Document:

EXHIBIT 10.4
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CITIZENS BANK OF MASSACHUSETTS                                SECURITY AGREEMENT
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         Able Laboratories, Inc., a corporation duly organized under the laws of
the State of Delaware with a chief executive office at 200 Highland Avenue,
Suite 301, Needham, Massachusetts, and principal place of business and mailing
address at 6 Hollywood Court, South Plainfield, New Jersey 07080 (hereinafter
referred to as "Debtor"), hereby grants to Citizens Bank of Massachusetts, a
Massachusetts banking corporation, with a principal place of business at 28
State Street, Boston, Massachusetts 02109 (hereinafter referred to as "Secured
Party") a security interest in the property set forth on EXHIBIT "A" annexed
hereto (hereinafter referred to as the "Collateral"), to secure the payment and
performance of all obligations of Debtor to Secured Party (hereinafter referred
to as the "Obligations"). The term "Obligations" shall mean any and all loans,
advances and other credit made by Secured Party prior to, on or after the date
of this Agreement to or for the account of Debtor, and any and all interest,
commissions, obligations, liabilities, indebtedness, charges and expenses now or
hereafter chargeable against Debtor by Secured Party or owing by Debtor to
Secured Party, whether any of the foregoing are direct or indirect, joint or
several, absolute or contingent, due or to become due, now existing or hereafter
arising, no matter how or when arising and whether under any present or future
agreement or instrument between Debtor and Secured Party or otherwise, and the
performance and fulfillment by Debtor of all of the terms, conditions, promises,
covenants and provisions contained in this Agreement or in any note or notes
secured hereby or in any present or future agreement or instrument between
Debtor and Secured Party. Without limiting the foregoing, the Obligations of the
Debtor to the Secured Party shall include, without limitation, all indebtedness
owed by the Debtor to the Secured Party under the a certain non-restoring
equipment credit facility described in that certain Credit Agreement dated
October 24, 2002 by and between the Secured Party and the Debtor (hereinafter
collectively referred to as the "Credit Agreement").

REPRESENTATIONS AND WARRANTIES:

         Debtor hereby represents and warrants to the Secured Party that: (a)
Debtor is solvent, is able to pay its debts as they mature, has not within the
last four months prior to the date hereof committed any act of bankruptcy, and
intends to pay, keep and perform its obligations hereunder; (b) Debtor's exact
legal name is as set forth in the first paragraph of this Agreement, except as
set forth on EXHIBIT "D" annexed hereto, Debtor has not, during the preceding
five (5) years, changed its name, been a party to a merger, or used any other
corporate, fictitious or trade name, and Debtor is organized in the state
identified in the first paragraph of this Agreement; (c) Debtor has the power to
execute, deliver and carry out this Agreement and to incur the Obligations, and
has taken all necessary action to authorize the execution, delivery and
performance by Debtor of this Agreement and the incurring of the Obligations;
(d) The execution and delivery of this Agreement and compliance by Debtor with
any of the terms and provisions of this Agreement or of any of the other
agreements or instruments referred to herein, will not, on the date hereof,
violate any provision of any applicable existing law or regulation or any writ
or decree of any court or governmental instrumentality or of the charter or
by-laws of Debtor or any agreement or instrument to which Debtor is a party
(except for any such violation as would not be likely to have a material adverse
effect on the Debtor's business), and will not result in the creation or
imposition of any lien, security interest, charge or encumbrance of any nature
whatsoever upon or in any of its assets except as contemplated by this
Agreement, and no consent of any other party that has not already been obtained
(including stockholders or other equity interest holders of Debtor) and no
consent, license, approval or authorization of, or registration or declaration
with, any governmental bureau or agency is required in connection with the
execution, delivery, performance, validity, and enforceability of this
Agreement; (e) Debtor has good and marketable title to the Collateral, and none
of the Collateral is subject to any mortgage, pledge, lease, trust, bailment,
lien, security interest, encumbrance, charge or title retention or other

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security agreement or arrangement of any character whatsoever other than those
listed on EXHIBIT "B" annexed hereto ("Permitted Encumbrances"), and, to the
extent that this Agreement states that the Collateral is to be acquired after
the date hereof, will be the owner of the Collateral free from any adverse
liens, security interest or encumbrance except as set forth on EXHIBIT "B"; and
Debtor will defend the Collateral against all claims and demands of all persons
at any time claiming the same or any interest therein; (f) Debtor will make
punctual payment of all monies and will faithfully and fully keep and perform
all of the terms, conditions, covenants, and agreement contained on Debtor's
part to be paid, kept, or performed hereunder, and will be bound in all respects
as debtor under this Agreement; and will make punctual payment of all monies and
will faithfully and fully keep and perform all of the terms, conditions,
covenants and agreements on its part to be paid, kept or performed under the
terms of any lease or mortgage of the premises where the Collateral is located
or is to be located wherein Debtor is lessee or mortgagor, and will promptly
notify Secured Party in the event of any default on the part of Debtor or
receipt by Debtor of any notice of alleged default under any such lease or
mortgage.

COVENANTS:

         Debtor hereby covenants to Secured Party and agrees that:

         1. Except as set forth on EXHIBIT "C": (a) the Collateral will be kept
at 6 Hollywood Court, South Plainfield, New Jersey, and Debtor will not remove
the Collateral from said location(s) without prior written consent of Secured
Party; and (b) Debtor's corporate headquarters is at the address set forth in
the first paragraph of this Agreement, and Debtor will immediately notify
Secured Party in writing of any change in or discontinuance of Debtor's place or
places of business.

         2. If Debtor is a legal entity, Debtor will preserve its legal
existence and not, in one transaction or a series of related transactions, merge
into or consolidate with any other entity other than a Subsidiary with the
Debtor being the surviving entity , or sell all or substantially all of its
assets, without the prior written consent of Secured Party. Debtor will not
change the state of its organization, nor change its legal name, without
providing Secured Party with thirty (30) days prior written notice.

         3. If any or all of the Collateral is attached to or may be attached to
real estate, prior to the perfection of the security interest granted hereby,
Debtor will, on demand of Secured Party, use commercially reasonable efforts
furnish the latter with a disclaimer signed by all persons having an interest in
the real estate, of any interest in the Collateral which is or may be prior to
Secured Party's interest.

         4. Except for Permitted Encumbrances, no financing statement covering
any Collateral or any additions, accessions, proceeds or products thereof or
thereto is on file in any public office. At the request of Secured Party, Debtor
will join with Secured Party in executing one or more financing statements
pursuant to the Uniform Commercial Code in form satisfactory to Secured Party
and will pay the cost of filing and recording the same in all public offices
wherever filing and/or recording is deemed by Secured Party to be necessary or
desirable. To the extent allowed by the Uniform Commercial Code, as the same may
be amended, Debtor authorizes Secured Party to execute one or more financing
statements describing the Collateral on Debtor's behalf and to file same, and
Debtor will pay the cost of filing and recording the same in all public offices
whenever filing and/or recording is deemed by Secured Party to be necessary or
desirable.

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         5. Debtor will not sell, exchange or otherwise dispose of the
Collateral, or any part thereof or any interest therein without the express
written authorization of Secured Party, except for any such sale, exchange or
disposition as may occur in the ordinary course of business or to compensate
professionals as may be necessary or appropriate. In the event of the sale,
exchange or other disposition of the Collateral or any part thereof or any
interest therein, other than any sale, exchange or disposition as may occur in
the ordinary course of business or to compensate professionals as may be
necessary or appropriate, (and no such sale, exchange or other disposition is
hereby authorized or consented to), the security interest of Secured Party shall
nevertheless continue in said Collateral (including all proceeds, cash and
non-cash) notwithstanding said sale, exchange or other disposition; all of said
proceeds shall remain Collateral hereunder and shall be transferred and paid
over to Secured Party immediately following said sale, exchange, or other
disposition and shall be applied at the option of Secured Party either to
installments due hereunder or referred to herein in their inverse order of
maturity or to the payment of any monies payable under this Agreement, or to any
Obligation of Debtor to Secured Party; and the receipt by Secured Party of all
or any part of said proceeds shall not be deemed or construed to be an
authorization or consent of Secured Party to such sale, exchange or other
disposition of said Collateral.

         6. Debtor will have and maintain insurance at all times with respect to
all Collateral against risks of fire (including so-called extended coverage),
theft and such risks as Secured Party may reasonably require, containing such
terms, in such form, and for such periods, and written by such companies as may
be satisfactory to Secured Party, such insurance to be payable to Secured Party
and Debtor as their interests may appear; each policy of insurance shall have a
loss payee endorsement providing:

         a.   That loss or damage, if any, under the policy, shall be payable to
              Secured Party, as secured party, as its interest may appear.
         b.   That the insurance as to the interest of Secured Party shall not
              be invalidated by any act or neglect of the insured or owner of
              the property described in said policy, nor by any foreclosure, or
              other proceeding, or notice of sale relating to said property, nor
              by any change in the title of ownership of said property, nor by
              the occupation of the premises where the property is located for
              purposes more hazardous than are permitted by said policy;
         c.   That, if the policy is canceled at any time by the insurance
              carrier, in such case the policy shall continue in force for the
              benefit of Secured Party for not less than thirty (30) days after
              written notice of cancellation to Secured Party from the insurance
              carrier; and
         d.   That the policy will not be reduced or canceled at the request of
              the insured nor will said loss payee endorsement be amended or
              deleted without thirty (30) days prior written notice to Secured
              Party from the insurance carrier.

              Debtor shall furnish Secured Party with certificates or other
evidence satisfactory to Secured Party of compliance with the foregoing
insurance provisions; and Secured Party may act as attorney for Debtor in
obtaining, adjusting, settling and canceling such insurance and receiving and
endorsing any drafts. Debtor hereby assigns to Secured Party any and all monies
which may become due and payable under any policy insuring the Collateral
covered by this Security Agreement, including return of unearned premiums, and
hereby directs any insurance company issuing any such policy to make payment
directly to Secured Party and authorizes Secured Party, at its option, (i) to
apply such monies in payment on account of any Obligation hereunder, whether or
not due, or (ii) to return said funds to Debtor for the purpose of replacement
of the Collateral, and (iii) to remit any surplus to Debtor.

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         7. Other than Permitted Encumbrances, Debtor will keep the Collateral
free from any lien, security interest or encumbrance and in good order and
repair, and will not waste or destroy the Collateral or any part thereof; Debtor
will not use the Collateral in violation of any statute or ordinance; and
Secured Party may examine and inspect the Collateral at any time, wherever
located; and Debtor will notify Secured Party in the event of loss, theft,
damage, destruction, sale or encumbrance to or of any of the Collateral or the
making of any levy, seizure or attachments thereof or thereon, or the placing of
any lien or liens thereon or generally on the property of Debtor by the United
States of America or any federal, state or local governmental agency or
authority.

         8. Debtor will pay promptly when due all taxes and assessments upon the
Collateral or for its use or operation or upon this Security Agreement or upon
any note or notes evidencing the Obligations of this Security Agreement. At its
option, in its sole and absolute discretion, Secured Party may discharge taxes,
liens, or security interests or other encumbrances at any time levied or placed
on the Collateral, may pay for insurance on the Collateral and may pay for the
maintenance and preservation of the Collateral, including but not limited to
payments on premises leased by Debtor. Debtor agrees to reimburse Secured Party
on demand for any payment made, or any expense incurred by Secured Party
pursuant to the foregoing authorization. Secured Party may, in its sole and
absolute discretion, and without notice to Debtor, make payment of same or any
part thereof. Each amount so paid by Secured Party shall be secured by all
Collateral held by Secured Party. Nothing herein contained shall obligate
Secured Party to make such payment nor shall the making of one or more such
payments constitute (i) an agreement on Secured Party's part to take any further
or similar action or (ii) a waiver of any default by Debtor under the terms
thereof or of this Security Agreement.

         9. From time to time, Debtor will execute, deliver, acknowledge, file,
record or register, or cause to be filed, recorded or registered, any and all
notices, amendments, statements, certificates, documents or other instruments,
and take any and all other action which may be deemed necessary by Secured Party
hereunder.

         10. Debtor shall pay: (i) recording and filing fees, incurred by
Secured Party in connection with the Obligations; (ii) reasonable counsel fees
and expenses (incurred by Secured Party up to and including the date hereof in
connection with negotiations regarding and consultation concerning this
Agreement or any supplemental agreement, or preparation therefor, or the
financing extended thereunder; or; (iii) reasonable counsel fees and expenses
hereafter incurred by Secured Party in efforts to collect the Obligations, or in
the enforcement of any provisions of this Agreement or protecting, enforcing,
increasing or releasing any security held by Secured Party or any Obligation or
any provision of this Agreement or any supplemental agreement, or the financing
extended thereunder. The Debtor's obligation to pay such reasonable fees and
expenses of Secured Party shall exist whether or not proceedings are instituted
or legal appearances made in any court on behalf of Secured Party. The Debtor
agrees that all such reasonable fees and expenses shall constitute Obligations
upon their becoming due.

         11. The Debtor shall furnish to Secured Party the financial information
set forth in the Credit Agreement. Upon providing reasonable notice to the
Debtor, the Secured Party and its representatives shall be entitled to free and
undisturbed access to Debtor's books of account, ledgers and cabinets and may
examine and audit the contents thereof and make excerpts therefrom.

         12. Debtor will at all times hereafter maintain a standard and modern
system of accounting in accordance with generally accepted accounting
principles. Debtor shall promptly notify Secured Party of any material adverse
change in its financial condition.

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         13. At the request of Secured Party, Debtor will furnish Secured Party
with proof satisfactory to Secured Party of the payment or deposit of F.I.C.A.
and withholding taxes required of Debtor by applicable law. Such proof shall be
furnished within five (5) days after the due date established by law for each
such payment or deposit. Should Debtor fail to make any such payment or deposit
or furnish such proof, Secured Party may, in its sole and absolute discretion,
and without notice to Debtor, make payment of the same or any part thereof. Each
amount so paid by Secured Party shall be secured by all Collateral held by
Secured Party. Nothing herein contained shall obligate Secured Party to make
such payment nor shall the making of one or more such payments constitute (i) an
agreement on Secured Party's part to take any further or similar action or (ii)
a waiver of any default by Debtor under the terms hereof or of any other
agreements between Debtor and Secured Party.

DEFAULT PROVISIONS:

         Debtor hereby agrees that:

         14. Until a Default occurs, Debtor may have possession of the
Collateral and use it in any lawful manner not inconsistent with this Agreement
and not inconsistent with any policy of insurance thereon. If a Default has
occurred and is continuing, the Secured Party may transfer any of the Collateral
into its name or that of its nominee and may receive the income and any
distribution thereon and hold the same as collateral for the Obligations.

         15. Debtor shall be in default under this Agreement, a ("Default") upon
the occurrence of an "Event of Default" as defined in the Credit Agreement.

         16. Upon the happening of any Default specified above, Secured Party
shall have the right to declare all Obligations immediately due and payable and
in addition to its rights hereunder, all of the remedies of a secured party
under the Uniform Commercial Code or any other applicable law, and, further,
Secured Party may sell and deliver any or all Collateral and any or all other
security and collateral held by Secured Party or for Secured Party at public or
private sale, for cash, upon credit or otherwise, at such prices and upon such
terms as Secured Party deems advisable, at Secured Party's sole discretion. In
the event Debtor commits a breach of any provision of this Agreement, in
addition to all other sums due Secured Party, Debtor will pay Secured Party all
costs and expenses incurred by Secured Party, in accordance with Section 10
hereof. Any requirement of reasonable notice shall be met if such notice is
mailed postage prepaid to Debtor at its address as set forth herein at least
five (5) days before the time of sale or other disposition. Secured Party may be
the purchaser at any such sale, if it is public, and, in the event Secured Party
is the purchaser, Secured Party shall have all the rights of a good faith, bona
fide purchaser for value from a secured party after default. The proceeds of
sale shall be applied first to all costs and expenses of sale, including
reasonable attorneys' fees, and second to the payment (in whatever order Secured
Party elects) of all Obligations, and any remaining proceeds shall be applied in
accordance with the provisions of Part 5 of Article 9 of the Uniform Commercial
Code. Debtor shall remain liable to Secured Party for any deficiency.

         17. Upon Default, Secured Party shall have the right to take possession
of its Collateral and to maintain such possession on Debtor's premises or to
remove the Collateral or any part thereof to such places as it may desire. If
Secured Party exercises its right to take possession of its Collateral, Debtor
will, upon Secured Party's demand, assemble the Collateral and make it available
to Secured Party at a place reasonably convenient to both parties.

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         18. No course of dealing between Debtor and Secured Party and no
failure to exercise or delay in exercising on the part of Secured Party any
right, power or privilege under the terms of this Agreement or under the terms
of any other agreements, instruments or other documents between Secured Party
and Debtor shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege. The rights and remedies provided
herein or in any other agreement are cumulative and not exclusive of or in
derogation of any rights or remedies provided in and thereof, by law or
otherwise.

         19. All rights of Secured Party in, to and under this Agreement and in
and to the Collateral shall pass to and may be exercised by any assignee
thereof.

AGREEMENTS AND WAIVERS:

         20. All rights of Secured Party hereunder shall inure to the benefit of
its successors and assigns, and all obligations of Debtor shall bind the
successors and assigns of Debtor.

         21. All Collateral described in this Agreement shall remain collateral
as security for the performance of all obligations of Debtor under this
Agreement until all monies required to be paid under this Agreement have been
paid in full and all obligations on the part of Debtor to be paid, kept and
performed under this Agreement have been paid, kept and performed. At such time
as all monies required to be paid under this Agreement have been paid in full
and all obligations on the part of Debtor to be paid, kept and performed under
this Agreement have been paid, kept and performed, the Secured Party shall
release all liens on the Collateral and terminate all financing statements filed
for the benefit of the Secured Party covering the Collateral.

         22. Debtor hereby waives such rights as it may have to notice and/or
hearing under any applicable federal or state laws pertaining to the exercise by
Secured Party of such rights as the Secured Party may have regarding the right
to seek prejudgment remedies and/or deprive Debtor or any Guarantor of or affect
the use of or possession or enjoyment of Debtor's property prior to the
rendition of a final judgment against the Debtor. The Debtor further waives any
right it may have to require Secured Party to provide a bond or other security
as a precondition to or in connection with any prejudgment remedy sought by
Secured Party, and waives any objection to the issuance of such prejudgment
remedy based on any offsets, claims, defenses or counterclaims to any action
brought by the Secured Party.

         23. DEBTOR AND SECURED PARTY MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED
HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF
ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR SECURED PARTY TO
ACCEPT this AGREEMENT.

         24. Debtor hereby agrees that the courts of the Commonwealth of
Massachusetts shall have exclusive jurisdiction to hear and determine any claims
or disputes between Debtor and Secured Party pertaining directly or indirectly
to this Agreement or to any matter arising in connection with this Agreement.
Debtor expressly submits and consents in advance to such jurisdiction in any

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action or proceeding commenced in such courts, hereby waiving personal service
of the summons and complaint, or other process or papers issued therein, and
agreeing that service of such summons and complaint, or other process or papers,
may instead be made by registered or certified mail addressed to Debtor at the
address set forth herein. Should Debtor fail to appear or answer any summons,
complaint, process or papers so served within thirty (30) days after the mailing
thereof, it shall be deemed in default and an order and/or judgment may be
entered against it as demanded or prayed for in such summons, complaint, process
or papers. The exclusive choice of forum set forth herein shall not be deemed to
preclude the enforcement of any judgment obtained in such forum or the taking of
any action under this Agreement to enforce the same in any appropriate
jurisdiction.

         25. Debtor hereby grants to Secured Party a lien, security interest and
a right of setoff as security for all of the Obligations, upon and against all
deposits, credits, collateral and property, now or hereafter in the possession,
custody, safekeeping or control of Secured Party or any entity under the control
of Secured Party, or in transit to any of them. At any time a Default has
occurred and is continuing, without demand or notice, Secured Party may set off
the same or any part thereof and apply the same to any liability or obligation
of Debtor regardless of the adequacy of any other collateral securing the
Obligations. ANY AND ALL RIGHTS TO REQUIRE SECURED PARTY TO EXERCISE ITS RIGHTS
OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS,
PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS
OR OTHER PROPERTY OF THE DEBTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND
IRREVOCABLY WAIVED. Secured Party shall not be required to marshal any present
or future security for, or guarantees of, the Obligations or to resort to any
such security or guarantee in any particular order and the Debtor waives to the
fullest extent that it lawfully can, (a) any right it might have to require the
Secured Party to pursue any particular remedy before proceeding against the
Secured Party and (b) any right to the benefit of, or to direct the application
of the proceeds of any collateral until the Obligations are paid in full.

         26. All terms used in this Agreement and in all documents referred to
herein and which have been defined in Articles 1, 2 or 9, of the Uniform
Commercial Code, shall be interpreted and construed in light of the sections,
the definitions, the "official comment," and the definitional and substantive
cross-references of the Uniform Commercial Code, as the same may be amended.

         27. This Agreement and the rights and obligations of the parties
hereunder shall be construed in accordance with and be governed by the laws of
the Commonwealth of Massachusetts, including its conflict of laws principles.
This Agreement may not be amended or modified orally and may only be amended or
modified in writing signed by both the Secured Party and the Debtor.

         28. All exhibits referred to herein and annexed hereto are hereby
incorporated in this Agreement and made a part hereof. All headings herein are
for reference only.

              [The remainder of this page is intentionally blank.]

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         IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered this 24th day of October, 2002.

                                             DEBTOR:

Witness:                                     Able Laboratories, Inc.

/s/ Daniele Ouellette Levy                   By: /s/ Dhananjay G. Wadekar
----------------------------------               -------------------------------
Print Name: Daniele Ouellette Levy           Name: Dhananjay G. Wadekar
            ----------------------                 -----------------------------
                                             Title: President
                                                    ----------------------------

                                             SECURED PARTY:

Witness:                                     Citizens Bank of Massachusetts

/s/ Louis DiFronzo                           By: /s/ Raymond Hoefling
----------------------------------               -------------------------------
Print Name: Louis DiFronzo                   Name: Raymond Hoefling
            ------------------------               -----------------------------
                                             Title: Vice President
                                                    ----------------------------

                                        8EXHIBIT 10.1
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                      AMENDMENT TO LOAN AGREEMENT AND NOTE

     This amendment (the "Amendment"), dated as of the date specified below, is
by and between the borrower (the "Borrower") and the bank (the "Bank")
identified below.

                                    RECITALS

     A.   The Borrower and the Bank have executed a Loan Agreement (the
          "Agreement") dated September 27, 2001 and the Borrower has executed a
          Note (the "Note "), dated September 27, 2001, either or both which may
          have been amended from time to time, and the Borrower (and if
          applicable, certain third parties) have executed the collateral
          documents which may or may not be identified in the Agreement and
          certain other related documents (collectively the "Loan Documents "),
          setting forth the terms and conditions upon which the Borrower may
          obtain loans from the Bank from time to time in the original amount of
          $ 1,000,000.00, as may be amended from time to time.

     B.   The Borrower has requested that the Bank permit certain modifications
          to the Agreement and Note as described below.

     C.   The Bank has agreed to such modifications, but only upon the terms and
          conditions outlined in this Amendment.

                               TERMS OF AGREEMENT

     In consideration of the mutual covenants contained herein, and for other
good and valuable consideration, the Borrower and the Bank agree as follows:

[X] Extension of Maturity Date. If checked here, any references in the Agreement
or Note to the maturity date or date of final payment are hereby deleted and
replaced with "August 31, 2003".

[X] Change in Maximum Loan Amount. If checked here, all references in the
Agreement and in the Note (whether or not numerically) as the maximum loan
amount which may be borrowed from time to time are hereby deleted and replaced
with "$2,000,000.00", which evidences an additional $ N/A available to be
advanced subject to the terms and conditions of the Agreement and Note.

[ ] Change in Multiple Advance Termination Date. If checked here, all references
to ""as the termination date for multiple advances are hereby deleted and
replaced with N/A.

Change in Financial Covenant(s).

(i) If checked here, all references to "$     " in the Agreement as the minimum
Net Working Capital amount are hereby deleted and replaced with "$     " for the
period beginning      and thereafter.

(ii) If checked here, all references to "$     " in the Agreement as the minimum
Tangible Net Worth amount are hereby deleted and replaced with "$     " for the
period beginning      and thereafter.

(iii) If checked here, all references to "     " in the Agreement as the maximum
Debt to Worth Ratio are hereby deleted and replaced with "     " for the period
beginning      and thereafter.

(iv) If checked here, all references to "     " in the Agreement as the minimum
Current Ratio are hereby deleted and replaced with "     " for the period
beginning      and thereafter.

(v) If checked here, all references to "$     " in the Agreement as the maximum
Capital Expenditures amount are hereby deleted and replaced with "$     " for
the period beginning      and thereafter.

(vi) If checked here, all references to "     " in the Agreement as the minimum
Cash Flow Coverage Ratio are hereby deleted and replaced with "     " for the
period beginning       and thereafter.

(vii) If checked here, all references to "$     " in the Agreement as the
maximum Officers, Directors, Partners, and Management Salaries and Other
Compensation amount are hereby deleted and replaced with "$     " for the period
beginning       and thereafter.

[ ] Change in Payment Schedule. If checked here, effective upon the date of this
Amendment, any payment terms are amended as follows:

[ ] Change in Interest Rate. If checked here, effective upon the date of this
Amendment, interest payable under the Note is amended as follows:

The unpaid principal balance will bear interest at an annual rate equal to
plus the prime rate announced by the Bank. The interest rate hereunder will be
adjusted each time that the prime rate changes.

                                   Page 1 of 2
<PAGE>

[ ] Change in Late Payment Fee. If checked here, subject to applicable law, if
any payment is not made on or before its due date, the Bank may collect a
delinquency charge of     % of the unpaid amount. Collection of the late payment
fee shall not be deemed to be a waiver of the Bank's right to declare a default
hereunder.

     Effectiveness of Prior Documents. Except as specifically amended hereby,
the Agreement, the Note and the other Loan Documents shall remain in full force
and effect in accordance with their respective terms. All warranties and
representations contained in the Agreement and the other Loan Documents are
hereby reconfirmed as of the date hereof. All collateral previously provided to
secure the Agreement and/or Note continues as security, and all guaranties
guaranteeing obligations under the Loan Documents remain in full force and
effect. This is an amendment, not a novation.

     Preconditions to Effectiveness. This Amendment shall only become effective
upon execution by the Borrower and the Bank, and approval by any other third
party required by the Bank.

     No Waiver of Defaults; Warranties. This Amendment shall not be construed as
or be deemed to be a waiver by the Bank of existing defaults by the Borrower,
whether known or undiscovered. All agreements, representations and warranties
made herein shall survive the execution of this Amendment.

     Counterparts. This Amendment may be signed in any number of counterparts,
each of which shall be considered an original, but when taken together shall
constitute one document.

     Authorization. The Borrower represents and warrants that the execution,
delivery and performance of this Amendment and the documents referenced herein
are within the authority of the Borrower and have been duly authorized by all
necessary action.

     Attachments. All documents attached hereto, including any appendices,
schedules, riders, and exhibits to this Amendment, are hereby expressly
incorporated herein by reference.

Dated as of: July 18, 2002
                                  Synthetech, Inc.
                                  Borrower Name (Organization)

                                  an  Oregon Corporation

                                  By:___________________________________________

                                  Name and Title: M. Sreenivasan, President/CEO

                                  By:___________________________________________

                                  Name and Title: Gary Weber, Vice President/CFO

Agreed to:

U.S. Bank N.A.(Bank)

By: __________________________________

Name and Title: Wayne H. Tyler, Offier

                                   Page 2 of 2
<PAGE>

     ADDENDUM TO                                          AMENDMENT TO LOAN
                               AGREEMENT AND NOTE

This Addendum is made part of the Amendment to Loan Agreement and Note (the
"Amendment ") made and entered into by and between the undersigned borrower (the
"Borrower ") and the undersigned bank (the "Bank ") as of the date identified
below. The following provisions are hereby added to the Amendment, (or to the
extent such provisions already exist, are hereby modified) as follows:

Borrower to maintain a Fixed Charge Coverage ratio of 1.20 to 1.00.

"Fixed Charge Coverage" means (a) EBITDA (EBITDA for a given period means net
income, plus interest expense, plus income tax expense, plus depreciation
expense plus amortization expense) minus cash taxes, cash dividends and Unfunded
Capital Expenditures for the previous four (4) rolling quarters and/or fiscal
period divided by (b) the sum of all required principal payments (on short and
long term debt and capital leases), and interest expense over the last four
rolling quarters and /or fiscal period.

"Unfunded (a/k/a, Unfinanced) Capital Expenditures" means the sum of all
purchases of capital assets or acquisitions of other companies less the sum of
all new financing amounts received or assumed to acquire capital assets or
acquisitions of other companies for the period specified.

Dated as of: JULY 18, 2002

                                  SYNTHETECH, INC.
                                  Borrower Name (Organization)
                                  An Oregon corporation

                                  By____________________________________________
                                  Name and Title:  M. Sreenivasan, President/CEO

                                  By____________________________________________
                                  Name and Title: Gary Weber, Vice-President/CFO

Agreed to:

U.S. Bank N.A.
--------------
(Bank)

By:________________________
   Wayne H. Tyler, Officer

<PAGE>

                           BUSINESS SECURITY AGREEMENT

This Business Security Agreement ("Agreement" is made and entered into by the
undersigned borrower, guarantor and/or other obligor/pledgor (the "Debtor") in
favor of U.S. BANK N. A. , 555 SW OAK, PORTLAND, OR 97204 (the "Bank") as of the
date set forth on the last page of this Agreement.

                          ARTICLE I. SECURITY INTEREST

1.1 Grant of Security Interest. Debtor hereby grants a security interest in and
collaterally assigns the Collateral (defined below) to Bank to secure all of
Debtor's Obligations (defined below) to Bank. The intent of the parties hereto
is that the Collateral secures all Obligations of Debtor to Bank, whether or not
such Obligations exist under this Agreement or any other agreements, whether now
or hereafter existing, between Debtor and Bank or in favor of Bank, including,
without limitation, any note, any loan or security agreement, any lease, any
mortgage, deed of trust or other pledge of an interest in real or personal
property, any guaranty, any letter of credit or banker's acceptance, any
agreement for any other services or credit extended by Bank to Debtor even
though not specifically enumerated herein, and any other agreement with Bank
(together and individually, the "Loan Documents").

1.2 "Collateral" means all of the following whether now owned or existing or
hereafter acquired by Debtor (or by Debtor with spouse), wherever located
(including all documents, general intangibles, additions and accessions, spare
and repair parts, special tools, replacements, returned or repossessed goods and
books and records relating to the following; and all proceeds, supporting
obligations and products of the following) [check all that apply]:

[ ] All accounts, instruments, documents, chattel paper, general intangibles,
contract rights, investment property (including any securities entitlements
and/or securities accounts held by Debtor), securities and certificates of
deposit, deposit accounts and letter of credit rights;

[ ] All inventory;

[ ] All equipment;

[ ] All fixtures; and

[X] Specific Collateral (the following, whether constituting equipment,
inventory, fixtures, or other collateral):

Accounts Receivables on hand and to be acquired.
--------------------------------------------------------------------------------

In the event the first four boxes are checked, Debtor acknowledges and agrees
that, in applying the law of any jurisdiction that at any time enacts all or
substantially all of the uniform provisions of Revised Article 9 of the Uniform
Commercial Code (1999 Official Text), the foregoing collateral description
covers all assets of Debtor. Bank may at any time and from time to time file
financing and continuation statements and amendments thereto reflecting the
same. Unless otherwise defined, the terms set forth in this Agreement shall have
the meanings set forth in the Uniform Commercial Code as adopted in the Loan
Documents and as amended from time to time. The defined terms hereunder shall be
interpreted in a manner most favorable to Bank.

1.3 "Obligation." means all Debtor's debts (except for consumer credit if Debtor
is a natural person), liabilities, obligations, covenants, warranties, and
duties to Bank (plus its affiliates including any credit card debt, but
specifically excluding any type of consumer credit), whether now or hereafter
existing or incurred, whether liquidated or unliquidated, whether absolute or
contingent, whether arising out of the Loan Documents or otherwise, and all
other debts and obligations due Bank under any lease, agricultural, real estate
or other financing transaction and regardless of whether such financing is
related in time or type to the financing provided at the time of grant of this
security interest, and regardless of whether such Obligations arise out of
existing or future credit granted by Bank to any Debtor, to any Debtor and
others, to others guaranteed, endorsed or otherwise secured by any Debtor or to
any debtor-in-possession or other successor-in-interest of any Debtor, and
including principal, interest, fees, expenses and charges relating to any of the
foregoing.

                      ARTICLE II. WARRANTIES AND COVENANTS

In addition to all other warranties and covenants of Debtor under the Loan
Documents which are expressly incorporated herein as part of this Agreement and
while any part of the credit granted Debtor under the Loan Documents is
available or any Obligations of Debtor to Bank are unpaid or outstanding, Debtor
continuously warrants and agrees as follows:

2.1 Debtor's Name, Location; Notice of Location Changes. Except as indicated in
the Article 9 Certificate executed by Debtor and made a part hereof, Debtor's
name and organizational structure has remained the same during the past five (5)
years. Debtor will continue to use only the name set forth with. Debtor's
signature unless Debtor gives Bank prior written notice of any change.
Furthermore, Debtor shall not do business under another name nor use any trade
name without giving ten (10) days prior written notice to Bank. Debtor will not
change its status or organizational structure without the prior written consent
of Bank. Debtor will not change its location or registration (if Debtor is a
registered organization) to another state without prior written notice to Bank.
The address appearing in the Article 9 Certificate is Debtor's chief executive
office (or residence if Debtor is a sole proprietor).

2.2 Status of Collateral. All Collateral is genuine and validly existing. Except
for items of insignificant value or as otherwise reflected in writing by Debtor
to Bank under a borrowing base or otherwise, (i) Collateral constituting
inventory, equipment and fixtures is in good condition, not obsolete and is
either currently saleable or usable; and (ii) Collateral constituting accounts,
contract rights, notes, chattel paper and other third-party obligations to pay
is fully enforceable in accordance with its terms and not subject to return,
dispute, setoff, credit allowance or adjustment, except for discounts for prompt
payment. Unless Debtor provides Bank with written notice to the contrary, Debtor
has no notice or knowledge of anything that would impair the ability of any
third-party obligor to pay any debt to Debtor when due.

                                   Page 1 of 4
<PAGE>

2.3 Ownership; Maintenance of Collateral; Restrictions on Liens and
Dispositions. Debtor is the sole owner of the Collateral free of all liens,
claims, other encumbrances and security interests except as permitted in writing
by Bank. Debtor shall: (i) maintain the Collateral in good condition and repair
(reasonable wear and tear excepted), and not permit its value to be impaired;
(ii) not permit waste, removal or loss of identity of the Collateral; (iii) keep
the Collateral free from all liens, executions, attachments, claims,
encumbrances and security interests (other than Bank's paramount security
interest and those permitted in writing by Bank); (iv) defend the Collateral
against all claims and legal proceedings by persons other than Bank; (v) pay and
discharge when due all taxes, levies and other charges or fees upon the
Collateral except for payment of taxes contested by Debtor in good faith by
appropriate proceedings so long as no levy or lien has been imposed upon the
Collateral; (vi) not lease, sell or transfer the Collateral to any party nor
move it to any new location outside of the ordinary course of business; (vii)
not permit the Collateral, without the consent of Bank, to become a fixture or
an accession to other goods; (viii) not permit the Collateral to be used in
violation of any applicable law, regulation or policy of insurance; and, (ix) as
to the Collateral consisting of instruments and chattel paper, preserve Bank's
rights in it against all other parties. Notwithstanding the above, Debtor may
sell, lease or transfer inventory in the ordinary course of its business
provided that no sale, lease or transfer shall include any transfer or sale in
satisfaction (partial or complete) of a debt owed by Debtor; title will not pass
to buyer until Debtor physically delivers the goods to buyer or Debtor ships the
goods F.O.B. to buyer's destination; and sales and/or leases to Debtor's
affiliates shall be for fair market value, cash on delivery, with the proceeds
remitted to Bank.

2.4 Maintenance of Security Interest; Purchase Money Security Interests. Debtor
shall take any action requested by Bank to preserve the Collateral and to
establish the value of, the priority of, to perfect, to continue the perfection
of or to enforce Bank's interest in the Collateral and Bank's rights under this
Agreement; and shall pay all costs and expenses related thereto. Debtor shall
also cooperate with Bank in obtaining control (for purposes of perfection under
the Uniform Commercial Code) of Collateral consisting of deposit accounts,
investment property, letter of credit rights, electronic chattel paper and any
other collateral where Bank may obtain perfection through control. Debtor hereby
authorizes Bank to take any and all actions described above and in place of
Debtor with respect to the Collateral and hereby ratifies any such actions Bank
has taken prior to the date of this Agreement and hereafter, which actions may
include, without limitation, filing UCC financing statements and obtaining or
attempting to obtain control agreements from holders of the Collateral. Debtor
and Bank intend to maintain the full effect of any purchase money security
interest granted in favor of Bank notwithstanding the fact that the Collateral
so purchased is also pledged as security for other Obligations under the Loan
Documents.

2.5 Collateral Inspections; Modifications and Changes in Collateral. At
reasonable times, Bank may examine the Collateral and Debtor's records
pertaining to it, wherever located, and make copies of such records at Debtor's
expense; and Debtor shall assist Bank in so doing. Without Bank's prior written
consent, Debtor shall not alter, modify, discount, extend, renew or cancel any
Collateral, except for ordinary discounts for prompt payment on accounts,
physical modifications to the inventory occurring in the manufacturing process
or alterations to equipment which do not materially affect its value. Debtor
shall promptly notify Bank in writing of any material change in the condition of
the Collateral and of any change in location of the Collateral.

2.6 Collateral Records, Reports and Statements. Debtor shall keep accurate and
complete records respecting the Collateral in such form as Bank may approve. At
such times as Bank may require, Debtor shall furnish to Bank any
records/information Bank might require, including, without limitation, a
statement certified by Debtor and in such form and containing such information
as may be prescribed by Bank showing the current status and value of the
Collateral.

2.7 Chattel Paper, Instruments, Etc. Chattel paper, instruments, drafts, notes,
acceptances, and other documents which constitute Collateral shall be on forms
satisfactory to Bank. Debtor shall promptly mark chattel paper to indicate
conspicuously Bank's security interest therein, shall not deliver any chattel
paper or negotiable instruments to any other entity and, upon request, shall
deliver all original chattel paper, instruments, drafts, notes, acceptances and
other documents which constitute Collateral to Bank.

2.8 United States Government Contracts. If any accounts or contract rights arose
out of contracts with the United States or any of its departments, agencies or
instrumentalities, Debtor shall promptly notify Bank and execute any writings
required by Bank so that all money due or to become due under such contracts
shall be assigned to Bank under the Federal Assignment of Claims Act.

2.9 Environmental Matters. Except as disclosed in a written schedule attached to
this Agreement (if no schedule is attached, there are no exceptions), there
exists no uncorrected violation by Debtor of any federal, state or local laws
(including statutes, regulations, ordinances or other governmental restrictions
and requirements) relating to the discharge of air pollutants, water pollutants
or process waste water or otherwise relating to the environment or Hazardous
Substances as hereinafter defined, whether such laws currently exist or are
enacted in the future (collectively "Environmental Laws"). The term "Hazardous
Substances" shall mean any hazardous or toxic wastes, chemicals or other
substances, the generation, possession or existence of which is prohibited or
governed by any Environmental Laws. Debtor is not subject to any judgment,
decree, order or citation, or a party to (or threatened with) any litigation or
administrative proceeding, which asserts that Debtor (i) has violated any
Environmental Laws; (ii) is required to clean up, remove or take remedial or
other action with respect to any Hazardous Substances (collectively "Remedial
Action"); or (iii) is required to pay all or a portion of the cost of any
Remedial Action, as a potentially responsible party. There are not now, nor to
Debtor's knowledge after reasonable investigation have there ever been, any
Hazardous Substances (or tanks or other facilities for the storage of Hazardous
Substances) stored, deposited, recycled or disposed of on, under or at any real
estate owned or occupied by Debtor during the periods that Debtor owned or
occupied such real estate, which if present on the real estate or in soils or
ground water, could require Remedial Action. To Debtor's knowledge, there are no
proposed or pending changes in Environmental Laws which would adversely affect
Debtor or its business, and there are no conditions existing currently or likely
to exist while the Loan Documents are in effect which would subject Debtor to
Remedial Action or other liability. Debtor currently complies with and will
continue to timely comply with all applicable Environmental Laws; and will
provide Bank, immediately upon receipt, copies of any correspondence, notice,
complaint, order or other document from any source asserting or alleging any
circumstance or condition which requires or may require a financial contribution
by Debtor or Remedial Action or other response by or on the part of Debtor under
Environmental Laws, or which seeks damages or civil, criminal or punitive
penalties from Debtor for an alleged violation of Environmental Laws.

2.10 Insurance. Debtor will maintain insurance to such extent, covering such
risks and with such insurers as is usual and customary for businesses operating
similar properties, and as is satisfactory to Bank, including insurance for fire
and other risks insured against by extended or comprehensive coverage, public
liability insurance and workers' compensation insurance; and will designate Bank
as loss payee with a "Lender's Loss Payable" endorsement on any casualty
policies and take such other action as Bank may reasonably request to ensure
that Bank will receive (subject to no other interests) the insurance proceeds of
the Collateral. Debtor hereby assigns all insurance proceeds to and irrevocably
directs, while any Obligations remain unpaid, any insurer to pay to Bank the
proceeds of all such

                                   Page 2 of 4
<PAGE>

insurance and any premium refund; and authorizes Bank to endorse Debtor's name
to effect the same, to make, adjust or settle, in Debtor's name, any claim on
any insurance policy relating to the Collateral; and, at the option of Bank, to
apply such proceeds and refunds to the Obligations or to restoration of the
Collateral, returning any excess to Debtor. In the event of any failure of the
Debtor to obtain or maintain any insurance required hereunder, the Bank shall
have the authority, but not the obligation, to obtain any such insurance
coverage, and the Debtor shall immediately reimburse the Bank for the cost
thereof, together with interest on such amount at the highest rate of interest
then accruing on any of the Obligations.

                            ARTICLE III. COLLECTIONS

3.1 Deposit with Bank. At any time Bank may require that all proceeds of
Collateral received by Debtor shall be held by Debtor upon an express trust for
Bank, shall not be commingled with any other funds or property of Debtor and
shall be turned over to Bank in precisely the form received (but endorsed by
Debtor, if necessary for collection) not later than the business day following
the day of their receipt. All proceeds of Collateral received by Bank directly
or from Debtor shall be applied against the Obligations in such order and at
such times as Bank shall determine.

                      ARTICLE IV. RIGHTS AND DUTIES OF BANK

In addition to all other rights (including setoff) and duties of Bank under the
loan Documents which are expressly incorporated herein as a part of this
Agreement, the following provisions shall also apply:

4.1 Authority to Perform for Debtor. Debtor presently appoints any officer of
Bank as Debtor's attorney-in-fact (coupled with an interest and irrevocable
while any Obligations remain unpaid) to do any of the following upon default by
Debtor hereunder (notwithstanding any notice requirements or grace/cure periods
under this or other agreements between Debtor and Bank): (i) to file, endorse or
place the name of Debtor on any invoice or document of title relating to
accounts, drafts against customers, notices to customers, notes, acceptances,
assignments of government contracts, instruments, financing statements, checks,
drafts, money orders, insurance claims or payments or other documents evidencing
payment or a security interest relating to the Collateral; (ii) to receive, open
and dispose of all mail addressed to Debtor and to notify the Post Office
authorities to change the address for delivery of mail addressed to Debtor to an
address designated by Bank; (iii) to do all such other acts and things necessary
to carry out Debtor's duties under this Agreement and the other loan Documents;
and (iv) to perfect, protect and/or realize upon Bank's interest in the
Collateral. If the Collateral includes funds or property in depository accounts,
Debtor authorizes each of its depository institutions to remit to Bank, without
liability to Debtor, all of Debtor's funds on deposit with such institution upon
written direction by Bank after default by Debtor hereunder. All acts by Bank
are hereby ratified and approved, and Bank shall not be liable for any acts of
commission or omission, nor for any errors of judgment or mistakes of fact or
law.

4.2 Verification and Notification; Bank's Rights. Bank may verify Collateral in
any manner, and Debtor shall assist Bank in so doing. Upon the occurrence of a
default hereunder, Bank may at any time and Debtor shall, upon request of Bank,
notify the account debtors to make payment directly to Bank; and Bank may
enforce collection of, sell, settle, compromise, extend or renew the
indebtedness of such account debtors; all without notice to or the consent of
Debtor. Until account debtors are so notified, Debtor, as agent of Bank, shall
make collections on the Collateral. Bank may at any time notify any bailee
possessing Collateral to turn over the Collateral to Bank.

4.3 Collateral Preservation. Bank shall use reasonable care in the custody and
preservation of any Collateral in its physical possession but in determining
such standard of reasonable care, Debtor expressly acknowledges that Bank has no
duty to: (i) insure the Collateral against hazards; (ii) ensure that the
Collateral will not cause damage to property or injury to third parties; (iii)
protect it from seizure, theft or conversion by third parties, third parties'
claims or acts of God; (iv) give to Debtor any notices received by Bank
regarding the Collateral; (v) perfect or continue perfection of any security
interest in favor of Debtor; (vi) perform any services, complete any
work-in-process or take any other action in connection with the management or
maintenance of the Collateral; or (vii) sue or otherwise effect collection upon
any accounts even if Bank shall have made a demand for payment upon individual
account debtors. Notwithstanding any failure by Bank to use reasonable care in
preserving the Collateral, Debtor agrees that Bank shall not be liable for
consequential or special damages arising therefrom.

                        ARTICLE V. DEFAULTS AND REMEDIES

Bank may enforce its rights and remedies under this Agreement upon default. A
default shall occur if Debtor fails to comply with the terms of any loan
Documents (including this Agreement or any guaranty by Debtor), a demand for
payment is made under a demand loan, or any other obligor fails to comply with
the terms of any loan Documents for which Debtor has given Bank a guaranty or
pledge.

5.1 Cumulative Remedies; Notice; Waiver. In addition to the remedies for default
set forth in the loan Documents, Bank upon default shall have all other rights
and remedies for default provided by the Uniform Commercial Code, as well as any
other applicable law and this Agreement, INCLUDING, WITHOUT LIMITATION, THE
RIGHT TO REPOSSESS, RENDER UNUSABLE AND/OR DISPOSE OF THE COLLATERAL WITHOUT
JUDICIAL PROCESS. The rights and remedies specified herein are cumulative and
are not exclusive of any rights or remedies which Bank would otherwise have.
With respect to such rights and remedies:

(a) Assembling Collateral; Storage; Use of Debtor's Name/Other Property. Bank
may require Debtor to assemble the Collateral and to make it available to Bank
at any convenient place designated by Bank. Debtor recognizes that Bank will not
have an adequate remedy in Law if this obligation is breached and accordingly,
Debtor's obligation to assemble the Collateral shall be specifically
enforceable. Bank shall have the right to take immediate possession of said
Collateral and Debtor irrevocably authorizes Bank to enter any of the premises
wherever said Collateral shall be located, and to store, repair , maintain,
assemble, manufacture, advertise and sell, lease or dispose of (by public sale
or otherwise) the same on said premises until sold, all without charge or rent
to Bank. Bank is hereby granted an irrevocable license to use, without charge,
Debtor's equipment, inventory, labels, patents, copyrights, franchises, names,
trade secrets, trade names, trademarks and advertising matter and any property
of a similar nature; and Debtor's rights under all licenses and franchise
agreements shall inure to Bank's benefit. Further, Debtor releases Bank from
obtaining a bond or surety with respect to any repossession and/or disposition
of the Collateral.

(b) Notice of Disposition. Written notice, when required by law, sent to any
address of Debtor in this Agreement, at least five (5)

                                   Page 3 of 4
<PAGE>

calendar days (counting the day of sending) before the date of a proposed
disposition of the Collateral is reasonable notice but less notice may be
reasonable under the circumstances. Notification to account debtors by Bank
shall not be deemed a disposition of the Collateral. Notice of any record shall
be deemed delivered when the record has been (a) deposited in the United States
Mail, postage pre-paid, (b) received by overnight delivery service, (c) received
by telex, (d) received by telecopy, (e) received through the internet, or (f)
when personally delivered.

(c) Possession of Collateral/Commercial Reasonableness. Bank shall not, at any
time, be obligated to either take or retain possession or control of the
Collateral. With respect to Collateral in the possession or control of Bank,
Debtor and Bank agree that as a standard for determining commercial
reasonableness, Bank need not liquidate, collect, sell or otherwise dispose of
any of the Collateral if Bank believes, in good faith, that disposition of the
Collateral would not be commercially reasonable, would subject Bank to
third-party claims or liability, that other potential purchasers could be
attracted or that a better price could be obtained if Bank held the Collateral
for up to 2 years. Bank may sell Collateral without giving any warranties and
may specifically disclaim any warranties of title or the like. Furthermore, Bank
may sell the Collateral on credit (and reduce the Obligations only when payment
is received from the buyer), at wholesale and/or with or without an agent or
broker; and Bank need not complete, process, repair, clean-up or otherwise
prepare the Collateral prior to disposition. If the purchaser fails to pay for
the Collateral, Bank my resell the Collateral and Debtor shall be credited with
the cash proceeds of the sale. Bank may comply with any applicable state or
federal law requirements in connection with a disposition of the Collateral and
compliance will not be considered to adversely affect the commercial
reasonableness of any sale of the Collateral.

(d) Waiver by Debtor. Bank has no obligation and Debtor waives any obligation to
attempt to satisfy the Obligations by collecting the obligations from any third
parties and Bank may release, modify or waive any collateral provided by any
third party to secure any of the Obligations, all without affecting Bank's
rights against Debtor. Debtor further waives any obligation on the part of Bank
to marshal any assets in favor of Debtor or in payment of the Obligations.
Notwithstanding any provisions in this Agreement or any other agreement between
Debtor and Bank, Debtor does not waive any statutory rights except to the extent
that the waiver thereof is permitted by law.

(e) Waiver by Bank. Bank may permit Debtor to attempt to remedy any default
without waiving its rights and remedies hereunder, and Bank may waive any
default without waiving any other subsequent or prior default by Debtor.
Furthermore, delay on the part of Bank in exercising any right, power or
privilege hereunder or at law shall not operate as a waiver thereof, nor shall
any single or partial exercise of such right, power or privilege preclude other
exercise thereof or the exercise of any other right, power or privilege. No
waiver or suspension shall be deemed to have occurred unless Bank has expressly
agreed in writing specifying such waiver or suspension.

                            ARTICLE VI. MISCELLANEOUS

All other provisions in the Loan Documents are expressly incorporated as a part
of this Agreement.

All documents attached hereto, including any appendices, schedules, riders, and
exhibits to this Agreement, are hereby expressly incorporated by reference.

IN WITNESS WHEREOF, the undersigned has/have executed this BUSINESS SECURITY
AGREEMENT as of JULY 18, 2002

(Individual Debtor)                SYNTHETECH, INC.
                                   ---------------------------------------------
                                   Debtor Name (Organization)

                     (SEAL)        a  OREGON Corporation
---------------------------          -------------------------------------------

Debtor Name        N/A             By
---------------------------           ------------------------------------------

                                   Name and Title  M. SREENIVASAN, PRESIDENT/CEO
                                                   -----------------------------

                     (SEAL)        By
---------------------------           ------------------------------------------

Debtor Name        N/A             Name and Title GARY WEBER, VICE PRESIDENT/CFO
---------------------------                       ------------------------------

                                  Page 4 of 4
<PAGE>

UCC FINANCING STATEMENT

FOLLOW INSTRUCTIONS (front and back) CAREFULLY

A. NAME & PHONE OF CONTACT AT FILER (optional)

B. SEND ACKNOWLEDGMENT TO: (Name and Address)

   U.S. Bank Commercial Loan Services
   Attn: COLLATERAL DEPARTMENT
   P.0. BOX 5308
   PORTLAND, OR 97228-5308         THE ABOVE SPACE IS FOR FILING OFFICE USE ONLY

1. DEBTOR'S EXACT FULL LEGAL NAME - insert one debtor name (1a or 1b) - do not
   abbreviate or combine names

     1a. ORGANIZATION'S NAME
         SYNTHETECH, INC.

OR   1b. INDIVIDUAL'S LAST NAME
         FIRST NAME
         MIDDLE NAME
         SUFFIX

     1c. MAILING ADDRESS     1290 INDUSTRIAL WAY
         CITY                ALBANY
         STATE               OR
         POSTAL CODE         97321
         COUNTRY             U.S.A.

     1d. TAX ID#: SSN OR EIN

         ADD'L INFO RE ORGANIZATION DEBTOR

     1e. TYPE OF ORGANIZATION CORPORATION

     1f: JURISDICTION OF ORGANIZATION    OREGON

     1g. ORGANIZATIONAL ID#, if any     224497-89
                                                     [ ] NONE

2. ADDITIONAL DEBTOR'S EXACT FULL LEGAL NAME - insert only one debtor name (2a
or 2b) - do not abbreviate or combine names

     2a. ORGANIZATION'S NAME

 OR  2b. INDIVIDUAL'S LAST NAME
         FIRST NAME
         MIDDLE NAME
         SUFFIX

     2c. MAILING ADDRESS
         CITY
         STATE
         POSTAL CODE
         COUNTRY             U.S.A.

     2d. TAX ID#: SSN OR EIN

         ADD'L INFO RE ORGANIZATION DEBTOR

     2e. TYPE OF ORGANIZATION

     2f: JURISDICTION OF ORGANIZATION

     2g. ORGANIZATIONAL ID#, if any
                                                     [ ] NONE

3. SECURED PARTY'S NAME (or NAME of TOTAL ASSIGNEE of ASSIGNOR S/P) - Insert
only one secured party name (3a or 3b)

     3a. ORGANIZATION'S NAME U.S. BANK N.A.

OR   3b. INDIVIDUAL'S LAST NAME
         FIRST NAME
         MIDDLE NAME
         SUFFIX

     3c. MAILING ADDRESS     555  SW OAK STREET CLS, PD-OR-P7LD
         CITY                PORTLAND
         STATE               OR
         POSTAL CODE         97204
         COUNTRY             U.S.A.

4. This FINANCING STATEMENT covers the following collateral: ACCOUNTS
RECEIVABLES ON HAND AND TO BE ACQUIRED.

5. ALTERNATIVE DESIGNATION [if applicable]: [ ]LESSEE/LESSOR
[ ]CONSIGNEE/CONSIGNOR [ ]BAILEE/BAILOR [ ]SELLER/BUYER [ ]AG LIEN [ ]NON-UCC
FILING

6. [ ] This FINANCING STATEMENT is to be filed (for record) in the REAL
ESTATE RECORDS. Attach Addendum [if applicable]

7. Check to REQUEST SEARCH REPORT(S) on Debtor(s)
[ADDITIONAL FEE] [Optional]      [x] All Debtors [ ] Debtor 1 [ ] Debtor 2

8. OPTIONAL FILER REFERENCE DATE 02-8741855333-LS

FILING OFFICE COPY- NATIONAL UCC FINANCING STATEMENT (FORM UCC1) (Rev- 07/29/98)

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