EMPLOYMENT AGREEMENT

                              --------------------



                  This EMPLOYMENT AGREEMENT ("AGREEMENT") effective as of

December 18, 2000 (the "EFFECTIVE Date"), between Gliatech Inc., a Delaware

corporation (the "COMPANY"), and Steven L. Basta ("EXECUTIVE").



                                   WITNESSETH:



                  WHEREAS, the Company desires to employ Executive as the

President of the Company, and Executive desires to accept employment as the

President of the Company;



                  WHEREAS, the Company recognizes that, as is the case with many

publicly held companies, the possibility of a Change in Control (as that term is

defined in Exhibit A hereof) exists;



                  WHEREAS, the Company wishes to assure itself of both present

and future continuity of management in the event of any Change in Control; and



                  WHEREAS, the Company wishes to ensure that certain of its

executives are not practically disabled from discharging their duties upon a

Change in Control.



                  NOW, THEREFORE, in consideration of the mutual covenants

contained herein and other good and valuable consideration, the receipt and

sufficiency of which are hereby acknowledged, the parties hereto agree as

follows:



                  1. EMPLOYMENT. The Company shall employ Executive, and

Executive accepts employment with the Company as of the date hereof, upon the

terms and conditions set forth in this Agreement, commencing on the Effective

Date.



                  2. POSITION AND DUTIES.



                  (a) During Executive's employment with the Company, Executive

shall serve as the President of the Company and, subject to the management of

the business and affairs of the Company at the direction of the Board of

Directors of the Company (the "BOARD"), shall have the normal duties,

responsibilities and authority of an executive serving in such position.

Initially, Executive shall have the title President of the Company, subject to

the power of the Board to change such title. Following an appropriate review

period, it shall be determined whether Executive shall be appointed as the Chief

Executive Officer of the Company.



                  (b) Executive shall report to the Board.



                  (c) During Executive's employment with the Company, Executive

shall devote his best efforts and his full business time and attention (except

for permitted vacation





{PAGE}   2



periods, reasonable periods of illness or other incapacity, and, provided such

activities do not have more than a DE MINIMIS effect on Executive's performance

of his duties under this Agreement, participation in charitable and civic

endeavors) to the business and affairs of the Company and any entity in which

the Company directly or indirectly beneficially owns 50% or more of the

outstanding voting stock (a "SUBSIDIARY"). Executive shall perform his duties

and responsibilities to the best of his abilities in a diligent, trustworthy,

businesslike and efficient manner.



                  (d) Executive shall perform his duties and responsibilities

principally in the Cleveland, Ohio metropolitan area.



                  3. COMPENSATION AND BENEFITS.



                  (a) SALARY. The Company agrees to pay Executive a salary

during his employment with the Company in a manner consistent with the normal

payroll cycle of the Company. Executive's salary shall be at an annual rate of

not less than $260,000 per year for such periods that he is employed by the

Company between the Effective Date and December 31, 2002, subject to an annual

review as set forth below. If Executive remains an employee of the Company after

December 31, 2002, Executive's salary shall be payable at such rate as is

established from time to time by the Compensation Committee of the Board (or, if

there is no such Committee, the Board). During Executive's employment with the

Company, the Compensation Committee of the Board (or, if there is no such

Committee, the Board) shall review Executive's salary annually.



                  (b) BONUS(ES). During Executive's employment with the Company,

Executive will be eligible for an annual bonus of up to 40% of Executive's base

annual salary (or such higher percentage of Executive's base annual salary as

may be determined by the Compensation Committee of the Board (or, if there is no

such Committee, the Board)), based on the achievement of specified Company goals

(as determined by the Compensation Committee of the Board (or, if there is no

such Committee, the Board)).



                  (c) STOCK OPTIONS. (i) As soon as reasonably practicable after

the Effective Date, Executive shall be granted an option to purchase 375,000

shares of common stock, par value $0.01 per share, of the Company ("COMMON

STOCK"), at an exercise price equal to the fair market value of the Common Stock

at the date of grant (the "STOCK OPTIONS"). The terms of each such stock option

(such as length and exercisability) shall be as set forth in the stock option

agreement between the Company and Executive attached hereto as Exhibit A (the

"STOCK OPTION AGREEMENT").



                  (ii) As soon as reasonably practicable after Executive's

exercise of a Grossed-Up Option (as defined below), the Company shall pay to

Executive (x) an amount equal to A minus B (the "STOCK OPTION TAX PAYMENT"),

plus (y) an additional amount such that, after payment by Executive of all

applicable federal, state and local income taxes on all amounts paid to

Executive pursuant to this Section 3(c)(ii), Executive will retain an amount

equal to the Stock Option Tax Payment. For purposes of this Section 3(c)(ii):







                                       2

{PAGE}   3



                  A    =   Executive's actual federal income tax liability

                           with respect to Executive's exercise of the number of

                           Stock Options which become exercisable for the first

                           time by Executive during a calendar year and have an

                           aggregate Option Price (as defined in the Stock

                           Option Agreement) which is less than $100,000 (the

                           "GROSSED-UP OPTIONS"); and



                  B    =   The amount of federal income tax liability

                           Executive would have incurred upon exercise of the

                           Grossed-Up Options if the amount of income recognized

                           by Executive upon such exercise for federal income

                           tax purposes had been subject to federal income tax

                           as long-term capital gain.



All determinations required to be made under this Section 3(c)(ii) shall be made

by the Company in consultation with Executive.



                  (d) CHANGE IN CONTROL SEVERANCE AGREEMENT. Executive and the

Company shall enter into the change in control severance agreement attached

hereto as Exhibit B (the "CHANGE IN CONTROL SEVERANCE AGREEMENT").



                  (e) RELOCATION EXPENSES. The Company shall reimburse

Executive, up to a maximum of $10,000, for the following reasonable and

documented expenses incurred by Executive in connection with Executive's

relocation to the Cleveland, Ohio area: (i) up to four trips by Executive

between the Boston, Massachusetts and Cleveland, Ohio areas to locate a home in

the Cleveland, Ohio area; and (ii) the actual moving expenses incurred by

Executive to move his household furnishings and other belongings to his home in

the Cleveland, Ohio area.



                  (f) EXPENSE REIMBURSEMENT. The Company shall reimburse

Executive for all reasonable expenses incurred by him during the period of

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