EXHIBIT 10.1

EMPLOYMENT AGREEMENT

 THIS  AGREEMENT is entered into this 28th day of December  1995, by and between
Elite Laboratories,  Inc., a Delaware corporation (hereinafter "ELITE") and Atul
M. Mehta of Ramsey, New Jersey (hereinafter "MEHTA").

STATEMENT OF PURPOSE

MEHTA is  currently  employed  by ELITE  under a  contract  dated  May 23,  1991
presently  terminable  at will at any time.  ELITE desires to continue to employ
MEHTA for a period of five (5) years  commencing  January 1, 1996 in order to be
more  certain  of his  continued  services  and in order to have  access  to his
research and development  skills and experience  relating to pharmaceutical  and
similar  products.  MEHTA desires to accept continued  employment upon the terms
herein. Therefore, the parties have agreed, and do hereby agree, that ELITE will
employ MEHTA and MEHTA will accept such continued employment, upon the terms and
conditions subsequently set out in this Agreement.

 AGREEMENT OF THE PARTIES

1. Term.  ELITE hereby agrees to employ MEHTA and MEHTA agrees to continue being
employed  by ELITE for a period  of five (5) years  ending  December  31,  2000,
provided that this Agreement is not sooner terminated pursuant to the provisions
contained herein. The current  employment  agreement shall be superseded by this
Agreement, effective January 1, 1996.

2. Duties.  MEHTA agrees to devote a sufficient  amount of his business  time to
diligently and faithfully perform his duties and  responsibilities  on behalf of
ELITE.  MEHTA,  however,  shall not be precluded from (a)  delivering  lectures,
fulfilling speaking engagements,  and writing or publishing any material related
to his area of expertise,  (b)  participating in professional  organizations and
program  activities,  (c) serving as a  consultant  in his area of  expertise to
government,  industrial,  and academic  entities where it does not conflict with
the  interests  of ELITE,  (d) serving as a director or member of a committee of
any  organization  or corporation or engaging in any other business  activities;
provided  that such  activities  do not  materially  interfere  with the regular
performance  of his  duties  hereunder  and  except  to the  extent  limited  by
paragraphs 11 and 12 of this Agreement.

 3. Responsibilities. ELITE agrees that during the term of this Agreement, MEHTA
shall  serve as and  retain  the title of both  President  and  Chief  Executive
Officer of ELITE. His responsibilities  shall include the overall management and
direction  of ELITE'S  affairs,  the  hiring,  direction  and  dismissal  of all
subordinate  employees,  and the development of ELITE'S  products.  In addition,
MEHTA  shall be  entitled  to  continue  to serve as a director of ELITE for the
entire term of this Agreement.

4. Compensation. As compensation for the services rendered hereunder,  including
any services provided as President, Chief Executive Officer, and Director, MEHTA
shall receive the following:

 a. An annual salary in the following amounts:

         (1) From January 1, 1996 until December 31, 1996,  $165,000.00, payable
in installments of $6,875.00 semi monthly;

         (2) From January 1, 1997 until December 31, 1997,  $180,000.00, payable
in installments of $7,500.00 semi monthly;

          (3) From January 1, 1998 until December 31,1998,  $200,000.00, payable
in installments of $8,333.33 semi monthly;

          (4) From January 1, 1999 until December 31, 2000, at a salary not less
than  $200,000.00  plus an additional  amount (i.e. a raise) to be determined by
the Board of Directors, in its discretion, for each of the two years.

b. Additional incentive commissions equal to five percent (5 %) of net profit of
each fiscal year as determined in accordance with generally accepted  accounting
principles, payable no later than the 15th day of the fourth month following the
completion of each such fiscal year.

c. Health  insurance,  purchased and maintained by ELITE,  which shall cover all
medical expenses incurred by MEHTA and his family.

d. Term life  insurance on MEHTA'S  life,  for the benefit of MEHTA'S  surviving
spouse or his estate, in an amount of at least $300,000 for each year the policy
is in effect.

e. Such  discretionary  bonus as the Board may (with MEHTA abstaining) from time
to time determine to be appropriate.

 f.  Options to purchase  Class A Common  voting stock of ELITE to be granted on
January  1, 1996 and each of the four  succeeding  anniversaries  thereafter  in
increments of 100,000 such options each year.  The options shall be  exercisable
from the date that they are  granted  until  earlier of (a) one year after MEHTA
ceases to be  employed  by ELITE or to serve as an officer or director of ELITE;
or (b) the  expiration  of ten years from the date the options are granted.  The
options shall provide for MEHTA to purchase shares at a price of:

         $1.00    for options issued January 1, 1996;  $1,50  for options issued
                  January 1, 1997;
         $2.00    for options issued January 1, 1998;  $2.50  for options issued
                  January 1, 1999;
         $3.00    for options issued January 1, 2000;

The Options shall be issued upon such  additional  terms and conditions as ELITE
deems  appropriate,  provided that such terms and  conditions are not materially
different from terms and conditions of options issued to members of the Board of
Directors of ELITE.

5. Expenses. ELITE shall reimburse MEHTA for all reasonable expenses incurred by
him in connection  with his employment  pursuant to this  Agreement.  ELITE will
reimburse MEHTA for such expenses upon the  presentation of an itemized  account
together with such receipts, invoices, or other evidence of the expenditure that
would  constitute  satisfactory  documentation  for tax purposes.  Additionally,
during the term of this Agreement,  ELITE shall provide MEHTA with the use of an
automobile to be selected by MEHTA,  provided that the automobile selected has a
fair market value at the time of acquisition not exceeding $50,000.  MEHTA shall
be responsible  for accounting for the use of the automobile in compliance  with
all applicable regulations imposed by federal and state taxing authorities.

6.  Incentive and Benefit Plans.  MEHTA shall be entitled to (a)  participate in
any  Management  Incentive  Compensation  Plans  adopted  by  ELITE'S  Board  of
Directors (provided any such plan is adopted upon a vote in which MEHTA abstains
or does not cast a deciding  vote) on a basis to be  determined  by the Board of
Directors at such time; (b) participate in any stock option plan  established by
the Board of Directors;  and (c)  participate  in, and benefit from, any and all
pension,  profit-sharing,  life, dental,  medical, and other group benefit plans
provided to management and/or other employees of ELITE.

7. Key Man Life Insurance.  MEHTA shall do anything that is reasonably necessary
to enable ELITE to maintain key man insurance  upon his life should the Board of
Directors so determine,  with all benefits payable to ELITE. Upon termination of
employment for reasons other than MEHTA's  death,  MEHTA shall have the right to
(a) cancel  such  insurance  policy or (b) rename the  beneficiary  provided  he
assumes all subsequent payment of premiums.

 8.  Termination.   MEHTA'S  employment   hereunder  shall  terminate  upon  the
occurrence of any of the following:

a. the death of MEHTA;

b. by election of either party upon the inability of MEHTA to perform his duties
on account of  disability  for a total of one hundred  twenty (120) days or more
during any consecutive twelve (12) month period;

c. by election of ELITE upon "Severe cause",  defined as (i) MEHTA'S  commission
of an act involving dishonesty, embezzlement or fraud causing material damage to
ELITE,  (ii) MEHTA'S  conviction for the commission of a felony involving an act
of  dishonesty or (iii)  willful  misconduct  by MEHTA which is  materially  and
demonstrably  injurious  to ELITE (and which  MEHTA  cannot or does not cease or
correct upon request). For purposes of this provision,  no act or failure to act
by MEHTA shall be considered  "willful",  unless done, or omitted to be done, by
him in bad faith and with  knowledge  that it was  contrary to the  interests of
ELITE;

d. by election of MEHTA upon (i) failure of ELITE to meet its obligations  under
paragraph  4,  (ii)   substantial   interference   with  the  discharge  of  his
responsibilities  under  paragraph 3, (iii)  purported  change by ELITE  without
MEHTA's consent,  of the duties and  responsibilities of MEHTA from those duties
and responsibilities  described in this Agreement, (iv) a change in ownership of
more than fifty  percent  (50%) of ELITE's  shares in any one twelve  (12) month
period,  or if any person or entity (or commonly  owned or  controlled  group of
entities)  acquires  shares which cause such person or entity's  shares to total
more than fifty  percent  (50 %) of the shares of ELITE;  provided  that  shares
acquired from MEHTA shall not be counted in calculating  the fifty percent (50%)
of shares,  and  provided  that  "ownership"  shall mean  ownership  or de facto
control,  (v)  requirement  by ELITE that MEHTA be based  anywhere  more than 40
miles from  Ramsey,  New  Jersey  unless  mutually  agreed,  (vi) any  purported
termination of MEHTA'S employment which is not effected pursuant to the terms of
this Agreement or which does not constitute  grounds for termination  under this
Agreement, or (vii) the occurrence of a vote by a majority of shares voting upon
an issue contrary to the vote of MEHTA,  if MEHTA in his sole  discretion  deems
the vote "likely to result in an interference in management" and requests at the
meeting that the shareholders  reconsider and the  shareholders  fail to reverse
the vote.

 The parties  recognize  that there may arise  disputes and  controversies  over
alleged  conditions or conduct that is wrongful or that  constitutes a breach of
this  Agreement.  However,  the parties  agree that such  conditions  or conduct
(which may give rise to a claim for damages)  shall not  constitute  grounds for
termination of employment or excuse performance under this Agreement unless, and
to the extent, provided above.

 9. Payments upon Termination.

a. In the event of termination due to MEHTA's death, his surviving spouse (or if
she predeceases MEHTA, his estate), shall be entitled to receive MEHTA's salary,
incentive  commissions,  benefits and any deferred  compensation accrued through
the last day of the  third  calendar  month  following  the  month in which  the
termination of employment  occurs and additional  salary payable monthly for the
following three years at the rate of one-half the aggregate annual amounts shown
in paragraph 4a above;  provided that ELITE may purchase life  insurance  (other
than the life  insurance  provided  under  paragraph 4d) payable to a designated
beneficiary  of MEHTA to cover all or a portion  of the  obligation  under  this
paragraph 9a.

 b. In the event of MEHTA's  termination in accordance  with paragraphs 8b or c,
MEHTA's salary,  incentive  commissions,  benefits and any deferred compensation
accrued  through the last day of the calendar month in which the  termination of
employment occurs shall be paid promptly.  No other unaccrued salary or benefits
shall be paid.

 c. In the event of  termination  pursuant to paragraph  8d, MEHTA shall receive
all  accrued  salary,   incentive   commissions,   benefits,  and  any  deferred
compensation and all salary and commissions payable under paragraph 4b through a
period  ending upon the later of (i) May 22, 2001 or (ii) the third  anniversary
of such  termination,  provided that the salary portion of such amounts shall be
aggregated  and discounted to Present  Value,  using as the discount  factor the
prime Rate published on the date of termination (or nearest date  thereafter) in
the Wall Street  Journal;  and provided that salary for the period after May 22,
2001 shall be imputed at the same rate as provided for under paragraph da(4).

10. Procedure for Termination. Termination of employment by ELITE or MEHTA shall
not be effective  until notice is received by the other party.  The notice shall
not be effective  unless it indicates the specific  termination  provision(s) in
paragraph 8 of this  Agreement  relied upon and sets forth in reasonable  detail
the facts and  circumstances  claimed  to  provide  a basis for  termination  of
employment   under  the  provisions   indicated.   Additionally,   no  purported
termination  by  ELITE  shall be  effective  unless  and  until  there  has been
delivered to MEHTA a copy of a resolution duly adopted by the  affirmative  vote
of not less than a majority of the entire  membership  of the Board of Directors
at a meeting of the Board held for the  purpose  (after  opportunity  for MEHTA,
together with his counsel,  to be heard before said Board),  finding that in the
good faith opinion of the Board, the facts and circumstances  claimed to provide
a basis for  termination  under  paragraph 8b or c of this  Agreement  exist and
specifying the particulars thereof.

11. Covenant Not To Compete.  MEHTA covenants and agrees that during the term of
this Agreement, he will not directly or indirectly engage in, conduct,  solicit,
be involved in, aid or assist,  either  personally  or as an employee,  partner,
director or consultant any business  which is  competitive  with the business of
ELITE. MEHTA, however,  shall be free to conduct any business he desires outside
of the United States, so long as such business does not sell any product sold or
licensed by ELITE in any market in which ELITE competes, and provided that MEHTA
does not use confidential information that he could not disclose under paragraph
12.

12.  Confidentiality.  MEHTA  acknowledges and recognizes that the disclosure of
confidential  information to ELITE'S  competitors will be highly  detrimental to
ELITE'S business.  Therefore, MEHTA agrees that he will not disclose, reveal, or
disseminate to any person,  firm, or  organization,  any information  concerning
ELITE'S  business  which is of a  confidential  nature.  This shall not preclude
MEHTA from  disclosing  confidential  information  (i) to the  extent  that such
information  is  generally  available  and known in the industry or is available
from a source other than ELITE,  through no action of MEHTA, or (ii) as required
by law,  or  (iii)  information  respecting  the  business  of ELITE  after  the
Expiration  Date  of this  Agreement;  or  (iv)  if  such  disclosure  is in the
Company's best interest or is made in order to promote and enhance the Company's
business.  This provision shall also not preclude MEHTA from using or disclosing
any information and experience he possesses in his memory and knowledge.

 13. Entire Agreement.  Each party acknowledges that he has read this Agreement,
understands  it, and agrees to be bound by its terms,  and  further  agrees that
this Agreement supersedes and merges all prior proposals, understandings and all
other agreements,  oral or written,  between the parties relating to its subject
matter.  The parties  further  agree that this  Agreement may not be modified or
altered except by a written instrument duly executed by both parties.

14.  Nonwaiver.  No  failure of a party to  exercise  any right or waiver of any
remedy shall  operate or be construed  to  constitute a waiver or bar  affecting
such party's  assertion of the right or obtaining the remedy at any future time.
No failure  of a party to insist  upon  compliance  with any  provision  of this
Agreement at any time or for any period of time shall  impair the party's  right
to insist upon compliance with such provision at any future time.

15.  Legality.  In the event any provision of this Agreement shall be held to be
invalid, illegal, or unenforceable, the validity, legality and enforceability of
the  remaining  provisions  shall in no way be affected or impaired  thereby and
said  Agreement  shall  remain  in full  force and  effect  as if such  cause or
provision had not been inserted therein.

16.  Binding  Effect.  This Agreement  shall be binding upon the parties,  their
respective  successors  and  permitted  assigns.  Neither  party may assign this
Agreement  or any of its  rights  or  obligations  hereunder  without  the prior
written consent of the other party,  and any such attempt at assignment shall be
void.

17. Notices.  Any notice to be given under this Agreement shall be sufficient if
it is in writing and is sent by Certified or Registered Mail, or  hand-delivered
by a person who is not  affiliated  with the  sender.  Notices to MEHTA shall be
sent to 252 East Crescent Avenue, Ramsey, New Jersey 07446 or such other address
as he designates  in writing.  Notice to ELITE shall be sent to its Secretary or
to any member of its Board of Directors (other than MEHTA).

IN WITNESS  WHEREOF,  the parties have here unto  executed this document the day
and year first above written.

                                                     ELITE LABORATORIES, INC.

[Corporate Seal]                               by: _____________________________
                                         Director, acting with authority of the

______________________                   Board of Directors  Assistant Secretary

                                                  ------------------------------
                                                  Atul M. Mehta