WOLFF & SAMSON PC

THE OFFICES AT CRYSTAL LAKE

ONE BOLAND DRIVE

WEST ORANGE, NEW JERSEY 07052

973-325-1500

Attorneys for Defendants Elite Pharmaceuticals,

Inc. and Elite Laboratories, Inc.



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                                                 SUPERIOR COURT OF NEW JERSEY

ATUL M. MEHTA, Ph.D.,                            LAW DIVISION - BERGEN COUNTY



                 Plaintiff,                      Docket No. L-4769-03



         vs.



ELITE PHARMACEUTICALS, INC.,

ELITE LABORATORIES, INC., and,

JOHN MOORE as a Director of Elite

Pharmaceuticals, Inc. and in his Individual

Capacity,



                 Defendants.



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



                     SETTLEMENT AGREEMENT AND MUTUAL RELEASE



      WHEREAS, by complaint filed on July 3, 2003, Plaintiff Atul Mehta

("Mehta") commenced an action (the "Action") in the Superior Court of New Jersey

(the "Court") seeking, among other things, damages relating to an alleged breach

of his employment agreement with Defendant Elite Pharmaceuticals, Inc. ("Elite")

and alleged defamatory remarks by Defendant John A. Moore ("Moore");



      WHEREAS, Defendants filed their answer and counterclaims to the Complaint

on September 17, 2003, denying Mehta's the material allegations and seeking,

among other things Judgment Dismissing Plaintiff's Complaint;



      WHEREAS, after motion practice and lengthy settlement negotiations over

which the Court presided, the parties, desirous of avoiding the time and cost of

further litigation agreed to resolve their differences in accordance with the

basic terms read into the record by the Court on November 21, 2003 and confirmed

by the parties on April 12, and April 13, 2004 (the "Record of Settlement

Terms");



{PAGE}



      WHEREAS, as indicated in the Record of Settlement Terms, the parties

desire that the terms of the settlement be set forth in an agreement;



      NOW, THEREFORE, in consideration of the mutual promises and covenants set

forth herein, the parties hereby agree as follows (this "Agreement"):



      1. SETTLEMENT CONSIDERATION TO PLAINTIFF. Upon the terms and subject to

the conditions set forth in this Agreement:



            (a) Settlement Payment. On the date upon which all parties shall

have executed and delivered this Agreement (or should earlier date as to which

the Court to have deemed the parties to have executed and delivered this

Agreement) (the "Effective Date"), Elite will pay Mehta $400,000, in cash, by

certified check or wire transfer in immediately available funds (provided that

in the case of a wire transfer, such transfer instructions must be delivered to

Elite two (2) business days prior to the Effective Date).



            (b) Extension of Expiration Date of Certain Options. Effective on

the Effective Date, Elite will extend the expiration date of the 700,000 vested

and outstanding options to purchase shares of Common Stock, par value $0.01, of

Elite (the "Elite Common Stock") owned by Mehta as of the Termination Date, as

set forth in Part I of Schedule II hereto.



            (c) Vesting and Extension of Certain Terminated Options. Effective

on the Effective Date, Elite will cause to vest, and extend the expiration date

of, 70,000 additional options to purchase Elite Common Stock that have

previously terminated as a result of the termination of Mehta's employment with

Elite, as set forth in Part II of Schedule II hereto. The options referred to in

Sections 1(b) and 1(c) are hereinafter referred to as the "Mehta Options". In

the event that prior to the exercise in full of the Mehta Options, Elite shall

have effected any stock dividend, stock split, recapitalization, reorganization,

merger, consolidation, reclassification, or similar event (each an "Adjustment

Event"), Elite shall immediately equitably adjust the number, kind and exercise

price per share of the Common Stock remaining subject to the Mehta Options and

thereafter, all provisions of this Settlement Agreement relating to restrictions

or lapse of restrictions shall thereupon be deemed applicable to such new or

additional or different shares of common stock or securities to the same extent

applicable to the Mehta Options as in effect immediately prior to such event.

The provision of this Section shall apply similarly to successive

consolidations, mergers, stock dividends, stock splits, recapitalizations,

reorganization or reclassification. Whenever the number of shares of Common

Stock to be obtained upon exercise of the Mehta Options or the exercise price

for the Mehta Options is adjusted, as provided herein, Elite shall immediately

send by first class mail, postage prepaid, to Mehta, notice of such adjustment.





                                      -2-

{PAGE}



            (d) Piggyback Registration Rights. If, at any time or from time to

time, after the Effective Date, Elite shall register the sale of any of the

Elite Common Stock under the Securities Act of 1933 (the "Securities Act") for

its own account or the account of any of its security holders, other than a

registration on Form S-8 relating solely to an employee benefit plan or a

registration on Form S-4 relating solely to a transaction under Rule 145 of the

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