COMMERCIAL SECURITY
                              AGREEMENT


Borrower:
Dynasil Corporation of America A/K/A Dynasil Corporation
385 Cooper Road
West Berlin, NJ 08091

Lender:
Premier Bank Doylestown Office
Corporate Address 379 North Main Street
Doylestown, PA 18901

Grantor:
Dynasil Corporation of America
385 Cooper Road
West Berlin, NJ 08091

DEFINITIONS. The following capitalized words and terms shall have the
following meanings when used in this Agreement. Unless specifically stated to
the contrary, all references to dollar amounts shall mean amounts in lawful
money of the United States of America. Words and terms used in the singular
shall include the plural, and the plural shall include the singular, as the
context may require. Words and terms not otherwise defined in this Agreement
shall have the meanings attributed to such terms in the Uniform Commercial
Code;

Account. The word "Account" means a trade account, account receivable, other
receivable, or other right to payment for goods sold or services rendered
owing to Grantor (or to a third party grantor acceptable to Lender).

Agreement. The word "Agreement" means this Commercial Security Agreement, as
this Commercial Security Agreement may be amended or modified from time to
time, together with all exhibits and schedules attached to this Commercial
Security Agreement from time to time.

Borrower. The word "Borrower" means Dynasil Corporation of America A/K/A
Dynasil Corporation and includes all co-signers and co-makers signing the
Note.

Collateral. The word "Collateral" means all of Grantor's right, title and
interest in and to all the Collateral as described in the Collateral
Description section of this Agreement.

Default. The word "Default" means the Default set forth in this Agreement in
the section titled "Default",

Environmental Laws. The words "Environmental Laws" mean any and all state,
federal and local statutes, regulations and ordinances relating to the
protection of human health or the environment, including without limitation
the Comprehensive Environmental Response, Compensation, and Liability. Act of
1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund
Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"), the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., the
New Jersey Industrial Site Recovery Act, NJSA Section 13:1 K-6 ("ISRA"), the
New Jersey Spill Compensation and Control Act, NJSA 58:10-23.11, et seq., or
other applicable state or federal laws, rules, or regulations adopted
pursuant thereto.

Event of Default. The words "Event of Default" mean any of the events of
default set forth in this Agreement in the default section of this Agreement.

Grantor. The word "Grantor" means Dynasil Corporation of America.

Guaranty. The word "Guaranty" means the guaranty from guarantor, endorser,
surety, or accommodation party to Lender, including without limitation a
guaranty of all or part of the Note.

Hazardous Substances. The words "Hazardous Substances" mean materials that,
because of their quantity, concentration or physical, chemical or infectious
characteristics, may cause or pose a present or potential hazard to human
health or the environment when improperly used, treated, stored, disposed of,
generated, manufactured, transported or otherwise handled. The words
"Hazardous Substances" are used in their very broadest sense and include
without limitation any and all hazardous or toxic substances, materials or
waste as defined by or listed under the Environmental Laws. The term
"Hazardous Substances" also includes, without limitation, petroleum and
petroleum by- products or any fraction thereof and asbestos.

Indebtedness. The word "Indebtedness" means the indebtedness evidenced by the
Note or Related Documents, including all principal and interest together with
all other indebtedness and costs and expenses for which Borrower is
respongible under this Agreement or under any of the Related Documents.
Specifically, without limitation, Indebtedness includes all amounts that may
be indirectly secured by the Cross-Collateralization provision of this
Agreement.

Lender. The word "Lender" means Premier Bank, its successors and assigns.

Note. The word "Note" means the Note executed by Dynasil Corporation of
America A/K/A Dynasil Corporation in the principal amount of $708,889.04
dated April 15, 2004, together with all renewals of, extensions of,
modifications of, refinancings of, consolidations of, and substitutions for
the note or credit agreement.

Property. The word "Property" means all of Grantor's right, title and
interest in and to all the Property as described in the "Collateral
Description" section of this Agreement.

Related Documents. The words "Related Documents" mean all promissory notes,
credit agreements, loan agreements, environmental agreements, guaranties,
security agreements, mortgages, deeds of trust, security deeds, collateral
mortgages, and all other instruments, agreements and documents, whether now
or hereafter existing, executed in connection with the Indebtedness.

THIS COMMERCIAL SECURITY AGREEMENT dated April 15, 2004, is made and executed
among Dynasil Corporation of America ("Grantor"); Dynasil Corporation of
America A/K/A Dynasil Corporation ("Borrower"); and Premier Bank ("Lender").

GRANT OF SECURITY INTEREST. For valuable consideration, Grantor grants to
Lender a security interest in the Collateral to secure the Indebtedness and
agrees that Lender shall have the rights stated in this Agreement with
respect to the Collateral, in addition to all other rights which Lender may
have by law. '

COLLATERAL DESCRIPTION. The word "Collateral" as used in this Agreement means
the following described property, whether now owned or hereafter acquired,
whether now existing or hereafter arising, and wherever located, in which
Grantor is giving to Lender a security interest for the payment of the
Indebtedness and performance of all other obligations under the Note and this
Agreement:

 All Inventory, Chattel Paper, Accounts, Equipment and General Intangibles

In addition, the word "Collateral" also includes all the following, whether
now owned or hereafter acquired, whether now existing or hereafter arising,
and wherever located:

(A) All accessions, attachments, accessories, tools, parts, supplies,
replacements of and additions to any of the collateral described herein,
whether added now or later.

(B) All products and produce of any of the property described in this
Collateral section.

(C) All accounts, general intangibles, instruments, rents, monies, payments,
and all other rights, arising out of a sale, lease, consignment or other
disposition of any of the property described in this Collateral section.

(D) All proceeds (including insurance proceeds) from the sale, destruction,
loss, or other disposition of any of the property described in this
Collateral section, and sums due from a third party who has damaged or
destroyed the Collateral or from that party's insurer, whether due to
judgment, settlement or other process.

(E) All records and data relating to any of the property described in this
Collateral section, whether in the farm of a writing, photograph, microfilm,
microfiche, or electronic media, together with all of Grantor's right, title,
and interest in and to all computer software required to utilize, create,
maintain, and process any such records or data on electronic media.

Despite any other provision of this Agreement, Lender is not granted, and
will not have, a nonpurchase money security interest in household goods, to
the extent such a security interest would be prohibited by applicable law. In
addition, if because of the type of any Property, Lender is required to give
a notice of the right to cancel under Truth in Lending for the Indebtedness,
then Lender will not have a security interest in such Collateral unless and
until such a notice is given.

CROSS-COLLATERALIZATION. In addition to the Note, this Agreement secures all
obligations, debts and liabilities, plus interest thereon, of Borrower to
Lender, or any one or more of them, as well as all claims by Lender against
Borrower or any one or more of them, whether now existing or hereafter
arising, whether related or unrelated to the purpose of the Note, whether
voluntary or otherwise, whether due or not due, direct or indirect,
determined or undetermined, absolute or contingent, liquidated or
unliquidated whether Borrower or Grantor may be liable individually or
jointly with others, whether obligated as guarantor, surety, accommodation
party or otherwise, and whether recovery upon such amounts may be or
hereafter may become barred by any statute of limitations, and whether the
obligation to repay such amounts may be or hereafter may become otherwise
unenforceable.

<PAGE>

                   COMMERCIAL SECURITY AGREEMENT
Loan No:                 (Continued) Page 2







BORROWER'S WAIVERS AND RESPONSIBILITIES. Except as otherwise required under
this Agreement or by applicable law, (A) Borrower agrees that Lender need not
tell Borrower about any action or inaction Lender takes in connection with
this Agreement; (B) Borrower assumes the responsibility for being and keeping
informed about the Collateral; and (C) Borrower waives any defenses that may
arise because of any action or inaction of Lender, including without
limitation any failure of Lender to realize upon the Collateral or any delay
by Lender in realizing upon the Collateral; and Borrower agrees to remain
liable under the Note no matter what action Lender takes or fails to take
under this Agreement.

GRANTOR'S REPRESENTATIONS AND WARRANTIES. Grantor warrants that: (A) this
Agreement is executed at Borrower's request and not at the request of Lender;
(B) Grantor has the full right, power and authority to enter into this
Agreement and to pledge the Collateral to Lender; (C) Grantor has established
adequate means of obtaining from Borrower on a continuing basis information
about Borrower's financial condition; and (D) Lender has made no
representation to Grantor about Borrower or Borrower's creditworthiness.

GRANTOR'S WAIVERS. Grantor waives all requirements of presentment, protest,
demand, and notice of dishonor or non- payment to Borrower or Grantor, or any
other party to the Indebtedness or the Collateral. Lender may do any of the
following with respect to any obligation of any Borrower, without first
obtaining the consent of Grantor: (A) grant any extension of time for any
payment, (B) grant any renewal, (C) permit any modification of payment terms
or other terms, or (D) exchange or release any Collateral or other security.
No such act or failure to act shall affect Lender's rights against Grantor or
the Collateral.

RIGHT OF SETOFF, To the extent permitted by applicable law, Lender reserves a
right of setoff in all Grantor's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Grantor holds
jointly with someone else and all accounts Grantor may open in the future.
However; this does not include any IRA or Keogh accounts, or any trust
accounts for which setoff would be prohibited by law. Grantor authorizes
Lender, to the extent permitted by applicable law, to charge or setoff all
sums owing on the Indebtedness against any and all such accounts, and, at
Lender's option, to administratively freeze all such accounts to allow Lender
to protect Lender's charge and setoff rights provided in this paragraph. .

GRANTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL. With
respect to the Collateral, Grantor represents and promises to Lender that:

Perfection of Security Interest. Grantor agrees to execute financing
statements and to take whatever other actions are requested by Lender to
perfect and continue Lender's security interest in the Collateral. Upon
request of Lender, Grantor will deliver to Lender any and all of the
documents evidencing or constituting the Collateral, and Grantor will note
Lender's interest upon any and all chattel paper if not delivered to Lender
for possession by Lender.

Notices to Lender. Grantor will promptly notify Lender in writing at Lender's
address shown above (or such other addresses as Lender may designate from
time to time) prior to any (1) change in Grantor's name; (2) change in
Grantor's assumed business name(s); (3) change in the management of the
Corporation Grantor; (4) change in the authorized signer(s); (5) change in
Grantor's principal office address; (6) change in Grantor's state of
organization; (7) conversion of Grantor to a new or different type of
business entity; or (8) change in any other aspect of Grantor that directly
or indirectly relates to any agreements between Grantor and Lender. No change
in Grantor's name or state of organization will take effect until after
Lender has received notice.

No Violation. The execution and delivery of this Agreement will not violate
any law or agreement governing Grantor or to which Grantor is a party, and
its certificate or articles of incorporation and bylaws do not prohibit any
term or condition of this Agreement.

Enforceability of Collateral. To the extent the Collateral consists of
accounts, chattel paper, or general intangibles, as defined by the Uniform
Commercial Code, the Collateral is enforceable in accordance with its terms,
is genuine, and fully complies with all applicable laws and regulations
concerning form, content and manner of preparation and execution, and all
persons appearing to be obligated on the Collateral have authority and
capacity to contract and are in fact obligated as they appear to be on the
Collateral. At the time any Account becomes subject to a security interest in
favor of Lender, the Account shall be a good and valid account representing
an undisputed, bona fide indebtedness incurred by the account debtor, for
merchandise held subject to delivery instructions or previously shipped or
delivered pursuant to a contract of sale, or for services previously
performed by Grantor with or for the account debtor. So long as this
Agreement remains in effect, Grantor shall not, without Lender's prior
written consent, compromise, settle, adjust, or extend payment under or with
regard to any such Accounts. There shall be no setoffs or counterclaims
against any of the Collateral, and no agreement shall have been made under
which any deductions or discounts may be claimed concerning the Collateral
except those disclosed to Lender in writing.

Location of the Collateral. Except in the ordinary course of Grantor's
business, .Grantor agrees to keep the Collateral (or to the extent the
Collateral consists of intangible property such as accounts or general
intangibles, the records concerning the Collateral) at Grantor's address
shown above or at such other locations as are acceptable to Lender. Upon
Lender's request, Grantor will deliver to Lender in form satisfactory to
Lender a schedule of real properties and Collateral locations relating to
Grantor's operations, including without limitation the following: (1) all
real property Grantor owns or is purchasing; (2) all real property Grantor is
renting or leasing; (3) all storage facilities Grantor owns, rents, leases,
or uses; and (4) all other properties where Collateral is or may be located.

Removal of the Collateral. Except in the ordinary course of Grantor's
business, including the sales of inventory, Grantor shall not remove the
Collateral from its existing location without Lender's prior written consent.
To the extent that the Collateral consists of vehicles, or other titled
property, Grantor shall not take or permit any action which would require
application for certificates of title for the vehicles outside the State of
New Jersey, without Lender's prior written consent. Grantor shall, whenever
requested, advise Lender of the exact location of the Collateral.

Transactions Involving Collateral. Except for inventory sold or accounts
collected in the ordinary course of Grantor's business; or as otherwise
provided for in this Agreement, Grantor shall not sell, offer to sell, or
otherwise transfer or dispose of the Collateral. While Grantor is not in
default under this Agreement, Grantor may sell inventory, but only in the
ordinary course of its business and only to buyers who qualify as a buyer in
the ordinary course of business. A sale in the ordinary course of Grantor's
business does not include a transfer in partial or total satisfaction of a
debt or any bulk sale. Grantor shall not pledge, mortgage, encumber or
otherwise permit the Collateral to be subject to any lien, security interest,
encumbrance, or charge, other than the security interest provided for in this
Agreement, without the prior written consent of Lender. This includes
security interests even if junior in right to the security interests granted
under this Agreement. Unless waived by Lender, all proceeds from any
disposition of the Collateral (for whatever reason) shall be held in trust
for Lender and shall not be commingled with any other funds; provided
however, this requirement shall not constitute consent by Lender to any sale
or other disposition. Upon receipt, Grantor shall immediately deliver any
such proceeds to Lender.

Title. Grantor represents and warrants to Lender that Grantor holds good and
marketable title to the Collateral, free and clear of all liens and
encumbrances except for the lien of this Agreement. No financing statement
covering any of the Collateral is on file in any public office other than
those which reflect the security interest created by this Agreement or to
which Lender has specifically consented. Grantor shall defend Lender's rights
in the Collateral against the claims and demands of all other persons.

Repairs and Maintenance. Grantor agrees to keep and maintain, and to cause
others to keep and maintain, the Collateral in good order, repair and
condition at all times while this Agreement remains in effect. Grantor
further agrees to pay when due all claims for work done on, or services
rendered or material furnished in connection with the Collateral so that no
lien or encumbrance may ever attach to or be filed against the Collateral.

Inspection of Collateral. Lender and Lender's designated representatives and
agents shall have the right at all reasonable times to examine and inspect
the Collateral wherever located.

Taxes, Assessments and Liens. Grantor will pay when due all taxes,
assessments and liens upon the Collateral, its use or operation, upon this
Agreement, upon any promissory note or notes evidencing the Indebtedness, or
upon any of the other Related Documents. Grantor may withhold any such
payment or may elect to contest any lien if Grantor is in good faith
conducting an appropriate proceeding to contest the obligation to pay and so
long as Lender's interest in the Collateral is not jeopardized in Lender's
sole opinion. If the Collateral is subjected to a lien which is not
discharged within fifteen (15) days, Grantor shall deposit with Lender cash,
a sufficient corporate surety bond or other security satisfactory to Lender
in an amount adequate to provide for the discharge of the lien plus any
interest, costs, attorneys' fees or other charges that could accrue as a
result of foreclosure or sale of the Collateral. In any contest Grantor shall
defend itself and Lender and shall satisfy any final adverse judgment before
enforcement against the Collateral. Grantor shall name Lender as an
additional obligee under any surety bond furnished in the contest
proceedings. Grantor further agrees to furnish Lender with evidence that such
taxes, assessments, and governmental and other charges have been paid in full
and in a timely manner. Grantor may withhold any such payment or may elect to
contest any lien if Grantor is in good faith conducting an appropriate
proceeding to contest the obligation to pay and so long as Lender's interest
in the Collateral is not jeopardized.

Compliance with Governmental Requirements. Grantor shall comply promptly with
all laws, ordinances, rules and regulations of all governmental authorities,
now or hereafter in effect, applicable to the ownership, production,
disposition, or use of the Collateral, including all laws or regulations
relating to the undue erosion of highly-erodible land or relating to the
conversion of wetlands for the production of an agricultural product or
commodity. Grantor may contest in good faith any such law, ordinance or
regulation and withhold compliance during any proceeding, including
appropriate appeals, so long as Lender's interest in the Collateral, in
Lender's opinion, is not jeopardized.

Hazardous Substances. Grantor represents and warrants that the Collateral
never has been, and never will be so long as this Agreement

<PAGE>


               COMMERCIAL SECURITY AGREEMENT
Loan No:                 (Continued) Page 3



remains a lien on the Collateral, used in violation of any Environmental Laws
or for the generation, manufacture, storage, transportation, treatment,
disposal, release or threatened release of any Hazardous Substance. The
representations and warranties contained herein are based on Grantor's due
diligence in investigating the Collateral for Hazardous Substances. Grantor
hereby (1) releases and waives any future claims against Lender for indemnity
or contribution in the event Grantor becomes liable for cleanup or other
costs under any Environmental Laws, and (2) agrees to indemnify and hold
harmless Lender against any and all claims and losses resulting from a breach
of this provision of this Agreement. This obligation to indemnify shall
survive the payment of the Indebtedness and the satisfaction of this
Agreement.

Maintenance of Casualty Insurance. Grantor shall procure and maintain all
risks insurance, including without limitation fire, theft and liability
coverage together with such other insurance as Lender may require with
respect to the Collateral, in form, amounts, coverages and basis reasonably
acceptable to Lender and issued by a company or companies reasonably
acceptable to Lender. Grantor, upon request of Lender, will deliver to Lender
from time to time the policies or certificates of insurance in form
satisfactory to Lender, including stipulations that coverages will not be
cancelled or diminished without at least thirty (30) days' prior written
notice to Lender and not including any disclaimer of the insurer's liability
for failure to give such a notice. Each insurance policy also shall include
an endorsement providing that coverage in favor of Lender will not be
impaired in any way by any act, omission or default of Grantor or any other
person. In connection with all policies covering assets in which Lender holds
or is offered a security interest, Grantor will provide.-Lender with such
loss payable or other endorsements as Lender may require. If Grantor at any
time fails to obtain or maintain any insurance as required under this
Agreement, Lender may (but shall not be obligated to) obtain such insurance
as Lender deems appropriate, including if Lender so chooses "single interest
insurance," which will cover only Lender's interest in the Collateral.

Application of Insurance Proceeds. Grantor shall promptly notify Lender of
any loss or damage to the Collateral. Lender may make proof of loss if
Grantor fails to do so within fifteen (15) days of the casualty. All proceeds
of any insurance on the Collateral, including accrued proceeds thereon, shall
be held by Lender as part of the Collateral. If Lender consents to repair or
replacement of the damaged or destroyed Collateral, Lender shall, upon
satisfactory proof of expenditure, pay or reimburse Grantor from the proceeds
for the reasonable cost of repair or restoration. If Lender does not consent
to repair or replacement of the Collateral, Lender shall retain a sufficient
amount of the proceeds to pay all of the Indebtedness, and shall pay the
balance to Grantor. Any proceeds which have not been disbursed within six (6)
months after their receipt and which Grantor has not committed to the repair
or restoration of the Collateral shall be used to prepay the Indebtedness.

Insurance Reserves. Lender may require Grantor to maintain with Lender
reserves for payment of insurance premiums, which reserves shall be created
by monthly payments from Grantor of a sum estimated by Lender to be
sufficient to produce, at least fifteen (15) days before the premium due
date, amounts at least equal to the insurance premiums to be paid. If fifteen
1151 days before payment is due, the reserve funds are insufficient, Grantor
shall upon demand pay any deficiency to Lender. The reserve funds shall be
held by Lender as a general deposit and shall constitute a non-
interest-bearing account which Lender may satisfy by payment of the insurance
premiums required to be paid by Grantor as they become due. Lender does not
hold the reserve funds in trust for Grantor, and Lender is not the agent of
Grantor for payment of the insurance premiums required to be paid by Grantor.
The responsibility for the payment of premiums shall remain Grantor's sole
responsibility.

Insurance Reports. Grantor, upon request of Lender, shall furnish to Lender
reports on each existing policy of insurance showing such information as
Lender may reasonably request including the following: (1) the name of the
insurer; (2) the risks insured; (3) the amount of the policy; (4) the
property insured; (5) the then current value on the basis of which insurance
has been obtained and the manner of determining that value; and (6) the
expiration date of the policy. In addition, Grantor shall upon request by
Lender (however not more often than annually) have an independent appraiser
satisfactory to Lender determine, as applicable, the cash value or
replacement cost of the Collateral.

Financing Statements. Grantor authorizes Lender to file a UCC-1 financing
statement, or alternatively, a copy of this Agreement to perfect Lender's
security interest. At Lender's request, Grantor additionally agrees to sign
all other documents that are necessary to perfect, protect, and continue
Lender's security interest in the Property. Grantor will pay all filing fees,
title transfer fees, and other fees and costs involved unless prohibited by
law or unless Lender is required by law to pay such fees and costs. Grantor
irrevocably appoints Lender to execute financing statements and documents of
title in Grantor's name and to execute all documents necessary to transfer
title if there is a default. Lender may file a copy of this Agreement as a
financing statement. If Grantor changes Grantor's name or address, or the
name or address of any person granting a security interest under this
Agreement changes, Grantor will promptly notify the Lender of such change.

GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and
except as otherwise provided below with respect to accounts, Grantor may have
possession of the tangible personal property and beneficial use of all the
Collateral and may use it in any lawful manner not inconsistent with this
Agreement or the Related Documents, provided that Grantor's right to
possession and beneficial use shall not apply to any Collateral where
possession of the Collateral by Lender is required by law to perfect Lender's
security interest in such Collateral. Until otherwise notified by Lender,
Grantor may collect any of the Collateral consisting of accounts. At any time
and even though no Event of Default exists, Lender may exercise its rights to
collect the accounts and to notify account debtors to make payments directly
to Lender for application to the Indebtedness. If Lender at any time has
possession of any Collateral, whether before or after an Event of Default,
Lender shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral if Lender takes such action for that purpose
as Grantor shall request or as Lender, in Lender's sole discretion, shall
deem appropriate under the circumstances, but failure to honor any request by
Grantor shall not of itself be deemed to be a failure to exercise reasonable
care. Lender shall not be required to take any steps necessary to preserve
any rights in the Collateral against prior parties, nor to protect, preserve
or maintain any security interest given to secure the Indebtedness.

LENDER'S EXPENDITURES. If any action or proceeding is commenced that would
materially affect Lender's interest in the Collateral or if Grantor fails to
comply with any provision of this Agreement or any Related Documents,
including but not limited to Grantor's failure to discharge or pay when due
any amounts Grantor is required to discharge or pay under this Agreement or
any Related Documents, Lender on Grantor's behalf may (but shall not be
obligated to) take any action that Lender deems appropriate, including but
not limited to discharging or paying all taxes, liens, security interests,
encumbrances and other claims, at any time levied or placed on the Collateral
and paying all costs for insuring, maintaining and preserving the Collateral.
All such expenditures incurred or paid by Lender for such purposes will then
bear interest at the rate charged under the Note from the date incurred or
paid by Lender to the date of repayment by Grantor. All such expenses will
become a part of the Indebtedness and, at Lender's option, will (A) be
payable on demand; (B) be added to the balance of the Note and be apportioned
among and be payable with any installment payments to become due during
either (1) the term of any applicable insurance policy; or (2) the remaining
term of the Note; or (C) be treated as a balloon payment which will be due
and payable at the Note's maturity. The Agreement also will secure payment of
these amounts. Such right shall be in addition to all other rights and
remedies to which Lender may be entitled upon Default.

DEFAULT. Each of the following shall constitute an Event of Default under
this Agreement:

Payment Default. Borrower fails to make any payment when due under the
Indebtedness.

Other Defaults. Borrower or Grantor fails to comply with or to perform any
other term, obligation, covenant or condition contained in this Agreement or
in any of the Related Documents or to comply with or to perform any term,
obligation, covenant or condition contained in any other agreement between
Lender and Borrower or Grantor.

Default in Favor of Third Parties. Should Borrower or any Grantor default
under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person
that may materially affect any of Grantor's property or Borrower's or any
Grantor's ability to repay the Indebtedness or perform their respective
obligations under this Agreement or any of the Related Documents.

False Statements. Any warranty, representation or statement made or furnished
to Lender by Borrower or Grantor or on Borrower's or Grantor's behalf under
this Agreement or the Related Documents is false or misleading in any
material respect, either now or at the time made or furnished or becomes
false or misleading at any time thereafter.

Defective Collateralization. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any Related
Documents to create a valid and perfected security interest or lien) at any
time and for any reason.

Insolvency. The dissolution or termination of Borrower's or Grantor's
existence as a going business, the insolvency of Borrower or Grantor, the
appointment of a receiver for any part of Borrower's or Grantor's property,
any assignment for the benefit of creditors, any type of creditor workout, or
the commencement of any proceeding under any bankruptcy or insolvency laws by
or against Borrower or Grantor;

Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self- help, repossession or any
other method, by any creditor of Borrower or Grantor or by any governmental
agency against any collateral securing the Indebtedness. This includes a
garnishment of any of Borrower's or Grantor's accounts, including deposit
accounts, with Lender. However, this Event of Default shall not apply if
there is a good faith dispute by Borrower or Grantor as to the validity or
reasonableness of the claim which is the basis of the creditor or forfeiture
proceeding and if Borrower or Grantor gives Lender written notice of the
creditor or forfeiture proceeding and deposits with Lender monies or a surety
bond for the creditor or forfeiture proceeding, in an amount determined by
Lender, in its sole discretion, as being an adequate reserve or bond for the
dispute.



<PAGE>

                   COMMERCIAL SECURITY AGREEMENT
Loan No;                  (Continued) Page 4





Events Affecting Guarantor. Any of the preceding events occurs with respect
to guarantor, endorser, surety, or accommodation party of any of the
Indebtedness or guarantor, endorser, surety, or accommodation party dies or
becomes incompetent or revokes or disputes the validity of, or liability
under, any Guaranty of the Indebtedness,

Adverse Change. A material adverse change occurs in Borrower's or Grantor's
financial condition, or Lender believes the prospect of payment or
performance of the Indebtedness is impaired.

Insecurity. Lender in good faith believes itself insecure.

Cure Provisions. If any default, other than a default in payment is curable
and if Grantor has not been given a notice of a breach of the same provision
of this Agreement within the preceding twelve (12) months, it may be cured
(and no event of default will have occurred) if Grantor, after receiving
written notice, from Lender demanding cure of such default: (1) cures the
default within fifteen (15) days; or (2) if the cure requires more than
fifteen (15) days, immediately initiates steps which Lender deems in Lender's
sole discretion to be sufficient to cure the default and thereafter continues
and completes all reasonable and necessary steps sufficient to produce
compliance as soon as reasonably practical.

RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a
secured party under the New Jersey Uniform Commercial Code. (n addition and
without limitation, Lender may exercise any one or more of the following
rights and remedies;

 Accelerate Indebtedness. Lender may declare the entire Indebtedness,
including any prepayment penalty which Borrower would be required to pay,
immediately due and payable, without notice of any kind to Borrower or
Grantor.

 Assemble Collateral. Lender may require Grantor to deliver to Lender all or
any portion of the Collateral and any and all certificates of title and other
documents relating to the Collateral. Lender may require Grantor to assemble
the Collateral and make it available to Lender at a place to be designated by
Lender. Lender also shall have full power to enter upon the property of
Grantor to take possession of and remove the Collateral. If the Collateral
contains other goods not covered by this Agreement at the time of
repossession, Grantor agrees Lender may take such other goods, provided that
Lender makes reasonable efforts to return them to Grantor after repossession.

 Sell the Collateral. Lender shall have full power to sell, lease, transfer,
or otherwise deal with the Collateral or proceeds thereof in Lender's own
name or that of Grantor. Lender may sell the Collateral at public auction or
private sale. Unless the Collateral threatens to decline speedily in value or
is of a type customarily sold on a recognized market, Lender will give
Grantor, and other persons as required by law, reasonable notice of the time
and place of any public sale, or the time after which any private sale or any
other disposition of the Collateral is to be made. However, no notice need be
provided to any person who, after Event of Default occurs, enters into and
authenticates an agreement waiving that person's right to notification of
sale. The requirements of reasonable notice shall be met if such notice is
given at least ten (10) days before the time of the sale or disposition. All
expenses relating to the disposition of the Collateral, including without
limitation the expenses of retaking, holding, insuring, preparing for sale
and selling the Collateral, shall become a part of the Indebtedness secured
by this Agreement and shall be payable on demand, with interest at the Note
rate from date of expenditure until repaid.

 Appoint Receiver. Lender shall have the right to have a receiver appointed
to take possession of all or any part of the Collateral, with the power to
protect and preserve the Collateral, to operate the Collateral preceding
foreclosure or sale, and to collect the Leases and Rents from the Collateral
and apply the proceeds, over and above the cost of the receivership, against
the Indebtedness. The receiver may serve without bond if permitted by law.
Lender's right to the appointment of a receiver shall exist whether or not
the apparent value of the Collateral exceeds the Indebtedness by a
substantial amount. Employment by Lender shall not disqualify a person from
serving as a receiver,

 Collect Revenues, Apply Accounts. Lender, either itself or through a
receiver, may collect the payments, rents, income, and revenues from the
Collateral. Lender may at any time in Lender's discretion transfer any
Collateral into Lender's own name or that of Lender's nominee and receive the
payments, rents, income, and revenues therefrom and hold the same as security
for the Indebtedness or apply it to payment of the Indebtedness in such order
of preference as Lender may determine. Insofar as the Collateral consists of
accounts, general intangibles, insurance policies, instruments, chattel
paper, choses in action, or similar property, Lender may demand, collect,
receipt for, settle, compromise, adjust, sue for, foreclose, or realize on
the Collateral as Lender may determine, whether or not Indebtedness or
Collateral is then due. For these purposes, Lender may, on behalf of and in
the name of Grantor, receive, open and dispose of mail addressed to Grantor;
change any address to which mail and payments are to be sent; and endorse
notes, checks, drafts, money orders, documents of title, instruments and
items pertaining to payment, shipment, or storage of any Collateral. To
facilitate collection, Lender may notify account debtors and obligors on any
Collateral to make payments directly to Lender.

 Other Rights and Remedies. Lender shall have all the rights and remedies of
a secured creditor under the provisions of the Uniform Commercial Code, as
may be amended from time to time. In addition, Lender shall have and may
exercise any or all other rights and remedies it may have available at law,
in equity, or otherwise.

 Election of Remedies. Except as may be prohibited by applicable law, all of
Lender's rights and remedies, whether evidenced by this Agreement, the
Related Documents, or by any other writing, shall be cumulative and may be
exercised singularly or concurrently. Election by Lender to pursue any remedy
shall not exclude pursuit of any other remedy, and an election to make
expenditures or to take action to perform an obligation of Grantor under this
Agreement, after Grantor's failure to perform, shall not affect Lender's
right to declare a default and exercise its remedies.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part
of this Agreement:

Amendments. This Agreement, together with any Related Documents, constitutes
the entire understanding and agreement of the parties as to the matters set
forth in this Agreement. No alteration of or amendment to this Agreement
shall be effective unless given in writing and signed by the party or parties
sought to be charged or bound by the alteration or amendment.

Attorneys' Fees; Expenses. Grantor agrees to pay upon demand all of Lender's
costs and expenses, including Lender's attorneys' fees and Lender's legal
expenses, incurred in connection with the enforcement of this Agreement.
Lender may hire or pay someone else to help enforce this Agreement, and
Grantor shall pay the costs and expenses of such enforcement. Costs and
expenses include Lender's attorneys' fees and legal expenses whether or not
there is a lawsuit, including attorneys' fees and legal expenses for
bankruptcy proceedings (including efforts to modify or vacate any automatic
stay or injunction), appeals, and any anticipated post-judgment collection
services. Grantor also shall pay all court costs and such additional fees as
may be directed by the court.

Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.

Governing Law. This Agreement will be governed by, construed and enforced in
accordance with federal law and the laws of the Commonwealth of Pennsylvania,
except and only to the extent of procedural matters related to the perfection
and enforcement of Lender's rights and remedies against the Collateral, which
matters shall be governed by the laws of the State of New Jersey. However; in
the event that the enforceability or validity of any provision of this
Agreement is challenged or questioned, such provision shall be governed by
whichever applicable state or federal law would uphold or would enforce such
challenged or questioned provision. The loan transaction which is evidenced
by the Note and this Agreement has been applied for, considered, approved and
made, and all necessary loan documents have been accepted by Lender in the
Commonwealth of Pennsylvania.

Joint and Several Liability. All obligations of Borrower and Grantor under
this Agreement shall be joint and several, and all references to Grantor
shall mean each and every Grantor, and all references to Borrower shall mean
each and every Borrower. This means that each Borrower and Grantor signing
below is responsible for all obligations in this Agreement. Where any one or
more of the parties is a corporation, partnership, limited liability company
or similar entity, it is not necessary for Lender to inquire into the powers
of any of the officers, directors, partners, members, or other agents acting
or purporting to act on the entity's behalf, and any obligations made or
created in reliance upon the professed exercise of such powers shall be
guaranteed under this Agreement.

No Waiver by Lender. Lender shall not be deemed to have waived any rights
under this Agreement unless such waiver is given in writing and signed by
Lender. No delay or omission on the part of Lender in exercising any right
shall operate as a waiver of such right or any other right. A waiver by
Lender of a provision of this Agreement shall not prejudice or constitute a
waiver of Lender's right otherwise to demand strict compliance with that
provision or any other provision of this Agreement. No prior waiver by
Lender, nor any course of dealing between Lender and Grantor, shall
constitute a waiver of any of Lender's rights or of any of Grantor's
obligations as to any future transactions. Whenever the consent of Lender is
required under this Agreement, the granting of such consent by Lender in any
instance shall not constitute continuing consent to subsequent instances
where such consent is required and in all cases such consent may be granted
or withheld in the sole discretion of Lender.

Notices. Any notice required to be given under this Agreement shall be given
in writing, and shall be effective when actually delivered, when actually
received by telefacsimile (unless otherwise required by law), when deposited
with a nationally recognized overnight courier, or, if mailed, when deposited
in the United States mail, as first class, certified or registered mail
postage prepaid, directed to the addresses shown near the beginning of this
Agreement. Any party may change its address for notices under this Agreement
by giving formal written notice to the other parties, specifying that the
purpose of the notice is to change the party's address. For notice purposes,
Grantor agrees

<PAGE>

                     COMMERCIAL SECURITY AGREEMENT
Loan No:                   (Continued) Page 5



to keep Lender informed at all times of Grantor's current address. Unless
otherwise 'provided or required by law, if there is more than one Grantor,
any notice given by Lender to any Grantor is deemed to be notice given to all
Grantors.

Power of Attorney. Grantor hereby appoints Lender as Grantor's irrevocable
attorney-in-fact for the purpose of executing any documents necessary to
perfect, amend, or to continue the security interest granted in this
Agreement or to demand termination of filings of other secured parties.
Lender may at any time, and without further authorization from Grantor, file
a carbon, photographic or other reproduction of any financing statement or of
this Agreement for use as a financing statement. Grantor will reimburse
Lender for all expenses for the perfection and the continuation of the
perfection of Lender's security interest in the Collateral.

Severability. If a court of competent jurisdiction finds any provision of
this Agreement to be illegal, invalid, or unenforceable as to any
circumstance, that finding shall not make the offending provision illegal,
invalid, or unenforceable as to any other circumstance. If feasible, the
offending provision shall be considered modified so that it becomes legal,
valid and enforceable. If the offending provision cannot be so modified, it
shall be considered deleted from this Agreement. Unless otherwise required by
law, the illegality, invalidity, or unenforceability of any provision of this
Agreement shall not affect the legality, validity or enforceability of any
other provision of this Agreement.

Successors and Assigns. Subject to any limitations stated in this Agreement
on transfer of Grantor's interest, this Agreement shall be binding upon and
inure to the benefit of the parties, their successors and assigns. If
ownership of the Collateral becomes vested in a person other than Grantor,
Lender, without notice to Grantor, may deal with Grantor's successors with
reference to this Agreement and the Indebtedness by way of forbearance or
extension without releasing Grantor from the obligations of this Agreement or
liability under the Indebtedness.

Survival of Representations and Warranties. All representations, warranties,
and agreements made by Grantor in this Agreement shall survive the execution
and delivery of this Agreement, shall be continuing in nature, and shall
remain in full force and effect until such time as Borrower's Indebtedness
shall be paid in full.

Time is of the Essence. Time is of the essence in the performance of this
Agreement.

Waive Jury. All parties to this Agreement hereby waive the right to any jury
trial in any action, proceeding, or counterclaim brought by any party against
any other party.

BORROWER AND GRANTOR HAVE READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS
COMMERCIAL SECURITY AGREEMENT AND AGREE TO ITS TERMS. THIS AGREEMENT IS DATED
APRIL 15, 2004;


GRANTOR:

DYNASIL CORPORATION OF AMERICA A/K/A DYNASIL CORPORATION
(Seal)

/s/ John Kane
John Kane, President


/s/ Patricia Johnson
Patricia Johnson, Assistant Secretary

BORROWER:

DYNASIL CORPORATION OF AMERICA A/K/A DYNASIL CORPORATION
(Seal)

/s/ John Kane
John Kane, President


/s/ Patricia Johnson
Patricia Johnson, Assistant Secretary