INDENTURE

Indenture Agreement

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ELITE PHARMACEUTICALS INC | NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY | THE BANK OF NEW YORK,

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Title: INDENTURE
Governing Law: New Jersey Date: 9/6/2005
Industry: Biotechnology and Drugs Sector: Healthcare

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INDENTURE

BETWEEN

NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY

AND

THE BANK OF NEW YORK, AS TRUSTEE

DATED AS OF AUGUST 15, 2005

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TABLE OF CONTENTS

ARTICLE I

DEFINITIONS AND INTERPRETATIONS

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PAGE

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Section 1.01 Definitions................................................................5

ARTICLE II

AUTHORIZATION, TERMS AND EXECUTION OF BONDS

Section 2.01 Issuance of Bonds in One or More Series...................................11

Section 2.02 Particular Terms of the Initial Bonds.....................................11

Section 2.03 General Terms of Bonds....................................................11

Section 2.04 Execution of Bonds........................................................14

Section 2.05 Authentication of Bonds...................................................14

Section 2.06 Interchangeability of Bonds...............................................15

Section 2.07 Transfer and Registry of Bonds and Agency Therefor........................15

Section 2.08 Transfer of Bonds.........................................................15

Section 2.09 Ownership of Bonds and Effect of Registration.............................15

Section 2.10 Mutilated, Destroyed, Stolen or Lost Bonds................................15

Section 2.11 Regulations with Respect to Registration, Exchanges and Transfers.........16

Section 2.12 Cancellation and Destruction of Surrendered Bonds.........................16

ARTICLE III

AUTHENTICATION AND DELIVERY OF BONDS

Section 3.01 Authorization of Bonds....................................................17

Section 3.02 Issuance of Initial Bonds.................................................17

Section 3.03 Disposition of Proceeds of Bonds..........................................17

Section 3.04 Issuance of Additional Bonds..............................................17

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ARTICLE IV

CREATION OF FUNDS

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Section 4.01 Establishment of Funds and Accounts.......................................20

Section 4.02 Payments into the Bond Fund...............................................20

Section 4.03 Application of the Bond Fund..............................................20

Section 4.04 Moneys to be Held in Trust................................................21

Section 4.05 No Further Payments Needed................................................21

Section 4.06 Funds Held for Bonds......................................................21

Section 4.07 Rebate Fund...............................................................22

Section 4.08 Payments into the Project Fund; Disbursements.............................22

Section 4.09 Completion of the Project.................................................22

Section 4.10 Debt Service Reserve Fund.................................................23

ARTICLE V

INVESTMENT AND DEPOSIT OF MONIES

Section 5.01 Deposits..................................................................24

Section 5.02 Investments...............................................................24

ARTICLE VI

REDEMPTION OF BONDS

Section 6.01 Bonds Subject to Redemption...............................................26

Section 6.02 Bonds Subject to Redemption; Selection of Bonds to be

Called for Redemption.....................................................26

Section 6.03 Special Mandatory Redemption - Breach of Certain Public

Purpose Covenants........................................................27

Section 6.04 Procedure for Redemption .................................................28

Section 6.05 Payment of Redemption Price...............................................29

ARTICLE VII

COVENANTS OF THE AUTHORITY

Section 7.01 Payment of Principal of and Interest on Bonds.............................30

Section 7.02 Corporate Existence; Compliance with Laws.................................30

Section 7.03 Enforcement of Agreement; Notice of Default...............................30

Section 7.04 Further Assurances........................................................30

Section 7.05 Financing Statements......................................................30

Section 7.06 Intentionally Omitted.....................................................31

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Section 7.07 Creation of Liens.........................................................31

Section 7.08 Exclusion of Interest on the Bonds from Gross Income......................31

Section 7.09 Continuing Disclosure.....................................................31

Section 7.10 Event of Default..........................................................31

Section 7.11 Immunity of Authority.....................................................31

Section 7.12 Authority and Trustee Entitled to Indemnity...............................32

Section 7.13 Neither Authority Nor Trustee Responsible for Insurance,

Taxes, Execution of Indenture, Acts of the Authority or Application

of Moneys Applied in Accordance with this Indenture.......................32

Section 7.14 Authority and Trustee May Rely on Certificates............................33

Section 7.15 Further Assurances........................................................33

ARTICLE VIII

DEFAULTS AND REMEDIES

Section 8.01 Events of Default.........................................................34

Section 8.02 Enforcement of Agreement..................................................35

Section 8.03 Judicial Proceedings by Trustee...........................................35

Section 8.04 Discontinuance or Abandonment of Proceedings..............................36

Section 8.05 Bondholders May Direct Proceedings........................................36

Section 8.06 Limitations on Actions by Bondholders.....................................36

Section 8.07 Trustee May Enforce Rights Without Possession of Bonds....................37

Section 8.08 Remedies Not Exclusive....................................................37

Section 8.09 Delays and Omissions Not to Impair Rights.................................37

Section 8.10 Application of Moneys in Event of Default.................................37

Section 8.11 Trustee's Right to Receiver; Compliance with Act..........................38

Section 8.12 Trustee and Bondholders Entitled to All Remedies Under Act................38

ARTICLE IX

THE TRUSTEE

Section 9.01 Acceptance of Trust.......................................................39

Section 9.02 No Responsibility, Etc....................................................39

Section 9.03 Trustee May Act Through Agents; Answerable Only for Willful

Misconduct or Negligence..................................................39

Section 9.04 Compensation..............................................................39

Section 9.05 Notice of Default; Right to Investigate...................................39

Section 9.06 Obligation to Act on Defaults.............................................40

Section 9.07 Reliance on Requisition, Etc..............................................40

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Section 9.08 Trustee May Deal in Bonds; Other Financial Transactions...................40

Section 9.09 No Duty to Renew Insurance................................................40

Section 9.10 Intentionally Omitted.....................................................40

Section 9.11 Resignation of Trustee....................................................40

Section 9.12 Removal of Trustee........................................................40

Section 9.13 Appointment of Successor Trustee..........................................41

Section 9.14 Qualification of Successor................................................41

Section 9.15 Instruments of Succession.................................................41

Section 9.16 Merger of Trustee.........................................................41

ARTICLE X

EXECUTION OF INSTRUMENTS BY BONDHOLDERS

AND PROOF OF OWNERSHIP OF BONDS

Section 10.01 Ownership of Bonds......................................................43

ARTICLE XI

AMENDMENTS AND SUPPLEMENTS

Section 11.01 Amendments and Supplements Without Bondholders' Consent.................44

Section 11.02 Amendments with Bondholders' Consent....................................44

Section 11.03 Company Consent Required................................................44

Section 11.04 Amendment of Agreement..................................................44

Section 11.05 Trustee Authorized to Join in Amendments and Supplements;

Reliance on Counsel.....................................................45

ARTICLE XII

DEFEASANCE

Section 12.01 Defeasance..............................................................46

ARTICLE XIII

MISCELLANEOUS

Section 13.01 Dissolution.............................................................47

Section 13.02 No Rights Conferred on Others...........................................47

Section 13.03 Deposit of Funds for Payment of Bonds...................................47

Section 13.04 Severability of Invalid Provisions......................................47

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Section 13.05 No Personal Recourse....................................................48

Section 13.06 Notice..................................................................48

Section 13.07 Execution in Several Counterparts.......................................48

Section 13.08 Laws Governing Indenture................................................49

Section 13.09 Successors and Assigns..................................................49

Section 13.10 Headings for Convenience Only...........................................49

Section 13.11 Credits on the Notes....................................................49

Section 13.12 Payments Due on Saturdays, Sundays and Holidays.........................49

Section 13.13 Form of Bonds...........................................................49

EXHIBIT A - FORM OF SERIES A BOND

EXHIBIT B - FORM OF SERIES B BOND

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<PAGE>

INDENTURE

THIS INDENTURE, dated as of August 15, 2005, between the NEW JERSEY

ECONOMIC DEVELOPMENT AUTHORITY (the "Authority"), a public body corporate and

politic constituting an instrumentality of the State of New Jersey, and THE BANK

OF NEW YORK, as Trustee (the "Trustee"), a state banking corporation organized

and existing under the laws of the State of New York, with fiduciary and

corporate trust powers in New Jersey, having a corporate trust office and place

of business in West Paterson, New Jersey.

W I T N E S S E T H:

WHEREAS, The New Jersey Economic Development Authority Act,

constituting Chapter 80 of the Pamphlet Laws of 1974 of the State of New Jersey

(the "State"), approved on August 7, 1974 as amended and supplemented, (the

"Act") declares it to be in the public interest and to be the policy of the

State to foster and promote the economy of the State, increase opportunities for

gainful employment and improve living conditions, assist in the economic

development or redevelopment of political subdivisions within the State, and

otherwise contribute to the prosperity, health and general welfare of the State

and its inhabitants by inducing manufacturing, industrial, commercial,

recreational, retail, service and other employment promoting enterprises by

making available financial assistance, to locate, remain or expand within the

State; and

WHEREAS, the Authority was created to aid in remedying the aforesaid

conditions and further to implement the purposes of the Act, and the Legislature

has determined and declared as a matter of express legislative determination

that the authority and powers conferred upon the Authority under the Act and the

expenditure of moneys pursuant thereto constitutes a serving of a valid public

purpose and that the enactment of the provisions set forth in the Act is in the

public interest and for the public benefit and good; and

WHEREAS, the Authority, to accomplish the purposes of the Act, is

empowered to extend credit to such employment promoting enterprises in the name

of the Authority, on such terms and conditions and in such manner as it may deem

proper for such consideration and upon such terms and conditions as the

Authority may determine to be reasonable; and

WHEREAS, on September 2, 1999, the Authority issued its Economic

Development Bonds (Elite Pharmaceuticals, Inc. - 1999 Project) in the aggregate

principal amount of $3,000,000 (the "1999 Bonds") for the purpose of the

acquisition of land and an existing approximately 15,000 sq. ft. building and

the acquisition of equipment, to be used in the manufacturing of pharmaceutical

products to be located in the municipality of Northvale, County of Bergen, State

of New Jersey (the "Project Site"); and

WHEREAS, Elite Pharmaceuticals, Inc. (the "Company") has requested, and

the Authority has determined to issue, its Economic Development Bonds

<PAGE>

(Elite Pharmaceuticals, Inc. - 2005 Project) in the aggregate principal amount

of $3,660,000 (the "Series A Bonds") for the purpose of currently refunding and

redeeming the 1999 Bonds and to finance the acquisition of additional equipment

to be used in the manufacturing of pharmaceutical products at the Project Site

(the "Project") and its Economic Development Bonds (Elite Pharmaceuticals, Inc.

- 2005 Project), Federally Taxable Series B, in the aggregate principal amount

of $495,000 (the "Series B Bonds"; together with the Series A Bonds, the

"Initial Bonds") for the purpose of refinancing the purchase of equipment used

at the Project Site and to finance costs of issuance incurred in connection with

the issuance of the Initial Bonds, all pursuant to a Loan Agreement by and

between the Authority and the Company dated as of August 15, 2005 (the

"Agreement"); and

WHEREAS, the Authority at a meeting thereof duly convened and held on

July 12, 2005, has duly authorized the execution and delivery of this Indenture

and the issuance thereunder of the Initial Bonds upon and subject to the terms

and conditions hereinafter set forth; and

WHEREAS, all acts and things have been done and performed, which are

necessary to make the Initial Bonds, when executed and issued by the Authority,

authenticated by the Trustee and delivered, the valid and binding legal

obligations of the Authority in accordance with their terms and to make this

Indenture a valid and binding agreement for the security of the Bonds

authenticated and delivered under this Indenture.

NOW THEREFORE, THIS INDENTURE WITNESSETH: That, to provide for the

payment of principal or Redemption Price, as the case may be and interest in

respect of the Bonds, issued and outstanding under this Indenture, together with

interest thereon, the rights of the bondholders and the performance of the

covenants contained in said Bonds and herein, the Authority has caused the

Company to deliver the Agreement, the Mortgage, the Assignment of Leases and the

Notes (as hereinafter defined) and as otherwise set forth in the Agreement and

does hereby sell, assign, transfer, set over and pledge unto the Trustee, its

successors in the trust and its assigns forever, all the right, title and

interest of the Authority in and to, and remedies under, the Notes, the

Mortgage, the Assignment of Leases and the Agreement and all the right, title

and interest of the Authority in and to the Revenues, the Collateral, the

Project, the Project Fund, the Bond Fund and all other funds under this

Indenture (other than the Rebate Fund) (as such terms are hereinafter defined)

(hereafter referred to as the "Trust Estate").

TO HAVE AND TO HOLD all and singular said Trust Estate; granted,

bargained, sold, assigned, transferred, conveyed, mortgaged, pledged, aliened,

remised, released, confirmed and set over by the Authority as aforesaid or

intended so to be, unto the said Trustee, its successors and assigns, forever.

IN TRUST, NEVERTHELESS, under and subject to the terms and conditions

hereinafter set forth, for the equal benefit, protection and security of the

Holders of any and all of the Bonds, all of which regardless

<PAGE>

of the time or times of their issuance or maturity, shall be of equal rank,

without preference, priority or distinction of any of the Bonds over any other

thereof, except as otherwise provided in or pursuant to this Indenture, and for

securing the observance and performance of all the conditions, covenants,

promises, stipulations, agreements and terms and provisions of this Indenture

and the uses and purposes herein expressed and declared.

EXPRESSLY RESERVING to the Authority the concurrent right:

(a) to receive notices under this Indenture and the Agreement;

(b) to consent to any amendments, modifications or supplements

to the Agreement and this Indenture;

Article VII of the Agreement all provisions or covenants in the Agreement under

and in accordance with the terms of the following sections:

Section 3.02 relating to disbursements from the Project Fund;

Section 3.03 relating to the limitations of the Authority's

liability;

Section 4.01 relating to certain representations and

warranties of the Company;

Section 4.11 relating to untrue statements of the Company;

Section 6.01 relating to the preservation of property and the

Collateral;

Section 6.02 relating to insurance;

Section 6.04 relating to the Project;

Section 6.05 relating to compliance with the Code and

arbitrage regulations;

Section 6.07 relating to compliance with the Department of

Environmental Protection;

Section 6.08 relating to financial statements;

Section 6.10 relating to indemnification;

Section 6.12 relating to reporting the number of employees;

Section 6.14 relating to inspection of the Project;

<PAGE>

Section 6.20 relating to a Project sign;

Section 6.21 relating to brokerage fees;

Section 6.24 relating to compliance with the Indenture;

Section 7.05 relating to the payment of attorneys' fees and

expenses;

Section 7.07 relating to certain remedies of the Authority;

Section 8.03 relating to the payment of fees and expenses;

Section 8.06 relating to modifications, waivers and

amendments;

Section 8.08 relating to the Authority's assignment;

Section 8.09 relating to further assurances and corrective

instruments; and

Section 8.13 relating to the special, limited obligations of

the Authority;

(d) the concurrent right to receive any and all reports,

notices, surveys, certificates and evidences of performance which the Company

may be required to furnish pursuant to the terms of the Agreement and the right

to exercise any rights of inspection granted to it pursuant to the terms of the

Agreement, whether or not the Trustee shall have exercised or shall have

purported to exercise such rights and remedies, without limiting the obligation

of the Trustee to do so;

(e) to receive indemnification and to be held harmless by the

Company;

(f) to redeem or cancel the Bonds in accordance with the

Agreement and this Indenture;

whether or not the Trustee shall have exercised or shall have purported to

exercise such rights and remedies, without limiting the obligation of the

Trustee to do so (the foregoing rights being referred to as the "Reserved

Rights").

<PAGE>

ARTICLE I

DEFINITIONS AND INTERPRETATIONS

SECTION 1.01. DEFINITIONS. As used or referred to in this Indenture,

unless a different meaning clearly appears from the context:

"Act" shall have the meaning given in the recitals hereto;

"Additional Bonds" shall mean any series of Bonds issued pursuant to

Section 3.04 hereof subsequent to the Initial Bonds;

"Additional Notice" shall mean the notice of redemption required by

Section 6.03;

"Agreement" shall have such meaning given in the recitals hereto;

Articles and Sections mentioned by number are the respective Articles

and Sections of this Indenture so numbered;

"Assignment of Leases" means the assignment dated the Closing Date from

the Company to the Authority, which is made part of the record of proceedings

and assigning to the Authority the benefits of existing and future leases on the

Project;

"Authority" shall have the meaning given in the recitals hereto;

"Authorized Authority Representative" shall mean any individual or

individuals duly authorized by the Authority to act on its behalf;

"Authorized Denominations" means denominations of $5,000 or any

integral multiple thereof;

"Bond" or "Bonds" means any of the bonds of the Authority authenticated

and delivered under and pursuant to this Indenture, including the Initial Bonds

and Additional Bonds, if any. Such Bonds may be Taxable Bonds or Tax-exempt

Bonds;

"Bondholder" or the term "Holder" or any similar term, when used with

reference to a Bond or Bonds, means any person who shall be the registered owner

of any Bond or Bonds;

<PAGE>

"Bond Counsel" means McManimon & Scotland, L.L.C., or an attorney or

firm of attorneys of nationally recognized standing on the subject of municipal

bonds;

"Bond Fund" means the fund so designated which is established and

created by Section 4.01 hereof;

"Bond Year" shall have the same meaning as that in the Agreement;

"Certified Resolution" means a copy of one or more resolutions or

amending resolutions certified by the Secretary or Assistant Secretary of the

Authority under its seal to have been duly adopted by the Authority and to be in

effect on the date of such certification;

"Closing Date" means August 31, 2005;

"Collateral" shall mean the land, building, fixtures and other

facilities in which the Authority is granted a lien by the Mortgage, the lease

and revenues assigned by the Assignment of Leases, the assets subject to the

security interest created by the Security Agreement and the security interest

under Section 2.07 of the Agreement;

"Company" shall have the meaning given in the recitals hereto;

"Cost" or "Costs"shall have the same meaning as that in the Agreement;

"Counsel" means an attorney at law or law firm serving as counsel for

the Authority, the Trustee or the Company;

"Debt Service Reserve Fund" shall mean the Fund established by Section

4.10 hereof;

"Event of Default" means any of the events specified in Section 8.01

hereof to be an Event of Default;

"Government Obligations" means (a) direct obligations of the United

States for which its full faith and credit are pledged for the full and timely

payment thereof, (b) obligations of a person controlled or supervised by and

acting as an agency or instrumentality of the United States, the payment of

which is unconditionally guaranteed as a full faith and credit obligation of the

United States for the full and timely payment thereof or (c) securities or

receipts evidencing ownership interests in obligations or specified portions

(such as principal or interest) of obligations described in (a) or (b).

"Guarantor" shall mean Elite Laboratories, Inc. and any successor

guarantor of the Loans;

"Indenture" means this Trust Indenture as amended or supplemented at

the time in question;

<PAGE>

"Initial Bonds" shall have the meaning given in the recitals hereto;

"Interest Account" means the account so designated which is established

and created by Section 4.01 hereof;

"Interest Payment Date" means March 1 and September 1 of each Bond

Year, commencing March 1, 2006;

"Investment Obligations" means, to the extent permitted by law (i)

Government Obligations, (ii) obligations rated in one of the two highest rating

categories by Moody's Investors Service, Inc. or Standard & Poor's Rating Group,

a division of McGraw Hill, Inc., the interest on which is excludable from gross

income under Section 103 of the Code, (iii) money market funds investing

exclusively in the obligations listed in (i) or (ii) or repurchase agreements

secured by such obligations rated AAA or better which may include funds as to

which the Trustee or any affiliate of the Trustee provides and earns

compensation for managerial, investment and/or custodial services, (iv)

repurchase agreements secured exclusively by obligations listed in (i) or (ii),

(v) commercial paper of a quality rated either A-1 or P-1 by Standard & Poor's

Rating Group, a division of McGraw Hill, Inc. or Moody's Investors Service,

Inc., (vi) shares of an Investment Company, organized under the Investment

Company Act of 1940, as amended, including an Investment Company for which the

Trustee or any affiliate provides and is compensated for managerial, investment

and/or custodial services, which invests its assets substantially in obligations

of the type described in clauses (i) and (ii) or repurchase agreements secured

by such obligations rated AAA or better, (vii) bank deposits or certificates, if

such deposits or certificates are insured by FDIC or FSLIC, (viii) banker's

acceptances of any bank (including the Trustee) organized under the laws of the

State or the United States or any foreign bank having a branch organized and

existing under the laws of the State or of the State of New York rated A or

higher by Standard & Poor's Rating Group, a division of McGraw Hill, Inc. or

Moody's Investors Service, Inc., and (ix) guaranteed investment contracts (GICs)

rated BBB or higher by Standard & Poor's Rating Group, a division of McGraw

Hill, Inc. or Moody's Investors Service, Inc.;

"Loans" shall mean the Series A Loan and the Series B Loan;

"Majority of Owners" means collectively, the owners of more than fifty

percent (50%) of the Bonds Outstanding;

"Mortgage" shall mean the first lien mortgage on the Premises, subject

only to Permitted Encumbrances, which is made part of the record of proceedings,

executed by the Company, as Mortgagor and given to the Authority, as Mortgagee;

"Notes" shall mean the Series A Note and the Series B Note;

"1999 Bonds" shall have the meaning given in the recitals hereto;

<PAGE>

"Outstanding", when used with reference to Bonds and as of any

particular date, describes all Bonds theretofore and thereupon being

authenticated and delivered except (a) any Bond canceled by the Trustee at or

before said date, (b) any Bond for the payment or redemption of which cash,

equal to the principal amount or Redemption Price thereof, as the case may be,

with interest to the date of maturity or redemption date, shall have theretofore

been deposited with the Trustee in trust whether upon or prior to maturity or

the redemption date of such Bonds and, except in the case of a Bond to be paid

at maturity, of which notice of redemption shall have been given or provided for

in accordance with Article VI, and (c) any Bond in lieu of or in substitution

for which another Bond shall have been authenticated and delivered pursuant to

the provisions of this Indenture;

"Paying Agent" means any paying agent appointed pursuant to this

Indenture, and its successor or successors of any other corporation or

association which may at any time be substituted in its place pursuant to this

Indenture;

"Placement Agent" means Ryan Beck & Co., Shrewsbury, New Jersey;

"Premises" shall mean the premises and all improvements thereon located

in the municipality of Northvale, County of Bergen, in the State, as described

in Schedule A to the Mortgage;

"Principal Account" means the account so designated which is

established and created by Section 4.01 hereof;

"Principal Installment Date" means any date on which the principal of

any Bonds shall mature;

"Project" shall have the meaning given in the recitals hereto;

"Project Site" shall have the meaning given in the recitals hereto;

"Rebatable Arbitrage" shall have the meaning given to such term in the

Agreement;

"Rebate Fund" shall mean the fund so designated and established

pursuant to Section 4.07;

"Redemption Price", when used with respect to a Bond, means the

principal amount of such Bond plus the applicable premium, if any, and accrued

interest payable upon redemption thereof in the manner contemplated in

accordance with its terms pursuant to this Indenture;

"Reserved Rights" shall have the meaning given in the recitals hereto;

"Revenues" means (i) all amounts payable in respect of the Notes which

may in the future be delivered to the Trustee, (ii) investment income in respect

<PAGE>

of any money held by the Trustee, and (iii) any other amounts paid by the

Company to the Trustee pursuant to the Agreement (subject, however, to the

Reserved Rights of the Authority);

"Security Agreement" shall mean the Security Agreement dated as of

August 15, 2005 by and between the Guarantor and the Authority in which the

Guarantor grants a security interest in certain assets described therein;

"Series A Bonds" shall have the meaning given in the recitals hereto;

"Series A Loan" shall mean the loan from the Authority to the Company

of the proceeds of the Series A Bonds;

"Series A Note" shall mean the promissory note dated the Closing Date,

executed and delivered by the Company to the Authority evidencing the Series A

Loan;

"Series B Bonds" shall have the meaning given in the recitals hereto;

"Series B Loan" shall mean the loan from the Authority to the Company

of the proceeds of the Series B Bonds;

"Series B Note" shall mean the promissory note dated the Closing Date,

executed and delivered by the Company to the Authority evidencing the Series B

Loan;

"Significant Bondholder" means any bond fund or bondholder which owns,

manages, controls or the like more than One Million Dollars ($1,000,000) of

Bonds Outstanding;

"State" shall have the meaning given in the recitals hereto;

"Supplemental Indenture" means any Indenture amending, modifying or

supplementing this Indenture made, signed and becoming effective in accordance

with the terms of Article XI hereof;

"Taxable Bonds" shall mean Bonds, including the Series B Bonds, the

interest on which is includable in the gross income of the holders thereof for

federal income tax purposes;

"Tax-exempt Bonds" shall mean Bonds, including the Series A Bonds, the

interest on which is not includable in the gross income of the holders thereof

for federal income tax purposes;

"Trust Estate" shall have the meaning given in the recitals hereto;

"Trustee"shall have the meaning given in the recitals hereto;

<PAGE>

The words "hereof", "herein", "hereto", "hereby" and "hereunder"

(except in the form of Bonds) refer to this entire Indenture.

Terms defined in the Agreement are hereby incorporated herein by

reference as though set forth in full.

<PAGE>

ARTICLE II

AUTHORIZATION, TERMS AND EXECUTION OF BONDS

SECTION 2.01. ISSUANCE OF BONDS IN ONE OR MORE SERIES. The Bonds may,

at the election of the Authority, be issued in one or more series and, except as

hereinafter provided, shall be designated generally as "Economic Development

Bonds (Elite Pharmaceuticals, Inc. - 2005 Project)" with such further

appropriate particular designations added to or incorporated in such title for

the Bonds of any particular series as the Authority may determine. Each Bond

shall bear upon the face thereof the designation so selected for the series to

which it belongs.

SECTION 2.02. PARTICULAR TERMS OF THE INITIAL BONDS. There shall be

issued under and secured by this Indenture a series of Bonds for the purpose of

financing the Project to be designated "Economic Development Bonds (Elite

Pharmaceuticals, Inc. - 2005 Project), Series A" in the aggregate principal

amount of $3,660,000 and a series of Bonds for the purpose of refinancing the

purchase of equipment used at the Project Site and to finance costs of issuance

incurred in connection with the issuance of the Initial Bonds to be designated

"Economic Development Bonds (Elite Pharmaceuticals, Inc. - 2005 Project),

Federally Taxable Series B" in the aggregate principal amount of $495,000, and

shall contain substantially the terms recited in the form of the Bonds in

Section 13.13 hereof. The Initial Bonds shall provide that principal or

Redemption Price, and interest in respect thereof, shall be payable only out of

Revenues.

SECTION 2.03. GENERAL TERMS OF BONDS. Every Bond shall bear such

designation or title, including the words "Economic Development Bond" with a

series designation as may be fixed herein or by Supplemental Indenture prior to

its authentication on original issuance by the Trustee. Every Bond shall be

payable, with respect to principal or Redemption Price, and interest, in any

coin or currency of the United States of America which, at the respective dates

of payment thereof, is legal tender for payment of public and private debts.

Every Bond shall be issued as fully registered bonds in the form of a Bond or in

the form of book entry and payable to Cede & Co. or to a named person or

registered assigns, shall be substantially in the form as provided in this

Indenture, with such omissions, insertions and variations as are properly

required and as specified in a Supplemental Indenture. The Bonds shall be

authenticated on or after the date of this Indenture, but may be dated a date

preceding the date of this Indenture for the purposes of calculating accrued

interest and the interest payable on the Initial Interest Payment Date. Interest

on the Bonds shall be calculated on the basis of a 360-day year of twelve thirty

day months. Interest on each Initial Bond shall be payable from and after its

date first on March 1, 2006 and on March 1 and September 1 in each year

thereafter to any Holder of Bonds as of the close of business on the record date

next preceding such Interest Payment Date until the Authority's obligation with

respect to the payment of the principal sum thereof shall be paid. Payments of

principal, Redemption Price or interest due on the Bonds may

<PAGE>

also be payable by electronic funds transfer to any Holder of Bonds in the

aggregate principal amount of $1,000,000 or more; provided such Holder requests

such electronic funds transfer and delivers to the Trustee in writing, in the

case of an interest payment, not later than the close of business on the

December15 or June 15 (each a "Record Date") preceding such transfer or in the

case of a payment of principal or Redemption Price, and not later than the close

of business on June 15 preceding such transfer, the following information needed

to make such transfer: the name of the bank to receive such transfer, wiring

code of said bank, ABA number, account number of the Holder and name of a

contact person at the bank. Any interest on any Bond which is payable, but is

not punctually paid or provided for, on any Interest Payment Date (herein called

"Defaulted Interest") shall forthwith cease to be payable to the registered

owner on the relevant Record Date by virtue of having been such owner, and such

Defaulted Interest shall be paid to the registered owner in whose name the Bond

is registered at the close of business on a special Record Date (the "Special

Record Date") to be fixed by the Trustee, such Special Record Date to be not

more than fifteen (15) nor less than ten (10) days prior to the date of proposed

payment. The Trustee shall cause notice of the proposed payment of such

Defaulted Interest and the Special Record Date therefor to be mailed, first

class postage prepaid, to each Bondholder, at such Bondholder's address as it

appears in the Bond Register, not less than ten (10) days prior to such Special

Record Date.

All Initial Bonds shall each be of the minimum denomination of $5,000

or any integral multiple of $5,000 and shall each be in substantially the form

provided for in Section 13.13. The Bonds of any series may contain or have

endorsed thereon such provisions, specifications and descriptive words as are

(a) not inconsistent with the provisions of this Indenture, (b) necessary or

desirable to comply with custom or the rules of any securities exchange or

commission or brokerage board, and (c) authorized by a supplemental resolution

adopted by the Authority prior to the authentication and delivery thereof by the

Trustee. The Initial Bonds shall be dated August 15, 2005. Thereafter, each Bond

shall be dated as of the date six (6)months preceding the interest payment date

next following the date of delivery thereof by the Trustee, except that (a) if

such date of such delivery shall be an interest payment date, said Bond shall be

dated as of such date of delivery, or (b) if interest on such Bond shall not

have been paid in full in accordance with its terms, then, notwithstanding any

of the foregoing provisions of this Section, such Bond shall be dated as of the

date to which interest has been paid in full on such Bond. Temporary Bonds in

denominations specified by the Placement Agent are authorized to be issued,

authenticated and delivered to the Placement Agent thereof in lieu of and until

such time as Bonds in definitive form are available for authentication and

delivery. The Initial Bonds shall be in the principal amounts set forth below

and shall mature on the dates set forth below and shall bear interest at the

rate of interest set forth below.

<PAGE>

SERIES A BONDS:

MATURITY AMOUNT INTEREST RATE

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

September 1, 2030 $3,660,000 6.50%

The Series A Bonds are subject to the following sinking fund redemption

payments:

YEAR AMOUNT

---- ------

2006 $120,000

2007 125,000

2008 135,000

2009 140,000

2010 150,000

2011 165,000

2012 170,000

2013 185,000

2014 195,000

2015 210,000

2016 220,000

2017 85,000

2018 90,000

2019 95,000

2020 105,000

2021 110,000

2022 115,000

2023 125,000

2024 130,000

2025 140,000

2026 150,000

2027 160,000

2028 170,000

2029 180,000

2030* 190,000

*Final Maturity

SERIES B BONDS:

MATURITY AMOUNT INTEREST RATE

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

September 1, 2012 $495,000 9.00%

<PAGE>

The Series B Bonds are subject to the following sinking fund redemption

payments:

YEAR AMOUNT

---- ------

2006 $55,000

2007 60,000

2008 65,000

2009 70,000

2010 75,000

2011 80,000

2012* 90,000

*Final Maturity

In lieu of the mandatory sinking fund redemption of the Bonds in any

year, the Company may deliver to the Trustee for cancellation Bonds in an amount

up to but not exceeding the principal amount of Bonds scheduled for sinking fund

redemption in such year, a notice of such forthcoming delivery to be provided by

the Company to the Trustee in writing at least sixty (60) days prior to the

redemption date. The Trustee shall reduce the principal amount of such Bonds

subject to mandatory sinking fund redemption on the next succeeding redemption

date by the principal amount of the Bonds so presented for cancellation.

SECTION 2.04. EXECUTION OF BONDS. Each Bond shall be executed in the

name of the Authority by the manual or facsimile signature of its Chairman, Vice

Chairman, Chief Executive Officer or Chief Financial Officer and its corporate

seal shall be thereunto affixed, imprinted or otherwise reproduced and attested

by the manual or facsimile signature of the Secretary or Assistant Secretary. In

case any officer who shall have signed, sealed or attested any of the Bonds

shall cease to be such officer of the Authority before the Bonds so signed,

sealed or attested shall have been authenticated and delivered by the Trustee,

such Bonds may nevertheless be authenticated and delivered as herein provided as

if the person who so signed, sealed or attested such Bonds had not ceased to be

such officer. Any Bond may be signed, sealed or attested on behalf of the

Authority by any person who, at the date of such act, shall hold the proper

office, notwithstanding that at the date of such Bond such person may not have

held such office.

SECTION 2.05. AUTHENTICATION OF BONDS. The Bonds shall bear thereon a

certificate of authentication, substantially in the form set forth hereinafter

in this Indenture, duly executed by the Trustee. Only such Bonds shall be

entitled to any right or benefit under this Indenture. No Bond shall be valid or

obligatory for any purpose unless such certificate of authentication upon such

Bond shall have been duly executed by the Trustee, and such certificate of

authentication by the Trustee upon any Bond executed on behalf of the Authority

shall be conclusive and the only evidence that the Bond so authenticated has

been duly authenticated and delivered under this

<PAGE>

Indenture and that the holder thereof is entitled to the benefit of this

Indenture.

SECTION 2.06. INTERCHANGEABILITY OF BONDS. Bonds, upon surrender

thereof at the corporate trust office of the Trustee with a written instrument

or instruments of transfer satisfactory to the Trustee duly executed by the

registered owner or owners thereof or his attorney duly authorized in writing,

may, at the option and expense of such registered owner, be exchanged for an

equal aggregate principal amount of Bonds of the same series, designation,

maturity and interest rate of any other authorized denominations.

SECTION 2.07. TRANSFER AND REGISTRY OF BONDS AND AGENCY THEREFOR. The

Authority shall cause the Trustee to maintain and keep registry books for the

registration and transfer of Bonds (the "Bond Register"), and, upon presentation

thereof for such purpose at the designated office of the Trustee, the Trustee

shall register or cause to be registered therein, and permit to be transferred

thereon or to be exchanged, under such reasonable regulations as the Authority

or the Trustee may prescribe, any Bond entitled to registration, transfer or

exchange. The Trustee is hereby appointed the agent of the Authority for such

registration, transfer and exchange of Bonds.

SECTION 2.08. TRANSFER OF BONDS. Each Bond shall be transferable only

upon the books of the Authority at the designated office of the Trustee, by the

registered owner thereof in person or by his attorney duly authorized in

writing, upon surrender thereof together with a written instrument of transfer

satisfactory to the Trustee duly executed by the registered owner or such duly

authorized attorney. Upon the transfer of any such Bond, the Authority shall

execute, and the Trustee shall authenticate and deliver, a new Bond or Bonds

registered in the name of the transferee of the same aggregate principal amount

and series, designation, maturity and interest rate as the surrendered Bond.

SECTION 2.09. OWNERSHIP OF BONDS AND EFFECT OF REGISTRATION. The

Authority, the Trustee and any Paying Agent may treat and consider the person in

whose name any Bond shall be registered as the holder and absolute owner

thereof, whether such Bond shall be overdue or not, for the purpose of receiving

payment of the principal or Redemption Price thereof or interest thereon and for

all other purposes whatsoever; and payment of, or on account of, the principal

or Redemption Price of or interest on such Bond shall be made only to, or upon

the order of, such registered owner thereof, but such registration may be

changed or discharged as herein provided. All payments made as in this Section

provided shall be valid and effectual to satisfy and discharge the liability

upon the several Bonds to the extent of the sum or sums so paid.

SECTION 2.10. MUTILATED, DESTROYED, STOLEN OR LOST BONDS. In case any

Outstanding Bond shall become mutilated or be destroyed, stolen, or lost, the

Trustee shall authenticate and deliver a new Bond of like tenor, number

<PAGE>

and amount as the Bond so mutilated, destroyed, stolen or lost, in exchange and

substitution for such mutilated Bond and upon surrender of such mutilated Bond

or, in lieu of and substitution for the Bond destroyed, stolen or lost, upon

filing with the Trustee evidence satisfactory to the Authority and the Trustee

that such Bond has been destroyed, stolen or lost and proof of ownership

thereof, and upon furnishing the Authority and the Trustee with indemnity

satisfactory to them and complying with such other reasonable regulations as the

Authority and the Trustee may prescribe in connection therewith and upon payment

to the Trustee of any charge, fee or expense incurred by the Authority or the

Trustee with respect to such authentication and delivery. In lieu of

authenticating and delivering a new Bond in substitution for a mutilated,

destroyed, lost or stolen Bond which is due and payable, the Trustee may pay the

amount due on such Bond to the owner or Holder thereof, provided all the other

requirements of this Section have been met.

SECTION 2.11. REGULATIONS WITH RESPECT TO REGISTRATION, EXCHANGES AND

TRANSFERS. In all cases in which the privilege of transferring Bonds is

exercised, the Authority shall execute and the Trustee shall authenticate Bonds

in accordance with the provisions of this Indenture. For every transfer of

Bonds, the Authority and the Trustee may charge a sum sufficient to reimburse

them for any tax, fee or other governmental charge required to be paid and any

mailing, delivery or insurance expense incurred with respect to such transfer,

which sum shall be paid by the person requesting such transfer as a condition

precedent to the exercise of the privilege of effecting such transfer. Neither

the Authority nor the Trustee shall be required to exchange or transfer any Bond

after the close of business on the Record Date next preceding any Interest

Payment Date and will not be required to exchange or transfer any Bond selected

for redemption in whole or in part after the mailing of notice calling such Bond

or portion thereof for redemption nor during the fifteen (15) days before

mailing of notice of redemption.

SECTION 2.12. CANCELLATION AND DESTRUCTION OF SURRENDERED BONDS. Bonds

surrendered for payment, redemption or transfer and Bonds purchased from any

moneys held by the Trustee hereunder or surrendered to the Trustee by the

Authority or by the Company shall be canceled and destroyed by the Trustee or

delivered to the Authority for destruction. No such Bonds shall be deemed

Outstanding under this Indenture and no Bonds shall be issued in lieu thereof

(except for a Bond transferred pursuant to Section 2.08 hereof).

<PAGE>

ARTICLE III

AUTHENTICATION AND DELIVERY OF BONDS

SECTION 3.01. AUTHORIZATION OF BONDS. The aggregate principal amount of

Bonds which may be executed by the Authority and authenticated by the Trustee

and delivered and secured by this Indenture is not limited, except as is or may

hereafter be provided in this Indenture or the Agreement or as may be limited by

law. This Indenture creates and shall be and constitute a continuing,

irrevocable and exclusive lien upon, and pledge of, the Revenues, and the income

earned by the investment of funds under this Indenture to the extent provided in

this Indenture. All Bonds issued and to be issued hereunder are, and are to be,

to the extent provided in this Indenture, equally and ratably secured by this

Indenture without preference, priority or distinction on account of the actual

time or times of the authentication or delivery or maturity of the Bonds or any

of them, so that subject as aforesaid, all Bonds at any time outstanding

hereunder shall have the same right, lien and preference under and by virtue of

this Indenture and shall all be equally and ratably secured hereby with like

effect as if they had all been executed, authenticated and delivered

simultaneously on the date hereof, whether the same or any of them shall

actually be disposed of at such date, or whether they, or any of them, shall be

disposed of at some future date.

SECTION 3.02. ISSUANCE OF INITIAL BONDS. Initial Bonds, consisting of

Series A Bonds in the aggregate principal amount of $3,660,000 and Series B

Bonds in the aggregate principal amount of $495,000, being Bonds issued under

this Indenture, shall forthwith be executed by the Authority and delivered to

the Trustee for authentication, together with a statement as to the amount and

disposition of the proceeds of the sale of such principal amount of said Bonds,

and thereupon the Initial Bonds shall be authenticated by the Trustee and shall

be delivered to or upon the written order of an Authorized Authority

Representative. Prior to authentication and delivery of the Bonds by the

Trustee, the Trustee shall also have received the documents described in Section

5.03 of the Agreement.

SECTION 3.03. DISPOSITION OF PROCEEDS OF BONDS. Simultaneously with the

delivery of the Initial Bonds by the Trustee, the amount received as accrued

interest on the Series A Bonds shall be deposited in the Series A Interest

Account of the Bond Fund and the amount received as accrued interest on the

Series B Bonds shall be deposited in the Series B Interest Account of the Bond

Fund. The remaining proceeds of the Series A Bonds shall be deposited by the

Trustee in the Series A Account of the Project Fund and the remaining proceeds

of the Series B Bonds shall be deposited by the Trustee in the Series B Account

of the Project Fund, to be disbursed in accordance with Section 3.02 of the

Agreement.

SECTION 3.04. ISSUANCE OF ADDITIONAL BONDS. So long as the Agreement is

in effect and no Event of Default shall have occurred thereunder and there is no

Event of Default hereunder, one or more series of Additional Bonds may be

authorized by resolution of the Authority to pay Costs or for the

<PAGE>

purpose of refunding any prior issue of Bonds. Such Additional Bonds shall be

issued in such series and principal amounts, shall be subject to redemption at

such times and at such prices, shall bear interest at such rate or rates, shall

mature in such amounts as the Supplemental Indenture authorizing the issuance

thereof and the resolution of the Authority in connection therewith shall fix

and determine not inconsistent with this Indenture. Such Supplemental Indenture

shall specify and determine the purpose for which such Additional Bonds are to

be issued (but no purpose shall be authorized other than paying Costs of the

Project, including any addition to the Project) or for the purpose of refunding

any prior issue of Bonds, and such other matters and things as may be deemed

necessary or appropriate by the Authority or as may be required by the Act, the

Agreement or this Indenture for authorization and issuance of such Additional

Bonds not inconsistent with this Indenture. Prior to the issuance of Additional

Bonds and the execution and delivery of a Supplemental Indenture in connection

therewith, the Authority and the Company shall enter into an amendment to the

Agreement pursuant to Article XI hereof which shall provide that the payments

due under the Agreement shall be increased and computed so as to provide for

payments sufficient to pay in full the principal of and interest on such

Additional Bonds and any other costs in connection therewith.

For the issuance of Additional Bonds to pay for Costs of the Project,

the Company is also required to deliver to the Trustee the following:

(a) a cost estimate of the Costs of the Project proposed to be

constructed from the proceeds of such Additional Bonds prepared by an architect

or engineering firm or a list of equipment with cost estimates prepared by the

Company and substantiated by estimates from vendors;

(b) a feasibility report prepared in accordance with GAAP by an

independent certified public accountant certifying that monies available for

debt service for the Company, upon completion of the proposed addition to the

Project, is equal to 125% of the debt service necessary for the Bonds. For

purposes hereof, monies available for debt service means cash flow of the

Company from operations less operating expenses (minus depreciation); and

fair market value of the bond financed facility, including additions thereto and

equipment financed with the Additional Bonds, is equal to 125% of the principal

amount of the Bonds Outstanding, after the issue of the Additional Bonds.

Each series of Additional Bonds shall be equally and ratably secured

under the Indenture with the Initial Bonds and all other series of Additional

Bonds, if any, without preference, priority or a distinction of any Bonds over

any other thereof except as expressly provided in or permitted by the Indenture

or any Supplemental Indenture.

The Additional Bonds shall be deposited with the Trustee and thereupon

shall be authenticated by the Trustee. Upon payment to the Trustee of the

<PAGE>

proceeds of sale of Additional Bonds, they shall be delivered by the Trustee to

or upon the order of the purchasers thereof, but only upon receipt by the

Trustee of:

(a) A copy of the resolution, duly certified by the Secretary or the

Assistant Secretary of the Authority, authorizing the execution and delivery of

the Supplemental Indenture and authorizing and awarding the Additional Bonds and

providing the terms thereof; and

(b) Original executed counterparts of the Supplemental Indenture,

together with an original executed counterpart amendment of, or supplement to,

the Agreement, and the other Loan Documents reflecting the increase in the

amount of Bonds Outstanding in the amount of the Loans; and

standing on the subject of municipal bonds, to the effect that the issuance of

the Additional Bonds and the execution thereof have been duly authorized and

that all conditions precedent to the delivery thereof as required hereunder have

been fulfilled and that the Additional Bonds constitute legal, valid and binding

obligations of the Authority enforceable in accordance with their terms and that

the issuance of the Additional Bonds will not adversely affect the exclusion of

interest on the Tax- exempt Bonds from gross income for federal income tax

purposes and with a reliance letter to the Trustee confirming the above; and

(d) A written order to the Trustee executed by an Authorized Authority

Representative to authenticate and deliver the Additional Bonds to the purchaser

or purchasers therein identified upon payment to the Trustee of a specified sum;

and

(e) All other documents reasonably required by the Authority and the

Trustee.

<PAGE>

ARTICLE IV

CREATION OF FUNDS

SECTION 4.01. ESTABLISHMENT OF FUNDS AND ACCOUNTS. The Authority hereby

establishes the following funds and accounts within such funds:

BOND FUND AND WITHIN THE BOND FUND,

THE SERIES A PRINCIPAL ACCOUNT,

THE SERIES B PRINCIPAL ACCOUNT,

THE SERIES A INTEREST ACCOUNT AND

THE SERIES B INTEREST ACCOUNT;

DEBT SERVICE RESERVE FUND;

REBATE FUND; AND

PROJECT FUND AND WITHIN THE PROJECT FUND,

THE SERIES A ACCOUNT AND

THE SERIES B ACCOUNT

SECTION 4.02. PAYMENTS INTO THE BOND FUND. There shall be deposited in

the Series A Interest Account all accrued interest received from the Placement

Agent at the time of the issuance and delivery of the Series A Bonds. There

shall be deposited in the Series B Interest Account all accrued interest

received from the Placement Agent at the time of the issuance and delivery of

the Series B Bonds. In addition, there shall be deposited into the applicable

Account of the Bond Fund on a pro rata basis based on the Outstanding principal

amount of each series of Bonds, as and when received, (a) all payments made

under the applicable Note and as specified in Section 2.01 of the Agreement, (b)

moneys transferred from the Debt Service Reserve Fund pursuant to Section 5.02

hereof, and (c) all other moneys, including any prepayments received by the

Trustee under and pursuant to any of the provisions of the Agreement, which are

required or which are accompanied by directions that such moneys are to be paid

into a specific Account in the Bond Fund. The Authority hereby covenants and

agrees that, so long as any of the Bonds issued hereunder are Outstanding, it

will deposit, or cause to be paid to the Trustee for deposit in the Bond Fund

for its account, sufficient sums from Revenues and other moneys derived and to

be derived from the Loans to the Company, promptly to meet and pay the principal

or Redemption Price of, or interest on the Bonds as the same become due and

payable. Nothing herein shall be construed as requiring the Authority or the

Trustee to operate the Project or to use any funds or revenues from any source

other than funds and Revenues derived from the Trust Estate.

SECTION 4.03. APPLICATION OF THE BOND FUND. Except as provided in

Section 4.06 hereof, moneys in the Bond Fund shall be used solely for the

payment of the principal or Redemption Price of and interest on the Bonds and

for the redemption of the Bonds prior to maturity; provided, investment income

earned on any such amount may be applied to the payment of interest on the

Bonds. Any moneys in the Bond Fund in excess of the moneys required for payment

of the Bonds theretofore matured, called at maturity or called for redemption

and past due interest shall be used, upon the written request of

<PAGE>

the Company, to the extent permitted by this Indenture to redeem a part of the

Bonds Outstanding (except for Bonds matured or called for redemption which have

not yet been presented for payment) so long as the Company is not in default

with respect to any payments under Section 2.01 of the Agreement or the Notes.

The Trustee, without further authorization than is in this Section 4.03

contained, shall pay to the Paying Agent from the moneys in the Bond Fund, (i)

the interest on the Bonds as and when the same shall become due, and (ii) the

principal of or Redemption Price of the Bonds as and when the same shall mature

or are called for redemption, as the case may be, provided that such payment of

principal or Redemption Price shall be made only upon presentation and surrender

of such Bonds as they severally mature or on or after the redemption date.

SECTION 4.04. MONEYS TO BE HELD IN TRUST. All moneys required to be

deposited with or paid to the Trustee for the account of any fund (except moneys

in the Rebate Fund) under any provision of this Indenture shall be held by the

Trustee in trust, and except for moneys deposited with or paid to the Trustee

for the redemption of Bonds, notice of the redemption of which has been duly

given, shall, while held by the Trustee, constitute part of the Trust Estate and

be subject to the lien or security interest created hereby. The Trustee shall be

required to render a monthly statement of account to the Authority, any

Significant Bondholder and the Company of the funds held in the Bond Fund and

the Project Fund, so long as there are any funds therein.

SECTION 4.05. NO FURTHER PAYMENTS NEEDED. For so long as the aggregate

of the amounts then on deposit in the Bond Fund is sufficient to redeem all of

the Bonds then Outstanding, together with accrued interest thereon, or the

Redemption Price, as applicable and all expenses of the Trustee and the

Authority have been paid, the Company shall notify the Trustee and the Authority

in writing that no additional or further payments need be made under this

Indenture and the Authority, at the written direction of the Company, shall

instruct the Trustee in writing to apply the moneys then in said fund to the

payment of the principal of and interest and Redemption Price (if any) on the

Bonds on the next succeeding redemption date for which the required redemption

notice may be given and to the payments of the amounts, if any, payable to

itself as Trustee and to the Authority.

SECTION 4.06. FUNDS HELD FOR BONDS. The amounts held or applied by the

Trustee or Paying Agent for the payment of interest, principal or Redemption

Price, due on any date with respect to particular Bonds shall, pending such

payment, be set aside and held in trust for the Holders of the Bonds, and for

the purposes of this Indenture such principal, interest or Redemption Price,

after the due date thereof, shall no longer be considered to be unpaid. Any

amounts remaining in the Bond Fund after payment in full of the Bonds, the fees,

charges and expenses of the Trustee and all other amounts required to be paid

hereunder and under the Agreement shall be paid to the Company upon the

expiration or sooner termination of the term of the Agreement as provided

therein.

<PAGE>

SECTION 4.07. REBATE FUND. There is hereby established with the Trustee

a Rebate Fund which shall be held separate and apart from all other funds

established under this Indenture. The Company shall comply with the provisions

of Sections 4.01(j) and 6.05 of the Agreement and instruct the Trustee in

writing to transfer from the Bond Fund to the Rebate Fund, or shall otherwise

pay to the Trustee for deposit into the Rebate Fund, such amounts as shall be

necessary to cause the aggregate amount transferred to or otherwise deposited in

the Rebate Fund to equal the Rebatable Arbitrage; provided that no such

transfers or deposits shall be necessary if the Gross Proceeds (within the

meaning of Section 148(f)(4)(B) of the Code) of the Tax-exempt Bonds, are fully

expended within six months of the date of issue. Withdrawals from the Rebate

Fund may be made only pursuant to written directions of the Company given in

accordance with Sections 4.01(j) and 6.05 of the Agreement. All amounts in the

Rebate Fund, including income earned from investment of the Rebate Fund, shall

be held by the Trustee free and clear of the lien of this Indenture, and the

Trustee shall pay said amounts over to the United States from time to time as

the Trustee shall be instructed in writing by the Company, provided that the

Trustee shall so pay over to the United States not less frequently than once

each five Bond Years after the date of original delivery and payment for the

Tax-exempt Bonds, an amount sufficient to assure that at least ninety percent

(90%) of the sum of the amount of the Rebatable Arbitrage with respect to the

Tax-exempt Bonds plus all previous rebate payments as of the close of the period

ending on the most recent Computation Date is paid not later than sixty (60)

days after such Computation Date. Not later than sixty (60) days after the

retirement of the last obligation of the Tax-exempt Bonds, the Company shall

direct the Trustee in writing to pay to the United States of America one hundred

percent (100%) of the Rebatable Arbitrage (as calculated by the Company) with

respect to the Tax-exempt Bonds.

The Trustee agrees to furnish the Company and the Authority with notice

of the Company's obligation to file a written certification to the Authority and

the Trustee indicating whether the Company has complied with the six (6) month

exception to the arbitrage rebate requirement. In addition, the Trustee agrees

to furnish the Company and the Authority with notice of the Company's obligation

to prepare its rebate calculation and make its rebate payment, if any, to the

Internal Revenue Service. Such reminder notice shall be furnished to the Company

and the Authority at least ninety (90) days prior to each fifth Bond Year and

within thirty (30) days following the redemption or final payment of the

Tax-exempt Bonds.

Moneys held in the Rebate Fund shall be held by the Trustee for a

period of not less than seventy-five (75) days following the redemption or final

maturity of the Tax-exempt Bonds.

SECTION 4.08. PAYMENTS INTO THE PROJECT FUND; DISBURSEMENTS.

(a) The balance of the proceeds of the issuance and delivery of the

Series A Bonds and Series B Bonds remaining after the deductions provided by the

first sentence of Section 4.02 hereof and the first paragraph of Section

<PAGE>

4.10 hereof have been made shall be deposited in the Series A Account and the

Series B Account of the Project Fund, respectively.

(B) The Trustee is hereby authorized and directed to make each

disbursement required by the provisions of the Agreement and to issue its checks

therefor. The Trustee shall keep and maintain adequate records pertaining to the

Project Fund and all such payments therefrom, and after the Project has been

completed and a certificate of payment of all costs is or has been filed as

provided in Section 4.09 hereof, the Trustee shall file a final monthly

statement of account thereof with the Authority, any Significant Bondholder and

the Company as required by Section 4.04 hereof.

SECTION 4.09. COMPLETION OF THE PROJECT. The completion of the Project

and payment or provision made for payment of all Costs shall be evidenced by the

filing with the Trustee of the Company's Completion Certificate required by the

provisions of Section 3.04 of the Agreement. As soon as practicable and in any

event not more than sixty (60) days from the date of receipt of the Company's

Completion Certificate, any balance remaining in the Project Fund (except

amounts the Company shall have directed the Trustee in writing to retain for any

Costs of the Project not then due or payable or not then paid) shall, at the

written direction of the Company, be deposited in the applicable series

Principal Account in the Bond Fund by the Trustee and, in accordance with

written direction provided to the Trustee by the Company as provided in Section

3.04, used to pay principal on the applicable series of Bonds or in any manner

requested by the Company which preserves the exclusion of interest on the

Tax-exempt Bonds from federal income taxation, provided there is delivered to

the Trustee an opinion of Counsel by an attorney or firm of attorneys of

nationally recognized standing on the subject of municipal bonds to the effect

that the use requested by the Company of such monies is permitted by law and

will not adversely affect the exclusion from federal income taxation of interest

on the Tax-exempt Bonds. The Trustee may rely conclusively on such opinion in

any disbursement of funds pursuant to this Section 4.09. Such balance of the

proceeds of Tax-exempt Bonds after the Completion Date shall not be invested at

a yield materially higher than the yield on the Tax-exempt Bonds beyond any

applicable temporary period or otherwise in contravention of Sections 103 and

148 of the Code. The Company shall provide written instruction to the Trustee

regarding such investment.

SECTION 4.10. DEBT SERVICE RESERVE FUND. There is hereby established

with the Trustee a Debt Service Reserve Fund which shall be maintained by the

Company at a level of $388,990 (the "Reserve Requirement"). $339,490 from the

proceeds of the issuance and delivery of the Series A Bonds and $49,500 from the

proceeds of the Series B Bonds shall be deposited into the Debt Service Reserve

Fund.

On the Business Day prior to an Interest Payment Date, the Trustee

shall withdraw from the Debt Service Reserve Fund for deposit in the Bond Fund,

the amount necessary to meet the deficiency, if any, in the applicable Principal

Account or Interest Account, in order to provide the moneys necessary to pay the

principal of and i

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