Document:

EXHIBIT 10.1

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.

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                     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");

         WHEREAS,  as indicated in the Record of Settlement  Terms,  the parties
desire that the terms of the settlement be set forth in an agreement;

<PAGE>

         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.

                  (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
Securities  Act, Mehta shall be entitled to piggyback  registration  rights with
respect  to the shares of Elite  Common  Stock  (the  "REGISTRABLE  SECURITIES")
issuable upon due and proper exercise of the Mehta Options, as follows:

                                      -2-
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                           (i) Elite  shall  notify  Mehta in  writing  at least
twenty  (20) days prior to the filing of any  registration  statement  under the
Securities  Act for  purposes  of  registering  Elite  Common  Stock for its own
account or the account of any of its  security  holders and will afford Mehta an
opportunity  to  include  in  such  registration  statement  all or part of such
Registrable Securities at Elite's sole cost and expense (other than the fees and
disbursement  of  counsel  to Mehta  and any  discounts  or  commissions  to any
underwriter,  if any,  payable in respect of the Registrable  Securities sold by
Mehta).  If Mehta desires to include in any such  registration  statement all or
any part of the Registrable  Securities  held by him, he shall,  within ten (10)
days after the above-described notice from Elite, so notify Elite in writing.

                           (ii) If the registration  statement under which Elite
gives Mehta notice is for an underwritten offering, Elite shall so advise Mehta.
In such  event,  (A)  Mehta's  rights  pursuant  to this  Section  1(d) shall be
conditioned  upon Mehta's  participation in such  underwriting,  (B) Mehta shall
enter into an  underwriting  agreement in customary form with the underwriter or
underwriters selected for such underwriting by Elite, and (C) if the underwriter
determines  in good faith that  marketing  factors  require a limitation  of the
number of shares to be  underwritten,  the number of shares that may be included
in the underwriting shall be allocated in the following manner: FIRST, to Elite;
SECOND,  to  all  holders  of  securities  proposed  to be  registered  in  such
underwriting  based  upon a demand  registration  right;  and THIRD to all other
holders of securities  proposed to registered in such underwriting on a PRO RATA
basis based on the total number of securities  proposed to be registered held by
all such holders thereof.  Such  registration  shall be at no cost or expense to
Mehta  (other  than  the fees  and  disbursement  of  counsel  to Mehta  and any
discounts or commissions to any  underwriter,  if any, payable in respect of the
Registrable  Securities sold by Mehta). If Mehta disapproves of the terms of any
such underwriting, he may elect to withdraw therefrom by written notice to Elite
and the  underwriter,  delivered  at least ten (10)  business  days prior to the
effective  date  of  the  registration  statement.  Any  Registrable  Securities
excluded or withdrawn  from such  underwriting  shall be excluded and  withdrawn
from the registration.

                           (iii)  Elite  shall  have the right to  terminate  or
withdraw any  registration  initiated by it prior to the  effectiveness  of such
registration  whether or not Mehta has  elected to  include  securities  in such
registration.

                           (iv) If within  one  hundred  and  eighty  (180) days
prior to the expiration of the Mehta Options,  the  Registrable  Securities have
not been registered pursuant to a registration  statement that has been declared
effective by the Securities and Exchange Commission, and pursuant to which Mehta
can sell his shares of Elite  Common  Stock  (whether or not Mehta in fact sells
any Registrable Securities), Elite shall extend the expiration date of the Mehta
Options by  additional  one hundred and eighty (180) day  increments  until such
registration  occurs.  If, at the time of the  effectiveness  of a  registration
statement  pursuant  to which  Mehta can sell his shares of Elite  Common  Stock
(whether  or not Mehta in fact  sells  any  Registrable  Securities),  the Mehta
Options  are to expire  less than one  hundred  and eighty  (180) days after the
effectiveness of such registration  statement,  Elite will extend the expiration
of the Mehta Options such that they shall expire at least one hundred and eighty
(180) days after the effectiveness of such registration statement.

                                      -3-
<PAGE>

                           (v) Mehta agrees to timely  furnish such  information
regarding  each person and the  securities  sought to be registered  and to take
such other action as Elite may reasonably  request,  including the entering into
of  agreements  and  the  providing  of  documents,   in  connection   with  the
registration or qualification  of such securities  and/or the compliance of such
registration   statement  with  all  applicable  laws.  Mehta  agrees  that,  in
connection with any offering  undertaken  pursuant to paragraph (d), Elite shall
have the right to,  if it deems an  underwriter  or  underwriters  necessary  or
appropriate, designate such underwriter(s).

                           (vi)     INDEMNIFICATION.

                                    (a) Subject to  applicable  law,  Elite will
indemnify  and hold  harmless  Mehta,  against all claims,  losses,  damages and
liabilities, including legal and other expenses reasonably incurred, arising out
of any untrue or allegedly  untrue statement of a material fact contained in the
registration  statement, or any omission or alleged omission to state a material
fact  required to be stated in the  registration  statement or necessary to make
any statements therein not misleading,  or arising out of any violation by Elite
of the Securities Act, any state securities or "blue sky" laws or any applicable
rule or  regulation,  except  with  respect to an untrue  statement  or omission
contained  in any  information  or  affidavit  furnished in writing by Mehta for
inclusion in such registration statement.

                                    (b) Subject to applicable law,  Mehta,  will
indemnify and hold harmless  Elite,  each of its  directors,  its officers,  its
underwriters  and each person or entity,  if any,  who or which  controls  Elite
within the meaning of the Securities Act,  against all claims,  losses,  damages
and  liabilities  (joint  or  several),   including  legal  and  other  expenses
reasonably  incurred  by  Elite,  each  of  its  directors,  its  officers,  its
underwriters  and each person or entity,  if any,  who or which  controls  Elite
within the meaning of the Securities Act, arising out of any untrue or allegedly
untrue statement of a material fact contained in the  registration  statement or
necessary  to make the  statements  contained  therein  not  misleading,  to the
extent,  but only to the  extent,  that such  untrue  statement  or  omission is
contained in any information or affidavit furnished in writing by Mehta to Elite
specifically for inclusion in such  registration  statement  provided,  however,
that in no event shall any indemnity by Mehta under this Section, exceed the net
proceeds received by Mehta from the offering.

                   (e)  REIMBURSEMENT  OF  EXPENSES.  On or after the  Effective
Date,  upon receipt by Elite of receipts or other  reasonable  documents,  Elite
shall  pay and  reimburse  Mehta  for any and all of his work  related  expenses
incurred  prior  to his end of work  commencing  on  January  1,  2000 up to and
including June 3, 2003, in an amount not to exceed $10,000 in the aggregate.

                   (f) PAYMENT OF MEDICAL  BENEFITS.  On or after the  Effective
Date,  upon receipt by Elite of receipts or other  reasonable  documents,  Elite
shall pay and reimburse Mehta for health, dental and life insurance premiums and
car expense for a period of two years from the execution of the Agreement, in an
amount not to exceed $50,000 in the aggregate for such two year period.

                                      -4-
<PAGE>

                   (g) LETTER OF  RECOMMENDATION.  On the Effective Date,  Elite
shall  provide  to  Asha  Mehta  (Mehta's   assistant  and  wife)  a  letter  of
recommendation  for  use by her  in  obtaining  other  employment,  in the  form
attached  hereto as  EXHIBIT  A, and shall pay to her any  unpaid  salary (in an
amount not to exceed $2,000 in the aggregate).

                  (h)  DISMISSAL OF ACTION.  On the Effective  Date,  the Action
shall be deemed dismissed,  with prejudice, and Elite shall be entitled to file,
without  further notice or  settlement,  the  stipulation  of dismissal  annexed
hereto as EXHIBIT B (the  "STIPULATION  OF  DISMISSAL").  In connection with the
foregoing,  on the Effective  Date,  Mehta's  counsel shall deliver to Elite the
executed Stipulation of Dismissal.

         2. COVENANTS REGARDING COMPANY INTELLECTUAL PROPERTY;  NON-COMPETITION;
FURTHER ASSURANCES.

                  (a) INTELLECTUAL  PROPERTY AND CONFIDENTIAL  INFORMATION.  All
company Intellectual Property (as defined below) shall be the exclusive property
of  Elite.  Mehta  shall  not,  directly  or  indirectly:  (i) use  any  Company
Intellectual  Property or (ii) use or  disclose  any  Confidential  Information,
except as  authorized  by Elite in writing.  Mehta shall keep  confidential  all
Confidential Information (as defined below). Specifically, Mehta agrees that (i)
all Company  Intellectual  Property  developed as a direct or indirect result of
Mehta's  efforts on behalf of Elite  during any  period of his  employment  with
Elite shall be, and shall remain, the exclusive property of Elite and (ii) Mehta
shall have no  ownership  interest  therein.  To the  extent  Mehta may have any
interest in such Company Intellectual Property and subject to the exceptions set
forth  in  "COMPANY  INTELLECTUAL  PROPERTY"  and  "CONFIDENTIAL   INFORMATION,"
hereinbelow,  Mehta hereby  assigns and transfers to Elite all right,  title and
interest in and to any and all Company  Intellectual  Property.  In  particular,
Mehta hereby assigns and transfers all interest in the  inventions  described in
the  following  patent and patent  applications  (which are included in, but not
exhaustive of, the Company Intellectual Property):

                  o   Patent No. 6,620,439  granted  September 16, 2003 entitled
                      "Chrono Delivery Formulations and Method of Use Thereof";

                  o   Registration  No.   01975612.1  in  EPO  entitled  "Chrono
                      Delivery Formulations and Method of Use Thereof";

                  o   Registration  No.  2002-532201 in Japan  entitled  "Chrono
                      Delivery Formulations and Method of Use Thereof";

                  o   Registration  No.  2002-537294 in Japan entitled  "Delayed
                      and  Sustained  Release  Formulations  and  Method  of Use
                      Thereof";

                  o   Registration No.  01988581.3 in EPO entitled  "Delayed and
                      Sustained Release Formulations and Method of Use Thereof";

                  o   Application No. 09/695,903 filed October 26, 2000 entitled
                      "Delayed and Sustained Release  Formulations and Method of
                      Use Thereof";

                  o   Application  No.  10/409,992  filed April 8, 2003 entitled
                      "Abuse-Resistant  Oral  Dosage  Forms  and  Method  of Use
                      Thereof";

                                      -5-
<PAGE>

                  o   Application  No.  10/406,961  filed April 4, 2003 entitled
                      "Chrono Delivery Formulations and Method of Use Thereof";

                  o   Application No.  10/412,110  filed April 10, 2003 entitled
                      "Chrono  Delivery  Formulations  and  Method  of  Treating
                      Atrial Fibrillation";

                  o   U.S. provisional  application no. 60/508,531 filed October
                      3, 2003 entitled "Extended Release
                      Formulations of Opioids and Method of Use Thereof";

                  o   PCT international application filed April 8, 2004 entitled
                      "Abuse-Resistant  Oral  Dosage  Forms  and  Method  of Use
                      Thereof" (international application no. not yet assigned),
                      corresponding   to  and   claiming   priority   from  U.S.
                      application no. 10/409,992 filed April 8, 2003; and

                  o   PCT international application filed April 8, 2004 entitled
                      "Chrono  Delivery  Formulations  and  Method  of  Treating
                      Atrial  Fibrillation"  (international  application no. not
                      yet assigned), corresponding to and claiming priority from
                      U.S. application no. 10/412,110 filed April 10, 2003.

For purposes of this Section 2(a), the following  terms shall have the following
meanings:

         (x) "COMPANY INTELLECTUAL PROPERTY" means the information and material,
whether or not  reduced to writing and  whether or not  patentable,  that Mehta,
during any period of Employment with Elite had, conceived,  created or developed
(as those terms are commonly  used in the Patent Law), in whole or in part, as a
direct or  indirect  result of either his  efforts on behalf of Elite or through
the use of any of Elite's  facilities  or  resources  or using any  confidential
information of Elite or of any third party  authorizing,  or having  authorized,
Elite to have,  or have  had,  access  and use of the same,  including,  without
limitation: (i) production processes, formulation procedures and techniques; and
(ii) discoveries, concepts, inventions,  developments (including but not limited
to the nature and results of research  and  development  activities),  formulae,
specialized   rather   than   general   "know-how,"   designs,    drawings   and
specifications, provided, however, that "Company Intellectual Property" does not
include any general  knowledge  or  "know-how"  known to Mehta,  (including  any
general  knowledge or "know-how" known to Mehta),  relating to any formulations,
processes, designs, technique in the field of oral-drug delivery system.

         (y) "CONFIDENTIAL INFORMATION" means (i) Elite's confidential financial
information,  customer  requirements,  data and other  information  or  material
relating to the manner in which the customer,  prospective  customer or Elite do
business,  and (ii) any of the information or material described herein which is
the  property  of any other  person or firm  which has  disclosed,  revealed  or
delivered  such  information  or  material to Elite  pursuant  to a  contractual
relationship  with  Elite  or  otherwise  in the  course  of  Elite's  business,
provided,  however,  that  "Confidential  Information"  shall  not  include  any
information  or  material of the type  described  herein to the extent that such
information  or material;  (A) is or becomes  publicly  known  through no act on
Mehta's part in violation of his nondisclosure  obligations,  (B) is required to
be used or disclosed by applicable law or governmental order or process,  (C) is
known to or independently developed by Mehta prior to or after his employment by
Elite and in compliance  with the  restrictions  set forth in this Section 2, or
(D) that is  disclosed to Mehta by a  third-party  that is both (I) not bound

                                      -6-
<PAGE>

by any nondisclosure obligation with respect to such information or material and
(II) is authorized to disclose such information or material to Mehta.

                  (b)  FURTHER  ASSURANCES  RELATING  TO  COMPANY   INTELLECTUAL
PROPERTY.  Subject to subsection 2(d) below,  and at Elite's expense Mehta shall
cooperate  with Elite in taking such  actions as may be necessary to allow Elite
to  secure  patent,   copyright  or  other  protections  for  any  such  Company
Intellectual  Property.  Mehta  shall  return to Elite all  documents  and files
pertinent to the Company Intellectual  Property and shall execute and deliver to
Elite such further  documentation  relating to assignments at no additional cost
to Elite, including,  without limitation,  assignment agreements for filing with
the US Patent and  Trademark  Office,  and foreign  patent  offices in the forms
annexed hereto as EXHIBIT C. However, Mehta's patent counsel may retain one copy
of patent applications and the related correspondence for archival purposes.

                  (c)      NON-COMPETITION.

                           (i)  Mehta  shall  not,  prior to 180  days  from the
effective date, (whether as an employee,  partner,  owner,  shareholder,  agent,
consultant  or  otherwise)  compete  with  Gentamycin,   Diltiazem,  Nifedipine,
Ketoprofen,  or Methylphenidate or develop any generic version thereof.  For the
purposes  of this  Section  2(c)(i)  only,  "compete"  shall  not be  deemed  or
construed to include  competing  with products that are in the same  therapeutic
category as the above referenced molecules.

                           (ii) Mehta shall not,  prior to one (1) year from the
effective  date (whether as an employee,  partner,  owner,  shareholder,  agent,
consultant or otherwise)  compete with a product which contains Oxycodone alone,
or a product which contains  Oxycodone in combination  with another  molecule in
which  Oxycodone is in a sustained  release form.  Notwithstanding  anything set
forth in this Section 2(c), this Section 2(c) shall not restrict Mehta's ability
to own no  greater  than 5% of the  outstanding  shares  of any  class of equity
securities  listed to trade on a nationally  recognized stock exchange or quoted
on the NASDAQ.

                  (d) COMPENSATION.  Mehta shall reasonably cooperate with Elite
upon  reasonable  advance  notice  to Mehta  and  take  such  actions  as may be
necessary  to allow  Elite to secure  and  maintain  its  rights in the  Company
Intellectual  Property  (after giving effect to the Section  2(a)).  Elite shall
reasonably  cooperate  with Mehta and  provide  him with  information  needed to
comply with his  obligations.  In  addition,  to the extent  requested by Elite,
Mehta  shall  assist  Elite  in  a  professional   consulting  capacity  in  the
prosecution of the Company  Intellectual  Property as follows (the  "SERVICES"):
(i) the  first ten (10)  hours of  Services  shall be  considered  pre-paid  and
included in the  $400,000  payment  made to Mehta on the  effective  date;  (ii)
thereafter,  Services  shall be  performed  at an hourly rate of $300.00 and all
payments therefor shall be due within ten (10) business days of an invoice being
received;  and (iii) Elite has the option, but not the obligation to request the
performance of any Services after the first ten (10) hours of Services.

                                      -7-
<PAGE>

         3.  MEHTA  STOCK  PURCHASE  OPTION;  RELEASE  OF MEHTA  STOCK  TRANSFER
             RESTRICTIONS.

                  (a) PURCHASE OPTION OF ELITE.

                           (i) Elite  and/or any its  designees  (who may be any
         third party other than Harris Freedman and his Affiliates (as such term
         is defined in Rule 144  promulgated  under the  Securities  Act)) shall
         have the  irrevocable  option (but not the  obligation) to exercise and
         complete  the  purchase,  at any time on or prior to  ninety  (90) days
         after the Effective Date (the "OPTION PERIOD"),  from Mehta and each of
         the Other  Mehta  Holders  (as  defined  below),  any or all  shares of
         capital stock of Elite (including,  without  limitation,  all shares of
         Elite  Common  Stock)  then owned by Mehta and any Other  Mehta  Holder
         (collectively,  the "MEHTA STOCK"),  at a price per share of $2.00 (the
         "OPTION"), as adjusted in the case of an Adjustment Event. The purchase
         of the Mehta Stock shall be by stock purchase  agreement (the "PURCHASE
         AGREEMENT") in substantially  the form annexed hereto as EXHIBIT D. The
         Option  shall be exercised  on one or more  occasion  during the Option
         Period by a purchaser or purchasers providing Mehta and the Other Mehta
         Holders  with  written   notice  of  such  exercise  by  executing  and
         delivering  a Purchase  Agreement,  which  shall then be  executed  and
         delivered  by Mehta  (and,  to the extent  applicable,  the Other Mehta
         Holders).  To the extent the Option is exercised for a number of shares
         of Mehta Stock that  constitutes less than all shares of Mehta Stock at
         the time of such exercise,  the purchaser(s)  shall purchase first from
         Mehta and then from the Other Mehta  Holders on a pro rata  basis,  and
         Mehta (and, to the extent  applicable,  the Other Mehta  Holders) shall
         sell to such purchaser(s), as provided above.

                           (ii) On the Effective Date,  Elite shall pay $100,000
         into an interest  bearing  escrow  account to be  maintained  by Wolf &
         Samson, as counsel to Elite in the Action (the "ESCROW"). If the Option
         has not been  exercised as to all of the Mehta Stock by the  expiration
         of the Option Period,  the principal of the Escrow  ($100,000) shall be
         released to Mehta and the interest  earned on such  principal  shall be
         released to Elite.  If the Option is  exercised  as to all of the Mehta
         Stock within the Option  Period and  completed in  accordance  with the
         Purchase  Agreement,  the principal and interest of the Escrow shall be
         released to Elite.

                  (b)  REPRESENTATION,  WARRANTY AND  RENOUNCEMENT  OF OWNERSHIP
         INTEREST IN ELITE. Mehta represents and warrants to Elite as follows:

                           (i) he is the beneficial owner of 1,175,100 shares of
         Elite  Common Stock and,  other than the options  listed on SCHEDULE II
         hereto, Mehta has no other (and hereby renounces any other),  ownership
         interest in Elite (legal,  equitable or otherwise) or the capital stock
         of Elite;

                           (ii) Schedule I attached hereto sets forth a true and
         complete list of all Affiliates of Mehta that own any shares of capital
         stock of Elite (including Elite Common Stock), or any right to purchase
         or acquire any shares of capital stock of Elite (including Elite Common
         Stock)  (such  holders,  the "OTHER  MEHTA  HOLDERS" and each an "OTHER
         MEHTA HOLDER");

                                      -8-
<PAGE>

                           (iii) when  executed and  delivered,  this  Agreement
         (and in the case of the Other  Mehta  Holders,  only as to Section 3 of
         this Agreement) will be valid and binding  obligation of Mehta and each
         of the Other Mehta Holders enforceable in accordance with their terms;

                           (iv)  neither  the  execution  or  delivery  of  this
         Agreement, nor the sale of the Mehta Stock pursuant to the Option, will
         conflict  with or  result  in a  breach  of the  terms,  conditions  or
         provisions of, or constitute a default under, any contract, covenant or
         instrument  under which Mehta or any of the Other Mehta  Holders is now
         obligated; and

                           (v) each of Mehta and the  Other  Mehta  Holders  has
         good and  marketable  title to the number of shares of the Mehta  Stock
         set forth in this section, subject to no mortgage, pledge, lien, lease,
         encumbrance or charge.

                  (c)      TRANSFER RESTRICTIONS.

                           (i) During the Option  Period,  neither Mehta nor any
         Other Mehta Holder may, directly or indirectly, sell, assign, transfer,
         offer, grant a participation in, mortgage, pledge, hypothecate,  create
         a security  interest  in or lien upon,  encumber,  donate,  contribute,
         place in trust,  enter into any  voting  agreement  in  respect  of, or
         otherwise dispose of (collectively,  "TRANSFER") any of its, his or her
         shares of Mehta Stock, except as follows:

                                    (x) if the  closing  price  on the  American
                  Stock  Exchange on the trading  day  immediately  prior to the
                  date  of  sale  is  $2.50   per   share  or   greater,   Mehta
                  (individually  and not any Other  Mehta  Holder)  may sell not
                  more  than one  thousand  (1,000)  shares on the  trading  day
                  immediately following; or

                                    (y) if the  closing  price  on the  American
                  Stock  Exchange on the trading  day  immediately  prior to the
                  date of sale is less than $2.50 per share, Mehta (individually
                  and not any  Other  Mehta  Holder)  may sell not more than one
                  thousand  five  hundred  (1,500)  shares  on the  trading  day
                  immediately following.

                           (ii) After the  expiration of the Option  Period,  to
         the extent Mehta and any Other Mehta Holder  remains in  possession  of
         any  shares of Mehta  Stock,  the  restrictions  set  forth in  Section
         3(c)(i)  hereof shall  terminate  and Mehta and each Other Mehta Holder
         shall be permitted to transfer all remaining  shares of the Mehta Stock
         in  accordance  with  Rule 144 or other  applicable  federal  and state
         securities laws. Elite represents and warrants that on the date hereof,
         so long as  Mehta  and  each  Other  Mehta  Holder  complies  with  the
         provisions   of  Rule  144  or  another   applicable   exemption   from
         registration  under the Securities  Act in connection  with the sale of
         his shares  Common  Stock,  Elite  knows of no reason why such  holders
         should be prevented  from selling  its,  his or her  respective  shares
         after the expiration of the Option Period.

                                      -9-
<PAGE>

                  (d)  AUTHORIZATION  LETTER TO ELITE  TRANSFER  AGENT AND MEHTA
BROKER.

                           (i) On the Effective Date, Elite shall provide to its
         stock  transfer  agent,  Jersey  Transfer  & Trust  Company,  a written
         instruction and opinion of counsel to the Company in substantially  the
         form attached hereto as EXHIBIT E.

                           (ii) On the  Effective  Date,  Mehta shall provide to
         his broker,  Merrill  Lynch  Pierce  Fenner and Smith,  Inc., a written
         instruction in substantially the form attached hereto as EXHIBIT F.

         4. RELEASES; INDEMNIFICATION.

                  (a) RELEASE OF ELITE.  Mehta  hereby  releases,  acquits,  and
forever discharges Elite and its direct and indirect subsidiaries, predecessors,
successors and assigns,  and each of their respective  past,  present and future
officers,  directors  (including  Moore),  employees,  agents,  representatives,
attorneys,  licensees, successors and assigns, and each and every one of them in
their  representative  and  individual  capacities,  from  any and  all  losses,
liabilities,  claims, demands, causes of action, and fees and expenses, of every
kind and nature,  whether known or unknown,  asserted or  unasserted,  in law or
equity,  which  Mehta ever had,  now has or  hereafter  can,  shall or may have,
whether jointly or severally, against the Released Party, for, upon or by reason
of any matter,  cause of action or thing  whatsoever  from the  beginning of the
world to the date hereof.

                  (b)  RELEASE  OF MEHTA.  Elite (and its  officers,  directors,
employees, subsidiaries,  predecessors, successors and assigns) and Moore hereby
release,  acquit,  and forever discharge Mehta and his agents,  representatives,
attorneys,  heirs  and  assigns,  and  each  and  every  one of  them  in  their
representative and individual capacities,  from any and all losses, liabilities,
claims,  demands,  causes of action,  and fees and  expenses,  of every kind and
nature,  whether  known or unknown,  asserted or  unasserted,  in law or equity,
which  Elite or Moore ever had,  now has or  hereafter  can,  shall or may have,
whether jointly or severally, against the Released Party, for, upon or by reason
of any matter,  cause of action or thing  whatsoever  from the  beginning of the
world to the date hereof.

                  (c)  INDEMNIFICATION  OF MEHTA. Elite shall indemnify and hold
Mehta harmless from any and all claims  arising from a certain  matter  entitled
ELITE V. PHOENIX  INTERNATIONAL  LIFE SCIENCES (U.S.),  INC., ET AL. (DOCKET NO.
BER-L-9903-00) (the "PHOENIX LITIGATION") from the beginning of time through the
execution of this Settlement  Agreement (including all reasonable attorneys fees
and costs).  Upon the assertion of any claim, or the commencement of any action,
suit or other proceeding,  by Phoenix International Life Sciences (or any of its
affiliates)  against Mehta arising from the Phoenix Litigation or the facts that
gave rise to such action (a "THIRD PARTY CLAIM"),  Mehta shall  promptly  notify
Elite in writing of such Third Party Claim and  provide  Elite such  information
with  respect  thereto as Elite may  reasonably  request.  Elite  shall have the
right,  exercisable  by written notice (the "NOTICE") to Mehta within 14 days of
receipt of notice from Mehta of  commencement of or assertion of any Third Party
Claim, to assume the defense of such Third Party Claim,  using counsel  selected
by Elite and  reasonably  acceptable to Mehta.  If Elite fails to give Mehta the
Notice complying with the provisions stated above within the stated time period,
Mehta  shall have the right to assume  control of the defense of the Third

                                      -10-
<PAGE>

Party Claim and all losses in connection  therewith  (including  all  reasonable
attorneys  fees and costs) shall be  reimbursed  by Elite from time to time upon
the demand of Mehta. Elite or Mehta, as the case may be, shall in any event have
the right to participate  at its own expense,  in the defense of any Third Party
Claim which the other is  defending.  If Elite shall have assumed the defense of
any Third Party Claim in accordance with the terms hereof,  Elite shall have the
right to consent to the entry of judgment with respect to, or otherwise  settle,
such Third Party  Claim;  provided  that Elite shall be  responsible  to pay all
amounts due under such judgment or settlement.

         5. MISCELLANEOUS.

                  (a) NO ASSIGNMENT OR TRANSFER OF ACTION.  Mehta represents and
warrants that he has not assigned or  transferred  any of his rights  concerning
the Action or his rights in or to the Mehta Stock. Elite and Moore represent and
warrant,  individually and not severally, to Mehta that each has not assigned or
transferred any of their respective rights concerning the Action.

                  (b) BINDING  AGREEMENT.  This Agreement  shall be binding upon
each of the  Parties  and upon their  respective  present  or former  directors,
partners, principals, officers, employees, agents, trustees, attorneys, insurers
and  reinsurers,   parents,  subsidiaries,   affiliates,   divisions,  managers,
representatives,  predecessors or successors,  partnerships or corporations  and
their respective heirs, administrators,  successors and assigns. If any fact now
believed to be true is found hereafter to be other than, or different from, that
which is now believed,  each Party expressly assumes the risk of such difference
in fact, this Agreement shall be, and will remain, effective notwithstanding any
such difference in fact.

                  (c) RES  JUDICATA;  ATTORNEYS'  FEES.  This  Agreement  may be
pleaded as a full and complete defense to, and used as a basis for an injunction
against, any action, suit or other proceeding that may be instituted, prosecuted
or attempted in breach of this Agreement.  Should any Party institute any action
and  proceeding  to enforce any provision of this  Agreement,  or for damages by
reason  of any  alleged  breach of any  provision  of this  Agreement,  or for a
declaration of such party's rights or  obligations  hereunder,  or for any other
judicial remedy,  the prevailing party shall be entitled to be reimbursed by the
losing  party for all  reasonable  and  necessary  costs and  expenses  incurred
thereby,  including,  but not  limited  to,  attorneys'  fees  for the  services
rendered to the party finally prevailing in any such action or proceeding.

                  (d) NO WAIVER.  Any  Party's  failure  to  enforce  any of the
provisions  of this  Agreement  shall in no way be construed as a waiver of such
provisions.

                  (e)  AMENDMENTS.   No  modification,   amendment,   waiver  or
termination of this  Agreement,  in whole or in part,  shall be valid or binding
unless in a writing signed by each of the parties.

                  (f) NOTICES.  All notices,  payments and other  communications
set  forth  in this  Agreement  are to be  deemed  duly  given  if sent by mail,
registered  or  certified  (return  receipt  requested),  or sent by same-day or
overnight  commercial  service to the applicable party at the following  address
(or such other address for a party as may be specified by like notice):

                                      -11-
<PAGE>

                   IF TO MEHTA:

                            Dr.  Atul M.  Mehta,  Ph.D.
                            76 Walsh  Drive
                            Mahwah, NJ 07430

                   WITH A COPY TO:

                            Edwards & Caldwell LLC
                            P.O. Box 23
                            1600 Route 208
                            Hawthorne, New Jersey 07507
                            Facsimile:  973-636-0505
                            Attention:  John A. Stone, Esq.
                                    Douglas Doyle, Esq.

                            and

                            Howard S. Jacobs
                            KMZ Rosenman
                            575 Madison Ave.
                            New York, New York  10022-2585
                            Facsimile:  212-894-5505

                   IF TO ELITE OR MOORE:

                            Elite Pharmaceuticals, Inc.
                            165 Ludlow Avenue
                            Northvale, NJ 07647
                            Facsimile: 201-750-2755
                            Attention: Mr. John A. Moore, Chairman

                   WITH A COPY TO:

                            Wolff & Samson, P.C.
                            The Offices at Crystal Lake
                            One Boland Drive
                            West Orange, New Jersey 07057
                            Facsimile:  973-530-2284
                            Attention:  Arthur Goldstein, Esq.

                            and

                                      -12-
<PAGE>

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

                  (g)  FURTHER  ASSURANCES.  The  Parties  agree to execute  all
documents  and to do all  things  necessary  to  effectuate  the  terms  of this
Agreement.

                  (h) GOVERNING  LAW. This  Agreement  shall be governed by, and
construed  in  accordance  with,  the laws of the State of New  Jersey  (without
giving effect to any choice or conflict of laws  provisions) as it exists on the
date hereof.  Each of the parties  hereby  agrees that the Court shall  maintain
exclusive  jurisdiction  over  all  actions  or  proceedings  arising  out of or
relating to this Agreement or the transactions contemplated hereby.

                  (i) PRESS RELEASES AND OTHER PUBLIC  FILINGS.  Elite and Mehta
shall  mutually agree to the substance and content of any and all press releases
and other public  filings  relating to the Settlement  Agreement.  To facilitate
Mehta's  review,  Elite shall provide a draft of such proposed press releases or
other  public  filings and Mehta  shall have the right to correct  any  material
inaccuracies  and  eliminate  any  disparaging  comments or  reference to Mehta.
Nothing in this  section is intended  to limit  Elite's  obligation  to properly
disclose the terms of the Settlement Agreement as required by the Securities and
Exchange Commission and its rules and regulations.

                  (j) EXECUTION IN COUNTERPARTS.  This Agreement may be executed
in one or more counterparts, each of which shall be deemed to be an original and
all of which taken together shall constitute one and the same agreement (and all
signatures  need not appear on any one  counterpart),  and this Agreement  shall
become  effective when one or more  counterparts  has been signed by each of the
parties hereto and delivered to each of the other parties hereto.

                  (k) EQUITABLE RELIEF BY MEHTA.  Elite  acknowledges and admits
that a breach of any of the covenants contained in the Agreement may cause Mehta
irreparable  harm or damages that are  difficult or  impossible  to ascertain or
which cannot be compensated monetarily. Therefore, subject to and as part of the
Court's  retained  jurisdiction  pursuant  to  Section  5(h) of this  Settlement
Agreement, Elite agrees that Mehta may seek and be awarded equitable relief as a
result of a breach of this Agreement as permitted by law.

                  (l) EQUITABLE RELIEF BY ELITE.  Mehta  acknowledges and admits
that a breach of any of the  covenants  contained  in this  Agreement  may cause
Elite  irreparable harm or damages that are difficult or impossible to ascertain
or which cannot be compensated monetarily.  Therefore, subject to and as part of
the Court's  retained  jurisdiction  pursuant to Section 5(h) of this Settlement
Agreement, Mehta agrees that Elite may seek and be awarded equitable relief as a
result of a breach of this Agreement as permitted by law.

                            (EXECUTION PAGE FOLLOWS)

                                      -13-
<PAGE>

WE, THE  UNDERSIGNED,  HEREBY  CERTIFY THAT WE HAVE READ THIS ENTIRE  SETTLEMENT
AGREEMENT AND MUTUAL RELEASE AND HAVE HAD THE TERMS HEREIN AND THE  CONSEQUENCES
THEREOF EXPLAINED BY OUR RESPECTIVE ATTORNEYS. WE FULLY UNDERSTAND ALL THE TERMS
AND  CONSEQUENCES  OF THIS  SETTLEMENT  AGREEMENT  AND MUTUAL  RELEASE  AND HAVE
EXECUTED THIS MUTUAL RELEASE OF ALL CLAIMS.

<TABLE>
<CAPTION>
                                                              ELITE PHARMACEUTICALS, INC.

<S>                                                           <C>
Dated:   April 21, 2004                                       By:   /s/ Bernard Berk
                                                              ----------------------------------
                                                                  Name:  Bernard Berk
                                                                  Title:  CEO

Dated:   April 21, 2004                                             /s/ Atul Mehta
                                                              ----------------------------------
                                                              ATUL MEHTA

Solely as to Section 4(b) of this Agreement:

Dated:   April 21, 2004                                             /s/ John A. Moore
                                                              ----------------------------------
                                                              JOHN A. MOORE

Solely as to Sections 3 and 5 of this Agreement:

Dated:   April 21, 2004                                             /s/ Asha Mehta
                                                              ----------------------------------
                                                              ASHA MEHTA

Dated:   April 21, 2004                                             /s/ Anand Mehta
                                                              ----------------------------------
                                                              ANAND MEHTA

Dated:   April 21, 2004                                             /s/ Amar Mehta
                                                              ----------------------------------
                                                              AMAR MEHTA
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
<S>                                                           <C>
                                                              MEHTA PARTNERS

Dated:   April 21, 2004                                       By:   /s/ Atul M. Mehta
                                                                    ----------------------------
                                                                    Name:  Atul M. Mehta
                                                                    Title:  General Partner
</TABLE>

                                      -15-
<PAGE>

                                                                      SCHEDULE I

                                   SCHEDULE OF

                               OTHER MEHTA HOLDERS

---------------------------- ---------------------------- --------------------
 HOLDER                       CLASS OF SHARES OF CAPITAL   NUMBER OF SHARES
                              STOCKOWNED BY SUCH HOLDER
---------------------------- ---------------------------- --------------------
 Asha Mehta                   Elite Common Stock           100,000
---------------------------- ---------------------------- --------------------
 Mehta Partners               Elite Common Stock           200,000
---------------------------- ---------------------------- --------------------
 Atul Mehta C/f Anand Mehta   Elite Common Stock           6,300
---------------------------- ---------------------------- --------------------
 Amar Mehta                   Elite Common Stock           6,300
---------------------------- ---------------------------- --------------------

<PAGE>

                                                                     SCHEDULE II

                                 OPTION SCHEDULE
                                 ---------------
<TABLE>
<CAPTION>
PART I
------------------ ------------- ----------------- --------------- ------------------ --------------------- ------------------------
GRANT DATE         GRANT         ORIGINAL          CURRENT STATUS  EXERCISE PRICE     ORIGINAL EXPIRATION   AGREEMENT OF ELITE IN
                                 VESTING DATE                                         DATE                  CONSIDERATION OF
                                                                                                            SETTLEMENT*
------------------ ------------- ----------------- --------------- ------------------ --------------------- ------------------------
<S>                <C>           <C>               <C>             <C>                <C>                   <C>
03/31/2000         100,000       12/31/2001        Vested          $10.00/share       06/13/2004            Expiration date
                                                                                                            extended to 06/13/2005
------------------ ------------- ----------------- --------------- ------------------ --------------------- ------------------------
03/31/2000         100,000       12/31/2002        Vested          $10.00/share       06/13/2004            Expiration date
                                                                                                            extended to 06/13/2005
------------------ ------------- ----------------- --------------- ------------------ --------------------- ------------------------
01/02/1996         100,000       01/01/1996        Vested          $1.00/share        06/13/2004            Expiration date
                                                                                                            extended to 06/13/2005
------------------ ------------- ----------------- --------------- ------------------ --------------------- ------------------------
01/02/1996         100,000       01/01/1997        Vested          $1.50/share        06/13/2004            Expiration date
                                                                                                            extended to 06/13/2005
------------------ ------------- ----------------- --------------- ------------------ --------------------- ------------------------
01/02/1996         100,000       01/01/1998        Vested          $2.00/share        06/13/2004            Expiration date
                                                                                                            extended to 06/13/2005
------------------ ------------- ----------------- --------------- ------------------ --------------------- ------------------------
01/02/1996         100,000       01/01/1999        Vested          $2.50/share        06/13/2004            Expiration date
                                                                                                            extended to 06/13/2005
------------------ ------------- ----------------- --------------- ------------------ --------------------- ------------------------
01/02/1996         100,000       01/01/2000        Vested          $3.00/share        06/13/2004            Expiration date
                                                                                                            extended to 06/13/2005
------------------ ------------- ----------------- --------------- ------------------ --------------------- ------------------------

PART II
------------------ ------------- ----------------- --------------- ------------------ --------------------- ------------------------
03/31/2000         100,000       12/31/2003        Terminated      $10.00/share       06/13/2001            70,000 options shall
                                                                                                            be deemed vested and
                                                                                                            the expiration date
                                                                                                            shall be extended to
                                                                                                            06/13/2005
------------------ -----------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
<S>                <C>
NET                RESULT MEHTA SHALL HAVE A TOTAL  770,000  OPTIONS TO PURCHASE ELITE COMMON STOCK, WHICH OPTIONS SHALL ALL
                   EXPIRE IF NOT  EXERCISED ON OR BEFORE JUNE 13, 2005. THE OPTIONS  SHALL HAVE VARYING  EXERCISE  PRICES AS
                   FOLLOWS:  270,000  OPTIONS  SHALL  HAVE AN  EXERCISE PRICE OF  $10/SHARE;  100,000  OPTIONS SHALL HAVE AN
                   EXERCISE PRICE OF $1.00/SHARE; 100,000 OPTIONS SHALL HAVE  AN  EXERCISE  PRICE  OF  $1.50/SHARE;  100,000
                   OPTIONS SHALL HAVE AN EXERCISE PRICE OF $2.00/SHARE; 100,000  OPTIONS  SHALL  HAVE AN  EXERCISE  PRICE OF
                   $2.50/SHARE;  100,000 OPTIONS SHALL HAVE AN EXERCISE PRICE OF  $3.00/SHARE.  AS OF THE  EXECUTION OF THIS
                   AGREEMENT, MEHTA SHALL NOT HAVE ANY OTHER OPTIONS TO PURCHASE CAPITAL STOCK OF ELITE.
------------------ -----------------------------------------------------------------------------------------------------------------
</TABLE>

* Expiration shall be subject to section 1(d)(iv).

--------------------------------EXHIBIT 4.4

                                     FORM OF

                            VIPER MOTORCYCLE COMPANY
                      SERIES A 16% CONVERTIBLE SECURED NOTE

Serial No. ___                                        Dated: ____________, 20___

Principal Amount: $______________

VIPER MOTORCYCLE COMPANY, a Minnesota corporation (hereinafter "Maker"), for
value received, hereby promises to pay to the order of: _____________________,
at the address designated below, or to any registered transferee (hereinafter
"Note Holder"), the principal sum of $______________, on the earlier of (i) that
date which is within 150 calendar days of the effective date of the Initial
Public Offering (IPO) of Maker, or (ii) that date which is 18 months after the
above-stated date of this Note, together with interest from the issuance date
hereof until all principal is paid in full at the rate of Sixteen Percent (16%)
per annum, in lawful money of the United States of America.

1.     PART OF CLASS. This Note is one of an issue of Series A 16% Convertible
       Secured Notes authorized to be issued by Maker incident to a limited
       private placement being offered only to accredited investors pursuant to
       a maximum offering of $600,000.

2.     PAYMENT OF INTEREST. Interest shall be paid quarterly during the term
       hereof, provided that such quarterly interest payments shall be made on
       March 31, 2004, June 30,2004, September 30, 2004, December 31,2004, March
       31, 2005, June 30, 2005, September 30,2005 provided that the term of this
       Note has not ended prior thereto due to conversion to common stock of
       Viper or to prior maturity hereof and payment of all principal due
       hereon. The first quarterly payment due March 31, 2004 shall also contain
       any accrued interest from 2003, if applicable.

3.     ACCELERATION OF MATURITY. In the event of any bankruptcy, liquidation,
       dissolution or any other insolvency of Maker, then the Noteholder may
       declare the entire principal and any accrued interest due and payable
       immediately without further notice, demand or presentment.

4.     SECURED STATUS OF NOTE. This Note is secured and collateralized, along
       with all other Notes in its class, by hereby assigning to Noteholders of
       such Notes a security interest in and to all of Maker's tangible and
       intangible assets including Maker's inventory of motorcycle components,
       Maker's development and production and office fixtures and equipment, and
       all Maker's proprietary motorcycle technology, whether presently owned or
       acquired in the future by Maker.

5.     OBLIGATION OF MAKER. This Note shall constitute a binding obligation of
       the Maker until satisfied in full.

<PAGE>

SERIES A 16% CONVERTIBLE SECURED NOTE

6.     INVESTMENT INTENT OF NOTEHOLDER. Noteholder hereby acknowledges and
       represents that Noteholder has acquired this Note for investment and
       without any present view toward resale, transfer or other disposition
       thereof, and that no transfer of this Note will be valid unless made in
       compliance with relevant securities laws restrictions.

7.     COVENANTS OF MAKER. The Maker hereof agrees that for so long as this Note
       or any portion hereof is outstanding, the Maker will:

       i.     Maintain and preserve its corporate existence and all rights,
              franchises, and other authority adequate for the effective conduct
              of its business; maintain its properties, equipment, facilities
              and intellectual property in good status, order and repair; and
              conduct its business in an orderly manner without voluntary
              interruption.

       ii.    Maintain adequate insurance including public liability, property
              damage, fire and other hazards with responsible insurance carriers
              sufficient to protect all property and business operations of
              Maker.

       iii.   Pay and discharge, prior to becoming delinquent, all taxes,
              assessments and governmental charges upon or against the Maker or
              its properties, except to the extent and so long as any of such
              liabilities are being contested by Maker in good faith.

       iv.    Promptly notify Noteholder in writing of any event of default
              hereunder.

       v.     Shall not make any loans or advances to any person or party unless
              in the ordinary course of business, and shall not incur any
              material mortgage, pledge, encumbrance or lien against any
              property of Maker unless for a valid business purpose.

       vi.    Shall not sell, lease, assign or transfer any substantial part of
              its business or fixed assets or intellectual property unless
              consented to in writing by Noteholder.

8.     CONVERSION RIGHTS. The principal of this Note shall be convertible into
       common stock of Maker anytime, and from time to time, at the option of
       Noteholder, at the rate of one share of common stock of Maker for each
       $2.50 principal hereof; provided, however, that in the event Maker
       obtains an effective date from the SEC for its proposed IPO, this Note
       shall mature 150 calendar days thereafter and Noteholder shall exercise
       its conversion right during such 150 calendar day period or Maker will
       pay all principal and accrued interest thereon upon the expiration of
       such 150 calendar days.

       Upon any conversion hereof, only principal shall be converted and any
       accrued interest shall be paid to Noteholder in cash, unless upon such
       conversion date both parties hereto agree in writing to also convert such
       accrued interest amount.

       Maker shall not be required to issue any fractional shares of its common
       stock incident to any conversion hereof, but rather any fractional amount
       shall be rounded off to the nearest whole common share.

                                       2
<PAGE>

SERIES A 16% CONVERTIBLE SECURED NOTE

9.     MANNER OF CONVERSION. In order to convert this Note into common stock of
       Maker, the Noteholder shall surrender this Note to Maker duly endorsed to
       Maker and give written notice to Maker that all or a specified part of
       this Note is being converted, such Notice to specify clearly the amount
       to be converted. As of the time of such written notice, the Noteholder
       shall be treated for all purposes as the record holder of common stock of
       Maker into which this Note or portion thereof is converted. Promptly
       thereafter,

       Maker shall issue and deliver to Noteholder a certificate representing
       the number of common shares of Maker into which this Note or portion
       thereof is being converted, and the amount converted shall be deemed to
       be satisfied and discharged, and the shares of common stock of Maker
       relating to such conversion shall be fully paid and non-assessable. In
       the event only a portion of this Note is converted, Maker shall issue and
       deliver to Noteholder a replacement Note like the one surrendered by
       Noteholder except that it shall be in the correct principal amount, which
       has not been converted.

       Common shares of Maker issued incident to such conversion shall
       constitute restricted securities" of Maker as defined under relevant
       securities laws, and accordingly certificates issued therefore shall bear
       a standard restrictive legend evidencing such restricted nature.

10.    ANTI-DILUTION. If Maker shall change its outstanding common shares
       hereafter by stock dividend, stock split, sale without consideration,
       reorganization, recapitalization, merger or other business combination,
       then and in each such event a proportionate adjustment shall be made to
       the conversion rate of this Note so as to avoid any diminishment or
       enlargement of the conversion terms of this Note.

11.    INVESTMENT REPRESENTATION/LACK OF REGISTRATION. By accepting this Note,
       the Noteholder represents that the principal amount of this Note and all
       shares of common stock of Maker issued incident to any conversion hereof
       have been acquired for Noteholder's own account for long-term investment
       and with no present intention to transfer, resell or otherwise dispose of
       such securities or any part thereof; and Noteholder further agrees that
       any common stock into which this Note is converted shall be legend to
       evidence its status as restricted securities as defined under relevant
       securities laws and regulations.

       Neither this Note nor the shares of common stock issuable upon conversion
       hereof have been registered under the Securities Act of 1933 or any state
       securities laws. Noteholder agrees hereby that prior to any transfer or
       other disposition of such common shares of Maker in the future,
       Noteholder will give written notice to Maker of such proposed transfer or
       disposition and Noteholder further will not make any such transfer or
       disposition unless, in the opinion of counsel of the Maker, either a
       proper registration has become effective or such registration is not
       required due to the existence of a lawful exemption there from.

12.    EVENT OF DEFAULT. The following shall be a default on this Note by Maker:

       i.     Maker shall fail to make any payment of interest or principal to
              Noteholder when due under the terms hereof; or

                                       3
<PAGE>

SERIES A 16% CONVERTIBLE SECURED NOTE

       ii.    Maker shall fail materially to comply with the covenants of Maker
              contained herein and such default shall remain uncured for 30 days
              after written notice thereof from Noteholder to Maker.

       iii.   Maker shall agree to immediately grant Noteholder bonus warrants
              in the event the effective date of the IPO does not occur as
              follows:

              a.     April 1, 2004: ________ warrants exercisable at $1.00 per
                     share for a period of 150 calendar days after the effective
                     date of the IPO; and

              b.     May 1, 2004: _________ warrants exercisable at $1.00 per
                     share for a period of 150 calendar days after the effective
                     date of the IPO.

       iv.    In the event the effective date of the IPO does not occur as
              follows:

              a.     April 1, 2004: The effective interest rate increases to
                     eighteen percent (18%), commencing on April 1, 2004.
                     Interest payments would then be due monthly, rather than
                     quarterly.

              b.     May 1, 2004: The effective interest rate increases to
                     eighteen percent (18%), retroactive, from the commencement
                     date of the note. Interest payments would then be due
                     monthly, rather than quarterly.

13.    REMEDY ON DEFAULT. In the event of any default hereunder, Noteholder
       shall have the option to declare the entire principal amount hereof plus
       any accrued interest hereon to be immediately due and payable without
       further notice, demand, presentment for payment, notice of intention to
       accelerate or acceleration. Maker hereby guarantees payment of this Note
       and waives demand for payment, presentment for payment, notice of
       non-payment, protest, notice of protest, notice of dishonor, notice of
       acceleration of maturity, and any other similar notices. Maker further
       agrees to pay all costs and expenses of collection incurred by
       Noteholder, including reasonable attorney's fees.

14.    TRANSFER. This Note may not be sold, pledged or otherwise transferred to
       any person other than an "accredited investor" as that term is defined in
       Regulation D of the Securities Act of 1933. Any authorized transfer of
       this Note shall be made only by surrendering this Note duly endorsed to
       Maker for cancellation, together with the Noteholder's instructions to
       Maker that a replacement Note of like principal amount shall be issued to
       such qualified transferee.

15.    GENERAL. Noteholder shall not have by any act, delay, omission or
       otherwise be deemed to have waived any of Noteholder's rights or remedies
       set forth herein, and no waiver of any kind shall be valid unless in
       writing and signed by Noteholder. This Note has been executed in the
       State of Minnesota and shall be construed and governed by the laws of
       Minnesota. No modification or amendment of this Note shall be effective
       unless made in writing and signed by both Maker and Noteholder. This Note
       shall be binding upon any successors or assigns of Maker, provided also
       that Maker shall not assign its obligations under this Note without the
       written consent of Noteholder.

                                       4
<PAGE>

SERIES A 16% CONVERTIBLE SECURED NOTE

16.    NOTICES. All demands and notices to be given hereunder shall be delivered
       or mailed to Maker at 5733 Industrial Parkway, New Hope, MN 55428 (or at
       such substituted address notified to Noteholder by Maker); and in the
       case of Noteholder to the address written below (or at such substituted
       address notified to Maker by Noteholder).

IN WITNESS WHEREOF, the Maker has caused this Note to be signed by its duly
authorized officer as of the aforesaid date of issuance.

                                         VIPER MOTORCYCLE COMPANY

                                         By_____________________________________

                                             Its________________________________

                                       5
<PAGE>

SERIES A 16% CONVERTIBLE SECURED NOTE

RESTRICTIVE LEGEND:

THIS NOTE HAS NOT BEEN REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933 OR ANY
STATE BLUE SKY LAWS,  AND  ACCORDINGLY  THIS NOTE MAY NOT BE SOLD,  OFFERED  FOR
SALE,  TRANSFERRED  OR  OTHERWISE  DISPOSED  OF IN THE  ABSENCE OF AN  EFFECTIVE
REGISTRATION  UNDER SUCH RELEVANT  SECURITIES LAWS, OR SATISFYING THE CONDITIONS
OF  AN  APPROPRIATE   EXEMPTION  FROM  SUCH   REGISTRATION   TO  THE  REASONABLE
SATISFACTION OF COUNSEL FOR MAKER.

AGREEMENT OF NOTEHOLDER:

Noteholder hereby confirms and agrees to any representations  made in writing by
Noteholder in this document.

                                       -----------------------------------------
                                                         Signature of Noteholder

                                       -----------------------------------------
                                                        Joint Noteholder, if any

                                       -----------------------------------------
                                          Printed or Typed Name of Noteholder(s)

                                       -----------------------------------------
                                                           Address of Noteholder

                                       -----------------------------------------
                                       City                State             ZIP

                                       6

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