ABLE LABORATORIES INC
SECURITY AGREEMENT
<DOCUMENT>
<TYPE>EX-10.55
<SEQUENCE>18
<FILENAME>exhibit10-55_12545.txt
<DESCRIPTION>SECURITY AGREEMENT
<TEXT>
                                                                   EXHIBIT 10.55
                                                                   -------------

CITIZENS BANK OF MASSACHUSETTS                                SECURITY AGREEMENT
--------------------------------------------------------------------------------

            Able Laboratories, Inc., a corporation duly organized under the laws
of the State of Delaware with a chief executive office, and principal place of
business and mailing address at 6 Hollywood Court, South Plainfield, New Jersey
07080 (hereinafter referred to as "Debtor"), hereby grants to Citizens Bank of
Massachusetts, as Administrative Agent for the ratable benefit of the Lenders
(as defined in the Credit Agreement), a Massachusetts banking corporation, with
a principal place of business at 28 State Street, Boston, Massachusetts 02109
(hereinafter referred to as "Secured Party") a security interest in the property
set forth on EXHIBIT "A" annexed hereto (hereinafter referred to as the
"Collateral"), to secure the payment and performance of all obligations of
Debtor to Secured Party (hereinafter referred to as the "Obligations"). The term
"Obligations" shall mean any and all loans, advances and other credit made by
Secured Party and Lenders prior to, on or after the date of this Agreement to or
for the account of Debtor, and any and all interest, commissions, obligations,
liabilities, indebtedness, charges and expenses now or hereafter chargeable
against Debtor by Secured Party or Lenders or owing by Debtor to Secured Party
or Lenders, whether any of the foregoing are direct or indirect, joint or
several, absolute or contingent, due or to become due, now existing or hereafter
arising, no matter how or when arising and whether under any present or future
agreement or instrument between Debtor and Secured Party and/or Lenders or
otherwise, and the performance and fulfillment by Debtor of all of the terms,
conditions, promises, covenants and provisions contained in this Agreement or in
any note or notes secured hereby or in any present or future agreement or
instrument between Debtor and Secured Party and/or Lenders. Without limiting the
foregoing, the Obligations of the Debtor secured hereby include, without
limitation, all indebtedness owed by the Debtor to the Secured Party and Lenders
under that certain revolving credit facility established pursuant to that
certain Credit Agreement of even date by and between the Secured Party, the
Lenders party thereto and the Debtor as it may be amended from time to time
(hereinafter referred to as the "Credit Agreement").

REPRESENTATIONS AND WARRANTIES:

            Debtor hereby represents and warrants to the Secured Party and
Lenders that: (a) Debtor is solvent, is able to pay its debts as they mature,
has not within the last four months prior to the date hereof committed any act
of bankruptcy, and intends to pay, keep and perform its obligations hereunder;
(b) Debtor's exact legal name is as set forth in the first paragraph of this
Agreement, except as set forth on EXHIBIT "D" annexed hereto, Debtor has not,
during the preceding five (5) years, changed its name, been a party to a merger,
or used any other corporate, fictitious or trade name, and Debtor is organized
in the state identified in the first paragraph of this Agreement; (c) Debtor has
the power to execute, deliver and carry out this Agreement and to incur the
Obligations, and has taken all necessary action to authorize the execution,
delivery and performance by Debtor of this Agreement and the incurring of the
Obligations; (d) The execution and delivery of this Agreement and compliance by
Debtor with any of the terms and provisions of this Agreement or of any of the
other agreements or instruments referred to herein, will not, on the date
hereof, violate any provision of any applicable existing law or regulation or
any writ or decree of any court or governmental instrumentality or of the
charter or by-laws of Debtor or any agreement or instrument to which Debtor is a
party (except for any such violation as would not be likely to have a material
adverse effect on the Debtor's business), and will not result in the creation or
imposition of any lien, security interest, charge or encumbrance of any nature
whatsoever upon or in any of its assets except as contemplated by this
Agreement, and no consent of any other party that has not already been obtained
(including stockholders or other equity interest holders of Debtor) and no
consent, license, approval or authorization of, or registration or declaration
with, any governmental bureau or agency is required in connection with the
execution, delivery, performance, validity, and enforceability of

                                        1
<PAGE>

this Agreement; (e) Debtor has good and marketable title to the Collateral, and
none of the Collateral is subject to any mortgage, pledge, lease, trust,
bailment, lien, security interest, encumbrance, charge or title retention or
other security agreement or arrangement of any character whatsoever other than
those listed on EXHIBIT "B" annexed hereto ("Permitted Encumbrances"), and, to
the extent that this Agreement states that the Collateral is to be acquired
after the date hereof, will be the owner of the Collateral free from any adverse
liens, security interest or encumbrance except as set forth on EXHIBIT "B"; and
Debtor will defend the Collateral against all claims and demands of all persons
at any time claiming the same or any interest therein; (f) Debtor will make
punctual payment of all monies and will faithfully and fully keep and perform
all of the terms, conditions, covenants, and agreement contained on Debtor's
part to be paid, kept, or performed hereunder, and will be bound in all respects
as debtor under this Agreement; and will make punctual payment of all monies and
will faithfully and fully keep and perform all of the terms, conditions,
covenants and agreements on its part to be paid, kept or performed under the
terms of any lease or mortgage of the premises where the Collateral is located
or is to be located wherein Debtor is lessee or mortgagor, and will promptly
notify Secured Party in the event of any default on the part of Debtor or
receipt by Debtor of any notice of alleged default under any such lease or
mortgage.

COVENANTS:

            Debtor hereby covenants to Secured Party and Lenders and agrees
that:

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

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

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

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

                                        2
<PAGE>

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

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

               a.   That loss or damage, if any, under the policy, shall be
                    payable to Secured Party, as secured party, as its interest
                    may appear.

               b.   That the insurance as to the interest of Secured Party shall
                    not be invalidated by any act or neglect of the insured or
                    owner of the property described in said policy, nor by any
                    foreclosure, or other proceeding, or notice of sale relating
                    to said property, nor by any change in the title of
                    ownership of said property, nor by the occupation of the
                    premises where the property is located for purposes more
                    hazardous than are permitted by said policy;

               c.   That, if the policy is canceled at any time by the insurance
                    carrier, in such case the policy shall continue in force for
                    the benefit of Secured Party for not less than thirty (30)
                    days after written notice of cancellation to Secured Party
                    from the insurance carrier; and

               d.   That the policy will not be reduced or canceled at the
                    request of the insured nor will said loss payee endorsement
                    be amended or deleted without thirty (30) days prior written
                    notice to Secured Party from the insurance carrier.

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

                    (ii) to return said funds to Debtor for the purpose of
                    replacement of the Collateral, and

                    (iii) to remit any surplus to Debtor.

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

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

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

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

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

                                        4
<PAGE>

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

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


DEFAULT PROVISIONS:

            Debtor hereby agrees that:

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

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

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

            17. Upon Default, Secured Party shall have the right to take
possession of its Collateral and to maintain such possession on Debtor's
premises or to remove the Collateral or any part thereof to such

                                        5
<PAGE>

places as it may desire. If Secured Party exercises its right to take possession
of its Collateral, Debtor will, upon Secured Party's demand, assemble the
Collateral and make it available to Secured Party at a place reasonably
convenient to both parties.

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

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


AGREEMENTS AND WAIVERS:

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

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

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

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

                                        6
<PAGE>

            24. Debtor hereby agrees that the courts of The Commonwealth of
Massachusetts shall have exclusive jurisdiction to hear and determine any claims
or disputes between Debtor and Secured Party pertaining directly or indirectly
to this Agreement or to any matter arising in connection with this Agreement.
Debtor expressly submits and consents in advance to such jurisdiction in any
action or proceeding commenced in such courts, hereby waiving personal service
of the summons and complaint, or other process or papers issued therein, and
agreeing that service of such summons and complaint, or other process or papers,
may instead be made by registered or certified mail addressed to Debtor at the
address set forth herein. Should Debtor fail to appear or answer any summons,
complaint, process or papers so served within thirty (30) days after the mailing
thereof, it shall be deemed in default and an order and/or judgment may be
entered against it as demanded or prayed for in such summons, complaint, process
or papers. The exclusive choice of forum set forth herein shall not be deemed to
preclude the enforcement of any judgment obtained in such forum or the taking of
any action under this Agreement to enforce the same in any appropriate
jurisdiction.

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

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

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

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


              [The remainder of this page is intentionally blank.]

                                        7
<PAGE>

            IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed and delivered this 2nd day of March, 2004.


                                         DEBTOR:


Witness:                                 Able Laboratories, Inc.


/s/ Gerard P. O'Connor                   By: /s/ Dhananjay G. Wadaker
--------------------------------             -----------------------------------
Print Name: Gerard P. O'Connor           Name: Dhananjay G. Wadaker
            --------------------               ---------------------------------
                                         Title: President and CEO
                                                --------------------------------



                                         SECURED PARTY:
Witness:
                                         Citizens Bank of Massachusetts,
                                         as Administrative Agent for the ratable
                                         benefit of the Lenders


/s/ Liz Amaral                           By: /s/ Raymond Hoefling
--------------------------------             -----------------------------------
Print Name: Liz Amaral                   Name: Raymond C. Hoefling
            --------------------               ---------------------------------
                                         Title: Vice President
                                                --------------------------------

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</DOCUMENT>
