EXHIBIT 10.16
                                                                   -------------

                              DIRECTOR STOCK OPTION

                                   GRANTED BY

                             ABLE LABORATORIES, INC.

                       (hereinafter called the "Company")

                                       TO

                              DHANANJAY G. WADEKAR


                        (hereinafter called the "Holder")



         For valuable consideration, the receipt of which is hereby
acknowledged, the Company hereby grants to the Holder the following option:

         FIRST: Subject to the terms and conditions hereinafter set forth, the
Holder is hereby given the right and option to purchase from the Company shares
of the common stock, $.01 par value per share, ("Common Stock"), of the Company.
Schedule A hereto, the provisions of which are incorporated by reference herein,
sets forth (a) the maximum number of shares that the Holder may purchase upon
exercise of this Option, (b) the exercise price per share of Common Stock
purchasable hereunder, (c) the expiration date of this Option, (d) the vesting
rate, if any and (e) certain other terms and conditions applicable to this
Option.

         This Option shall be exercised in whole or in part by the Holder's
delivery to the Company of written notice (the "Notice of Exercise") setting
forth the number of shares with respect to which this Option is to be exercised,
together with (a) cash in an amount, or a check, bank draft or postal or express
money order payable in an amount, equal to the aggregate exercise price for the
shares being purchased, (b) with the consent of the Board (which term shall
herein include the compensation committee of the Board), shares of Common Stock
having a fair market value equal to such aggregate exercise price; (c) with the
consent of the Board, such other consideration that is acceptable to the Board
and that has a fair market value, as determined by the Board, equal to such
aggregate exercise price; or (d) with the consent of the Board, any combination
of the foregoing. The "fair market value" of the Common Stock shall equal (i)
the closing price per share on the date of grant of the Option as reported by
the National Market System or another automated quotation system of the National
Association of Securities Dealers, Inc., including the OTC Bulletin Board, (ii)
if the Common Stock is not quoted on any such system, as reported by a national
stock exchange or (iii) if the Common Stock is not listed on such an exchange,
the fair market value as determined by the Board.

<PAGE>

         SECOND: The Company, in its discretion, may file a registration
statement on Form S-8 under the Securities Act of 1933, as amended, to register
shares of Common Stock reserved for issuance under this option. At any time at
which such a registration statement is not in effect, it shall be a condition
precedent to any exercise of this Option that the Holder shall deliver to the
Company a customary "investment letter" satisfactory to the Company and its
counsel in which, among other things, the Holder shall (a) state that he or she
is acquiring shares of Common Stock subject to the Option for his or her own
account for investment and not with a view to the resale or distribution thereof
and (b) acknowledge that those shares are not freely transferable except in
compliance with federal and state securities laws.

         THIRD: In order to exercise this option in whole or in part, the Holder
shall deliver to the Company the Notice of Exercise and related investment
letter, payment of exercise price pursuant to Paragraphs First and Second hereof
and any agreement not inconsistent with that may then be required by the Company
in its sole discretion. As promptly as practicable after receipt by the Company,
such materials, the Company shall deliver to the Holder (or if any other
individual or individuals are exercising this Option, to such individual or
individuals) a certificate registered in the name of the Holder (or the names of
the other individual or individuals exercising this Option) and representing the
number of shares with respect to which this Option is then being exercised;
PROVIDED, HOWEVER, that if any law or regulation or order of the Securities and
Exchange Commission or any other body having jurisdiction in the premises shall
require the Company or the Holder (or the individual or individuals exercising
this Option) to take any action in connection with the shares then being
purchased, the date for the delivery of the certificate for such shares shall be
extended for the period necessary to take and complete such action. The Company
may imprint upon said certificate such legends as counsel for the Company may
consider appropriate. Delivery by the Company of the certificates for such
shares shall be deemed effected for all purposes when the Company or a stock
transfer agent of the Company shall have deposited such certificates in the
United States mail, addressed to the Holder, at the address specified in the
Notice. The Company will pay all fees or expenses necessarily incurred by the
Company in connection with the issuance and delivery of shares pursuant to the
exercise of this Option.

         The Company will, at all times while any portion of this Option is
outstanding, reserve and keep available, out of shares of its authorized and
unissued Common Stock or shares of Common Stock held in treasury, a sufficient
number of shares of its Common Stock to satisfy the requirements of this Option.

         FOURTH: If the Company shall effect any subdivision or consolidation of
shares of its stock or other capital readjustment, the payment of a stock
dividend, or other increase or reduction of the number of shares outstanding, in
any such case without receiving compensation therefor in money, services or
property, then the number, class and per share price of shares of stock subject
to this Option shall be appropriately adjusted in such a manner as to entitle
the Holder to receive upon exercise of this Option, for the same aggregate cash
consideration, the same total number and class of shares as he or she would have
received as a result of the event requiring the adjustment had he or she
exercised this Option in full immediately prior to such event.

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<PAGE>

         If the Company shall be a party to a reorganization or merger with one
or more other corporations (whether or not the Company is the surviving or
resulting corporation), shall consolidate with or into one or more other
corporations, shall be liquidated, or shall sell or otherwise dispose of
substantially all of its assets to another corporation (each a "Transaction"),
then:

                  (a) subject to the provisions of clauses (b) and (c) below,
         after the effective date of the Transaction, the Holder of this Option
         shall be entitled, upon exercise hereof and at no additional cost, to
         receive shares of Common Stock or, if applicable, shares of such other
         stock or other securities, cash or property as the holders of shares of
         Common Stock received pursuant to the terms of the Transaction;

                  (b) the Board may accelerate the time for exercise of this
         Option to a date prior to the effective date of the Transaction, as
         specified by the Board; or

                  (c) this Option may be canceled by the Board as of the
         effective date of the Transaction, PROVIDED that (i) notice of such
         cancellation shall have been given to the Holder and (ii) the Holder
         shall have the right to exercise this Option to the extent the same is
         then exercisable or, if the Board shall have accelerated the time for
         exercise of this Option, in full during the thirty-day period preceding
         the effective date of the Transaction.

         Except as hereinbefore expressly provided, the issue by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, for cash or property, or for labor or services, either upon direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock then
subject to this Option.

         FIFTH: Neither the Holder nor any other person shall, by virtue of the
granting of this Option, be deemed for any purpose to be the owner of any shares
of Common Stock subject to this Option or to be entitled to the rights or
privileges of a holder of such shares unless and until this Option has been
exercised pursuant to the terms hereof with respect to such shares and the
Company has issued and delivered the shares to the Holder.

         SIXTH: This Option is not transferable by the Holder or by operation of
law, otherwise than by will or under the laws of descent and distribution. This
Option is exercisable, during the Holder's lifetime, only by the Holder.

         In the event that the Holder's employment (which term shall
"employment" include service as a director with the Company or any subsidiary is
terminated by the Holder or by the Company without "Cause" (as defined
hereinafter) other than in connection with the Holder's death or permanent and
total disability, the Holder shall nonetheless have the right to exercise this
Option after the date on which the Holder so ceases to be an employee of the
Company or

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<PAGE>

any subsidiary or parent (but not later than the expiration date of this Option)
with respect to the shares which were purchasable by the Holder by exercise of
this Option on such date.

         In the event that the Holder's employment is terminated by the Company
for Cause, this Option shall terminate immediately. As used in this Option,
"Cause" shall mean a determination by the Company (including the Board) or a
subsidiary or parent that the Holder's employment with the Company or such
subsidiary or parent should be terminated as a result of (i) a material breach
by the Holder of any agreement to which the Holder and the Company (or such
subsidiary or parent) are both parties, (ii) any act (other than resignation or
retirement) by the Holder that may have a material and adverse effect on the
business of the Company or any subsidiary or on the ability to perform services
for the Company or such subsidiary, including the proven or admitted commission
of any crime (other than an ordinary traffic violation), or (iii) any material
misconduct or material neglect of duties by the Holder in connection with the
business or affairs of the Company or such subsidiary or parent.

         In the event of the death or permanent and total disability of the
Holder prior to the date of termination or expiration of this Option, this
Option shall terminate on the earlier of the expiration date of this Option or
one year following the date of such death or disability. In the event of the
death of the Holder prior to the date of termination or expiration of this
Option, the Holder's executors, administrators or any individual or individuals
to whom this Option is transferred by will or under the laws of descent and
distribution, as the case may be, shall have the right to exercise this Option
(but not later than the expiration date of this Option) with respect to the
number of shares purchasable by the Holder at the date of death.

         SEVENTH: The Holder agrees that, during the 180-day period commencing
with the closing date of any public offering by the Company of shares of Common
Stock pursuant to a registration statement filed under the Securities Act of
1933, as amended, or any successor act, the Holder will not, without the prior
written consent of the representative or representatives of the underwriters of
such offering, directly or indirectly, sell, offer to sell, contract to sell,
grant any option for the sale of, assign, transfer, pledge, hypothecate or
otherwise dispose of or encumber any shares of Common Stock acquired upon
exercise of this Option, other than such shares, if any, as shall be covered by
such registration statement or as shall be consented to by the Company and such
representative or representatives. The Holder further agrees that, in order to
facilitate any such public offering, (a) the agreements in this Paragraph
Seventh shall be for the benefit of such underwriters as well as the Company and
(b) upon request of such representative or representatives, the Holder will
execute a separate written instrument to the effect set forth in the preceding
sentence, with such changes therein as such representative or representatives
may request, PROVIDED that such changes are not materially adverse to the
interest of the Holder.

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<PAGE>

         EIGHTH: If the Company in its discretion determines that it is
obligated to withhold tax with respect to shares of Common Stock received on
exercise of this Option, the Holder agrees that the Company may withhold from
the Holder's wages the appropriate amount of federal, state or local withholding
taxes attributable to the Holder's exercise of such Option. At the Company's
discretion, the amount required to be withheld may be withheld in cash from such
wages or (with respect to compensation income attributable to the exercise of
this Option) in kind from the Common Stock otherwise deliverable to the Holder
on exercise of this Option. The Holder further agrees that, if the Company does
not withhold an amount from the Holder's wages sufficient to satisfy the
Company's withholding obligation, the Holder will remit to the Company on
demand, in cash, the amount estimated by the Company to be underwithheld.

         NINTH: Any notice to be given to the Company hereunder shall be deemed
sufficient if addressed to the Company and delivered at the office of the Chief
Financial Officer of the Company, or to such other officer or at such other
address as the Company may hereafter designate, or when deposited in the mail,
postage prepaid, addressed to the attention of the Chief Financial Officer of
the Company at such office or other address.

         Any notice to be given to the Holder hereunder shall be deemed
sufficient if addressed to and delivered in person to the Holder at the address,
or by facsimile to the number, furnished to the Company or when deposited in the
mail, postage prepaid, addressed to the Holder at such address.

         TENTH: This Option is subject to all laws, regulations and orders of
any governmental authority which may be applicable thereto and, notwithstanding
any of the provisions hereof, the Holder agrees that he will not exercise the
Option granted hereby nor will the Company be obligated to issue any shares of
stock hereunder if the exercise thereof or the issuance of such shares, as the
case may be, would constitute a violation by the Holder or the Company of any
such law, regulation or order or any provision thereof.

                                      * * *


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<PAGE>

         IN WITNESS WHEREOF, the Company has caused this instrument to be
executed in its name and on its behalf as of the effective date.


                               ABLE LABORATORIES, INC.



                               By:/s/ Dhananjay G. Wadekar
                                  ---------------------------------
                                  Name: Dhananjay G. Wadekar
                                  Title:  President and Chief Executive Officer




Acknowledgment

         The undersigned Holder acknowledges receipt of this Stock Option
Agreement, including Schedule A hereto, and agrees to be bound by all
obligations of the Holder as set forth in such Stock Option Agreement.

                               HOLDER

                               /s/ Dhananjay G. Wadekar
                               ------------------------------
                               Name: Dhananjay G. Wadekar


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<PAGE>

                                   SCHEDULE A

                             ABLE LABORATORIES, INC.

                              DIRECTOR STOCK OPTION
                              ---------------------


Date of Grant:                                 August 24, 2002

Name of Holder:                                Dhananjay G. Wadekar

Address:

Social Security Number:                        ______________________


Maximum number of shares for which
this Option is exercisable:                    40,000 shares

Exercise (purchase) price per share:           $5.00

Expiration date of this Option:                August 24, 2009

Vesting rate:                                  Option vests in twelve equal
                                               installments, on the last day of
                                               each fiscal quarter beginning
                                               with the quarter ending September
                                               30, 2002; provided that the
                                               Option shall not be exercisable
                                               until the Common Stock is listed
                                               on either the Nasdaq National
                                               Market or the Nasdaq Small Cap
                                               Market and that the Option will
                                               remain exercisable after listing
                                               of the Common Stock on the Nasdaq
                                               National Market or the Nasdaq
                                               Small Cap Market regardless of
                                               whether the Common Stock
                                               continues to be listed on either
                                               market.

Other terms and conditions:                    None.


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