Document:

<PAGE>

                                                                   Exhibit 10.37

* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

              LICENSE, DEVELOPMENT AND COMMERCIALIZATION AGREEMENT

This LICENSE, DEVELOPMENT AND COMMERCIALIZATION AGREEMENT is entered into as of
May 7, 2003 (the "Effective Date"), by and between PFIZER INC ("Pfizer"), a
Delaware corporation, having an office at 235 East 42nd Street, New York, New
York 10017, and GUILFORD PHARMACEUTICALS INC., a Delaware corporation, having an
office at 6611 Tributary Street, Baltimore, MD 21224, and GPI NAALADASE
HOLDINGS, INC., a Delaware corporation, having an office at 222 Delaware Avenue,
Wilmington, Delaware 19899 (collectively, with Guilford Pharmaceuticals Inc.,
"Guilford").

WHEREAS, Pfizer desires to obtain an exclusive license under Guilford's right,
title and interest in the Patent Rights so that Pfizer can evaluate the Patent
Rights and manufacture, use, sell, offer for sale and import the Products; and

WHEREAS, Guilford is willing to grant a license on the terms and subject to the
conditions set forth in this Agreement;

Therefore, in consideration of the mutual covenants and promises set forth in
this Agreement, the parties agree as follows:

1.    DEFINITIONS. The capitalized terms used in this Agreement and not defined
      elsewhere in it shall have the meanings specified for such terms in
      Section 1.

      (a)   "PATENT RIGHTS" shall mean (a) all the patents and patent
            applications listed in Exhibit A, and patents issuing on them,
            including any divisional, continuation, continuation-in-part,
            renewal, extension, reexamination, reissue or foreign counterpart of
            such patent applications; (b) Other Patent Rights; and (c) any
            patent restoration or extension period granted by a Governmental
            Authority, including but not limited to the compensation for patent
            term lost during the clinical trial or regulatory approval process.

      (b)   "VALID CLAIM" shall mean a claim within the Patent Rights so long as
            such claim shall neither have been disclaimed by the owner of the
            patent, nor held invalid in a final decision rendered by a tribunal
            of competent jurisdiction from which no appeal has been taken during
            the applicable appeal period or for

<PAGE>

                                       2

            which no further appeal can be taken.

      (c)   "PRODUCT" means any compound that the manufacture, use, sale, offer
            for sale or import of which would infringe any Valid Claim within
            the Patent Rights in the absence of a license. For purposes of this
            Agreement, in the event there is more than one compound as an active
            pharmaceutical ingredient in a single drug formulation, such
            combination of compounds shall be considered a single compound,
            which shall be separate and distinct from each of the individual
            compounds so combined.

      (d)   "AFFILIATE" shall mean with respect to a party to this Agreement,
            any entity which controls, is controlled by, or is under common
            control with such party. Control" means the ownership or ability to
            direct the voting power of at least 50% of all voting securities of
            an entity.

      (e)   "NET SALES" means the gross amount invoiced by Pfizer, its
            Affiliates, or any sublicensee of Pfizer for sales to a third party
            or parties of Products, less normal and customary trade discounts
            actually allowed, credits or allowances for rejected or returned
            Products previously sold, taxes the legal incidence of which is on
            the purchaser and separately shown on Pfizer's, its Affiliate's, or
            any sublicensee of Pfizer's, invoices and transportation, insurance
            and postage charges, if prepaid by Pfizer, any of its Affiliates or
            any sublicensee of Pfizer and billed on Pfizer's, its Affiliate's or
            any sublicensee of Pfizer's invoices as a separate item, and
            compulsory payments and rebates, accrued, paid or deducted pursuant
            to governmental regulations or agreements (other than employment
            agreements or agreements with Affiliates) with third parties
            (provided such agreements with third parties are identified and made
            available to Guilford for review and deductions relating to such
            agreements are identified separately in any statements pursuant to
            Section 4.6(b)).

      (f)   "GUILFORD COLLABORATIONS" means (a) (1) Guilford's research for the
            evaluation of NAALADase inhibitor conjugated to chemotherapy and
            radiotherapy for the treatment of prostate cancer; (2) Guilford's
            research for the formulation and evaluation of I.V. NAALADase
            inhibitors in acute conditions of glutamate toxicity, such as
            traumatic brain insult, spinal cord injury, cardiac arrest and/or
            global ischemia; and (3) Guilford's proposed clinical trial and
            research with * for the evaluation of NAALADase inhibitors for
            the treatment of drug addiction; and any agreements covering or
            arising out of any of the above-described trials or research; and
            (b) such other collaborations as Guilford may enter into following
            notice to and approval by Pfizer of such collaborations. Unless
            otherwise agreed to by Pfizer, Guilford shall not use * (or any
            other Guilford compounds as to which Pfizer has previously notified
            Guilford that it intends to pursue in development) in connection
            with the Guilford Collaborations. Guilford and Pfizer shall
            cooperate to ensure that compounds developed by Pfizer under

<PAGE>

                                       3

            this Agreement are not also developed by Guilford under the Guilford
            Collaborations.

      (g)   "COLLABORATION MILESTONE" means, with respect to each Guilford
            Collaboration, unless the parties otherwise agree, the completion of
            a Phase II trial demonstrating safety and efficacy with a
            presentation of data sufficient to enable Pfizer to decide whether
            or not to advance into Phase III trials.

      (h)   "OTHER PATENT RIGHTS" means all patents and patent applications
            relating to NAALADase and patents issuing on them, including any
            divisional, continuation, continuation-in-part, renewal, extension,
            reexamination, reissue or foreign counterpart of such patents and
            patent applications, that arise pursuant to Guilford Collaborations
            to the extent of Guilford's interest therein.

      (i)   "INFORMATION" means all information, including data; process
            information; Product information, know-how; technical and
            nontechnical materials; and Product samples and specifications,
            which one party delivers or makes available to the other pursuant to
            this Agreement.

      (j)   "GUILFORD CONFIDENTIAL INFORMATION" means all Information that
            Guilford discloses to Pfizer and designates "Confidential" in
            writing at the time of disclosure or within thirty (30) days
            following disclosure, to the extent that such Information as of the
            date of disclosure to Pfizer is not (i) known to Pfizer other than
            by virtue of a prior confidential disclosure to Pfizer by Guilford;
            or (ii) disclosed in published literature, or otherwise generally
            known to the public through no fault or omission of Pfizer; or (iii)
            obtained from a third party free from any obligation of
            confidentiality to Guilford.

      (k)   "PFIZER CONFIDENTIAL INFORMATION" means all Information that Pfizer
            discloses to Guilford and designates "Confidential" in writing at
            the time of disclosure or within thirty (30) days following
            disclosure to the extent that such information as of the date of
            disclosure to Guilford is not (i) known to Guilford other than by
            virtue of a prior confidential disclosure to Guilford by Pfizer; or
            (ii) disclosed in published literature, or otherwise generally known
            to the public through no fault or omission of Guilford; or (iii)
            obtained from a third party free from any obligation of
            confidentiality to Pfizer.

      (l)   "GUILFORD TECHNOLOGY" means (A) all proprietary Information and
            intellectual property (other than Patent Rights) (i) developed,
            discovered or invented by Guilford or on behalf of Guilford under an
            agreement which grants Guilford the right to convey the information
            or property, whether on, before or after the Effective Date,
            relating to (a) the modulation of NAALADase or (b) the compounds
            provided by Guilford to Pfizer under the Agreement; (ii) owned by
            Guilford on the Effective Date or at any time during the term of
            this Agreement which describes or relates to (a) the modulation of
            NAALADase or

<PAGE>

                                       4

            (b) the compounds provided by Guilford to Pfizer; or (iii) owned by
            Guilford on the Effective Date or at any time during the term of
            this Agreement and necessary or useful to manufacture, use, sell,
            offer for sale or import Products or compounds that modulate
            NAALADase, or (B) any exclusivity rights (other than Patent Rights)
            under Applicable Law that limit the ability of another Person to
            manufacture, use, sell, offer for sale or import a product that
            modulates NAALADase.

      (m)   "NAALADASE" means the enzyme known as
            N-Acetylated-Alpha-Linked-Acid-Dipeptidase.

      (n)   "INITIAL PERIOD" means the period commencing on the Effective Date
            and ending at the earlier of (i) 5:00 p.m., New York, New York time,
            on March 31, 2004; (ii) ninety (90) days after the date on which
            Pfizer, pursuant to its Candidate Alert Notice guidelines, formally
            nominates a compound to proceed in human clinical trials of a
            Product; or (iii) the date on which this Agreement terminates in
            accordance with the provisions of Section 9.

      (o)   "APPLICABLE LAW" means, with respect to any Person, any domestic or
            foreign, federal, state or local statute, treaty, law, ordinance,
            rule, regulation, administrative interpretation, order, writ,
            injunction, judicial decision, decree or other requirement of any
            Governmental Authority applicable to such Person or any of such
            Person's respective properties, assets, officers, directors,
            employees, consultants or agents (in connection with such officers',
            directors', employees', consultants' or agents' activities on behalf
            of such Person).

      (p)   "PERSON" means an individual, a corporation, a general partnership,
            a limited partnership, a limited liability company, a limited
            liability partnership, an association, a trust or any other entity
            or organization, including a Governmental Authority.

      (q)   "GOVERNMENTAL AUTHORITY" means any foreign, domestic, federal,
            territorial, state or local governmental authority,
            quasi-governmental authority, instrumentality, court, government or
            self-regulatory organization (including any national or
            international securities exchange and The NASDAQ Stock Market),
            commission, tribunal or organization or any regulatory,
            administrative or other agency, or any political or other
            subdivision, department or branch of any of the foregoing.

      (r)   "FDA" means the Federal Food and Drug Administration of the United
            States Department of Health and Human Services or any successor
            agency thereof.

      (s)   "INITIAL TARGET COMPOUNDS" means Guilford's compounds known as *,
            and to the extent contemplated by Exhibit B, such other Guilford
            compounds

<PAGE>

                                       5

            relating to NAALADase inhibitors (including * and those in the*) as
            Guilford and Pfizer may agree during the Initial Period.

      (t)   "SECURITIES LAWS" means the United States Securities Act of 1933, as
            amended, the United States Securities Exchange Act of 1934, as
            amended, and any other similar law or regulation of a Governmental
            Authority, or any successor to any such laws or regulations,
            together with any rules, regulations or listing standards or
            agreements of any national or international securities exchange or
            The NASDAQ Stock Market.

      (u)   "EXCLUSIVITY PERIOD" means, with respect to a Product in a
            particular country, the period prior to the termination of the
            Patent Rights in that country for any reason (including but not
            limited to any patent restoration period granted by a Governmental
            Authority to compensate for patent term lost during the clinical
            trial or regulatory approval process), and with respect to that
            country, any period in which Guilford or Pfizer has exclusivity
            rights (other than Patent Rights) under Applicable Law that limit
            the ability of all other Persons in the country to manufacture,
            obtain regulatory approval, use, sell, offer for sale or import the
            Product, including data exclusivity and/or exclusivity based on
            approval of a new chemical entity or new use of a previously
            approved drug (including but not limited to that afforded under the
            Hatch Waxman Act), pediatric exclusivity, orphan drug exclusivity,
            or the 180-day Abbreviated New Drug Application Exclusivity.

      (v)   "NDA" means a New Drug Application, "SNDA" means a Supplemental New
            Drug Application, and "IND" means an Investigational New Drug
            Application under 21 U.S.C. Section 355.

      (w)   "ADDITIONAL INDICATION" means an indicated use of a Product,
            separate from a previously indicated use, for which the commercial
            marketing or sale would require approval of an application under 21
            U.S.C. Section 355 (or an equivalent provision of Applicable Law of
            a foreign jurisdiction).

      (x)   "BACK UP COMPOUND" means a compound identified and nominated by
            Pfizer as a "back up compound" to a specified lead compound in
            accordance with Pfizer's ordinary business practices; provided,
            however, that such a compound shall only qualify as a "Back Up
            Compound" so long as and if (a) on or before the time Pfizer first
            files a regulatory application with a regulatory authority in
            respect of particular lead compound, Pfizer notifies Guilford in
            writing of the identity of the lead compound and the respective
            possible "back up compound or compounds," (b) no more than two (2)
            compounds may be identified and qualify as possible Back Up
            Compounds for a particular lead compound, (c) a Back Up Compound
            must initially be and remain for the same indication as the lead
            compound, (d) a compound shall only qualify as a Back Up Compound if
            Pfizer is no longer pursuing regulatory approval or

<PAGE>

                                       6

            conducting clinical trials with respect to the identified lead
            compound and any other compound initially identified by Pfizer as a
            possible Back Up Compound to that lead compound, and (e) a compound
            shall no longer qualify as a Back Up Compound at such time as the
            lead compound or another Back Up Compound as to the same lead
            compound is approved for marketing and sale by the FDA or a
            comparable foreign regulatory authority.

2.    GRANT OF EXCLUSIVE COMMERCIAL LICENSE UNDER PATENT RIGHTS AND GUILFORD
      TECHNOLOGY

      In consideration of Pfizer paying Guilford (i) $5,000,000 on the Effective
      Date, (ii) unless this Agreement has been earlier terminated, $10,000,000
      on or before the last day of the Initial Period, and (iii) the royalties
      contemplated by Section 4, Guilford hereby grants Pfizer the following
      licenses, on the terms and conditions set forth in this Agreement:

2.1   GRANT OF RESEARCH LICENSE
      Guilford hereby grants Pfizer a nonexclusive, irrevocable, worldwide,
      royalty-free, perpetual license, including the right to grant sublicenses
      to Affiliates, to use Patent Rights and Guilford Technology, but only for
      internal research purposes in respect of human therapeutic purposes, and
      not for the sale, manufacture for sale or import of products or processes.

2.2   EXCLUSIVE LICENSE UNDER THE PATENT RIGHTS
      Subject to any limitations or restrictions set forth in this Agreement,
      Guilford grants Pfizer a worldwide license, including the right to grant
      sublicenses, to manufacture, use, sell, offer for sale and import Products
      under the Patent Rights and Guilford Technology, such license to be
      exclusive as to Patent Rights and nonexclusive as to Guilford Technology,
      it being understood and agreed that the exclusive license as to Patent
      Rights and the nonexclusive license as to Guilford Technology may not be
      assigned or sublicensed separately. Guilford shall retain the right to
      practice the inventions under the Patent Rights (i) for internal research
      purposes, but not for the sale or manufacture for sale of products or
      processes generally, and/or (ii) in connection with the pursuit of any of
      the Guilford Collaborations at any time up to the date on which Guilford
      may assign its rights in respect of any such Guilford Collaboration to
      Pfizer pursuant to Section 2.4.1, and/or (iii) in connection with the
      pursuit of any of the Guilford Collaborations to the extent that Pfizer no
      longer has the right to acquire Guilford's rights in respect of such
      Guilford Collaboration pursuant to Section 2.4.3, and thereafter to
      manufacture, use, sell, offer for sale and import products resulting from
      such Guilford Collaborations, either directly or indirectly through
      another Person pursuant to a co-promotion, distribution or other
      arrangement intended to further Guilford's commercialization of such
      products in accordance with the

<PAGE>

                                       7

      provisions of Section 2.4.3, and/or (iv) for diagnostic purposes. The
      license granted under this Section 2.2 in each country shall commence on
      the date of this Agreement and shall terminate in accordance with Section
      9 of this Agreement.

2.3   TECHNICAL ASSISTANCE. Guilford shall provide to Pfizer or any permitted
      sublicensee of Pfizer, at Pfizer's request and expense, during normal
      business hours and upon reasonable advance notice and request, any
      technical assistance reasonably necessary to enable Pfizer or such
      sublicensee to manufacture, use, sell, offer for sale or import each
      Product and to enjoy fully all the rights granted to Pfizer pursuant to
      this Agreement; provided, however, that Guilford is reasonably capable of
      providing that assistance and the terms upon which such assistance shall
      be provided are mutually agreeable to Guilford and Pfizer.

2.4   GUILFORD COLLABORATIONS
      During the Initial Period (and, with respect to each Guilford
      Collaboration until such time as Pfizer no longer has the right to acquire
      Guilford's rights under such Guilford Collaboration), subject to any
      restrictions of Applicable Law and the terms and conditions of the
      agreements constituting such Guilford Collaboration, Guilford shall permit
      Pfizer, and shall use reasonable commercial efforts to cause its
      collaborators in each Guilford Collaboration to permit Pfizer, to be kept
      apprised of the work of such Guilford Collaboration and Guilford shall
      keep Pfizer apprised of the work of such Guilford Collaborations at
      quarterly Steering Committee meetings.

            2.4.1 Pfizer may, in respect of each Guilford Collaboration, at any
                  time during the period commencing on the date of delivery to
                  Pfizer by Guilford of a report, in form and substance
                  satisfactory to Pfizer and containing all information relating
                  to the Guilford Collaborations in Guilford's possession and
                  material to Pfizer's decision under this Section 2.4.1,
                  summarizing the results of the respective Guilford
                  Collaboration through the Collaboration Milestone, and ending
                  on the sixtieth (60th) day thereafter, by advance, written
                  irrevocable notice, direct Guilford to make Guilford's rights
                  under any or all of the Guilford Collaborations available to
                  Pfizer subject to the terms and conditions of the agreements
                  constituting such Guilford Collaborations.

            2.4.2 If Pfizer elects to direct Guilford to make its rights
                  available to Pfizer pursuant to Section 2.4.1, thereafter
                  Pfizer will have the right to control the assigned
                  collaboration (including the right to modify the scope of the
                  collaboration or terminate it, in either case in accordance
                  with the terms and conditions of the collaboration), in

<PAGE>

                                       8

                  Pfizer's sole discretion, subject only to (i) Pfizer paying
                  Guilford * within thirty (30) days of receipt of an invoice or
                  invoices from Guilford; and (ii) Pfizer assuming the
                  obligations of Guilford in respect of the collaboration from
                  and after the date on which such rights are made available to
                  Pfizer in accordance with an agreement between Guilford and
                  Pfizer consistent with this Section 2.4. and on other terms
                  and conditions acceptable to Guilford and Pfizer. Payment of
                  such costs shall be subject to Pfizer's receipt of appropriate
                  documentation of such costs, and such costs shall include
                  Guilford's internal direct and indirect costs as well as costs
                  of the collaborator and any other third-party costs to the
                  extent borne, directly or indirectly, by Guilford.

            2.4.3 If Pfizer does not direct Guilford to make Guilford's rights
                  under a particular Guilford Collaboration available to Pfizer,
                  as set forth in Section 2.4.1, Guilford in its sole discretion
                  may develop and commercialize the Products resulting from that
                  particular Guilford Collaboration for its own account at its
                  own cost. In such event Guilford may manufacture, use, sell,
                  offer for sale and import products resulting from such
                  Guilford Collaboration directly or, subject to Pfizer's
                  consent (which will not be unreasonably withheld), indirectly
                  through another Person pursuant to a co-promotion,
                  distribution or other arrangement intended to further
                  Guilford's commercialization of such products.

2.5   STEERING COMMITTEE.

            2.5.1 Guilford and Pfizer agree to form a steering committee (the
                  "Steering Committee") that will meet at least on a quarterly
                  basis to (i) consult regarding Pfizer's evaluation of the
                  Initial Target Compounds and the screening of Pfizer and other
                  Guilford compounds for efficacy in the modulation of
                  NAALADase, (ii) review and evaluate the progress in respect of
                  Pfizer's research, development and commercialization of
                  Products, including the results of any clinical trials and the
                  status of any regulatory applications, (iii) discuss and seek
                  to resolve any Disputes (as hereinafter defined) in accordance
                  with the provisions of Section 11, and (iv) review and
                  evaluate the progress being made in connection with the
                  Guilford Collaborations.

            2.5.2 Guilford and Pfizer each shall appoint, in its sole
                  discretion, three members, respectively, to the Steering
                  Committee. The party who appointed any particular member of
                  the Steering Committee shall at all times have the power and
                  authority to remove that member of the Steering Committee by
                  providing written notice of such removal

<PAGE>

                                       9

                  to the other party. Substitutes may be appointed at any time
                  by the party who appointed the member whose resignation or
                  removal caused a vacancy on the Steering Committee.

                  The initial members of the Steering Committee shall be:

                  Guilford:

                  *

                  Pfizer:

                  *

            2.5.3 Steering Committee meetings will take place on a quarterly
                  basis on mutually agreeable dates, times and places. Such
                  meetings may be conducted by videoconference no more than
                  twice a year. Pfizer shall prepare and distribute an agenda at
                  least fifteen (15) days before each meeting of the Steering
                  Committee. Guilford may propose changes and additions to the
                  agenda. Pfizer shall cause one of its representatives on the
                  Steering Committee to prepare and send meeting minutes to
                  Guilford for review and comment within fifteen (15) days
                  following the applicable committee meeting. Final minutes
                  shall be completed by Guilford and Pfizer within thirty (30)
                  days of each meeting.

            2.5.4 Pfizer shall have all decision authority regarding the
                  research and development and commercialization of Products.
                  Notwithstanding the foregoing, subject to its obligation to
                  maintain the confidentiality of the Pfizer Confidential
                  Information in accordance with the provisions of this
                  Agreement and any restrictions of Applicable Law, Guilford
                  shall have reasonable access to any data or reports prepared
                  in connection with Steering Committee meetings.

3.    PFIZER DILIGENCE.

      3.1   Pfizer shall use reasonable efforts to develop and exploit the
            Products commercially employing similar effort to that applied to
            similarly situated Pfizer products and programs that are being
            actively pursued.

      3.2   In furtherance of the provisions of Section 3.1, during the Initial
            Period Guilford will transfer to Pfizer its NAALADase screening
            assay. Upon successful incorporation of Guilford's screening assay
            into Pfizer's high throughput screening format, Pfizer will begin to
            screen Pfizer's compound library for NAALADase inhibitors in
            accordance with Pfizer's

<PAGE>

                                       10

            standard procedures and criteria for screening and progression.
            During the Initial Period, Pfizer will perform the compound
            characterization studies on * set forth in Exhibit B, and take the
            other actions contemplated by Exhibit B.

      3.3   If Pfizer grants a sublicense pursuant to Section 2, Pfizer shall
            give written notice to Guilford of such sublicense, shall cause the
            sublicensee to confirm in writing to and for the benefit of Guilford
            that it will comply with the covenants and agreements of Pfizer
            hereunder and shall guarantee that any sublicensee fulfills all of
            Pfizer's obligations under this Agreement; provided, however, that
            Pfizer shall not be relieved of its obligations pursuant to this
            Agreement by virtue of any such sublicense.

4.    MILESTONE PAYMENTS, ROYALTIES, PAYMENTS OF ROYALTIES, ACCOUNTING FOR
      ROYALTIES, RECORDS.

      4.1   MILESTONES
            Pfizer shall pay Guilford, in respect of each Product (regardless of
            whether the active ingredient in the Product is an Initial Target
            Compound, another compound of Guilford, or a compound of Pfizer or
            another Person), within thirty (30) business days of the achievement
            by such Product of each event set forth below (each a "Milestone"),
            the payment listed opposite that Milestone (the "Milestone Amount").

<TABLE>
<CAPTION>
            ------------------------------------------------------------------------------------
                                          Milestone                      Milestone Amount
                                          ---------                      ----------------
                                              *                                 *
            ------------------------------------------------------------------------------------
<S>                            <C>                                       <C>

</TABLE>

            Guilford shall be entitled to payment of the Milestone Amounts in
            respect of each Milestone set forth above only once for each Product
            (including Back Up Compounds).

      4.2   ADDITIONAL INDICATIONS.

            If Pfizer pursues an Additional Indication for a Product as to which
            another indicated use has been approved by the FDA (or a comparable
            regulatory authority of a foreign jurisdiction) or in respect of
            which such approval is

<PAGE>

                                       11

            being pursued, Pfizer shall pay Guilford the payment listed opposite
            each Milestone (each an "Additional Indication Milestone Amount")
            set forth below within thirty (30) business days of the achievement
            of the respective Milestone. Pfizer shall pay each Additional
            Indication Milestone Amount in respect of a Milestone for an
            Additional Indication only once, regardless of how many additional
            indications are pursued with respect to a Product or how many
            different Products are the subject of attempts to seek approvals for
            Additional Indications; provided, however, that the Additional
            Indication Milestone Amounts set forth below need not be paid in
            respect of the same Additional Indication.

<TABLE>
<CAPTION>
           -------------------------------------------------------------------------------------
                                 Milestone                         Additional Indication
                                 ---------                            Milestone Amount
                                                                      ----------------
                                     *                                        *
           -------------------------------------------------------------------------------------
<S>                   <C>                                           <C>

</TABLE>

      4.3   *

      4.4   ROYALTIES. Pfizer shall pay Guilford a royalty based on the Net
            Sales of each Product. Such royalty shall be paid with respect to
            each country of the world from the date of the first commercial sale
            by Pfizer or any sublicensee of Pfizer of such Product in each such
            country until the termination of the Exclusivity Period covering
            such Product in such country.

      4.5   ROYALTY RATES.
            4.5.1 Pfizer shall pay Guilford a royalty for the sale of each
                  Product as set forth in Section 4.6 based on the royalty rates
                  set forth in this Section 4.5; provided, however, that such
                  Royalty shall be subject to application of the credits set
                  forth in Section 4.3.

            4.5.2 The royalty paid each calendar year by Pfizer to Guilford
                  shall be based on increments of Net Sales with respect to each
                  Product sold during the calendar year according to the
                  following schedule:

<TABLE>
<CAPTION>
            Annual Net Sales of each Product           Per Product Royalty Rate
            --------------------------------           -------------------------
<S>                                                    <C>
                  *                                           *
</TABLE>

      4.6   PAYMENT.

            (a)   Pfizer shall pay royalties on Net Sales within sixty (60) days
                  after the end of each calendar quarter in which such Net Sales
                  are made.

<PAGE>

                                       12

            (b)   Such payments shall be accompanied by a statement showing the
                  Net Sales of each Product by Pfizer or any sublicensee of
                  Pfizer in each country, the applicable royalty rate for such
                  Product, and a calculation of the amount of royalty due,
                  including the application of any credits contemplated by
                  Section 4.3.

            (c)   All payments due to Guilford by Pfizer, whether in payment of
                  a Milestone Amount or a royalty, shall be computed and paid in
                  U.S. dollars by wire transfer in immediately available funds
                  to a U.S. bank account designated by Guilford, or by other
                  mutually acceptable means.

            (d)   For purposes of determining the amount of royalties due, the
                  amount of Net Sales in any respect of sales originally
                  denominated in a foreign currency shall be computed by
                  converting such foreign currency amount into U.S. dollars at
                  the prevailing commercial rate of exchange for purchasing
                  dollars with such foreign currency as published in the Wall
                  Street Journal for the close of the last business day of the
                  calendar quarter for which the relevant royalty payment is to
                  be made by Pfizer.

            (e)   In the event that any payment due hereunder is not paid when
                  due, such payment obligation shall bear interest from the date
                  on which the payment was due and payable at a rate of interest
                  per annum equal to*.

            (f)   *

      4.7   TAXES If Applicable Laws require Pfizer to withhold any tax from any
            payment to Guilford, Pfizer will do so and will pay such tax to the
            proper taxing authority. If Pfizer does so, it will provide Guilford
            with copies of official receipts for such taxes withheld and paid by
            Pfizer to such taxing authority, and Pfizer will cooperate as
            Guilford may reasonably request and at Guilford's expense, in any
            filings or other actions by Guilford with respect to such taxes.

      4.8   RECORDS.
            4.8.1 Pfizer shall keep for three (3) years from the date of each
                  payment of royalties complete and accurate records of sales by
                  Pfizer of each Product in sufficient detail to allow the
                  accruing royalties to be determined accurately. Guilford shall
                  have the right for a period of three (3) years after receiving
                  any report or statement with respect to royalties due and
                  payable to appoint at its expense an

<PAGE>

                                       13

                  independent certified public accountant reasonably acceptable
                  to Pfizer to inspect the relevant records of Pfizer to verify
                  such report or statement. Pfizer shall make its records
                  available for inspection by such independent certified public
                  accountant during regular business hours at such place or
                  places where such records are customarily kept, upon
                  reasonable notice from Guilford, to verify the accuracy of the
                  reports and payments. Such inspection right shall not be
                  exercised more than once in any calendar year nor more than
                  once with respect to sales in any given period. Guilford
                  agrees to hold in strict confidence all information concerning
                  royalty payments and reports, and all information learned in
                  the course of any audit or inspection, except to the extent
                  necessary for Guilford to reveal such information in order to
                  enforce its rights under this Agreement or if disclosure is
                  required by law. The failure of Guilford to request
                  verification of any report or statement during said three-year
                  period shall be considered acceptance of the accuracy of such
                  report, and Pfizer shall have no obligation to maintain
                  records pertaining to such report or statement beyond said
                  three-year period. The results of each inspection, if any,
                  shall be binding on both parties unless Pfizer objects, by
                  delivery to Guilford of a written notice of objections, within
                  thirty (30) days of receipt of a report of the independent
                  certified public accountant retained by Guilford. In the event
                  Pfizer disagrees with the conclusions reached by the
                  independent certified public accountant retained by Guilford
                  within such thirty (30) day period in accordance with the
                  preceding sentence, the disagreement shall be considered a
                  Dispute within the meaning of Section 11 and shall be treated
                  accordingly.

            4.8.2 The costs and expenses of the independent certified public
                  accountant retained by Guilford pursuant to Section 4.8.1 to
                  review the records of Pfizer shall be paid by Guilford;
                  provided, however, that if the results of any review of the
                  records of Pfizer pursuant to Section 4.8.1 shall reveal that
                  the Net Sales reported by Pfizer for any period covered by
                  such review shall have been understated by five percent (5%)
                  or more, Pfizer shall reimburse Guilford for all such costs
                  and expenses.

            4.8.3 In the event that it is determined (by failure of Pfizer to
                  object to the report of the independent certified public
                  accountant retained by Guilford, by agreement of the parties
                  or upon any other resolution of a Dispute) that the royalties
                  paid by Pfizer to Guilford hereunder shall have been
                  understated as a result of underreporting of Net Sales for the
                  applicable period, any amount of royalties that were
                  understated shall be paid within thirty (30) days of the final

<PAGE>

                                       14

                  determination of the amount by which such royalties were
                  understated and the amount so understated shall bear interest
                  from the date on which the royalties otherwise would have been
                  due and payable had they not been understated at a rate of
                  interest per annum equal to*.

      4.9   MISCELLANEOUS.
            For purposes of further defining the Milestones in Sections 4.1 and
            4.2, the following provisions apply:

            (a)   a clinical trial shall be deemed to have started at the time
                  the relevant Governmental Authority grants permission to begin
                  human clinical testing (as one example, in the United States,
                  the approval of the IND);

            (b)   Phase I clinical trials include a clinical trial anywhere in
                  the world;

            (c)   a Phase III clinical trial shall be deemed to have started at
                  the time that (i) in the United States the FDA grants
                  permission to begin a Phase III clinical trial or (ii) in any
                  other country the relevant Governmental Authority grants
                  permission to begin the final clinical trial needed to obtain
                  approval to make a commercial sale of the Product in such
                  country;

            (d)   NDA Filing or SNDA filing shall include the filing of an
                  application under 21 U.S.C. Section 355 (or an equivalent
                  provision of Applicable Law of a foreign jurisdiction); and

            (e)   NDA Approval or SNDA Approval shall include the approval of an
                  application under 21 U.S.C. Section 355 (or an equivalent
                  provision of Applicable Law of a foreign jurisdiction).

5.    LEGAL ACTION.

      5.1   If information comes to the attention of Pfizer to the effect that
            any Patent Rights claiming a Product have been or are threatened to
            be unlawfully infringed or a Person is engaged in unauthorized use
            of Guilford Technology in connection with a Product, Pfizer shall
            have the right at its expense to take such action as it may deem
            necessary to prosecute or prevent such unlawful infringement or
            unauthorized use, including the right to bring or defend any suit,
            action or proceeding involving any such infringement or unauthorized
            use. Pfizer shall notify Guilford promptly of the receipt of any
            such information and of the commencement of any such suit, action or
            proceeding and shall consult with Guilford concerning the

<PAGE>

                                       15

            actions it intends to take; provided, that Pfizer may not take any
            action that reasonably could be expected to prejudice Guilford's
            rights in respect of such Patent Rights or Guilford Technology. If
            Pfizer determines that it is necessary or desirable for Guilford to
            join any such suit, action or proceeding, Guilford shall, at
            Pfizer's expense, execute all papers and perform such other acts as
            may be reasonably required to permit Pfizer to commence such action,
            suit or proceeding in which case Pfizer shall hold Guilford free,
            clear and harmless from any and all costs and expenses of
            litigation, including attorneys fees.

            If Pfizer brings a suit, it shall have the right first to reimburse
            itself out of any sums recovered in such suit or in its settlement
            for all costs and expenses, including attorneys' fees, related to
            such suit or settlement, and * of any funds that shall remain from
            said recovery shall be paid to Guilford and the balance of such
            funds shall be retained by Pfizer. If Pfizer does not, within one
            hundred twenty (120) days after giving notice to Guilford of the
            above-described information, notify Guilford of Pfizer's intent to
            bring suit against any infringer, Guilford shall have the right to
            bring suit for such alleged infringement, but it shall not be
            obligated to do so, and may join Pfizer as party plaintiff, if
            appropriate, in which event Guilford shall hold Pfizer free, clear
            and harmless from any and all costs and expenses of such litigation,
            including attorney's fees, and any sums recovered in any such suit
            or in its settlement shall belong to Guilford. However, * of any
            such sums received by Guilford, after deduction of all costs and
            expenses, including attorneys' fees, related to such suit or
            settlement shall be paid to Pfizer. Each party shall always have the
            right to be represented by counsel of its own selection and at its
            own expense in any suit instituted by the other for infringement
            under the terms of this Section.

      5.2   DEFENSE OF INFRINGEMENT CLAIMS. Guilford will cooperate with Pfizer
            at Pfizer's expense in the defense of any suit, action or proceeding
            against Pfizer or any sublicensee of Pfizer alleging the
            infringement of the intellectual property rights of a third party by
            reason of the use of Patent Rights in the manufacture, use or sale
            of the Product. Pfizer shall give Guilford prompt written notice of
            the commencement of any such suit, action or proceeding or claim of
            infringement and will furnish Guilford a copy of each communication
            relating to the alleged infringement. Guilford shall give to Pfizer
            all authority (including the right to exclusive control of the
            defense of any such suit, action or proceeding and the exclusive
            right after consultation with Guilford, to compromise, litigate,
            settle or otherwise dispose of any such suit, action or proceeding),
            at Pfizer's expense, including by providing information and
            assistance necessary to defend or settle any such suit, action or
            proceeding; provided, however, Pfizer shall

<PAGE>

                                       16

            obtain Guilford's prior consent to such part of any settlement which
            contemplates payment or other action by Guilford or has a material
            adverse effect on Guilford's business. If the parties agree that
            Guilford should institute or join any suit, action or proceeding
            pursuant to this Section, Pfizer may, at Pfizer's expense, join
            Guilford as a defendant if necessary or desirable, and Guilford
            shall execute all documents and take all other actions, including
            giving testimony, which may reasonably be required in connection
            with the prosecution of such suit, action or proceeding.

      5.3   NO CHALLENGE TO PATENT RIGHTS. Pfizer shall not challenge the
            validity or enforceability of any of the Patent Rights by
            litigation, opposition, re-examination, revocation, or invalidation
            proceeding; or by requesting or participating in a declaration of an
            interference against any Patent Rights; or by contesting or
            disputing Guilford's entitlement to or ownership of the Patent
            Rights.

      5.4   THIRD PARTY LICENSES. If the manufacture, use or sale by Pfizer of a
            Product in any country would, in the reasonable opinion of Pfizer,
            infringe a patent owned by a third party and Pfizer has obtained or
            will obtain a license under such patent, * of any payments made by
            Pfizer to such third party under the license agreement with such
            third party shall be deductible from royalty payments due from
            Pfizer to Guilford pursuant to this Agreement; provided, however,
            that in no event will royalty payments payable to Guilford hereunder
            in respect of the relevant Product be reduced by an amount greater
            than * of Net Sales for that Product in any quarterly period.

6.    REPRESENTATIONS AND WARRANTIES Guilford represents and warrants to Pfizer
      that it has all legal right, title and authority to grant the licenses
      contemplated by Section 2 of this Agreement, and that, except for rights
      of third parties (including Governmental Authorities) who have provided or
      provide funding in respect of the Guilford Collaborations, or rights of
      third parties in respect of such Guilford Collaborations to consent to the
      actions contemplated by Section 2.4., such licenses do not conflict with
      or violate the terms of any agreement between Guilford and any third
      party.

7.    TREATMENT OF CONFIDENTIAL INFORMATION.

      7.1   CONFIDENTIALITY.
            Subject to Pfizer's and Guilford's right and obligations pursuant to
            this Agreement, Pfizer and Guilford each agree that during the term
            of this Agreement and for five (5) years thereafter, it will keep
            confidential all Guilford Confidential Information or Pfizer
            Confidential Information, as the case may be, that is disclosed to
            it pursuant to this Agreement. Neither Pfizer nor Guilford shall use
            Confidential Information of the other party

<PAGE>

                                       17

            except as expressly permitted under this Agreement.

            Subject to Pfizer's and Guilford's rights and obligations pursuant
            to this Agreement, Pfizer and Guilford each agree that any
            disclosure of the other's Confidential Information to any officer,
            employee or agent of the other party shall be made only if and to
            the extent necessary to carry out its responsibilities under this
            Agreement and shall be limited to the maximum extent possible
            consistent with such responsibilities. Subject to Pfizer's and
            Guilford's rights and obligations pursuant to this Agreement, Pfizer
            and Guilford each agree not to disclose the other's Confidential
            Information to any third parties under any circumstance without
            written permission from the other party. Each party shall take such
            action to preserve the confidentiality of each other's Confidential
            Information as it would customarily take to preserve the
            confidentiality of its own Confidential Information. Upon
            termination of this Agreement, each party, upon the other's request,
            (i) will return all the Confidential Information disclosed to it by
            the other party pursuant to this Agreement, including all copies and
            extracts of documents, within sixty (60) days of the request upon
            the termination of this Agreement except for one (1) copy which may
            be kept for the purpose of complying with continuing obligations
            under this Agreement; or (ii) will destroy and certify such
            destruction, if acceptable to the other party.

            Except as required by Applicable Law and except for the Guilford
            press release attached hereto as Exhibit C (and any subsequent
            disclosure consistent with the information included in such press
            release), neither party may disclose the terms of this Agreement
            without the written consent of the other party. Notwithstanding the
            foregoing or the provisions of Section 7.2, each party acknowledges
            and agrees that the other party may be required to disclose the
            existence of this Agreement or some or all of the information
            included in this Agreement in order to comply with its obligations
            under the Securities Laws or under the rules of a national or
            international securities exchange or The NASDAQ Stock Market, and
            hereby consents to such disclosure to the extent deemed advisable or
            appropriate by counsel to the other party.

      7.2   DISCLOSURE REQUIRED BY APPLICABLE LAW.

            If either party is requested to disclose the Confidential
            Information in connection with a legal or administrative proceeding
            or is otherwise required by Applicable Law to disclose the
            Confidential Information, such party will give the other party
            prompt notice of such request. The disclosing party may seek an
            appropriate protective order or other remedy or waive compliance
            with the provisions of this Agreement. If such party seeks a
            protective order or other remedy, the other party will cooperate. If

<PAGE>

                                       18

            such party fails to obtain a protective order or waive compliance
            with the relevant provisions of this Agreement, the other party will
            disclose only that portion of Confidential Information which its
            legal counsel determines it is required to disclose.

8.    FILING, PROSECUTION AND MAINTENANCE BY GUILFORD.

      8.1   With respect to Patent Rights, except as set forth in Section 8.1.2.
            and Section 8.1.3., Guilford shall have the exclusive right and
            obligation:
            (a)   to file applications for letters patent on patentable
                  inventions; provided, however, that Guilford shall consult
                  with Pfizer regarding countries in which such patent
                  applications should be filed and shall file patent
                  applications in those countries where Pfizer requests that
                  Guilford file such applications; and, further provided, that
                  Guilford, at its option and expense, may file in countries
                  where Pfizer does not request that Guilford file such
                  applications;
            (b)   to take all reasonable steps to prosecute all pending and new
                  patent applications;
            (c)   to respond to oppositions, nullity actions, re-examinations,
                  revocation actions and similar proceedings filed by third
                  parties against the grant of letters patent for such
                  applications;
            (d)   to maintain in force any letters patent included in Patent
                  Rights by duly filing all necessary papers and paying any fees
                  required by the patent laws of the particular country in which
                  such letters patent were granted; and
            (e)   to cooperate fully with, and take all necessary actions
                  requested by, Pfizer in connection with the preparation,
                  prosecution and maintenance of any letters patent included in
                  Patent Rights. Guilford shall notify Pfizer in a timely manner
                  of any decision to abandon a pending patent application or an
                  issued patent included in Patent Rights. Thereafter, Pfizer
                  shall have the option, at its expense, of continuing to
                  prosecute any such pending patent application or of keeping
                  the issued patent in force.

                  8.1.1 COPIES OF DOCUMENTS.
                  Guilford shall provide to Pfizer copies of all patent
                  applications that are part of Other Patent Rights prior to
                  filing, for the purpose of obtaining substantive comment of
                  Pfizer's patent counsel. Guilford shall also provide to Pfizer
                  other copies of all documents relating to prosecution of all
                  such patent applications in a timely manner and shall provide
                  every six (6) months a report detailing the status of all
                  patent applications that are a part of Other Patent Rights.

<PAGE>

                                       19

                  8.1.2 REIMBURSEMENT OF COSTS FOR FILING PROSECUTING AND
                  MAINTAINING PATENT RIGHTS.
                  Within thirty (30) days of receipt of invoices from Guilford,
                  Pfizer shall reimburse Guilford for all the costs of filing,
                  prosecuting, responding to opposition or other interested
                  parties proceedings and maintaining patent applications and
                  patents during the term of this Agreement. Such reimbursement
                  shall be in addition to other funding payments under this
                  Agreement and shall include such costs of all activities
                  described in Section 8.1 (a)-(e) above. However, Pfizer may,
                  upon sixty (60) days notice, request that Guilford discontinue
                  filing or prosecution of patent applications in any country
                  (other than the countries listed in Schedule 8.1.2) and
                  discontinue reimbursing Guilford for the costs of filing,
                  prosecuting, responding to opposition or maintaining such
                  patent application or patent in any such country (other than
                  the countries listed in Schedule 8.1.2). Guilford shall pay
                  all costs in those countries in which Pfizer requests that
                  Guilford not file, prosecute or maintain patent applications
                  and patents, but in which Guilford, at its option, elects to
                  do so in accordance with this Section 8.1.2; provided,
                  however, that in the event Guilford so elects to continue to
                  file, prosecute or maintain patent applications and patents in
                  those countries the licenses granted to Pfizer in respect of
                  such patent applications and patents under Section 2 shall no
                  longer extend to such patent applications and patents in those
                  countries.

                  8.1.3 PATENT AND OTHER EXCLUSIVITY EXTENSIONS.
                  Pfizer and Guilford will consult with each other from time to
                  time regarding all applications for exclusivity extensions
                  pursuant to Applicable Law, including but not limited to
                  extensions pursuant to 35 USC Section 156 and foreign
                  counterparts, with respect to the Products to the extent that
                  such extensions are available. Guilford agrees to sign such
                  further documents and take such further actions as may be
                  reasonably requested by Pfizer to support all actions
                  necessary to obtain any such extension in this regard, at
                  Pfizer's expense.

9.    TERMINATION AND DISENGAGEMENT.

      9.1   Each of the following events shall constitute events of termination
            ("Events of Termination") for purposes of this Agreement:

            (a)   with respect to each Product, the termination of the
                  Exclusivity Period with respect to that Product;

            (b)   Guilford or Pfizer shall fail in any material respect to
                  perform or

<PAGE>

                                       20

                  observe any term, covenant or understanding contained in this
                  Agreement or in any of the other documents or instruments
                  delivered pursuant to, or concurrently with, this Agreement,
                  which failure remains unremedied for thirty (30) days after
                  written notice to the failing party; or

            (c)   during the Initial Period, Pfizer shall fail to take the
                  actions contemplated by, or conduct the evaluation of the
                  Initial Target Compounds and the compounds included in
                  Pfizer's compound library in accordance with, Exhibit B.

      9.2   Upon the occurrence of any Event of Termination under Section 9.1(b)
            or 9.1(c), the party not responsible may, by notice to the other
            party, terminate this Agreement.

      9.3   Termination of this Agreement by either party, with or without
            cause, will not terminate the Research License granted pursuant to
            Section 2.1.

      9.4   Termination of this Agreement for any reason shall be without
            prejudice to:

            (a)   the rights and obligations of the parties set forth in
                  sections which provide for performance of either party
                  subsequent to termination;

            (b)   Guilford's right to receive payments in respect of all
                  Milestone Amounts and royalties accrued hereunder prior to the
                  termination date; or

            (c)   any other remedies which either party may otherwise have under
                  and in accordance with Applicable Law or this Agreement.

      9.5   Prior to the end of the Initial Period, Pfizer at its sole
            discretion may terminate this Agreement by written notice to
            Guilford. In the event that Pfizer fails to make payment of a total
            of $15,000,000 in accordance with Section 2 prior to the end of the
            Initial Period, Guilford at its sole discretion may terminate this
            Agreement by written notice to Pfizer.

      9.6   At any time, Pfizer at its sole discretion may terminate this
            Agreement with respect to any Product in any country or countries in
            the world upon thirty (30) days prior notice to Guilford and
            cessation of sale of the Product. Upon such termination by Pfizer,
            all licenses other than the license granted under Section 2.1 of
            this Agreement, shall terminate with respect to such country or
            countries for any such Product.

      9.7   In addition to the right to terminate this Agreement upon the
            occurrence of

<PAGE>

                                       21

            any Event of Termination, if at any time during the term of this
            Agreement Pfizer, directly or indirectly, takes any action or
            assists or supports another Person in taking any action challenging
            any of the Patent Rights, including any action in connection with an
            opposition, re-examination, revocation or invalidation proceeding,
            or requests a declaration of an interference against or otherwise
            attacks the validity or enforceability of any Patent Rights, or
            contests or disputes Guilford's entitlement to or ownership of the
            Patent Rights, Guilford shall have the right to terminate this
            Agreement immediately.

      9.8   (a) Upon termination of this Agreement (except for breach by
            Guilford), Pfizer shall make available to and transfer or assign to
            Guilford the following: the clinical human experience database, all
            audited toxicology reports and all in vivo animal study data
            including ADME in vivo data, any regulatory submissions and any
            correspondence with the FDA or other regulatory authorities.*

            (b)*

            (c)*

<PAGE>

                                       22

      9.9   Upon termination, this Agreement shall become void and of no further
            force or effect, except for the following provisions, which shall
            remain in full force and effect: provisions relating to payment or
            reimbursement accruing before the termination of the Agreement,
            Sections 4.7, 4.8, and 4.9, Article 5 to the extent relating to the
            period or accruing before the termination of the Agreement, and
            Articles 7, 9, 10, 11, 13 and 14. Any termination shall not affect
            any right or claim hereunder that arises prior to such termination,
            which claims and rights shall survive termination.

10.   INDEMNIFICATION. Pfizer and Guilford will indemnify each other for
      damages, settlements, costs, legal fees and other expenses incurred in
      connection with a claim by a third party against either party based on any
      action or omission of the indemnifying party's agents, employees, or
      officers related to its obligations under this Agreement; provided,
      however, that the foregoing shall not apply (i) if the claim is found to
      be based upon the negligence, recklessness or wilful misconduct of the
      party seeking indemnification; or (ii) if such party fails to give the
      other party prompt notice of any claim it receives and such failure
      materially prejudices the other party with respect to any claim or action
      to which its obligation pursuant to this Section applies.

      Each party will notify the other in the event it becomes aware of a claim
      for which indemnification may be sought hereunder. In case any proceeding
      shall be instituted involving any party in respect of which indemnity may
      be sought pursuant to this Section 10, such party (the "Indemnified
      Party") shall promptly notify the other party (the "Indemnifying Party")
      in writing and the Indemnifying Party and Indemnified Party shall meet to
      discuss how to respond to any claims that are the subject matter of such
      proceeding. The Indemnifying Party, upon request of the Indemnified Party,
      shall retain counsel reasonably satisfactory to the Indemnified Party to
      represent the Indemnified Party and shall pay the fees and expenses of
      such counsel related to such proceeding. In any such proceeding, the
      Indemnified Party shall have the right to retain its own counsel, but the
      fees and expenses of such counsel shall be at the expense of the
      Indemnified Party unless (i) the Indemnifying Party and the Indemnified
      Party shall have mutually agreed to the retention of such counsel or (ii)
      the named parties to any such proceeding include both the Indemnifying
      Party and the Indemnified Party and representation of both parties by the
      same counsel would be inappropriate due to actual or potential differing
      interests between them. All such fees and expenses shall be reimbursed as
      they are incurred. The Indemnifying Party shall not be liable for any
      settlement of any proceeding effected without its written consent, but if
      settled with such consent or if there be

<PAGE>

                                       23

      a final judgment for the plaintiff, the Indemnifying Party agrees to
      indemnify the Indemnified Party from and against any loss or liability by
      reason of such settlement or judgment. The Indemnifying Party shall not,
      without the written consent of the Indemnified Party, effect any
      settlement of any pending or threatened proceeding in respect of which the
      Indemnified Party is, or arising out of the same set of facts could have
      been, a party and indemnity could have been sought hereunder by the
      Indemnified Party, unless such settlement includes an unconditional
      release of the Indemnified Party from all liability on claims that are the
      subject matter of such proceeding.

11.   DISPUTE RESOLUTION.

      If a dispute, controversy or difference (in each case, a "Dispute")
      between the parties arises out of or is related to this Agreement, then
      such Dispute first shall be referred to the Steering Committee to seek a
      resolution of the Dispute. In such an event, the Steering Committee shall
      hold at least one (1) meeting within thirty (30) days of the date on which
      the Dispute is referred to the Steering Committee. In the event that the
      Steering Committee is unable to resolve the Dispute within forty five (45)
      days of the date on which the Dispute is referred to the Steering
      Committee, each party shall designate a member of its senior management to
      discuss the Dispute in an effort to settle it amicably during a period of
      no less than thirty (30) days.

12.   NOTICES AND REPORTS.

      12.1  All notices shall be in writing mailed via certified mail, return
            receipt requested, courier, or facsimile transmission addressed as
            follows, or to such other address as may be designated from time to
            time:

            IF TO PFIZER:    Pfizer Global R&D Headquarters
                             50 Pequot Avenue
                             New London, CT 06320
                             Attn.: Executive Vice President, PGRD
                             with copy (which shall not constitute notice) to:
                                    Assistant General Counsel

                             Invoices should be sent to the attention of Lori
                             Schenking, Strategic Alliances, PGRD Groton
                             Laboratories, at the following address:

                             Pfizer Global Research & Development
                             Groton Laboratories
                             Eastern Point Road - MS 8200-30
                             Groton, CT  06340

<PAGE>

                                       24

            IF TO GUILFORD:  Guilford Pharmaceuticals Inc.
                             6611 Tributary Street
                             Baltimore, MD 21224
                             Attn: Senior Vice President Corporate Development
                             with a copy (which shall not constitute notice) to:
                                    Senior Vice President & General Counsel
                             and
                             GPI NAALADase Holdings, Inc.
                             222 Delaware Avenue
                             Wilmington, Delaware 19899
                             Attn: Vice President & Secretary

               Notices shall be deemed given as of the date sent.

      12.2  On a quarterly basis during the term of this Agreement, to the
            extent not made available to Guilford through the Steering
            Committee, Pfizer will provide Guilford with written reports,
            summarizing all material data and information arising out of the
            actions contemplated by this Agreement and the research and
            development conducted by Pfizer in respect of NAALADase inhibitors.
            In the event that after receipt of any such report, Guilford shall
            request additional data or information relating to the report,
            Pfizer shall promptly provide such data or information to Guilford.

13.   GOVERNING LAW. This Agreement shall be governed by and construed in
      accordance with the laws of the State of New York.

14.   MISCELLANEOUS.

      14.1  BINDING EFFECT. This Agreement shall be binding upon and inure to
            the benefit of the parties and their respective legal
            representatives, successors and permitted assigns.

      14.2  HEADINGS. Section headings are inserted for convenience of reference
            only and do not form a part of this Agreement.

      14.3  COUNTERPARTS. This Agreement may be executed simultaneously in two
            or more counterparts, each of which shall be deemed an original.

      14.4  AMENDMENT; WAIVER; ETC. This Agreement may be amended, modified,
            superseded or cancelled, and any of the terms may be waived, only by
            a written instrument executed by each party or, in the case of
            waiver, by the party or parties waiving compliance. The delay or
            failure of any party at any time or times to require performance of
            any provisions shall in no

<PAGE>

                                       25

            manner affect the rights at a later time to enforce the same. No
            waiver by any party of any condition or of the breach of any term
            contained in this Agreement, whether by conduct, or otherwise, in
            any one or more instances, shall be deemed to be, or considered as,
            a further or continuing waiver of any such condition or of the
            breach of such term or any other term of this Agreement.

      14.5  NO THIRD PARTY BENEFICIARIES. No third party including any employee
            of any party to this Agreement, shall have or acquire any rights by
            reason of this Agreement. Nothing contained in this Agreement shall
            be deemed to constitute the parties partners with each other or any
            third party.

      14.6  ASSIGNMENT AND SUCCESSORS. This Agreement may not be assigned by
            either party, except that each party may assign this Agreement and
            the rights and interests of such party, in whole or in part, to any
            of its Affiliates, any purchaser of all or substantially all of its
            assets or to any successor corporation resulting from any merger or
            consolidation of such party with or into such corporations.

      14.7  FORCE MAJEURE. Neither Pfizer nor Guilford shall be liable for
            failure of or delay in performing obligations set forth in this
            Agreement, and neither shall be deemed in breach of its obligations,
            if such failure or delay is due to an act of God, weather
            conditions, strikes, lockouts, inability to procure labor,
            materials, or fuels due to shortages, fires, riots, interference by
            civil or military authorities, or acts of war, or other cause which
            is beyond the reasonable control of Pfizer or Guilford.

      14.8  SEVERABILITY. If any provision of this Agreement is or becomes
            invalid or is ruled invalid by any court of competent jurisdiction
            or is deemed unenforceable, it is the intention of the parties that
            the remainder of the Agreement shall not be affected.

      14.9. INTERPRETATION. The Section headings contained in this Agreement are
            for convenience of reference only and shall not affect the meaning
            or interpretation of this Agreement. As used in this Agreement, any
            reference to the masculine, feminine or neuter gender shall include
            all genders, the plural shall include the singular, and singular
            shall include the plural. Unless the context otherwise requires, the
            term "party" when used herein means a party hereto. References
            herein to a party or other Person include their respective
            successors and assigns. The words "include," "includes" and
            "including" when used herein shall be deemed to be followed by the
            phrase "without limitation" unless such phrase otherwise appears.
            Unless the context otherwise requires, references herein to
            Sections, Schedules and Exhibits shall be deemed references to
            Sections of, and Schedules and Exhibits to, this Agreement. Unless
            the

<PAGE>

                                       26

            context otherwise requires, the words "hereof," "hereby" and
            "herein" and words of similar meaning when used in this Agreement
            refer to this Agreement in its entirety and not to any particular
            Section or provision hereof. With regard to each and every term and
            condition of this Agreement, the parties understand and agree that
            the same have or has been mutually negotiated, prepared and drafted,
            and that if at any time the parties desire or are required to
            interpret or construe any such term or condition or any agreement or
            instrument subject thereto, no consideration shall be given to the
            issue of which party actually prepared, drafted or requested any
            term or condition of this Agreement.

      14.10 ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
            understanding between the parties hereto with respect to the subject
            matter hereof and supersedes all prior agreements, commitments,
            arrangements, negotiations or understandings, whether oral or
            written, between the parties hereto and their respective Affiliates
            with respect thereto. There are no agreements, covenants or
            undertakings with respect to the subject matter of this Agreement
            other than those expressly set forth or referred to herein and no
            representations or warranties of any kind or nature whatsoever,
            express or implied, are made or shall be deemed to be made herein by
            the parties hereto, except those expressly made in this Agreement.

            THE PARTIES HERETO ACKNOWLEDGE AND AGREE THAT NO REPRESENTATION,
            WARRANTY, PROMISE, INDUCEMENT, UNDERSTANDING, COVENANT OR AGREEMENT
            HAS BEEN MADE OR RELIED UPON BY ANY PARTY HERETO OTHER THAN THOSE
            EXPRESSLY SET FORTH IN THE TRANSACTION DOCUMENTS. WITHOUT LIMITING
            THE GENERALITY OF THE DISCLAIMER SET FORTH IN THE PRECEDING
            SENTENCE, (I) NEITHER GUILFORD NOR ANY OF ITS AFFILIATES HAS MADE OR
            SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATIONS OR WARRANTIES, IN
            ANY PRESENTATION OR WRITTEN INFORMATION RELATING TO THE BUSINESS OR
            THE TECHNOLOGY GIVEN OR TO BE GIVEN IN CONNECTION WITH THE
            CONTEMPLATED TRANSACTIONS, IN ANY FILING MADE OR TO BE MADE BY OR ON
            BEHALF OF GUILFORD OR ANY OF ITS AFFILIATES WITH ANY GOVERNMENTAL
            AUTHORITY, AND NO STATEMENT MADE IN ANY SUCH PRESENTATION OR WRITTEN
            MATERIALS, MADE IN ANY SUCH FILING OR CONTAINED IN ANY SUCH OTHER
            INFORMATION SHALL BE DEEMED A REPRESENTATION OR WARRANTY HEREUNDER
            OR OTHERWISE, AND (II) GUILFORD EXPRESSLY DISCLAIMS ANY IMPLIED
            WARRANTIES, INCLUDING WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE
            AND WARRANTIES OF MERCHANTABILITY. PFIZER ACKNOWLEDGES THAT GUILFORD

<PAGE>

                                       27

            HAS INFORMED IT THAT NO PERSON HAS BEEN AUTHORIZED BY GUILFORD OR
            ANY OF ITS AFFILIATES TO MAKE ANY REPRESENTATION OR WARRANTY IN
            RESPECT OF THE BUSINESS OR THE TECHNOLOGY OR IN CONNECTION WITH THE
            CONTEMPLATED TRANSACTIONS, UNLESS IN WRITING AND CONTAINED IN THIS
            AGREEMENT OR IN ANY OF THE TRANSACTION DOCUMENTS TO WHICH THEY ARE A
            PARTY.

      14.11 EXPENSES. Except as expressly set forth herein, each party hereto
            shall bear all fees and expenses incurred by such party in
            connection with, relating to or arising out of the execution,
            delivery and performance of this Agreement and the consummation of
            the transactions contemplated by this Agreement, including
            attorneys', accountants' and other professional fees and expenses.

<PAGE>

                                       28

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives as of the date first set forth above.

PFIZER INC                                  GUILFORD PHARMACEUTICALS INC.

By:   /s/ Peter B. Corr                     By: /s/ Craig R. Smith, M.D.
    ---------------------------                --------------------------------
Name:  Peter B. Corr                        Name: Craig R. Smith, M.D.

Title: Senior Vice President,               Title: Chairman, President and Chief
       Science and Technology                       Executive Officer

GPI NAALADASE HOLDINGS, INC.

By: /s/ Daniel P. McCollom
   -----------------------
Name: Daniel P. McCollom
Title: Vice President and Secretary

<PAGE>

                                    EXHIBIT A
                         PATENTS AND PATENT APPLICATIONS

                                       *
<PAGE>

                                    EXHIBIT B
                                DILIGENCE ACTIONS

                                       *
<PAGE>

                                    EXHIBIT C
                         FORM OF GUILFORD PRESS RELEASE

<PAGE>

FOR IMMEDIATE RELEASE

          GUILFORD PHARMACEUTICALS SIGNS LICENSE AGREEMENT WITH PFIZER

             NOVEL NAALADASE INHIBITOR TECHNOLOGY TO BE DEVELOPED TO
                        TREAT NEURODEGENERATIVE DISEASES

BALTIMORE, MD, May 8, 2003, Guilford Pharmaceuticals Inc. (Nasdaq: GLFD)
announced today that it has entered into an exclusive license agreement with
Pfizer for a novel class of potential drugs called NAALADase inhibitors that
have been shown in preclinical testing to ameliorate certain central and
peripheral neurodegenerative diseases, such as diabetic peripheral neuropathy
and neuropathic pain.

Under the terms of the agreement, Pfizer will have exclusive right to develop
Guilford's NAALADase inhibitors worldwide and will conduct and pay for all costs
associated with research, development, manufacturing, and commercialization of
any products that may emerge from this agreement. Guilford retains the right to
continue to conduct and pay for the development of NAALADase inhibitors not
under development by Pfizer for prostate cancer, head and spinal cord injury,
and drug addiction. Pfizer has the exclusive right in the future to acquire, for
certain consideration, any products developed by Guilford for these indications.
In exchange, Pfizer has agreed to pay Guilford $15 million in cash, including $5
million at signing, and $10 million by March 31, 2004 (or earlier depending on
whether a lead compound has been selected for clinical development). If Pfizer
does not pay the additional $10 million on or before March 31, 2004, all rights
revert to Guilford at its election, along with data and other information
generated by Pfizer relating to Guilford's NAALADase inhibitors.

<PAGE>

As part of the agreement, Guilford is eligible to receive royalties on future
product sales and milestone payments related to the successful development and
commercialization of a NAALADase inhibitor. The schedule of milestone payments
outlines a total of $42 million to be paid for each compound developed through
commercialization, as well as one additional set of milestone payments totaling
$20 million for an additional indication for the same compound.

"We are very pleased to license our NAALADase inhibitor program to Pfizer, the
world's leading pharmaceutical company. Pfizer has a major commitment to the
fields of central and peripheral nervous system disorders," commented Craig R.
Smith, M.D., Chairman, President and Chief Executive Officer of Guilford. "Our
agreement with Pfizer is consistent with Guilford's objective of finding the
highest-quality strategic partnerships for the programs we intend to license,
while continuing to advance select product development efforts in the US
independently."

Guilford has one marketed product, GLIADEL(R) Wafer, which recently received FDA
approval for an expanded indication for use in patients with newly diagnosed
high-grade malignant glioma as an adjunct to surgery and radiation, and a
pipeline which includes two product candidates, GPI 1485 and AQUAVAN(TM)
Injection, in Phase II clinical testing.

NAALADASE INHIBITOR PROGRAM BACKGROUND

NAALADase, or N-Acetylated-Alpha-Linked-Acidic-Dipeptidase, is a membrane-bound
enzyme found principally in the central and peripheral nervous systems.
NAALADase is believed to play a role in modulating the release of glutamate, one
of the most common chemical messengers between nerves. During conditions of
acute injury or chronic neurodegenerative disorders, there may be a large
increase in

<PAGE>

glutamate release that incites a cascade of biochemical events, ultimately
leading to cell injury and death.

Guilford has created several unique classes of NAALADase inhibitors and
evaluated their potential therapeutic application in preclinical models of
various acute and chronic neurodegenerative disorders, including diabetic
peripheral neuropathy, neuropathic pain, Lou Gehrig's Disease (ALS), head and
spinal cord trauma, and stroke. NAALADase is the same protein as prostate
specific membrane antigen (PSMA), a protein found on the surface of prostate
cancer cells. Guilford has also shown that its compounds may have utility for
diagnostic or therapeutic purposes in prostate cancer.

In preclinical animal models of diabetic peripheral neuropathy and neuropathic
pain, Guilford scientists have shown that treatment with a NAALADase inhibitor
can normalize pain sensitivity, increase nerve conduction velocity and prevent
or slow peripheral nerve degeneration.

Diabetic peripheral neuropathy is a debilitating and progressive disorder
involving increased pain sensitivity, tingling, weakness and numbness in a
patient's extremities. It is believed to affect approximately one million people
in the United States.

Guilford has 37 issued US patents and 10 pending patent applications, and
corresponding foreign counterparts protecting its NAALADase inhibitor
technology.

ABOUT GUILFORD

Guilford Pharmaceuticals Inc. is a fully integrated pharmaceutical company that
discovers, develops and markets novel pharmaceutical products targeting the
hospital and neurological markets. Guilford's product pipeline includes a
marketed therapeutic for the most common form of brain cancer, GLIADEL(R) Wafer,
and products in

<PAGE>

development for Parkinson's disease, post-prostatectomy erectile dysfunction,
peripheral nerve damage, and anesthesia and sedation.

                                       ###

Contact:    Guilford Pharmaceuticals Inc.
            Stacey Jurchison 410.631.5022

Internet addresses: www.guilfordpharm.com

This press release contains forward-looking statements that involve risks and
uncertainties, including those described in the section entitled "Risk Factors"
contained in the Company's Annual Report on Form 10-K filed with the SEC on
March 31, 2003, that could cause the Company's actual results and experience to
differ materially from anticipated results and expectations expressed in these
forward-looking statements. Among other things, there can be no assurance that
the Company will receive additional payments from Pfizer, or that Pfizer will
successfully develop the Company's NAALADase technology into an approved
pharmaceutical product.

<PAGE>

                                   SCHEDULE 4

                                       *

<PAGE>

                                 SCHEDULE 8.1.2
                                TIER I COUNTRIES

                                       *<PAGE>

                                                                  EXHIBIT 10.38

                           LOAN AND SECURITY AGREEMENT

                                   Dated as of

                                   May 7, 2003

                                     Between

                       WACHOVIA BANK, NATIONAL ASSOCIATION

                                  as the Lender
                                  -------------

                                       and

                          GUILFORD PHARMACEUTICALS INC.

                                 as the Borrower
                                 ---------------

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                                         <C>
ARTICLE I INTERPRETATION OF THIS AGREEMENT.                                                                  1
    Section 1.1     Definitions.                                                                             1
    Section 1.2     Accounting Terms.                                                                        6
    Section 1.3     Interpretive Provisions.                                                                 6

ARTICLE II LOAN                                                                                              7
    Section 2.1     Term Loan.                                                                               7
    Section 2.2     Bank Products.                                                                           8

ARTICLE III INTEREST AND FEES                                                                                8
    Section 3.1     Interest.                                                                                8
    Section 3.2     Origination Fee.                                                                         8

ARTICLE IV PAYMENTS AND PREPAYMENTS.                                                                         8
    Section 4.1     Repayment of Term Loan.                                                                  8
    Section 4.2     Voluntary Prepayments of Term Loan.                                                      9
    Section 4.3     Place and Form of Payments; Extension of Time; Automatic Debit.                          9
    Section 4.4     Application and Reversal of Payments.                                                    9
    Section 4.5     INDEMNITY FOR RETURNED PAYMENTS.                                                         9
    Section 4.6     Lender's Books And Records; Monthly Statements.                                         10

ARTICLE V TAXES, YIELD PROTECTION AND ILLEGALITY                                                            10
    Section 5.1     Taxes.                                                                                  10
    Section 5.2     Increased Costs and Reduction of Return.                                                11
    Section 5.3     Funding Losses.                                                                         11
    Section 5.4     Inability to Determine Rates.                                                           12
    Section 5.5     Survival.                                                                               12

ARTICLE VI COLLATERAL.                                                                                      12
    Section 6.1     Grant of Security Interest.                                                             12
    Section 6.2     Perfection and Protection of Security Interest.                                         12
    Section 6.3     Title to, Liens on, and Sale and Use of Collateral.                                     12
    Section 6.4     Power of Attorney.                                                                      13
    Section 6.5     Lender's Rights, Duties, and Liabilities.                                               13

ARTICLE VII BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES.                                              13
    Section 7.1     Books and Records.                                                                      13
    Section 7.2     Financial Information.                                                                  14
    Section 7.3     Notices to Lender.                                                                      15

ARTICLE VIII GENERAL WARRANTIES AND REPRESENTATIONS.                                                        15
    Section 8.1     Authorization, Validity, and Enforceability of this Agreement and the Loan Documents.   16
    Section 8.2     Validity and Priority of Security Interest.                                             16
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                                         <C>
    Section 8.3     Organization and Qualification.                                                         16
    Section 8.4     Corporate Name; Prior Transactions.                                                     16
    Section 8.5     Subsidiaries and Affiliates.                                                            17
    Section 8.6     Financial Statements and Projections.                                                   17
    Section 8.7     Solvency.                                                                               17
    Section 8.8     Debt.                                                                                   17
    Section 8.9     Adequate Assets.                                                                        17
    Section 8.10    Litigation.                                                                             17
    Section 8.11    Restrictive Agreements.                                                                 18
    Section 8.12    Labor Disputes.                                                                         18
    Section 8.13    No Violation of Law.                                                                    18
    Section 8.14    No Default.                                                                             18
    Section 8.15    Taxes.                                                                                  18
    Section 8.16    Use of Proceeds.                                                                        18
    Section 8.17    Private Offerings.                                                                      19
    Section 8.18    Broker's Fees.                                                                          19
    Section 8.19    No Material Adverse Change.                                                             19

ARTICLE IX AFFIRMATIVE AND NEGATIVE COVENANTS.                                                              19
    Section 9.1     Taxes and Other Obligations.                                                            19
    Section 9.2     Corporate Existence and Good Standing.                                                  19
    Section 9.3     Compliance with Law and Agreements.                                                     20
    Section 9.4     Mergers, Consolidations, Acquisitions, or Sales.                                        20
    Section 9.5     Transactions Affecting Collateral or Obligations.                                       20
    Section 9.6     Debt.                                                                                   20
    Section 9.7     Liens.                                                                                  21
    Section 9.8     Further Assurances.                                                                     21
    Section 9.9     Swap Agreement.                                                                         21

ARTICLE X CONDITIONS TO CLOSING.                                                                            21
    Section 10.1    Conditions Precedent to Making of Term Loan on the Closing Date.                        21

ARTICLE XI DEFAULT.                                                                                         22
    Section 11.1    Events of Default.                                                                      22
    Section 11.2    Remedies.                                                                               23

ARTICLE XII MISCELLANEOUS.                                                                                  25
    Section 12.1    Cumulative Remedies.                                                                    25
    Section 12.2    No Implied Waivers.                                                                     25
    Section 12.3    Severability.                                                                           25
    Section 12.4    Governing Law.                                                                          25
    Section 12.5    Waiver of Jury Trial.                                                                   25
    Section 12.6    Survival of Representations and Warranties.                                             25
    Section 12.7    Other Security and Guaranties.                                                          26
    Section 12.8    Fees and Expenses.                                                                      26
    Section 12.9    Notices.                                                                                26
    Section 12.10   Waiver of Notices.                                                                      27
</TABLE>

                                       ii

<PAGE>

<TABLE>
<S>                                                                                                         <C>
    Section 12.11   Binding Effect; Assignment.                                                             27
    Section 12.12   Modification.                                                                           27
    Section 12.13   Counterparts.                                                                           28
    Section 12.14   Captions.                                                                               28
    Section 12.15   Right of Set-Off.                                                                       28
    Section 12.16   Participating Lender's Security Interests.                                              28
</TABLE>

                                      iii
<PAGE>

                           LOAN AND SECURITY AGREEMENT

         THIS LOAN AND SECURITY AGREEMENT (this "Agreement") is dated as of May
7, 2003, by and between WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking
association ("Lender") and GUILFORD PHARMACEUTICALS INC., a corporation
organized and existing under the laws of the State of Delaware ("Borrower").

                                   WITNESSETH:

         WHEREAS, the Borrower has requested the Lender to make a term loan the
Borrower in the principal amount of $18,800,000, which term loan the Borrower
will use to refinance certain existing obligations and for its working capital
needs and general business purposes; and

         WHEREAS, the Lender has agreed to make the term loan to the Borrower
upon the terms and conditions set forth in this Agreement.

         NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth in this Agreement, and for good and valuable consideration,
the receipt of which is hereby acknowledged, the Lender and the Borrower hereby
agree as follows.

                                   ARTICLE I
                        INTERPRETATION OF THIS AGREEMENT.

         Section 1.1    Definitions.

         As used herein:

         "ACH Transactions" means any cash management or related services
including the automatic clearing house transfer of funds by the Lender for the
account of the Borrower pursuant to agreement or overdrafts.

         "Affiliate" means, as to any Person, any other Person which, directly
or indirectly, is in control of, is controlled by, or is under common control
with, such Person or which owns, directly or indirectly, fifty percent (50%) or
more of the outstanding equity interest of such Person. A Person shall be deemed
to control another Person if the controlling Person possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of the other Person, whether through the ownership of voting
securities, by contract, or otherwise.

         "Agreement" means this Loan and Security Agreement.

         "Attorney Costs" means and includes all fees, expenses and
disbursements of any law firm or other counsel engaged by the Lender, the
allocated costs of internal legal services of the Lender and the reasonable
expenses of internal counsel to the Lender.

         "Bank Products" means any one or more of the following types of
services or facilities extended to the Borrower by the Lender or any Affiliate
of the Lender in reliance on the

<PAGE>

Lender's agreement to indemnify such Affiliate: (a) credit cards; (b) ACH
Transactions; and (c) Swap Agreements.

         "Bankruptcy Code" means Title 11 of the United States Code (11
U.S.C. Section 101 et seq.).

         "Business Day" means (a) any day that is not a Saturday, Sunday, or a
day on which banks in the State of Maryland are required or permitted to be
closed and (b) during any period in which the Interest Rate is based on the
LIBOR Rate, any which commercial banks are open for international business,
including dealings in U.S. Dollar deposits, in London, England.

         "Capital Adequacy Regulation" means any guideline, request or directive
of any central bank or other Governmental Authority, or any other law, rule or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any bank or of any corporation controlling a bank.

         "Change in Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Borrower to any "person" (as such term is
used in Section 13(d)(3) of the Exchange Act), (ii) the adoption of a plan
relating to the liquidation or dissolution of the Borrower, or (iii) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" (as defined above)
becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule
13d-5 under the Exchange Act), directly or indirectly, of more than 50% of the
voting stock of the Borrower. For purposes of this definition, any transfer of
an equity interest of an entity that was formed for the purpose of acquiring
voting stock of the Borrower will be deemed to be a transfer of such portion of
such voting stock as corresponds to the portion of the equity of such entity
that has been so transferred.

         "Closing Date" means the date of this Agreement.

         "Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute, and regulations promulgated thereunder.

         "Collateral" has the meaning specified in Section 6.1 (Grant of
Security Interest).

         "Debt" means, without duplication, all liabilities, obligations and
indebtedness of the Borrower to any Person, of any kind or nature, now or
hereafter owing, arising, due or payable, howsoever evidenced, created,
incurred, acquired or owing, whether primary, secondary, direct, contingent,
fixed or otherwise, and including, without in any way limiting the generality of
the foregoing: (a) liabilities and obligations to trade creditors; (b) all
Obligations; (c) all obligations and liabilities of any Person secured by any
Lien on the Borrower's property, even though the Borrower shall not have assumed
or become liable for the payment thereof; provided, however, that all such
obligations and liabilities which are limited in recourse to such property shall
be included in Debt only to the extent of the book value of such property as
would be shown on a balance sheet of the Borrower prepared in accordance with
GAAP; (d) all obligations or liabilities created or arising under any capital
lease or conditional sale or other title retention agreement with respect to
property used or acquired by the Borrower, even if the rights and remedies of
the lessor, seller or lender thereunder are limited to repossession of such
property;

                                       2

<PAGE>

provided, however, that all such obligations and liabilities which are limited
in recourse to such property shall be included in Debt only to the extent of the
book value of such property as would be shown on a balance sheet of the Borrower
prepared in accordance with GAAP; and (e) all obligations and liabilities under
Guaranties.

         "Default" means any event or circumstance which, with the giving of
notice, the lapse of time, or both, would (if not cured or otherwise remedied
during such time) constitute an Event of Default.

         "Default Rate" means the otherwise applicable Interest Rate plus (b)
two percent (2%). The Default Rate shall be adjusted simultaneously with any
change in the Interest Rate.

         "Deposit" means (i) that certain certificate of deposit having account
number 140811290120072 and (ii) that certain certificate of deposit having
account number 140811290120073, (together with all renewals and extensions of,
substitutions for, and additions to either or both certificates of deposit,
however titled or styled, the "Deposit") in the original aggregate amount of
$18,800,000 issued and/or opened by the Lender and styled in the name of the
Borrower.

         "Dollar" and "$" means dollars in the lawful currency of the United
States.

         "Event of Default" has the meaning specified in Section 11.1 (Events of
Default).

         "Exchange Act" means the Securities Exchange Act of 1934, and
regulations promulgated thereunder.

         "Federal Reserve Board" means the Board of Governors of the Federal
Reserve System or any successor thereto.

         "Financial Statements" means, according to the context in which it is
used, the financial statements referred to in Section 7.2 or any other financial
statements required to be given to the Lender pursuant to this Agreement.

         "Fiscal Year" means the Borrower's fiscal year for financial accounting
purposes. The current Fiscal Year of the Borrower will end on December 31, 2003.

         "GAAP" means generally accepted accounting principles and practices set
forth from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board (or
agencies with similar functions of comparable stature and authority within the
U.S. accounting profession), which are applicable to the circumstances as of the
Closing Date.

         "Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.

                                       3

<PAGE>

         "Interest Rate" means each or any of the interest rates, including the
Default Rate, set forth in Section 3.1 (Interest).

         "IRS" means the Internal Revenue Service and any Governmental Authority
succeeding to any of its principal functions under the Code.

         "Laws" means Requirement of Law.

         "Lender" means Wachovia Bank, National Association, a national banking
association, or any successor entity thereto.

         "LIBOR Rate" means, with respect to each calendar month (each an
"Interest Period"), the rate for U.S. dollar deposits with a 1-month maturity as
reported on Telerate page 3750 as of 11:00 a.m., London time, on the second
London Business Day before such Interest Period (or if not so reported, then as
determined by the Lender) from another recognized source or interbank quotation.
"Telerate Page 3750" means the British Bankers Association Libor Rates
(determined as of 11:00 a.m. London time) that are published by Bridge
Information Systems, Inc.

         "Loan Documents" means this Agreement, the Note, and all other
agreements, instruments, and documents heretofore, now or hereafter evidencing,
securing, guaranteeing or otherwise relating to the Loan Obligations, the
Collateral, or any other aspect of the transactions contemplated by this
Agreement, excluding any and all Swap Agreements and other agreements,
instruments and documents which relate solely to any and all Swap Agreements.

         "Loan Obligations" means all liabilities, obligations, covenants,
duties, and Debt owing by the Borrower to the Lender under and in connection
with the Term Loan, this Agreement, the Term Note, and the other Loan Documents,
whether or not evidenced by any note, or other instrument or document, whether
arising from an extension of credit, opening of a letter of credit, acceptance,
loan, guaranty, indemnification or otherwise, whether direct or indirect
(including, without limitation, those acquired by assignment from others, and
any participation by the Lender in the Borrower's debts owing to others)
absolute or contingent, due or to become due, primary or secondary, as principal
or guarantor, and including, without limitation, all interest, charges,
expenses, fees, attorneys' fees, filing fees and any other sums chargeable to
the Borrower hereunder, under another Loan Document. "Loan Obligations" shall
not include any of the Borrower's existing and future obligations under or in
connection with any and all ACH Transactions or any and all Swap Agreements.

         "Margin Stock" means "margin stock" as such term is defined in
Regulation T, U or X of the Federal Reserve Board.

         "Material Adverse Effect" means (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties, condition
(financial or otherwise) or prospects of the Borrower; (b) a material impairment
of the ability of the Borrower to perform under any Loan Document to which it is
a party and to avoid any Event of Default; or (c) a material adverse effect upon
the legality, validity, binding effect or enforceability against the Borrower of
any Loan Document to which it is a party.

         "Maturity Date" means May 1, 2008.

                                       4

<PAGE>

         "Other Taxes" means any present or future stamp or documentary taxes or
any other excise or property taxes, charges or similar levies which arise from
the execution, delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Documents.

         "Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, limited liability company
association, corporation, Public Authority, or any other entity.

         "Proceeds" means all products and proceeds of any Collateral, and all
proceeds of such proceeds and products.

         "Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.

         "Public Authority" means the government of any country or sovereign
state, or of any state, province, municipality, or other political subdivision
thereof, or any department, agency, public corporation or other instrumentality
of any of the foregoing.

         "Requirement of Law" means any law (statutory or common), treaty, rule
or regulation or determination of an arbitrator or of a Public Authority.

         "Secured Obligations" means all present and future loans, advances,
liabilities, obligations, covenants, duties, and Debt owing by the Borrower to
the Lender, whether or not arising under this Agreement, whether or not
evidenced by any note, or other instrument or document, whether arising from an
extension of credit, opening of a letter of credit, acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment from others, and any participation by
the Lender in the Borrower's debts owing to others) absolute or contingent, due
or to become due, primary or secondary, as principal or guarantor, and
including, without limitation, all interest, charges, expenses, fees, attorneys'
fees, filing fees and any other sums chargeable to the Borrower hereunder, under
another Loan Document, or under any other agreement or instrument with the
Lender. "Secured Obligations" includes, without limitation, any and all of the
Borrower's existing and future obligations under or in connection with any and
all ACH Transactions and any and all Swap Agreements and also includes the Loan
Obligations.

         "Security Interest" means collectively the Liens granted to the Lender
in the Collateral pursuant to this Agreement, the other Loan Documents, or any
other agreement or instrument.

         "Solvent" means when used with respect to any Person that at the time
of determination:

                  (a)      the assets of such Person, at a fair valuation, are
         in excess of the total amount of its debts (including, without
         limitation, contingent liabilities); and

                  (b)      the present fair saleable value of its assets is
         greater than its probable liability on its existing debts as such debts
         become absolute and matured; and

                                       5

<PAGE>

                  (c)      it is then able and expects to be able to pay its
         debts (including, without limitation, contingent debts and other
         commitments) as they mature; and

                  (d)      it has capital sufficient to carry on its business as
         conducted and as proposed to be conducted.

         For purposes of determining whether a Person is Solvent, the amount of
any contingent liability shall be computed as the amount that, in light of all
the facts and circumstances existing at such time, represents the amount that
can reasonably be expected to become an actual or matured liability.

         "Subsidiary" of a Person means any corporation, association,
partnership, joint venture or other business entity of which more than fifty
percent (50%) of the voting stock or other equity interests (in the case of
Persons other than corporations), is owned or controlled directly or indirectly
by the Person, or one or more of the Subsidiaries of the Person, or a
combination thereof. Unless the context otherwise clearly requires, references
herein to a "Subsidiary" refer to a Subsidiary of the Borrower.

         "Swap Agreement" has the meaning given such term in 11 U.S.C. Section
101, as amended, or any successor statute and includes (a) an agreement
(including terms and conditions incorporated by reference therein) which is a
rate swap agreement, basis swap, forward rate agreement, commodity swap,
interest rate option, forward foreign exchange agreement, rate cap agreement,
rate floor agreement, rate collar agreement, currency swap agreement,
cross-currency rate swap agreement, currency option, any other similar agreement
(including any option to enter into any of the foregoing); (b) any combination
of the foregoing; or (c) a master agreement for any of the foregoing, together
with all supplements.

         "Taxes" means any and all present or future taxes, assessments, levies,
imposts, impositions, deductions, charges or withholdings, and all liabilities
with respect thereto, excluding, in the case of the Lender, such taxes
(including income taxes or franchise taxes) as are imposed on the Lender.

         "UCC" means the Uniform Commercial Code (or any successor statute), as
in effect from time to time, of the State of Maryland or of any other state the
laws of which are required as a result thereof to be applied in connection with
the issue of perfection of security interests.

         Section 1.2    Accounting Terms.

         Any accounting term used in this Agreement shall have, unless otherwise
specifically provided herein, the meaning customarily given in accordance with
GAAP.

         Section 1.3    Interpretive Provisions.

                  (a)      The meanings of defined terms are equally applicable
to the singular and plural forms of the defined terms.

                  (b)      The words "hereof," "herein," "hereunder" and similar
words refer to this Agreement as a whole and not to any particular provision of
this Agreement; and Subsection, Section, Schedule and Exhibit references are to
this Agreement unless otherwise specified.

                                       6

<PAGE>

                  (c)      (i)      The term "documents" includes any and all
instruments, documents, agreements, certificates, indentures, notices and other
writings, however evidenced.

                           (ii)     The term "including" is not limiting and
means "including without limitation."

                           (iii)    In the computation of periods of time from a
specified date to a later specified date, the word "from" means "from and
including," the words "to" and "until" each mean "to but excluding" and the word
"through" means "to and including."

                  (d)      Unless otherwise expressly provided herein, (i)
references to agreements (including this Agreement) and other contractual
instruments shall be deemed to include all subsequent amendments and other
modifications thereto, but only to the extent such amendments and other
modifications are not prohibited by the terms of any Loan Document, and (ii)
references to any statute or regulation are to be construed as including all
statutory and regulatory provisions consolidating, amending, replacing,
supplementing or interpreting the statute or regulation.

                  (e)      The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.

                  (f)      This Agreement and other Loan Documents may use
several different limitations, tests or measurements to regulate the same or
similar matters. All such limitations, tests and measurements are cumulative and
shall each be performed in accordance with their terms.

                  (g)      This Agreement and the other Loan Documents are the
result of negotiations among and have been reviewed by counsel to the Lender,
the Borrower and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Lender merely because of
the Lender's involvement in their preparation.

                                   ARTICLE II
                                      LOAN

         Section 2.1    Term Loan.

         (a)      Amount of Term Loan. The Lender agrees to make a term loan
("Term Loan") to the Borrower on the Closing Date, upon the satisfaction of the
conditions precedent set forth in ARTICLE X (Conditions of Closing), in an
amount equal to Eighteen Million Eight Hundred Thousand Dollars ($18,800,000).

         (b)      Term Note. The Borrower shall execute and deliver to the
Lender on the Closing Date a promissory note substantially in the form of
Exhibit A attached hereto and made a part hereof ("Term Note") to evidence the
Term Loan.

         (c)      Deposit Balance. The Borrower covenants and agrees to at all
times maintain a collected funds Deposit balance equal to the then unpaid
principal balance of the Term Loan.

                                       7

<PAGE>

         Section 2.2    Bank Products.

         The Borrower may request and the Lender may, in its sole and absolute
discretion, arrange for the Borrower to obtain from the Lender or the Lender's
Affiliates Bank Products although the Borrower is not required to do so. The
Borrower acknowledges and agrees that the obtaining of Bank Products from the
Lender or the Lender's Affiliates (a) is in the sole and absolute discretion of
the Lender or the Lender's Affiliates, and (b) is subject to all rules and
regulations of the Lender or the Lender's Affiliates.

                                  ARTICLE III
                                INTEREST AND FEES

         Section 3.1    Interest.

         (a)      Applicable Interest Rate Prior to Event of Default. All Loan
Obligations shall bear interest on the unpaid principal amount thereof from the
date made until paid in full in cash at a rate equal to the LIBOR Rate, plus
fifty (50) basis points. Each change in the LIBOR Rate shall be reflected in the
Interest Rate as of the effective date of such change. All interest charges
shall be computed on the basis of a year of three hundred sixty (360) days and
actual days elapsed.

         (b)      Interest Subsequent to an Event of Default. If any Event of
Default occurs, then, from the date such Event of Default occurs until it is
cured, or if not cured until all Loan Obligations are paid and performed in
full, the applicable Interest Rate shall be increased by two percent (2%) per
annum.

         Section 3.2    Origination Fee.

         (a)      The Borrower shall pay to the Lender on or before the Closing
Date a loan origination fee in an amount equal to one-half of one percent (.5%)
of the Term Loan amount, which origination fee has been fully earned and is
non-refundable.

                                   ARTICLE IV
                            PAYMENTS AND PREPAYMENTS.

         Section 4.1    Repayment of Term Loan.

         The unpaid principal balance of the Term Loan shall accrue interest at
the Interest Rate. Accrued interest shall be payable on the unpaid principal
balance of the Term Note monthly on the first day of each calendar month
commencing with the first such date after the Closing Date and continuing on the
first day of each calendar month thereafter. As set forth in the Term Note, the
unpaid principal balance of the Term Note shall be payable in monthly
installments on the first day of each calendar month commencing with the first
such date after the Closing Date and continuing on the first day of each
calendar month thereafter. Each principal installment shall be in the amount set
forth in the Term Note and shall be calculated so as to fully amortize the
unpaid principal balance of the Term Loan over a period of two hundred forty
(240) months. Unless sooner paid, the unpaid principal balance of the Term Loan,
together with any and all unpaid and accrued interest thereon, shall be due and
payable in full on the Maturity Date.

                                       8

<PAGE>

         Section 4.2    Voluntary Prepayments of Term Loan.

         The Borrower may prepay the principal of the Term Loan in whole or in
part at any time and from time to time upon at least five (5) Business Days
prior written notice to the Lender. All voluntary prepayments of the principal
of the Term Loan shall be accompanied by the payment of all accrued but unpaid
interest on the Term Loan to the date of prepayment. Amounts prepaid in respect
of the Term Loan pursuant to this Section 4.2 (Voluntary Prepayments of Term
Loan) may not be reborrowed. Any voluntary prepayment under this Section of less
than all of the outstanding principal of the Term Loan shall be applied to the
principal amount due on the Maturity Date and then to the principal installments
in the inverse order of their maturities. Notwithstanding the foregoing, no
prepayment shall affect the Borrower's obligation to continue making payments
under any applicable SWAP Agreement which will remain in full force and effect
notwithstanding such prepayment.

         Section 4.3    Place and Form of Payments; Extension of Time; Automatic
Debit.

         All payments of principal, interest, premium, and other sums due to the
Lender shall be made at the Lender's address set forth in Section 12.9
(Notices). All such payments shall be made in immediately available funds. If
any payment of principal, interest, premium, or other sum to be made hereunder
becomes due and payable on a day other than a Business Day, the due date of such
payment shall be extended to the next succeeding Business Day and interest
thereon shall be payable at the applicable interest rate during such extension,
except that if such next succeeding Business Day would be in the succeeding
calendar month, the due date of such payment shall be the then preceding
Business Day.

         Section 4.4    Application and Reversal of Payments.

         The Lender shall determine in its sole discretion the order and manner
in which payments that the Lender receives are applied to the Term Loan,
interest thereon, and the other Loan Obligations, and the Borrower hereby
irrevocably waives the right to direct the application of any payment. The
Lender shall have the continuing and exclusive right to apply and reverse and
reapply any and all such payments to any portion of the Loan Obligations.

         Section 4.5    INDEMNITY FOR RETURNED PAYMENTS.

         IF AFTER RECEIPT OF ANY PAYMENT WHICH IS APPLIED TO THE PAYMENT OF ALL
OR ANY PART OF THE LOAN OBLIGATIONS, THE LENDER IS FOR ANY REASON COMPELLED TO
SURRENDER SUCH PAYMENT TO ANY PERSON BECAUSE SUCH PAYMENT IS INVALIDATED,
DECLARED FRAUDULENT, SET ASIDE, DETERMINED TO BE VOID OR VOIDABLE AS A
PREFERENCE, IMPERMISSIBLE SETOFF, OR A DIVERSION OF TRUST FUNDS, OR FOR ANY
OTHER REASON, THEN: THE LOAN OBLIGATIONS OR PART THEREOF INTENDED TO BE
SATISFIED SHALL BE REVIVED AND CONTINUE AND THIS AGREEMENT SHALL CONTINUE IN
FULL FORCE AS IF SUCH PAYMENT HAD NOT BEEN RECEIVED BY THE LENDER AND THE
BORROWER SHALL BE LIABLE TO PAY TO THE LENDER AND HEREBY DOES INDEMNIFY THE
LENDER AND HOLD THE LENDER HARMLESS FOR THE AMOUNT OF SUCH PAYMENT SURRENDERED.
The provisions of this Section 4.5 (Indemnity for Returned Payments) shall be
and remain effective notwithstanding any contrary action which may have been
taken by the Lender in reliance upon such payment, and any such contrary action

                                       9

<PAGE>

so taken shall be without prejudice to the Lender's rights under this Agreement
and shall be deemed to have been conditioned upon such payment having become
final and irrevocable. The provisions of this Section 4.5 (Indemnity for
Returned Payments) shall survive the termination of this Agreement.

         Section 4.6    Lender's Books And Records; Monthly Statements.

         The Borrower agrees that the Lender's books and records showing the
Loan Obligations and the transactions pursuant to this Agreement and the other
Loan Documents shall be admissible in any action or proceeding arising
therefrom, and shall constitute prima facie proof thereof, irrespective of
whether any Loan Obligation is also evidenced by a promissory note or other
instrument. The Lender will provide to the Borrower a monthly statement of
payments and other transactions pursuant to this Agreement. Such statement shall
be deemed correct, accurate, and binding on the Borrower and as an account
stated (except for reversals and reapplications of payments made as provided in
Section 4.4 (Application and Reversal of Payments) and corrections of errors
discovered by the Lender), unless the Borrower notifies the Lender in writing to
the contrary within sixty (60) days after such statement is rendered. In the
event a timely written notice of objections is given by the Borrower, only the
items to which exception is expressly made will be considered to be disputed by
the Borrower.

                                   ARTICLE V
                     TAXES, YIELD PROTECTION AND ILLEGALITY

         Section 5.1    Taxes.

         (a)      Any and all payments by the Borrower to the Lender under this
Agreement and any other Loan Document shall be made free and clear of, and
without deduction or withholding for any Taxes. In addition, the Borrower shall
pay all Other Taxes.

         (b)      The Borrower agrees to indemnify and hold harmless the Lender
for the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes
imposed by any jurisdiction on amounts payable under this Section) paid by the
Lender and any liability (including penalties, interest, additions to tax and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within thirty (30) days after the date the Lender
makes written demand therefor.

         (c)      If the Borrower shall be required by law to deduct or withhold
any Taxes or Other Taxes from or in respect of any sum payable hereunder to
Lender, then:

                  (i)      the sum payable shall be increased as necessary so
         that after making all required deductions and withholdings (including
         deductions and withholdings applicable to additional sums payable under
         this Section) the Lender receives an amount equal to the sum it would
         have received had no such deductions or withholdings been made;

                  (ii)     the Borrower shall make such deductions and
         withholdings;

                                       10

<PAGE>

                  (iii)    the Borrower shall pay the full amount deducted or
         withheld to the relevant taxing authority or other authority in
         accordance with applicable law; and

                  (iv)     the Borrower shall also pay to the Lender at the time
         interest is paid, all additional amounts which the Lender specifies as
         necessary to preserve the after-tax yield the Lender would have
         received if such Taxes or Other Taxes had not been imposed.

         (d)      Within thirty (30) days after the date of any payment by the
Borrower of Taxes or Other Taxes, the Borrower shall furnish the Lender the
original or a certified copy of a receipt evidencing payment thereof, or other
evidence of payment satisfactory to the Lender.

         Section 5.2    Increased Costs and Reduction of Return.

         (a)      If the Lender determines that, due to either (i) the
introduction of or any change in the interpretation of any law or regulation or
(ii) the compliance by the Lender with any guideline or request from any central
bank or other Public Authority (whether or not having the force of law), there
shall be any increase in the cost to the Lender of agreeing to make or making,
funding or maintaining the Term Loan with interest being charged based on the
LIBOR Rate, then the Borrower shall be liable for, and shall from time to time,
upon demand, pay to the Lender, additional amounts as are sufficient to
compensate the Lender for such increased costs.

         (b)      If the Lender shall have determined that (i) the introduction
of any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy
Regulation, (iii) any change in the interpretation or administration of any
Capital Adequacy Regulation by any central bank or other Public Authority
charged with the interpretation or administration thereof, or (iv) compliance by
the Lender or any corporation controlling the Lender with any Capital Adequacy
Regulation, affects or would affect the amount of capital, reserves, or special
deposits required or expected to be maintained by the Lender or any corporation
controlling the Lender and (taking into consideration such Lender's or such
corporation's policies with respect to capital adequacy and such Lender's
desired return on capital) determines that the amount of such capital, reserves,
or special deposits is increased as a consequence of its loans, credits or
obligations under this Agreement, then, upon demand of the Lender to the
Borrower, the Borrower shall pay to the Lender, from time to time as specified
by the Lender, additional amounts sufficient to compensate the Lender for such
increase.

         Section 5.3    Funding Losses.

         The Borrower shall reimburse the Lender and hold the Lender harmless
from any out-of-pocket loss or expense that the Lender may incur due to:

         (a)      the failure of the Borrower to make on a timely basis any
payment of principal of the Term Loan if the applicable Interest Rate is based
on the LIBOR Rate;

         (b)      the prepayment or other payment (including after acceleration
thereof) of the Term Loan if the applicable Interest Rate is based on the LIBOR
Rate on a day that is not the Maturity Date; including any such loss or expense
arising from the liquidation or reemployment of funds obtained by it to maintain
the Term Loan at an Interest Rate based on the LIBOR Rate or from fees payable
to terminate the deposits from which such funds were obtained.

                                       11

<PAGE>

         Section 5.4    Inability to Determine Rates.

         If the Lender determines that for any reason adequate and reasonable
means do not exist for determining the LIBOR Rate, the Lender will promptly so
notify the Borrower and the Lender shall select a reasonably comparable base or
index for the Interest Rate.

         Section 5.5    Survival.

         The agreements and obligations of the Borrower in this ARTICLE V
(Taxes, Yield Protection) shall survive the payment of all other Loan
Obligations.

                                   ARTICLE VI
                                   COLLATERAL.

         Section 6.1    Grant of Security Interest.

         As security for the Secured Obligations (including the Loan
Obligations), the Borrower hereby grants to the Lender a continuing security
interest in, lien on, and assignment of all of the Borrower's rights, title and
interest in, to and under (i) the Deposit, including any and all principal,
interest and other income earned thereon or amounts payable with respect
thereto, together with any and all Proceeds and products thereof and (ii) all
books, records and other property relating to or referring to any of the
foregoing, including, without limitation, all books, records, ledger cards, data
processing records, computer software and other property and general intangibles
at any time evidencing or relating to the foregoing (all of the foregoing, and
all other property in which the Lender may at any time be granted a Lien, being
herein collectively referred to as the "Collateral"). The Lender shall have all
of the rights of a secured party with respect to the Collateral under the UCC
and other applicable laws.

         Section 6.2    Perfection and Protection of Security Interest.

         The Borrower shall, at its expense, perform all steps requested by the
Lender at any time to perfect, maintain, protect, and enforce the Security
Interest including, without limitation: (a) authorizing, executing and filing
financing or continuation statements, and amendments thereof, in form and
substance satisfactory to the Lender; (b) delivering to the Lender the originals
of all instruments, documents, and chattel paper, and all other Collateral of
which the Lender determines it should have physical possession in order to
perfect and protect the Security Interest therein, duly endorsed or assigned to
the Lender without restriction; and (c) taking such other steps as are deemed
necessary by the Lender to maintain the Security Interest. The Lender is hereby
authorized to file, without the Borrower's signature or further consent or
authorization, one or more financing statements disclosing the Security
Interest. From time to time, the Borrower shall, upon Lender's request, execute
and deliver confirmatory written instruments pledging to the Lender the
Collateral, but the Borrower's failure to do so shall not affect or limit the
Security Interest or the Lender's other rights in and to the Collateral. So long
as this Agreement is in effect and until all Secured Obligations have been fully
satisfied, the Security Interest shall continue in full force and effect in all
Collateral.

         Section 6.3    Title to, Liens on, and Sale and Use of Collateral.

         The Borrower represents and warrants to the Lender that (a) all
Collateral is and will continue to be owned by the Borrower free and clear of
all Liens whatsoever, except for the

                                       12

<PAGE>

Security Interest; (b) the Security Interest will not be subject to any prior
Lien; (c) the Borrower will ensure that the aggregate principal balance of the
Deposit shall at all times be at least equal to the unpaid principal balance of
the Term Loan, and (d) the Borrower will not, without the Lender's prior written
approval, sell, assign or dispose of or permit the sale, assignment or
disposition of the Collateral or any portion thereof or interest therein. The
inclusion of Proceeds in the Collateral shall not be deemed the Lender's consent
to any sale, assignment or other disposition of the Collateral.

         Section 6.4    Power of Attorney.

         The Borrower hereby appoints the Lender and the Lender's designees as
the Borrower's attorney, with power to file any such financing statements by
electronic means with or without a signature as authorized or required by
applicable law or filing procedure and to do all things necessary to carry out
this Agreement. The Borrower ratifies and approves all acts of such attorney.
Neither the Lender nor the attorney will be liable for any acts or omissions or
for any error of judgment or mistake of fact or law. This power, being coupled
with an interest, is irrevocable until this Agreement has been terminated and
the Secured Obligations have been fully satisfied.

         Section 6.5    Lender's Rights, Duties, and Liabilities.

         The Secured Obligations shall not be affected by any failure of the
Lender to take any steps to perfect the Security Interest or to collect or
realize upon the Collateral, nor shall loss of or damage to the Collateral
release the Borrower from any of the Secured Obligations. Following the
occurrence of and continuation of an Event of Default, the Lender may (but shall
not be required to), without notice to or consent from the Borrower, sue upon or
otherwise collect, modify or amend the terms of, compromise or settle for cash,
credit, or otherwise upon any terms, grant other indulgences, extensions,
renewals, compositions, or releases, and take or omit to take any other action
with respect to the Collateral, any security therefor, any agreement relating
thereto, any Person liable directly or indirectly in connection with any of the
foregoing, without discharging or otherwise affecting the liability of the
Borrower for the Secured Obligations or under this Agreement or any other
agreement now or hereafter existing between the Lender and the Borrower.

                                  ARTICLE VII
               BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES.

         Section 7.1    Books and Records.

         The Borrower shall maintain, at all times, correct and complete books,
records and accounts in which complete, correct and timely entries are made of
its transactions in accordance with GAAP consistent with those applied in the
preparation of the Financial Statements. The Borrower shall, by means of
appropriate entries, reflect in such accounts and in all Financial Statements
proper liabilities and reserves for all taxes and proper provision for
depreciation and amortization of Property and bad debts, all in accordance with
GAAP. The Borrower shall maintain at all times books and records pertaining to
the Collateral in such detail, form, and scope as the Lender shall reasonably
require.

                                       13

<PAGE>

         Section 7.2    Financial Information.

         The Borrower shall promptly furnish to the Lender or its agents all
such financial information as the Lender shall reasonably request, and notify
its auditors and accountants that the Lender is authorized to obtain such
information directly from them. Without limiting the foregoing, the Borrower and
its Subsidiaries will furnish to the Lender, in such detail as the Lender shall
request, the following:

         (a)      Annual Statements. As soon as available, but in any event not
later than one hundred twenty (120) days after the close of each Fiscal Year,
consolidated audited balance sheets, and statements of income and expense,
retained earnings, and changes in financial position and stockholders equity for
the Borrower and its consolidated Subsidiaries for such Fiscal Year, and the
accompanying notes thereto, setting forth in each case in comparative form
figures for the previous Fiscal Year, all in reasonable detail, fairly
presenting the financial position and the results of operations of the Borrower
and its consolidated Subsidiaries as at the date thereof and for the Fiscal Year
then ended, and prepared in accordance with GAAP. Such statements shall be
examined in accordance with generally accepted auditing standards and
accompanied by a report thereon unqualified as to scope by independent certified
public accountants selected by the Borrower and reasonably satisfactory to the
Lender.

         (b)      Quarterly Statements. As soon as available, but in any event
not later than forty five (45) days after the close of each fiscal quarter other
than the fourth quarter of a Fiscal Year, consolidated unaudited balance sheets
of the Borrower and its consolidated Subsidiaries as at the end of such quarter,
and consolidated and consolidating unaudited statements of income and expense
and changes in financial position for the Borrower and its consolidated
Subsidiaries for such quarter and for the period from the beginning of the
Fiscal Year to the end of such quarter, together with the accompanying notes
thereto, all in reasonable detail, fairly presenting the financial position and
results of operation of the Borrower and its consolidated Subsidiaries as at the
date thereof and for such periods, prepared in accordance with GAAP consistent
with the audited Financial Statements required pursuant to Section 7.2(a)
(Annual Statements). Such statements shall be certified to be fairly stated in
all material respects by the chief financial or accounting officer of the
Borrower, subject to normal year-end adjustments.

         (c)      Accountant's Certificate. With each of the audited Financial
Statements delivered pursuant to Section 7.2(a) (Annual Statements), a
certificate of the independent certified public accountants that examined such
statements to the effect that they have reviewed and are familiar with the Loan
Documents and that, in examining such Financial Statements, they did not become
aware of any fact or condition which then constituted an Event or Event of
Default, except for those, if any, described in reasonable detail in such
certificate.

         (d)      Proxy Statements and Other Information. Promptly after their
release, copies of any and all proxy statements, financial statements, and
reports that the Borrower makes available to its stockholders.

         (e)      Annual Filings and Reports. Promptly after filing with the
SEC, a copy of each annual and/or quarterly report (including 10K and 10Q
reports) or other filing or notice filed with respect to the Borrower.

                                       14

<PAGE>

         (f)      Other Information. Such additional information as the Lender
may from time to time reasonably request regarding the financial and business
affairs of the Borrower or any Subsidiary, including, without limitation,
projections of future operations on both a consolidated and consolidating basis.

         Section 7.3    Notices to Lender.

         The Borrower shall notify the Lender in writing of the following
matters at the following times:

         (a)      Immediately after becoming aware of the existence of any
Default or Event of Default.

         (b)      Immediately after becoming aware of any material adverse
change in the Borrower's Property, business, operations, or condition (financial
or otherwise).

         (c)      Immediately after becoming aware of any pending action, suit,
proceeding, or counterclaim by any Person, or any pending or threatened
investigation by a Public Authority, which may materially and adversely affect
the Collateral, the repayment of the Loan Obligations, the Lender's rights under
the Loan Documents, or the Borrower's Property, business, operations, or
condition (financial or otherwise).

         (d)      Immediately after becoming aware of any pending strike, work
stoppage, material unfair labor practice claim, or other material labor dispute
affecting the Borrower or any of its Subsidiaries.

         (e)      Immediately after becoming aware of any violation of any law,
statute, regulation, or ordinance of a Public Authority applicable to Borrower,
any Subsidiary, or their respective Properties which may materially and
adversely affect the Collateral, the repayment of the Loan Obligations, the
Lender's rights under the Loan Documents, or the Borrower's Property, business,
operations, or condition (financial or otherwise).

         (f)      Thirty (30) days prior to the Borrower changing its name or
the address of its chief executive office.

         Each notice given under this Section 7.3 (Notices to Lender) shall
describe the subject matter thereof in reasonable detail and shall set forth the
action that the Borrower has taken or proposes to take with respect thereto.

                                  ARTICLE VIII
                     GENERAL WARRANTIES AND REPRESENTATIONS.

         The Borrower continuously warrants and represents to the Lender, at all
times during the term of this Agreement and until all Loan Obligations have been
satisfied, that, except as hereafter disclosed to and accepted by the Lender in
writing:

                                       15

<PAGE>

         Section 8.1    Authorization, Validity, and Enforceability of this
Agreement and the Loan Documents.

         The Borrower has the corporate power and authority to execute, deliver
and perform this Agreement and the other Loan Documents, to incur the Loan
Obligations and any other Secured Obligations existing or contemplated as of the
date of this Agreement, and to grant the Security Interest. The Borrower has
taken all necessary corporate action to authorize its execution, delivery, and
performance of this Agreement and the other Loan Documents. No consent,
approval, or authorization of, or declaration or filing with, any Public
Authority, and no consent of any other Person, is required in connection with
the Borrower's execution, delivery, and performance of this Agreement and the
other Loan Documents, except for those already duly obtained. This Agreement and
the other Loan Documents have been duly executed and delivered by the Borrower
and constitute the legal, valid and binding obligations of the Borrower,
enforceable against it in accordance with their respective terms without
defense, setoff, or counterclaim. The Borrower's execution, delivery, and
performance of this Agreement and the other Loan Documents do not and will not
conflict with, or constitute a violation or breach of, or constitute a default
under, or result in the creation or imposition of any Lien upon the Property of
the Borrower or any of its Subsidiaries (except as contemplated by this
Agreement and the other Loan Documents) by reason of the terms of (a) any
mortgage, lease, agreement, or instrument to which the Borrower or any of its
Subsidiaries is a party or which is binding upon it, (b) any judgment, law,
statute, rule or governmental regulation applicable to the Borrower or any of
its Subsidiaries, or (c) the certificate or articles of incorporation or bylaws
of the Borrower or any of its Subsidiaries.

         Section 8.2    Validity and Priority of Security Interest.

         The provisions of this Agreement and the other Loan Documents create
legal and valid Liens on all the Collateral in the Lender's favor, and when all
proper filings, recordings, and other actions necessary to perfect such Liens
have been made or taken, such Liens will constitute perfected and continuing
Liens on all the Collateral, having priority over all other Liens on the
Collateral and enforceable against the Borrower and all third parties.

         Section 8.3    Organization and Qualification.

         The Borrower: (a) is duly incorporated and organized and validly
existing in good standing under the laws of the State of Delaware; (b) is
qualified to do business as a foreign corporation and is in good standing in
each other State where the qualification is necessary in order for it to own or
lease its Property and conduct its business; and (c) has all requisite power and
authority to conduct its business and to own its Property.

         Section 8.4    Corporate Name; Prior Transactions.

         The Borrower has not, during the past five years, been known by or used
any other corporate or fictitious name, or been a party to any merger or
consolidation, or acquired all or substantially all of the assets of any Person,
or acquired any of its Property out of the ordinary course of business.

                                       16

<PAGE>

         Section 8.5    Subsidiaries and Affiliates.

         The exhibits and schedules attached to the Borrower's most recent 10-K
statement furnished to the Lender set forth a correct and complete list of the
name and relationship to the Borrower of each and all of the Borrower's
Subsidiaries and other Affiliates. Each Subsidiary is (a) duly incorporated and
organized and validly existing in good standing under the laws of its state of
incorporation set forth on Schedule 8.5, and (b) qualified to do business as a
foreign corporation and in good standing in the states set forth opposite its
name on Schedule 8.5, which are the only states in which such qualification is
necessary in order for it to own or lease its Property and conduct its business.

         Section 8.6    Financial Statements and Projections.

          The Borrower has delivered to the Lender the audited balance sheet and
related statements of income, retained earnings, cash flows, and changes in
stockholders equity for the Borrower as of December 31, 2002 and for the Fiscal
Year then ended, accompanied by the report thereon of the Borrower's independent
certified public accountants. The Borrower has also delivered to the Lender the
unaudited balance sheet and related statements of income and cash flows for the
Borrower, as of March 31, 2003 and for the three (3) months then ended. All such
financial statements have been prepared in accordance with GAAP and present
accurately and fairly the Borrower's financial position as at the dates thereof
and its results of operations for the periods then ended.

         Section 8.7    Solvency.

         The Borrower is Solvent prior to and after giving effect to, the making
of the Term Loan.

         Section 8.8    Debt.

         The Borrower has no Debt, except (a) the Secured Obligations, (b) Debt
set forth in the most recent Financial Statements delivered to the Lender, or
the notes thereto, (c) trade payables and other contractual obligations arising
in the ordinary course of business since the date of such Financial Statements,
and (d) Debt incurred since the date of such Financial Statements to finance
capital expenditures permitted hereby.

         Section 8.9    Adequate Assets.

         The Borrower possesses adequate assets for the conduct of its business.

         Section 8.10   Litigation.

         Except as set forth on Schedule 8.10, there is no pending or, to the
best of the Borrower's knowledge, threatened action, suit, proceeding, or
counterclaim by any Person, or investigation by any Public Authority, or any
basis for any of the foregoing, which may materially and adversely affect the
Collateral, the repayment of the Loan Obligations, the Lender's rights under the
Loan Documents, or the Borrower's Property, business, operations, or condition
(financial or otherwise).

                                       17

<PAGE>

         Section 8.11   Restrictive Agreements.

         The Borrower is not a party to any contract or agreement, and is not
subject to any charter or other corporate restriction, which affects its ability
to execute, deliver, and perform the Loan Documents and repay the Loan
Obligations or which materially and adversely affects the Borrower's Property,
business, operations, or condition (financial or otherwise).

         Section 8.12   Labor Disputes.

         (a) there is no collective bargaining agreement or other labor contract
covering employees of the Borrower or any of its Subsidiaries; (b) no such
collective bargaining agreement or other labor contract is scheduled to expire
during the term of this Agreement; (c) no union of other labor organization is
seeking to organize, or to be recognized as, a collective bargaining unit of
employees of the Borrower or any of its Subsidiaries or for any similar purpose;
and (d) there is no pending or, to the best of the Borrower's knowledge,
threatened strike, work stoppage, material unfair labor practice claim, or other
material labor dispute against or affecting the Borrower, or any of its
Subsidiaries or their respective employees.

         Section 8.13   No Violation of Law.

         The Borrower is not in violation of any law, statute, regulation,
ordinance, judgment, order, or decree applicable to it which violation would in
any respect materially and adversely affect the Collateral, the repayment of the
Loan Obligations, the Lender's rights under the Loan Documents, or the
Borrower's Property, business, operations, or condition (financial or
otherwise).

         Section 8.14   No Default.

         The Borrower is not in default with respect to any note, indenture,
loan agreement, mortgage, lease, deed, or other agreement to which the Borrower
is a party or bound, which default could reasonably be expected to materially
and adversely affect the Collateral, the repayment of the Loan Obligations, the
Lender's rights under the Loan Documents, or the Borrower's Property, business,
operations, or condition (financial or otherwise).

         Section 8.15   Taxes.

         The Borrower and its Subsidiaries have filed all tax returns and other
reports required to be filed and have paid all Taxes, assessments, fees and
other governmental charges levied or imposed upon them or their properties,
income or assets that are otherwise due and payable.

         Section 8.16   Use of Proceeds.

         None of the transactions contemplated in this Agreement (including,
without limitation, the use of proceeds from the Term Loan) will violate or
result in the violation of Section 7 of the Securities Exchange Act of 1934, as
amended, or any regulations issued pursuant thereto, including without
limitation, Regulations T, U and X of the Board of Governors of the Federal
Reserve System ("Federal Reserve Board"), 12 CFR, Chapter II. Borrower does not
own or intend to carry or purchase any "margin stock" within the meaning of said
Regulation U. None of the proceed of the loans will be used, directly or
indirectly, to purchase or carry (or refinance any borrowing, the proceeds of
which were used to purchase or carry) any "security" within the meaning of the
Securities Exchange Act of 1934, as amended.

                                       18

<PAGE>

         Section 8.17   Private Offerings.

         Borrower has not, directly or indirectly, offered the Term Loan for
sale to, or solicited offers to buy part thereof from, or otherwise approached
or negotiated with respect thereto with any prospective purchaser other than
Lender. Borrower hereby agrees that neither it nor anyone acting on its behalf
has offered or will offer the Term Loan or any part thereof or any similar
securities for issue or sale to or solicit any offer to acquire any of the same
from anyone so as to bring the issuance thereof within the provisions of Section
5 of the Securities Act of 1933, as amended.

         Section 8.18   Broker's Fees.

         No Person is entitled to any brokerage or finder's fee with respect to
the transactions described in this Agreement.

         Section 8.19   No Material Adverse Change.

         No material adverse change has occurred in the Borrower's Property,
business, operations, or conditions (financial or otherwise) since the date of
the Financial Statements delivered to the Lender.

                                   ARTICLE IX
                       AFFIRMATIVE AND NEGATIVE COVENANTS.

         The Borrower covenants that, so long as any of the Loan Obligations
remain outstanding or this Agreement is in effect:

         Section 9.1    Taxes and Other Obligations.

         The Borrower and each of its Subsidiaries shall: (a) file when due all
tax returns and other reports which it is required to file, pay, or provide for
the payment, when due, of all Taxes, fees, assessments and other governmental
charges against it or upon its Property, income, and franchises, make all
required withholding and other tax deposits, and establish adequate reserves for
the payment of all such items, and shall provide to the Lender, upon request,
satisfactory evidence of its timely compliance with the foregoing; and (b) pay
when due all Debt owed by it and perform and discharge in a timely manner all
other obligations undertaken by it; provided, however that the Borrower and its
Subsidiaries need not pay any tax, fee, assessment, governmental charge, or
Debt, or perform or discharge any other obligation, that it is contesting in
good faith by appropriate proceedings diligently pursued.

         Section 9.2    Corporate Existence and Good Standing.

         The Borrower and each of its Subsidiaries shall maintain its corporate
existence and its qualification and good standing in all states necessary to
conduct its business and own its Property, and shall obtain and maintain all
licenses, permits, franchises and governmental authorizations necessary to
conduct its business and own its Property.

                                       19

<PAGE>

         Section 9.3    Compliance with Law and Agreements.

         The Borrower and each of its Subsidiaries shall comply in all material
respects with the terms and provisions of each judgment, law, statute, rule, and
governmental regulation applicable to it and each contract, mortgage, lien,
lease, indenture, order, instrument, agreement, or document to which it is a
party or by which it is bound where the failure to so comply would have a
materially and adverse affect on the Collateral or the Borrower's ability to
perform its obligations under the Loan Documents.

         Section 9.4    Mergers, Consolidations, Acquisitions, or Sales.

         The Borrower shall not enter into any transaction of merger,
reorganization, or consolidation, or transfer, sell, assign, lease, or otherwise
dispose of all or substantially all of its Property, or wind up, liquidate or
dissolve, or agree to do any of the foregoing.

         Section 9.5    Transactions Affecting Collateral or Obligations.

         Neither the Borrower nor any of its Subsidiaries shall enter into any
transaction that materially and adversely affects the Collateral or the
Borrower's ability to repay the Loan Obligations.

         Section 9.6    Debt.

         The Borrower will not, and will not permit any Subsidiary to, create,
incur, assume or suffer to exist any Debt, or permit any Subsidiary so to do,
except:

                  (a)      the Obligations;

                  (b)      current accounts payable arising in the ordinary
         course;

                  (c)      Debt which is incurred on account of purchase money
         or finance lease arrangements of assets (other than real property)
         acquired by the Borrower, after the Closing Date; provided that (i)
         each such purchase money or finance lease arrangement does not exceed
         the cost of the assets acquired or leased, (ii) any Lien securing such
         purchase money or finance lease arrangement does not extend to any
         assets or property other than that purchased or leased and other
         property similarly financed from the same financing source, and (iii)
         the aggregate amount of Debt under and in connection with all such
         purchase money and/or finance lease arrangements shall not exceed, in
         the aggregate, the sum of One Million Five Hundred Thousand Dollars
         ($1,500,000) during any fiscal year and the cost of any single asset
         acquired or leased shall not exceed Five Hundred Thousand Dollars
         ($500,000);

                  (d)      unsecured Debt of the Borrower incurred at any time
         and from time to time after the Closing Date which is fully convertible
         to equity; and

                  (e)      unsecured Debt of the Borrower existing on the date
         hereof and reflected on the financial statements most recently
         furnished to the Lender on or before the Closing Date.

                                       20

<PAGE>

         Section 9.7    Liens.

         Neither the Borrower nor any of its Subsidiaries shall create, incur,
assume, or permit to exist any Lien on the Collateral.

         Section 9.8    Further Assurances.

         The Borrower shall execute and deliver, or cause to be executed and
delivered, to the Lender such documents and agreements, and shall take or cause
to be taken such actions, as the Lender may, from time to time, request to carry
out the terms and conditions of this Agreement and the other Loan Documents.

         Section 9.9    Swap Agreement.

         The Borrower may, in its discretion, hedge the floating interest
expense of the Term Loan for the full term of the Term Loan by maintaining one
or more Swap Agreements with the Lender (or with another financial institution
approved by the Lender in writing) in an aggregate notional amount equal to the
outstanding principal balance of the Term Loan with the Borrower making fixed
rate payments and receiving floating rate payments to offset changes in the
variable interest expense of the Term Loan, all upon terms and subject to such
conditions as shall be acceptable to the Lender (or if such transaction is with
another financial institution, all upon terms and subject to such conditions as
shall be approved by the Lender in writing).

                                   ARTICLE X
                             CONDITIONS TO CLOSING.

         The Lender will not be obligated to make the Term Loan on the Closing
Date, unless the following conditions precedent have been satisfied in a manner
satisfactory to Lender:

         Section 10.1   Conditions Precedent to Making of Term Loan on the
Closing Date.

         (a)      Representations and Warranties; Covenants. The Borrower's
representations and warranties contained in this Agreement and the other Loan
Documents shall be correct and complete; the Borrower shall have performed and
complied with all covenants, agreements, and conditions contained herein and in
the other Loan Documents which are required to have been performed or complied
with.

         (b)      Delivery of Documents. The Borrower shall have delivered, or
caused to be delivered, to the Lender such documents, instruments and agreements
as the Lender shall request in connection herewith, duly executed by all parties
thereto other than the Lender, and in form and substance satisfactory to the
Lender and its counsel.

         (c)      Payment of Fees and Expenses. The Borrower shall have paid all
fees and expenses of the Lender's outside counsel and all other fees and
expenses of the Lender, if any, incurred in connection with any of the Loan
Documents and the transactions contemplated thereby and reflected in the closing
statement approved by the Borrower and the Lender on or before the Closing Date.

                                       21

<PAGE>

         (d)      Required Approvals. The Lender shall have received certified
copies of all consents or approvals of any Public Authority or other Person that
the Lender determines is required in connection with the transactions
contemplated by this Agreement.

         (e)      No Material Adverse Change. There shall have occurred no
material adverse change in the Borrower's business or financial condition since
December 31, 2002.

         (f)      Proceedings. All proceedings to be taken in connection with
the transactions contemplated by this Agreement, and all documents, contemplated
in connection herewith, shall be satisfactory in form and substance to the
Lender and its counsel.

         (g)      Deposit. The Deposit in an aggregate amount at least equal to
the principal amount of the Term Loan.

                                   ARTICLE XI
                                    DEFAULT.

         Section 11.1   Events of Default.

         It shall constitute an event of default ("Event of Default") if any one
or more of the following shall occur for any reason:

         (a)      failure to make payment of principal, interest, fees or
premium on any of the Loan Obligations when due, which failure to make payments
shall continue uncured for a period of ten (10) days after written notice
thereof to the Borrower or failure to make payment of any of the other Secured
Obligations when due, subject to any applicable notice and cure period;

         (b)      any representation or warranty made or deemed made by the
Borrower in this Agreement, any of the other Loan Documents, any Financial
Statement, or any certificate furnished by the Borrower or any Subsidiary at any
time to the Lender shall prove to be untrue in any material respect as of the
date when made, deemed made, or furnished;

         (c)      default shall occur in the observance or performance by the
Borrower of any of the covenants and agreements contained Section 9.1, 9.2, 9.3,
9.8 and 9.9 in this Agreement and such default shall continue for a period of
thirty (30) days after written notice thereof is given by the Lender to the
Borrower

         (d)      except as provided in subpart (a), (b) or (c) above, default
shall occur in the observance or performance by the Borrower of any of the
covenants and agreements contained in this Agreement or, subject to any
applicable notice and cure periods, any of the other Loan Documents, or any
other agreement entered into at any time to which the Borrower and the Lender
(or any Affiliate of the Lender) are party, including, without limitation, any
Swap Agreement;

         (e)      the Borrower or any Subsidiary shall: (i) file a voluntary
petition in bankruptcy or file a voluntary petition or an answer or otherwise
commence any action or proceeding seeking reorganization, arrangement or
readjustment of its debts or for any other relief under the Bankruptcy Code, as
amended, or under any other bankruptcy or insolvency act or law, state or

                                       22

<PAGE>

federal, now or hereafter existing, or consent to, approve of, or acquiesce in,
any such petition, action or proceeding; (ii) apply for or acquiesce in the
appointment of a receiver, assignee, liquidator, sequestrator, custodian,
trustee or similar officer for it or for all or any part of its Property; (iii)
make an assignment for the benefit of creditors; or (iv) be unable generally to
pay its debts as they become due;

         (f)      an involuntary petition shall be filed or an action or
proceeding otherwise commenced seeking reorganization, arrangement or
readjustment of the Borrower's or any Subsidiary's debts or for any other relief
under the Federal Bankruptcy Code, as amended, or under any other bankruptcy or
insolvency act or law, state or federal, now or hereafter existing which shall
not have been dismissed within sixty (60) days after the date of filing;

         (g)      a receiver, assignee, liquidator, sequestrator, custodian,
trustee or similar officer for the Borrower or any Subsidiary or for all or any
part of their Property shall be appointed involuntarily; or a warrant of
attachment, execution or similar process shall be issued against any part of the
Property of the Borrower or any Subsidiary which if involuntary shall not have
been dismissed within sixty (60) days after the date of appointment or filing;

         (h)      the Borrower shall file a certificate of dissolution under
applicable state law or shall be liquidated, dissolved or wound-up or shall
commence or have commenced against it any action or proceeding for dissolution,
winding-up or liquidation, or shall take any corporate action in furtherance
thereof;

         (i)      all or any material part of the Property of the Borrower shall
be nationalized, expropriated or condemned, seized or otherwise appropriated, or
custody or control of such Property or of the Borrower shall be assumed by any
Public Authority or any court of competent jurisdiction at the instance of any
Public Authority, except where contested in good faith by proper proceedings
diligently pursued where a stay of enforcement is in effect;

         (j)      one or more final judgments for the payment of money
aggregating in excess of $250,000 (whether or not covered by insurance) shall be
rendered against the Borrower and the Borrower shall fail to discharge the same
within thirty (30) days from the date of notice of entry thereof or to appeal
therefrom;

         (k)      there occurs a Change in Control;

         (l)      if at any time the aggregate principal amount of the Deposit
is less than the then unpaid principal balance of the Term Loan;

         (m)      if a default shall occur under or with respect to any other
Debt; and

         (n)      if a default shall occur under any other agreement to which
the Borrower is a party which is considered material by the Lender in its sole
and absolute.

         Section 11.2   Remedies.

         (a)      If an Event of Default has occurred and is continuing, the
Lender may, without notice to or demand on the Borrower, do one or more of the
following at any time or times and in

                                       23

<PAGE>

any order: (i) declare any or all Loan Obligations to be immediately due and
payable (provided however that upon the occurrence of any Event of Default
described in Section 11.1(e), Section 11.1(f), Section 11.1(g) or Section
11.1(h), all Loan Obligations shall automatically become immediately due and
payable); and (ii) pursue its other rights and remedies under the Loan Documents
and applicable law.

         (b)      If an Event of Default has occurred and is continuing: (i) the
Lender shall have, in addition to all other rights, the rights and remedies of a
secured party under the UCC; (ii) the Lender may, at any time, terminate and
unwind the Deposit (without regard to any early termination or withdrawal fees,
penalties or premiums) and apply the proceeds thereof to the Secured Obligations
in such order and manner as the Lender shall determine in its sole and absolute
discretion; and (iii) the Lender may sell and deliver any Collateral at public
or private sales, for cash, upon credit or otherwise, at such prices and upon
such terms as the Lender deems advisable, in its sole discretion, and may, if
the Lender deems it reasonable, postpone or adjourn any sale of the Collateral
by an announcement at the time and place of sale or of such postponed or
adjourned sale without giving a new notice of sale. Without in any way requiring
notice to be given in the following manner, the Borrower agrees that any notice
by the Lender of sale, disposition or other intended action hereunder or in
connection herewith, whether required by the UCC or otherwise, shall constitute
reasonable notice to the Borrower if such notice is mailed by registered or
certified mail, return receipt requested, postage prepaid, or is delivered
personally against receipt, at least five (5) days prior to such action to the
Borrower's address specified in or pursuant to Section 12.9 (Notices). If any
Collateral is sold on terms other than payment in full at the time of sale, no
credit shall be given against the Secured Obligations until the Lender receives
payment, and if the buyer defaults in payment, the Lender may resell the
Collateral without further notice to the Borrower. In the event the Lender seeks
to take possession of all or any portion of the Collateral by judicial process,
the Borrower irrevocably waives: (a) the posting of any bond, surety or security
with respect thereto which might otherwise be required; (b) any demand for
possession prior to the commencement of any suit or action to recover the
Collateral; and (c) any requirement that the Lender retain possession and not
dispose of any Collateral until after trial or final judgment. The Borrower
agrees that the Lender has no obligation to preserve rights to the Collateral or
marshal any Collateral for the benefit of any Person. The proceeds of sale shall
be applied first to all expenses of sale, including attorney's fees, and second,
in whatever order the Lender elects, to all Secured Obligations. The Lender will
return any excess to the Borrower or such other Person as shall be legally
entitled thereto and the Borrower shall remain liable for any deficiency.

         (c)      If an Event of Default occurs, the Borrower hereby waives all
rights to notice and hearing prior to the exercise by the Lender of the Lender's
rights to repossess the Collateral without judicial process or to replevy,
attach or levy upon the Collateral without notice or hearing.

                                       24

<PAGE>

                                  ARTICLE XII
                                 MISCELLANEOUS.

         Section 12.1   Cumulative Remedies.

         The enumeration herein of the Lender's rights and remedies is not
intended to be exclusive, and such rights and remedies are in addition to and
not by way of limitation of any other rights or remedies that the Lender may
have under the UCC or other applicable law. The Lender shall have the right, in
its sole discretion, to determine which rights and remedies are to be exercised
and in which order. The exercise of one right or remedy shall not preclude the
exercise of any others, all of which shall be cumulative. The Lender may,
without limitation, proceed directly against the Borrower to collect the Secured
Obligations without any prior recourse to the Collateral.

         Section 12.2   No Implied Waivers.

         No act, failure or delay by the Lender shall constitute a waiver of any
of its rights and remedies. No single or partial waiver by the Lender of any
provision of this Agreement or any other Loan Document, or of breach or default
hereunder or thereunder, or of any right or remedy which the Lender may have,
shall operate as a waiver of any other provision, breach, default, right or
remedy or of the same provision, breach, default, right or remedy on a future
occasion. No waiver by the Lender shall affect its rights to require strict
performance of this Agreement.

         Section 12.3   Severability.

         If any provision of this Agreement shall be prohibited or invalid,
under applicable law, it shall be ineffective only to such extent, without
invalidating the remainder of this Agreement.

         Section 12.4   Governing Law.

         This Agreement shall be deemed to have been made in the State of
Maryland and shall be governed by and interpreted in accordance with the laws of
such state, except that no doctrine of choice of law shall be used to apply the
laws of any other state or jurisdiction.

         Section 12.5   Waiver of Jury Trial.

         THE BORROWER AND THE LENDER EACH HEREBY WAIVES TRIAL BY JURY, RIGHTS OF
SETOFF, AND THE RIGHT TO IMPOSE COUNTERCLAIMS IN ANY LITIGATION IN ANY COURT
WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS, THE SECURED OBLIGATIONS OR THE COLLATERAL, OR ANY INSTRUMENT OR
DOCUMENT DELIVERED PURSUANT HERETO OR THERETO, OR ANY OTHER CLAIM OR DISPUTE
HOWSOEVER ARISING, BETWEEN THE BORROWER AND THE LENDER. THE BORROWER CONFIRMS
THAT THE FOREGOING WAIVERS ARE INFORMED AND FREELY MADE.

         Section 12.6   Survival of Representations and Warranties.

         All of the Borrower's representations and warranties contained in this
Agreement shall survive the execution, delivery, and acceptance thereof by the
parties, notwithstanding any investigation by the Lender or its agents.

                                       25

<PAGE>

         Section 12.7   Other Security and Guaranties.

         The Lender may, without notice or demand and without affecting the
Borrower's obligations hereunder, from time to time: (a) take from any Person
and hold collateral (other than the Collateral) for the payment of all or any
part of the Secured Obligations and exchange, enforce or release such collateral
or any part thereof; and (b) accept and hold any endorsement or guaranty of
payment of all or any part of the Secured Obligations and release or substitute
any such endorser or guarantor, or any Person who has given any Lien in any
other collateral as security for the payment of all or any part of the Secured
Obligations, or any other Person in any way obligated to pay all or any part of
the Secured Obligations.

         Section 12.8   Fees and Expenses.

         The Borrower shall pay to the Lender on demand all costs and expenses
that the Lender pays or incurs in connection with the negotiation, preparation,
enforcement, and termination of this Agreement and the other Loan Documents,
including, without limitation: (a) attorneys' and paralegals' fees and
disbursements of counsel to the Lender (including, without limitation, a
reasonable estimate of the allocable cost of in-house counsel and staff); (b)
costs and expenses including attorneys' and paralegals' fees and disbursements
(including, without limitation, a reasonable estimate of the allocable cost of
in-house counsel and staff) for any amendment, supplement, waiver, consent, or
subsequent closing in connection with the Loan Documents and the transactions
contemplated thereby; (c) Taxes, fees and other charges for filing financing
statements and continuations, and other actions to perfect, protect, and
continue the Security Interest; (d) sums paid or incurred to pay any amount or
take any action required of the Borrower under the Loan Documents that the
Borrower fails to pay or take; (e) costs and expenses of preserving and
protecting the Collateral; and (f) costs and expenses including attorneys' and
paralegals' fees and disbursements (including, without limitation, a reasonable
estimate of the allocable cost of in-house counsel and staff) paid or incurred
to obtain payment of the Secured Obligations, enforce the Security Interest,
sell or otherwise realize upon the Collateral, and otherwise enforce the
provisions of the Loan Documents, or to defend any claims made or threatened
against the Lender arising out of the transactions contemplated hereby
(including without limitation, preparations for and consultations concerning any
such matters). The foregoing shall not be construed to limit any other
provisions of the Loan Documents regarding costs and expenses to be paid by the
Borrower.

         Section 12.9   Notices.

         Except as otherwise provided herein, all notices, demands, and requests
that either party is required or elects to give to the other shall be in
writing, shall be delivered personally against receipt, or sent by recognized
overnight courier services, or mailed by registered or certified mail, return
receipt requested, postage prepaid, and shall be addressed to the party to be
notified as follows:

                                       26

<PAGE>

         If to the Lender:     Wachovia Bank, National Association
                               7 Saint Paul Street
                               Baltimore, Maryland 21202
                               Attention: Kevin Mahon

         with a copy to:       Ballard Spahr Andrews & Ingersoll, LLP
                               300 E. Lombard Street
                               Baltimore, Maryland 21202
                               Attention: Shaun F. Carrick

         If to the Borrower:   Guilford Pharmaceuticals Inc.
                               6611 Tributary Street
                               Baltimore, Maryland 21224
                               Attention: Chief Financial Officer

         with a copy to:       Guilford Pharmaceuticals Inc.
                               6611 Tributary Street
                               Baltimore, Maryland 21224
                               Attention: General Counsel

or to such other address as each party may designate for itself by like notice.
Any such notice, demand, or request shall be deemed given when received if
personally delivered or sent by overnight courier, or when deposited in the
United States mails, postage paid, if sent by registered or certified mail.

         Section 12.10  Waiver of Notices.

         Unless otherwise expressly provided herein, the Borrower waives
presentment, protest and notice of demand or dishonor and protest as to any
instrument, as well as any and all other notices to which it might otherwise be
entitled. No notice to or demand on the Borrower that the Lender may elect to
give shall entitle the Borrower to any or further notice or demand in the same,
similar or other circumstances.

         Section 12.11  Binding Effect; Assignment.

         The provisions of this Agreement shall be binding upon and inure to the
benefit of the respective representatives, successors and assigns of the parties
hereto; provided, however, that no interest herein may be assigned by the
Borrower without the prior written consent of the Lender. The rights and
benefits of the Lender hereunder shall, if the Lender so agrees, inure to any
assignee of the Loan Obligations or any part thereof.

         Section 12.12  Modification.

         This Agreement is intended by the Borrower and the Lender to be the
final, complete, and exclusive expression of the agreement between them. This
Agreement supersedes any and all prior oral or written agreements relating to
the subject matter hereof and may not be contradicted by evidence of prior,
contemporaneous or subsequent oral agreements of the parties. There are no oral
agreements between the parties. No modification, rescission, waiver, release,

                                       27

<PAGE>

or amendment of any provision of this Agreement shall be made, except by a
written agreement signed by the Borrower and a duly authorized officer of the
Lender.

         Section 12.13  Counterparts.

         This Agreement may be executed in any number of counterparts, and by
the Lender and the Borrower in separate counterparts, each of which shall be an
original, but all of which shall together constitute one and the same agreement.

         Section 12.14  Captions.

         The captions contained in this Agreement are for convenience only, are
without substantive meaning and should not be construed to modify, enlarge, or
restrict any provision.

         Section 12.15  Right of Set-Off.

         Whenever an Event of Default exists, the Lender is hereby authorized at
any time and from time to time, to the fullest extent permitted by law, to set
off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by the Lender or any affiliate of the Lender to or for the credit or the account
of the Borrower against any and all of the Secured Obligations, whether or not
then due and payable. The Lender agrees promptly to notify the Borrower after
any such set-off and application made by the Lender, provided that the failure
to give such notice shall not affect the validity of such set-off and
application.

         Section 12.16  Participating Lender's Security Interests.

         The Lender may, without notice to or consent by the Borrower, grant one
or more participations in the Term Loan to participating lenders. If a
participating lender shall at any time with the Borrower's knowledge participate
with the Lender in the Term Loan, the Borrower hereby grants to such
participating lender, and the Lender and such participating lender shall have
and are hereby given, a continuing lien on and security interest in any money,
securities and other property of the Borrower in the custody or possession of
the participating lender, including the right of setoff, to the extent of the
participating lender's participation in the Loan Obligations, and such
participating lender shall be deemed to have the same right of setoff to the
extent of Participating Lender's participation in the Loan Obligations under
this Agreement as it would have it were a direct lender.

                                       28

<PAGE>

         IN WITNESS WHEREOF, the parties have entered into this Agreement on the
date first above written.

                                     GUILFORD PHARMACEUTICALS INC.

                                     By: /s/ Andrew R. Jordan            (SEAL)
                                        ---------------------------------
                                        Name: Andrew R. Jordan
                                        Title: Executive Vice President, Finance
                                               and Administration, Chief
                                               Financial Officer and Treasurer

                                     WACHOVIA BANK, NATIONAL
                                     ASSOCIATION

                                     By: /s/ Kevin Mahon                 (SEAL)
                                        ---------------------------------
                                        Name: Kevin Mahon
                                        Title: Vice President

                                       29

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00052-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00052-of-00352.parquet"}]]