Document:

<PAGE>

                                                               Exhibit 10(y)

              AMENDMENT NO. 1 TO FINANCING AGREEMENT AND WAIVER

         THIS AMENDMENT NO. 1 TO FINANCING AGREEMENT AND WAIVER, dated as of
March 1, 2004 (this "Amendment"), by and among Solutia Inc., as a debtor and
                     ---------
debtor-in-possession, a Delaware corporation (the "Parent"), and Solutia
                                                   ------
Business Enterprises, Inc., as a debtor and debtor-in-possession, a New York
corporation, ("Solutia Business" and together with the Parent, each a
               ----------------
"Borrower" and collectively, the "Borrowers"), each subsidiary of the Parent
 --------                         ---------
listed as a "Guarantor" on the signature pages hereto, each as a debtor and
debtor-in-possession (each a "Guarantor" and collectively, the
                              ---------
"Guarantors"), the lenders from time to time party hereto (each a "Lender"
 ----------                                                        ------
and collectively, the "Lenders"), the issuers from time to time party hereto
                       -------
(each an "Issuer" and collectively, the "Issuers"), Citicorp USA, Inc.
          ------                         -------
("CUSA"), as collateral agent for the Lenders (in such capacity, the
  ----
"Collateral Agent"), CUSA, as administrative agent for the Lenders (in such
 ----------------
capacity, the "Administrative Agent"), and CUSA and Wells Fargo Foothill,
               --------------------
LLC, as co-documentation agents for the Lenders, (in such capacity, the
"Documentation Agent" and together with the Collateral Agent and the
 -------------------
Administrative Agent, each an "Agent" and collectively, the "Agents").
                               -----                         ------

                                  RECITALS:

         WHEREAS, the Borrowers, the Guarantors, the Lenders, the Issuers,
the Collateral Agent, the Administrative Agent and CUSA as initial
Documentation Agent ("Initial Documentation Agent") have heretofore entered
                      ---------------------------
into that certain Financing Agreement, dated as of January 16, 2004 (the
"Financing Agreement");
 -------------------

         WHEREAS, the Borrowers, the Guarantors, the Lenders, the Issuers,
the Collateral Agent, the Administrative Agent and the Initial Documentation
Agent now desire to amend the Financing Agreement in certain respects, as
hereinafter provided; and

         WHEREAS, the Borrowers have requested the Lenders to waive
compliance with certain provisions of the Financing Agreement.

         NOW, THEREFORE, in consideration of the premises set forth above,
the terms and conditions contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:

                                 ARTICLE I

                                 DEFINITIONS

                  Section 1.01 Definitions. Unless otherwise defined or the
                               -----------
context otherwise requires, terms for which meanings are provided in the
Financing Agreement shall have such meanings when used in this Amendment.

<PAGE>
<PAGE>

                                 ARTICLE II

                                 AMENDMENTS

                  Section 2.01 Amendment to Section 1.01 of the Financing
                              -------------------------------------------
Agreement.
---------

                           (a) Section 1.01 of the Financing Agreement is
hereby amended by deleting the definition of "Documentation Agent" and
                                              -------------------
replacing it with the following:

                           "'Documentation Agent' means CUSA and Wells Fargo
                             -------------------
         Foothill, LLC collectively in their capacities as co-documentation
         agents."

                           (b) Section 1.01 of the Financing Agreement is
hereby amended by deleting the words "the Agents, the Required Lenders and
the Borrowers" appearing in the definition of "Bankruptcy Court Order"
therein and inserting in lieu thereof the words "the Administrative Agent,
the Required Lenders and the Borrowers".

                           (c) Section 1.01 of the Financing Agreement is
hereby amended by deleting the words "in form and substance satisfactory to
the Agents" appearing in the definition of "Pledge Agreement" therein and
inserting in lieu thereof the words "in form and substance satisfactory to
the Administrative Agent and the Collateral Agent".

                           (d) Section 1.01 of the Financing Agreement is
hereby amended by (i) deleting the words "on terms and conditions acceptable
to the Agents and the Required Lenders" appearing in the definitions of
"2009 Post-Petition Liens" and "2009 Pre-Petition Liens" therein and
inserting in lieu thereof the words "on terms and conditions acceptable to
the Administrative Agent and the Required Lenders" and (ii) deleting the
words "in form and substance satisfactory to the Agents and the Required
Lenders" appearing in such definitions and inserting in lieu thereof the
words "in form and substance satisfactory to the Administrative Agent and
the Required Lenders".

                           (e) Section 1.01 of the Financing Agreement is
hereby amended by inserting the following definitions of "Approved Fund" and
                                                          -------------
"Fund" in the proper alphabetical position:
 ----

                           "'Approved Fund' means any Fund that is advised
                             -------------
         or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an
         entity or Affiliate of an entity that administers or manages a
         Lender."

                           "'Fund' means any Person (other than a natural
                             ----
         Person) that is or will be engaged in making, purchasing, holding
         or otherwise investing in commercial loans and similar extensions
         of credit in the ordinary course of its business."

                                     2

<PAGE>
<PAGE>

                  Section 2.02 Amendment to Section 5.02 of the Financing
                               ------------------------------------------
Agreement. Section 5.02(a) of the Financing Agreement is hereby amended by
---------
deleting the words "or the Documentation Agent" appearing therein.

                  Section 2.03 Amendment to Section 8.01 of the Financing
                               ------------------------------------------
Agreement. Section 8.01 of the Financing Agreement is hereby amended in the
---------
manner set forth below:

                           (a) Section 8.01(r)(i) is hereby amended by
deleting the words "30 days" appearing therein and inserting in lieu thereof
the words "90 days".

                           (b) Section 8.01(r)(iii) is hereby amended by
deleting the words "14 days" appearing therein and inserting in lieu thereof
the words "90 days".

                  Section 2.04 Amendment to Section 9.03 of the Financing
                               ------------------------------------------
Agreement. Section 9.03 of the Financing Agreement is hereby amended in the
---------
manner set forth below:

                           (a) Section 9.03(a) is hereby amended by deleting
the words "and the Documentation Agent" appearing therein.

                           (b) Section 9.03(a)(ii) of the Financing
Agreement is hereby amended by deleting the words "ten (10) days" appearing
therein and inserting in lieu thereof the words "ten (10) Business Days".

                  Section 2.05 Amendment to Section 11.08 of the Financing
                               -------------------------------------------
Agreement. Section 11.08(a) of the Financing Agreement is hereby amended by
---------
deleting the words "the Administrative Agent, the Collateral Agent and the
Documentation Agent" appearing therein and inserting in lieu thereof the
words "the Administrative Agent and the Collateral Agent".

                  Section 2.06 Amendment to Section 13.01 of the Financing
                               -------------------------------------------
Agreement. Section 13.01 of the Financing Agreement is hereby amended to
---------
provide that all notices to the Documentation Agent shall also be sent to
the following address:

                  Wells Fargo Foothill, LLC
                  2450 Colorado Avenue, Suite 3000W
                  Santa Monica, CA 90404
                  Attention: Lan Wong
                  Telecopier: 310-453-7446.

                  Section 2.07 Amendment to Section 13.07 of the Financing
                               -------------------------------------------
Agreement. Section 13.07 of the Financing Agreement is hereby amended in the
---------
manner set forth below:

                           (a) The first paragraph of Section 13.07(b)
thereof is hereby amended and restated to read in its entirety as follows:

                                     3

<PAGE>
<PAGE>

                  "(b) Each Lender may, (x) with the written consent of the
Administrative Agent (such consent not to be unreasonably withheld or
delayed), assign to one or more other lenders or other entities all or a
portion of its rights and obligations under this Agreement with respect to
all or a portion of its Term Loan A Commitment and the Term Loan A made by
it or its Term Loan B Commitment and the Term Loan B made by it and (y) with
the written consent of the Administrative Agent (such consent not to be
unreasonably withheld or delayed), assign to one or more other lenders or
other entities all or a portion of its rights and obligations under this
Agreement with respect to all or a portion of its Revolving Credit
Commitment, the Revolving Loans made by it and its Pro Rata Share of Letter
of Credit Obligations; provided, however, that (i) such assignment is in an
                       --------  -------
amount which is at least $5,000,000 or a multiple of $1,000,000 in excess
thereof (or the remainder of such Lender's Revolving Credit Commitment)
(except such minimum amount shall not apply to an assignment by a Lender (A)
to an Affiliate of such Lender or an Approved Fund or (B) with the consent
of the Administrative Agent (such consent not to be unreasonably withheld or
delayed), to a Person and its Affiliates or an Approved Fund to the extent
the aggregate amount assigned to all such Persons is at least $5,000,000 or
a multiple of $1,000,000 in excess thereof), (ii) the parties to each such
assignment shall execute and deliver to the Administrative Agent, for its
acceptance, an Assignment and Acceptance and an acknowledgement to a
separate written agreement among the Agents and the Lenders, together with
any promissory note subject to such assignment and such parties shall
deliver to the Administrative Agent a processing and recordation fee of
$3,500 (except (A) the payment of such fee shall not be required in
connection with an assignment by a Lender to an Affiliate of such Lender or
to an Approved Fund and (B) only a single processing and recordation fee
shall be required in connection with two or more contemporaneous assignments
by a Lender, an Affiliate of such Lender or an Approved Fund, and (iii) no
written consent of the Administrative Agent shall be required in connection
with any assignment by a Lender to an Affiliate of such Lender or to an
Approved Fund. The Borrowers and the Agents may continue to deal solely and
directly with an assigning Lender in connection with the interest so
assigned until such Lender and its assignee shall have executed and
delivered to the Administrative Borrower and the Administrative Agent, and
the Administrative Agent shall have accepted and recorded, an Assignment and
Acceptance. Upon such execution, delivery and acceptance, from and after the
effective date specified in each Assignment and Acceptance, which effective
date shall be at least three (3) Business Days after the delivery thereof to
the Administrative Agent (or such shorter period as shall be agreed to by
the Administrative Agent and the parties to such assignment), (A) the
assignee thereunder shall become a "Lender" hereunder and, in addition to
the rights and obligations hereunder held by it immediately prior to such
effective date, have the rights and obligations hereunder that have been
assigned to it pursuant to such Assignment and Acceptance and (B) the
assigning Lender thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations under
this Agreement (and, in the case of an Assignment and Acceptance covering
all or the remaining portion of an assigning Lender's rights and obligations
under this Agreement, such Lender shall cease to be a party hereto)."

                                     4

<PAGE>
<PAGE>

                           (b) Section 13.07 is further amended by adding
the following subsection (d):

                  "(d) In addition to the other assignment rights provided
in this Section 13.07, each Lender may assign, as collateral or otherwise,
        -------------
any of its rights under this Agreement, whether now owned or hereafter
acquired (including rights to payments of principal or interest on the
Loans), to, without consent of the Administrative Agent or the Borrowers,
any trustee for the benefit of the holders of obligations owed, or
securities issued, by such Lender as security for such obligations or
securities; provided, however, that no such assignment or grant shall
            --------  -------
release such Lender from any of its obligations hereunder except, in the
case of a subsequent foreclosure, pursuant to an assignment made in
compliance with the other provisions of this Section 13.07."
                                             -------------

                  Section 2.08 Amendments to Certain Other References to
                               -----------------------------------------
"Agents" Appearing in the Financing Agreement. The Financing Agreement is
---------------------------------------------
hereby further amended in the manner set forth below:

                           (a) Sections 1.03, 2.08(d), 8.01(a)(vi),
8.01(a)(x), 8.01(a)(xx), 8.01(f), 10.01(c), and 10.01(d), and clause (y) of
Section 13.04, are each hereby amended by deleting each instance of the
words "any Agent" appearing therein and inserting in lieu thereof the words
"the Administrative Agent or the Collateral Agent".

                           (b) Sections 2.05(c)(vii), 2.08(d), 5.01,
6.01(a), 7.01(i), 7.01(dd), 8.01(a)(v), 8.01(a)(vi), 8.01(a)(vii),
8.01(j)(iii), 8.01(j)(vii), 8.02(c)(ii)(B), and 8.02(m), the first sentence
of Section 7.01(p), the second paragraph of Section 8.01(j), and the first
sentence of Section 13.16, are each hereby amended by deleting each instance
of the words "the Agents" appearing therein and inserting in lieu thereof
the words "the Administrative Agent and the Collateral Agent".

                           (c) Sections 9.01(f) and 9.01(h) are each hereby
amended by deleting each instance of the words "each Agent" appearing
therein and inserting in lieu thereof the words "each of the Administrative
Agent and the Collateral Agent".

                           (d) Section 10.01(i) is hereby amended by
deleting the words "the Agents and the Required Lenders" appearing therein
and inserting in lieu thereof the words "the Administrative Agent, the
Collateral Agent and the Required Lenders".

                  Section 2.09 Amendment to Schedule II to the Pledge
                               --------------------------------------
Agreement. Schedule II of the Pledge Agreement is hereby is hereby amended
---------
and restated to read in its entirety as set forth in Exhibit A hereto.
                                                     ---------

                  Section 2.10 Limited Waiver of Section 8.01(r)(i) of the
                               -------------------------------------------
Financing Agreement. The Lenders hereby waive compliance by the Loan Parties
-------------------
with the provisions of Section 8.01(r)(i) of the Financing Agreement to the
extent that such section requires the delivery of those certain agreements
and documents set forth therein not later than 30 days following the
Facility Effective Date. Such waiver does not constitute a waiver of Section
8.01(r)(i) of the Financing Agreement as amended herein, any other provision
of the Financing Agreement or any other Loan Document or any

                                     5

<PAGE>
<PAGE>

waiver of any other Default or Event of Default that may exist under the
Financing Agreement or arise after the date hereof or an acquiescence
therein.

                  Section 2.11 Limited Waiver of Section 8.01(r)(iii) of the
                               ---------------------------------------------
Financing Agreement. The Lenders hereby waive compliance by the Loan Parties
-------------------
with the provisions of Section 8.01(r)(iii) of the Financing Agreement to
the extent that such section requires the delivery of those certain
agreements and documents set forth therein not later than 14 days following
the Facility Effective Date. Such waiver does not constitute a waiver of
Section 8.01(r)(iii) of the Financing Agreement as amended herein, any other
provision of the Financing Agreement or any other Loan Document or any
waiver of any other Default or Event of Default that may exist under the
Financing Agreement or arise after the date hereof or an acquiescence
therein.

                                ARTICLE III

                            CONDITIONS PRECEDENT

                  Section 3.01 Conditions to Effectiveness of this
                               -----------------------------------
Amendment. This Amendment shall be effective as of the date hereof, upon the
---------
satisfaction of the conditions precedent that:

                           (a) Amendment. The Administrative Agent shall
                               ---------
have received executed counterparts of this Amendment, duly executed by at
least the Required Lenders, the Borrowers, each Guarantor, the Documentation
Agent, the Administrative Agent, the Collateral Agent and the Issuer.

                           (b) Representations and Warranties. As of the
                               ------------------------------
date hereof, both before and after giving effect to this Amendment, all of
the representations and warranties contained in the Financing Agreement and
in each other Loan Document shall be true and correct in all material
respects as though made on the date hereof (and by its execution hereof, the
Borrowers shall be deemed to have represented and warranted such).

                           (c) No Default. As of the date hereof, both
                               ----------
before and after giving effect to this Amendment, no Default (other than
with respect to the provisions of Sections 8.01(r)(i) and (iii) that would,
upon effectiveness of this Amendment, be waived pursuant to Sections 2.05
and 2.06 above) shall have occurred and be continuing (and by its execution
hereof, the Borrowers shall be deemed to have represented and warranted
such).

                                 ARTICLE IV

                                MISCELLANEOUS

                  Section 4.01 Effect; Ratification. The amendments and
                               --------------------
waivers set forth herein are effective solely for the purposes set forth
herein and shall be limited precisely as written, and shall not be deemed to
(i) be a consent to, or acknowledgment of, any amendment, waiver or
modification of any other term or condition of the Financing Agreement or of
any other instrument or agreement referred to therein or (ii) prejudice

                                     6

<PAGE>
<PAGE>

any right or remedy which the Agents or any other party may now have or may
have in the future under or in connection with the Financing Agreement as
amended hereby or any other instrument or agreement referred to therein.
This Amendment shall be construed in connection with and as part of the
Financing Agreement, and all terms, conditions, representations, warranties,
covenants and agreements set forth in the Financing Agreement and each other
instrument or agreement referred to therein, except as herein amended, are
hereby ratified and confirmed and shall remain in full force and effect.

                  Section 4.02 Due Authorization; Authority; No Conflicts;
                               -------------------------------------------
Enforceability. The execution, delivery and performance by each Loan Party
--------------
of this Amendment (i) have been duly authorized by all necessary action,
(ii) do not and will not contravene its charter or by-laws, its limited
liability company or operating agreement or its certificate of partnership
or partnership agreement, as applicable, or any applicable law or any
contractual restriction binding on or otherwise affecting it or any of its
properties (other than conflicts, breaches and defaults, the enforcement of
which will be stayed by virtue of the filing of the Chapter 11 Cases), or
any order or decree of any court or Governmental Authority (including,
without limitation, any order entered in the Chapter 11 Cases), (iii) do not
and will not result in or require the creation of any Lien upon or with
respect to any of its material properties, and (iv) do not and will not
result in any material default, noncompliance, suspension, revocation,
impairment, forfeiture or nonrenewal of any material permit, license,
authorization or approval applicable to its operations or any of its
properties. No authorization or approval or other action by, and no notice
to or filing with, any Governmental Authority, including the Bankruptcy
Court, is required in connection with the due execution, delivery and
performance by any Loan Party of this Amendment. This Amendment, when
delivered hereunder, is or will be, duly and validly executed and delivered
by each of the Loan Parties which is a party hereto and each of this
Amendment and the Financing Agreement as amended hereby constitutes the
legal, valid and binding obligation of each of the Loan Parties which is a
party hereto or thereto, enforceable in accordance with the terms hereof or
thereof.

                  Section 4.03 No Novation. Neither this Amendment nor the
                               -----------
replacement of the terms of the Financing Agreement by the terms of this
Amendment shall extinguish the obligations for the payment of money
outstanding under the Financing Agreement or discharge or release the Lien
or priority of any security agreement, any pledge agreement or any other
security therefor. Nothing herein contained shall be construed as a
substitution or novation of the Obligations outstanding under the Financing
Agreement or instruments securing the same, which shall remain in full force
and effect, except as modified hereby. Nothing expressed or implied in this
Amendment or any other document contemplated hereby or thereby shall be
construed as a release or other discharge of the Borrowers or any other Loan
Party under any Loan Document from any of its obligations and liabilities
thereunder. Each of the Financing Agreement and the other Loan Documents
shall remain in full force and effect, until and except as modified hereby
or in connection herewith. This Amendment is a Loan Document executed
pursuant to the Financing Agreement and shall be construed, administered and
applied in accordance with the terms and provisions thereof.

                                     7

<PAGE>
<PAGE>

                  Section 4.04 Costs, Fees and Expenses. The Borrowers
                               ------------------------
jointly and severally agree to reimburse the Agents and the Lenders upon
demand for all costs, fees and expenses (including the reasonable fees and
expenses of counsel to the Agents and the Lenders) incurred in connection
with the preparation, execution and delivery of this Amendment.

                  Section 4.05 Counterparts. This Amendment may be executed
                               ------------
in any number of counterparts and by different parties hereto in separate
counterparts, each of which shall be deemed to be an original, but all of
which taken together shall constitute one and the same agreement. Delivery
of an executed counterpart of this Amendment by telecopier shall be equally
as effective as delivery of an original executed counterpart of this
Amendment. Any party delivering an executed counterpart of this Amendment by
telecopier also shall deliver an original executed counterpart of this
Amendment but the failure to deliver an original executed counterpart shall
not affect the validity, enforceability, and binding effect of this
Amendment.

                  Section 4.06 Severability. Any provision of this Amendment
                               ------------
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining portions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.

                  Section 4.07 CHOICE OF LAW. THIS AMENDMENT SHALL BE
                               -------------
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW
YORK EXCEPT AS GOVERNED BY THE BANKRUPTCY CODE.

                  Section 4.08 No Party Deemed Drafter. Each of the parties
                               -----------------------
hereto agrees that no party hereto shall be deemed to be the drafter of this
Amendment.

                  Section 4.09 Ratification of Guaranty. Each Guarantor
                               ------------------------
hereby consents to this Amendment and hereby confirms and agrees that (a)
notwithstanding the effectiveness of this Amendment, the Guaranty is, and
shall continue to be, in full force and effect and is hereby ratified and
confirmed in all respects, except that, on and after the effectiveness of
this Amendment, each reference in the Guaranty to the "Agreement",
"thereunder", "thereof" or words of like import referring to the Financing
Agreement shall mean and be a reference to the Financing Agreement as
amended by this Amendment, and (b) the Loan Documents to which it is a party
and all of the Collateral described therein do, and shall continue to,
secure the payment of all of the Obligations secured thereby.

                          (Signature Page Follows)

                                     8

<PAGE>
<PAGE>

                  IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly
authorized, as of the date first above written.

                                   BORROWERS:
                                   ----------

                                   SOLUTIA INC., as a debtor and a debtor-in-
                                   possession

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

                                   SOLUTIA BUSINESS ENTERPRISES, INC., as
                                   a debtor and a debtor-in-possession

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

                                   GUARANTORS:
                                   -----------

                                   AXIO RESEARCH CORPORATION, as a debtor
                                   and a debtor-in-possession

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

<PAGE>
<PAGE>

                                   BEAMER ROAD MANAGEMENT COMPANY, as a
                                   debtor and a debtor-in-possession

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

                                   CPFILMS INC., as a debtor and a debtor-in-
                                   possession

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

                                   MONCHEM, INC., as a debtor and a debtor-
                                   in-possession

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

                                   MONCHEM INTERNATIONAL, INC., as a debtor
                                   and a debtor-in-possession

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

                                   SOLUTIA GREATER CHINA, INC., as a debtor
                                   and a debtor-in-possession

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

<PAGE>
<PAGE>

                                   SOLUTIA INTER-AMERICA, INC., as a debtor
                                   and a debtor-in-possession

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

                                   SOLUTIA INTERNATIONAL HOLDING, LLC, as a
                                   debtor and a debtor-in-possession

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

                                   SOLUTIA INVESTMENTS, LLC, as a debtor and
                                   a debtor-in-possession

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

                                   SOLUTIA MANAGEMENT COMPANY, INC., as a
                                   debtor and a debtor-in-possession

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

                                   SOLUTIA OVERSEAS, INC., as a debtor and a
                                   debtor-in-possession

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

<PAGE>
<PAGE>

                                   SOLUTIA SYSTEMS, INC., as a debtor and a
                                   debtor-in-possession

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

                                   SOLUTIA TAIWAN, INC., as a debtor and a
                                   debtor-in-possession

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

<PAGE>
<PAGE>

                                   ADMINISTRATIVE AGENT, COLLATERAL AGENT,
                                   ---------------------------------------
                                   CO-DOCUMENTATION AGENT AND A LENDER:
                                   -----------------------------------

                                   CITICORP USA, INC., for itself as the
                                   Administrative Agent, the Collateral
                                   Agent, a Co-Documentation Agent and a
                                   Lender

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

<PAGE>
<PAGE>

                                   CO-DOCUMENTATION AGENT AND A LENDER:
                                   -----------------------------------

                                   WELLS FARGO FOOTHILL, LLC, for itself as
                                   a Co-Documentation Agent and a Lender

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

<PAGE>
<PAGE>

                                   ISSUER:
                                   ------

                                   CITIBANK, N.A., as an Issuer and a Lender

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

<PAGE>
<PAGE>

                                   LENDER:
                                   -------

                                   CITIGROUP GLOBAL MARKETS INC., as a
                                   Lender

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

<PAGE>
<PAGE>

                                   LENDER:
                                   -------

                                   HIGHLAND LEGACY LIMITED, as a Lender

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

<PAGE>
<PAGE>

                                   LENDER:
                                   -------

                                   HIGHLAND LOAN FUNDING V LTD., as a Lender

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

<PAGE>
<PAGE>

                                   LENDER:
                                   -------

                                   RESTORATION FUNDING CLO, LTD., as a
                                   Lender

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

<PAGE>
<PAGE>

                                   LENDER:
                                   -------

                                   CALIFORNIA PUBLIC EMPLOYEES RETIREMENT
                                   SYSTEM, as a Lender

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

<PAGE>
<PAGE>

                                   LENDER:
                                   -------

                                   AMARANTH LLC, as a Lender

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

<PAGE>
<PAGE>

                                   LENDER:
                                   -------

                                   SATELLITE ASSET MANAGEMENT, L.P., as a
                                   Lender

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

<PAGE>
<PAGE>

                                   LENDER:
                                   -------

                                   SATELLITE SENIOR INCOME FUND, LLC, as a
                                   Lender

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

<PAGE>
<PAGE>

                                   LENDER:
                                   -------

                                   SATELLITE SENIOR INCOME FUND II, LLC, as
                                   a Lender

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

<PAGE>
<PAGE>

                                   LENDER:
                                   -------

                                   MORGAN STANLEY SENIOR FUNDING, INC., as a
                                   Lender

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

<PAGE>
<PAGE>

                                   LENDER:
                                   -------

                                   OZ SPECIAL MASTER FUND, LTD., as a Lender

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

<PAGE>
<PAGE>

                                   LENDER:
                                   -------

                                   PERRY PRINCIPALS INVESTMENTS, LLC, as a
                                   Lender

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

<PAGE>
<PAGE>

                                   LENDER:
                                   -------

                                   WINGATE CAPITAL LTD., as a Lender

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

<PAGE>
<PAGE>

                                   LENDER:
                                   -------

                                   BAYERISCHE HYPO-UND VEREINSBANK AG,
                                   NEW YORK BRANCH, as a Lender

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

<PAGE>
<PAGE>

                                   LENDER:
                                   -------

                                   SHEPHERD INVESTMENTS INTERNATIONAL, LTD.,
                                   as a Lender

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

<PAGE>
<PAGE>

                                   LENDER:
                                   -------

                                   TCW SELECT LOAN FUND, LIMITED, as a
                                   Lender

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

<PAGE>
<PAGE>

                                   LENDER:
                                   -------

                                   C-SQUARED CDO LTD., as a Lender

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:

<PAGE>
<PAGE>

                                   LENDER:
                                   -------

                                   LOAN FUNDING I LLC, as a Lender

                                   By:
                                       --------------------------------------
                                       Name:
                                       Title:EXHIBIT 10.2
                                                                    ------------

                              EMPLOYMENT AGREEMENT

            THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated as of November
18, 2003, by and between Able Laboratories, Inc., a Delaware corporation (the
"Corporation"), and Raju V.K. Vegesna, an individual (the "Employee"). The
Agreement will be effective on the day the employee begins employment (the
"Effective Date").

                              W I T N E S S E T H:

            WHEREAS, the Corporation and the Employee desire to set forth the
terms and conditions on which, from and after the Effective Date, (i) the
Corporation shall employ the Employee, (ii) the Employee shall render services
to the Corporation, and (iii) the Corporation shall compensate the Employee for
such services;

            NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and covenants herein contained, the parties agree as follows:

1.          EMPLOYMENT; DUTIES

            (a) The Corporation engages and employs the Employee, and the
Employee hereby accepts engagement and employment, as Vice President, Liquids
Operations of the Corporation. In the capacity of Vice President, Liquids
Operations, the Employee will perform all such executive and administrative
duties and services for the Corporation as are consistent with that position and
as are assigned to the Employee from time to time by the Corporation, including,
but not limited to meet, meeting production and growth objectives set by the
management.

            (b) The Employee shall perform his duties hereunder from the
Corporation's executive office, or other designated location, in the New Jersey
area and report to Shailesh V. Daftari, Executive Vice President and General
Manager of the Corporation.

2.          TERM

            The Employee's employment hereunder shall be for an initial period
of three (3) years commencing on the Effective Date and continuing through the
third anniversary thereof, unless sooner terminated as hereinafter provided (the
"Initial Term"). Thereafter, the term and each extension will be automatically
extended for successive one-year periods (each a "Renewal Term"), unless either
party gives written notice of termination to the other party at least sixty (60)
days prior to the expiration of the Initial Term or the Renewal Term, as the
case may be.

                                        1
<PAGE>

3.          COMPENSATION

            (a) Subject to the terms and conditions of this Agreement, as
compensation for the performance of his duties on behalf of the Corporation, the
Employee shall be compensated as follows:

                        (i) The Corporation shall pay the Employee a base salary
("Base  Compensation") at the rate of $165,000 per annum payable no less
frequently than monthly in arrears on or before the first day of each succeeding
month plus other compensation as described below in Section 5.

                        (ii) Upon the Effective Date, the Employee shall
receive, from the Corporation, an option (the "Employee Option") to
purchase 45,000 shares of common stock of the Corporation (the "Option Shares")
at an exercise price per share equal to the last sale price of the common stock
on the Nasdaq Stock Market on the date hereof. Such option shall have a term of
ten (10) years and vest over three (3) years subject to the terms contained in
the Corporation's stock option plan and the stock option agreement attached as
Exhibit A hereto.

                        (iii) The Corporation shall withhold all applicable
federal, state and local taxes, social security and workers' compensation
contributions and such other amounts as may be required by law or agreed upon by
the parties with respect to the compensation payable to the Employee pursuant to
this paragraph 3(a).

            (b) The Corporation shall reimburse the Employee for all reasonable
expenses incurred by the Employee in furtherance of the business and affairs of
the Corporation, including reasonable travel and entertainment, cell phone and
other incidental expenses and all such other expenses against receipt by the
Corporation of appropriate vouchers or other proof of the Employee's
expenditures and otherwise in accordance with such Expense Reimbursement Policy
as may from time to time be adopted by the Board of Directors of the
Corporation.

            (c) The Employee shall be entitled to accrue paid vacation at the
rate of fifteen (15) business days per annum, plus all the appropriate
Corporation holidays.

            (d) The Employee shall be eligible to participate in any Company
bonus plan as may be maintained in effect by the Company from time to time, on a
basis substantially equivalent to other members of the Company's senior
management.

            (e) The Corporation shall provide health insurance coverage for the
Employee and his family, and such other employee benefit plans and/or fringe
benefits which, from time to time, the Corporation makes available to its senior
management employees.

                                        2
<PAGE>

4. REPRESENTATIONS AND WARRANTIES BY THE EMPLOYEE AND CORPORATION

            (a) The Employee hereby represents and warrants to the Corporation
as follows:

            (i) Neither the execution and delivery of this Agreement nor the
performance by the Employee of his duties and other obligations hereunder
violate or will violate any statute, law, determination or award, or conflict
with or constitute a default under (whether immediately, upon the giving of
notice or lapse of time or both) any prior employment agreement, contract, or
other instrument to which the Employee is a party or by which he is bound.

            (ii) The Employee has the full right, power and legal capacity to
enter and deliver this Agreement and to perform his duties and other obligations
hereunder. This Agreement constitutes the legal, valid and binding obligation of
the Employee enforceable against him in accordance with its terms. No approvals
or consents of any persons or entities are required for the Employee to execute
and deliver this Agreement or perform his duties and other obligations
hereunder.

            (b) The Corporation hereby represents and warrants to the Employee
as follows:

            (i) The Corporation is duly organized, validly existing and in good
standing under the laws of the State of Delaware, with all requisite corporate
power and authority to own its properties and conduct its business in the manner
presently contemplated.

            (ii) The Corporation has full power and authority to enter into this
Agreement and to incur and perform its obligations hereunder.

            (iii) The execution, delivery and performance by the Corporation of
this Agreement does not conflict with or result in a breach or violation of or
constitute a default under (whether immediately, upon the giving of notice or
lapse of time or both) the certificate of incorporation or by-laws of the
Corporation, or any agreement or instrument to which the Corporation is a party
or by which the Corporation of any of its properties may be bound or affected.

5.          RELOCATION ALLOWANCE

            The Corporation expects Employee to move from Pennsylvania to within
reasonable proximity to the Corporation's New Jersey headquarters. The Employee
shall receive a relocation allowance of up to $25,000 to reimburse him for any
out-of-pocket expenses incurred by Employee in connection with the move. The
reimbursement will be paid when the Employee completes the move.

6.          INVENTION ASSIGNMENTS; CONFIDENTIAL INFORMATION

            (a) All inventions, improvements, ideas, names, patents, trademarks,
copyrights, and innovations, including all data and records pertaining thereto,
whether or not reduced to writing,

                                        3
<PAGE>

which the Employee may originate, make or conceive during the term of his
employment and for a period of three (3) months thereafter, either alone or with
others and whether or not during working hours or by the use of facilities of
the Corporation, and which relate to or are or may likely be useful in
connection with the business or contemplated business of the Corporation
(collectively, "Inventions") shall be the exclusive property of the Corporation.
Employee hereby assigns, and, to the extent any such assignment cannot be made
at the present time, agrees to assign, to the Company all his right, title and
interest throughout the world in and to all Inventions, and to anything tangible
which evidences, incorporates, constitutes, represents or records any such
Inventions. The Employee agrees that all such Inventions shall constitute works
made for hire under the copyright laws of the United States and hereby assigns
and, to the extent any such assignment cannot be made at present, hereby agrees
to assign to the Company all copyrights, patents and other proprietary rights
the Employee may have in any of such Inventions, together with the right to file
for and/or own wholly without restriction United States and foreign patents,
trademark registration and copyright registration and any patent, or trademark
or copyright registration issuing thereon.

            (b) The Employee agrees that, during the course of his employment or
at any time after termination, he will not disclose or make accessible to any
other person, any information regarding the Corporation's products, services and
technology, both current and under development, promotion and marketing
programs, lists, trade secrets or any other confidential and proprietary
business information of the Corporation, or any material or reproductions
thereof, or any such information or materials of third parties in the possession
of the Company ("Confidential Information"). The Employee agrees: (i) not to
disclose or publish any Confidential Information at any time during or after his
employment with the Corporation; (ii) not to use any Confidential Information
for himself or others; and (iii) not to take any Confidential Information from
the Corporation's facilities at any time during his employment by the
Corporation, except as required in the Employee's duties to the Corporation. The
Employee agrees immediately to return all Confidential Information in his
possession to the Corporation upon request and in any event upon termination of
his employment. The foregoing notwithstanding, the parties acknowledge and agree
that Confidential Information shall not include the following: (a) information
already in the public domain or hereafter disclosed to the public through no
fault of the Employee; including but not limited to knowledge of (i) the
business of other companies in the field, (ii) general business methods and
structures useful in operating pharmaceutical marketing companies, (iii) the
status of patents and other technology in the field other than those of the
Corporation; (b) general knowledge about the field of pharmaceutical marketing
obtained through the Employee's academic experience, (c) specific ideas and
projections of the field of pharmaceutical marketing's evolution, (d)
information that was available to the Employee on a non-confidential basis prior
to the Employee's employment by LiquiSource, Inc. or (e) information that
becomes available to the Employee on a non-confidential basis from a source
other than the Corporation or any of its agents, provided that such source is
not bound by a confidentiality agreement with the Corporation or any of such
agents.

                                        4
<PAGE>

7.          TERMINATION

            (a) The Employee's employment hereunder shall terminate upon the
first to occur of the following events:

               (i)  the death of the Employee or the "Disability" of the
                    Employee, as defined below; or

               (ii) termination by the Corporation, either with or without Cause
                    (as defined below); or

               (iii) voluntary resignation by the Employee after providing the
                    Corporation with at least thirty (30) days prior written
                    notice. The date, which is thirty (30) days after the
                    Employee has provided written notice, will be deemed the
                    "Termination Date."

            (b) Upon termination pursuant to clause (a)(i) above, the Employee
Option shall accelerate to the extent necessary so that at least 22,500 Option
Shares shall be exercisable. "Disability" of the Employee shall be deemed to
have occurred if the Employee, by virtue of any injury, sickness, or physical
condition is unable to perform substantially and continuously the duties
assigned to his hereunder for more than sixty (60) consecutive or
non-consecutive days out of any consecutive twelve (12) month period, exclusive
of any accrued vacation.

            (c) Upon termination pursuant to clause (a)(ii) for any reason other
than for Cause (as defined below), (i) the Corporation shall pay the Employee
six (6) months' Base Compensation as severance; provided, that if the Employee
is terminated by the Corporation for any reason prior to the first anniversary
of the date hereof then the severance period shall be extended, to the extent
necessary, so that the period of employment plus the severance period shall be
no shorter than one year.

            (d) Upon termination by the Corporation during the Initial or any
Renewal Term pursuant to clause (a)(ii) with Cause (except prior to the first
anniversary of the date hereof as provided in Section 7(c) above) or upon the
voluntary resignation of the Employee pursuant to clause (a)(iii), such
termination shall be effective immediately or on the effective date of the
Employee's notice, as the case may be, and the Employee will be paid a portion
of the Base Compensation due through the Termination Date, which has not been
paid to him.

            (e) For purposes of this Agreement, "Cause" shall mean the unlawful
conduct of the Employee constituting a felony under the law or dishonest conduct
of the Employee involving moral turpitude and causing material harm to the
Corporation, willful, reckless or grossly negligent misconduct or
insubordination which is or is reasonably likely to be injurious to the
Corporation, monetarily or otherwise, continuing after written notice thereof by
the Board of Directors or a material breach of any of the Employee's obligations
(not occasioned by the Employee's death or Disability) hereunder after written
notice by the Corporation and failure to cure within thirty (30) days of such
notice.

                                        5
<PAGE>

8.          NOTICES

            Any notice or other communication under this Agreement shall be in
writing and shall be deemed to have been given upon receipt by the other party.

9.          SEVERABILITY OF PROVISIONS

            If any provision of this Agreement shall be declared by a court of
competent jurisdiction to be invalid, illegal or incapable of being enforced in
whole or in part, the remaining conditions and provisions or portions thereof
shall nevertheless remain in full force and effect and enforceable to the extent
they are valid, legal and enforceable, and no provision shall be deemed
dependent upon any other covenant or provision unless so expressed herein.

10.         ENTIRE AGREEMENT; MODIFICATION

            This Agreement contains the entire agreement of the parties relating
to the subject matter hereof, and the parties hereto have made no agreements,
representations or warranties relating to the subject matter of this Agreement,
which are not set forth herein. No modification of this Agreement shall be valid
unless made in writing and signed by the parties hereto.

11.         BINDING EFFECT

            The rights, benefits, duties and obligations under this Agreement
shall inure to, and be binding upon, the Corporation, its successors and
assigns, and upon the Employee and his legal representatives. This Agreement
constitutes a personal service agreement, and the performance of the Employee's
obligations hereunder may not be transferred or assigned by the Employee.

12.         NON-WAIVER

            The failure of either party to insist upon the strict performance of
any of the terms, conditions and provisions of this Agreement shall not be
construed as a waiver or relinquishment of future compliance therewith, and said
terms, conditions and provisions shall remain in full force and effect. No
waiver of any term or condition of this Agreement on the part of either party
shall be effective for any purpose whatsoever unless such waiver is in writing
and signed by such party.

13.         GOVERNING LAW; WAIVER OF JURY TRIAL

            This Agreement shall be governed by, and construed and interpreted
in accordance with, the laws of the State of New Jersey without regard to
principles of conflict of laws. The parties irrevocably waive all right to a
trial by jury in any suit, action, or other proceeding hereafter instituted by
or against such party in respect of its obligations hereunder or the
transactions contemplated hereby.

                                        6
<PAGE>

            IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.

                                               ABLE LABORATORIES, INC.

                                               By: /s/ Robert Weinstein
                                                   -------------------------

                                               Title: Vice President and CFO

            Agreed and Accepted

            /s/ Raju V.K. Vegesna
            -----------------------------
            Raju Vegesna

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