expired, reissuance; and

(b) The Company shall deliver or cause to be delivered to each Investor (i) any deliveries required to be made by the Company upon proper exercise of the Initial Warrants (as set forth therein), including, without limitation, a certificate representing the shares of Common Stock for which any Initial Warrant has been exercised and (ii) within ten (10) business days after the expiration of the Exercise Period, a Replacement Warrant in accordance with the terms and conditions hereof.

3. REPRESENTATIONS OF THE COMPANY. The Company represents and warrants to the Warrant Holder as follows:

(a) ORGANIZATION. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted.

(b) AUTHORITY. The Company has the corporate power and authority to enter into and perform this Agreement, and all corporate action necessary to authorize the execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby by the Company has been duly and validly taken. This Agreement has been duly and validly executed and delivered by the Company. This Agreement constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the rights of creditors and to general principles of equity.

(c) ISSUANCE OF SECURITIES. The Replacement Warrant is duly authorized and, when issued in accordance with this Agreement, will be duly and validly issued. The Company has reserved from its duly authorized capital stock a sufficient number of shares of Common Stock for issuance upon exercise of the Replacement Warrant.

4. REPRESENTATIONS OF THE WARRANT HOLDER. The Warrant Holder represents and warrants to the Company as follows:

(a) ORGANIZATION. If the Warrant Holder is not a natural person, the Warrant Holder is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted.

(b) AUTHORITY. The Warrant Holder has the requisite power and authority to enter into and perform this Agreement, and all action necessary to authorize the execution, delivery and performance of this Agreement by the Warrant Holder and the consummation of the transactions contemplated hereby by the Warrant Holder has been duly and validly taken. This Agreement has been duly and validly executed and delivered by the Warrant Holder. This Agreement constitutes a valid and binding agreement of the Warrant Holder, enforceable against the Warrant Holder in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the rights of creditors and to general principles of equity.

(c) OWN ACCOUNT. The Warrant Holder understands that the Replacement Warrant and the Replacement Warrant Shares (together, 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 distributing or reselling such Securities or any part thereof, has no present intention of distributing any of such Securities and has no arrangement or understanding with any other persons regarding the distribution of such Securities (this representation and warranty not limiting the Warrant Holder's right to sell the Securities pursuant to a registration statement or otherwise in compliance with applicable federal and state securities laws). The Warrant Holder does not have any agreement or understanding, directly or indirectly, with any person or entity to distribute any of the Securities.

(d) WARRANT HOLDER STATUS. At the time the Warrant Holder was offered the Securities, it was, and at the date hereof it is, and on each date on which it exercises the Replacement Warrant 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.

(e) EXPERIENCE OF THE WARRANT HOLDER. The Warrant Holder, 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. The Warrant Holder acknowledges and agrees that in making the decision to invest in the Securities, the Warrant Holder has relied on his, her or its own examination of the Company and the terms of the offering, including the merits, risks and tax and other considerations involved. The Warrant Holder 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.

(f) GENERAL SOLICITATION. The Warrant Holder 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.

(g) TITLE. The Warrant Holder has good and marketable title to the LT Warrant, free and clear of any liens, claims, encumbrances, charges or restrictions of any kind, other than those that may be imposed by securities laws generally.

5. MISCELLANEOUS.

(a) ASSIGNMENT. This Agreement and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors of the Warrant Holder.

(b) HEADINGS. The headings used in this Agreement are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Agreement.

(c) GOVERNING LAW. This Agreement shall be construed in accordance with, and governed by, the laws of the State of New York (without giving effect to its conflict of laws principles).

(d) CONSENT TO JURISDICTION AND SERVICE OF PROCESS. Each of the parties hereby irrevocably and unconditionally submits to the jurisdiction of the courts of the State of New York and of the Federal courts sitting in the State of New York in any action or proceeding directly or indirectly arising out of or relating to this Agreement or the transactions contemplated hereby or thereby (whether based in contract, tort, equity or any other theory). Each of the parties agrees that all actions or proceedings arising out of or relating to this agreement must be litigated exclusively in any such State or, to the extent permitted by law, Federal court that sits in the County of New York, and accordingly, each party irrevocably waives any objection which it may now or hereafter have to the laying of the venue of any such action or proceeding in any such court. Each party further irrevocably consents to service of process in the manner provided for notices in Section 5(f). Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

(e) WAIVER OF JURY TRIAL. Each party waives any right it may have to a trial by jury in any action or proceeding directly or indirectly arising out of or relating to this Agreement or the transactions contemplated hereby or thereby (whether based on contract, tort, equity or any other theory). Each of the parties (i) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver and
(ii) acknowledges that it and the other parties hereto have been induced to enter into this agreement by, among other things, the mutual waivers and certifications in this Section 5(e).

(f) 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., EST, on a business day, (b) the next business 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 business day or later than 5:30 p.m., EST, on any business day, (c) the second business 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 follows:

If to the Company:

Elite Pharmaceuticals, Inc.
165 Ludlow Avenue
Northvale, New Jersey 07647
Attention: Chief Executive Officer
Fax: (201) 750-2755

with a copy to:

Reitler Brown & Rosenblatt LLC
800 Third Avenue, 21st Floor
New York, New York 10022
Attention: Scott H. Rosenblatt
Fax: (212) 371-5500

If to the Warrant Holder, at the address specified on
the signature page hereto.

(g) AMENDMENT. This Agreement may be modified or amended or the provisions hereof waived with the written consent of the Company and the Warrant Holder.

(h) SEVERABILITY. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Agreement.

(SIGNATURE PAGE FOLLOWS)

IN WITNESS WHEREOF, the parties hereto have executed or have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written.

ELITE PHARMACEUTICALS, INC.

WARRANT HOLDER:

                                           COMMON     COMMON  WARRANT                           TOTAL         $ TO        $ TO
                                           SHARES     SHARES   SHARES       ST        LT        SHARES      EXERCISE     EXERCISE
INVESTOR                       INVESTMENT   BASIS      OWNED    BASIS    WARRANTS   WARRANT   REGISTERED   ST WARRANTS  LT WARRANTS
------------------------------------------------------------------------------------------------------------------------------------

Martin Fund II, LP                $69,999   $1.23     56,910    $1.54      28,455    28,455     113,820    $43,749.55    $43,749.56
Martin Fund Offshore, LDC         $50,000   $1.23     40,650    $1.54      20,325    20,325      81,300    $31,249.69    $31,249.69
Martin Fund Offshore, Ltd.       $500,007   $1.23    406,510    $1.54     203,255   203,255     813,020   $312,504.56   $312,504.56
Martin Fund, LP                  $379,996   $1.23    308,940    $1.54     154,470   154,470     617,880   $237,497.63   $237,497.63
------------------------------                                                                            -----------   -----------
   Total                                                                                                  $625,001.44   $625,001.44

Treppel, Jerry                   $250,000   $1.23    203,252    $1.54     101,625   101,625     406,502   $156,248.44   $156,248.44
Wheaten HealthCare
Partners, LP                     $250,000   $1.23    203,252    $1.54     101,625   101,625     406,502   $156,248.44   $156,248.44
Valor Capital Management, LP     $750,000   $1.23    609,756    $1.54     304,880   304,880   1,219,516   $468,753.00   $468,753.00
SAV HealthCo Partners          $1,000,000   $1.23    813,008    $1.54     406,505   406,505   1,626,018   $625,001.44   $625,001.44
------------------------------
Bushido Capital                  $250,000   $1.23    203,252    $1.54     101,625   101,625     406,502   $156,248.44   $156,248.44
                                                                                                    n/a
------------------------------
Myron Neugeboren                  $25,000   $1.23     20,325    $1.54      10,163    10,163      40,650    $15,624.84    $15,624.84
Edward Neugeboren                 $25,000   $1.23     20,325    $1.54      10,163    10,163      40,650    $15,624.84    $15,624.84
Charon Behl                      $246,000   $1.23    200,000    $1.54     100,000   100,000     400,000   $153,750.00   $153,750.00
Christopher Dick                  $20,000   $1.23     16,260    $1.54       8,130     8,130      32,520    $12,499.88    $12,499.88
Shirley Rae Sullivan              $25,000   $1.23     20,325    $1.54      10,165    10,165      40,655    $15,628.69    $15,628.69
William Austin Lewis IV          $123,000   $1.23    100,000    $1.54      50,000    50,000     200,000    $76,875.00    $76,875.00
------------------------------                                          ---------
Trade Winds                       $86,715   $1.23     70,500    $1.54      35,250    35,250     141,000                  $54,196.88
                                                                          (35,250)                  n/a
------------------------------                                          ---------
Little Wing                      $413,280   $1.23    336,000    $1.54     168,000   168,000     672,000                 $258,300.00
                                                                         (168,000)                  n/a
------------------------------                                          ---------
Greg Osborn                       $12,300   $1.23     10,000    $1.54       5,000     5,000      20,000     $7,687.50     $7,687.50
Eric Brachfeld                    $12,300   $1.23     10,000    $1.54       5,000     5,000      20,000     $7,687.50     $7,687.50
Periscope Partners LP            $150,000   $1.23    121,951    $1.54      60,975    60,975     243,901    $93,749.06    $93,749,06
------------------------------                                          ---------
Keith Barksdale                   $24,600   $1.23     20,000    $1.54      10,000    10,000      40,000                  $15,375.00
                                                                          (10,000)
------------------------------                                          ---------
Jess Morgan & Co.              $1,122,000   $1.40    801,429    $1.75     400,715   400,715   1,602,859   $701,251,25   $701,251,25
RC----                           $150,000   $1.40    107,143    $1.75      53,570    53,570     214,283    $93,747.50    $93,747.50
Amy Daly                         $100,000   $1.40     71,429    $1.75      35,715    35,715     142,859    $62,501.25    $62,501.25
Peter S. Rosemary O'Gorman        $66,000   $1.40     47,143    $1.75      23,570    23,570      94,283    $41,247.50    $41,247.50
Fineman Revocable Trust          $100,000   $1.40     71,429    $1.75      35,715    35,715     142,859    $62,501.25    $62,501.25
Neil V. Moddy Revocable Trust    $132,000   $1.40     94,286    $1.75      47,145    47,145     188,576    $82,503,75    $82,503,75
------------------------------                                          ---------
Sunrise Capital                  $266,803   $1.47    181,498    $1.84      90,750    90,750     362,998

EXHIBIT A

FORM OF REPLACEMENT WARRANT

(SEE ATTACHED)

EXHIBIT B

FORM OF REGISTRATION RIGHTS AGREEMENT

(SEE ATTACHED)

Bank Name:            BANK OF AMERICA

Bank Address:         300 Garden State Plaza
                      Route 4 & 17
                      Paramus, NJ 07652
                      Telephone: (201) 845-5450

Account Title:        ELITE PHARMACEUTICALS, INC.
                      PRIVATE PLACEMENT ACCOUNT NO.: 9420365795
                      BANK ROUTING NUMBER: 021200339

REPLACEMENT WARRANT HOLDERS

REGISTRATION RIGHTS AGREEMENT

REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of December 14, 2005, by and among Elite Pharmaceuticals, Inc., a Delaware corporation (the "Company") and the holders of Warrants to purchase Common Stock issued by the Company pursuant to the Exercise Agreements (as each term is defined below) listed on SCHEDULE 1 attached hereto (each, a "Warrant Holder");

WHEREAS, the Company and each of the Warrant Holders have entered into a Warrant Exercise Agreement dated within thirty days of the date hereof (each an "Exercise Agreement"); and

WHEREAS, to induce each Warrant Holder to execute and deliver the Exercise Agreement, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended (the "Securities Act"), and the rules and regulations thereunder, or any similar successor statute, as well as any applicable state securities laws.

NOW, THEREFORE, in consideration of the premises, representations, warranties, and the mutual covenants and agreements contained herein, and in the Exercise Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company, the Placement Agent and the Warrant Holders, intending to be legally bound, hereby agree as follows:

1. CERTAIN DEFINITIONS.

Capitalized terms defined in the Exercise Agreements shall have the same meanings herein as are ascribed to them therein. In addition, as used in this Agreement, the following terms shall have the following meanings ascribed to them below:

"Affiliate" means any Person that has a relationship with a designated Person whereby either of such Persons directly or indirectly controls or is controlled by or is under common control with the other. For this purpose "control" means the power, direct or indirect, of one Person to direct or cause direction of the management and policies of another, or any act with respect to the securities of the Company, whether by contract, through voting securities or otherwise.

"Closing Date" means December 14, 2005.

"Common Stock" shall be the Company's authorized common stock, as constituted on the date of this Agreement, any stock into which such common stock may thereafter be changed and any stock of the Company of any other class, which is not preferred as to dividends or assets over any other class of stock of the Company issued to the Warrant Holders of shares of such common stock upon any re-classification thereof.

"Company Registration Expenses" shall mean bills or invoices (other than Selling Expenses) incident to the Company's performance of or compliance with this Agreement including, without limitation, all registration, filing and NASDR fees, fees and expenses of compliance with securities or blue sky laws, word processing, duplicating and printing expenses, messenger and delivery expenses, fees and disbursements of counsel for the Company and all independent public accountants including the expenses of any audit and/or "cold comfort" letter, all fees and expenses in connection with the Company's obligations under
Section 3.1, if applicable, and other Persons retained by the Company.

"Controlling Person" shall have the meaning set forth under Section 15 of the Securities Act.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Excluded Form" means a Form S-4 or Form S-8, pursuant to the Securities Act or any similar or successor form then in effect.

"NASDR" means the NASD Regulation, Inc.

"Offering" means the solicitation by the Placement Agent of Warrant Holders to enter into Exercise Agreements.

"Person" means a corporation, an association, a partnership, a limited liability company, a joint venture, a trust, an organization, a business, an entity, an individual, a government or political subdivision thereof or a governmental body.

"Placement Agent" shall mean Indigo Securities, LLC.

"Placement Agent Agreement" shall mean the placement agent agreement, dated as of November 9, 2005, between the Placement Agent and the Company.

"Placement Agent Warrants" shall mean the warrants to purchase shares of Common Stock issued to the Placement Agent pursuant to the Placement Agent Agreement.

"Register, registered and registration" means a registration effected by preparing and filing a Registration Statement on a form approved by the SEC other than an Excluded Form in compliance with the Securities Act and the declaration of effectiveness ordering the effectiveness of such Registration Statement.

"Registrable Securities" means Common Stock issued upon (i) exercise of the Warrants and (ii) exercise of the Placement Agent Warrants. As to any Registrable Securities, once issued, such securities shall cease to be Registrable Securities when (i) a Registration Statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such Registration Statement, (ii) they can be sold to the public pursuant to Rule 144 (or any successor provision) under the Securities Act, (iii) they shall have been otherwise transferred but new certificates for them not bearing a legend restricting further transfer shall have been delivered by the Company and subsequent disposition of them shall not require registration or qualification of them under the

Securities Act or any similar state law then in force, or (iv) they shall have ceased to be outstanding.

"Registration Statement" means one or more registration statements of the Company on Form S-3 under the Securities Act registering all of the Registrable Securities, including any amendments or supplements thereto.

"SEC" means the Securities and Exchange Commission or any other governmental body at the time administering the Securities Act.

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

"Selling Expenses" shall mean all underwriting discounts, brokerage fees and selling commissions applicable to the Registrable Securities registered and all fees and disbursements of counsel for the Warrant Holder.

"Warrants" means the warrants to purchase Common Stock issued by the Company pursuant to the Exercise Agreements and listed on SCHEDULE 1 attached hereto.

"Warrant Holders" means the Warrant Holders and any transferees or assignees who agree to become bound by the provisions of this Agreement in accordance with Section 10 hereof. Warrant Holders also refers to the Placement Agent and its assignees when referring to the offer and sale of Registrable Securities and other rights arising under Sections 2 and 3.

2. REGISTRATION.

2.1 MANDATORY REGISTRATION.

2.1.1 The Company shall file with the SEC, on the date which is on or before forty-five (45) days after the Closing Date (the "Filing Deadline") a Registration Statement on Form S-3 (or, if Form S-3 is not available, on such form of Registration Statement as is then available to effect a registration of all of the Registrable Securities; provided, that the Company shall convert such other form to Form S-3, or file a replacement registration statement on Form S-3 promptly after the first date on which it meets such requirement) pertaining to the resale of all of the Registrable Securities and, to the extent allowable under the Securities Act and the rules promulgated thereunder, to such indeterminate number of additional shares of Common Stock as may become issuable pursuant to provisions to prevent dilution resulting from stock splits, stock dividends or similar transactions (the "Mandatory Registration Statement"). The Mandatory Registration Statement shall contain, unless otherwise required by applicable law or the SEC, the "Selling Shareholders" and "Plan of Distribution" section of the Prospectus in a form reasonably satisfactory to the Warrant Holders based upon information provided by the selling shareholder. The Registrable Securities included in the Mandatory Registration Statement shall be registered on behalf of the Warrant Holders set forth on Schedule 1 hereof. The Mandatory Registration Statement (and each amendment or supplement thereto, and each request for acceleration of effectiveness thereof) shall be provided to the Warrant Holders and their counsel at least five (5) business days prior to its filing or other submission; such notice to specify the securities to be registered, the proposed numbers and amounts thereof and the date thereafter by which the Company must receive the Warrant Holders' written indication if any

Warrant Holder does not wish to include their Registrable Securities in such Registration Statement and advising the Warrant Holders of their rights under this Section 2. The Company shall file the Mandatory Registration Statement and use its best efforts to cause all of the Registrable Securities (unless an Warrant Holder has indicated otherwise with respect to all or any portion of such Warrant Holder's Registrable Securities pursuant to the preceding sentence) to be registered under the Securities Act, in connection with the sale or other disposition by the Warrant Holders of the Registrable Securities so registered. The Company shall use its best efforts to cause the Mandatory Registration Statement, as amended, to become effective as soon as practicable after the filing thereof. The Mandatory Registration Statement shall only cover the Registrable Securities and any stockholder of the Company that is entitled to participate under, and exercises any existing, piggy-back registration rights.

2.1.2 If the Mandatory Registration Statement (i) has not been declared or ordered effective within one-hundred and twenty (120) days after the Closing Date (the "Four Month Period") or (ii) has been declared effective, but prior to the second anniversary of the Closing Date ceases for any reason to remain continuously effective as to all Registrable Securities for which it is required to be effective or the Holders are not permitted to utilize the Prospectus therein to resell such Registrable Securities, in each case for a period of 15 consecutive Trading Days or more than an aggregate of any 25 Trading Days, in each case during which a Warrant Holder could exercise the Warrant and sell the Warrant Shares at a profit, during a 12-month period (any such failure or breach being referred to as an "Event", and for purposes of clause (i) the date on which such Event occurs, or for purposes of clause (ii) the date on which such 15 or 25 Trading Day period, as applicable, is exceeded, being referred to as an "Event Date"), then in addition to any other rights the Holders may have hereunder or under applicable law, on each monthly anniversary of each such Event Date (if the applicable Event shall not have been cured by such date) until the date on which the applicable Event is cured, the Company shall pay to each Holder an amount in cash, as damages and not as a penalty, equal to 0.5% per month of the aggregate exercise price applicable under the terms of the Warrants to the Registrable Securities then held by such Holder. If the Company fails to pay any liquidated damages pursuant to this Section in full within seven business days after the date payable, the Company will pay interest thereon at a rate of 16% per annum (or such lesser maximum amount that is permitted to be paid by applicable law) to the Holder, accruing daily from the date such liquidated damages are due until such amounts, plus all such interest thereon, are paid in full. The damages pursuant to the terms hereof shall apply on a daily pro-rata basis for any portion of a month prior to the date on which an Event is cured. The Company shall have the option to pay any damages in cash or Common Stock.

2.2 DEMAND REGISTRATION

2.2.1 If the Mandatory Registration Statement shall not have been declared or ordered effective and the Company shall receive a written request no earlier than ninety (90) days following the Closing but no later than 22 months after the Closing from Warrant Holders holding more than $1,000,000 in value of the Registrable Securities then outstanding (the "Initiating Warrant Holder") that the Company file a registration statement under the Securities Act covering the registration of the Registrable Securities, then the Company shall, within thirty (30) days of the receipt thereof, give written notice of such request to all Warrant Holders, and subject to the limitations set forth herein, effect, as expeditiously as reasonably possible, the

registration under the Securities Act of all Registrable Securities that the Warrant Holders request to be registered.

2.2.2 The Company shall not be required to effect a registration pursuant to this Section 2.2 if (i) the Mandatory Registration Statement has been declared or ordered effective, whether or not one or more holders of Registrable Securities elected not to register all of their respective shares in the Mandatory Registration Statement (ii) the Company has previously effected two registrations pursuant to this Section 2.2 and such previous registrations has been declared or ordered effective or (iii) the Registrable Securities covered by registrations pursuant to this Section 2.2 may be sold pursuant to Rule 144(k) promulgated under the Securities Act or any successor provision. Subject to the foregoing, the Company shall file a registration statement covering the Registrable Securities and other securities so requested to be registered pursuant to this Section 2.2 as soon as practicable after receipt of the request or requests of the Warrant Holders.

2.3 PIGGYBACK RIGHTS.

2.3.1 If the Company shall determine to prepare and file with the SEC 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 an Excluded Form), then the Company shall send to each Warrant Holder holding Registrable Securities that have not been covered by a registration statement that has been declared or ordered effective (each, an "Eligible Warrant Holder"), written notice of such determination and if, within 15 business days after receipt of such notice any such Eligible Warrant Holder shall so request in writing, the Company shall include in such registration statement the Registrable Securities requested by the Eligible Warrant Holders to be so included. Such written notice shall state the intended method of disposition of the Registrable Securities by such Eligible Warrant Holder. If an Eligible Warrant Holder decides not to include all of its Registrable Securities in any registration statement thereafter filed by the Company, such Eligible Warrant Holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth herein, to the extent all Registrable Securities held by such Warrant Holder have not been covered by a registration statement that has been declared or ordered effective by the time of such subsequent registration.

2.3.2 If the registration statement under which the Company gives notice under this Section 2.3 is for an underwritten offering, the Company shall so advise the Eligible Warrant Holders of Registrable Securities. In such event, the right of any such Eligible Warrant Holder to be included in a registration pursuant to this Section 2.3 shall be conditioned upon such Eligible Warrant Holder's participation in such underwriting and the inclusion of such Eligible Warrant Holder's Registrable Securities in the underwriting to the extent provided herein. All Eligible Warrant Holders proposing to distribute their Registrable Securities through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company. Notwithstanding any other provision of the Agreement, if the underwriter determines in good faith that marketing factors require a limitation of the number of shares to be underwritten, the number of shares that may be included in the underwriting shall be allocated, first, to the Company; second, to any selling

shareholders that shall have exercised a demand registration right; third, on a PRO RATA basis, to the Eligible Warrant Holders and any other shareholders of the Company exercising incidental registration rights based on the total number of Registrable Securities sought to be registered in such registration by the Eligible Warrant Holders and such other shareholder of the Company.

2.3.3 If any Eligible Warrant Holder disapproves of the terms of any such underwriting, such Eligible Warrant Holder may elect to withdraw therefrom by written notice to the Company and the underwriter, delivered at least ten (10) business days prior to the effective date of the registration statement. Any Registrable Securities excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration. For any Eligible Warrant Holder which is a partnership, limited liability company, or corporation, the partners, retired partners, members, retired members and shareholders of such Eligible Warrant Holder, or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing person shall be deemed to be a single "Eligible Warrant Holder," and any PRO RATA reduction with respect to such "Eligible Warrant Holder" shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such "Eligible Warrant Holder," as defined in this sentence.

2.3.4 The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.3 prior to the effectiveness of such registration whether or not any Eligible Warrant Holder has elected to include securities in such registration.

3. REGISTRATION PROCEDURES.

3.1 If and whenever the Company is required by the provisions hereof to effect or cause the registration of any Registrable Securities under the Securities Act as provided herein, the Company shall, as expeditiously as possible:

3.1.1 prepare and file with the SEC, on or before the Filing Deadline the Mandatory Registration Statement required by Section 2.1 or a demand Registration Statement pursuant to Section 2.2 with respect to such Registrable Securities and use its best efforts to cause such Registration Statement to become and remain effective (pursuant to Rule 415 of the Securities Act) as soon as practicable after such filing (provided that, before filing a Registration Statement or prospectus or any amendments or supplements thereto, the Company shall furnish to the Warrant Holders copies of all such documents proposed to be filed);

3.1.2 prepare and file with the SEC such amendments (including post-effective amendments) and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective, true and correct during the Registration Period. For purposes of this Agreement, "Registration Period" means the period commencing with the effective date and ending on the earlier of (i) the sale of all Registrable Securities covered thereby, (ii) the date upon which the Warrant Holders may sell the Registrable Securities pursuant to Rule 144(k) promulgated under the Securities Act, or (iii) the expiration of the 24 months after Closing or such shorter period as shall be necessary to complete the distribution of the securities covered thereby, and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all Registrable Securities

covered by such Registration Statement during such period in accordance with the intended methods of disposition by the Warrant Holders in such Registration Statement;

3.1.3 permit the Warrant Holders and their counsel to review and comment upon all Registration Statements at least five (5) business days prior to its filing with the SEC and all amendments and supplements to all Registration Statements (except for documents incorporated by reference therein) within a reasonable number of days prior to their filing with the SEC;

3.1.4 submit to the SEC, within two (2) business days after the Company learns that no review of the Registration Statement will be made by the staff of the SEC (the "Staff") or that the Staff has no further comments on the Registration Statement, as the case may be, a request for acceleration of effectiveness of the Registration Statement to a time and date not later than 48 hours after the submission of such request;

3.1.5 furnish to each Warrant Holder whose Registrable Securities are included in the Registration Statement, and to the Placement Agent's counsel and each underwriter of the securities being sold by the Warrant Holders such number of copies of such Registration Statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus included in such Registration Statement (including each preliminary prospectus), in conformity with the requirements of the Securities Act, and such other documents, as such counsel and underwriter may reasonably request, in substantially the form in which they are proposed to be filed with the SEC, in order to facilitate the public sale or other disposition of the Registrable Securities owned by the participating Warrant Holders. In the case of all Registration Statements referred to in Section 2, the Company shall furnish to each Warrant Holder which requests (i) a copy of any request to accelerate the effectiveness of any Registration Statement or amendment thereto, (ii) on the date of effectiveness of the Registration Statement or any amendment thereto, a notice stating that the Registration Statement or amendment has been declared effective, and (iii) such number of copies of a prospectus, including a preliminary prospectus, and all amendments and supplements thereto and such other documents as such Warrant Holder may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Warrant Holder. In responding to comments from the staff of the SEC, the Company shall cooperate with any Warrant Holder that notifies the Company that it desires to be consulted with respect to such process. To the extent that issues raised by the staff of the SEC have an impact primarily on any such Warrant Holder rather than the Company, the Company shall give reasonable deference to such Warrant Holder's requests with respect to the process and substance of responses with respect to such issues;

3.1.6 use its best efforts to (i) register and qualify the Registrable Securities covered by the Registration Statement under such other securities or "blue sky" laws of such jurisdictions in the United States as each Warrant Holder who holds Registrable Securities being offered reasonably requests, (ii) prepare and file in those jurisdictions such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions as may be reasonably necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv) take all other actions

reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; PROVIDED, HOWEVER, that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3.1.6;

3.17 subject to Section 3.1.6, use its best efforts to cause such Registrable Securities covered by such Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be reasonably necessary to enable the participating Warrant Holders to consummate the disposition of its Registrable Securities;

3.1.8 notify the participating Warrant Holders at any time when a prospectus relating to its Registrable Securities is required to be delivered under the Securities Act, of the Company's becoming aware that the prospectus included in the related Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and promptly prepare and furnish to the participating Warrant Holders and each underwriter a reasonable number of copies of a prospectus supplemented or amended so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include 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 not misleading in the light of the circumstances then existing;

3.1.9 otherwise use its best efforts to comply with all applicable rules and regulations of the SEC;

3.1.10 if the Common Stock is listed on the American Stock Exchange, another national securities exchange, or on the Nasdaq Stock Market, as the case may be, the Company shall use its best efforts to cause all such Registrable Securities covered by such Registration Statement to be listed on the American Stock Exchange, other national securities exchange, or on the Nasdaq Stock Market, as the case may be (if such Registrable Securities are not already so listed), if the listing of such Registrable Securities is then permitted under the rules of such exchange or market;

3.1.11 provide a transfer agent and registrar, which may be a single entity, for the Registrable Securities not later than the effective date of the Registration Statement;

3.1.12 in the case of an underwritten offering, enable the Registrable Securities to be in such denominations and registered in such names as the underwriters may request at least two business days prior to the sale of the Registrable Securities;

3.1.13 cooperate with the Warrant Holders who hold Registrable Securities being offered to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legends) representing Registrable Securities to be offered pursuant to the Registration Statement and enable such certificates to be in such denominations or amounts, as the case may be, as the Warrant Holders may reasonably request and registered in such names as the Warrant Holders may request;

3.1.14 notify the Warrant Holders of any stop order threatened, to the knowledge of the Company, or issued by the SEC (and the Company shall notify the Warrant Holders of the resolution of any issued stop order) and take all actions reasonably necessary to prevent the entry of such stop order or to remove it if entered;

3.1.15 instruct the Company's transfer agent to remove the restrictive legend on the stock certificates after effectiveness of the applicable Registration Statement and provide. with the cooperation of the Warrant Holders, any required legal opinions at the Company's sole expense; and

3.1.16 the Company shall use its commercially reasonable efforts to (subject to applicable law), as soon as practicable, (A) incorporate in a prospectus supplement or post-effective amendment the information provided by an Warrant Holder pursuant to Section 3.2 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, (B) 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 (C) supplement or make amendments to any Registration Statement if reasonably requested by an Warrant Holder holding any Registrable Securities as it relates to the information provided by an Warrant Holder pursuant to Section 3.2 relating to the sale and distribution of Registrable Securities.

3.2 In connection with the registration of the Registrable Securities, the Warrant Holders shall have the following obligations:

3.2.1 each participating Warrant Holder shall furnish to the Company in writing such information and documents regarding it and the distribution of its securities as may reasonably be required to be disclosed in the Registration Statement in question by the rules and regulations under the Securities Act or under any other applicable securities or blue sky laws of the jurisdictions referred to in Section 3.1.4 above, or as may otherwise be reasonably requested; and

3.2.2 if any such registration or comparable statement refers to any participating Warrant Holder by name or otherwise as the Warrant Holder of any securities of the Company, but such reference to such participating Warrant Holder by name or otherwise is not required by the Securities Act or any similar federal statute then in force, then such participating Warrant Holder shall have the right to require the deletion of the reference to such participating Warrant Holder.

3.3 From and after the date of this Agreement, the Company shall not, and shall not agree to, allow the holders of any securities of the Company to include any of their securities in the Mandatory Registration Statement under
Section 2.1 hereof or any amendment or supplement thereto under Section 3.1.2 hereof without the consent of the Warrant Holders of a majority of the Registrable Securities, except pursuant to outstanding registration rights set forth on SCHEDULE 3.3 attached hereto.

4. REGISTRATION EXPENSES.

In connection with any registration of Registrable Securities pursuant to Section 2, the Company shall, whether or not any such registration shall become effective, from time to time promptly pay all Company Registration Expenses. Such expenses shall not include any Selling Expenses other than up to $10,000 of reasonable fees and expenses of one counsel selected by a majority of the Warrant Holders solely with respect to the Mandatory Registration Statement.

5. INDEMNIFICATION.

5.1 The Company shall, and hereby does, indemnify and hold harmless, to the fullest extent permitted by law, each Warrant Holder and the Placement Agent (and their respective officers, directors, managers, members, partners, stockholders, employees, agents and advisors) and each Person who controls any Warrant Holder or the Placement Agent within the meaning of the Securities Act (each, an "Indemnified Party") from and against all losses, claims, damages, liabilities and expenses, joint or several, to which any such Indemnified Party may become subject under the Securities Act, the Exchange Act and all rules and regulations under each such act, any other federal or state statute, law or regulation at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or any amendment or supplement thereto or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary, final or summary prospectus, together with the documents incorporated by reference therein (as amended or supplemented if the Company shall have filed with the SEC, any amendment thereof or supplement thereto), or any omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or (iii) any violation by the Company of any federal, state or common law rule or regulation applicable to the Company and relating to action of or inaction by the Company in connection with any such registration including the failure to deliver any document required herein to be delivered, to an Warrant Holder and a Placement Agent; and in each such case, the Company shall reimburse each such Indemnified Party for any reasonable legal or other expenses as such reasonable expenses are incurred by any of them in connection with investigating, defending, settling, compromising, proving or defending any such loss, claim, damage, liability, expense, action or proceeding; PROVIDED, HOWEVER, that the Company shall not be liable to any such Indemnified Party insofar as such losses, claims, damages, liabilities, expenses, actions or proceedings are caused by any untrue statement or alleged untrue statement or material omission to provide information pursuant to Section 5.2 made in reliance on and in conformity with any written information furnished to the Company by or on behalf of any Indemnified Party to be furnished under the Section 5.2 or as a result of the failure of the Indemnified Party to furnish a prospectus to a purchaser.

5.2 In connection with any Registration Statement in which any Warrant Holder and the Placement Agent is participating, such participating parties shall furnish to the Company in writing such information as shall be reasonably requested by the Company for use in any such

Registration Statement or prospectus and shall indemnify and hold harmless, severally and not jointly, to the extent permitted by law, the Company, its officers, directors, employees, agents, advisors and each Person, if any, who controls the Company within the meaning of Section 15 of the Securities Act, against any losses, claims, damages, liabilities, expenses, actions or proceedings resulting from any untrue statement or alleged untrue statement of a material fact or any omission or alleged omission of a material fact with respect to information furnished by the Warrant Holder to the Company and required to be stated in the Registration Statement or prospectus or preliminary prospectus or any amendment thereof or supplement thereto, or necessary to make the statements therein in the light of the circumstance under which they were made (in the case of a prospectus) not misleading, in each case to the extent, but only to the extent, that such untrue statement or omission with respect to information expressly requested by the Company is made in reliance on and in conformity with any information so furnished in writing or to be furnished under this Section 5.2 by such participating Warrant Holder expressly for use therein. Notwithstanding the provisions of this Section 5.2, each Investor shall not be liable for any indemnification obligation under this Agreement in excess of the aggregate amount of net proceeds received by such Investor from the sale of the Registrable Securities pursuant to the applicable Registration Statement. In no case shall the Placement Agent be liable for any indemnification obligation under this Agreement in excess of the compensation received by it pursuant to the Placement Agent Agreement.

5.3 Any Person entitled to indemnification under the provisions of this
Section 5 shall (i) give prompt notice to the indemnifying party of any claim with respect to which it seeks indemnification but the omission to so notify the indemnifying party will not relieve the indemnifying party from any liability which it may have pursuant to this Section 5 to the extent it is not materially prejudiced as a result of such failure, and (ii) unless in the reasonable judgment of counsel for such indemnified party a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, permit such indemnifying party to assume the defense of such claim, with counsel reasonably satisfactory to the indemnified party; and if such defense is so assumed, such indemnifying party shall not enter into any settlement without the consent of the indemnified party if such settlement attributes liability to the indemnified party and such indemnifying party shall not be subject to any liability for any settlement made without its consent. In the event an indemnifying party shall not be entitled, or elects not, to assume the defense of a claim, such indemnifying party shall not be obligated to pay the fees and expenses of more than one law firm for all parties indemnified by such indemnifying party hereunder in respect of such claim. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of any indemnified party and shall survive the transfer of such securities by such indemnified party.

5.4 If for any reason the foregoing indemnity is unavailable, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party as well as any other relevant equitable considerations in accordance with Section 6 below. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

5.5 An indemnifying party shall make payments of all amounts required to be made pursuant to the foregoing provisions of this Section 5 to or for the account of the indemnified party from time to time promptly upon receipt of bills or invoices relating thereto or when otherwise due and payable.

6. CONTRIBUTION.

To provide for just and equitable contribution, if an Indemnified Party makes a claim for indemnification pursuant to Section 5 but it is found in a final judicial determination, not subject to further appeal, that such indemnification may not be enforced in such case, even though this Agreement expressly provides indemnification in such case, then the Company (including for this purpose any contribution made by or on behalf of any officer, director, employee or agent for the Company, or any Controlling Person of the Company), on the one hand, and the indemnified party, on the other hand, shall contribute to the losses, liabilities, claims, damages, and expenses whatsoever to which any of them may be subject, in such proportions as are appropriate to reflect the relative benefits received by the Company, on the one hand, and the indemnified party, on the other hand; PROVIDED, HOWEVER, that if applicable law does not permit such allocation, then other relevant equitable considerations such as the relative fault of the Company and the indemnified party in connection with the facts which resulted in such losses, liabilities, claims, damages, and expenses shall also be considered. No Person liable for a fraudulent misrepresentation shall be entitled to contribution from any person who is not liable for such fraudulent misrepresentation. Anything in this Section 6 to the contrary notwithstanding, no party shall be liable for contribution with respect to the settlement of any claim or action effected without its written consent. The Company, the Warrant Holders and the Placement Agent agree that it would not be just and equitable if contribution pursuant to this Section 6 were determined solely by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 6. The Warrant Holders' and the Placement Agent's obligations to contribute pursuant to this Section 6 are several and not joint.

7. RULE 144.

The Company covenants that it shall file the reports required to be filed under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder (or, in the event that the Company is not required to file such reports, it shall make publicly available information as set forth in Rule 144(c)(2) promulgated under the Securities Act), or to the extent required from time to time to enable the Warrant Holders and the Placement Agent to sell their Registrable Securities without registration under the Securities Act within the limitation of the exemption provided by (i) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or
(ii) any similar rule or regulation hereafter adopted by the SEC (collectively, "Rule 144").

8. REGISTRATION RIGHTS OF OTHERS.

If the Company shall at any time hereafter provide any Person any rights with respect to the registration of any securities of the Company under the Securities Act, such rights shall not permit any such securities to become registered during the period between Closing and the date that is 180 days after the Mandatory Registration Statement becomes effective or, in any other

manner, be superior to the rights provided herein to the Warrant Holders and the Placement Agent. For the avoidance of doubt, this Section 8 excludes any registration rights that exist on the date hereof.

9. REPORTING STATUS AND LISTING.

(a) Until the date on which the Warrant Holders shall have sold all of their Registrable Securities, the Company shall file all reports required to be filed with the SEC pursuant to the Exchange Act, and the Company shall not terminate its status as an issuer required to file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would otherwise permit such termination.

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

10. TRANSFER OF REGISTRATION RIGHTS.

If and to the extent that any Warrant Holder or the Placement Agent sells or otherwise disposes of Registrable Securities or warrants exercisable for Registrable Securities in any transaction that does not require registration under the Securities Act (other than a transaction exempt under Rule 144), the rights of the Warrant Holder or the Placement Agent hereunder with respect to such Registrable Securities shall be assignable to any transferee of such Registrable Securities; PROVIDED, HOWEVER, that such transferee agrees in writing to be bound by all the terms and conditions of this Agreement.

11. MISCELLANEOUS.

11.1 The registration rights provided to the Warrant Holders of Registrable Securities hereunder shall terminate on the date there shall no longer be any outstanding Registrable Securities; PROVIDED, HOWEVER that the provisions of Section 5 hereof shall survive any termination of this Agreement.

11.2 A Person is deemed to be an Warrant Holder of Registrable Securities whenever such Person owns of record such Registrable Securities. If the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from the registered owner of such Registrable Securities.

11.3 All notices, offers, acceptance and any other acts under this Agreement shall be in writing, and shall be sufficiently given if delivered to the addressees in person, by Federal Express or similar receipted overnight delivery, or by facsimile or e-mail delivery followed by a copy sent by Federal Express or similar receipted overnight delivery, as follows:

If to the Company:      Elite Pharmaceuticals, Inc.
                        165 Ludlow Avenue
                        Northvale, NJ 07647
                        Facsimile No.:  (201) 750-2755
                        Attention:  Mr. Bernard Berk
                                    Chief Executive Officer

With a copy to:         Reitler Brown & Rosenblatt LLC
                        800 Third Avenue, 21st Floor
                        New York, NY 10022
                        Facsimile No.: (212) 371-5500
                        Attention:  Scott H. Rosenblatt, Esq.

If to an Warrant Holder, at such address as such Warrant Holder shall have provided in writing to the Company or such other address as such Warrant Holder furnishes by notice given in accordance with this Section 11.3, with a copy to:

                        Indigo Securities, LLC
                        780 Third Avenue, 23rd Floor
                        New York, NY 10017
                        Facsimile No.: (212) 298-9933
                        Attention:  Eric Brachfeld

With a Copy to:         Wollmuth Maher & Deutsch LLP
                        500 Fifth Avenue
                        New York, New York 10110
                        Facsimile No.:  (212) 382-0050
                        Attention:  Rory M. Deutsch, Esq.

11.4 Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.

11.5 This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed in the State of New York.

11.6 Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal courts sitting in Manhattan, New York. Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in Manhattan, New York for the adjudication of any dispute hereunder or in

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

11.7 This Agreement (including all schedules and exhibits thereto) constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and thereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein. This Agreement supersedes all prior agreements and understandings (whether oral or written) among the parties hereto and thereto with respect to the subject matter hereof and thereof.

11.8 Subject to the requirements of Section 10 hereof, this Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto.

11.9 The headings in this Agreement are for convenience of reference only and shall not form part of or effect the interpretation of this Agreement.

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

11.11 Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

11.12 Except as otherwise set forth herein, all consents, approvals and other determinations to be made by the Warrant Holders pursuant to this Agreement shall be made by the Warrant Holders holding more than 66 2/3% of the Registrable Securities then held by all Warrant Holders.

11.13 If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement or the validity or enforceability of this Agreement in any other jurisdiction.

11.14 This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by any other Person.

[REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK.]

IN WITNESS WHEREOF, the parties have set their hands and seals the date and year first above written.

ELITE PHARMACEUTICALS, INC.

INVESTORS:

INDIGO SECURITIES, LLC

[ADDITIONAL SIGNATURE PAGES ATTACHED]

Address:

Dated:                                          NON-INDIVIDUAL:
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                                                   -----------------------------
                                                   Name of Entity


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


                                                   Address:

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SCHEDULE 1

TO

REPLACEMENT WARRANT HOLDERS

                                                               REPLACEMENT
           NAME                           ADDRESS                WARRANTS
           ----                           -------              ------------

Marlin Fund II, LP
Marlin Fund Offshore, LDC

Bushido Capital
Myron Neugeboren
Charon Behl
Chris Dick
Shirley Rae Sullivan
Lewis Asset Management
Abbey E. Blatt                         24 Saber Dr., Kings Park
Bill Mitsinikos                        1645 Lands End Road, Manalapan
Norman Rothstein

INDIGO SECURITIES, LLC

November 9, 2005

Mr. Bernard Berk
Chief Executive Officer
Elite Pharmaceuticals, Inc.
150 Northvale Avenue
Ludlow, New Jersey 07647

Ladies and Gentlemen

Pursuant to our ongoing relationship, we are writing to confirm with you the arrangements under which Indigo Securities, LLC ("INDIGO") has acted as financial advisor to Elite Pharmaceuticals, Inc. (the "COMPANY") with respect to the Transactions (as defined below). This letter agreement shall be referred to herein as the "AGREEMENT" and the "EFFECTIVE DATE" shall mean November 9, 2005. Each of Indigo and the Company may be referred to herein individually as a "PARTY" and collectively as the "PARTIES".

1. THE ENGAGEMENT; WARRANT TRANSACTION.

In connection with the Engagement, the Company has requested Indigo's assistance in facilitating (i) the exercise of warrants (the "OLD WARRANTS") by investors ("EXCHANGING HOLDERS") who received warrants to purchase shares of the Company's common stock in connection with the Company's private placement transaction dated as of October, 2004 (such exercise shall be referred to as the "WARRANT TRANSACTION"); and (ii) the issuance of new warrants by the Company (as described in the term sheet attached hereto as Exhibit A) to Exchanging Holders participating in the Warrant Transaction (the "NEW WARRANTS"; and such issuance, together with the Warrant Transaction, the "TRANSACTIONS"). It is contemplated that the New Warrants issued in the Transactions will be issued by the Company in a private placement transaction (the "PRIVATE PLACEMENT") exempt from registration under the U. S. Securities Act of 1933 (the "SECURITIES ACT"), and otherwise in compliance with the applicable laws and regulations of any jurisdiction in which the Securities are offered. Indigo shall only be obligated to assist the Company with the Transactions on a "best efforts" basis as described above.

2. THE PRIVATE PLACEMENT.

The Company and Indigo will each reasonably believe at the time of the Private Placement that each Exchanging Holder will be an "accredited investor" as defined in Rule 501 of Regulation D of the Securities Act and will satisfy any private placement requirements applicable in any non-U.S. jurisdiction where the New Warrants may be offered. The Company will file in a timely manner with the U.S. Securities and Exchange Commission (the "SEC") any notices with respect to the Securities required by Rule 503 of Regulation D and will furnish to Indigo promptly thereafter a signed copy of each such notice.

Elite Pharmaceuticals, Inc.
November 9, 2005

3. INFORMATION SUPPLIED; REPRESENTATIONS.

The Company will furnish to Indigo such information as Indigo believes appropriate to its engagement hereunder. In addition, the representations and warranties of the Company made in the Exchange Agreement are hereby incorporated herein by reference in their entirety with the same legal effect as if such representations and warranties were set forth herein. This Agreement has been duly and validly authorized by the Company and Indigo is a valid and binding agreement of the Company and Indigo, enforceable in accordance with its terms.

4. FEES AND EXPENSES.

(a) Simultaneous with payment of the exercise price under the Old Warrants and the delivery of the New Warrants, at the Closing, the Company shall pay the Placement Agent a commission equal to (i) seven and one-half percent (7.5%) of the gross cash proceeds received by the Company from the exercise of the Old Warrants (the "CASH FEE"), and (ii) New Warrants exercisable for a number of shares of the Company's common stock equal to the Cash Fee divided by the exercise price of the New Warrants (the "PLACEMENT AGENT WARRANT"). The Placement Agent Warrant shall include a "cashless exercise" provision. Placement Agent shall be reimbursed at Closing for its reasonable expenses incurred in connection with the Engagement including, without limitation, legal fees of the Placement Agent's counsel and disbursements of Placement Agent's counsel, in an amount not to exceed $20,000; provided, that Placement Agent's counsel presents a copy of the bill at Closing documenting such fees and disbursements.

(b) If the Company conducts a separate private placement of securities to any investor(s) introduced to the Company by the Placement Agent ("PA INVESTORS") at any time during the eighteen (18) month period following the Termination Date, then the Company will pay to the Placement Agent a commission equal to seven and on-half percent (7.5%) of the gross cash proceeds received by the Company from the PA Investors in such new private placement ("SUBSEQUENT CASH FEE"), and, in addition thereto, issue to the Placement Agent warrants to purchase a number of shares common stock of the Company equal to the Subsequent Cash Fee divided by the per share purchase price of the Company's common stock in such private placement, or such other fee as mutually agreed to by the Parties.

5. NOTICES.

All communications hereunder shall be in writing and shall be mailed or delivered (a) to the Company, at its offices at 165 Northvale Avenue, Ludlow, New Jersey 07647, and (b) to Indigo, at its offices at 780 Third Avenue, Suite 2302, New York, NY 10017, Attention: Eric Brachfeld.

6. INDEMNIFICATION.

(a) The Company agrees to indemnify and hold harmless Indigo, its employees and representatives and each person who controls Indigo within the meaning of Section 15 of the Securities Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Securities Act or any other statute or at common law in connection with the performance of its duties described herein and to reimburse persons indemnified as above for any legal or other expense (including the cost of any investigation and preparation) incurred by them in connection with any litigation whether or not resulting in any liability, provided, however, that the indemnity agreement contained in this Section 6(a) shall not

Elite Pharmaceuticals, Inc.
November 9, 2005

apply to amounts paid in settlement of any such litigation if such settlement is effected without the consent of the Company, nor shall it apply to Indigo or any person controlling Indigo in respect of any such losses, claims, damages, or liabilities arising out of, or based upon, any such untrue statement or alleged untrue statement, or any such omission or alleged omission, if such statement or omission was made in reliance upon information furnished in writing to the Company by Indigo. Indigo agrees within ten days after the receipt by it of written notice of the commencement of any action against it or against any person controlling it as aforesaid, in respect of which indemnity may be sought from the Company on account of the indemnity agreement contained in this Section
6(a), to notify the Company in writing of the commencement thereof. The omission of Indigo so to notify the Company of any such action shall not relieve the Company from any liability which it may have to Indigo or any person controlling it as aforesaid on account of the indemnity agreement contained in this subsection. In case any such action shall be brought against Indigo or any such controlling person and Indigo shall notify the Company of the commencement thereof, the Company shall be entitled to participate in (and, to the extent that it shall wish, to direct) the defense thereof at its own expense but such defense shall be conducted by counsel of recognized standing and reasonably satisfactory to Indigo or such controlling person or persons, defendant or defendants in the litigation; provided, that the Company shall not be required to pay for more than one firm of counsel for all indemnified parties, which firm shall be designated by Indigo. The Company agrees to notify Indigo promptly of the commencement of any litigation or proceeding against it or in connection with the issue and sale of any of its securities and to furnish to Indigo, at its request, copies of all pleadings therein and permit Indigo to be an observer therein and apprise Indigo of all developments therein, all at the Company's expense.

(b) Indigo agrees, in the same manner and to the same extent as set forth in Section 6(a) of this Agreement, to indemnify and hold harmless the Company and each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act, with respect to any statement in or omission from the information provided to investors any amendments thereto, if such statement or omission was made in reliance upon information furnished in writing to the Company by Indigo, on its behalf, specifically for use in connection with the preparation of documents to be provided to prospective investors or any amendment thereof or supplement thereto or by reason of improper selling practices (including failure to comply with, or a violation of, any law or regulation by Indigo, its officers, directors and registered placement agents). Indigo shall not be liable for amounts paid in settlement of any such litigation if such settlement was effected without its consent. In case of commencement of any action, in respect of which indemnity may be sought from Indigo on account of the indemnity agreement contained in this Section 6(b), each person agreed to be indemnified by Indigo shall have the same obligation to notify Indigo as Indigo has toward the Company in Section 6(a) of this Agreement, subject to the same loss of indemnity in the event such notice is not given, and Indigo shall have the same right to participate in (and to the extent that it shall wish, to direct) the defense of such action at its own expense, but such defense shall be conducted by one firm of counsel of recognized standing and satisfactory to the Company. Indigo agrees to notify the Company promptly of the commencement of any litigation or proceeding against it or against any such controlling person, of which it may be advised, in connection with the issue and sale of any of the securities of the Company, and to furnish the Company at its request copies of all pleadings therein and permit the Company to be an observer therein and apprise it of all developments therein, all at Indigo's expense.

Elite Pharmaceuticals, Inc.
November 9, 2005

(c) The respective indemnity agreements between Indigo and the Company contained in Sections 6(a) and 6(b) of this Agreement, and the representations and warranties of the Company set forth elsewhere in this Agreement, shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of Indigo or by or on behalf of any controlling person of Indigo or the Company any controlling person of the Company, shall survive the delivery of the Units. Any successor of the Company and Indigo or of any controlling person of Indigo, as the case may be, shall be entitled to the benefits of the respective indemnity agreements.

(d) In order to provide for just and equitable contribution under the Securities Act in any case in which (i) any person entitled to indemnification under this Section 6 makes claim for indemnification pursuant hereto but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 6 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any such person in circumstances for which indemnification is provided under this Section 6, then, and in each such case, the Company and Indigo shall contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after any contribution from others) in such proportions so that Indigo is responsible for the proportion that the fees provided for herein bear to the purchase price of the Securities, and the Company is responsible for the remaining portion; provided, that, in any such case, no person guilty of a fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

Within ten days after receipt by any party to this Agreement of notice of the commencement of any action, suit or proceeding, such party will, if a claim for contribution in respect thereof is to be made against another party (the "CONTRIBUTING PARTY"), notify the contributing party, in writing, of the commencement thereof, but the omission so to notify the contributing party will not relieve it from any liability which it may have to any other party other than for contribution hereunder. In case any such action, suit or proceeding is brought against any party, and such party so notifies a contributing party or his or its Placement Agent of the commencement thereof within the aforesaid ten days, the contributing party will be entitled to participate therein with the notifying party and any other contributing party similarly notified. Any such contributing party shall not be liable to any party seeking contribution on account of any settlement of any claim, action or proceeding effected by such party seeking contribution without the written consent of such contributing party. The contribution provisions contained in Section 6 are in addition to any other rights or remedies which either party hereto may have with respect to the other or hereunder.

7. MISCELLANEOUS.

(a) No waiver, amendment or other modification of this Agreement shall be effective unless in writing and signed by each party to be bound. This Agreement shall inure to the benefit of and be binding on the Company, Indigo and their respective successors.

(b) In case any provision of this letter agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this letter agreement shall not in any way be affected or impaired thereby.

Elite Pharmaceuticals, Inc.
November 9, 2005

(c) The Company has retained Indigo to act as an independent contractor, and any duties of Indigo arising out of its engagement shall be owed solely to the Company and to no other party.

(d) This letter agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York.

(e) Each of Indigo and the Company (on its own behalf and, to the extent permitted by applicable law, on behalf of its shareholders) waives all right to trial by jury in any action, proceeding or counterclaim (whether based upon contract, tort or otherwise) related to or arising out of this letter agreement.

Please confirm that the foregoing correctly sets forth our agreement by signing and returning to Indigo the enclosed duplicate copy of this Agreement. We are delighted to participate in this engagement and have enjoyed working with you on the assignment.

Very truly yours,

INDIGO SECURITIES LLC

By:  /s/ Eric Brachfeld
Print Name:  Eric Brachfeld
Title:  Managing Partner

ACCEPTED AS OF THE DATE FIRST WRITTEN ABOVE:

ELITE PHARMACEUTICALS, INC.

By:  /s/ Bernard Berk
Print Name: Bernard Berk
Title:  CEO