Document:

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                                                                    Exhibit 10.8

                      NON-QUALIFIED STOCK OPTION AGREEMENT

                           ARIAD PHARMACEUTICALS, INC.

         AGREEMENT made as of the 1st day of October, 2003, between ARIAD
Pharmaceuticals, Inc. (the "Company"), a Delaware corporation having a principal
place of business in Cambridge, Massachusetts and Paul J. Sekhri of New York,
New York (the "Participant").

         WHEREAS, the Company desires to grant to the Participant an option to
purchase shares of its common stock, $.001 par value per share (the "Shares");

         WHEREAS, the Company and the Participant each intend that the option
granted herein shall be a Non-Qualified Option (the "Option").

         NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the parties hereto
agree as follows:

         1.       GRANT OF OPTION.

         The Company hereby grants to the Participant the right and option to
purchase all or any part of an aggregate of One Hundred Thirty-Five Thousand
(135,000) Shares, on the terms and conditions and subject to all the limitations
set forth herein, under United States securities and tax laws. Except as
expressly provided in this Agreement, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of the Shares. Except as expressly provided in this
Agreement, no adjustments shall be made for dividends paid in cash or in
property (including without limitation, securities) of the Company.

         2.       PURCHASE PRICE.

         The purchase price of the Shares covered by the Option shall be $6.51
per Share, subject to adjustment, as provided in Section 9 of this Agreement, in
the event of a stock split, reverse stock split or other events affecting the
holders of Shares (the "Purchase Price"). Payment shall be made in accordance
with Section 5 of this Agreement.

         3.       EXERCISABILITY OF OPTION.

         Subject to the terms and conditions set forth in this Agreement, the
Option granted hereby shall become exercisable as follows:

On the first anniversary of the date            up to 33,750 Shares
    of this Agreement

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On the second anniversary of the date           an additional 33,750 Shares
    of this Agreement

On the third anniversary of the date            an additional 33,750 Shares
    of this Agreement

On the fourth anniversary of the date           an additional 33,750 Shares
    of this Agreement

The foregoing rights are cumulative and are subject to the other terms and
conditions of this Agreement.

         4.       TERM OF OPTION.

         The Option shall terminate ten years from the date of this Agreement,
but shall be subject to earlier termination as provided herein.

         If the Participant ceases to be an employee, director or consultant of
the Company or any parent or subsidiary, direct or indirect, of the Company (an
"Affiliate") (for any reason other than the death or permanent and total
disability as defined in Section 22(e)(3) of the United States Internal Revenue
Code of 1986, as amended (the "Code") of the Participant (a "Disability") or
termination of the Participant for Cause (as defined below)), the Option may be
exercised, if it has not previously terminated, within three months after the
date the Participant ceases to be an employee, director or consultant of the
Company or an Affiliate, or within the originally prescribed term of the Option,
whichever is earlier, but may not be exercised thereafter. In such event, the
Option shall be exercisable only to the extent that the Option has become
exercisable and is in effect at the date of such cessation of employment,
directorship or consultancy.

         Notwithstanding the foregoing, in the event of the Participant's
Disability or death within three months after the termination of employment,
directorship or consultancy, the Participant or the deceased Participant's legal
representatives and/or any person or persons who acquired the Participant's
rights to the Option by will or by the laws of descent and distribution (the
"Participant's Survivors") may exercise the Option within one year after the
date of the Participant's termination of employment, directorship or
consultancy, but in no event after the date of expiration of the term of the
Option.

         In the event the Participant's employment, directorship or consultancy
is terminated by the Company or an Affiliate for Cause (as defined below), the
Participant's right to exercise any unexercised portion of the Option shall
cease immediately as of the date of termination, and the Option shall thereupon
terminate. For purposes of this Agreement, the term Cause means (i) the failure
by the Participant to perform any of his material duties under his Employment
Agreement dated as of September 10, 2003 (the "Employment Agreement"), as may be
amended from time to time, (ii) the conviction of the Participant of any felony
involving moral turpitude, (iii) any acts of fraud or embezzlement by the
Participant involving the Company or any of its Affiliates,

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(iv) violation of any federal, state or local law, or administrative regulation
related to the business of the Company, (v) breach of fiduciary duty, including,
but not limited to, conflict of interest, (vi) conduct that could result in
publicity reflecting unfavorably on the Company in a material way, (vii) failure
to comply with any written policies of the Company, or (viii) a breach of the
terms of the Employment Agreement by the Participant.

           Notwithstanding anything herein to the contrary, if subsequent to the
Participant's termination, but prior to the exercise of the Option, the Board of
Directors of the Company determines that, either prior or subsequent to the
Participant's termination, the Participant engaged in conduct which would
constitute Cause, then the Participant shall immediately cease to have any right
to exercise the Option and the Option shall thereupon terminate.

         In the event of the Disability of the Participant, the Option shall be
exercisable within one year after the Participant's termination of service or,
if earlier, within the term originally prescribed by the Option. In such event,
the Option shall be exercisable:

         (a)      to the extent that the Option has become exercisable but has
                  not been exercised as of the date of Disability; and

         (b)      in the event rights to exercise the Option accrue
                  periodically, to the extent of a pro rata portion through the
                  date of Disability of any additional vesting rights that would
                  have accrued on the next vesting date had the Participant not
                  become Disabled. The proration shall be based upon the number
                  of days accrued in the current vesting period prior to the
                  date of Disability.

         In the event of a Disability, the Participant may exercise the Option
only within the period ending one year after the date of the Participant's
termination of employment, directorship or consultancy, as the case may be,
notwithstanding that the Participant might have been able to exercise the Option
as to some or all of the Shares on a later date if the Participant had not
become Disabled and had continued to be an employee, director or consultant or,
if earlier, within the originally prescribed term of the Option.

         The Board of Directors of the Company or, if applicable, a Committee of
the Board of Directors, shall make the determination both of whether a
Disability has occurred and the date of its occurrence (unless a procedure for
such determination is set forth in another agreement between the Company and
such Participant, in which case such procedure shall be used for such
determination). If requested, the Participant shall be examined by a physician
selected or approved by the Board of Directors of the Company or, if applicable,
a Committee of the Board of Directors, the cost of which examination shall be
paid for by the Company.

         In the event of the death of the Participant while an employee,
director or consultant of the Company or of an Affiliate, the Option shall be
exercisable by the Participant's Survivors within one year after the date of
death of the Participant or, if earlier, within the originally prescribed term
of the Option. In such event, the Option shall be exercisable:

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         (x)      to the extent that the Option has become exercisable but has
                  not been exercised as of the date of death; and

         (y)      in the event rights to exercise the Option accrue
                  periodically, to the extent of a pro rata portion through the
                  date of death of any additional vesting rights that would have
                  accrued on the next vesting date had the Participant not died.
                  The proration shall be based upon the number of days accrued
                  in the current vesting period prior to the Participant's date
                  of death.

         If the Participant's Survivors wish to exercise the Option, they must
take all necessary steps to exercise the Option within one year after the date
of death of such Participant, notwithstanding that the decedent might have been
able to exercise the Option as to some or all of the Shares on a later date if
he or she had not died and had continued to be an employee, director or
consultant or, if earlier, within the originally prescribed term of the Option.

         In the event of a consummation of a Change in Control of the Company,
and if the Participant gives notice of termination within 90 days after such
occurrence, then the Option shall immediately vest and remain fully exercisable
through its original term with all rights. Change in Control means the
occurrence of any of the following events (without the consent of the
Participant):

         (i)      Any corporation, person or other entity makes a tender or
                  exchange offer for shares of the Company's Common Stock
                  pursuant to which such corporation, person or other entity
                  acquires more than 50% of the issued and outstanding shares of
                  the Company's Common Stock;

         (ii)     The stockholders of the Company approve a definitive agreement
                  to merge or consolidate the Company with or into another
                  corporation or to sell or otherwise dispose of all or
                  substantially all of the Company's assets; or

         (iii)    Any person within the meaning of Section 3 (a) (9) or Section
                  13 (d) of the Securities Exchange Act of 1934 acquires more
                  than 50% of the combined voting power of Company's issued and
                  outstanding voting securities entitled to vote in the election
                  of the Board.

         5.       METHOD OF EXERCISING OPTION.

         Subject to the terms and conditions of this Agreement, the Option may
be exercised by written notice to the Company or its designee, in substantially
the form of Exhibit A attached hereto, together with provision for payment of
the full purchase price in accordance with this Section 5 for the Shares as to
which the Option is being exercised. Such notice shall state the number of
Shares with respect to which the Option is being exercised and shall be signed
by the person exercising the Option. Payment of the purchase price for such
Shares shall be made (a) in United States dollars in cash or by check, or (b) at
the discretion of the Board of Directors of the Company or, if applicable, a
Committee of the Board of Directors, through delivery of shares of

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Common Stock having a Fair Market Value (as defined below) equal as of the date
of the exercise to the cash exercise price of the Option and held for at least
six months, or (c) at the discretion of the Board of Directors of the Company
or, if applicable, a Committee of the Board of Directors, by having the Company
retain from the shares otherwise issuable upon exercise of the Option, a number
of shares having a Fair Market Value equal as of the date of exercise to the
exercise price of the Option, or (d) at the discretion of the Board of Directors
of the Company or, if applicable, a Committee of the Board of Directors, in
accordance with a cashless exercise program established with a securities
brokerage firm, and approved by the Board of Directors of the Company or, if
applicable, a Committee of the Board of Directors, or (e) at the discretion of
the Board of Directors of the Company or, if applicable, a Committee of the
Board of Directors, by any combination of (a), (b), (c) and (d) above.

         For purposes of this Agreement, Fair Market Value of a Share of common
stock means:

         (1)      If the common stock of the Company is listed on a national
                  securities exchange or traded in the over-the-counter market
                  and sales prices are regularly reported for the common stock,
                  the closing or last price of the common stock on the Composite
                  Tape or other comparable reporting system for the trading day
                  immediately preceding the applicable date;

         (2)      If the common stock of the Company is not traded on a national
                  securities exchange but is traded on the over-the-counter
                  market, if sales prices are not regularly reported for the
                  common stock for the trading day referred to in clause (1),
                  and if bid and asked prices for the common stock are regularly
                  reported, the mean between the bid and the asked price for the
                  common stock at the close of trading in the over-the-counter
                  market for the trading day on which common stock was traded
                  immediately preceding the applicable date; and

         (3)      If the common stock is neither listed on a national securities
                  exchange nor traded in the over-the-counter market, such value
                  as the Board of Directors of the Company, in good faith, shall
                  determine.

         The Company shall deliver such Shares as soon as practicable after the
notice shall be received, provided, however, that the Company may delay issuance
of such Shares until completion of any action or obtaining of any consent, which
the Company deems necessary under any applicable law (including, without
limitation, state securities or "blue sky" laws). The Shares as to which the
Option shall have been so exercised shall be registered in the Company's share
register in the name of the person or persons so exercising the Option (or, if
the Option shall be exercised by the Participant and if the Participant shall so
request in the notice exercising the Option, shall be registered in the name of
the Participant and another person jointly, with right of survivorship) and
shall be delivered as provided above to or upon the written order of the person
exercising the Option. In the event the Option shall be exercised, pursuant to
Section 4 hereof, by any person other than the Participant, such notice shall be
accompanied by appropriate proof of the right of such person to exercise the
Option. All Shares that shall be purchased upon the exercise of the Option as
provided herein shall be fully paid and nonassessable.

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         6.       PARTIAL EXERCISE.

         Exercise of the Option to the extent above stated may be made in part
at any time and from time to time within the above limits, except that no
fractional share shall be issued pursuant to the Option.

         7.       NON-ASSIGNABILITY.

         The Option shall not be transferable by the Participant other than (i)
by will or by the laws of descent and distribution, (ii) pursuant to a qualified
domestic relations order as defined by the Code or Title I of the Employee
Retirement Income Security Act or the rules thereunder, (iii) if approved by the
Board of Directors of the Company or, if applicable, a Committee of the Board of
Directors, in its sole discretion, through establishment of blind trusts, family
limited partnerships, or other estate planning vehicles wherein the Participant
or his direct descendants are the primary beneficiary, or (iv) under any other
circumstances that are approved by the Board of Directors of the Company or, if
applicable, a Committee of the Board of Directors, in its sole discretion.
Except as provided above, the Option shall be exercisable, during the
Participant's lifetime, only by the Participant (or, in the event of legal
incapacity or incompetency, by the Participant's guardian or representative) and
shall not be assigned, pledged or hypothecated in any way (whether by operation
of law or otherwise) and shall not be subject to execution, attachment or
similar process. Any attempted transfer, assignment, pledge, hypothecation or
other disposition of the Option or of any rights granted hereunder contrary to
the provisions of this Section 7, or the levy of any attachment or similar
process upon the Option shall be null and void.

         8.       NO RIGHTS AS STOCKHOLDER UNTIL EXERCISE.

         The Participant shall have no rights as a stockholder with respect to
Shares subject to this Agreement until registration of the Shares in the
Company's share register in the name of the Participant. Except as is expressly
provided in this Agreement with respect to certain changes in the capitalization
of the Company, no adjustment shall be made for dividends or similar rights for
which the record date is prior to the date of such registration.

         9.       ADJUSTMENTS.

         Upon the occurrence of any of the following events, the Participant's
rights with respect to the Option, except to the extent previously exercised
shall be adjusted as hereinafter provided:

         A.       Stock Dividends and Stock Splits. If (i) shares of common
stock of the Company shall be subdivided or combined into a greater or smaller
number of shares or if the Company shall issue any shares of common stock as a
stock dividend on its outstanding common stock, or (ii) additional shares or new
or different shares or other securities of the Company or other non-cash assets
are distributed with respect to such shares of common stock, the Shares
deliverable upon the exercise of the Option may be appropriately increased or
decreased proportionately, and appropriate adjustments may be made including, in
the purchase price per Share to reflect such events.

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         B.       Corporate Transactions. If the Company is to be consolidated
with or acquired by another entity in a merger, sale of all or substantially all
of the Company's assets or otherwise other than a transaction to merely change
the state of incorporation (a "Corporate Transaction"), the Board of Directors
of the Company or, if applicable, a Committee of the Board of Directors or the
board of directors of any entity assuming the obligations of the Company
hereunder (the "Successor Board"), shall, as to the unexercised portion of the
Option, either (i) make appropriate provision for the continuation of the Option
by substituting on an equitable basis for the Shares either the consideration
payable with respect to the outstanding shares of common stock in connection
with the Corporate Transaction or securities of any successor or acquiring
entity; or (ii) upon written notice to the Participant, provide that the Option
must be exercised (either to the extent then exercisable or, at the discretion
of the Board of Directors or, if applicable, a Committee of the Board of
Directors, the Option being made fully exercisable for purposes of this
Subparagraph), within a specified number of days of the date of such notice, at
the end of which period the Option shall terminate; or (iii) terminate the
Option in exchange for a cash payment equal to the excess of the Fair Market
Value of the Shares (either to the extent then exercisable or, at the discretion
of the Board of Directors of the Company or, if applicable, a Committee of the
Board of Directors, the Option being made fully exercisable for purposes of this
Subparagraph) over the exercise price thereof.

         C.       Recapitalization or Reorganization. In the event of a
recapitalization or reorganization of the Company other than a Corporate
Transaction pursuant to which securities of the Company or of another
corporation are issued with respect to the outstanding shares of common stock of
the Company, the Participant upon exercising the Option after the
recapitalization or the reorganization shall be entitled to receive for the
purchase price paid upon such exercise the number of replacement securities
which would have been received if the Option had been exercised prior to such
recapitalization or reorganization.

         D.       Dissolution or Liquidation of the Company. Upon the
dissolution or liquidation of the Company, the Option will terminate and become
null and void; provided, however, that if the rights of the Participant or the
Participant's Survivors have not otherwise terminated and expired, the
Participant or the Participant's Survivors will have the right immediately prior
to such dissolution or liquidation to exercise the Option to the extent that the
Option is exercisable as of the date immediately prior to such dissolution or
liquidation.

         10.      TAXES.

         The Participant acknowledges that upon exercise of the Option the
Participant will be deemed to have taxable income measured by the difference
between the then fair market value of the Shares received upon exercise and the
price paid for such Shares pursuant to this Agreement. The Participant
acknowledges that any income or other taxes due from him or her with respect to
the Option or the Shares issuable pursuant to the Option shall be the
Participant's responsibility.

         The Participant agrees that the Company may withhold from the
Participant's remuneration, if any, the minimum statutory amount of federal,
state and local withholding taxes attributable to such amount that is considered
compensation includable in such person's gross

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income. At the Company's discretion, the amount required to be withheld may be
withheld in cash from such remuneration, or in kind from the Shares otherwise
deliverable to the Participant on exercise of the Option. The Fair Market Value
of the Shares to be withheld shall be determined as of the most recent
practicable date prior to the date of exercise. The Participant further agrees
that, if the Company does not withhold an amount from the Participant's
remuneration sufficient to satisfy the Company's income tax withholding
obligation, the Participant will reimburse the Company on demand, in cash, for
the amount under-withheld.

         11.      PURCHASE FOR INVESTMENT.

         Unless the offering and sale of the Shares to be issued upon the
particular exercise of the Option shall have been effectively registered under
the Securities Act of 1933, as now in force or hereafter amended (the "1933
Act"), the Company shall be under no obligation to issue the Shares covered by
such exercise unless and until the following conditions have been fulfilled:

         (a)      The person(s) who exercise the Option shall warrant to the
                  Company, at the time of such exercise, that such person(s) are
                  acquiring such Shares for their own respective accounts, for
                  investment, and not with a view to, or for sale in connection
                  with, the distribution of any such Shares, in which event the
                  person(s) acquiring such Shares shall be bound by the
                  provisions of the following legend which shall be endorsed
                  upon the certificate(s) evidencing the Shares issued pursuant
                  to such exercise:

                           "The shares represented by this certificate have been
                           taken for investment and they may not be sold or
                           otherwise transferred by any person, including a
                           pledgee, unless (1) either (a) a Registration
                           Statement with respect to such shares shall be
                           effective under the Securities Act of 1933, as
                           amended, or (b) the Company shall have received an
                           opinion of counsel satisfactory to it that an
                           exemption from registration under such Act is then
                           available, and (2) there shall have been compliance
                           with all applicable state securities laws"; and

         (b)      If the Company so requires, the Company shall have received an
                  opinion of its counsel that the Shares may be issued upon such
                  particular exercise in compliance with the 1933 Act without
                  registration thereunder. Without limiting the generality of
                  the foregoing, the Company may delay issuance of the Shares
                  until completion of any action or obtaining of any consent,
                  which the Company deems necessary under any applicable law
                  (including without limitation state securities or "blue sky"
                  laws).

         12.      NO OBLIGATION TO MAINTAIN RELATIONSHIP.

         The Company is not by this Option obligated to continue the Participant
as an employee, director or consultant of the Company or an Affiliate. The
Participant acknowledges: (i) that this Agreement is discretionary in nature and
may be suspended or terminated by the Company at any time; (ii) that the grant
of the Option is a one-time benefit which does not create any

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contractual or other right to receive future grants of options, or benefits in
lieu of options; (iii) that all determinations with respect to any such future
grants, including, but not limited to, the times when options shall be granted,
the number of shares subject to each option, the option price, and the time or
times when each option shall be exercisable, will be at the sole discretion of
the Company; (iv) that the Participant's participation in this Agreement is
voluntary; (v) that the value of the Option is an extraordinary item of
compensation which is outside the scope of the Participant's employment
contract, if any; and (vi) that the Option is not part of normal or expected
compensation for purposes of calculating any severance, resignation, redundancy,
end of service payments, bonuses, long-service awards, pension or retirement
benefits or similar payments.

         13.      NOTICES.

         Any notices required or permitted by the terms of this Agreement shall
be given by recognized courier service, facsimile, registered or certified mail,
return receipt requested, addressed as follows:

                  If to the Company:         ARIAD Pharmaceuticals, Inc.
                                             26 Landsdowne Street
                                             Cambridge, Massachusetts 02139-4234
                                             Attn: Chief Financial Officer

                  If to the Participant:     Paul J. Sekhri
                                             164 Christopher Street
                                             New York, NY 10014

or to such other address or addresses of which notice in the same manner has
previously been given. Any such notice shall be deemed to have been given upon
the earlier of receipt, one business day following delivery to a recognized
courier service or three business days following mailing by registered or
certified mail.

         14.      GOVERNING LAW.

         This Agreement shall be construed and enforced in accordance with the
law of the State of Delaware, without giving effect to the conflict of law
principles thereof.

         15.      BENEFIT OF AGREEMENT.

         Subject to the provisions hereof, this Agreement shall be for the
benefit of and shall be binding upon the heirs, executors, administrators,
successors and assigns of the parties hereto.

         16.      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 oral or written

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agreements and understandings relating to the subject matter hereof. No
statement, representation, warranty, covenant or agreement not expressly set
forth in this Agreement shall affect or be used to interpret, change or
restrict, the express terms and provisions of this Agreement.

         17.      MODIFICATIONS AND AMENDMENTS.

         The terms and provisions of this Agreement may be modified or amended
by the Company in a manner which is not adverse to the Participant, including,
without limitation, to the extent necessary to qualify the shares issuable upon
exercise of the Option for listing on any national securities exchange or
quotation in any national automated quotation system of securities dealers. Any
modification or amendment of this Agreement shall not, without the consent of
the Participant, adversely affect his rights under the Option.

         18.      WAIVERS AND CONSENTS.

         The terms and provisions of this Agreement may be waived, or consent
for the departure therefrom granted, only by written document executed by the
party entitled to the benefits of such terms or provisions. No such waiver or
consent shall be deemed to be or shall constitute a waiver or consent with
respect to any other terms or provisions of this Agreement, whether or not
similar. Each such waiver or consent shall be effective only in the specific
instance and for the purpose for which it was given, and shall not constitute a
continuing waiver or consent.

         19.      DATA PRIVACY.

         By entering into this Agreement, the Participant: (i) authorizes the
Company and each Affiliate, and any agent of the Company or any Affiliate
administering this Agreement or providing record keeping services, to disclose
to the Company or any of its Affiliates such information and data as the Company
or any such Affiliate shall request in order to facilitate the grant of options
and the administration of this Agreement; (ii) waives any data privacy rights he
or she may have with respect to such information; and (iii) authorizes the
Company and each Affiliate to store and transmit such information in electronic
form.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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         IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and the Participant has hereunto set
his or her hand, all as of the day and year first above written.

                                         ARIAD PHARMACEUTICALS, INC.

                                         By: /s/ Harvey J. Berger
                                            ------------------------------------
                                             Name: Harvey J. Berger, M.D.
                                             Title: Chairman and Chief Executive
                                                    Officer

                                         PAUL J. SEKHRI

                                          /s/ Paul J. Sekhri
                                         ---------------------------------------

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                                                                       Exhibit A

                NOTICE OF EXERCISE OF NON-QUALIFIED STOCK OPTION

TO:      ARIAD Pharmaceuticals, Inc.

Ladies and Gentlemen:

         I hereby exercise my Non-Qualified Stock Option to purchase ___________
shares (the "Shares") of the common stock, $.001 par value, of ARIAD
Pharmaceuticals, Inc. (the "Company"), at the exercise price of $6.51 per share,
pursuant to and subject to the terms of that certain Non-Qualified Stock Option
Agreement between the undersigned and the Company dated October 1, 2003.

         I understand the nature of the investment I am making and the financial
risks thereof. I am aware that it is my responsibility to have consulted with
competent tax and legal advisors about the relevant national, state and local
income tax and securities laws affecting the exercise of the Option and the
purchase and subsequent sale of the Shares.

         I am paying the option exercise price for the Shares as follows:

                     ______________________________________

         Please issue the Shares (check one):

         [ ] to me; or

         [ ] to me and ____________________________, as joint tenants with right
                   of survivorship,

         at the following address:

               ________________________________
               ________________________________
               ________________________________

                                      A-1

<PAGE>

         My mailing address for shareholder communications, if different from
the address listed above, is:

               ________________________________
               ________________________________
               ________________________________

                                         Very truly yours,

                                         _______________________________________
                                         Participant (signature)

                                         _______________________________________
                                         Print Name

                                         _______________________________________
                                         Date

                                         _______________________________________
                                         Social Security Number

                                      A-2<PAGE>
                                                                     Exhibit 4.4

                       THIRD AMENDMENT TO CREDIT AGREEMENT

     This THIRD AMENDMENT TO CREDIT AGREEMENT, dated as of September 25, 2003
(the "THIRD AMENDMENT"), is entered into among NASHUA CORPORATION, a
Massachusetts corporation (the "BORROWER"), whose address is 11 Trafalgar
Square, 2nd Floor, Nashua, New Hampshire 03063, FLEET NATIONAL BANK, a national
Banking association ("FLEET") and LASALLE BANK NATIONAL ASSOCIATION, a national
Banking association ("LASALLE", TOGETHER WITH FLEET, THE "BANKS" AND AS AGENT
FOR THE BANKS "AGENT"), whose address is 135 South LaSalle Street, Chicago,
Illinois 60603

                                R E C I T A L S:

     A. The Borrower and the Banks entered into that certain Credit Agreement
dated as of March 1, 2002, as amended by that certain First Amendment to Credit
Agreement, dated as of July 15, 2003 and that certain Waiver and Second
Amendment to Credit Agreement, dated as of July 24, 2003 (as further amended,
restated and modified from time to time, the "CREDIT AGREEMENT").

     B. At the present time the Borrower requests, and the Banks are agreeable
to (i) a new definition defining Adjusted EBITDA under Section 1.1 and (ii) an
adjustment to the EBITDA financial covenant contained in Section 10.6.3,
pursuant to the terms and conditions hereinafter set forth.

     NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
Borrower and the Banks hereby agree as follows:

                              A G R E E M E N T S:

     1.   RECITALS

     The foregoing Recitals are hereby made a part of this Third Amendment.

     2.   DEFINITIONS

     Capitalized words and phrases used herein without definition shall have the
respective meanings ascribed to such words and phrases in the Credit Agreement.

     3.   AMENDMENTs TO THE CREDIT AGREEMENT

          3.1  Adjusted EBITDA Definition. Section 1.1 of the Credit Agreement
is hereby amended by inserting, in its proper alphabetic position, the
definition of Adjusted EBITDA to read as follows:

          "Adjusted EBITDA means, for any period, EBITDA for the period of the
     four fiscal quarters most recently ended, plus (i) restructuring,
     nonrecurring, one-time charges mutually agreed upon, (ii) non-cash

<PAGE>

     expenses mutually agreed upon, and (iii) proforma adjustments mutually
     agreed upon for acquisitions."

          3.2  Adjusted EBITDA. Section 10.6.3 of the Credit Agreement is hereby
amended in its entirety to read as follows:

          "Adjusted EBITDA. Not permit Adjusted EBITDA to be less than the
     applicable amount set forth below for such Computation Period:

     Computation Periods
           Ending                                Adjusted EBITDA
     -------------------                         ---------------
     September 30, 2003                            $11,600,000

     December 31, 2003                             $12,000,000

     March 31, 2004                                $12,250,000

     June 30, 2004                                 $12,500,000

     September 30, 2004                            $12,750,000

     December 31, 2004 and all                     $13,000,000
     times thereafter"

          3.3  Exhibit B. All references in the Credit Agreement to Exhibit B
shall be deemed to be references to the revised Exhibit B in the form of
Attachment A attached hereto and made a part hereof.

     4.   REPRESENTATIONS AND WARRANTIES

     To induce the Banks to enter into this Third Amendment, the Borrower hereby
certifies, represents and warrants to the Banks that:

          4.1  Organization

     The Borrower is a corporation duly organized, existing and in good standing
under the laws of the Commonwealth of Massachusetts, with full and adequate
corporate power to carry on and conduct its business as presently conducted. The
Borrower is duly licensed or qualified in all foreign jurisdictions wherein the
nature of its activities require such qualification or licensing. The exact
legal name of the Borrower is as set forth in the preamble of this Third
Amendment, and the Borrower currently does not conduct, nor has it during the
last five (5) years conducted, business under any other name or trade name,
except that some of its operations were conducted under the name Rittenhouse,
Rittenhouse Paper Company or Rittenhouse, L.L.C. prior to 2002. The Borrower
will not change its name, its organizational identification number, its type of
organization, its jurisdiction of organization or other legal structure.

                                       2
<PAGE>

          4.2  Authorization

     The Borrower is duly authorized to execute and deliver this Third Amendment
and is and will continue to be duly authorized to borrow monies under the Credit
Agreement, as amended hereby, and to perform its obligations under the Credit
Agreement, as amended hereby.

          4.3  No Conflicts

     The execution and delivery of this Third Amendment and the performance by
the Borrower of its obligations under the Credit Agreement, as amended hereby,
do not and will not conflict with any provision of law or of the articles of
incorporation of the Borrower or of any agreement binding upon the Borrower.

          4.4  Validity and Binding Effect

     The Credit Agreement, as amended hereby, is a legal, valid and binding
obligation of the Borrower, enforceable against the Borrower in accordance with
its terms, except as enforceability may be limited by Bankruptcy, insolvency or
other similar laws of general application affecting the enforcement of
creditors' rights or by general principles of equity limiting the availability
of equitable remedies.

          4.5  Compliance with Credit Agreement

     The representation and warranties set forth in Section 9 of the Credit
Agreement, as amended hereby, are true and correct with the same effect as if
such representations and warranties had been made on the date hereof, with the
exception that all references to the financial statements shall mean the
financial statements most recently delivered to the Banks and except for such
changes as are specifically permitted under the Credit Agreement. In addition,
the Borrower has complied with and is in compliance with all of the covenants
set forth in the Credit Agreement, as amended hereby, including, but not limited
to, those set forth in Section 10 thereof.

          4.6  No Event of Default

     As of the date hereof, no Event of Default under Section 12 of the Credit
Agreement, as amended hereby, or event or condition which, with the giving of
notice or the passage of time, or both, would constitute an Event of Default,
has occurred or is continuing.

     5.   CONDITIONS PRECEDENT

     This Third Amendment shall become effective as of the date above first
written after receipt by the Banks of the following documents (and the date on
which all such conditions precedent have been satisfied or waived by the Banks
shall be called the "THIRD AMENDMENT EFFECTIVE DATE"):

                                       3
<PAGE>

          5.1  Third Amendment

     This Third Amendment executed by the Borrower and the Banks.

          5.2  Resolutions

     A certified copy of resolutions of the Board of Directors and/or
shareholders of the Borrower authorizing the execution, delivery and performance
of this Third Amendment and the related loan documents.

          5.3  Other Documents

     Such other documents, certificates and/or opinions of counsel as the Banks
may request.

     6.   GENERAL

          6.1  Governing Law; Severability

     This Third Amendment shall be construed in accordance with and governed by
the laws of Illinois. Wherever possible each provision of the Credit Agreement
and this Third Amendment shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of the Credit Agreement and
this Third Amendment shall be prohibited by or invalid under such law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of the Credit Agreement and this Third Amendment.

          6.2  Successors and Assigns

     This Third Amendment shall be binding upon the Borrower and the Banks and
their respective successors and assigns, and shall inure to the benefit of the
Borrower and the Banks and the successors and assigns of the Banks.

          6.3  Continuing Force and Effect of Loan Documents

     Except as specifically modified or amended by the terms of this Third
Amendment, all other terms and provisions of the Credit Agreement and the other
Loan Documents are incorporated by reference herein, and in all respects, shall
continue in full force and effect. The Borrower, by execution of this Third
Amendment, hereby reaffirms, assumes and binds itself to all of the obligations,
duties, rights, covenants, terms and conditions that are contained in the Credit
Agreement and the other Loan Documents.

          6.4  Financing Statements

     The Borrower hereby irrevocably authorizes the Banks at any time and from
time to time to file in any jurisdiction any initial UCC financing statements
and/or amendments thereto that (a) describe the Collateral, and (b) contain any
other information required by

                                       4
<PAGE>

part 5 of Article 9 of the UCC for the sufficiency or filing office acceptance
of any financing statement or amendment.

          6.5  References to Credit Agreement

     Each reference in the Credit Agreement to "this Agreement", "hereunder",
"hereof", or words of like import, and each reference to the Credit Agreement in
any and all instruments or documents delivered in connection therewith, shall be
deemed to refer to the Credit Agreement, as amended hereby.

          6.6  Expenses

     The Borrower shall pay all costs and expenses in connection with the
preparation of this Third Amendment and other related loan documents, including,
without limitation, reasonable attorneys' fees and time charges of attorneys who
may be employees of the Banks or any affiliate or parent of the Banks. The
Borrower shall pay any and all stamp and other taxes, UCC search fees, filing
fees and other costs and expenses in connection with the execution and delivery
of this Third Amendment and the other instruments and documents to be delivered
hereunder, and agrees to save the Banks harmless from and against any and all
liabilities with respect to or resulting from any delay in paying or omission to
pay such costs and expenses.

          6.7  Counterparts

     This Third Amendment may be executed in any number of counterparts, all of
which shall constitute one and the same agreement.

                            [Signature Page Follows]

                                       5
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have executed this Third Amendment
to Credit Agreement as of the date first above written.

WITNESS:                                NASHUA CORPORATION

/s/ Margaret Callan                     By: /s/ John L. Patenaude
                                        Name: John L. Patenaude
                                        Title: Vice President-Finance, Chief
                                               Financial Officer and Treasurer

WITNESS:                                LASALLE BANK NATIONAL
                                        ASSOCIATION, as Agent

/s/ Erica Scully
--------------------------------
                                        By: /s/ Brian Sullivan
                                        Name: Brian Sullivan
                                        Title: Vice President

WITNESS:                                LASALLE BANK NATIONAL
                                        ASSOCIATION, as Issuing Bank and as a
                                        Bank
/s/ Erica Scully
-------------------------------
                                        By: /s/ Brian Sullivan
                                        Name: Brian Sullivan
                                        Title: Vice President

WITNESS:                                FLEET NATIONAL BANK, as a Bank

/s/ Signature Illegible                 By: /s/ Kenneth R. Sheldon
                                        Name: Kenneth R. Sheldon
                                        Title: Vice President

<PAGE>

                                  ATTACHMENT A

                                    EXHIBIT B

                         FORM OF COMPLIANCE CERTIFICATE

To:       LaSalle Bank National Association, as Agent

     Please refer to the Credit Agreement dated as of March 1, 2002 (as amended
or otherwise modified from time to time, the "Credit Agreement") among Nashua
Corporation (the "Company"), various financial institutions and LaSalle Bank
National Association, as Agent. Terms used but not otherwise defined herein are
used herein as defined in the Credit Agreement.

I.   Reports. Enclosed herewith is a copy of the [annual audited/monthly] report
     of the Company as at _____________, ____ (the "Computation Date"), which
     report fairly presents in all material respects the financial condition and
     results of operations (subject to the absence of footnotes and to normal
     year-end adjustments) of the Company as of the Computation Date and has
     been prepared in accordance with GAAP consistently applied.

II.  Financial Tests. The Company hereby certifies and warrants to you that the
     following is a true and correct computation as at the Computation Date of
     the following ratios and/or financial restrictions contained in the Credit
     Agreement:

A.   SECTION 10.6.1 - MINIMUM FIXED CHARGE COVERAGE RATIO

1.   Consolidated Net Income                      $________

2.   Plus: Interest Expense                       $________
     income tax expense                           $________
     depreciation                                 $________
     amortization                                 $________

3.   Total (EBITDA)                               $________

4.   Income taxes paid                            $________

5.   Capital Expenditures                         $________

6.   Sum of (4) and (5)                           $________

7.   Remainder of (3) minus (6)                   $________

8.   Interest Expense                             $________

                                       7
<PAGE>

9.   Required payments of
     principal of Funded Debt
     (including Term Loans but
     excluding Revolving Loans)                   $________

10.  Sum of (8) and (9)                           $________

11.  Ratio of (7) to (10)                         ____ to 1

12.  Minimum Required                             ____ to 1

B.   SECTION 10.6.2 - MAXIMUM FUNDED DEBT TO EBITDA RATIO

1.   Funded Debt                                  $________

2.   EBITDA                                       $________
     (from Item A(3) above)

3.   Ratio of (1) to (2)                          ____ to 1

4.   Maximum allowed                              ____ to 1

C.   SECTION 10.6.3-MINIMUM ADJUSTED EBITDA

1.   EBITDA
     (from Item A(3) above)                       $_________

2.   Restructuring, nonrecurring,
     one-time charges mutually
     agreed upon                                  $_________

3.   Non-cash expenses mutually
     agreed upon                                  $_________

4.   Proforma adjustments mutually
     agreed upon for acquisitions                 $_________

5.   Sum of (1), (2), (3), and (4)                $_________

6.   Minimum required                             $_________

D.   SECTION 10.6.4 - CAPITAL EXPENDITURES

1.   Capital Expenditures for the
     Fiscal Year                                  $__________

2.   Maximum Permitted Capital
     Expenditures                                 $__________

                                       8
<PAGE>

III. Pricing Schedule Computation

TOTAL DEBT TO EBITDA RATIO

1.   Total Debt                                   $__________

2.   EBITDA (from item A(3) above)                $__________

3.   Ratio of (1) to (2)                          ____ to 1

The Company further certifies to you that no Event of Default or Unmatured Event
of Default has occurred and is continuing.

                                       9

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