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                                                                    Exhibit 10.3


                                 ALKERMES, INC.
                                64 Sidney Street
                               Cambridge, MA 02139

                                                              September 27, 1996

Fleet National Bank
75 State Street
Boston, MA  02109


Gentlemen:

     This letter agreement will set forth certain understandings among Alkermes,
Inc., a Pennsylvania corporation ("Alkermes"), Alkermes Controlled Therapeutics,
Inc., a Pennsylvania corporation and a wholly-owned Subsidiary of Alkermes ("ACT
I"), Alkermes Controlled Therapeutics Inc. II, a Pennsylvania corporation and a
wholly-owned Subsidiary of Alkermes ("ACT II") (Alkermes, ACT I and ACT II being
hereinafter referred to collectively as the "Borrowers" and individually as a
"Borrower") and Fleet National Bank (the "Bank") with respect to the Term Loans
(hereinafter defined). The Bank is the successor by merger to Fleet Bank of
Massachusetts, N.A. ("Fleet Mass"). This letter agreement is intended to amend
and restate in its entirety that certain letter agreement dated November 19,
1992 between Alkermes and Fleet Mass, as heretofore amended (as so amended, the
"Prior Loan Agreement"), with the result that this letter agreement will be
deemed to replace and supersede the Prior Loan Agreement. In consideration of
the mutual promises contained herein and in the other documents referred to
below, and for other good and valuable consideration, receipt and sufficiency of
which are hereby acknowledged, the Borrowers and the Bank agree as follows:

     I. AMOUNTS AND TERMS
        -----------------
 
     1.1. REFERENCE TO DOCUMENTS. Reference is made to (i) that certain
$3,187,496 original principal amount promissory note dated December 23, 1994
made by Alkermes and payable to the order of Fleet Mass, as amended by Allonge
to Note of even date herewith among Alkermes, ACT I and the Bank (said December
23, 1994 promissory note, as so amended, being hereinafter referred to as the
"1994 Note"), (ii) that certain $1,500,000 original principal amount promissory
note dated December 19, 1995 made by Alkermes and payable to the order of Fleet
Mass, as amended by Allonge to Note of even date herewith among Alkermes, ACT I
and the Bank (said December 19, 1995 promissory note, as so amended, being
hereinafter referred to as the "1995 Note"), (iii) that certain $5,000,000
original principal amount promissory note of even date herewith (the "Ohio Term
Note") made by Alkermes and ACT II jointly and severally and payable to the
order of the Bank, (iv) that certain Security Agreement of even date herewith
(as same may be amended from time to time, the "Security Agreement") from the
Borrowers to the 



     THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
     TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
     SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.           

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Bank, and (v) that certain Pledge Agreement of even date herewith (as same may
be amended from time to time, the "Pledge") from Alkermes to the Bank.

     1.2. THE 1994 TERM LOAN; THE 1994 NOTE. Fleet Mass has made a loan (the
"1994 Term Loan") to Alkermes in the original principal amount of $3,187,496,
the Bank having succeeded to the rights of Fleet Mass thereunder and ACT I
having become jointly and severally liable (together with Alkermes) in respect
thereof. The 1994 Term Loan was made in order to finance or refinance the
purchase by Alkermes and/or ACT I of certain of the items of equipment (the
"Equipment") listed on Exhibit A attached to the Security Agreement. Alkermes
and ACT I represent that, at the date hereof, each such item of Equipment has
been actually delivered to Alkermes and/or ACT I by the vendor, has been
installed at the Cambridge Premises (hereinafter defined) and has become
operational. The 1994 Term Loan is evidenced by the 1994 Note, and interest
thereon shall be payable at the times and at the rate provided for in the 1994
Note. Overdue principal shall bear interest at a rate per annum equal to the sum
of two (2%) percent plus the per annum rate otherwise payable under the 1994
Note (but in no event in excess of the maximum rate from time to time permitted
by then applicable law), payable on demand. Each of Alkermes and ACT I hereby
irrevocably authorizes the Bank to make or cause to be made, on a schedule
attached to the 1994 Note or on the books of the Bank, at or following the time
of making the 1994 Term Loan and of receiving any payment of principal of the
1994 Term Loan, an appropriate notation reflecting each such transaction and the
then unpaid principal balance of the 1994 Term Loan. The amount so noted shall
constitute presumptive evidence as to the amount owed jointly and severally by
Alkermes and ACT I with respect to principal of the 1994 Term Loan. Failure of
the Bank to make any such notation shall not, however, affect any obligation of
any Borrower or any right of the Bank hereunder or under the 1994 Note.

     1.3. THE 1995 TERM LOAN; THE 1995 NOTE. In addition to the 1994 Term Loan,
Fleet Mass also made a loan (the "1995 Term Loan") to Alkermes in the original
principal amount of $1,500,000, the Bank having succeeded to the rights of Fleet
Mass thereunder and ACT I having become jointly and severally liable (together
with Alkermes) in respect thereof. The 1995 Term Loan was made in order to
finance or refinance the purchase by Alkermes and/or ACT I of certain items of
the Equipment listed on Exhibit A to the Security Agreement. Alkermes and ACT I
represent that, at the date hereof, each such item of Equipment has been
actually delivered to Alkermes and/or ACT I by the vendor, has been installed at
the Cambridge Premises and has become operational. The 1995 Term Loan is
evidenced by the 1995 Note, and interest thereon shall be payable at the times
and at the rate provided for in the 1995 Note. Overdue principal shall bear
interest at a rate per annum equal to the sum of two (2%) percent plus the per
annum rate otherwise payable under the 1995 Note (but in no event in excess of
the maximum rate from time to time permitted by then applicable law), payable on
demand. Each of Alkermes and ACT I hereby irrevocably authorizes the Bank to
make or cause to be made, on a schedule attached to the 1995 Note or on the
books of the Bank, at or following the time of making the 1995 Term Loan and of
receiving any payment of principal of the 1995 Term Loan, an appropriate
notation reflecting each such transaction and the then unpaid principal balance
of the 1995 Term Loan. The amount so noted shall constitute presumptive evidence
as to the amount owed jointly and severally by Alkermes and ACT I with respect
to principal of the 1995 Term Loan. Failure of 


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     THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
     TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
     SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.           

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the Bank to make any such notation shall not, however, affect any obligation of
any Borrower or any right of the Bank hereunder or under the 1995 Note.

     1.4. OHIO TERM LOAN; OHIO TERM NOTE. At the date hereof, the Bank is making
a term loan (the "Ohio Term Loan") to Alkermes and ACT II in the original
principal amount of $5,000,000. The Ohio Term Loan is being made in order to
finance or refinance the purchase by ACT II of certain land and the buildings
thereon located in Wilmington, Clinton County, Ohio and certain equipment
therein and certain equipment in a facility leased by ACT II in Blue Ash, Ohio
(the premises owned or leased by ACT II in Wilmington, Ohio and Blue Ash, Ohio
being hereinafter referred to collectively as the "Ohio Premises"). The Ohio
Term Loan is evidenced by the Ohio Term Note, and interest thereon shall be
payable at the times and at the rate provided for in the Ohio Term Note. Overdue
principal shall bear interest at a rate per annum equal to the sum of two (2%)
percent plus the per annum rate otherwise payable under the Ohio Term Note (but
in no event in excess of the maximum rate from time to time permitted by then
applicable law), payable on demand. Each of Alkermes and ACT II hereby
irrevocably authorizes the Bank to make or cause to be made, on a schedule
attached to the Ohio Term Note or on the books of the Bank, at or following the
time of making the Ohio Term Loan and of receiving any payment of principal of
the Ohio Term Loan, an appropriate notation reflecting each such transaction and
the then unpaid principal balance of the Ohio Term Loan. The amount so noted
shall constitute presumptive evidence as to the amount owed jointly and
severally by Alkermes and ACT II with respect to principal of the Ohio Term
Loan. Failure of the Bank to make any such notation shall not, however, affect
any obligation of any Borrower or any right of the Bank hereunder or under the
Ohio Term Note.

     1.5. ADDITIONAL TERM LOANS. The Bank may in the future, in its discretion,
make additional term loans (the "Additional Term Loans") to Alkermes (or, if
appropriate, to Alkermes and one or more of the other Borrowers) in such amounts
and on such terms as are mutually satisfactory to the Bank and Alkermes. Each
Additional Term Loan will be represented by a promissory note (each, an
"Additional Term Note") made by Alkermes (and, if appropriate, one or more of
the other Borrowers). Principal of each Additional Term Loan will be paid as
provided for in the related Additional Term Note. Interest on each Additional
Loan will be paid at the times and at the rate provided for in the related
Additional Term Note. The inclusion in this letter agreement of references to
"Additional Term Loans" and "Additional Term Notes" shall in no event be deemed
to constitute a commitment or agreement on the part of the Bank to make any
Additional Loan or Loans.

     1.6. PRINCIPAL REPAYMENT. Alkermes and ACT I shall repay (and are jointly
and severally obligated to repay) principal of the 1994 Term Loan in the
installments set forth in the 1994 Note; Alkermes and ACT I shall repay (and are
jointly and severally obligated to repay) principal of the 1995 Term Loan in the
installments set forth in the 1995 Note; Alkermes and ACT II shall repay (and
are jointly and severally obligated to repay) principal of the Ohio Term Loan in
the installments set forth in the Ohio Term Note; and Alkermes (and, if
appropriate, one or more of the other Borrowers) shall repay principal of each
Additional Term Loan in the installments set forth in the related Additional
Term Note. The Borrowers may prepay, at any time, the whole or any portion of
any Term Loan; provided that each such principal prepayment 

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     THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
     TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
     SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.           

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shall be accompanied by (i) payment of all interest under the relevant Note
accrued but unpaid to the date of payment and (ii) the additional payment, if
any, required by the next following paragraph. Any partial prepayment of
principal of any Note will be applied to installments of principal of such Note
thereafter coming due in inverse order of normal maturity.

     The following provisions shall apply to the 1994 Term Loan, to the 1995
Term Loan, to the Ohio Term Loan and to each Additional Term Loan which bears
interest at a fixed rate: If, due to voluntary prepayment by any Borrower, or
due to acceleration of the maturity of any Note, or due to any other reason, the
Bank receives payment (a "Prepayment") of all or any portion of any installment
of principal of any Term Loan prior to the regularly-scheduled due date for such
installment, the Borrowers which are (or were) obligated for such Term Loan
shall upon demand forthwith pay to the Bank (and shall be jointly and severally
obligated so to pay) an amount equal to the Make-Whole Amount (hereinafter
defined) applicable to such Prepayment. As used herein, the "Make-Whole Amount"
applicable to each Prepayment of any installment of any Note means the product
of (x) the principal amount being so prepaid, times (y) the Make-Whole Rate
(hereinafter defined), expressed as a decimal times (z) a decimal determined by
dividing (A) the number of days scheduled to elapse from the date of such
Prepayment through the date on which such installment was to have normally
become due by (B) 360, discounted to present value using the Reinvestment Rate
(hereinafter defined) as the discount factor. As used herein, the "Make-Whole
Rate" is a rate per annum equal to the excess, if any, of (x) the effective
annual yield of the relevant Term Loan over (y) the Reinvestment Rate, but in no
event less than zero. The "Reinvestment Rate" is a per annum rate of interest
determined by the Bank in its reasonable discretion to represent the effective
annual yield which the Bank could obtain if at the Prepayment date the Bank were
to reinvest a sum equal to the amount of the Prepayment, such sum to be
reinvested in U.S. Treasury obligations maturing on or about the regularly
scheduled due date of such Prepayment. The Bank may use reasonable methods of
estimation and interpolation in determining the appropriate Reinvestment Rate.

     1.7. PAYMENTS BY BORROWERS. The Bank may charge any deposit account of any
Borrower at the Bank with the amount of all payments of interest, principal and
other sums due (after the expiration of any applicable grace period), from time
to time, under this letter agreement and/or any Note; and will immediately
thereafter notify the relevant Borrower of the amount so charged. The failure of
the Bank so to charge any account or to give any such notice shall not affect
any obligation of the Borrowers to pay interest, principal or other sums as
provided herein or in any Note.

     Whenever any payment to be made to the Bank hereunder or under any Note
shall be stated to be due on a day which is not a Business Day, such payment may
be made on the next succeeding Business Day, and interest payable on each such
date shall include the amount thereof which shall accrue during the period of
such extension of time. All payments by any Borrower hereunder and/or in respect
of any Note shall be made net of any impositions or taxes and without deduction,
set-off or counterclaim, notwithstanding any claim which any Borrower may now or
at any time hereafter have against the Bank. All payments of interest, principal
and any other sum payable hereunder and/or under any Note shall be made to the
Bank, in immediately available funds, at its Principal Office or otherwise as
the Bank may from time to 

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     THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
     TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
     SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.           
<PAGE>   5

time direct. All payments received by the Bank after 12:00 noon on any day shall
be deemed received as of the next succeeding Business Day. All monies received
by the Bank shall be applied first to fees, charges, costs and expenses payable
to the Bank under this letter agreement, any Note and/or any of the other Loan
Documents, next to interest then accrued on account of the Term Loans and only
thereafter to principal of the Term Loans, being applied against principal
installments in inverse order of normal maturity. All interest payable hereunder
and/or under any Note shall be calculated on the basis of a 360-day year for the
actual number of days elapsed.

     1.8. PLEDGED COLLATERAL. Alkermes has deposited with the Bank and has
pledged to the Bank and will maintain with the Bank at all times, as security
for payment of the Term Loans and performance of the Borrowers' obligations
hereunder, cash and/or readily-marketable Government Securities, as to which the
Bank shall have a first lien, with an aggregate fair market value of not less
than the Required Minimum Value. The "Required Minimum Value", as determined at
any time, shall mean the lesser of (x) $1,000,000 or (y) 50% of the then
outstanding aggregate principal amounts of the Term Loans; provided, however,
that at all times from and after the occurrence of any failure on the part of
Alkermes to comply for any reason with Section 3.6 and/or Section 3.7 below
(without waiving or releasing any default of Alkermes or any right or remedy of
the Bank consequent upon such failure), the Required Minimum Value will be
deemed to mean 100% of the then outstanding aggregate principal amounts of the
Term Loans. If at any time after the above-described percentage shall have been
increased to 100% pursuant to the proviso contained in the immediately preceding
sentence Alkermes shall achieve compliance with both Section 3.6 and Section 3.7
for two consecutive fiscal quarters (as evidenced by the quarterly financial
statements submitted by Alkermes to the Bank) and there shall then exist no
Event of Default nor any event or circumstance which, with the passage of time
or the giving notice or both could become an Event of Default, the Required
Minimum Value shall be reduced automatically to the lesser of (x) $1,000,000 or
(y) 50% of the then outstanding aggregate principal amounts of the Term Loans.
If, following any such reduction, Alkermes shall at any time again fail to
comply for any reason with Section 3.6 and/or Section 3.7, then (without waiving
or releasing any default of Alkermes or any right or remedy of the Bank
consequent upon such failure) the Required Minimum Value will be increased again
to 100% of the then outstanding aggregate principal amounts of the Term Loans
and the relevant percentage will not thereafter be decreased even if Alkermes
subsequently achieves compliance with said Sections. At any time when the
Required Minimum Value is less than $1,000,000, the Required Minimum Value shall
be calculated no less frequently than quarterly.

     II. REPRESENTATIONS AND WARRANTIES
         ------------------------------

     2.1. REPRESENTATIONS AND WARRANTIES. In order to induce the Bank to enter
into this letter agreement, the Borrowers jointly and severally warrant and
represent to the Bank as follows:

     (a) Each of Alkermes, ACT I and ACT II is a corporation duly organized,
validly existing and in good standing under the laws of Pennsylvania and each
has full corporate power to own its property and conduct its business as now
conducted and as contemplated to be conducted, to grant the security interests
contemplated by the Security Agreement, the Pledge 

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     THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
     TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
     SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.           
<PAGE>   6

and the Mortgage and to enter into and perform this letter agreement and the
other Loan Documents in which it is named as a party. Alkermes and ACT I are
duly qualified to do business and are in good standing in Massachusetts. ACT II
is duly qualified to do business and is in good standing in Ohio. Alkermes, ACT
I and ACT II are duly qualified to do business and are in good standing in each
other jurisdiction in which (i) the relevant Borrower maintains any
manufacturing plant, sales office, warehouse or other physical facility or in
which the character of the properties owned or the nature of the activities
conducted by such Borrower makes such qualification necessary and (ii) the
failure so to qualify would have a material adverse effect on such Borrower's
business or financial condition. All of the jurisdictions described in the
immediately preceding sentence are listed on item 2.1(a)(i) of the attached
Disclosure Schedule. Except as listed on item 2.1(a)(ii) of the attached
Disclosure Schedule, no Borrower has any Subsidiaries and is not a member of any
partnership or joint venture. All such Subsidiaries are (except as otherwise
noted on said item 2.1(a)(ii)) wholly-owned by Alkermes.

     (b) To the best of the Alkermes' knowledge, each record and/or beneficial
owner of 5% or more of the outstanding capital stock of Alkermes is listed on
item 2.1(b) of the attached Disclosure Schedule. Alkermes is the record and
beneficial owner of 100% of the outstanding capital stock of each of ACT I and
ACT II.

     (c) The execution, delivery and performance by Alkermes, ACT I and ACT II
of this letter agreement and each of the other Loan Documents have been duly
authorized by all necessary corporate and other action and do not and will not:

     (i)  violate any provision of, or require any filings, registration,
          consent or approval under, any law, rule, regulation (including,
          without limitation, Regulation U of the Board of Governors of the
          Federal Reserve System), order, writ, judgment, injunction, decree,
          determination or award presently in effect having applicability to any
          Borrower;

     (ii) violate any provision of the respective charters or by-laws of the
          Borrowers, or result in a breach of or constitute a default or require
          any waiver or consent under any indenture or loan or credit agreement
          or any other agreement, lease or instrument to which any Borrower is a
          party or by which any Borrower or any of their respective properties
          may be bound or affected; or

    (iii) result in, or require, the creation or imposition of any lien,
          security interest or other encumbrance (other than in favor of the
          Bank) upon or with respect to any of the properties now owned or
          hereafter acquired by any Borrower.

     (d) This letter agreement and each of the other Loan Documents in which any
Borrower is named as a party has been duly executed and delivered by each
relevant Borrower and is a legal, valid and binding obligation of such Borrower,
enforceable against such Borrower in accordance with its respective terms,
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws or equitable principles from time to time in
effect relating to or affecting the rights of creditors generally.

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     THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
     TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
     SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.           
<PAGE>   7

     (e) Except as described in item 2.1(e) of the attached Disclosure Schedule,
there are no actions, suits, proceedings or investigations pending or, to the
knowledge of any Borrower, threatened by or against any Borrower or any
Subsidiary of Alkermes before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, which could
prevent or hinder the consummation of the transactions contemplated hereby or
call into question the validity of this letter agreement or any of the other
Loan Documents or any other instrument provided for or contemplated by this
letter agreement or any of the other Loan Documents or any action taken or to be
taken in connection with the transactions contemplated hereby or thereby or
which in any single case or in the aggregate, if adversely determined, would be
reasonably likely to result in any material adverse change in the business,
prospects, condition, affairs or operations of any Borrower or any such
Subsidiary.

     (f) No Borrower is in violation of any term of its charter or by-laws as
now in effect, the violation of which would be reasonably likely to have a
material adverse effect on the financial condition, business or prospects of
such Borrower. No Borrower is in material violation of any material term of any
mortgage, indenture or judgment, decree or order, or any other instrument,
contract or agreement to which it is a party or by which any of its property is
bound.

     (g) All federal, state and local tax returns, reports and estimates of each
Borrower and/or any Subsidiary of Alkermes required to be filed have been duly
filed or extensions have been granted and the relevant Borrower (or such
Subsidiary, as the case may be) has paid all taxes, assessments, impositions,
fees and other governmental charges due in respect of such returns, reports or
estimates, except to the extent that any such taxes, assessments, impositions,
fees or other charges are being contested in good faith by appropriate
proceedings which serve to stay the enforcement thereof and as to which the
relevant Borrower shall have set aside on its books adequate reserves.

     (h) Each Borrower and each Subsidiary of Alkermes is in compliance with all
requirements of law, federal, foreign, state and local, and all requirements of
all governmental bodies or agencies having jurisdiction over it, the conduct of
its business, the use of its properties and assets, and all premises occupied by
it, failure to comply with any of which (singly or in the aggregate) would be
reasonably likely to have a material adverse effect upon the assets, business,
financial condition or prospects of any Borrower or any such Subsidiary. Without
limiting the foregoing, each Borrower and each Subsidiary of Alkermes has all
material franchises, licenses, permits, certificates and authorizations needed
for the use of its properties and all premises occupied by it, as now owned and
used.

     (i) The financial statements of Alkermes as at March 31, 1996, heretofore
delivered to the Bank, are complete and accurate in all material respects and
fairly present the financial condition of Alkermes and its Subsidiaries as at
the date thereof and for the periods covered thereby. No Borrower has any
liability, contingent or otherwise, not disclosed in the aforesaid financial
statements or in any notes thereto that could materially affect the financial
condition of such Borrower. Since the date of said March 31, 1996 financial
statements, there has been no 


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     THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
     TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
     SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.           
<PAGE>   8

material adverse development in the business or condition of any Borrower other
than normal monthly operating losses previously disclosed in writing to the Bank
and (except as disclosed in the notes to said financial statements) no Borrower
has entered into any transactions other than in the ordinary course.

     (j) The principal place of business and chief executive offices of each
Borrower are located at 64 Sidney Street, Cambridge, MA 02139 (the "Cambridge
Premises"). Except as described in item 2.1(j) of the attached Disclosure
Schedule, (i) all of the books and records of each Borrower are located at the
Cambridge Premises (and certain books and records of ACT II may also be located
at the Ohio Premises), (ii) no assets of Alkermes or ACT I are located at any
location other than the Cambridge Premises, and (iii) no assets of ACT II are
located at any location other than the Ohio Premises. The Borrowers are tenants
in the Cambridge Premises and the record owner of the Cambridge Premises is
Forest City 64 Sidney Street, Inc.

     (k) Each Borrower owns or has a valid right to use the patents, patent
rights or licenses, trademarks, trademark applications, trademark rights and
trade names or trade name rights or franchises now being used or necessary to
conduct its business, and, to the best of each Borrower's knowledge, the conduct
of its business as now operated does not conflict with valid patents, patent
rights or licenses, trademarks, trademark rights and trade names and trade name
rights or franchises of others in any manner that could materially adversely
affect in any manner the business or assets or condition, financial or
otherwise, of such Borrower.

     (1) To the best of each Borrower's knowledge, none of the executive
officers or key employees of such Borrower is subject to any agreement in favor
of anyone, other than such Borrower, which limits or restricts that person's
right to engage in the type of business activity conducted or proposed to be
conducted by such Borrower or which grants to anyone other than such Borrower
any rights in any inventions or other ideas susceptible to legal protection
developed or conceived by any such officer or key employee while in the
employment or service of such Borrower.

     (m) No Borrower is a party to any contract or agreement, the terms of which
now has or, as far as can be foreseen, would be reasonably likely to have a
material adverse effect on the financial condition, business or properties of
such Borrower. Each Borrower's material contracts and long-term commitments are
listed on item 2.1(m) of the attached Disclosure Schedule.

     III. AFFIRMATIVE COVENANTS AND REPORTING REQUIREMENTS
          ------------------------------------------------

     Without limitation of any covenants and agreements contained in the
Security Agreement or elsewhere, the Borrowers jointly and severally agree that
so long as any portion of any Term Loan or any of the other Obligations shall be
outstanding:

     3.1. LEGAL EXISTENCE; QUALIFICATION; COMPLIANCE. Each Borrower will
maintain its corporate existence and good standing in the jurisdiction of its
incorporation. Each Borrower will qualify to do business and remain qualified
and in good standing in each jurisdiction where (i) it maintains any
manufacturing plant, sales office, warehouse or other physical facility or in

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     THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
     TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
     SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.           
<PAGE>   9

which the character of the properties owned or the nature of the activities
conducted by such Borrower makes such qualification necessary and (ii) the
failure so to qualify would have a material adverse effect on such Borrower's
business or financial condition. Each Borrower will comply (and will use its
best efforts to cause each Subsidiary of Alkermes to comply) with its charter
documents and by-laws, all contractual requirements by which it or any of its
properties may be bound and all applicable laws, rules and regulations
(including, without limitation, ERISA and those relating to environmental
protection) other than (i) laws, rules or regulations the validity or
applicability of which the relevant Borrower or such Subsidiary shall be
contesting in good faith by proceedings which serve as a matter of law to stay
the enforcement thereof and (ii) those charter or by-law provisions or
contractual requirements or laws, rules and regulations the failure to comply
with any of which could not (singly or in the aggregate) reasonably be expected
to materially adversely affect the financial condition, business or prospects of
such Borrower or any such Subsidiary.

     3.2. MAINTENANCE OF PROPERTY; INSURANCE. Each Borrower will maintain and
preserve all of the properties used in its business in good working order and
condition, ordinary wear and tear excepted, making all necessary repairs thereto
and replacements thereof. Each Borrower will maintain all such insurance as may
be required under the Security Agreement and will also maintain, with
financially sound and reputable insurers, insurance with respect to its property
and business against such liabilities, casualties and contingencies and of such
types and in such amounts as shall be customary for companies conducting a
business similar to that of such Borrower in similar locales.

     3.3. PAYMENT OF TAXES AND CHARGES. Each Borrower will pay and discharge
(and will use its best efforts to cause each Subsidiary of Alkermes to pay and
discharge) all taxes, assessments and governmental charges or levies imposed
upon it or upon its income or property, or upon this letter agreement or any
notes evidencing Obligations, including, without limitation, taxes, assessments,
charges or levies relating to real and personal property, the Collateral,
franchises, income, unemployment, old age benefits, withholding, or sales or
use, prior to the date on which penalties would attach thereto, and all lawful
claims (whether for any of the foregoing or otherwise) which, if unpaid, might
give rise to a lien upon any property of any Borrower or any such Subsidiary,
except any of the foregoing which is being contested in good faith and by
appropriate proceedings which serve as a matter of law to stay the enforcement
thereof and for which the relevant Borrower has established and is maintaining
adequate reserves. Each Borrower will pay in a timely manner, all material lease
obligations, all material trade debt, material purchase money obligations,
material equipment lease obligations and all of its other material Indebtedness.
Each Borrower will fully, faithfully and punctually perform and fulfill all
material covenants and agreements under any material leases of real estate,
material agreements relating to purchase money debt, material equipment leases
and other material contracts.

     3.4. CONDUCT OF BUSINESS. Each Borrower will continue (and will use its
best efforts to cause each of Alkermes' Subsidiaries to continue) to engage in
business of the same general type as now conducted by such Borrower (or such
Subsidiary, as the case may be). No Borrower will, directly or through any
Subsidiary or other entity, enter into any other lines of business, 


                                      -9-


     THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
     TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
     SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.           
<PAGE>   10

businesses or ventures which are not of the same general type as the businesses
now conducted by the Borrowers and Alkermes' Subsidiaries.

     3.5. REPORTING REQUIREMENTS. The Borrowers will furnish to the Bank:

          (i) Within ninety (90) days after the end of each fiscal year of
          Alkermes, a copy of the annual audit report for such fiscal year of
          Alkermes, including therein the consolidated balance sheet of Alkermes
          and Subsidiaries as at the end of such fiscal year and related
          statements of operations, stockholders' equity and cash flow for the
          fiscal year then ended. The annual financial statements shall be
          certified by independent public accountants selected by the Board of
          Directors of Alkermes and reasonably acceptable to the Bank, such
          certification to be in such form as is generally recognized as
          "unqualified". Such annual financial statements shall be accompanied
          by an unaudited consolidating balance sheet of Alkermes and its
          Subsidiaries, prepared by Alkermes' management.

          (ii) Within forty-five (45) days after the end of each fiscal quarter
          of Alkermes, the consolidated balance sheet of Alkermes and
          Subsidiaries and related statements of operations and stockholders'
          equity and cash flow, unaudited but certified by the chief financial
          officer or controller of Alkermes to be accurate in all material
          respects and to present fairly the financial condition of Alkermes as
          of the date thereof and for the periods covered thereby, and to have
          been prepared in accordance with generally accepted accounting
          principles consistently applied (subject to normal year-end
          adjustments). Such balance sheets shall be as at the end of such
          fiscal quarter and such statements of operations and stockholders'
          equity and cash flow shall be for such fiscal quarter and for the
          period from the beginning of the fiscal year to the end of such fiscal
          quarter, in each case with comparative statements for the
          corresponding period in the prior fiscal year. Such quarterly
          statements shall be accompanied by an unaudited consolidating balance
          sheet of Alkermes and its Subsidiaries, prepared by Alkermes'
          management.

          (iii) At the time of delivery of each quarterly or annual statement of
          Alkermes, a certificate executed by the chief financial officer or
          controller of Alkermes stating that he or she has reviewed this letter
          agreement and the other Loan Documents and has no knowledge of any
          default by any Borrower in the performance or observance of any of the
          provisions of this letter agreement or of any of the other Loan
          Documents or, if he or she has such knowledge, specifying each such
          default and the nature thereof. Each such certificate shall also set
          forth the calculations necessary to evidence compliance with ss.ss.3.6
          and 3.7 as of the last day of the applicable reporting period.

          (iv) Promptly after receipt, a copy of all audits or reports submitted
          to Alkermes by independent public accountants in connection with any
          annual, special or interim audits of the books of Alkermes and any
          letter of comments directed by such accountants to the management of
          Alkermes.

                                      -10-


     THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
     TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
     SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.           
<PAGE>   11

          (v) Promptly upon same becoming publicly available, one copy of each
          financial statement, report, notice or proxy statement sent by
          Alkermes to stockholders or the holders of debt securities generally,
          and of each regular or periodic report and any registration statement,
          prospectus or listing application filed by Alkermes with the National
          Association of Securities Dealers, any securities exchange or the
          Securities and Exchange Commission or any successor agency.

          (vi) As soon as possible and in any event within five (5) days after
          any Borrower has knowledge of the occurrence or existence of any Event
          of Default or any event which, with the giving of notice or the
          passage of time or both, could constitute an Event of Default, the
          statement of such Borrower setting forth details of such Event of
          Default or event and the action which the Borrowers propose to take
          with respect thereto.

          (vii) Promptly after the commencement thereof, notice of all actions,
          suits and proceedings before any court or governmental department,
          commission, board, bureau, agency or instrumentality, domestic or
          foreign, affecting any Borrower or any Subsidiary of Alkermes, which,
          if adversely determined, would be reasonably likely to result in a
          material adverse effect on the business or financial condition of any
          Borrower. For the purposes of this Paragraph (vii), an action will not
          be deemed likely to result in a material adverse effect if it seeks
          monetary damages only and in an amount not in excess of $100,000.

          (viii) Promptly after any Borrower has knowledge thereof, written
          notice of any development or circumstance which would be reasonably
          likely to have a material adverse effect on any Borrower or any of
          Alkermes' Subsidiaries or any of their respective businesses,
          properties, assets or condition, financial or otherwise; provided that
          this Paragraph (viii) will not be deemed to apply to normal monthly
          operating losses of the Borrowers consistent with the Borrowers' prior
          operating history and normal industry experience.

          (ix) Promptly upon request, such other information respecting the
          financial condition, operations, receivables, inventory, machinery or
          equipment of any Borrower or any Subsidiary of Alkermes as the Bank
          may from time to time reasonably request.

     3.6. CASH BALANCE. Alkermes will maintain at all times an Unencumbered Cash
Balance of not less than $12,500,000.

     3.7. CASH RATIO. Alkermes will maintain, as at the end of each fiscal
quarter of Alkermes, a Cash Ratio of not less than 2.0 to 1.

                                      -11-


     THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
     TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
     SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.           

<PAGE>   12

     3.8. BOOKS AND RECORDS. Each Borrower will maintain complete books, records
and accounts, accurate in all material respects, which will at all times fairly
reflect all of its transactions in accordance with generally accepted accounting
principles consistently applied. Each Borrower will, at any reasonable time and
from time to time (and at any time following the occurrence of an Event of
Default), permit the Bank, and any agents or representatives thereof, to examine
and make copies of and take abstracts from the financial records and books of
account of, and visit the properties of such Borrower and any of Alkermes'
Subsidiaries, and to discuss the affairs, finances and accounts of any Borrower
and any of Alkermes' Subsidiaries with their respective managers, officers and
independent accountants, all of whom are hereby authorized and directed to
cooperate with the Bank in carrying out the intent of this ss.3.8; provided,
however, that certain areas of the Borrowers' facilities may be restricted for
reasons of health and safety and that certain aspects of the Borrowers' business
are highly confidential and the Bank will not be permitted access to such
restricted areas or such confidential information in the Borrowers' possession.

     IV. NEGATIVE COVENANTS.
         ------------------

     Without limitation of any covenants and agreements contained in the
Security Agreement or elsewhere, the Borrowers jointly and severally agree that,
unless the prior written consent of the Bank has been obtained, so long as any
portion of any Term Loan or any of the other Obligations shall be outstanding:

     4.1. INDEBTEDNESS. No Borrower will create, incur, assume or suffer to
exist any Indebtedness, except for:

          (i) Indebtedness owed to the Bank, including, without limitation, the
          Indebtedness represented by the 1994 Note, the 1995 Note, the Ohio
          Term Note and any Additional Term Note hereafter delivered by any
          Borrower;

          (ii) Indebtedness of such Borrower for taxes, assessments and
          governmental charges or levies not yet due and payable;

          (iii)unsecured current liabilities of any Borrower (other than for
          money borrowed or the deferred purchase price of property) incurred
          upon customary terms in the ordinary course of business;

          (iv)   obligations under long-term leases of real estate;

          (v)    Permitted Purchase Money Indebtedness;

          (vi) reimbursement obligations not in excess of $800,000 in the
          aggregate in connection with any letter of credit which any Borrower
          is required to provide under the rules and regulations of the Nuclear
          Regulatory Commission ("NRC Obligations");

                                      -12-


     THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
     TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
     SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.           
<PAGE>   13

          (vii) any Indebtedness hereafter assumed by any Borrower in connection
          with any Acquisition or permitted merger, which Indebtedness had been
          an obligation of the acquired or merged entity prior to such
          Acquisition or merger, but not any refinancing or extension thereof;

          (viii) any guaranties or other arrangements whereby responsibility is
          assumed for the obligations of others; but only to the extent that
          such guaranties or other arrangements are permitted by ss.4.3 below;
          and

          (ix) Indebtedness not otherwise described above that is existing at
          the date of this letter agreement, all of which is listed on item 4.1
          of the attached Disclosure Schedule.

     4.2. LIENS. No Borrower will create, incur, assume or suffer to exist any
mortgage, deed of trust, pledge, lien, security interest, or other charge or
encumbrance (including the lien or retained security title of a conditional
vendor) of any nature (collectively, "Liens") upon or with respect to any of its
property or assets, now owned or hereafter acquired, except that the foregoing
restrictions shall not apply to:

          (i) Liens for taxes, assessments or governmental charges or levies on
          property of any Borrower if the same shall not at the time be
          delinquent or thereafter can be paid without interest or penalty or
          are being contested in good faith and by appropriate proceedings which
          serve as a matter of law to stay the enforcement thereof and as to
          which adequate reserves have been made;

          (ii) Liens imposed by law, such as carriers', warehousemen's and
          mechanics' liens and other similar Liens arising in the ordinary
          course of business for sums not yet due or which are being contested
          in good faith and by appropriate proceedings which serve as a matter
          of law to stay the enforcement thereof and as to which adequate
          reserves have been made;

          (iii) Liens arising out of pledges or deposits under workmen's
          compensation laws, unemployment insurance, social security, retirement
          benefits or similar legislation;

          (iv)  Liens in favor of the Bank;

          (v)   Permitted Purchase Money Liens;

          (vi) rights of other parties under development arrangements with any
          Borrower involving the licensing out from such Borrower of rights to
          technology and the sublicensing of such rights back to such Borrower;

          (vii) rights of the United States government in certain technology,
          the development of which is or was funded in whole or in part by the
          United States government;

                                      -13-


     THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
     TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
     SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.           
<PAGE>   14

          (viii) liens arising out of pledges or grants of security interests
          (not including security interests in any of the Collateral) securing
          NRC Obligations, provided that the amount so secured will never exceed
          $800,000;

          (ix) security deposits under leases of any Borrower's premises;

          (x) other Liens existing at the date hereof, but only to the extent
          and with the relative priorities set forth on item 4.2 of the attached
          Disclosure Schedule; or

          (xi) Liens securing Indebtedness hereafter assumed by any Borrower
          pursuant to clause (vii) of ss.4.1 above in connection with an
          Acquisition or permitted merger and not incurred in contemplation of
          such Acquisition or permitted merger; provided that no such Lien will
          encumber any assets of any Borrower other than the specific assets
          which were owned by the acquired or merged entity and which were
          encumbered by such Lien immediately prior to the relevant acquisition
          or merger.

     4.3. GUARANTIES. No Borrower will assume, guarantee, endorse or otherwise
become directly or contingently liable in connection with any obligations of any
other Person, except (i) guaranties or other assumptions of liability not
exceeding $500,000 in aggregate principal amount and (ii) guaranties by
endorsement for deposit or collection in the ordinary course of business.

     4.4. LOANS AND ADVANCES. No Borrower will make any loans or advances to any
Person, including, without limitation, any Borrower's directors, officers and
employees, except advances to employees in the ordinary course and payment of
moving and other expenses relating to recruitment and the like, all of which
loans and advances will not exceed, in the aggregate, $1,000,000 outstanding at
any one time.

     4.5. ACQUISITIONS. No Borrower will, directly or indirectly, except as
specifically permitted by this ss.4.5, make any Acquisition. A Borrower may make
Acquisitions of Persons that engage in business of the same general type as now
conducted by such Borrower or any Subsidiary; provided that (i) Alkermes does
not, in connection with any such Acquisition, issue securities representing in
the aggregate more than fifty percent (50%) of the voting power of Alkermes and
(ii) after giving effect to each such Acquisition each Borrower remains in
compliance with all covenants and conditions of this letter agreement. A
Borrower may also make an Acquisition consisting of the purchase of shares of
stock in another corporation, provided that (i) such purchase is made for
investment purposes, (ii) such stock is publicly traded, (iii) the shares of
stock so purchased do not constitute 5% or more of the outstanding shares of the
class of stock to which they belong, and (iv) such stock will in no event be
includable in Alkermes' Unencumbered Cash Balance for the purpose of computing
compliance with ss.ss.3.7 and 3.8 above.

     4.6. MERGERS. Alkermes will not merge or consolidate with any Person,
except that Alkermes may participate in any merger in which Alkermes is the
surviving entity so long as (i) Richard F. Pops and Michael J. Landine continue
as the management of the surviving entity and 

                                      -14-

     THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
     TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
     SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.           

<PAGE>   15


(ii) after giving effect to such merger each Borrower remains in compliance with
all covenants and conditions of this letter agreement. Neither ACT I nor ACT II
will merge or consolidate with any Person, other than a merger into Alkermes in
which Alkermes is the surviving entity; provided that each of ACT I and ACT II
may merge into another wholly-owned Subsidiary of Alkermes with the prior
written consent of the Bank, such consent not to be unreasonably withheld.

     4.7. TRANSFER OF ASSETS. No Borrower will sell, lease, transfer or
otherwise dispose of all or any material portion of its assets (whether in one
or more transactions), except that (i) any Borrower may dispose of obsolete or
worn out equipment (exclusive of the Collateral), (ii) any Borrower may replace
equipment (exclusive of the Collateral) with upgraded equipment and may
thereafter dispose of the equipment so upgraded and replaced, and (iii) any
Borrower may engage in research and development transactions (each, an "R&D
Transaction") involving the licensing of such Borrower's rights in certain
technology to other Persons and the licensing back of such rights to such
Borrower, provided that after giving effect to each such R&D Transaction each
Borrower remains in compliance with all covenants and conditions of this letter
agreement.

     4.8. CHANGE OF ADDRESS, ETC. No Borrower will change its name or legal
structure, nor will any Borrower move its chief executive office or principal
place of business from the Cambridge Premises, nor will any Borrower remove any
books or records from the Cambridge Premises, from its location described in
Schedule 2.1(j) attached hereto or, in the case of ACT II, from the Ohio
Premises, nor will any Borrower keep any Collateral at any location other than
the Cambridge Premises and the Ohio Premises without, in each instance, giving
the Bank at least thirty (30) days' prior written notice and providing all such
financing statements, certificates and other documentation as the Bank may
request in order to maintain the perfection and priority of the security
interests granted or intended to be granted pursuant to the Security Agreement.

     4.9. HAZARDOUS WASTE. Except as provided below, no Borrower will dispose of
or suffer or permit to exist any hazardous material or oil on any site or vessel
owned, occupied or operated by such Borrower or any Subsidiary of Alkermes, nor
shall any Borrower store (or permit any such Subsidiary to store) on any site or
vessel owned, occupied or operated by such Borrower or any such Subsidiary, or
transport or arrange the transport of, any hazardous material or oil (the terms
hazardous material, oil, site and vessel, respectively, being used herein with
the meanings given those terms in Mass. Gen. Laws, Ch. 21E or any comparable
terms in any comparable statute in effect in any other relevant jurisdiction).
To the extent that a Borrower has knowledge of the following, each Borrower
shall provide the Bank with written notice of (i) the intended storage or
transport of any hazardous material or oil by such Borrower or any Subsidiary of
Alkermes, (ii) any known release or threat of release of any hazardous material
or oil at or from any site or vessel owned, occupied or operated by such
Borrower or any Subsidiary of Alkermes, and (iii) any incurrence of any expense
or loss by any government or governmental authority in connection with the
assessment, containment or removal of any hazardous material or oil for which
expense or loss such Borrower or any Subsidiary of Alkermes may be liable.
Notwithstanding the foregoing, each Borrower and the Subsidiaries of Alkermes
may use, store and transport, and need not notify the Bank of the use, storage
or transportation of, (x) oil in reasonable quantities, as fuel for heating of
their respective facilities or for vehicles or machinery 


                                      -15-


     THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
     TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
     SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.           
<PAGE>   16

used in the ordinary course of their respective businesses and (y) hazardous
materials that are solvents, cleaning agents or other materials used or produced
in the ordinary course of the respective business operations of such Borrower
and such Subsidiaries, in reasonable quantities, as long as in any case such
Borrower or the relevant Subsidiary has obtained and maintains in effect any
necessary governmental permits, licenses and approvals, complies with all
requirements of applicable federal, state and local law relating to such use,
storage or transportation, follows the protective and safety procedures that a
prudent businessperson conducting a business the same as or similar to that of
such Borrower or the relevant Subsidiary would follow, and disposes of such
materials (not consumed in the ordinary course) only through appropriately
licensed providers of removal services. Further, no Borrower will be deemed to
have violated this ss.4.9 if it fails to comply with any of the aforesaid
requirements of federal, state and local law provided that all of the following
requirements are met: (i) the violation of law (taking into consideration both
the type of violation and the particular hazardous materials involved) is of a
de minimis nature and would not be reasonably likely to jeopardize in any way
the continued operations of any Borrower or any such Subsidiary nor lead to any
material fine or expense, (ii) such Borrower reports each such violation to the
Bank and to all appropriate governmental agencies immediately upon becoming
aware of same, (iii) such Borrower promptly commences and thereafter diligently
prosecutes to completion all appropriate remedial action (including, in any
event, all such actions and within such time limits as may be established by the
Massachusetts Department of Environmental Protection or any other relevant
governmental agency), and (iv) no suit or other legal action based on or
relating to any such violation is commenced against any Borrower or any such
Subsidiary by any such governmental agency, by any abutter to any of the
premises of any Borrower or any such Subsidiary or by any other Person.

     4.10. NO MARGIN STOCK. No proceeds of any Term Loan shall be used to
purchase or carry any margin security (within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System).

     V. DEFAULT AND REMEDIES
        --------------------

     5.1. EVENTS OF DEFAULT. The occurrence of any one of the following events
shall constitute an Event of Default hereunder:

     (a) The Borrowers shall fail to make any payment of principal of or
interest on any Note within five (5) days after the date when due; or

     (b) Any representation or warranty of any Borrower contained herein shall
at any time prove to have been incorrect in any material respect when made or
any representation or warranty made by any Borrower in connection with the
execution and delivery of this letter agreement or any other instrument,
document, certificate or statement executed and delivered in connection with any
Term Loan shall at any time prove to have been incorrect in any material respect
when made; or

                                      -16-


     THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
     TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
     SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.           
<PAGE>   17

     (c) Any Borrower shall default in the performance or observance of any
agreement or obligation under any of ss.ss.3.1 (as relates to legal existence
only), 3.5, 3.6 or 3.7, or Article IV; or

     (d) Any Borrower shall default in the performance or observance of any
agreement or obligation under the first sentence of ss.3.3 and such failure
continues uncured for ten (10) days; or

     (e) Any Borrower shall default in the performance of any other term,
covenant or agreement contained in this letter agreement and such default shall
continue unremedied for thirty (30) days after notice thereof shall have been
given to such Borrower; or

     (f) Any default on the part of any Borrower or any Subsidiary of Alkermes
shall exist, and shall remain unwaived or uncured beyond the expiration of any
applicable notice and/or grace period, under the Security Agreement, the
Mortgage or any other contract, agreement or understanding now existing or
hereafter entered into with or for the benefit of the Bank (or any affiliate of
the Bank); or

     (g) Any obligation of any Borrower for the payment of borrowed money in
excess of $50,000 (other than to the Bank hereunder or under any Note) is
declared to be due and payable prior to its stated maturity or is not paid or
discharged when due or within any permitted grace period after such due date or
there shall occur any event which constitutes, or which with the giving of
notice or the passage of time or both would constitute, an event of default
under any instrument, agreement or evidence of Indebtedness of any Borrower and
has not been waived by the holder of such obligation for borrowed money;
provided that no Event of Default will be deemed to have occurred under this
paragraph (g) with respect to any Indebtedness if payment of or default under
such Indebtedness, after notice thereof having been given to the Bank, is being
contested by the relevant Borrower in good faith and by appropriate proceedings
and such contest operates to prevent the other party to such instrument,
agreement or evidence of Indebtedness from exercising its remedies against such
Borrower or any of such Borrower's properties; or

     (h) Any Borrower shall be dissolved, or any Borrower or any Subsidiary of
Alkermes shall become insolvent or bankrupt or shall cease paying its debts as
they mature or shall make an assignment for the benefit of creditors, or a
trustee, receiver or liquidator shall be appointed for any Borrower or any such
Subsidiary or for a substantial part of any Borrower's or any such Subsidiary's
property, or bankruptcy, reorganization, arrangement, insolvency or similar
proceedings shall be instituted by or against any Borrower or any such
Subsidiary under the laws of any jurisdiction (except for an involuntary
proceeding filed against a Borrower or any such Subsidiary which is dismissed
within ninety (90) days following the institution thereof); or

     (i) Any attachment, execution or similar process shall be issued or levied
against all or any portion of the Collateral or against all or any other
substantial part of the assets of any Borrower and such attachment, execution or
similar process shall not be paid, stayed, released, vacated or fully bonded
within twenty (20) days after its issue or levy; or

                                      -17-


     THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
     TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
     SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.           
<PAGE>   18

     (j) Any final uninsured judgment in excess of $100,000 shall be entered
against any Borrower or any Subsidiary of Alkermes by any court of competent
jurisdiction and the same remains unsatisfied for more than thirty (30) days,
unless the same has been appealed and a stay of enforcement thereof has been
obtained and remains in effect; or

     (k) Any Borrower or any Subsidiary of Alkermes shall fail to meet its
minimum funding requirements under ERISA with respect to any employee benefit
plan (or other class of benefit which the PBGC has elected to insure) or any
such plan shall be the subject of termination proceedings (whether voluntary or
involuntary) and there shall result from such termination proceedings a
liability of such Borrower or any such Subsidiary to the PBGC which in the
reasonable opinion of the Bank may have a material adverse effect upon the
financial condition of such Borrower or such Subsidiary; or

     (1) The Security Agreement, the Mortgage or any other Loan Document shall
for any reason (other than due to payment in full of all amounts secured or
evidenced thereby or due to discharge in writing by the Bank) not remain in full
force and effect; or

     (m) Any Person or "group" (as defined in Section 13(d) of the Securities
Exchange Act of 1934, as amended) acquires or holds more than fifty percent
(50%) of the outstanding voting stock of Alkermes; or either or both of ACT I
and/or ACT II ceases to be a wholly-owned Subsidiary of Alkermes, other than due
to a merger of ACT I or ACT II into Alkermes or (with the prior written consent
of the Bank, such consent not to be unreasonably withheld) due to a merger of
ACT I or ACT II into another wholly-owned Subsidiary of Alkermes.

     5.2. RIGHTS AND REMEDIES ON DEFAULT. Upon the occurrence and during the
continuance of any Event of Default, in addition to any other rights and
remedies available to the Bank, hereunder or otherwise, the Bank may exercise
any one or more of the following rights and remedies (all of which shall be
cumulative):

     (a) Declare the entire unpaid principal amounts of the Notes then
outstanding, all interest accrued and unpaid thereon and all other amounts
payable under this letter agreement, and all other Indebtedness of each Borrower
to the Bank, to be forthwith due and payable, whereupon the same shall become
forthwith due and payable, without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived by the Borrowers.

     (b) Exercise all rights and remedies hereunder, under the Notes, and under
the Security Agreement, the Pledge, the Mortgage and each and any other
agreement with or for the benefit of the Bank; and exercise all other rights and
remedies which the Bank may have under applicable law.

     5.3. SET-OFF. In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence of any Event of Default, the Bank is hereby authorized at any time or
from time to time, without presentment, demand, protest or other notice of any
kind to any Borrower or to any other Person, all of which are hereby expressly
waived, to set off and to appropriate and apply any and all deposits (general or


                                      -18-


     THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
     TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
     SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.           
<PAGE>   19

special) and any other Indebtedness at any time held or owing by the Bank or any
affiliate thereof to or for the credit or the account of any Borrower against
and on account of the obligations and liabilities of any Borrower to the Bank
under this letter agreement or otherwise, irrespective of whether or not the
Bank shall have made any demand hereunder and although said obligations,
liabilities or claims, or any of them, may then be contingent or unmatured and
without regard for the availability or adequacy of other collateral. Each
Borrower also grants to the Bank, effective upon the occurrence and during the
continuance of an Event of Default, a security interest with respect to all its
deposits and all securities or other property in the possession of the Bank or
any affiliate of the Bank from time to time, and, upon the occurrence of any
Event of Default, the Bank may exercise all rights and remedies of a secured
party under the Uniform Commercial Code.

     VI. MISCELLANEOUS
         -------------

     6.1. COSTS AND EXPENSES. The Borrowers agree to pay (and shall be jointly
and severally obligated to pay) on demand all reasonable costs and expenses
(including, without limitation, reasonable legal fees) of the Bank in connection
with the preparation, execution and delivery of this letter agreement, the
Security Agreement, the Pledge, the Mortgage, any Note and all other instruments
and documents to be delivered in connection with any Term Loan and any
amendments or modifications of any of the foregoing, or in connection with the
examination, review or administration of any of the foregoing, as well as the
reasonable costs and expenses (including, without limitation, the reasonable
fees and out-of-pocket expenses of legal counsel) incurred by the Bank in
connection with administering, preserving, enforcing or exercising any rights or
remedies under this letter agreement, the Security Agreement, the Pledge, the
Mortgage, any Note and all other instruments and documents delivered or to be
delivered hereunder or in connection herewith, all whether or not legal action
is instituted. In addition, the Borrowers shall be jointly and severally
obligated to pay any and all stamp and other taxes payable or determined to be
payable in connection with the execution and delivery of this letter agreement,
the Security Agreement, the Pledge, the Mortgage, any Note and all other
instruments and documents to be delivered in connection with any Obligation. Any
fees, expenses or other charges which the Bank is entitled to receive from the
Borrowers under this Section shall bear interest from the date of any demand
therefor until the date when paid at a rate per annum equal to the lesser of two
(2%) percent plus the per annum rate payable under the 1995 Note or the maximum
rate permitted by then applicable law.

     6.2. CAPITAL ADEQUACY; INCREASED COSTS. If the Bank shall have determined
that the adoption or phase-in after the date hereof of any applicable law, rule
or regulation regarding capital requirements for banks or bank holding
companies, or any change therein after the date hereof, or any change after the
date hereof in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof (whether or not having the force of law) has or would
have the direct effect of reducing the return on the Bank's capital with respect
to any Term Loan to a level below that which the Bank could have achieved
(taking into consideration the Bank's policies with respect to capital adequacy
immediately before such adoption, phase-in, change or compliance and assuming
that the Bank's capital was fully utilized prior to such adoption, phase-in,
change or compliance) but for such adoption, phase-in, change 

                                      -19-


     THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
     TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
     SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.           
<PAGE>   20

or compliance by any amount deemed by the Bank to be material: (i) the Bank
shall promptly after its determination of such occurrence give notice thereof to
the Borrowers; and (ii) the Borrowers shall pay to the Bank (and shall be
jointly and severally obligated so to pay) as an additional fee from time to
time on demand such amount as the Bank certifies to be the amount that will
compensate it for such reduction.

     If, at any time prior to the payment in full of any Term Loan, there shall
be any increase in the cost to the Bank of making or maintaining such Term Loan
for any period prior to the date of such payment in full or any reduction in the
amount of payment received by the Bank from any Borrower due to either (i) the
introduction or effectiveness after the date hereof of any change (including,
without limitation, any change as to applicable Impositions, reserve
requirements or FDIC assessment) with respect to, or with respect to the
interpretation of, any law or regulation, or (ii) compliance with any written
guideline or request effective or issued after the date hereof from any central
bank or other governmental authority having or claiming jurisdiction over the
Bank, then (i) the Bank shall promptly after its determination of such
occurrence give notice thereof to the Borrowers; and (ii) the Borrowers shall
pay to the Bank (and shall be jointly and severally obligated so to pay) as an
additional fee from time to time on demand such amount as the Bank certifies to
be the amount that will compensate the Bank for such increase in cost or
reduction in payments. Additional amounts payable under this paragraph shall in
no event include income taxes of the Bank.

     A certificate of the Bank claiming compensation under this Section shall be
conclusive in the absence of manifest error. Such certificate shall set forth
the nature of the occurrence giving rise to such compensation, the additional
amount or amounts to be paid to it hereunder and the method by which such
amounts were determined. In determining such amounts, the Bank may use any
reasonable averaging and attribution methods. No failure on the part of the Bank
to demand compensation on any one occasion shall constitute a waiver of its
right to demand such compensation on any other occasion and no failure on the
part of the Bank to deliver any certificate in a timely manner shall in any way
reduce any obligation of any Borrower to the Bank under this Section.

     6.3. FACILITY FEES. At the date hereof, the Borrowers are paying to the
Bank a facility fee of $25,000 in respect of the Ohio Term Loan. Said facility
fee, as well as all facility fees heretofore paid by Alkermes to Fleet Mass
under the Prior Loan Agreement and any facility fee hereafter required to be
paid in connection with any Additional Term Loan, are non-refundable and are in
addition to any balances and fees required by the Bank or any of its affiliates
in connection with any other services made available to any Borrower.

     6.4. OTHER AGREEMENTS. The provisions of this letter agreement are not in
derogation or limitation of any obligations, liabilities or duties of any
Borrower under any of the other Loan Documents or any other agreement with or
for the benefit of the Bank. No inconsistency in default provisions between this
letter agreement and any of the other Loan Documents or any such other agreement
will be deemed to create any additional grace period or otherwise derogate from
the express terms of each such default provision. No covenant, agreement or
obligation of any Borrower contained herein, nor any right or remedy of the Bank
contained herein, shall in 

                                      -20-


     THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
     TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
     SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.           
<PAGE>   21

any respect be limited by or be deemed in limitation of any inconsistent or
additional provisions contained in any of the other Loan Documents or any such
other agreement.

     6.5. GOVERNING LAW. This letter agreement shall be governed by, and
construed and enforced in accordance with, the laws of The Commonwealth of
Massachusetts.

     6.6. ADDRESSES FOR NOTICES, ETC. All notices, requests, demands and other
communications provided for hereunder shall be in writing and shall be given or
delivered by (i) personal service, (ii) certified or registered United States
mail, postage and registration or certification charges prepaid, (iii)
recognized overnight delivery service, charges prepaid, or (iv) telecopy or
other means of electronic transmission, if confirmed promptly by any of the
methods specified in clauses (i), (ii), or (iii) of this sentence, to the
parties at the following respective addresses:

               If to the Borrowers:

               Alkermes, Inc.
               Alkermes Controlled Therapeutics, Inc.
               Alkermes Controlled Therapeutics Inc. II
               64 Sidney Street
               Cambridge, MA 02139
               Attention: Michael J. Landine, Senior Vice President
                           and Chief Financial Officer

               If to the Bank:

               Fleet National Bank
               High Technology Group
               75 State Street
               Boston, MA 02109
               Attention: Catherine M. Bruton, Vice President

or, as to each of the foregoing, at such other address as shall be designated by
such Person in a written notice to the other party complying as to delivery with
the terms of this Section. All such notices, requests, demands and other
communications shall be effective (i) when delivered by personal service, (ii)
upon transmission when sent by telecopy or other means of electronic
transmission, (iii) two (2) days after deposit in the United States mails, if
sent postage prepaid, certified or registered mail, return receipt requested,
addressed as aforesaid, or (iv) one (1) day after same is given to a recognized
overnight delivery service, addressed as aforesaid.

     6.7. ELECTRONIC FILING. The Bank agrees to use reasonable efforts to
provide to Alkermes copies of any of this letter agreement, the Security
Agreement, the Pledge, the Mortgage, the Allonges to the 1994 and 1995 Notes,
the Ohio Note and any other document which is produced and stored in a computer
file by the Bank's counsel and which relates to the Loans and any amendments and
supplements hereto or thereto, such copies to be provided in a 


                                      -21-


     THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
     TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
     SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.           

<PAGE>   22

computer-readable format if so requested by Alkermes in connection with its
public filings. Alkermes will bear the costs, if any, relating to such
computer-readable copies.

     VII. DEFINED TERMS
          -------------

     7.1. DEFINITIONS. In addition to terms defined elsewhere in this letter
agreement, as used in this letter agreement, the following terms have the
following respective meanings:

     "Acquisition" - Any purchase or other acquisition by any Borrower or any of
its Subsidiaries of: (i) any capital stock of, or other equity interest in, any
Person other than any corporation which is a Subsidiary of such Borrower on the
date hereof or (ii) any assets of such Person, if such assets include all or
substantially all of the fixed assets and inventory of such Person or of any
business division, line of business or business operation conducted by such
Person.

     "Business Day" - Any day which is not a Saturday, nor a Sunday nor a public
holiday under the laws of the United States of America or The Commonwealth of
Massachusetts applicable to a national bank.

     "Cambridge Premises" - As defined in Subsection 2.1(j) above.

     "Cash-Equivalents" - Any of the following: (i) readily marketable direct
obligations of or obligations guarantied by, the United States of America or any
agency thereof and entitled to the full faith and credit of the United States of
America, (ii) demand deposits with the Bank or with any other commercial bank
chartered by the United States or by any state and having undivided capital and
surplus of not less than $100,000,000, or (iii) interests in mutual funds,
substantially all of the assets of which shall be governmental obligations of
the type described in clause (i) of this sentence.

     "Cash Ratio" - As at any date as of which same is to be determined, the
ratio of (x) Alkermes' then Unencumbered Cash Balance to (y) all then
outstanding Indebtedness of the Alkermes and its Subsidiaries on a consolidated
basis.

     "Collateral" - All property which is described as "Collateral" in the
Security Agreement and/or the Pledge.

     "ERISA" - The Employee Retirement Income Security Act of 1974, as amended.

     "FDIC" - The Federal Deposit Insurance Corporation or any successor
thereto.

     "Government Securities" - Debt securities issued or guaranteed by the
United States government or any agency thereof and secured by the full faith and
credit of the United States.

                                      -22-


     THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
     TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
     SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.           
<PAGE>   23

     "Impositions" - All present and future taxes, impositions, levies,
deductions, charges and withholdings applicable to the Bank with respect to any
Term Loan, excluding, however any income taxes imposed on the Bank.

     "Indebtedness" - The total of all obligations of a Person, whether current
or long-term, senior or subordinated, which in accordance with generally
accepted accounting principles would be included as liabilities upon such
Person's balance sheet at the date as of which Indebtedness is to be determined,
and shall also include guaranties, endorsements (other than for collection in
the ordinary course of business) or other arrangements whereby responsibility is
assumed for the obligations of others, whether by agreement to purchase or
otherwise acquire the obligations of others, including any agreement, contingent
or otherwise, to furnish funds through the purchase of goods, supplies or
services for the purpose of payment of the obligations of others.
Notwithstanding the foregoing, (i) for the purposes of Sections 3.7, 4.1 and
5.1(g) above, "Indebtedness" will not be deemed to include the obligations of
Alkermes to Genentech, Inc. in respect to an amount of up to $3,500,000 (and the
interest thereon) which has been invested by Genentech, Inc. in a development
project of Alkermes on terms substantially identical to those disclosed by
Alkermes to the Bank under cover letter dated December 6, 1994; provided that
the terms of such investment shall permit Alkermes' obligation to repay such
amount to be satisfied (at Alkermes' option) either by the payment of cash or by
the issuance to Genentech, Inc. of stock in Alkermes; and (ii) for the purposes
of Sections 3.7 and 4.1 above, "Indebtedness" will not be deemed to include any
liabilities accrued by Alkermes for levelized rent which are included in "Other
Long-Term Liabilities" on Alkermes' balance sheet. Furthermore, for the purposes
of Sections 3.7, 4.1 and 5.1(g) above, "Indebtedness" will not be deemed to
include the obligations of ACT I and Alkermes to Schering Corporation
("Schering") to repay certain royalties in an amount of up to $[         ] (and
the interest thereon) which were paid to ACT I pursuant to the Prepaid Royalty
Agreement between ACT I, Alkermes and Schering dated July 26, 1995; provided
that (and only for so long as) Alkermes' and ACT I's obligations to repay such
amount may (at Alkermes' option) be satisfied either by the payment of cash or
by issuance to Schering of stock in Alkermes.

     "Loan Documents" - Each of this letter agreement, the Notes, the Security
Agreement, the Pledge, the Mortgage and each other instrument, document or
agreement evidencing, securing, guaranteeing or relating in any way to any Term
Loan, all whether now existing or hereafter arising or entered into.

     "Mortgage" - The Mortgage and Security Agreement of even date herewith from
ACT II to the Bank, encumbering property of ACT II in Wilmington, Clinton
County, Ohio.

     "Note" - Any of the 1994 Note, the 1995 Note, the Ohio Term Note or any
Additional Term Note, in each case as the context may require.

     "Notes" - All of the following: the 1994 Note, the 1995 Note and the Ohio
Term Note (and, when issued, each Additional Term Note).

                                      -23-


     THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
     TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
     SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.           
<PAGE>   24

     "Obligations" - All "Obligations" described in the Security Agreement,
whether now existing or hereafter arising.

     "Ohio Premises" - As defined in ss.1.4 above.

     "PBGC" - The Pension Benefit Guaranty Corporation or any successor thereto.

     "Permitted Purchase Money Indebtedness" - Any and all of the following
types of Indebtedness hereafter incurred by any Borrower: (i) Indebtedness to
equipment vendors for pieces of equipment (other than the Collateral) purchased
by a Borrower and installed at such Borrower's Cambridge Premises or Ohio
Premises; provided that the amount of Indebtedness so financed with each such
vendor will not exceed 100% of the invoice price of the pieces of equipment
purchased from such vendor; (ii) Indebtedness to equipment lessors under
capitalized or operating equipment leases; and (iii) Indebtedness representing
the acquisition cost and/or construction cost of any real property and
improvements acquired and/or constructed by any Borrower, which Indebtedness is
owed to any seller of such property or to any bank or other institutional lender
financing such acquisition and/or construction.

     "Permitted Purchase Money Lien" - Any mortgage, security interest or other
consensual lien hereafter granted by any Borrower in order to secure any
Permitted Purchase Money Indebtedness; provided that no such Permitted Purchase
Money Lien will encumber any property of any Borrower other than the specific
item financed by the Permitted Purchase Money Indebtedness to which it relates.

     "Person" - An individual, corporation, partnership, joint venture, trust or
unincorporated organization, or a government or any agency or political
subdivision thereof.

     "Prime Rate" - That rate of interest per annum from time to time announced
by the Bank as its prime rate, it being understood that such rate is only a
reference rate, not necessarily the lowest, established from time to time which
serves as the basis upon which effective interest rates are calculated for
obligations making reference thereto.

     "Principal Office" - The principal place of business of the Bank in Boston,
MA, now located at 75 State Street, Boston, MA 02109.

     "R&D Transaction" - As defined in ss.4.7 above.

     "Subsidiary" - Any corporation or other entity of which Alkermes and/or any
of its Subsidiaries, directly or indirectly, owns, or has the right to control
or direct the voting of, more than fifty (50%) percent of the outstanding
capital stock or other ownership interest having general voting power (under
ordinary circumstances); provided, however, that neither Alkermes Clinical
Partners, L.P. nor any general or limited partnership formed to effectuate an
R&D Transaction will be deemed a Subsidiary.

                                      -24-


     THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
     TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
     SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.           
<PAGE>   25

     "Term Loan" - Any of the 1994 Term Loan, the 1995 Term Loan, the Ohio Term
Loan or any Additional Term Loan, in each case as the context may require.

     "Term Loans" - All of the following: the 1994 Term Loan, the 1995 Term Loan
and the Ohio Term Loan (and, when made, each Additional Term Loan).

     "Unencumbered Cash Balance" - At any time, the total of all cash and
Cash-Equivalents of Alkermes (and, to the extent expressly provided below,
certain Subsidiaries of Alkermes) which are not subject to any pledge, lien,
encumbrance or right of set-off (other than a right of set-off in favor of an
investment manager for its normal management fees) in favor of any other Person.
The Unencumbered Cash Balance will in no event be deemed to include the sums
from time to time pledged to the Bank pursuant to [Section]1.8 above. Further,
the Unencumbered Cash Balance will in no event be deemed to include any cash or
Cash-Equivalents of any partnership or other entity in which Alkermes now or
hereafter may have an interest, except that (A) for the purposes of satisfying
the Minimum Unencumbered Cash Balance test set forth in Section 3.6 above as at
any date, Alkermes' "Unencumbered Cash Balance" will be deemed to include both
the unencumbered cash and unencumbered Cash-Equivalents then held by a
wholly-owned Subsidiary of Alkermes which is operated pursuant to 30 Del. Code
[Section]1902(b)(8) and the unencumbered cash and unencumbered Cash-Equivalents
then held by ACT I, and (B) for the purposes of determining as at any date the
Cash Ratio required to be maintained by Section 3.7 above, Alkermes' 
"Unencumbered Cash Balance" will be deemed to include both the unencumbered cash
and unencumbered Cash-Equivalents of Alkermes and the unencumbered cash and
unencumbered Cash-Equivalents of Alkermes' wholly-owned Subsidiaries.

     Any defined term used in the plural preceded by the definite article shall
be taken to encompass all members of the relevant class. Any defined term used
in the singular preceded by "any" shall be taken to indicate any number of the
members of the relevant class.

     This letter agreement is executed, as an instrument under seal, as of the
day and year first above written.

                                        Very truly yours,

                                        ALKERMES, INC.


                                        By /s/ Michael Landine
                                           ---------------------------------
                                           Its Senior Vice President and CFO

                                        ALKERMES CONTROLLED
                                        THERAPEUTICS, INC.


                                        By /s/ Michael Landine
                                           ------------------------
                                           Its Vice President


                                      -25-


     THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
     TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
     SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.           
<PAGE>   26

                                                     ALKERMES CONTROLLED
                                                     THERAPEUTICS INC. II


                                                     By /s/ Michael Landine
                                                       ------------------------
                                                       Its Vice President


                                      -26-


     THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
     TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
     SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.           
<PAGE>   27


Accepted and agreed:

FLEET NATIONAL BANK


By /s/ Catherine Bruton
  --------------------------------
  Its Vice President


By /s/ William E Rano Jr.
  --------------------------------
  Its Senior Vice President

                                      -27-


     THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
     TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED
     SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.           
<PAGE>   28


                               DISCLOSURE SCHEDULE


Item 2.1(a)(i)        Jurisdictions where each Borrower is qualified

Item 2.1(a)(ii)       Subsidiaries, partnerships, joint ventures

Item 2.1(b)           List of 5% Stockholders

Item 2.1(e)           Litigation

Item 2.1(j)           Location of Assets

Item 2.1(m)           Material contracts and long-term commitments

Item 4.1              Existing Indebtedness

Item 4.2              Existing Liens




<PAGE>   29

                                 Item 2.1(a)(i)
                                 --------------

                     Jurisdictions In Which Each Borrower Is
                       Qualified As a Foreign Corporation

Alkermes, Inc.:
---------------

         Massachusetts
         Ohio

Alkermes Controlled Therapeutics, Inc.:
---------------------------------------

         Massachusetts

Alkermes Controlled Therapeutics Inc. II:
-----------------------------------------

         Ohio


<PAGE>   30


                                 Item 2.1(a)(ii)
                                 ---------------

                  Subsidiaries, Partnerships and Joint Ventures

                                  Subsidiaries
                                  ------------

Alkermes, Inc.
--------------

Alkermes Controlled Therapeutics, Inc., a
         Pennsylvania corporation

Alkermes Development Corporation II, a
         Delaware corporation ("ADC II"). (1)

Alkermes Europe Ltd., a corporation incorporated
         under the laws of the United Kingdom

Alkermes Investments, Inc., a Delaware corporation ("AII")

Alkermes Controlled Therapeutics Inc. II, a
         Pennsylvania corporation

Alkermes Controlled Therapeutics, Inc.
--------------------------------------

None

Alkermes Controlled Therapeutics Inc. II
----------------------------------------

None

                                  Partnerships
                                  ------------

Alkermes, Inc.
--------------

Alkermes Clinical Partners, L.P., a Delaware limited partnership. ADC II is the
general partner of this partnership.

Alkermes Controlled Therapeutics, Inc.
--------------------------------------

None

Alkermes Controlled Therapeutics Inc. II
----------------------------------------

None

                                 Joint Ventures
                                 --------------

None

-----------

1    Although ADC II is a wholly owned subsidiary of the Borrower, PaineWebber
     Development Corporation has the right to nominate at least half of the
     members of ADC II's board of directors until certain events occur.


<PAGE>   31






                                   Item 2.1(b)
                                   -----------

<TABLE>
                           5 Percent Beneficial Owners

<CAPTION>
                                     Number of
                                      Shares           % of
                                    Beneficially    Common Stock
Name                                  Owned            Owned
----                                ------------    ------------

<S>                                   <C>              <C>   
Amerindo Investment Advisors Inc.     2,715,000        14.80%
  One Embarcadero, Ste. 2300
  San Francisco, CA  94111 (1)

Pioneering Management Corporation     1,174,000         6.40%
  60 State Street
  Boston, MA  02109 (2)


<FN>
-------------
     (1) Amerindo Investment Advisors Inc. holds these shares in its capacity as
investment advisor for various fiduciary accounts.

     (2) Consists of shares held by Pioneer Capital Growth Fund, Inc. (the
"Fund"). Pioneering Management Corporation serves as investment advisor to the
Fund, and has investment discretion over these shares.

</TABLE>

<PAGE>   32






                                   Item 2.1(e)
                                   -----------

                               Pending Litigation

None


<PAGE>   33


                                   Item 2.1(j)
                                   -----------

                      Location of Books, Records and Assets

     Certain of each Borrowers' corporate books and records, including its
minute books, are located at the offices of Ballard Spahr Andrews & Ingersoll,
1735 Market Street, 51st Floor, Philadelphia, PA 19103.

     In addition, certain of Alkermes, Inc.'s corporate books, records and
assets relating to its European operations are located at the offices of
Alkermes Europe Ltd. in Cambridge, England.

     In addition, certain of Alkermes, Inc.'s corporate books, records and
assets relating to AII are located at the offices of AII in Wilmington, Delaware
19805.

     In addition, certain of Alkermes, Inc.'s stock records are located at the
offices of its transfer agent, the First National Bank of Boston.


<PAGE>   34


                                   Item 2.1(m)
                                   -----------

                  Material Contracts and Long-Term Commitments

1.   Form of 1992 Warrant to purchase 2,800 shares of Alkermes, Inc.'s Common
     Stock.

2.   Form of 1995 Warrant to purchase 300 shares of Alkermes, Inc.'s Common
     Stock.

3.   Form of Global Warrant Certificate for 1994 Class A Warrants to purchase
     1,700 shares of Alkermes, Inc.'s Common Stock.

4.   Form of Class B 1994 Warrant to purchase 3,400 shares of Alkermes, Inc.'s
     Common Stock.

5.   Form of Fund Warrant to purchase 7,293 shares of Alkermes, Inc.'s Common
     Stock.

6.   Form of Incentive Warrant to purchase 42,280 shares of Alkermes, Inc.'s
     Common Stock.

7.   Warrant Agreement, dated as of November 18, 1994, by and between Alkermes,
     Inc. and The First National Bank of Boston.

8.   Amended and Restated 1989 Non-Qualified Stock Option Plan, as amended.

9.   Amended and Restated 1990 Omnibus Stock Option Plan, as amended.

10.  1991 Restricted Common Stock Award Plan.

11.  1992 Non-Qualified Stock Option Plan.

12.  Stock Option Plan for Non-Employee Directors.

13.  Lease, dated as of September 18, 1991, between Forest City 64 Sidney
     Street, Inc. and Alkermes, Inc., as amended by a First Amendment of Lease
     dated September 1, 1992.

14.  Lease, dated as of March 16, 1990, between Forest City 64 Sidney Street,
     Inc. and Enzytech, Inc.


<PAGE>   35






15.  Product Development Agreement, dated as of March 6, 1992, between Alkermes
     Clinical Partners, L.P. and Alkermes, Inc.

16.  Purchase Agreement, dated as of March 6, 1992, by and among Alkermes, Inc.
     and each of the Limited Partners, from time to time, of Alkermes Clinical
     Partners, L.P.

17.  Alkermes Clinical Partners, L.P. Agreement of Limited Partnership, dated as
     of February 7, 1992, as amended by Amendment No. 1 to Agreement of Limited
     Partnership, dated as of September 29, 1992, as further amended by
     Amendment No. 2 to Agreement of Limited Partnership, dated as of March 30,
     1993.

18.  Class A Note of Alkermes Development Corporation II, dated April 10, 1992,
     to PaineWebber Development Corporation in the amount of $100.00.

19.  License Agreement, dated February 5, 1990, between Enzytech, Inc. and
     Massachusetts Institute of Technology.

20.  Development and License Agreement dated February 4, 1992, between Enzytech,
     Inc. and Schering Corporation, as amended by an Amendment to Development
     and License Agreement dated July 26, 1995 between Alkermes Controlled
     Therapeutics, Inc. and Schering Corporation.

21.  Prepaid Royalty Agreement dated July 26, 1995 between Alkermes Controlled
     Therapeutics, Inc. and Schering Corporation.

22.  Collaborative Development Agreement dated as of January 9, 1995 between
     Alkermes Controlled Therapeutics, Inc. and Genentech, Inc.

23.  Note Purchase Agreement, dated as of January 9, 1995, by and between
     Alkermes, Inc. and Genentech, Inc.

24.  Convertible Promissory Note of Alkermes, Inc. dated January 31, 1995.

25.  Development Agreement, dated as of December 23, 1993, between Medisorb
     Technologies International L.P. and Janssen Pharmaceutica International, as
     amended by the First Amendment to Development Agreement, dated as of
     December 23, 1993.

26.  License Agreement, dated as of February 13, 1996, between Medisorb
     Technologies International L.P. and Janssen Pharmaceutica International
     (United States).


<PAGE>   36






27.  License Agreement, dated as of February 21, 1996, between Medisorb
     Technologies International L.P. and Janssen Pharmaceutica International
     (worldwide except United States).

28.  Loan Agreement, dated November 19, 1992, between Fleet Bank of
     Massachusetts, N.A. and Alkermes, Inc., as amended by a Loan Modification
     Agreement, dated as of November 24, 1993, a Second Loan Modification
     Agreement dated as of December 23, 1994, a Third Loan Modification
     Agreement dated as of February , 1995, a letter dated August 8, 1995 and a
     Modification Agreement, dated as of December 19, 1995.

29.  Promissory Note of Alkermes, Inc., dated December 23, 1994, to Fleet Bank
     of Massachusetts, N.A.

30.  Promissory Note of Alkermes, Inc., dated December 19, 1995, to Fleet Bank
     of Massachusetts, N.A.

31.  Loan Agreement dated December 30, 1993, among The Daiwa Bank, Limited,
     Alkermes Investments, Inc. and Alkermes, Inc., as amended by Amendment No.
     1 to Loan Agreement, dated as of December 31, 1994, and as further amended
     by Amendment to Loan Agreement, dated as of December 29, 1995.

32.  Amended and Restated Note of Alkermes, Inc. and Alkermes Investments, Inc.
     dated December 29, 1995, to The Daiwa Bank, Limited.

33.  Employment Agreement, entered into as of February 7, 1991, between Richard
     F. Pops and Alkermes, Inc.

34.  Employment Agreement, entered into as of June 13, 1994, by and between
     Robert A. Breyer and Alkermes, Inc.


<PAGE>   37
                                    Item 4.1
                                    --------

                              Existing Indebtedness

Alkermes, Inc.
--------------

1.   Indebtedness which may be incurred as the result of any transaction
     contemplated by Section 7.1.

2.   Note, dated December 30, 1993, to The Daiwa Bank, Limited.

3.   Note, dated December 29, 1995, to The Daiwa Bank, Limited.

4.   Note Purchase Agreement, dated as of January 9, 1995, by and between
     Alkermes, Inc. and Genentech, Inc.


Alkermes Controlled Therapeutics, Inc.
--------------------------------------

None

Alkermes Controlled Therapeutics Inc. II
----------------------------------------

None


<PAGE>   38






                                    Item 4.2
                                    --------

                                 Existing Liens

Liens with respect to the Collateral, (as such term is defined in the Security
Agreement, dated as of November 19, 1992, by and among Alkermes, Inc., Alkermes
Controlled Therapeutics, Inc., Alkermes Controlled Therapeutics Inc. II and the
Bank), granted by Alkermes, Inc., Alkermes Controlled Therapeutics, Inc. and
Alkermes Controlled Therapeutics Inc. II in favor of the Bank, which Liens were
created by the Security Agreement.

Pursuant to a Loan Agreement, dated December 30, 1993, as amended by the
Amendment No. 1 to Loan Agreement, dated December 31, 1994, and the Amendment to
Loan Agreement, dated as of December 29, 1995, among The Daiwa Bank, Limited
("Daiwa"), Alkermes Investments, Inc. and Alkermes, Inc., Alkermes, Inc. has
established for the benefit and on behalf of Daiwa Bank Trust Company a
restricted custodial account (the "Restricted Account"). Pursuant to such Loan
Agreement, as amended, and certain other agreements executed in connection
therewith, upon the occurrence of certain specified events, Daiwa has the right
to require Morgan Stanley & Co. to deliver certain funds of Alkermes, Inc. for
which Morgan Stanley serves as custodian to Daiwa Bank Trust Company for deposit
into the Restricted Account. Alkermes, Inc. has granted Daiwa a security
interest in all of its right, title and interest in the Restricted Account and
all deposits or investments held therein.