CONFIDENTIAL TREATMENT REDACTED VERSION

 

                                                          CONFIDENTIAL TREATMENT

                                                                REDACTED VERSION

 

PRODUCT DEVELOPMENT AND   COMERCIALIZATION   AGREEMENT (together with all exhibits

and schedules,   the   "AGREEMENT"),   made as of this 21th day of June,   2005 (the

"EFFECTIVE   DATE"),   by   and   between   ELITE   LABORATORIES,    INC.,   a   Delaware

corporation   having   its   principal   place of   business   at 165   Ludlow   Avenue,

Northvale,    NJ   07657   USA,   and   ELITE    PHARMACEUTICALS,    INC.,   a   Delaware

corporation,   having its   principal   place of   business   at 165   Ludlow   Avenue,

Northvale, NJ 07657 US (jointly and severally "ELITE") and   IntelliPharmaCeutics

Corp., a Nova Scotia   corporation,   having its principal place of business at 30

Worcester Road, Toronto Ontario, Canada M9W 5X2 ("IPC", and together with ELITE,

the "PARTIES" and each individually, a "PARTY").

 

                                    RECITALS:

 

         WHEREAS,    IPC    and    ELITE    specialize    in   the    development    and

commercialization   of time   release and other   technologies   for   pharmaceutical

providers;

 

         WHEREAS,   IPC is the owner of   Know-How   (as   defined   below) and other

proprietary technology relative to the Product (as defined below);

 

         WHEREAS,    ELITE   and   IPC   desire   to   work    together    to    develop,

commercialize and license for manufacture and sale, the Product;

 

         WHEREAS,   the   Parties   desire to set   forth   herein   their   respective

agreements with respect to the Product.

 

         NOW, THEREFORE,   in consideration of the recitals and the covenants and

conditions herein contained, ELITE and IPC agree as follows:

 

          1.       DEFINITIONS

 

     The following   terms as used in this Agreement   shall have the meanings set

forth in this Article:

 

                  1.1.   "AFFILIATE"   shall mean, as to either Party,   any Person

which owns or controls or which is owned or controlled by or the common   control

with such Party to the extent of at least fifty   percent   (50%) of the equity or

voting power of the owned or controlled entity.

 

                  1.2.   "ANDA"   shall   have the   meaning   set   forth in   Section

3.2(b).

 

                  1.3.   "CFR" shall mean the Code of Federal Regulations, as may

be amended from time to time.

 

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                  1.4.   "CONFIDENTIAL   INFORMATION"   shall mean any   information

pertaining to the Product or the Study from time to time   communicated   by or on

behalf   of   either   Party   or the   other or   developed   pursuant   to the   Study,

including,    without   limitation,    trade   secrets,   Know-How,   pricing,   costs,

suppliers,    Licensees,    customer   information,    patent   rights,    scientific,

technical, commercial and medical product development,   product formulations and

technical   specifications   including, but not limited to the Product, methods of

analysis and testing,   manufacturing   methods,   processes and production,   batch

records,    contractual   arrangements,    results,    discoveries   and   inventions,

procedures   and forms,   and all   information   related to the   Studies   including

without limitation, the Protocol, whether of a written, oral or visual nature.

 

                  1.5.   "COMMERCIALIZATION",         "COMMERCIALIZING",          or

"COMMERCIALIZE"   shall mean all activities   relating to manufacture,   promotion,

distribution, marketing and sale of the Product in the Territory.

 

                  1.6.   "COMMITTEE"   shall have the meaning set forth in Section

2.1 hereof.

 

                   1.7.   "CRO" shall have the meaning set forth in Section 3.2(f)

hereof.

 

                  1.8.   "DEVELOPMENT   PLAN" shall mean the   Product   Development

Activity Schedule annexed hereto as Exhibit A.

 

                  1.9.   "FDA" shall mean the U.S. Food and Drug Administration.

 

                  1.10. "IPC   INTELLECTUAL    PROPERTY   RIGHTS"   shall   have   the

meaning set forth in Section 5.2 hereof.

 

                  1.11. "KNOW-HOW" shall mean all technology, data, information,

formulations,   technical   specifications,   processes   and methods   necessary   or

useful   in the   manufacturing,   production,   testing   or   registration   of   drug

products, including but not limited to, the Product.

 

                  1.12.   "LICENSEE"   shall mean any Person   that holds a license

approved by the Parties and granted by the Parties to Commercialize   the Product

in the Territory pursuant to a License Agreement.

 

                  1.13. "LIEN" shall mean any lien, pledge,   mortgage,   security

interest,   claim, lease, charge,   option, right of first refusal or first offer,

easement,   transfer   restriction,   voting   requirement or any other encumbrance,

restriction or limitation.

 

                  1.14.   "LICENSE AGREEMENT" shall have the meaning set forth in

Section 6.1 hereof.

 

                  1.15. "MARKETING   AUTHORIZATION" shall mean the final approval

of all regulatory   authorities necessary to market the Product in the Territory,

including   as   applicable   pricing   and   reimbursement   approval   and all   other

approvals required in the Territory for the marketing,   distribution and sale of

the Product in the normal course of business.

 

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                  1.16. "PERSON"    shall   mean   any    individual,    partnership,

limited-liability company, corporation, joint venture, trust, association or any

other entity, domestic or foreign.

 

                  1.17. "PRODUCT"   shall   mean [*] generic   [*] delayed   release

capsules, [*], or either of these.

 

                   1.18. "PROTOCOL" shall   mean the protocol   developed by IPC in

connection   with the   Studies   to be   conducted   for,   and as agreed to by,   the

Parties.

 

                  1.19. "REGULATORY   FILING" shall have the meaning set forth in

Section 3.2(h) hereof.

 

                  1.20. "REPRESENTATIVE"   shall   have the   meaning   set forth in

Section 2.1 hereof.

 

                  1.21. "STUDIES"   shall   mean   the   clinical   trials   needed to

qualify the Product for an ANDA.

 

                  1.22. "TERRITORY"   shall   mean   the   United    States   and   its

territories, Canada and Mexico.

 

          2.       DEVELOPMENT AND COMERCIALIZATION COMMITTEES

 

                  2.1.   DEVELOPMENT   COMMITTEE   Within   ten (10) days   after the

Effective   Date,   ELITE and IPC shall   establish a   Development   Committee   (the

"D-COMMITTEE")   comprised of not less than two, and not more than three, persons

("Representatives")   selected by each Party.   ELITE and IPC shall each designate

an equal number of   Representatives   to the D-Committee,   with each Party having

the right to increase the number of   Representatives   at any time to the maximum

of three upon   written   notice to the other   Party;   PROVIDED,   HOWEVER,   in any

event,   IPC and ELITE shall   retain an equal   number of   Representatives   on the

Committee and equal voting rights.   The   D-Committee   shall carry out the duties

set forth below in Section 2.4.

 

                  2.2.   The   first   meeting   of the   D-Committee   shall   be held

within   fifteen (15) days from the Effective   Date, at which time the procedures

of the D-Committee may be established. Thereafter, the D-Committee shall meet on

such   schedule   as   deemed   appropriate   by the   Representatives,   but not   less

frequently   than   each   calendar   quarter,   with   any one   Representative   being

empowered   to call a meeting   of the   D-Committee   upon at least   five (5) days'

notice (which notice shall include a detailed description of all matters to come

before the D-Committee at such meeting for consideration or action).

 

                  2.3. At   meetings,   each Party shall have the right to provide

information for consideration and the D-Committee shall consider all such input.

All   decisions   by the   D-Committee   shall   be   made   by   unanimous   vote of its

Representatives. For greater certainty, a vote is unanimous if, and only if, all

of the   Parties'   Representatives   in   actual   attendance   at any such   meeting,

irrespective   of the Party   they   represent,   vote for the same   outcome   of any

decision to be taken. A quorum required for any action by the D-Committee   shall

consist   of at   least   one   ELITE   Representative   and one   IPC   Representative.

Participation at a meeting may be in person,

 

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by telephone conference call or by video conference, so long as all participants

can hear and be heard by one another at all times throughout the meeting. If the

meeting is in person, it shall be held alternately at ELITE's and IPC's offices,

unless otherwise agreed by the Representatives.   All Representatives   serving on

the   D-Committee not in attendance   shall be notified in writing   immediately of

any action taken or approved by the D-Committee.

 

                  2.4.   The duties of the D-Committee shall be to:

 

                   (1)    keep the Parties apprised of any development issues with

respect to the Product and effect a plan of action to resolve same;

 

                  (2)    monitor the   performance and progress of the Development

Plan;

 

                  (3)    such other matters relating to sub-paragraphs (1)and (2)

above as may be necessary or appropriate to consider.

 

                  2.5.   If the D-Committee cannot resolve any dispute within its

purview   after   fifteen   (15) days or such other   period as may be agreed by the

D-Committee, the dispute will be referred to a designated senior officer of each

of ELITE and IPC, and thereafter,   in the event of continued   deadlock,   will be

resolved pursuant to the deadlock provisions set forth in Section 14.

 

                   2.6.   COMMERCIALIZATION    COMMITTEE    At   such    time   as   the

D-Committee so   recommends,   ELITE and IPC shall   establish a   Commercialization

Committee (the "C-COMMITTEE")   comprised of not less than two, and not more than

three,   Representatives   selected   by   each   Party.   ELITE   and IPC   shall   each

designate an equal number of Representatives to the C-Committee, with each Party

having the right to increase   the number of   Representatives   at any time to the

maximum of three upon written notice to the other Party;   PROVIDED,   HOWEVER, in

any event, IPC and ELITE shall retain an equal number of   Representatives on the

C-Committee and equal voting rights.   The C-Committee shall carry out the duties

set forth below in Section 2.9.

 

                   2.7.   The   first   meeting   of the   C-Committee   shall   be held

within fifteen (15) days from the date of   recommendation   for its establishment

by the   D-Committee,   at which time the   procedures   of the   C-Committee   may be

established.   Thereafter,   the C-Committee shall meet on such schedule as deemed

appropriate by the   Representatives,   but not less frequently than each calendar

quarter,   with any one   Representative   being empowered to call a meeting of the

C-Committee   upon at least five (5) days' notice   (which   notice shall include a

detailed   description   of all   matters to come   before the   C-Committee   at such

meeting   for    consideration    or   action).    Nothing    herein    precludes    any

Representative   for   either   the   D-Committee   or the   C-Committee   from being a

Representative of the other or both committees. Where practical, the D-Committee

and the C-Committee will hold their meetings concurrently.

 

                  2.8.   At meetings,   each Party shall have the right to provide

information for consideration and the C-Committee shall consider all such input.

All   decisions   by the   C-Committee   shall   be   made   by   unanimous   vote of its

Representatives. For greater certainty, a vote is unanimous if, and only if, all

of the   Parties'   Representatives   in   actual   attendance   at any such   meeting,

irrespective   of the Party   they   represent,   vote for the same   outcome   of any

decision to be

 

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taken. A quorum required for any action by the   C-Committee   shall consist of at

least one ELITE   Representative and one IPC   Representative.   Participation at a

meeting may be in person,   by telephone   conference call or by video conference,

so long as all   participants   can hear and be heard by one   another at all times

throughout   the   meeting.   If   the   meeting   is in   person,   it   shall   be   held

alternately   at   ELITE's   and   IPC's   offices,   unless   otherwise   agreed by the

Representatives.   All Representatives of the C-Committee not in attendance shall

be   notified   in writing   immediately   of any action   taken or   approved   by the

C-Committee.

 

                  2.9.   The duties of the C- Committee shall be to:

 

                  (1)    pursue   and    consider    license    agreements    for   the

Commercialization of the Product in the Territory,   or in any part thereof, with

any potential   Licensee   suggested for consideration by either Elite or IPC. The

criteria which the C-Committee   shall take into account in the   consideration of

any   such   license   agreements   shall   include,   but are   not   limited   to,   the

maximization   of   market   penetration   and   revenues   for   the   Product   in   the

Territory, or in any part thereof; and

 

                  (2)    such other   matters   relating to paragraph   (1) above as

may be necessary or appropriate to consider.

 

                  2.10. If the C-Committee cannot resolve any dispute within its

purview   after   fifteen   (15) days or such other   period as may be agreed by the

C-Committee, the dispute will be referred to a designated senior officer of each

of ELITE and IPC, and thereafter,   in the event of continued   deadlock,   will be

resolved pursuant to the deadlock provisions set forth in Section 14.

 

         3.        RESPONSIBILITIES OF THE PARTIES

 

                   3.1.   The Development   Plan, with milestones   listed,   setting

out the specific responsibilities of each of ELITE and IPC that will be required

in order to   complete   development   of the   Product,   and to   secure   regulatory

approval   necessary to the manufacture and sale of the Product in the Territory,

is annexed   hereto as EXHIBIT A. Each of the   Parties   agrees to use   reasonable

efforts to perform each of the milestone   activities required to be performed by

such Party on or before the dates   required   for   performance   of such   activity

under the   Development   Plan.   Subject to all the terms and   conditions   of this

Agreement,   including   but not   limited to the   provisions   of Section 5, and in

order to achieve the milestones set forth in the Development Plan, IPC and ELITE

hereby agree to conduct and carry out the   activities   set forth in Section 3.2,

in the case of IPC and in Section 3.3, in the case of Elite.

 

                  3.2.   IPC   hereby    represents    and   warrants    that   it   has

completed,   or agrees that it will complete in accordance   with the   Development

Plan, certain matters as follows:

 

                  (a)    IPC   has   developed and   validated   all    pharmaceutical

analytical   methods   necessary   and   sufficient   for the   analysis   of the   drug

substance,   impurities, and degradation products, including stability indicating

methods,   and has prepared or will prepare all necessary   written   documentation

and reports in relation to these methods;

 

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                  (b)    IPC   has   developed formulations   and   processes for the

manufacture   of the Product as required   for pilot   clinical   studies.   IPC will

transfer the technology in relation to the formulations and the processes to the

Elite facility during the scale-up process at the Elite facility,   and will make

such   adjustments and   optimizations   of such   formulations and processes during

such scale-up and during the pivotal   clinical   studies phase of the development

program, with a view to filing an Abbreviated New Drug Application ("ANDA") with

the FDA with respect to the Product;

 

                  (c)    IPC has managed and   overseen the design and the conduct

of successful pilot clinical studies on the Product;

 

                   (d)    IPC will transfer pharmaceutical   analytical methods and

operating   procedures   relating to the Product to the ELITE   facility,   and will

provide all reasonable technical and documentary   assistance in the transfer and

revalidation process of such methods;

 

                  (e)    IPC   will   provide   on-site   assistance   and   sufficient

information to designated   ELITE   personnel to allow ELITE personnel to scale up

the   process   developed   by IPC   and to   manufacture   Product   batches   for   the

additional pilot studies,   if any, and the pivotal clinical studies at the ELITE

facility.   IPC personnel   will be present at the Elite facility and, the Parties

agree, will take an active role in the manufacture of such product batches;

 

                   (f)    IPC   (together   with   ELITE) will manage and oversee the

design and the conduct of additional pilot clinical studies, if any, and pivotal

clinical studies for the Products,   such studies to be done at the facilities of

such third party contract research   organization ("CRO") as may be acceptable to

both IPC and ELITE;

 

                  (g)    IPC will   prepare   and   file,   in the name of IPC,   such

patent   application(s)   on the   Product   as   may be   possible,   based   on   IPC's

intellectual property, and take all appropriate steps to receive a grant of such

patent(s) and maintain such patent(s) if granted; and

 

                  (h)    IPC   shall be   responsible   for the   preparation   of all

regulatory   filings   (which   shall be filed in IPC's sole name),   including   all

clinical    investigational    new   drug    applications   in   connection   with   the

applications for regulatory approval for the Product in each jurisdiction of the

Territory (each a "REGULATORY FILING"), all as required under applicable laws of

the Territory.

 

                  3.3.   ELITE hereby   agrees that it will complete in accordance

with the Development Plan, certain matters as follows

 

                  (a)    ELITE will conduct all work reasonably necessary for the

transfer    of    fully    validated    pharmaceutical    analytical    methods    (and

implementation   thereof) and operating   procedures   transferred   from IPC to the

ELITE   facility   for the   manufacture   and   release of Product   batches   for the

Studies;

 

                   (b)    ELITE   will   manufacture   the   Product   batches   for the

Studies at its premises (whereas, commercial manufacturing shall be as set forth

in Section 6.2);

 

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                  (c)    ELITE   will   be   responsible    for   conducting   the   CMC

(chemistry, manufacturing and controls) activities including production, quality

controls,   and   stability   studies with respect to the Product   (with input from

IPC, if necessary);

 

                  (d)    ELITE   (together   with IPC) will   manage and oversee the

design and the conduct of additional   pilot   clinical   studies,   if any, and the

pivotal   clinical   studies   for   the   Product,   such   studies   to be done at the

facilities of such third party CRO as may be acceptable to both Parties;

 

                  (e)    ELITE will   oversee the   packaging   and   labeling of the

Product at a mutually   agreed   upon   packaging   facility   for the purpose of the

pivotal clinical studies and the stability studies;

 

                   (f)    ELITE   will    provide   to   IPC,    for   the   purposes   of

regulatory   filing,   all necessary   documentation   and reports in respect of the

manufacture,   release   and   packaging   of the   Product   batches   for the pivotal

clinical studies and stability studies; and

 

                  (g)    ELITE   will    provide   to   IPC,    for   the   purposes   of

regulatory filing, all other reasonably   necessary data, results,   documents and

documentary support.

 

                  3.4.   The Parties shall jointly take the following actions:

 

                  (a)    The Parties shall agree, as required, as to the identity

of the Party best able to prepare any aspect of any regulatory   filing, and each

Party   will   co-operate   with the other to   provide   such   assistance   as may be

requested   or   necessary   to complete   such   regulatory   filing at the   earliest

opportunity.

 

                  3.5.   COSTS OF PERFORMING HEREUNDER.

 

                  (a)    IPC   alone    will   bear   the   costs   for   its   areas   of

responsibilities as set forth in Section 3.2 and ELITE alone will bear the costs

for its areas of responsibilities as set forth in Section 3.3;

 

                  (b)    IPC and ELITE will share [*] the following costs:

 

                           (i)   the CRO   and   other   third   party   costs   of all

clinical studies   (including pilot studies already   completed or to be conducted

after   the date   hereof),   all   pivotal   studies   and all   bio-analytics   as may

reasonably be required; and

 

                           (ii) the cost of all   regulatory   filing fees for the

regulatory   applications to the FDA or to such other   regulatory   authorities to

whom applications are made.

 

                  (c)    It is the   intention   of the Parties   that a   commercial

Licensee or Licensees should bear all litigation costs in relation to regulatory

filing   or   defense   of   the   Product    arising   after   filing   with   regulatory

authorities.   To the extent that such costs, as may arise after the date of this

Agreement and before or after filing,   are not borne by such Licensee(s),   ELITE

and IPC will

 

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share [*] in the costs of such   legal   defense   of the   Product   and/or   defense

against any litigation against the Parties in respect of the Product.

 

                  3.6.   STANDARD    OF    PERFORMANCE.    The    Parties    must   use

reasonable,   timely efforts to fulfill their respective obligations set forth in

this Section 3 hereof and elsewhere in this Agreement to pursue the   development

and    Commercialization   of   the   Products   in   accordance   with   the   estimated

timetables as set forth in the   Development   Plan. A Party's   failure to fulfill

its   obligations   shall provide the other Party with the right to terminate this

Agreement in accordance with the provisions of Section 13 hereof.

 

                  3.7.   COOPERATION.   Each Party shall use reasonable efforts to

cooperate   with the   other   Party in   connection   with the   preparation   of each

regulatory filing relating to the Product.   ELITE shall have the right to review

and   comment   upon   any and all   prepared   applications   and   filings   prior   to

submission to the relevant   governmental   authorities.   ELITE shall   manufacture

bio-batches as required for submission purposes.

 

          4.        CLINICAL STUDIES

 

                   4.1. IPC and ELITE shall   jointly   determine the identity of,

and thereafter   engage,   a reputable third party to conduct the clinical studies

for the Product in accordance with the Development Plan (the "STUDIES") and such

third party shall be   contractually   bound to fulfill its obligations to conduct

such Studies in accordance   with 21 CFR ss.312.52 and all applicable   laws. Each

of IPC and ELITE agrees that, during the Term (and any Renewal Term), except for

the Studies   contemplated   hereunder,   neither it nor any of its Affiliates will

conduct   clinical   studies   for any other   generic   version of [*],   whether for

itself or any third party.

 

                  4.2.   ELITE and IPC shall   each have the right to   discontinue

the Studies at any time prior to   completion   of such Studies upon 3 days' prior

written   notice   to the   other   Party,   if   ELITE   or IPC,   as the   case may be,

reasonably believes that any serious adverse clinical event may arise.

 

          5.       PATENT   PROSECUTION,   MAINTENANCE   AND   DEFENSE;   OWNERSHIP OF

INTELLECTUAL PROPERTY

 

                  5.1.   PATENTS.   During the Term (including all Renewal Terms),

IPC shall have the sole and exclusive   right to file and   obligation to maintain

all patent rights   relating to the Product   throughout   the Territory and shall,

subject to the   provisions   set forth   herein,   use   reasonable   efforts to file

patent applications to protect the Product.

 

                  5.2.   INTELLECTUAL PROPERTY. All IPC proprietary   information,

Know-How,   materials,   methods and technology   related to the Products including

without    limitation,    manufacturing    information    and   any   related    patent

applications and patents owned or controlled by IPC to the extent they cover the

Products or any such information,   know-how,   materials or technology as applied

to the   Product   ("IPC   INTELLECTUAL   PROPERTY   RIGHTS")   are and shall,   in all

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

actions, and

 

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execute and deliver such documents,   as may be reasonably requested from time to

time by IPC at IPC's expense, to perfect the IPC Intellectual Property Rights.

 

                    5.3.   IDENTIFICATION   OF IPC TECHNOLOGY.   At such time as the

Product is commercialized,   the Parties a