Non-qualified Stock Option

NON-QUALIFIED STOCK OPTION


GRANTED BY


ABLE LABORATORIES, INC.


(hereinafter called the "Company")


TO


ELIOTT HAHN


(hereinafter called the "Holder")


under the
1998 INCENTIVE AND NON-STATUTORY STOCK OPTION PLAN


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


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


This Option is and shall be subject in every respect to the provisions of the Company's 1998 Incentive and Non-Qualified Stock Option Plan, as the same may be amended from time to time (the "Plan"). A copy of the Plan is being delivered herewith, and the Plan is hereby incorporated herein by reference and made a part hereof. In the event of any conflict or inconsistency between the terms of this Option and those of the Plan, the terms of the Plan shall govern.


This Option shall be exercised in whole or in part by the Holder's delivery to the Company of written notice (the "Notice of Exercise") setting forth the number of shares with respect to which this Option is to be exercised, together with (a) cash in an amount, or a check, bank draft or postal or express money order payable in an amount, equal to the aggregate exercise price for the shares being purchased, (b) with the consent of the Board (which term shall herein include the "Committee" as defined in the Plan), shares of Common Stock


-1- having a fair market value equal to such aggregate exercise price; (c) with the consent of the Board, such other consideration that is acceptable to the Board and that has a fair market value, as determined by the Board, equal to such aggregate exercise price; or (d) with the consent of the Board, any combination of the foregoing. The "fair market value" of the Common Stock shall equal (i) the closing price per share on the date of grant of the Option as reported by the National Market System or another automated quotation system of the National Association of Securities Dealers, Inc., including the OTC Bulletin Board, (ii) if the Common Stock is not quoted on any such system, as reported by a national stock exchange or (iii) if the Common Stock is not listed on such an exchange, the fair market value as determined by the Board.


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


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


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


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