Document:

Filed by Automated Filing Services Inc. (604) 609-0244 - Net 1 UEPS Technologies Inc.  - Exhibit 10.4

Exhibit 10.4

 SERVICE LEVEL AGREEMENT

  

 BETWEEN

  

 THE DEPARTMENT OF SOCIAL WELFARE

  AND POPULATION DEVELOPMENT

  KWAZULU-NATAL

 

 AND

  

 CASH PAYMASTER SERVICES

  KWAZULU-NATAL (PTY) LTD

 

 14 AUGUST 2001

MEMORANDUM OF ACCEPTANCE 

BETWEEN 

THE PROVINCE OF KWAZULU-NATAL 

 as represented by Mr L.P.H.M. MTshali, in his capacity as
  Premier 

  of the Province of KwaZulu-Natal (hereinafter referred to as “Province”)
   

AND 

 CASH PAYMASTER SERVICES KWAZULU-NATAL (PTY) LTD  

 as represented by Mr M. Yako, in his capacity as Executive
  Chairperson of 

  Cash Paymaster Services KwaZulu-Natal (Pty) Ltd (hereinafter referred to as
  ,.CPS)  

 The KwaZulu-Natal Department of Social Welfare and Population
  Development entered into a contract for the payment of grants with Cash Paymaster
  Services (Pty) Ltd on 6 September 1999. In an effort to set minimum standards,
  and address concerns of service delivery in terms of this contract, a Service
  Level Agreement has been signed. Embodied in the Service Level Agreement are
  the principles of good governance and co-responsibility, to ensure that customers
  of this Department are treated with dignity and respect. With the acceptance,
  of the Service Level Agreement, all parties commit themselves to the implementation
  of both the content and spirit of this agreement. 

 The Memorandum of Acceptance is signed for and on behalf of the parties
  so authorised.

	THUS DONE AND SIGNED AT DURBAN ON THIS 14th
      DAY OF AUGUST 2011. 	 
	 	 
	 	 
	 	 
	 	 
	FOR AND ON BEHALF OF THE PROVINCE OF KWAZULU-NATAL 	 
	 	 
	 	 
	 	 
	 	 
	FOR AND ON BEHALF OF CPS KWAZULU-NATAL (PTY) LTD 	 

AS WITNESSES:  

	 	   	 
	PRINCE G.L. ZULU FOR AND ON	 	MR N.V.E. NGIDI FOR AND ON
	BEHALF OF THE DEPARTMENT OF	 	BEHALF OF THE KWAZULU-NATAL
	SOCIAL WELFARE AND	 	WELFARE PORTFOLIO
	POPULATION DEVELOPMENT	 	COMMITTEE

2

SERVICE LEVEL AGREEMENT 

	1.	PARTIES

       The parties to this agreement are:

	 	 
	1.1 	Department of Social Welfare
        and Population DevelopmentProvince of KwaZulu-Natal 

	 	 
	 	And
	 	 
	1.2 	Cash Paymaster Services (KwaZulu-Natal) Pty Ltd
	 	 
	2.	DEFINITIONS

       In this agreement, unless the context otherwise indicates,
        the words and expression set forth below shall bear the meanings as defined.
        It must be noted that in this document

	 	 	 
	 	•
	reference to any one gender shall include
        the other gender

	 	•
	a natural person includes an artificial
        person and vice versa

	 	•
	the singular includes the plural and
        vice versa

	 	ACT	The Social Assistance Act, No. 59 of 1992, as amended
	 	 	 
	 	AFIS	Automated fingerprint identification system
	 	 	 
	 	AGREEMENT	This service level agreement, including all schedules and
      annexures thereto
	 	 	 
	 	BFIS	Biometric fingerprint identification system used for the
      positive verification of fingerprints
	 	 	 
	 	BUSINESS DAY	Any day other than a Saturday, Sunday or official public
      holiday
	 	 	 
	 	COMMUNITY	People who ordinarily reside in the Province of KwaZulu-Natal
	 	 	 
	 	CONTRACTOR	Cash Paymaster Services (KwaZulu-Natal) Pty Ltd
	 	 	 
	 	CUSTOMER	Any person to whom social assistance is rendered under the
      Social Assistance Act, 1992 as amended
	 	 	 
	 	CUSTOMER CARD	Individual smart cards which will be
        provided and issued by the Contractor to each customer after enrolment,
        according to the requirements as mutually agreed upon

3

	   	DEPARTMENT	The Department of Social Welfare and
        Population Development in the Administration of the Province of KwaZulu-Natal

	 	 	 
	 	ENROLMENT	Electronic registration of the identifying
        details, and fingerprints of each customer in the Province of KwaZulu-Natal

	 	 	 
	 	HANIS	Home Affairs National Identification
        System

	 	 	 
	 	IDENTITY DOCUMENT	13 Digit bar-coded RSA identity document

	 	 	 
	 	IMPLEMENTATION
 TIMETABLE	The implementation plan as mutually
        agreed upon by the Department and the Contractor, in accordance with the
        specifications set in the Tender Document

	 	 	 
	 	MANAGEMENT
 COMMITTEE	The team that will represent the Department
        and the Contractor in the management of the services rendered in terms
        of this contract

	 	 	 
	 	NPSI	National Payment Systems Infrastructure

	 	 	 
	 	PAYMENT MONTH	A calendar month

	 	 	 
	 	PAY POINTS	Designated venues at which the payment
        of grants may be undertaken. These may be:

	 	 	 
	 	 	Mobile - payment equipment mounted in
        vehicles, adapted to the terrain

	 	 	 
	 	 	Fixed - ATM type services for payment
        at mutually agreed upon static venues

	 	 	 
	 	 	Portable - payment equipment which is
        easily transportable, and which can be used in a variety of venues

	 	 	 
	 	 	The list of pay points is attached to
        this Service level agreement as Annexure A

	 	 	 
	 	PROVINCE	The province of KwaZulu-Natal

	 	 	 
	 	SECURITY SERVICES	The security services (both cash-in-transit
        and guarding) that will be provided by the Contractor in terms of the
        agreement contained in the tender documents

4

	   	SOCPEN	National Government’s computerised
        social assistance grant system

	 	 	 
	 	SOCPEN SCHEDULE	Schedules detailing cut-off dates for
        interaction with Socpen, as agreed upon by National Department of Social
        Development and the Provincial Departments responsible for social grant
        administration

	 	 	 
	 	SMART CARD BASED
 SYSTEM	The enhanced automated application and
        payment system which will be used to enrol and pay beneficiaries, according
        to information received from Socpen, with which this system will interface

	 	 	 
	 	TENDER DOCUMENT	The tender as proposed to the Province
        by the Contractor for rendering a comprehensive enrolment, payment and
        communication service to beneficiaries in the Province of KwaZulu-Natal

	3.	RECORD

	 	 
	3.1	 The Contractor submitted a tender to
        the Province, which was accepted by the Province on 29 July 1999. The
        contract was signed on 6 September 1999, and is valid for a 3 year period,
        with provision for an extension for a further 2 years, if mutually agreed
        to.

        Subsequently the date on which this contract became effective was changed
        to 1 January 2000, as confirmed by Tender Board.

	 	 
	3.2 	The provisions as set out in the tender
        document shall be supplementary to this document in all respects. Any
        changes to the procedure as set out in the tender document will be mutually
        negotiated and agreed to. No changes to any provision contained in the
        tender document or this agreement shall be binding unless reduced to writing.

	 	 
	3.3	 It is to be understood that all services
        rendered in terms of this agreement are to conform to the Government’s
        principles of “Batho Pele” that is - people first.

	 	 
	4.	DUTIES OF THE CONTRACTOR

       The Contractor will render the following services:

	 	 
	4.1 	enrolment of all customers and their
        nominated procurators in the Province of KwaZulu-Natal.

	 	 
	4.2 	payment of all customers and/or their
        duly nominated procurators electing to receive their payment in cash.
        This includes the transition of all customers currently paid on the voucher
        system by the South African Post Office Limited.

5

	4.3 	Dissemination of information
        to the customers as and when requested by the Department. 

	 	 	 	 
	4.4 	
Promotion of the National Payment System Infrastructure
        (NPSI) network within the Province of KwaZulu-Natal, for use by customers
        in terms of an action plan as mutually agreed upon between the Department
        and Contractor. 

	 	 	 	 
	In order to render these services, the following
      will apply in respect of 
	 	 	 	 
	4.1 	ENROLMENT  

       Enrolment will consist of both bulk (the immediate enrolment
        of all existing customers and their elected nominees onto the new payment
        system) and on-going (the continued enrolment of all new customers in
        the Province) 

       Enrolment will take place of all customers who have
        re-registered or applied for a grant after 1 October 1998, according to
        information supplied to the Contractor by the Department in the form of
        a pre-list (starter data base). 

       It is agreed that customers will be enrolled on a 13
        digit identity number only. However, provision must be made to accommodate
        the enrolment of foster parents, who are not necessarily South African
        citizens, on alternative identification numbers, as directed by the Department.
      

       Any customer who does not have fingers, or who has fingerprints
        of such a poor quality that they cannot be read by the equipment, must
        nominate a procurator for enrolment purposes. No provision will be made
        in the system for PIN (personal identification number) access. Only biometric
        identification will be permitted. 

	 	 	 	 
	 	4.1.1
	Bulk Enrolment:
         

       This will take place according to an implementation
        timetable as agreed upon by the Department and the Contractor. Bulk enrolment
        is to take place with the least disruption to the payment process and
        the least inconvenience to the customers. Advertising of the venues and
        dates for enrolment is to be a joint responsibility of the Department
        and the Contractor. This process is to be complete within a period of
        5 months from award of tender.

	 	 	 	 
	 	4.1.1.1
	 
	Bulk Enrolment : Cash Payments:
      

       Enrolment is to take place at the payment sites for
        all current cash payment methods. A hard copy of a fingerprint (preferably
        the thumb print) taken will be submitted to the Department and compared
        with the Department of Home Affairs classification system using the fingerprint
        comparers employed within the Department, after the enrolment has taken
        place. All prints not matched will be followed up by the Department. 

	 	 	 	 
	 	4.1.1.2
	 	Bulk Enrolment : Post Office Payments:
      

6

	 	 	 	Enrolment of current customers paid through
        the Post Office will take place in accordance with a timetable as mutually
        agreed upon. 

	 	 	 	 
	 	4.1.1.3	 	Bulk Enrolment : ACB Payments: 

       Bulk enrolment of current ACB customers will be conducted
        at venues as determined by the Department. Individual letters will be
        sent by the Department to every customer to advise them of the enrolment
        venue and date. The Department will devise a management plan to deal with
        those customers who do not respond to this communication. 

	 	 	 	 
	 	4.1.1.4	 	Bulk Enrolment : Institution Payments: 

       Bulk enrolment of institution customers will be done
        at the institutions, in accordance with a timetable as mutually agreed
        upon. 

	 	 	 	 
	 	4.1.1.5	 	Bulk Enrolment : Bed-ridden Customers: 

       Enrolment of customers who are bed-ridden, together
        with their procurators, will have to be undertaken in their homes, in
        accordance with a programme as mutually agreed upon. The Department will
        advise the Contractor of identified cases. 

	 	 	 
	 	4.1.2 	Enrolment of New Applicants
        (ongoing):  

       Enrolment equipment will be available at each service
        office of the Department, in accordance with a timetable, mutually agreed
        upon, determined by the average number of new applications received at
        each district office each month. All new applicants will be enrolled on
        application, but the customer card will be issued on approval of that
        application only. 

      Any changes to the timetable for enrolments must be negotiated
        between the parties, and the changes agreed and confirmed by both parties.
      

	 	 	 
	4.2 	CUSTOMER CARDS 
	 	 	 	 
	 	4.2.1 	The Contractor will provide
        and issue an individual smart card to every customer, once he is enrolled
        on the new system. This card is to contain the following information:
      

       identity number of the customer 

        surname and initials of the customer 

        identity number of the procurator 

        surname and initials of the procurator 

        fingerprints of the customer 

        fingerprints of the procurator 

        bank account number (when applicable) 

7

	 	 	cash purse/s 

        control/s 

	 	 	 	 
	 	 	In addition, a facial photograph
        of the customer is taken on enrolment. This is stored by the Contractor,
        with all 10 fingerprints, on the Contractor’s central data base.
      

	 	 	 
	 	4.2.2
	The card should be easily
        identifiable as a KwaZulu-Natal customer grant in terms of a design as
        approved by the Department. 

	 	 	 
	 	4.2.3
	The Contractor will be responsible
        for the replacement of a maximum of 20% of lost or damaged cards per annum.
        Thereafter, replacement cards will be charged to the Department at the
        cost of the card. 

	 	 	 
	 	4.2.4 
	The customer card is to
        be durable and able to withstand rigorous use. All cards issued will be
        confirmed to not be faulty. 

	 	 	 
	 	4.2.5 
	All lost or damaged cards
        are to be replaced within a period of 3 business days, following the report
        of the loss. Replacement cards are to be issued to the customer or his
        procurator on biometric identification only: Lost cards will be reported
        to the Department, representative at the pay point, or the local district
        welfare office. This Departmental representative or district welfare officer
        will report the loss in writing directly to the Contractor. The Contractor
        will replace the card, and confirm this replacement through a summary
        list to a central controlling officer in the Department. The replacement
        card will be available to the customer or his procurator 3 business days
        after notification of the loss, at the reporting district office. 

	 	 	 
	 	4.2.6 
	Receipts for the damaged
        cards removed by the payment staff at pay points are to be issued to customers
        when their cards are withdrawn. Replacement of all damaged cards is to
        be done within three business days. No customer may have payment withheld
        as a result of the withdrawal of a damaged card, if this is not replaced
        within the 3 business day limit agreed upon. 

	 	 	 
	 	4.2.7 
	The initial card will be
        issued at bulk enrolment, but only activated when payment is generated.
      

	 	 	 
	 	4.2.8
	Enrolment for new applications
        will be done on application for the grant, but the card will only be generated
        once the application has been approved. 

	 	 	 
	4.3 	GRANT PAYMENTS 
	 	 	 
	 	4.3.1 
	Implementation of New
        Payment System: 

	 	 	 	 
	 	4.3.1.1
	 	Cash payment of grants on the new system will be introduced
      in terms of a timetable to be agreed upon by both the Department and the
      Contractor. 

8

	 	 	 	The transition from existing payments methods to
        the new system will be undertaken in terms of a roll-out plan, as mutually
        agreed upon. This will include the transition of post office customers
        within 12 month from implementation date of this contract. 

	 	 	 	 
	 	4.3.1.2 	 	With the phasing in of the new system, payment will
        take place at existing pay points for the first 3 months. Thereafter,
        any change of pay point will be negotiated between the Contractor and
        the Department. The number and location of pay points is detailed on the
        schedule attached as Annexure A. There is to be no amendment to this schedule
        without authorisation from the Department, which retains final approval
        for the changing or creation of any pay point. A variation of 15% of the
        initial number of pay points will be allowed in terms of this contract.
        Costs attached to any variation over or below this number will have to
        be negotiated between the Department and the Contractor. 

	 	 	 	 
	 	4.3.1.3 	 	The creation or change of any pay points will only
        be considered after full consultation between the affected community,
        the Contractor and the Department, which retains the right of final approval.
      

	 	 	 	 
	 	4.3.1.4 	 	The maximum number of customers registered to any
        one pay point should not exceed 1000, while every attempt should be made
        to ensure that no customer spends longer than 2 hours waiting for payment
        at a pay point. (This clause must be read in conjunction with clause 4.3.2.3.)
      

	 	 	 	 
	 	4.3.1.5 	 	Limits of false rejection will not exceed 0,35% on
        the 4 template approach. Limits of false acceptance will not exceed 0,01%
        on the 4 template approach. 

	 	 	 	 
	 	4.3.1.6 	 	The Contractor will bear all costs for the upgrading
        and maintenance of the system and equipment to support the service standards
        as set in the tender specifications. 

	 	 	 	 
	 	4.3.1.7 	 	All hard- or software customisation required to support
        the service standards as set in the tender document, during the contract,
        will be performed at no cost to the Department. 

	 	 	 	 
	 	4.3.1.8 	 	Identified Departmental staff will have on-line access
        to the system as managed by the Contractor. Installation costs for these
        communication links and the necessary software will be borne by the Contractor.
        Communication links will be required at the Departmental Head Office in
        Ulundi. 

	 	 	 	 
	 	4.3.2 	Payment Availability:
         

	 	 	 	 
	 	4.3.2.1 	 	Cash payment of grants will take place over the period
        of a calendar month, in accordance with the legislation. 

9

	 	4.3.2.2	 	Payment at fixed pay points must be available during
        normal office hours, that is from 08h00 to 16h00 weekdays, excluding Saturdays,
        Sundays and public holidays. Payment teams are not to leave fixed pay
        points earlier than an agreed upon time. 

	 	 	 	 
	 	4.3.2.3 	 	Cash payment of grants at any pay point, whether
        portable or mobile, is not to continue after 16h00. Should there be extraordinary
        circumstances which cause payment after 16h00, or to take place on days
        not designated as payment days, to be desirable or necessary, the Department
        (in the form of the management committee representative for that region)
        must be informed, in order to give prior approval. When a team is ready
        to leave any pay point, consultation between the Pension Committee, the
        Departmental representative and the Contractor’s team leader must
        take place, in order to ensure that the customers remain informed, and
        every reasonable effort has been made to pay every customer. 

	 	 	 	 
	 	4.3.2.4 	 	Where late payment at a pay point occurs, the Contractor
        and the Department are to make arrangements to ensure that customers are
        able to return home. Arrangements following late payments may include
        the provision of transport and refreshments for the customers at the defaulting
        party’s cost. 

	 	 	 	 
	 	4.3.2.5 	 	Manual overrides of the system should be limited.
        Where it is confirmed that money has been generated by Socpen for payment
        to any customer, arrangements must be made to ensure that the customer
        is paid, subject to clause 4.3.2.6. 

	 	 	 	 
	 	4.3.2.6 	 	The principle of “no card / no payment”
        will apply. However, if the replacement period of 3 business days for
        reported lost cards is not met, payment must be effected by the Contractor,
        and the Contractor will bear all the risks with payment outside the system.
      

	 	 	 	 
	 	4.3.2.7 	 	All pay stations must be accessible to the frail
        and disabled. 

	 	 	 	 
	 	4.3.2.8	 	The Contractor must develop contingency plans for all
        events which could affect the payment of grants. All rescheduling in the
        event of the non-payment of a pay point must be undertaken in conjunction
        with the Department. In all cases, should a pay point not be paid, payment
        must be rescheduled within a maximum of 5 working days. 

	 	 	 	 
	 	4.3.2.9 	 	A transaction receipt is to be printed for each customer
        after each transaction. Details to be included on the receipt are the
        date and time of payment; the customer’s identity number and name;
        the grant type; the amount paid; the balance available; the payment station
        at which the money was paid and the date of the next payment. The receipt
        is also to make provision for the printing of messages, in either English
        or isiZulu, which will be supplied by Socpen. 

10

 

	 	4.3.2.10
	 	The system must make provision for partial withdrawals.
      

	 	 	 	 
	 	4.3.2.11
	 	The Contractor is to provide plans for the extension
        of the NPSI network of vendors. These points may be used as additional
        withdrawal points by the customers. 

	 	 	 	 
	 	4.3.3
	Casual Illness:
         

       Provision is to be made by the Contractor for the payment
        of grants to persons nominated by the customer, in the event of temporary
        incapacity, as provided for in the legislation, in accordance with the
        following procedure: 

	 	 	 	 
	 	4.3.3.1
	 	The customer will duly authorise a nominee to collect
        his grant on his behalf. This authorisation to be on the approved form,
        or in the form of a letter, on which a thumb print of both the customer
        and the nominee, as well as both names and identity numbers are clearly
        displayed. The local district welfare office is to approve this request,
        by stamping and signing the form. 

	 	 	 	 
	 	4.3.3.2
	 	The nominee will present the approved form, together
        with the customer’s grant card, to the Contractor’s paymaster
        at the payment site. 

	 	 	 	 
	 	4.3.3.3
	 	A senior staff member on the pay team will have the
        authority to pay the grant, which will be written to the customer’s
        grant card. This staff member will retain the letter authorising the payment
        to that specific nominee, for record purposes. 

	 	 	 	 
	 	4.3.4
	Alternative Pay Points:
         

       Customers are to receive payment at their nominated
        pay point on the scheduled pay date, or any subsequent pay point in that
        district during that payment month. This must also apply to the post offices
        used as pay points. 

	 	 	 
	 	4.3.5
	Security at Pay Points:
         

       Security of the pay site and cash-in-transit is the
        Contractor’s responsibility. A security team for each pay team should
        consist of a minimum of 4armed, registered security guards. Of these four,
        one must be at least a Grade C guard, while the remainder must be at least
        Grade D guards. Each guard used must have successfully completed formal
        security training commensurate with the specified training requirements
        as laid down by the Security Officer’s Board. In addition, all guards
        used in this contract must be registered as security officers in terms
        of the Security Officer Act, 92 of 1987. 

	 	 	 
	 	4.3.6 
	Payment Denominations:
         

	 	 	 
	 	4.3.6.1
	 	The maximum denominations to be used
        in the payment of grants is R100. 

11

	 	4.3.6.2	 	Payment of the grant will be made in full, but withdrawals
        from automated cash dispensers will be rounded off to the nearest R10.

	 	 	 	 
	 	4.3.6.3	 	Authority for the Contractor to withhold payment
        issued by Socpen will be valid only when issued by the Department (either
        the Accounting Officer, or his delegated official) in writing. Where possible,
        this will be done at least 2 working days prior to payment date, and is
        valid for the current month only.

	 	 	 
	4.4 	DISSEMINATION OF INFORMATION

       The Contractor will disseminate information to the customers
        as directed by the Department. Details regarding the frequency and content
        of this information shall be dealt with by the management committee.

	 	 
	4.5 	TRAINING

       The Contractor will train identified Departmental staff
        on the new system. This facility will be available on an on-going basis,
        to ensure that, as a result of staff changes and movement, all relevant
        staff are trained. The first session of training for identified staff
        must be complete by the time the payment system is implemented.

	 	 
	5.	RESPONSIBILITIES OF THE
        DEPARTMENT

       The Department will supply the following to the Contractor
        to enable the Contractor to render the required services:

	 	 
	5.1	Information:

       The Department will supply correct, current information
        on customers to the Contractor to enable the phasing in of the new payment
        system.

	 	 
	5.2	Electronic Information:

	 	 
	 	5.2.1 
	The Department will provide
        the necessary authorisation for an electronic link, to enable data transfers
        between the Contractor and Socpen.

	 	 	 
	 	5.2.2 
	The Department will ensure
        that correct monthly payment information is received from Socpen, in accordance
        with the Socpen schedules, in order to enable the Contractor to pay the
        customers.

	 	 	 
	 	5.2.3 	The Department is responsible
        for the management of the number of customers allocated to each pay point.
        In conjunction with clause 4.3.1.4, the Department shall make every attempt
        to rationalise pay points to achieve a minimum of 100 customers per pay
        point. However, in this attempt, neither the Department nor the Contractor
        should sacrifice the overall standard of service delivery.

12

	 	5.2.4
	The Department will implement pay point changes,
        when requested by the customer, in accordance with approved procedures.

	 	 	 
	5.3 	Communication:

       The Department will ensure the provision of information
        and/or material for communication with the customers to the contractor,
        who will ensure the distribution thereof, during the payment cycle.

	 	 
	5.4 	Help Desks:

       The Department will be responsible for the provision
        of help desks at cash pay points, in accordance with a management plan,
        giving due consideration to the availability of resources.

	 	 
	6.	CONTRACTOR REMUNERATION

       The Department shall be liable for fees payable in respect
        of services rendered by the Contractor. All fees quoted are inclusive
        of VAT. The fees will be calculated as follows:

	 	 
	6.1 	Enrolment by the Contractor
        at R15,00 per enrolment.

	 	 
	6.2 	The fees for payment will
        be at a fixed rate of 3,6% of the amount paid out. The tendered fees include
        all costs for setting up the infrastructure of the new system.

	 	 
	6.3 	For the duration of the contract,
        the Contractor will be responsible for the cost of the replacement of
        all lost and damaged customer cards, to a maximum of 20% of cards lost
        or damaged.

      Any further replacement of customer cards will be charged
        to the Department all the cost of the replacement card.

	 	 
	6.4 	The cost for the system to
        be implemented in the Post Offices will be at the rate of R10,26 per payment
        transaction (that is R9,00 plus VAT). The Department will also be responsible
        for the payment of the amount of R11,49 (that is R10,08 plus VAT) per
        payment transaction to the Post Office, as Post Office employees will
        retain responsibility for the payments.

       These separate costs for the post office network are
        to be valid for a period of 12 months following implementation only As
        the Post Office pay points are migrated to the new payment system, so
        the separate costing for the post office will reduce. Once this process
        is complete, all cash payments are to be charged for in a uniform manner,
        at the agreed rate of 3,6% of the amount paid out.

	 	 
	6.5 	The Contractor shall supply
        the money to make grant payments. No money will be made available to the
        Contractor by the Department in advance. This clause will relate to the
        Post Office payments only once the new payment method has been implemented
        in post offices.

13

	6.6 	The Contractor shall, on
        confirmation of receipt of the grant by the individual customer or his
        nominated procurator, render an account to the Department for payment
        thereof. The Department will only reimburse the Contractor for grant money
        actually paid to customers. The invoices for these amounts will be submitted
        to the Department each Thursday of each week, for payment by the Friday
        of that week for the payment days prior to that Thursday. 

	 	 	 
	6.7 	The Contractor is to meet
        the Socpen cut off schedules, as set annually. All grants paid by month
        end 3 will be reconciled to Socpen by the date set for month end 3. The
        balance of the grants for that payment month should be reconciled on month
        end 3 as unresolved. These will be reconciled at the end of the payment
        month. 

	 	 
	6.8 	The Contractor is not to
        carry over payments for uncollected amounts. All grants must be reconciled
        to Socpen monthly. Any uncollected payments will be cancelled and carried
        over for payment by Socpen, for a period of three months, after which
        payment will be systematically suspended. 

	 	 
	6.9 	The account for the Contractor’s
        service fee will be rendered after the service has actually taken place,
        that is, after the customer has confirmed his existence, and has had his
        money transferred to his card. The invoice for the service fee will be
        submitted to the Department monthly, together with the amount due for
        enrolment. The two amounts will be shown separately on the invoice. 

	 	 
	6.10 	Costs for replacement of
        lost cards will be submitted to the Department monthly, on a separate
        invoice, to be included with the invoice for service fees. 

	 	 
	6.11 	The Department shall settle
        its account, within seven (7) days from the date that the invoice was
        received at the Departmental Head Office in Ulundi. Should the Department
        default in the settling of this account, interest at prime rate will be
        payable on all overdue amounts. An invoice shall be deemed to have been
        received on the same day if delivered by hand before 09h00, on the same
        day if delivered by fax, with confirmation of faxing having been effected
        before 09h00 (provided the original is then immediately posted) and on
        the seventh day after posting, if sent by pre-paid registered mail. 

	 	 
	6.12 	Price increases will occur
        annually on notification by the Contractor and will be calculated as follows:
      

	 	 	 
	 	6.12.1 
	Annual price increases will be equal
        to the average increase in the consumer price index (inflation rate /
        CPI) as published by he South African Statistical Services after every
        12 consecutive months of the agreement. 

	 	 	 
	 	6.12.2
	Price increases will come into effect
        one year after the commencement date of the contract. 

	 	 	 
	 	6.12.3 
	Any increases in benefits enjoyed by
        the customers during the period prior to the increase date each year shall
        be offset against the CPI increase before determining the fee percentage
        to be applied to the amount paid out for the new year. 

14

	 	6.12.4
	The written notification for price increases
        must be at the Department’s Head Office no later than 28 February
        annually. This will be finalised within 30 days following receipt by the
        Department.

	 	 	 
	7.	 MANAGEMENT COMMITTEE

	 	 
	7.1 	A management committee will
        be established for the purpose of managing and controlling this contract.

	 	 
	7.2 	The management committee
        shall meet monthly, under the Chairmanship of a Departmental official.
        The Department shall also provide the secretarial services. This committee
        will be the official communication channel for this contract.

	 	 
	7.3 	The management committee
        will be responsible for identifying the needs of the community, and managing
        the disbursement of the funds in the development fund to be established
        with the funds identified for RDP and pay point development in the tender
        document.

	 	 
	7.4 	The management committee
        will also monitor the Contractor’s performance regarding affirmative
        action and the benefits to the Province emanating from this contract.

	 	 
	8.	COMMUNICATION PLAN

	 	 
	8.1 	The communication of the
        implementation of the new system will be a joint responsibility of the
        Department and the Contractor.

	 	 
	8.2 	Communication regarding
        added benefits of this system will be the sole responsibility of the Contractor.

	 	 
	8.3 	Ongoing communication through,
        amongst others, pensioner committees will remain a joint responsibility
        of the Department and the Contractor.

	 	 
	9.	ADJUSTMENTS

       Adjustments to the contract agreed upon by the management
        committee that will have a financial implication for the Department will
        only be implemented after submission to, and approval by, the Head of
        the Department of Social Welfare and Population Development. No adjustments
        will be implemented until confirmed in writing.

	 	 	 
	10.	 TECHNICAL EQUIPMENT
        AND SOFTWARE

	 	 	 
	10.1	 The Contractor shall, apart
        from its duty to provide and supply all equipment necessary for enrolment.,
        grant payments and the communication link for the Departmental Head Office,
        also be responsible for:

	 	 	 
	 	•
	maintenance of equipment;

15

	 	•
	upgrading of equipment, including hard-
        and software, on a regular basis, ensure, that it remains abreast of industry
        technology, to comply with the requirements as laid down in the tender
        document;

	 	 	 
	 	•
	replacing equipment that fails, which
        does not comply to the requirements laid down in the tender document at
        its own expense;

	 	 	 
	 	•
	providing and executing of all back-up
        procedures;

	 	 	 
	 	•
	replacing all lost or stolen equipment;
        and

	 	 	 
	 	•
	ensuring that an adequate disaster recovery
        procedure is in place.

	 	 	 
	10.2 	 All equipment supplied
        and installed by the Contractor for the purpose of this contract shall
        remain the sole property of the Contractor.

	 	 	 
	10.3 	The Contractor shall be
        responsible to install and maintain all equipment to introduce this payment
        system in selected Post offices.

	 	 	 
	11.	DATA AND FEEDBACK

	 	 	 
	11.1	 All data transfers between
        the Contractor and Socpen shall be made electronically, and will comply
        with the specifications as set by Socpen.

	 	 	 
	11.2 	The Contractor shall ensure
        that the Department has on-line access to the Contractor’s central
        data base.

	 	 	 
	11.3 	All data collected and used
        during the contract will remain the confidential property of the Department
        and shall be returnable in a format as agreed upon, at no charge.

	 	 	 
	12.	RDP AND PAY POINT DEVELOPMENT

       The Contractor undertakes to pay an amount of R50 000
        per month (R600 000 per annum) into a development fund, as from the implementation
        of the new payment system for the duration of this contract, which is
        to be used for pay point development and RDP projects. The identification
        of projects for development will be a responsibility of the management
        committee.

	 	 	 
	13.	BENEFITS TO THE COMMUNITY

       The Contractor commits itself to benefit the Province
        of KwaZulu-Natal by means of the following:

	 	 	 
	13.1	The major benefit to the
        community will occur in the area of employment. A minimum of 90% of the
        staff for this contract will be recruited from this Province.

16

	13.2 	Sub-Contractors for service functions
        will be sourced from within the Province, with provision made for the
        inclusion of SMME’s in this venture. Details of SMME’s used
        are to be submitted to the management committee on a quarterly basis.

	 	 
	13.3 	The promotion of the NPSI network of
        vendors must be shown. It is expected that there will be an increase of
        30% in the number of participating dealers each year for the life of this
        contract. Businesses in rural areas are to be given priority in terms
        of this development - it is not intended to support development only in
        the towns or urban areas. The Contractor is to report progress on this
        aspect to the management committee on a quarterly basis.

	 	 
	13.4 	The Contractor must make provision in
        their Service Level Agreement with the S.A. Post Office for a roll-out
        plan for the extension of the spaza and retail post office network, with
        specific reference to how this will improve services in the rural areas.
        Progress reports on this aspect will be submitted to the management committee
        on a quarterly basis.

	 	 
	14.	AUDITING

	 	 
	14.1 	Internal reconciliation and auditing
        facilities have been built into the system by the Contractor. These facilities
        will be accessible to authorised Departmental staff, and staff from the
        office of the Auditor-General.

	 	 
	14.2 	An audited annual financial report will
        be submitted by the Contractor to the Department no later than 30 September
        each year.

	 	 
	15.	DOMICILIA CITANDI ET EXECUTANDI

       The parties hereto choose their domicilia et execulandi
        for all purposes of and in connection with this agreement as follows:

	 	The Department:	The Head
	 	 	Department of Social Welfare and
	 	 	Population Development
	 	 	2nd Floor Administration Building
	 	 	ULUNDI
	 	 	 
	 	The Contractor:	Cash Paymaster Services KwaZulu-Natal (Pty) Ltd
	 	 	113 Old Main Road
	 	 	PINETOWN
	 	 	 
	 	Should any party hereto change its domicilium, it
        shall advise the other party in writing. 

       A notice sent by one party to another shall be deemed
        to have been received on the same day, if delivered by hand on the same
        day if delivered by fax (provided the original is then immediately posted);
        on the seventh day after posting, if sent by pre-paid registered mail.
      

17

	16.	BREACH

       An event of a breach shall be deemed to have occurred
        if:

	 	 
	16.1	 any party breaches any
        of its obligations in terms of this agreement and fails to remedy the
        breach within 7 (seven) days after the receipt of written notice from
        the other party requiring the remedying thereof, if such breach is capable
        of being remedied;

	 	 
	16.2	 any party ceases or is
        unable for any reason whatsoever to conduct its business in an ordinary
        or regular manner, and fails to take reasonable steps to remedy such situation
        within 60 (sixty) days after having been called upon in writing to do
        so by the other party;

	 	 
	16.3 	any covenant or warranty
        made by any party that goes to the root of this agreement is found to
        be untrue or incorrect in any material respect;

	 	 
	16.4 	an event of a breach shall
        not be deemed to have occurred if the equipment fails temporarily. However,
        in this case, arrangements must be made to continue with the required
        service with minimum disruption to the customer;

	 	 
	16.5 	should a breach of this
        agreement, which goes to the root of this agreement, occur, which is not
        corrected within the specified time frame, the party which is not in breach
        shall be entitled to:

	 	 	 
	 	16.5.1 
	call upon the defaulting party to perform
        its obligations in terms of the agreement, or

	 	 	 
	 	16.5.2 
	cancel this agreement

	 	 	 
	16.6	 termination will become
        effective after notice has been given in writing to the defaulting party.

	 	 	 
	17.	FORCE MAJEURE

	 	 	 
	17.1 	If the performance of a
        material part of this agreement is suspended due to force majeure (that
        is, any event which is beyond the control of, and could not have been
        foreseen by that party, including an act of God, lockout, strikes, government
        action, riots, war, or events of a similar nature) that party shall give
        written notice of the force majeure to the other party.

	 	 	 
	17.2	 This notice shall be given
        within 3 (three) working days on which the event of the force majeure
        takes effect.

	 	 	 
	17.3 	The party first affected
        by force majeure shall do its utmost to reinstate the service due
        in terms of this agreement in the shortest possible time.

	 	 	 
	17.4 	Adjustment of the timetable
        for the service required shall be mutually agreed upon in the event of
        force majeure.

18

	17.5 	If a period of 90 (ninety)
        days has elapsed, and if the condition of force majeure persists,
        either party shall be entitled to cancel this agreement with immediate
        effect, and without prejudice. 

	 	 	 	 
	18. 	DETERMINATION OF DISPUTES
         

	 	 
	18.1	Mediation:
        

	 	 	 
	 	18.1.1 
	Prior to the initiation
        of formal dispute resolution procedures as set out in clause 18.2, the
        parties shall first attempt to resolve their dispute informally as follows:
      

	 	 	 	 
	 	18.1.1.1 
	 	Upon written request of either party,
        containing a short statement as to the nature of the dispute and the requesting
        party’s position with respect thereto, each party shall appoint a
        designated representative who does not devote substantially all of his
        time to performance under the Agreement, whose task will be to meet for
        the purpose of endeavouring to resolve such dispute. 

	 	 	 	 
	 	18.1.1.2 
	 	The designated representatives shall meet
        as often as the parties deem reasonably necessary in order to provide
        the other all information with respect to the dispute which the parties
        believe to be appropriate and relevant in connection with the resolution
        of the dispute. The representatives shall discuss and attempt to resolve
        the dispute without the necessity of any formal proceeding and without
        prejudice of any rights. 

	 	 	 	 
	 	18.1.1.3 
	 	During the course of discussion, all
        reasonable requests made by one party to the other for non-privileged
        information, reasonably related to the agreement shall be honoured, in
        order that each of the parties may be fully advised of the other’s
        position (provided that a party shall not be required as part of the informal
        dispute resolution process to disclose information subject to confidential
        restrictions under agreements with third parties.) 

	 	 	 	 
	 	18.1.1.4 
	 	The specific format for the discussions
        shall be left to the discretion of the designated representative. 

	 	 
	18.2 	Arbitration:
        

	 	 	 
	 	18.2.1 
	In the event of any dispute
        of difference between the parties hereto relating to or arising out of
        this agreement, including the implementation, execution, interpretation,
        rectification, validity, enforceability, termination or cancellation of
        this agreement which could not be resolved in terms of clause 18.1, the
        said dispute or difference shall, if demanded by any party on written
        notice to the other party, be submitted for resolution to an arbitrator
        in accordance with the provisions set below: 

	 	 	 
	 	18.2.2 
	Settlement of disputes 

19

	 	18.2.2.1 	 	Should any dispute arise
        between the parties in connection with the interpretation or application
        of the provisions of this agreement or its breach or termination, or the
        validity of any document furnished by the parties pursuant to the provisions
        of this agreement, that dispute will, unless resolved amongst the parties,
        be referred to and be determined by arbitration in terms of this clause.

	 	 	 
	 	18.2.2.2 	 	Any party to this agreement
        may demand that a dispute be determined in terms of this clause by written
        notice given to the other party.

       The party commencing legal action shall decide whether
        the dispute will be resolved by way of arbitration or litigation and in
        the event of the former, this clause shall be taken to constitute the
        submission of the parties to arbitration, and

	 	 	 
	 	18.2.2.3 	 	This clause will not preclude
        any party from obtaining interim relief on an urgent basis from a court
        of competent jurisdiction pending the decision of the arbitrator.

	 	 	 
	 	18.2.3 	The arbitration will be
        held:

	 	 	 
	 	18.2.3.1	 	 In Pietermaritzburg, Durban
        or Ulundi with only the legal and other representatives of the parties
        to the dispute present in accordance with the formalities and procedures
        settled by the arbitrator, and may be held in an informal and summary
        manner, on the basis that it will not be necessary to observe or carry
        out the usual formalities or procedures, pleadings and discovery, or the
        strict rules of evidence, it being the intention that the arbitration
        will be held and completed as soon as possible, and on the basis that
        the arbitrator will be entitled to decide the dispute in accordance with
        what he considers to be just and equitable in the circumstances.

	 	 	 	 
	 	18.2.3.2 	 	The arbitrator must be acceptable
        to both parties and, if the matter in a dispute is principally:

	 	 	 	 
	 	 	 	(a)
	A legal matter, be a practising attorney
        or advocate of at least ten (10) years standing;

	 	 	 	 	 
	 	 	 	(b)
	an accounting matter, be a practising
        chartered accountant of at least ten (10) years standing;

	 	 	 	 	 
	 	 	 	(c)
	any other matter, be an independent
        person.

	 	 	 	 	 
	 	18.2.4	 Should the parties to the
        dispute fail to agree whether the dispute is principally a legal, accounting
        or other matter within seven (7) working days after the arbitration was
        demanded, the matter will be deemed to be a legal matter.

20

	 	18.2.5
	 Should the parties fail
        to agree on an arbitrator within fourteen (14) working days after giving
        notice in terms of the above clause, the arbitrator will be appointed
        at the request of any party to the dispute by the Chairman for the time
        being of the Bar Council according to the provision of the above clauses.

	 	 	 
	 	18.2.6 
	The decision of the arbitrator
        will be final and binding on the parties to the dispute and may be made
        an order of any court to whose jurisdiction the parties are subject at
        the instance of any of the parties to the dispute.

	 	 	 
	 	18.2.7 
	The arbitrator will be entitled
        to make such award, including an award for specific performance, an interdict,
        damages or a penalty or otherwise as he in his sole discretion may deem
        fit and appropriate and to deal as he deems fit with the question of costs,
        including, if applicable, costs on the attorney and client scale and his
        own fees.

	 	 	 
	 	18.2.8 
	The provisions of this clause:

	 	 	 	 	 	 
	 	18.2.8.1
	 	 Constitute an irrevocable
        consent by the parties to any proceedings in terms hereof, and no party
        will be entitled to withdraw therefrom or claim at any such proceedings
        that it is not bound by such provisions;

	 	 	 	 	 	 
	 	18.2.8.2 
	 	Are severable from the rest
        of this agreement and will remain in effect despite termination of or
        invalidity for any reason of this agreement.

	 	 	 	 	 	 
	19.	PENALTY CLAUSE

	 	 
	19.1 	Should the Contractor repudiate
        the agreement at any time or commit a material breach of any term of this
        agreement, the Department shall, without prejudice to the rights it may
        have in law, have the right, notwithstanding the provisions of clause
        16, clause 18.1 and/or clause 18.2, to demand compliance with the term
        or terms of this agreement within a reasonable period stated in a written
        notice delivered by hand and confirmed by registered post to the Contractor,
        failing which, to commence immediately with the procedures as set out
        in clause 18.1 and 18.2 (if necessary). The foregoing is without prejudice
        to such other rights as the aggrieved party may have at law.

	 	 
	19.2 	Notwithstanding the provisions
        of clauses 16, 18 and 19.1, the following specific penalties shall apply
        for the non-performance as listed hereunder:

	 	 
	 	19.2.1 
	Non-performance by
        the Contractor:

	 	 	 	 
	 	 	 	(a) 
	Bulk enrolment

	 	 	 	 	 	 
	 	 	 	 	(i)
	Non-performance

       Failing to enrol all customers who present themselves
        for enrolment within the period specified in clause 4.1.1.

21

	 	 	 	 	(ii)
	Penalty for non-performance

       A reduction of 10% per month of the Contractor’s
        service charge for each month or part thereof that the Contractor needs
        following the date in clause 4.1.1 to rectify the non performance in 19.2.1(a)(i).

	 	 	 	 	 
	 	 	 	(b)
	Payment days

	 	 	 	 	 	 
	 	 	 	 	(i)
	Non performance

       Failing to pay all customers who present themselves
        for payment on or after their allocated payment days within their allocated
        districts, but no later than the last working day of each month.

	 	 	 	 	 	 
	 	 	 	 	(ii)
	Penalty

       A reduction of 15% in the Contractor’s service
        fee for all payments which took place after the last working day of each
        month.

	 	 	 	 	 
	 	 	 	(c)
	Scheduled payment days

	 	 	 	 	 	 
	 	 	 	 	(i)
	Non-performance

       Failing to visit a scheduled pay point(s) on a predetermined
        pay day(s) without prior notification to the Department (in writing) and
        customers.

	 	 	 	 	 	 
	 	 	 	 	(ii)
	Penalty

       A penalty equivalent to 20% of the Contractor’s
        service fee for customers registered to receive payment at such pay points,
        but which the Contractor failed to visit on the predetermined days.

	 	 	 	 	 
	 	 	 	(d)
	Technical support

       Penalties for non-availability of technical support
        will be affected through clauses 19.2.1(a) and 19.2.1(b).

	 	 	 	 	 
	 	 	 	(e)
	Insufficient infrastructure

       Where non-performance in 19.2.1(a) and 19.2.1(b) is
        a result of the fact that the Contractor deployed insufficient infrastructure,
        an additional penalty of 10% will be added to that already specified in
        19.2.1(a) and 19.2.2(b).

22

	 	 	 	(f)
	Reconciliation data

       The Department will be able to withhold the financial
        consideration payable to the Contractor for a particular month for as
        long as the Contractor fails to submit the reconciliation data for that
        month. The Contractor will not charge the Department interest on this
        amount.

	 	 	 	 	 
	 	19.2.2 
	Non-performance by
        the Department:

	 	 	 	 	 
	 	 	 	(a)
	Transfer of funds

       The Contractor will recover from the Department any
        cost incurred (if any) by the Contractor due to the transfer of funds
        after the period specified in clause 6.5.10, including interest (if any).

	 	 	 	 	 
	 	 	 	(b)
	Transfer of data

       The Contractor will not be held liable if any of the
        non-performances by the Contractor listed under 19.2.1 above is caused
        by SOCPEN.

	 	 	 	 
	20.	VARIATION/ MODIFICATION
        / WAIVER

       No variation, modification or waiver of any provision
        or consensual cancellation of this agreement or consent to any departure
        therefrom, shall in any way be of any force or effect unless confirmed
        in writing and signed by both parties, and then any such variation, modification
        or waiver, cancellation or consent shall be effected only in the specific
        instance and for that purpose and to the extent for which it is made or
        given.

23

	21.	WAIVER OF RIGHTS

       The waiver, whether expressed or implied, by any party
        of any breach of the terms or conditions of this agreement by any other
        party, shall not prejudice any remedy of the waiving party in respect
        of any continuing or other breach of the terms and conditions hereof.

       No failure, delay, relaxation or indulgence on the part
        of any party in exercising any power or right conferred on such party
        in terms of this agreement shall operate as a waiver of such power or
        right, nor shall any single or partial exercise of any such power or right
        preclude any other or further exercise thereof, or the exercise of any
        other power or right under this agreement.

  

	SIGNED AT	 	ON	 

 
	AS WITNESSES:	 	ON BEHALF OF THE DEPARTMENT
	 	 	 
	1.	 	 	 
	 	 	 	Duly authorised thereto
	 	 	 	 
	2.	 	 	 

  

	SIGNED AT	 	ON	 

 
	AS WITNESSES:	 	ON BEHALF OF THE CONTRACTOR
	 	 	 	 
	1.	 	 	 
	 	 	 	Duly authorised thereto
	 	 	 	 
	2.================================================================================

                           LOAN AND SECURITY AGREEMENT

================================================================================
<PAGE>
                                TABLE OF CONTENTS
                                                                            Page
                                                                            ----

1    ACCOUNTING AND OTHER TERMS .............................................. 4
     --------------------------

2    LOAN AND TERMS OF PAYMENT ............................................... 4
     -------------------------
     2.1     Promise to Pay................................................... 4
     2.2     Overadvances..................................................... 4
     2.3     Interest Rate, Payments.......................................... 4
     2.4     Fees............................................................. 5

3    CONDITIONS OF LOANS ..................................................... 5
     -------------------
     3.1     Conditions Precedent to Initial Credit Extension ................ 5
     3.2     Conditions Precedent to all Credit Extensions.................... 5

4    CREATION OF SECURITY INTEREST ........................................... 5
     -----------------------------
     4.1 Grant of Security Interest .......................................... 5

5    REPRESENTATIONS AND WARRANTIES........................................... 6
     ------------------------------
     5.1     Due Organization and Authorization............................... 6
     5.2     Collateral....................................................... 6
     5.3     Litigation....................................................... 6
     5.4     No Material Adverse Change in Financial Statements............... 6
     5.5     Solvency......................................................... 6
     5.6     Regulatory Compliance............................................ 6
     5.7     Subsidiaries .................................................... 7
     5.8     Full Disclosure ................................................. 7

6    AFFIRMATIVE COVENANTS ................................................... 7
     ---------------------
     6.1     Government Compliance ........................................... 7
     6.2     Financial Statements, Reports, Certificates ..................... 7
     6.3     Inventory; Returns .............................................. 8
     6.4     Taxes ........................................................... 8
     6.5     Insurance ....................................................... 8
     6.6     Primary Accounts................................................. 9
     6.7     Financial Covenants ............................................. 9
     6.8     Registration of Intellectual Property Rights .................... 9
     6.9     Further Assurances............................................... 9

7    NEGATIVE COVENANTS ...................................................... 9
     ------------------
     7.1     Dispositions .................................................... 9
     7.2     Changes in Business, Ownership, Management or
             Business Locations ..............................................10
     7.3     Mergers or Acquisitions .........................................10
     7.4     Indebtedness ....................................................10
     7.5     Encumbrance .....................................................10
     7.6     Distributions; Investments ......................................10
     7.7     Transactions with Affiliates ....................................10
     7.8     Subordinated Debt ...............................................11
     7.9     Compliance ......................................................11

8    EVENTS OF DEFAULT .......................................................11
     -----------------
     8.1     Payment Default .................................................11
     8.2     Covenant Default ................................................11
     8.3     Material Adverse Change .........................................11

                                        2
<PAGE>
     8.4     Attachment ......................................................11
     8.5     Insolvency ......................................................12
     8.6     Other Agreements ................................................12
     8.7     Judgments .......................................................12
     8.8     Misrepresentations ..............................................12

9    BANKS RIGHTS AND REMEDIES ...............................................12
     -------------------------
     9.1     Rights and Remedies .............................................12
     9.2     Power of Attorney ...............................................13
     9.3     Accounts Collection .............................................13
     9.4     Bank Expenses ...................................................13
     9.5     Bank's Liability for Collateral .................................13
     9.6     Remedies Cumulative .............................................13
     9.7     Demand Waiver ...................................................13

10   NOTICES .................................................................14
     -------

11   CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER ..............................14
     ------------------------------------------

12   GENERAL PROVISIONS ......................................................14
     ------------------
     12.1    Successors and Assigns ..........................................14
     12.2    Indemnification .................................................14
     12.3    Time of Essence .................................................14
     12.4    Severability of Provision .......................................14
     12.5    Amendments in Writing, Integration ..............................14
     12.6    Counterparts ....................................................15
     12.7    Survival ........................................................15
     12.8    Confidentiality .................................................15
     12.9    Attorneys' Fees, Costs and Expenses .............................15

13   DEFINITIONS .............................................................15
     -----------
     13.1    Definitions .....................................................15

                                        3
<PAGE>
          THIS LOAN AND SECURITY AGREEMENT dated as of the Effective Date,
between SILICON VALLEY BANK ("Bank"), whose address is 3003 Tasman Drive, Santa
Clara, California 95054 and SYNTHETECH, INC. ("Borrower"), whose address is 1290
Industrial Way, Albany, Oregon 97321, provides the terms on which Bank will lend
to Borrower and Borrower will repay Bank. The parties agree as follows:

1         ACCOUNTING AND OTHER TERMS
          --------------------------
          Accounting terms not defined in this Agreement will be construed
following GAAP. Calculations and determinations must be made following GAAP. The
term "financial statements" includes the notes and schedules. The terms
"including" and "includes" always mean "including (or includes) without
limitation," in this or any Loan Document.

2         LOAN AND TERMS OF PAYMENT
          -------------------------
2.1       PROMISE TO PAY.

          Borrower promises to pay Bank the unpaid principal amount of all
Credit Extensions and interest on the unpaid principal amount of the Credit
Extensions.

2.1.1     REVOLVING ADVANCES.

          (a) Bank will make Advances not exceeding (i) the lesser of (A) the
Committed Revolving Line or (B) the Borrowing Base; provided however, that the
Borrowing Base shall not limit the amount of Advances unless and until the
outstanding Advances exceed the sum of $500,000. Amounts borrowed under this
Section may be repaid and reborrowed during the term of this Agreement.

          (b) To obtain an Advance, Borrower must notify Bank by facsimile or
telephone by 12:00 p.m. Pacific time on the Business Day the Advance is to be
made. Borrower must promptly confirm the notification by delivering to Bank the
Payment/Advance Form attached as Exhibit B. Bank will credit Advances to
Borrower's deposit account. Bank may make Advances under this Agreement based on
instructions from a Responsible Officer or his or her designee or without
instructions if the Advances are necessary to meet Obligations which have become
due. Bank may rely on any telephone notice given by a person whom Bank believes
is a Responsible Officer or designee. Borrower will indemnify Bank for any loss
Bank suffers due to such reliance.

          (c) The Committed Revolving Line terminates on the Revolving Maturity
Date, when all Advances are immediately payable.

          (d) Bank's obligation to lend the undisbursed portion of the
Obligations will terminate if, in Bank's sole discretion, there has been a
material adverse change in the general affairs, management, results of
operation, condition (financial or otherwise) or the prospect of repayment of
the Obligations, or there has been any material adverse deviation by Borrower
from the most recent business plan of Borrower presented to and accepted by Bank
prior to the execution of this Agreement.

2.2       OVERADVANCES.

          If Borrower's Obligations under Section 2.1.1 exceed the lesser of
either (i) the Committed Revolving Line or (ii) the Borrowing Base, Borrower
must immediately pay Bank the excess; provided however, that so long as the
Advances are less than or equal to $500,000, then Borrower is not obligated to
pay Bank the excess of amounts that exceed the Borrowing Base.

2.3       INTEREST RATE, PAYMENTS.

          (a) Interest Rate. Advances accrue interest on the outstanding
principal balance at a per annum rate of the Prime Rate. After the occurrence
and during the continuation of an Event of Default, Obligations accrue interest
at 5 percent above the rate effective immediately before the Event of Default.

                                        4
<PAGE>
The interest rate increases or decreases when the Prime Rate changes. Interest
is computed on a 360 day year for the actual number of days elapsed.

          (b) Payments. Borrower shall pay interest due on the Committed
Revolving Line monthly on the 25th of each month. Bank may debit any of
Borrower's deposit accounts including Account Number _______________ for
principal and interest payments owing or any amounts Borrower owes Bank. Bank
will promptly notify Borrower when it debits Borrower's accounts. These debits
are not a set-off. Payments received after 12:00 noon Pacific time are
considered received at the opening of business on the next Business Day. When a
payment is due on a day that is not a Business Day, the payment is due the next
Business Day and additional fees or interest accrue.

2.4       FEES.

          Borrower will pay:

          (a) Revolving Line Fee. A fully earned, non-refundable facility fee of
$5,000.00 due on the Closing Date; and

          (b) Bank Expenses. All Bank Expenses (including reasonable attorneys'
fees and reasonable expenses) incurred through and after the date of this
Agreement, are payable when due.

3         CONDITIONS OF LOANS
          -------------------
3.1       CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION.

          Bank's obligation to make the initial Credit Extension is subject to
the condition precedent that it receives the agreements, documents and fees it
requires.

3.2       CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS.

          Bank's obligations to make each Credit Extension, including the
initial Credit Extension, is subject to the following:

          (a) timely receipt of any Payment/Advance Form; and

          (b) the representations and warranties in Section 5 must be materially
true on the date of the Payment/Advance Form and on the effective date of each
Credit Extension and no Event of Default may have occurred and be continuing, or
result from the Credit Extension. Each Credit Extension is Borrower's
representation and warranty on that date that the representations and warranties
of Section 5 remain true.

4         CREATION OF SECURITY INTEREST
          -----------------------------
4.1       GRANT OF SECURITY INTEREST.

          Borrower grants Bank a continuing security interest in all presently
existing and later acquired Collateral to secure all Obligations and performance
of each of Borrower's duties under the Loan Documents. Except for Permitted
Liens, any security interest will be a first priority security interest in the
Collateral. Bank may place a "hold" on any deposit account pledged as
Collateral. If this Agreement is terminated, Bank's lien and security interest
in the Collateral will continue until Borrower fully satisfies its Obligations.

          If Borrower is profitable for two consecutive quarters, Bank agrees to
release its security interest in the Collateral only if the following conditions
have been performed or satisfied: (a) Borrower is in compliance with all of the
terms and conditions of this Agreement and no Event of Default has occurred; and
(b) Borrower executes and delivers to Bank a Negative Pledge Agreement with
respect to the Collateral, in form and substance satisfactory to Bank.

                                        5
<PAGE>
5         REPRESENTATIONS AND WARRANTIES
          ------------------------------
          Borrower represents and warrants as follows:

5.1       DUE ORGANIZATION AND AUTHORIZATION.

          Borrower and each Subsidiary is duly existing and in good standing in
its state of formation and qualified and licensed to do business in, and in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be qualified, except where the failure to do so could
not reasonably be expected to cause a Material Adverse Change.

          The execution, delivery and performance of the Loan Documents have
been duly authorized, and do not conflict with Borrower's formation documents,
nor constitute an event of default under any material agreement by which
Borrower is bound. Borrower is not in default under any agreement to which or by
which it is bound in which the default could reasonably be expected to cause a
Material Adverse Change.

5.2       COLLATERAL.

          Borrower has good title to the Collateral, free of Liens except
Permitted Liens. The Accounts are bona fide, existing obligations, and the
service or property has been performed or delivered to the account debtor or its
agent for immediate shipment to and unconditional acceptance by the account
debtor. Borrower has no notice of any actual or imminent Insolvency Proceeding
of any account debtor whose accounts are an Eligible Account in any Borrowing
Base Certificate. All Inventory is in all material respects of good and
marketable quality, free from material defects. To the best of Borrower's
knowledge, Borrower is the sole owner of the Intellectual Property, except for
non-exclusive licenses granted to its customers in the ordinary course of
business. To the best of Borrower's knowledge, each Patent is valid and
enforceable and no part of the Intellectual Property has been judged invalid or
unenforceable, in whole or in part, and no claim has been made that any part of
the Intellectual Property violates the rights of any third party, except to the
extent such claim could not reasonably be expected to cause a Material Adverse
Change.

5.3       LITIGATION.

          Except as shown in the Schedule, there are no actions or proceedings
pending or, to the knowledge of Borrower's Responsible Officers, threatened by
or against Borrower or any Subsidiary in which a likely adverse decision could
reasonably be expected to cause a Material Adverse Change.

5.4       NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS.

          All consolidated financial statements for Borrower, and any
Subsidiary, delivered to Bank fairly present in all material respects Borrower's
consolidated financial condition and Borrower's consolidated results of
operations. There has not been any material deterioration in Borrower's
consolidated financial condition since the date of the most recent financial
statements submitted to Bank.

5.5       SOLVENCY.

          The fair salable value of Borrower's assets (including goodwill minus
disposition costs) exceeds the fair value of its liabilities; the Borrower is
not left with unreasonably small capital after the transactions in this
Agreement; and Borrower is able to pay its debts (including trade debts) as they
mature.

5.6       REGULATORY COMPLIANCE.

          Borrower is not an "investment company" or a company "controlled" by
an "investment company" under the Investment Company Act. Borrower is not
engaged as one of its important activities in extending credit for margin stock
(under Regulations T and U of the Federal Reserve Board of Governors). Borrower
has complied in all material respects with the Federal Fair Labor Standards Act.

                                        6
<PAGE>
Borrower has not violated any laws, ordinances or rules, the violation of which
could reasonably be expected to cause a Material Adverse Change. None of
Borrower's or any Subsidiary's properties or assets has been used by Borrower or
any Subsidiary or, to the best of Borrower's knowledge, by previous Persons, in
disposing, producing, storing, treating, or transporting any hazardous substance
other than legally. Borrower and each Subsidiary has timely filed all required
tax returns and paid, or made adequate provision to pay, all material taxes,
except those being contested in good faith with adequate reserves under GAAP.
Borrower and each Subsidiary has obtained all consents, approvals and
authorizations of, made all declarations or filings with, and given all notices
to, all government authorities that are necessary to continue its business as
currently conducted, except where the failure to do so could not reasonably be
expected to cause a Material Adverse Change.

5.7       SUBSIDIARIES.

          Borrower does not own any stock, partnership interest or other equity
securities except for Permitted Investments.

5.8       FULL DISCLOSURE.

          No written representation, warranty or other statement of Borrower in
any certificate or written statement given to Bank (taken together with all such
written certificates and written statements to Bank) contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained in the certificates or statements not misleading. It
being recognized by Bank that the projections and forecasts provided by Borrower
in good faith and based upon reasonable assumptions are not viewed as facts and
that actual results during the period or periods covered by such projections and
forecasts may differ from the projected and forecasted results.

6         AFFIRMATIVE COVENANTS
          ---------------------
          Borrower will do all of the following for so long as Bank has an
obligation to lend, or there are outstanding Obligations:

6.1       GOVERNMENT COMPLIANCE.

          Borrower will maintain its and all Subsidiaries' legal existence and
good standing in its jurisdiction of formation and maintain qualification in
each jurisdiction in which the failure to so qualify would reasonably be
expected to cause a material adverse effect on Borrower's business or
operations. Borrower will comply, and have each Subsidiary comply, with all
laws, ordinances and regulations to which it is subject, noncompliance with
which could have a material adverse effect on Borrower's business or operations
or would reasonably be expected to cause a Material Adverse Change.

6.2       FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.

          (a) Borrower will deliver to Bank: (i) within 5 days after filing with
the Securities and Exchange Commission ("SEC"), its quarterly Form 10Q report;
(ii) within 5 days after filing with the Sec, its annual 10K report; (iii) a
prompt report of any legal actions pending or threatened against Borrower or any
Subsidiary that could result in damages or costs to Borrower or any Subsidiary
of $100,000 or more; (iv) budgets, sales projections, operating plans or other
financial information Bank reasonably requests; and (v) within 30 days after the
end of each month, the monthly statement for its securities account at Morgan
Stanley DW Inc., including any replacement securities account if the Borrower's
securities are moved to another broker. If Borrower has obtained any Advance
under the Committed Revolving Line, Borrower will deliver to Bank as soon as
available, but no later than 45 days after the last day of each month
thereafter, a company prepared consolidated balance sheet and income statement
covering Borrower's consolidated operations during the period certified by a
Responsible Officer and in a form acceptable to Bank.

          (b) In the event the outstanding Advances under the Committed
Revolving Line exceed $500,000 or if Borrower has failed to comply with any
terms or conditions of this Agreement or an Event

                                        7
<PAGE>
of Default has occurred, then within 20 days after the last day of each month,
Borrower will deliver to Bank a Borrowing Base Certificate signed by a
Responsible Officer in the form of Exhibit C, with aged listings of accounts
receivable and accounts payable, and within 45 days after the last day of each
month, Borrower will deliver to Bank an inventory report.

          (c) Borrower will deliver to Bank with the Form 10-Q and Form 10-K
reports and, when required hereunder, the monthly financial statements, a
Compliance Certificate signed by a Responsible Officer in the form of Exhibit D.

          (d) In the event the outstanding Advances under the Committed
Revolving Line exceed $500,000 or if Borrower has failed to comply with any
terms or conditions of this Agreement or an Event of Default has occurred,
Borrower will allow Bank to audit Borrower's Collateral at Borrower's expense.
Such audits will be conducted no more often than every 12 months unless an Event
of Default has occurred and is continuing. The inclusion of any raw material
Inventory in the Borrowing Base is subject to a satisfactory audit of the raw
material Inventory by Bank.

6.3       INVENTORY; RETURNS.

          Borrower will keep all Inventory in good and marketable condition,
free from material defects. Returns and allowances between Borrower and its
account debtors will follow Borrower's customary practices as they exist at
execution of this Agreement. Borrower must promptly notify Bank of all returns,
recoveries, disputes and claims that involve more than $100,000.

6.4       TAXES.

          Borrower will make, and cause each Subsidiary to make, timely payment
of all material federal, state, and local taxes or assessments (other than taxes
and assessments which Borrower is contesting in good faith, with adequate
reserves maintained in accordance with GAAP) and will deliver to Bank, on
demand, appropriate certificates attesting to the payment.

6.5       INSURANCE.

          Borrower will keep its business and the Collateral insured for risks
and in amounts standard for Borrower's industry, and as Bank may reasonably
request. Insurance policies will be in a form, with companies, and in amounts
that are satisfactory to Bank in Bank's reasonable discretion. All property
policies will have a lender's loss payable endorsement showing Bank as an
additional loss payee and all liability policies will show the Bank as an
additional insured and provide that the insurer must give Bank at least 20 days
notice before canceling its policy. At Bank's request, Borrower will deliver
certified copies of policies and evidence of all premium payments. Proceeds
payable under any policy will, at Bank's option, be payable to Bank on account
of the Obligations.

                                     WARNING

          UNLESS YOU PROVIDE US WITH EVIDENCE OF THE INSURANCE COVERAGE AS
REQUIRED BY OUR CONTRACT OR LOAN AGREEMENT, WE MAY PURCHASE INSURANCE AT YOUR
EXPENSE TO PROTECT OUR INTEREST. THIS INSURANCE MAY, BUT NEED NOT, ALSO PROTECT
YOUR INTEREST. IF THE COLLATERAL BECOMES DAMAGED, THE COVERAGE WE PURCHASE MAY
NOT PAY ANY CLAIM YOU MAKE OR ANY CLAIM MADE AGAINST YOU. YOU MAY LATER CANCEL
THIS COVERAGE BY PROVIDING EVIDENCE THAT YOU HAVE OBTAINED PROPERTY COVERAGE
ELSEWHERE.

          YOU ARE RESPONSIBLE FOR THE COST OF ANY INSURANCE PURCHASED BY US. THE
COST OF THIS INSURANCE MAY BE ADDED TO YOUR CONTRACT OR LOAN BALANCE. IF THE
COST IS ADDED TO YOUR CONTRACT OR LOAN BALANCE, THE INTEREST RATE ON THE
UNDERLYING CONTRACT OR LOAN WILL APPLY TO THIS ADDED AMOUNT. THE EFFECTIVE DATE
OF COVERAGE MAY BE THE DATE YOUR PRIOR COVERAGE LAPSED OR THE DATE YOU FAILED TO
PROVIDE PROOF OF COVERAGE.

                                        8
<PAGE>
          THIS COVERAGE WE PURCHASED MAY BE CONSIDERABLY MORE EXPENSIVE THAN
INSURANCE YOU CAN OBTAIN ON YOUR OWN AND MAY NOT SATISFY ANY NEED FOR PROPERTY
DAMAGE COVERAGE OR ANY MANDATORY LIABILITY INSURANCE REQUIREMENTS IMPOSED BY
APPLICABLE LAW.]

6.6       PRIMARY ACCOUNTS.

          Borrower will maintain its primary banking relationship with Bank,
including operating and cash management products and services.

6.7       FINANCIAL COVENANTS.

          Borrower will maintain the following financial covenants as of the
last day of each quarter, but if Borrower is required to provide monthly
financial statements to Bank pursuant to Section 6.2 of this Agreement, then
Borrower will maintain the following financial covenants as of the last day of
each month:

          (i) QUICK RATIO. A ratio of Quick Assets to Current Liabilities of at
least 1.50 to 1.00.

          (ii) TANGIBLE NET WORTH. A Tangible Net Worth of at least $19,000,000.

6.8       REGISTRATION OF INTELLECTUAL PROPERTY RIGHTS.

          Borrower will register with the United States Patent and Trademark
Office or the United States Copyright Office its Intellectual Property and
additional Intellectual Property rights developed or acquired including
revisions or additions with any product before the sale or licensing of the
product to any third party in a manner consistent with Borrower's past practice.

          Borrower will (i) protect, defend and maintain the validity and
enforceability of the Intellectual Property and promptly advise Bank in writing
of material infringements and (ii) not allow any Intellectual Property material
to Borrower's business to be abandoned, forfeited or dedicated to the public
without Bank's written consent, except to the extent that the failure to do so
does not cause a Material Adverse Change.

6.9       FURTHER ASSURANCES.

          Borrower will execute any further instruments and take further action
as Bank reasonably requests to perfect or continue Bank's security interest in
the Collateral or to effect the purposes of this Agreement.

7         NEGATIVE COVENANTS
          ------------------
          Borrower will not do any of the following without Bank's prior written
consent, which will not be unreasonably withheld, for so long as Bank has an
obligation to lend or there are any outstanding Obligations:

7.1       DISPOSITIONS.

          Except as otherwise permitted by Section 7.5, convey, sell, lease,
transfer or otherwise dispose of (collectively "Transfer"), or permit any of its
Subsidiaries to Transfer, all or any part of its business or property, except
for Transfers (i) of Inventory in the ordinary course of business; (ii) of
non-exclusive licenses and similar arrangements for the use of the property of
Borrower or its Subsidiaries in the ordinary course of business; or (iii) of
worn-out or obsolete Equipment.

                                        9
<PAGE>
7.2       CHANGES IN BUSINESS, OWNERSHIP, MANAGEMENT OR BUSINESS LOCATIONS.

          Engage in or permit any of its Subsidiaries to engage in any business
other than the businesses currently engaged in by Borrower or reasonably related
thereto or have a material change in its ownership of greater than 25% (other
than by the sale of Borrower's equity securities in a public offering or to
venture capital investors so long as Borrower identifies the venture capital
investors prior to the closing of the investment) or either its chief financial
officer or chief executive officer is replaced by a person or persons not
reasonably acceptable to Bank. Borrower will not, without at least 30 days prior
written notice, relocate its chief executive office, change its state of
incorporation or add any new offices or business locations in which Borrower
maintains or stores over $50,000 in Borrower's assets or property.

7.3       MERGERS OR ACQUISITIONS.

          Merge or consolidate, or permit any of its Subsidiaries to merge or
consolidate, with any other Person, or acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the capital stock or
property of another Person, except where (i) no Event of Default has occurred
and is continuing or would result from such action during the term of this
Agreement and (ii) such transaction would not result in a decrease of more than
25% of Tangible Net Worth. A Subsidiary may merge or consolidate into another
Subsidiary or into Borrower.

7.4       INDEBTEDNESS.

          Create, incur, assume, or be liable for any Indebtedness, or permit
any Subsidiary to do so, other than Permitted Indebtedness.

7.5       ENCUMBRANCE.

          Create, incur, or allow any Lien on any of its property, or assign or
convey any right to receive income, including the sale of any Accounts, or
permit any of its Subsidiaries to do so, except for Permitted Liens, or permit
any Collateral not to be subject to the first priority security interest granted
here, subject to Permitted Liens.

7.6       DISTRIBUTIONS; INVESTMENTS.

          Except as otherwise permitted by Section 7.3, directly or indirectly
acquire or own any Person, or make any Investment in any Person, other than
Permitted Investments, or permit any of its Subsidiaries to do so. Pay any
dividends or make any distribution or payment or redeem, retire or purchase any
capital stock; provided however that Borrower may redeem Borrower's stock
pursuant to such stock repurchase plan(s) as are adopted from time to time by
Borrower's Board of Directors so long as no Event of Default has occurred and is
continuing and the redemption would not cause any Event of Default to occur
under any other provision of this Agreement or the other Loan Documents, and
Borrower may pay dividends so long as Borrower gives Bank at least 15 days'
written notice of its intent to declare a dividend, together with pro forma
financial information that demonstrates to Bank's reasonable satisfaction that
payment of such dividend will not cause an Event of Default.

7.7       TRANSACTIONS WITH AFFILIATES.

          Directly or indirectly enter into or permit to exist any material
transaction with any Affiliate of Borrower except for transactions that are in
the ordinary course of Borrower's business, upon fair and reasonable terms that
are no less favorable to Borrower than would be obtained in an arm's length
transaction with a nonaffiliated Person.

                                       10
<PAGE>
7.8       SUBORDINATED DEBT.

          Make or permit any payment on any Subordinated Debt, except under the
terms of the Subordinated Debt, or amend any provision in any document relating
to the Subordinated Debt without Bank's prior written consent.

7.9       COMPLIANCE.

          Become an "investment company" or a company controlled by an
"investment company," under the Investment Company Act of 1940 or undertake as
one of its important activities extending credit to purchase or carry margin
stock, or use the proceeds of any Credit Extension for that purpose; fail to
meet the minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the
Federal Fair Labor Standards Act or violate any other law or regulation, if the
violation could reasonably be expected to have a material adverse effect on
Borrower's business or operations or would reasonably be expected to cause a
Material Adverse Change, or permit any of its Subsidiaries to do so.

8         EVENTS OF DEFAULT
          -----------------
          Any one of the following is an Event of Default:

8.1       PAYMENT DEFAULT.

          If Borrower fails to pay any of the Obligations within 5 days after
their due date. During the additional period the failure to cure the default is
not an Event of Default (but no Credit Extension will be made during the cure
period);

8.2       COVENANT DEFAULT.

          If Borrower does not perform any obligation in Section 6 or violates
any covenant in Section 7; or

          If Borrower does not perform or observe any other material term,
condition or covenant in this Agreement, any Loan Documents, or in any agreement
between Borrower and Bank and as to any default under a term, condition or
covenant that can be cured, has not cured the default within 10 days after it
occurs, or if the default cannot be cured within 10 days or cannot be cured
after Borrower's attempts within 10 day period, and the default may be cured
within a reasonable time, then Borrower has an additional period (of not more
than 30 days) to attempt to cure the default. During the additional time, the
failure to cure the default is not an Event of Default (but no Credit Extensions
will be made during the cure period);

8.3       MATERIAL ADVERSE CHANGE.

          If there (i) occurs a material adverse change in the business,
operations, or condition (financial or otherwise) of the Borrower, or (ii) is a
material impairment of the prospect of repayment of any portion of the
Obligations or (iii) is a material impairment of the value or priority of Bank's
security interests in the Collateral.

8.4       ATTACHMENT.

          If any material portion of Borrower's assets is attached, seized,
levied on, or comes into possession of a trustee or receiver and the attachment,
seizure or levy is not removed in 10 days, or if Borrower is enjoined,
restrained, or prevented by court order from conducting a material part of its
business or if a judgment or other claim becomes a Lien on a material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed against
any of Borrower's assets by any government agency and not paid within 10 days
after Borrower receives notice. These are not Events of Default if stayed or if
a bond is posted pending contest by Borrower (but no Credit Extensions will be
made during the cure period);

                                       11
<PAGE>
8.5       INSOLVENCY.

          If Borrower becomes insolvent or if Borrower begins an Insolvency
Proceeding or an Insolvency Proceeding is begun against Borrower and not
dismissed or stayed within 30 days (but no Credit Extensions will be made before
any Insolvency Proceeding is dismissed);

8.6       OTHER AGREEMENTS.

          If there is a default in any agreement between Borrower and a third
party that gives the third party the right to accelerate any Indebtedness
exceeding $100,000 or that could cause a Material Adverse Change;

8.7       JUDGMENTS.

          If a money judgment(s) in the aggregate of at least $100,000 is
rendered against Borrower and is unsatisfied and unstayed for 10 days (but no
Credit Extensions will be made before the judgment is stayed or satisfied);

8.8       MISREPRESENTATIONS.

          If Borrower or any Person acting for Borrower makes any material
misrepresentation or material misstatement now or later in any warranty or
representation in this Agreement or in any writing delivered to Bank or to
induce Bank to enter this Agreement or any Loan Document.

9         BANK'S RIGHTS AND REMEDIES
          --------------------------
9.1       RIGHTS AND REMEDIES.

          When an Event of Default occurs and continues Bank may, without notice
or demand, do any or all of the following:

          (a) Declare all Obligations immediately due and payable (but if an
Event of Default described in Section 8.5 occurs all Obligations are immediately
due and payable without any action by Bank);

          (b) Stop advancing money or extending credit for Borrower's benefit
under this Agreement or under any other agreement between Borrower and Bank;

          (c) Settle or adjust disputes and claims directly with account debtors
for amounts, on terms and in any order that Bank considers advisable;

          (d) Make any payments and do any acts it considers necessary or
reasonable to protect its security interest in the Collateral. Borrower will
assemble the Collateral if Bank requires and make it available as Bank
designates. Bank may enter premises where the Collateral is located, take and
maintain possession of any part of the Collateral, and pay, purchase, contest,
or compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. Borrower grants Bank a license to enter
and occupy any of its premises, without charge, to exercise any of Bank's rights
or remedies;

          (e) Apply to the Obligations any (i) balances and deposits of Borrower
it holds, or (ii) any amount held by Bank owing to or for the credit or the
account of Borrower;

          (f) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell the Collateral. Bank is granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower's labels, Patents, Copyrights, Mask Works, rights of use of any name,
trade secrets, trade names, Trademarks, service marks, and advertising matter,
or any similar property as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in

                                       12
<PAGE>
connection with Bank's exercise of its rights under this Section, Borrower's
rights under all licenses and all franchise agreements inure to Bank's benefit;
and

          (g) Dispose of the Collateral according to the Code.

 9.2      POWER OF ATTORNEY.

          Effective only when an Event of Default occurs and continues, Borrower
irrevocably appoints Bank as its lawful attorney to: (i) endorse Borrower's name
on any checks or other forms of payment or security; (ii) sign Borrower's name
on any invoice or bill of lading for any Account or drafts against account
debtors, (iii) make, settle, and adjust all claims under Borrower's insurance
policies; (iv) settle and adjust disputes and claims about the Accounts directly
with account debtors, for amounts and on terms Bank determines reasonable; and
(v) transfer the Collateral into the name of Bank or a third party as the Code
permits. Bank may exercise the power of attorney to sign Borrower's name on any
documents necessary to perfect or continue the perfection of any security
interest regardless of whether an Event of Default has occurred. Bank's
appointment as Borrower's attorney in fact, and all of Bank's rights and powers,
coupled with an interest, are irrevocable until all Obligations have been fully
repaid and performed and Bank's obligation to provide Credit Extensions
terminates.

9.3       ACCOUNTS COLLECTION.

          When an Event of Default occurs and continues, Bank may notify any
Person owing Borrower money of Bank's security interest in the funds and verify
the amount of the Account. Borrower must collect all payments in trust for Bank
and, if requested by Bank, immediately deliver the payments to Bank in the form
received from the account debtor, with proper endorsements for deposit.

9.4       BANK EXPENSES.

          If Borrower fails to pay any amount or furnish any required proof of
payment to third persons, Bank may make all or part of the payment or obtain
insurance policies required in Section 6.5, and take any action under the
policies Bank deems prudent. Any amounts paid by Bank are Bank Expenses and
immediately due and payable, bearing interest at the then applicable rate and
secured by the Collateral. No payments by Bank are deemed an agreement to make
similar payments in the future or Bank's waiver of any Event of Default.

9.5       BANK'S LIABILITY FOR COLLATERAL.

          If Bank complies with reasonable banking practices and the Code, it is
not liable for: (a) the safekeeping of the Collateral; (b) any loss or damage to
the Collateral; (c) any diminution in the value of the Collateral; or (d) any
act or default of any carrier, warehouseman, bailee, or other person. Borrower
bears all risk of loss, damage or destruction of the Collateral.

9.6       REMEDIES CUMULATIVE.

          Bank's rights and remedies under this Agreement, the Loan Documents,
and all other agreements are cumulative. Bank has all rights and remedies
provided under the Code, by law, or in equity. Bank's exercise of one right or
remedy is not an election, and Bank's waiver of any Event of Default is not a
continuing waiver. Bank's delay is not a waiver, election, or acquiescence. No
waiver is effective unless signed by Bank and then is only effective for the
specific instance and purpose for which it was given.

9.7       DEMAND WAIVER.

          Borrower waives demand, notice of default or dishonor, notice of
payment and nonpayment, notice of any default, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Bank on which Borrower is
liable.

                                       13
<PAGE>
10        NOTICES
          -------
          All notices or demands by any party about this Agreement or any other
related agreement must be in writing and be personally delivered or sent by an
overnight delivery service, by certified mail, postage prepaid, return receipt
requested, or by telefacsimile to the addresses set forth at the beginning of
this Agreement. A party may change its notice address by giving the other party
written notice.

11        CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
          ------------------------------------------
          Oregon law governs the Loan Documents without regard to principles of
conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of
the State and Federal courts in Multnomah County, Oregon.

BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED
TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS
WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.
EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

12        GENERAL PROVISIONS
          ------------------
12.1      SUCCESSORS AND ASSIGNS.

          This Agreement binds and is for the benefit of the successors and
permitted assigns of each party. Borrower may not assign this Agreement or any
rights under it without Bank's prior written consent which may be granted or
withheld in Bank's discretion. Bank has the right, without the consent of or
notice to Borrower, to sell, transfer, negotiate, or grant participation in all
or any part of, or any interest in, Bank's obligations, rights and benefits
under this Agreement.

12.2      INDEMNIFICATION.

          Borrower will indemnify, defend and hold harmless Bank and its
officers, employees, and agents against: (a) all obligations, demands, claims,
and liabilities asserted by any other party in connection with the transactions
contemplated by the Loan Documents; and (b) all losses or Bank Expenses
incurred, or paid by Bank from, following, or consequential to transactions
between Bank and Borrower (including reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.

12.3      TIME OF ESSENCE.

          Time is of the essence for the performance of all obligations in this
Agreement.

12.4      SEVERABILITY OF PROVISION.

          Each provision of this Agreement is severable from every other
provision in determining the enforceability of any provision.

12.5      AMENDMENTS IN WRITING, INTEGRATION.

          All amendments to this Agreement must be in writing and signed by
Borrower and Bank. This Agreement represents the entire agreement about this
subject matter, and supersedes prior negotiations or agreements. All prior
agreements, understandings, representations, warranties, and negotiations
between the parties about the subject matter of this Agreement merge into this
Agreement and the Loan Documents.

                                       14
<PAGE>
12.6      COUNTERPARTS.

          This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, are an original, and all taken together, constitute one Agreement.

12.7      SURVIVAL.

          All covenants, representations and warranties made in this Agreement
continue in full force while any Obligations remain outstanding. The obligations
of Borrower in Section 12.2 to indemnify Bank will survive until all statutes of
limitations for actions that may be brought against Bank have run.

12.8      CONFIDENTIALITY.

          In handling any confidential information, Bank will exercise the same
degree of care that it exercises for its own proprietary information, but
disclosure of information may be made (i) to Bank's subsidiaries or affiliates
in connection with their business with Borrower, (ii) to prospective transferees
or purchasers of any interest in the loans (provided, however, Bank shall use
commercially reasonable efforts in obtaining such prospective transferee or
purchasers agreement of the terms of this provision), (iii) as required by law,
regulation, subpoena, or other order, (iv) as required in connection with Bank's
examination or audit and (v) as Bank considers appropriate exercising remedies
under this Agreement. Confidential information does not include information that
either: (a) is in the public domain or in Bank's possession when disclosed to
Bank, or becomes part of the public domain after disclosure to Bank other than
as a result of the Bank's violation of the other provisions of this Section
12.8; or (b) is disclosed to Bank by a third party, if Bank does not know that
the third party is prohibited from disclosing the information.

12.9      ATTORNEYS' FEES, COSTS AND EXPENSES.

          In any action or proceeding between Borrower and Bank arising out of
the Loan Documents, the prevailing party will be entitled to recover its
reasonable attorneys' fees and other reasonable costs and expenses incurred at
trial, on appeal and in any arbitration or bankruptcy proceeding, in addition to
any other relief to which it may be entitled.

13        DEFINITIONS
          -----------
13.1      DEFINITIONS

          In this Agreement:

          "ACCOUNTS" are all existing and later arising accounts, contract
rights, and other obligations owed Borrower in connection with its sale or lease
of goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.

          "ADVANCE" or "ADVANCES" is a loan advance (or advances) under the
Committed Revolving Line.

          "AFFILIATE" of a Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person's senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person's managers and members.

          "BANK EXPENSES" are all audit fees and expenses and reasonable costs
and expenses (including reasonable attorneys' fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals, arbitrations or Insolvency Proceedings).

                                       15
<PAGE>
          "BORROWER'S BOOKS" are all Borrower's books and records including
ledgers, records regarding Borrower's assets or liabilities, the Collateral,
business operations or financial condition and all computer programs or discs or
any equipment containing the information.

          "BORROWING BASE" is 80% of Eligible Accounts plus 25% of raw material
Inventory, subject to a maximum amount of $250,000, as determined by Bank from
Borrower's most recent Borrowing Base Certificate; provided, however, that Bank
may lower the percentage of the Borrowing Base after performing an audit of
Borrower's Collateral.

          "BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on
which the Bank is closed.

          "CLOSING DATE" is the date of this Agreement.

          "CODE" is the Uniform Commercial Code, as applicable.

          "COLLATERAL" is the property described on Exhibit A.

          "COMMITTED REVOLVING LINE" is an Advance of up to $1,000,000.

          "CONTINGENT OBLIGATION" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangement.

          "COPYRIGHTS" are all copyright rights, applications or registrations
and like protections in each work or authorship or derivative work, whether
published or not (whether or not it is a trade secret) now or later existing,
created, acquired or held.

          "CREDIT EXTENSION" is each Advance or any other extension of credit by
Bank for Borrower's benefit.

          "CURRENT LIABILITIES" are the aggregate amount of Borrower's Total
Liabilities which mature within one (1) year.

          "EFFECTIVE DATE" is the date Bank executes this Agreement.

          "ELIGIBLE ACCOUNTS" are Accounts in the ordinary course of Borrower's
business that meet all Borrower's representations and warranties in Section 5;
but Bank may change eligibility standards by giving Borrower notice. Unless Bank
agrees otherwise in writing, Eligible Accounts will not include:

          (a) Accounts that the account debtor has not paid within 90 days of
          invoice date;

          (b) Accounts for an account debtor, 50% or more of whose Accounts have
          not been paid within 90 days of invoice date;

          (c) Credit balances over 90 days from invoice date;

          (d) Accounts for an account debtor, including Affiliates, whose total
          obligations to Borrower exceed 25% of all Accounts, for the amounts
          that exceed that percentage, unless the Bank

                                       16
<PAGE>
          approves in writing, except that if Borrower provides financial
          information requested by Bank with respect to the following account
          debtors and Bank approves in advance, the percentage may be 50% for
          Accounts from the following account debtors:

          (e) Accounts for which the account debtor does not have its principal
          place of business in the United States, to the extent they exceed the
          sum of $250,000;

          (f) Accounts for which the account debtor is a federal, state or local
          government entity or any department, agency, or instrumentality;

          (g) Accounts for which Borrower owes the account debtor, but only up
          to the amount owed (sometimes called "contra" accounts, accounts
          payable, customer deposits or credit accounts);

          (h) Accounts for demonstration or promotional equipment, or in which
          goods are consigned, sales guaranteed, sale or return, sale on
          approval, bill and hold, or other terms if account debtor's payment
          may be conditional;

          (i) Accounts for which the account debtor is Borrower's Affiliate,
          officer, employee, or agent;

          (j) Accounts in which the account debtor disputes liability or makes
          any claim and Bank believes there may be a basis for dispute (but only
          up to the disputed or claimed amount), or if the Account Debtor is
          subject to an Insolvency Proceeding, or becomes insolvent, or goes out
          of business;

          (k) Accounts for which Bank reasonably determines collection to be
          doubtful.

          "EQUIPMENT" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.

          "ERISA" is the Employment Retirement Income Security Act of 1974, and
its regulations.

          "GAAP" is generally accepted accounting principles.

          "INDEBTEDNESS" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.

        "INSOLVENCY PROCEEDING" are proceedings by or against any Person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.

          "INTELLECTUAL PROPERTY" is:

          (a) Copyrights, Trademarks, Patents, and Mask Works including
amendments, renewals, extensions, and all licenses or other rights to use and
all license fees and royalties from the use;

          (b) Any trade secrets and any intellectual property rights in computer
software and computer software products now or later existing, created, acquired
or held;

          (c) All design rights which may be available to Borrower now or later
created, acquired or held;

          (d) Any claims for damages (past, present or future) for infringement
of any of the rights above, with the right, but not the obligation, to sue and
collect damages for use or infringement of the intellectual property rights
above;

                                       17
<PAGE>
          All proceeds and products of the foregoing, including all insurance,
indemnity or warranty payments.

          "INVENTORY" is present and future inventory in which Borrower has any
interest, including merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products intended for sale or
lease or to be furnished under a contract of service, of every kind and
description now or later owned by or in the custody or possession, actual or
constructive, of Borrower, including inventory temporarily out of its custody or
possession or in transit and including returns on any accounts or other proceeds
(including insurance proceeds) from the sale or disposition of any of the
foregoing and any documents of title.

          "INVESTMENT" is any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.

          "Lien" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.

          "LOAN DOCUMENTS" are, collectively, this Agreement, any note or notes
executed by Borrower, and any other present or future agreement between Borrower
and/or for the benefit of Bank in connection with this Agreement, all as
amended, extended or restated.

          "MASK WORKS" are all mask works or similar rights available for the
protection of semiconductor chips, now owned or later acquired.

          "MATERIAL ADVERSE CHANGE" is described in Section 8.3.

          "OBLIGATIONS" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including cash management services,
letters of credit and foreign exchange contracts, if any and including interest
accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank.

          "PATENTS" are patents, patent applications and like protections,
including improvements, divisions, continuations, renewals, reissues, extensions
and continuations-in-part of the same.

          "PERMITTED INDEBTEDNESS" is:

          (a) Borrower's indebtedness to Bank under this Agreement or any other
Loan Document;

          (b) Indebtedness existing on the Closing Date and shown on the
Schedule and all renewals and extensions of such Indebtedness, so long as the
principal amount thereof is not increased over the amount set forth on the
Schedule and the collateral, if any, granted to such lender does not change;

          (c) Subordinated Debt;

          (d) Indebtedness to trade creditors incurred in the ordinary course of
business;

          (e) Indebtedness secured by Permitted Liens; and

          (f) Equipment lease obligations, excluding leases arising out of any
sale/leaseback transactions.

          "PERMITTED INVESTMENTS" are:

          (a) Investments shown on the Schedule and existing on the Closing
Date;

          (b) Investments permitted under the Borrower's investment policy
approved by its Board of Directors; and

                                       18
<PAGE>
          (c) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States or its agency or any State maturing within 1
year from its acquisition, (ii) commercial paper maturing no more than 1 year
after its creation and having the highest rating from either Standard & Poor's
Corporation or Moody's Investors Service, Inc., and (iii) Bank's certificates of
deposit issued maturing no more than 1 year after issue.

          "PERMITTED LIENS" are:

          (a) Liens existing on the Closing Date and shown on the Schedule or
arising under this Agreement or other Loan Documents;

          (b) Liens for taxes, fees, assessments or other government charges or
levies, either not delinquent or being contested in good faith and for which
Borrower maintains adequate reserves on its Books, if they have no priority over
any of Bank's security interests;

          (c) Purchase money Liens (i) on Equipment acquired or held by Borrower
or its Subsidiaries incurred for financing the acquisition of the Equipment, or
(ii) existing on equipment when acquired, if the Lien is confined to the
property and improvements and the proceeds of the equipment;

          (d) Licenses or sublicenses granted in the ordinary course of
Borrower's business and any interest or title of a licensor or under any license
or sublicense, if the licenses and sublicenses permit granting Bank a security
interest;

          (e) Leases or subleases granted in the ordinary course of Borrower's
business, including in connection with Borrower's leased premises or leased
property;

          (f) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), but any extension,
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase.

          "PERSON" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company association, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or government agency.

          "PRIME RATE" is Bank's most recently announced "prime rate," even if
it is not Bank's lowest rate.

          "QUICK ASSETS" is, on any date, the Borrower's consolidated,
unrestricted cash, cash equivalents, net billed accounts receivable and
investments with maturities of fewer than 12 months determined according to
GAAP.

          "RESPONSIBLE OFFICER" is each of the Chief Executive Officer, the
President, the Chief Financial Officer, Vice President of Operations and the
Controller of Borrower.

          "REVOLVING MATURITY DATE" is December 23, 2004.

          "SCHEDULE" is any attached schedule of exceptions.

          "SUBORDINATED DEBT" is debt incurred by Borrower subordinated to
Borrower's indebtedness owed to Bank and which is reflected in a written
agreement in a manner and form acceptable to Bank and approved by Bank in
writing.

          "SUBSIDIARY" is for any Person, or any other business entity of which
more than 50% of the voting stock or other equity interests is owned or
controlled, directly or indirectly, by the Person or one or more Affiliates of
the Person.

          "TANGIBLE NET WORTH" is, on any date, the consolidated total assets of
Borrower and its Subsidiaries minus, (i) any amounts attributable to (a)
goodwill, (b) intangible items such as unamortized

                                       19
<PAGE>
debt discount and expense, Patents, trade and service marks and names,
Copyrights and research and development expenses except prepaid expenses, and
(c) reserves not already deducted from assets, and (ii) Total Liabilities.

          "TOTAL LIABILITIES" is on any day, obligations that should, under
GAAP, be classified as liabilities on Borrower's consolidated balance sheet,
including all Indebtedness, and current portion Subordinated Debt allowed to be
paid, but excluding all other Subordinated Debt.

          "TRADEMARKS" are trademark and servicemark rights, registered or not,
applications to register and registrations and like protections, and the entire
goodwill of the business of Assignor connected with the trademarks.

                                       20
<PAGE>
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY BANK AFTER
OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR
PERSONAL FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S
RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY BANK TO BE
ENFORCEABLE.

BORROWER:

SYNTHETECH, INC.

By: ____________________
Title: _________________
Date: __________________

BANK:

SILICON VALLEY BANK

By: ____________________
Title: _________________
Date: __________________

                                       21
<PAGE>
                     Schedule to Loan and Security Aqreement
                     ---------------------------------------

The exact correct corporate name of Borrower is (attach a copy of the formation
documents, e.g., articles, partnership agreement):

          Synthetech, Inc.

Borrower's State of formation:

          Oregon.

Borrower has operated under only the following other names (if none, so state):

          None.

All other address at which the Borrower does business are as follows (attach
additional sheets if necessary and include all warehouse addresses):

          1437 Industrial Way, Albany, Oregon 97322 (not a mailing address).

Borrower has deposit accounts and/or investment accounts located only at the
following institutions:

          MorganStanley
          Ragen Mackenzie
          US Bank General Account
          US Bank Money Market Account

List Acct. Numbers: See above.

Liens existing on the Closing Date and disclosed to and accepted by Bank in
writing:

          City of Albany - SDC

Investments existing on the Closing Date and disclosed to and accepted by Bank
in writing:

          Synthetech FSC, Inc.

Subordinated Debt:

          None.

Indebtedness on the Closing Date and disclosed to and consented to by Bank in
writing:

          City of Albany.

The following is a list of the Borrower's copyrights (including copyrights of
software) which are registered with the United States Copyright Office. (Please
include name of the copyright and registration number and attach a copy of the
registration):

          None.

The following is a list of all software which the Borrower sells, distributes or
licenses to others, which is not registered with the United States Copyright
Office. (Please include versions which are not registered:

          None.

                                       22
<PAGE>
The following is a list of all of the Borrower's patents which are registered
with the United States Patent Office. (Please include name of the patent and
registration number and attach a copy of the registration.):

          See attached patent schedule.

The following is a list of all of the Borrower's patents which are pending with
the United States Patent Office. (Please include name of the patent and a copy
of the application.):

          None.

The following is a list of all of the Borrower's registered trademarks. (Please
include name of the trademark and a copy of the registration.):

          None.

Borrower is not subject to litigation which would have a material adverse effect
on the Borrower's financial condition, except the following (attach additional
comments, if needed):

          None.

Tax ID Number: 84-0845771

Organizational Number, if any: N/A.

                                       23
<PAGE>
                                    EXHIBIT A
                                    ---------

          The Collateral consists of all of Borrower's right, title and interest
in and to the following:

          All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;

          All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above;

          All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;

          All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower;

          All documents, cash, deposit accounts, securities, securities
entitlements, securities accounts, investment property, financial assets,
letters of credit, certificates of deposit, instruments and chattel paper now
owned or hereafter acquired and Borrower's Books relating to the foregoing;

          All copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work thereof,
whether published or unpublished, now owned or hereafter acquired; all trade
secret rights, including all rights to unpatented inventions, know-how,
operating manuals, license rights and agreements and confidential information,
now owned or hereafter acquired; all mask work or similar rights available for
the protection of semiconductor chips, now owned or hereafter acquired; all
claims for damages by way of any past, present and future infringement of any of
the foregoing; and

          All Borrower's Books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions
and accessions to and proceeds thereof.

          Notwithstanding the foregoing, the Collateral shall not be deemed to
include any copyrights, copyright applications, copyright registrations and like
protection in each work of authorship and derivative work thereof, whether
published or unpublished, now owned or hereafter acquired; any patents, patent
applications and like protections including without limitation improvements,
divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same, trademarks, servicemarks and applications
therefor, whether registered or not, and the goodwill of the business of
Borrower connected with and symbolized by such trademarks, any trade secret
rights, including any rights to unpatented inventions, know-how, operating
manuals, license rights and agreements and confidential information, now owned
or hereafter acquired; or any claims for damage by way of any past, present and
future infringement of any of the foregoing (collectively, the "Intellectual
Property"), except that the Collateral shall include the proceeds of all the
Intellectual Property that are accounts, (i.e. accounts receivable) of Borrower,
or general intangibles consisting of rights to payment, if a judicial authority
(including a U.S. Bankruptcy Court) holds that a security interest in the
underlying Intellectual Property is necessary to have a security interest in
such accounts and general intangibles of Borrower that are proceeds of the
Intellectual Property, then the Collateral shall automatically, and effective as
of the Closing Date, include the Intellectual Property to the extent necessary
to permit perfection of Bank's security interest in such accounts and general
intangibles of Borrower that are proceeds of the Intellectual Property.
<PAGE>
                                    EXHIBIT B
                                    ---------
LOAN PAYMENT/ADVANCE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 12:00 P.S.T.

FAX TO:                                                      DATE:_____________
================================================================================
LOAN PAYMENT:
                                        Client Name (Borrower): SYNTHETECH, INC.

From Account #________________________     To Account #________________________
                (Deposit Account #)                       (Loan Account #)

Principal $______________________________and/or Interest $_____________________

All Borrower's representation and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects to on the date of the
telephone transfer request for and advance, but those representations and
warranties expressly referring to another date shall be true, correct and
complete in all material respects as of the date:

AUTHORIZED SIGNATURE:___________________________  Phone Number:________________
================================================================================

================================================================================
LOAN ADVANCE:

COMPLETE OUTGOING WIRE REQUEST SECTION BELOW IF ALL OR A PORTION OF THE FUNDS
FROM THIS LOAN ADVANCE ARE FOR AN OUTGOING WIRE.

From Account #________________________     To Account #________________________
                 (Loan Account #)                        (Deposit Account #)

Amount of Advance $___________________

All Borrower's representation and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects to on the date of the
telephone transfer request for and advance, but those representations and
warranties expressly referring to another date shall be true, correct and
complete in all material respects as of the date:

AUTHORIZED SIGNATURE:___________________________  Phone Number:________________
================================================================================

================================================================================
OUTGOING WIRE REQUEST

COMPLETE ONLY IF ALL OR A PORTION OF FUNDS FROM THE LOAN ADVANCE ABOVE ARE TO
BE WIRED.
Deadline for same day processing is 12:00pm, P.S.T.

Beneficiary Name:_____________________     Amount of Wire: $____________________

Beneficiary Bank:_____________________     Account Number: _____________________

City and Sate:________________________

Beneficiary Bank Transit (ABA) #:          Beneficiary Bank Code (Swift, Sort,
                                           Chip, etc.):_________________________
-- -- -- -- -- -- -- -- --                 (FOR INTERNATIONAL WIRE ONLY)

Intermediary Bank:____________________     Transit (ABA) #:_____________________

For Further Credit to:__________________________________________________________

Special Instruction:____________________________________________________________

BY SIGNING BELOW, I (WE) ACKNOWLEDGE AND AGREE THAT MY (OUR) FUNDS TRANSFER
REQUEST SHALL BE PROCESSED IN ACCORDANCE WITH AND SUBJECT TO THE TERMS AND
CONDITIONS SET FORTH IN THE AGREEMENTS(S) COVERING FUNDS TRANSFER SERVICE(S),
WHICH AGREEMENTS(S) WERE PREVIOUSLY RECEIVED AND EXECUTED BY ME (US).

Authorized Signature:_________________     2nd Signature (If Required):_________

Print Name/Title:_____________________     Print Name/Title:____________________

Telephone #___________________________     Telephone #__________________________

================================================================================
<PAGE>
                                    EXHIBIT C
                           BORROWING BASE CERTIFICATE
--------------------------------------------------------------------------------
Borrower:  SYNTHETECH, INC.                       Bank:  Silicon Valley Bank
           1290 Industrial Way                           3003 Tasman Drive
           Albany, OR 97321                              Santa Clara, CA 95054
Commitment Amount: $1,000,000
--------------------------------------------------------------------------------
ACCOUNTS RECEIVABLE

1.  Accounts Receivable Book Value net of reserves as of______       $_________
2.  Additions (please explain on reverse)                            $_________
3.  TOTAL ACCOUNTS RECEIVABLE                                        $_________

INVENTORY
4.  Raw Material Inventory Book Value as of___________________       $_________
5.  LOAN VALUE OF INVENTORY (25% of #4, up to $250,000)              $_________

ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
6.  Amounts over 90 days due                                         $_________
7.  Balance of 50% over 90 day accounts                              $_________
8.  Credit balances over 90 days                                     $_________
9.  Concentration Limits*                                            $_________
10. Foreign Accounts in excess of $250,000                           $_________
11. Governmental Accounts                                            $_________
12. Contra Accounts                                                  $_________
13. Promotion or Demo Accounts                                       $_________
14. Intercompany/Employee Accounts                                   $_________
15. Other (please explain on reverse)                                $_________
16. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS                             $_________
17. Eligible Accounts (#3 minus #16)                                 $_________
18. LOAN VALUE OF ACCOUNTS (80% of #17)                              $_________

*25%, but if pre-approved by Bank after review of financial information.

BALANCES
19. Maximum Loan Amount                                              $_________
20. Total Funds Available [Lesser of #19 or the sum of #5 + #18]     $_________
21. Present balance owing on Line of Credit                          $_________
22. RESERVE POSITION (#20 minus #21)                                 $_________

THE UNDERSIGNED REPRESENTS AND WARRANTS THAT THIS IS TRUE, COMPLETE AND CORRECT,
AND THAT THE INFORMATION IN THIS BORROWING BASE CERTIFICATE COMPLIES WITH THE
REPRESENTATIONS AND WARRANTIES IN THE LOAN AND SECURITY AGREEMENT BETWEEN THE
UNDERSIGNED AND SILICON VALLEY BANK.

COMMENTS:                                                  =====================
                                                              BANK USE ONLY

                                                           Rec'd By:____________
                                                                    Auth. Signer
                                                           Date:________________

                                                           Verified:____________
                                                                    Auth. Signer
                                                           Date:________________

                                                           _____________________

                                                           =====================
Borrower

SYNTHETECH, INC.

By:_____________________________
        Authorized Signer
<PAGE>
                                    EXHIBIT D
                             COMPLIANCE CERTIFICATE

TO:   SILICON VALLEY BANK
      3003 Tasman Drive
      Santa Clara, CA 95054

FROM: SYNTHETECH, INC.
      1290 Industrial Way
      Albany, OR 97321

      The undersigned authorized officer of Synthetech, Inc. ("Borrower")
certifies in his capacity as such officer that under the terms and conditions of
the Loan and Security Agreement between Borrower and Bank (the "Agreement"), (i)
Borrower is in complete compliance for the period ending______________ with all
required covenants except as noted below and (ii) all representations and
warranties in the Agreement are true and correct in all material respects on
this date. Attached are the required documents supporting the certification. The
Officer certifies that these are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) consistently applied from one period to the next
except as explained in an accompanying letter or footnotes. The Officer
acknowledges that no borrowings may be requested at any time or date of
determination that Borrower is not in compliance with any of the terms of the
Agreement, and that compliance is determined not just at the date this
certificate is delivered.

      PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES"
COLUMN.
<TABLE><CAPTION>
      REPORTING COVENANT                      REQUIRED                                   COMPLIES
      ------------------                      --------                                  -----------
      <S>                                     <C>                                       <C>
      10Q + CC                                Quarterly within 5 days of SEC filing     Yes      No
      10K + CC                                Annually, within 5 days of SEC filing     Yes      No
      Morgan Stanley statement                Monthly within 30 days                    Yes      No
      *Monthly financial statements + CC      Monthly within 45 days                    Yes      No
      **A/R & A/P Agings                      Monthly within 20 days                    Yes      No
      **A/R Audit and Collateral Exam         Initial and Annually                      Yes      No
      **Borrowing Base Certificate            Monthly within 20 days                    Yes      No
      **Inventory Report                      Monthly within 45 days                    Yes      No
</TABLE>

* Monthly financial statements and Compliance Certificates will be required
beginning when Borrower has obtained an Advance under the Committed Revolving
Line and continues each month thereafter.
**These will be required in the event the outstanding Advances under the
Committed Revolving Line exceed $500,000 or if Borrower fails to comply with the
Agreement or upon occurrence of an Event of Default.

<TABLE><CAPTION>
      FINANCIAL COVENANT                      REQUIRED                  ACTUAL            COMPLIES
      ------------------                      --------                  ------            --------
      <S>                                     <C>                       <C>               <C>
      Maintain on a Quarterly Basis, changing to monthly if monthly financial
      statements are required above:

      Minimum Quick Ratio                     1.50:1.00                    :1.00        Yes      No
                                                                     ------
      Minimum Tangible Net Worth              $19,000,000            $                  Yes      No
                                                                      ----------

Have there been updates to Borrower's intellectual property, if appropriate?            Yes      No
</TABLE>
<PAGE>
COMMENTS REGARDING EXCEPTIONS:
See Attached.                             ______________________________________
                                                     BANK USE ONLY

Sincerely,                                Received by:__________________________
                                                           AUTHORIZED SIGNER

SYNTHETECH, INC.                          Date:_________________________________

______________________________            Verified:_____________________________
SIGNATURE                                                  AUTHORIZED SIGNER

                                          Date:_________________________________
______________________________
TITLE
                                          Compliance Status:   Yes ___   No ___

______________________________            ______________________________________
DATE

<PAGE>
                         CORPORATE BORROWING RESOLUTION

BORROWER:  SYNTHETECH, INC.               BANK:  SILICON VALLEY BANK
           1290 INDUSTRIAL WAY                   3003 TASMAN DRIVE
           ALBANY, OR 97321                      SANTA CLARA, CA 95054-1191

I, THE SECRETARY OR ASSISTANT SECRETARY OF SYNTHETECH, INC. ("BORROWER"),
CERTIFY that Borrower is a corporation existing under the laws of the State of
Oregon.

I certify that at a meeting of Borrower's Directors (or by other authorized
corporate action) duly held the following resolutions were adopted.

It is resolved that ANY ONE of the following officers of Borrower, whose name,
title and signature is below:

        NAMES                       POSITIONS              ACTUAL SIGNATURES
        -----                       ---------              -----------------

________________________    ________________________    ________________________

________________________    ________________________    ________________________

________________________    ________________________    ________________________

________________________    ________________________    ________________________

may act for Borrower and:

BORROW MONEY. Borrow money from Silicon Valley Bank ("Bank").

EXECUTE LOAN DOCUMENTS. Execute any loan documents Bank requires.

GRANT SECURITY. Grant Bank a security interest in any of Borrower's assets.

NEGOTIATE ITEMS. Negotiate or discount all drafts, trade acceptances, promissory
notes, or other indebtedness in which Borrower has an interest and receive cash
or otherwise use the proceeds.

LETTERS OF CREDIT. Apply for letters of credit from Bank.

FOREIGN EXCHANGE CONTRACTS. Execute spot or forward foreign exchange contracts.

ISSUE WARRANTS. Issue warrants for Borrower's stock.

FURTHER ACTS. Designate other individuals to request advances, pay fees and
costs and execute other documents or agreements (including documents or
agreement that waive Borrowers right to a jury trial) they think necessary to
effectuate these Resolutions.

Further resolved that all acts authorized by these Resolutions and performed
before they were adopted are ratified. These Resolutions remain in effect and
Bank may rely on them until Bank receives written notice of their revocation.

I certify that the persons listed above are Borrower's officers with the titles
and signatures shown following their names and that these resolutions have not
been modified are currently effective.
<PAGE>
CERTIFIED TO AND ATTESTED BY:

x
  ---------------------------------
  *Secretary or Assistant Secretary

x ---------------------------------
*NOTE: In case the Secretary or other certifying officer is designated by the
 foregoing resolutions as one of the signing officers, this resolution should
 also be signed by a second Officer or Director of Borrower.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00060-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00060-of-00352.parquet"}]]