10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2000

Commission File Number 000-23736

GUILFORD PHARMACEUTICALS INC.
(Exact name of Registrant as specified in its charter)

Delaware	52-1841960
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)
6611 Tributary Street	21224
Baltimore, Maryland	(Zip Code)
(Address of principal executive offices)

410-631-6300
(Registrant’s telephone number, including area code)

      Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X]       No [ ]

      Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date.

Class	Outstanding at November 10, 2000
Common Stock, $0.01 par value	23,898,401

1

INDEX

		Page
Part I	Financial Information
Item 1	Financial Statements		3
	Consolidated Balance Sheets as of September 30, 2000 and December 31, 1999		3
	Consolidated Statements of Operations for the three months and nine months ended September 30, 2000 and 1999		4
	Consolidated Statement of Changes in Stockholders’ Equity for the nine months ended September 30, 2000		5
	Consolidated Statements of Cash Flows for the three months and nine months ended September 30, 2000 and 1999		6
	Notes to Consolidated Financial Statements		7
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		9 15
Item 3	Quantitative and Qualitative Disclosures about Market Risk		20
Part II	Other Information
Item 1	Legal Proceedings		21
Item 2	Changes in Securities		21
Item 3	Defaults Upon Senior Securities		21
Item 4	Submission of Matters to a Vote of Security Holders		21
Item 5	Other Information		22
Item 6	Exhibits and Reports on Form 8-K		36
	Signatures

2

PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements.

GUILFORD PHARMACEUTICALS INC.
AND SUBSIDIARIES

Consolidated Balance Sheets
(in thousands, except share data)

				September 30, 2000			December 31,
				(unaudited)			1999
			Assets
Current assets:
	Cash and cash equivalents			$	23,051		$	14,336
	Investments				74,464			108,997
	Accounts and contract receivable				1,576			1,020
	Inventories				1,776			1,348
	Other current assets				1,022			752
		Total current assets			101,889			126,453
Investments — restricted					19,615			21,385
Property and equipment, net					14,076			15,793
Other assets					1,246			611
				$	136,826		$	164,242
			Liabilities and Stockholders’ Equity
Current liabilities:
	Accounts payable			$	3,536		$	3,085
	Current portion of long-term debt				2,214			2,214
	Accrued payroll related costs				2,163			2,070
	Accrued contracted services				1,249			2,066
	Accrued expenses and other current liabilities				1,332			1,550
	Deferred income				—			1,125
		Total current liabilities			10,494			12,110
Long-term debt, net of current portion					5,491			7,152
		Total liabilities			15,985			19,262
Stockholders’ equity:
	Preferred stock, par value $0.01 per share; authorized 4,700,000      shares, none issued				—			—
	Series A junior participating preferred stock, par value $0.01 per     share; authorized 300,000 shares, none issued				—			—
	Common stock, par value $0.01 per share; authorized 75,000,000     shares, 23,844,845 and 23,328,313 issued at September 30,     2000 and December 31, 1999, respectively				238			233
	Additional paid-in capital				239,533			232,913
	Accumulated deficit				(114,116	)		(82,877	)
	Accumulated other comprehensive loss				(1,350	)		(1,838	)
	Note receivable from officer				(60	)		(60	)
	Treasury stock, at cost: 267,868 and 274,880 shares at September 30,     2000 and December 31, 1999, respectively				(3,336	)		(3,284	)
	Deferred compensation				(68	)		(107	)
		Total stockholders’ equity			120,841			144,980
				$	136,826		$	164,242

See accompanying notes to consolidated financial statements.

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GUILFORD PHARMACEUTICALS INC.
AND SUBSIDIARIES

Consolidated Statements of Operations (unaudited)
(in thousands, except per share data)

					Three Months Ended						Nine Months Ended
					September 30,						September 30,
					2000			1999			2000			1999
Revenues:
	Contract revenues				$	1,000		$	4,500		$	2,000		$	4,500
	Net product sales					285			565			1,492			3,432
	License fees and royalties					521			542			1,622			1,785
	Revenues under collaborative agreements					1,172			1,269			3,422			3,682
				Total revenues		2,978			6,876			8,536			13,399
Costs and expenses:
	Cost of sales:
		Net product sales				140			303			797			1,746
		Unabsorbed manufacturing overhead				455			—			455			—
	Research and development					12,230			11,050			34,106			30,660
	General and administrative					3,146			2,208			8,634			8,383
	Merger costs					332			—			1,403			—
				Total costs and expenses		16,303			13,561			45,395			40,789
Operating loss						(13,325	)		(6,685	)		(36,859	)		(27,390	)
Other income (expense):
	Investment and other income					1,902			1,642			6,030			5,584
	Interest expense					(136	)		(166	)		(410	)		(514	)
			Net loss		$	(11,559	)	$	(5,209	)	$	(31,239	)	$	(22,320	)
Basic and diluted loss per common share					$	(0.49	)	$	(0.26	)	$	(1.33	)	$	(1.14	)
Weighted-average common shares outstanding						23,502			19,937			23,404			19,608

See accompanying notes to consolidated financial statements.

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GUILFORD PHARMACEUTICALS INC.
AND SUBSIDIARIES

Consolidated Statement of Changes in Stockholders’ Equity (unaudited)
Nine Months Ended September 30, 2000
(in thousands, except share data)

			Common Stock
												Accumulated
			Numbers				Additional					Other
			of Shares		Dollar		Paid-In		Accumulated			Comprehensive
			Issued		Amount		Capital		Deficit			Loss
Balance, January 1, 2000				23,328,313	$	233	$	232,913	$	(82,877	)	$	(1,838	)
Comprehensive loss:
	Net loss for the period									(31,239	)
	Other comprehensive income:
	Unrealized gain on available-for-sale securities												488
		Total comprehensive loss
Issuances upon exercise of options				516,532		5		6,306
Purchase of 8,285 shares of common stock
Distribution of 15,297 shares of treasury stock to     401(k) plan								102
Stock option compensation								212
Amortization of deferred compensation
Balance, September 30, 2000				23,844,845	$	238	$	239,533	$	(114,116	)	$	(1,350	)

[Additional columns below]

[Continued from above table, first column(s) repeated]

			Note
			Receivable			Treasury						Total
			From			Stock,			Deferred			Stockholders'
			Officer			at Cost			Compensation			Equity
Balance, January 1, 2000.			$	(60	)	$	(3,284	)	$	(107	)	$	144,980
Comprehensive loss:
	Net loss for the period												(31,239	)
	Other comprehensive income:
	Unrealized gain on available-for-sale     securities												488
		Total comprehensive loss										$	(30,751	)
Issuances upon exercise of options													6,311
Purchase of 8,285 shares of common     stock							(237	)					(237	)
Distribution of 15,297 shares of treasury     stock to 401(k) plan							185						287
Stock option compensation													212
Amortization of deferred compensation										39			39
Balance, September 30, 2000.			$	(60	)	$	(3,336	)	$	(68	)	$	120,841

See accompanying notes to consolidated financial statements.

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GUILFORD PHARMACEUTICALS INC.
AND SUBSIDIARIES

Consolidated Statements of Cash Flows (unaudited)
(in thousands)

				Three Months Ended						Nine Months Ended
				September 30,						September 30,
				2000			1999			2000			1999
Cash Flows from Operating Activities:
	Net loss			$	(11,559	)	$	(5,209	)	$	(31,239	)	$	(22,320	)
	Adjustments to reconcile net loss to net cash used in operating    activities:
		Depreciation and amortization			1,000			1,152			2,997			3,801
		Noncash compensation expense			155			638			635			995
	Changes in assets and liabilities:
		Accounts and contract receivable and other assets			(1,037	)		(300	)		(1,471	)		(695	)
		Inventories			107			(225	)		(428	)		(77	)
		Accounts payable			(645	)		(1,422	)		451			(2,158	)
		Accrued expenses and other current liabilities			(102	)		(192	)		(1,039	)		855
		Deferred income			(1,125	)		1,125			(1,125	)		—
Net cash used in operating activities					(13,206	)		(4,433	)		(31,219	)		(19,599	)
Cash Flows from Investing Activities:
		Purchases of property and equipment			(514	)		(576	)		(1,270	)		(2,790	)
		Maturities of marketable securities			53,004			4,505			178,338			90,276
		Purchases of marketable securities			(31,325	)		(1,136	)		(141,547	)		(74,558	)
Net cash provided by investing activities					21,165			2,793			35,521			12,928
Cash Flows from Financing Activities:
		Net proceeds from issuances of common stock			1,714			42,749			6,311			45,139
		Purchase of treasury stock			(146	)		—			(237	)		(2,209	)
		Principal payments on debt			(554	)		(540	)		(1,661	)		(1,620	)
			Net cash provided by financing activities		1,014			42,209			4,413			41,310
Net increase in cash and cash equivalent					8,973			40,569			8,715			34,639
Cash and Cash Equivalents at the Beginning of Period					14,078			2,550			14,336			8,480
Cash and Cash Equivalents at the End of Period				$	23,051		$	43,119		$	23,051		$	43,119
Supplemental disclosures of cash flow information:
	Net interest paid			$	134		$	161		$	408		$	497

See accompanying notes to consolidated financial statements.

6

GUILFORD PHARMACEUTICALS INC.

Notes to Consolidated Financial Statements
September 30, 2000
(unaudited)

1. Organization and Basis of Presentation

      Guilford Pharmaceuticals Inc. (together with its subsidiaries, “Guilford”) is a biopharmaceutical company located in Baltimore, Maryland, engaged in the development and commercialization of novel products in two principal areas: (1) targeted and controlled drug delivery systems using proprietary biodegradable polymers for the treatment of cancer and other diseases or conditions and (2) therapeutic and diagnostic products for neurological diseases and conditions.

      The consolidated financial statements included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures, normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the audited financial statements and the related notes included in our annual report on Form 10-K for the year ended December 31, 1999.

      In the opinion of management, any adjustments contained in the accompanying unaudited consolidated financial statements are of a normal recurring nature, necessary to present fairly our financial position, results of operations, changes in stockholders’ equity and cash flows for the three-month and nine-month periods ended September 30, 2000 as set forth in the Index. Interim results are not necessarily indicative of results for the full fiscal year.

2. Summary of Significant Accounting Policies

Principles of Consolidation

      The consolidated financial statements include the accounts of Guilford Pharmaceuticals Inc. and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Earnings (Loss) Per Common Share

      Basic earnings (loss) per share (“EPS”) are computed by dividing earnings (loss) by the weighted-average number of shares outstanding for the period. The computation of Diluted EPS is similar to Basic EPS except that the weighted-average number of shares outstanding for the period is increased to include the number of additional shares that would have been outstanding if the dilutive potential shares had been issued. Potential common shares are excluded if the effect on earnings (loss) per share is antidilutive.

      The following table sets forth the computation our basic and diluted net loss per share (in thousands, except per share amount):

	Three Months Ended September 30,						Nine months Ended September 30,
	2000			1999			2000			1999
Net loss	$	(11,559	)	$	(5,209	)	$	(31,239	)	$	(22,320	)
Weighted-average common shares outstanding		23,502			19,937			23,404			19,608
Basic and diluted loss per common share	$	(0.49	)	$	(0.26	)	$	(1.33	)	$	(1.14	)

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Recently Issued Accounting Pronouncements

      In December 1999, the staff of the SEC issued Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (“SAB 101”). SAB 101 summarizes certain of the staff’s views in applying generally accepted accounting principles to revenue recognition in the financial statements, including recognition of non-refundable fees received upon entering into arrangements. In June 2000, the SEC issued Staff Accounting Bulletin No. 101B which delays the implementation date of SAB 101 until no later than the fourth fiscal quarter for the fiscal years beginning after December 15, 1999. Accordingly, we are evaluating SAB 101 and the effect it will have on our consolidated financial statements including the effect, if any, on previously recognized transactions with Amgen and Aventis.

Reclassifications

      Certain prior year amounts have been reclassified to conform with current year presentation.

3. Inventories and Cost of Sales

	September 30, 2000		December 31, 1999
(in thousands) Raw materials	$	314	$	280
Work in process		713		416
Finished goods		749		652
	$	1,776	$	1,348

      Inventories are net of applicable reserves and allowances. Inventories include finished goods and raw materials that may be available for sale, consumed in production or consumed internally in our development activities. Inventories identified for development activities are expensed in the period in which such inventories are designated for such use.

      As a result of the reacquisition of GLIADEL^® Wafer, we did not manufacture GLIADEL^® Wafer during the three-month period ended September 30, 2000. Therefore, the fixed costs associated with our manufacturing capabilities were shown in our Consolidated Statments of Operations as "Cost of Sales — unabsorbed manufacturing overhead".

4. Termination of Proposed Merger with Gliatech Inc.

      On August 28, 2000, we announced that we agreed with Gliatech Inc. (“Gliatech”) to terminate our Agreement and Plan of Merger (the “Merger Agreement”) entered into on May 29, 2000. Under the Merger Agreement, a wholly-owned subsidiary of ours would have acquired all of the outstanding shares of Gliatech in a tax-free transaction intended to be accounted for as a pooling of interests.

      Related to the proposed merger, in June 2000, Cartech Company, LTD, (“Cartech”) filed a lawsuit against Gliatech and Guilford alleging breach of and interference with Gliatech’s build-to-suit lease with Cartech. The parties subsequently entered into a settlement agreement to resolve the litigation. Due to the termination of the Merger Agreement on August 28, 2000, we have no payment obligations under the terms of the settlement agreement.

      We incurred costs related to the proposed merger transaction of $0.3 million and $1.4 million for the three and nine-month periods ended September 30, 2000, respectively.

5. Investment in ProQuest Pharmaceuticals Inc.

      In March 2000, we acquired from ProQuest Pharmaceuticals Inc. ("ProQuest") an exclusive worldwide license to a pro-drug of propofol, a novel pro-drug of a widely used anesthetic agent. Pursuant to this transaction, we paid approximately $0.7 million for 133,333 shares of common stock of ProQuest. In addition, we paid approximately $0.3 million for in process research and development that was charged to earnings during the three-month period ended March 31, 2000. Under the terms of the agreement, we are obligated to make milestone payments based on clinical development and royalties on any product sales. ProQuest is a privately held pharmaceutical company based in Lawrence, Kansas. Because our investment in ProQuest is less than 20% of the outstanding common stock of ProQuest, we have accounted for our investment under the cost method.

6. Related Party Transaction

      A note receivable on common stock of $60,000 at September 30, 2000 and December 31, 1999, represents an amount due from an officer of Guilford related to the officer’s purchase of shares of our common stock. The note bears interest at the rate of 5.34% per

8

annum and is due and payable on February 14, 2002. This amount is reflected as a reduction of stockholders’ equity in the accompanying balance sheets.

7. Subsequent Event — Reacquisition of Commercial Rights to GLIADEL^® Wafer

      In June 1996, we entered into certain agreements (as amended from time to time, the “Aventis Agreements”) with Rhone-Poulenc Rorer Pharmaceuticals Inc. (“RPR,” Aventis Pharmaceuticals Inc. (“Aventis”) is the successor by merger to RPR as a result of the merger of RPR and Hoescht AG in December 1999) for the worldwide sale, marketing and distribution of GLIADEL^® Wafer (except in Scandinavia and Japan).

      On October 23, 2000, we entered into a Rights Reversion Agreement (the “Rights Reversion Agreement”) with Aventis, pursuant to which we reacquired the rights to sell, market and distribute GLIADEL^® Wafer held by Aventis pursuant to the Aventis Agreements (sometimes referred to as the GLIADEL^® Wafer Repurchase"). In consideration for the reacquisition of these rights, we issued to Aventis 300,000 shares of the Company’s common stock, valued at approximately $8.0 million and granted Aventis certain registration rights with respect to such stock. In accordance with the terms of the Rights Reversion Agreement, after the conclusion of a transition period ending December 31, 2000, we will be responsible for all aspects of the worldwide sale, marketing and distribution of GLIADEL^® Wafer (except in Scandinavia where GLIADEL^® Wafer will continue to be distributed by Orion Pharma). We intend to continue marketing GLIADEL^® Wafer in the United States and Europe (except for Scandinavia) and in other countries to the extent permitted by local laws. Until December 31, 2000, we and Aventis will generally continue to operate under the Aventis Agreements except that Aventis is no longer obligated to make additional milestone payments resulting from GLIADEL^® Wafer receiving additional regulatory approvals, nor is it required to make an equity investment in us upon the approval of the use of GLIADEL^® Wafer in first surgeries for glioblastoma multiforme. Additionally, we no longer have the right to borrow from Aventis up to $7.5 million, as provided under the Aventis Agreements.

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Note

      In this quarterly report we make statements that reflect our current expectations regarding our future results of operations, economic performance, and financial condition, as well as other matters that may affect our business. In general, we try to identify these forward-looking statements by using words such as:

• “anticipate,”

• “believe,”

• “expect,”

• “estimate,” and similar expressions.

      While these statements reflect our current plans and expectations, and we base the statements on information currently available to us, we cannot be sure that we will be able to implement these plans successfully. We may not realize our expectations in whole or in part in the future.

      The forward-looking statements contained in this quarterly report may cover, but are not necessarily limited to, the following topics:

• the consequences of our reacquisition from Aventis of the worldwide sale, marketing and distribution rights to GLIADEL^® Wafer;

9

• our efforts to market, sell and distribute GLIADEL^® Wafer;

• our efforts to expand the labeled uses for GLIADEL^® Wafer, including our efforts to obtain additional U.S. and international regulatory clearances for such uses;

• our efforts to develop polymer drug delivery product line extensions and new polymer drug delivery products;

• our research programs related to our FKBP neuroimmunophilin ligand technology partnered with Amgen Inc. (“Amgen”), as well as our NAALADase inhibition, PARP inhibition, polymer drug delivery and other technologies;

• our clinical development activities, including the commencement and conducting of clinical trials, related to our polymer-based drug delivery products and product candidates (including GLIADEL^® Wafer, PACLIMER™ Microspheres and LIDOMER^™ Microspheres) and our pharmaceutical product candidates (including lead compounds in our FKBP neuroimmunophilin ligand, NAALADase and propofol pro-drug programs and any future lead compounds in our PARP program);

• our efforts to scale-up product candidates from laboratory bench quantities to commercial quantities;

• our efforts to secure adequate supply of the active pharmaceutical ingredients for clinical development and commercialization;

• our efforts to manufacture drug candidates for clinical development and eventual commercial supply;

• our strategic plans;

• anticipated expenditures and the potential need for additional funds; and

• specific guidance we give in the section entitled “Outlook” below, regarding our current expectations of our future operating results.

      All of these items involve significant risks and uncertainties.

      Any of the statements we make in this quarterly report that are forward-looking are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. We wish to caution you that our actual results may differ materially from the results we discuss in the forward-looking statements.

      We discuss factors that could cause or contribute to such differences elsewhere in this quarterly report, as well as in our filings with the SEC. Our SEC filings include our annual report on Form 10-K for the year ended December 31, 1999. For convenience, we refer to this document as the “1999 Form 10-K” in the discussion set forth below. In addition, any forward-looking statements we make in this document speak only as of the date of this document, and, except for our ongoing obligations to disclose material developments as required by the federal securities laws, we do not intend to update or alter any such forward-looking statements to reflect events or circumstances that occur after the date of this report.

Introduction

      In the following sections of this Management’s Discussion and Analysis of Financial Condition and Results of Operations, we explain the general financial condition and the results of operations for Guilford and its subsidiaries, including:

• what factors affect our business;

• what our revenues and expenses were in the periods presented;

• why our revenues and expenses changed between periods;

• where our revenues came from;

• how all of the foregoing affect our overall financial condition; and

10

• what our expenditures for capital projects were in the periods presented.

      As you read the Management’s Discussion and Analysis, you may find it helpful to refer to our consolidated financial statements beginning on page 3 of this quarterly report. These consolidated financial statements present the results of our operations for the three-month and nine-month periods ended September 30, 2000 and 1999, as well as our financial position at September 30, 2000 and December 31, 1999. We analyze and explain the changes in certain line items set forth in the section of our consolidated financial statements titled “Consolidated Statements of Operations”. Our analysis may be important to you in making decisions about your investment in Guilford.

General

      Guilford is a biopharmaceutical company located in Baltimore, Maryland, engaged in the development and commercialization of novel products in two principal areas:

• targeted and controlled drug delivery systems using proprietary biodegradable polymers for the treatment of cancer and other diseases or conditions and

• therapeutic and diagnostic products for neurological diseases and conditions.

      In February 1997, we commercially launched our first product, GLIADEL^® Wafer, in the United States through Aventis. GLIADEL^® Wafer is a proprietary polymer product for the treatment of certain types of brain cancer. This product dissolves over time and releases an anti-cancer drug known as “BCNU” (or carmustine) directly to the tumor site. Until October 23, 2000, Aventis was our exclusive worldwide marketing partner (except in Scandinavia and Japan) for GLIADEL^® Wafer. On October 23, 2000, we reacquired from Aventis its sales, marketing and distribution rights to GLIADEL^® Wafer in consideration for the issuance to Aventis of 300,000 shares of our common stock. Aventis will continue to sell, market and distribute GLIADEL^® Wafer during a transition period ending December 31, 2000, after which we will assume responsibility for all aspects of sales, marketing and distribution of GLIADEL^® Wafer worldwide (except in Scandinavia, where our Scandinavian distributor and marketing partner, Orion Pharma, will continue to distribute our product).

      We have also licensed from others and internally developed on our own:

• technologies that may be useful in preventing and treating certain neurological diseases and conditions;

• a novel pro-drug of propofol, a widely-used anesthetic; and

• a new class of biodegradable polymers different from the type used in GLIADEL^® Wafer, including PACLIMER^™ Microspheres and LIDOMER^™ Microspheres, which we are using for the targeted and controlled delivery of cancer chemotherapeutics and other drugs, including drugs for pain management.

      For the nine-month period ended September 30, 2000, our revenues came primarily from the following sources:

• sales of GLIADEL^® Wafer to Aventis and Orion Pharma;

• royalties from Aventis related to its sales of GLIADEL^® Wafer to third parties; and/or

• one-time rights, milestone, and other payments from corporate partners under our current collaborative agreements.

      As we discuss in greater detail below, if compounds which are the subject of our collaboration with Amgen attain certain regulatory and/or development objectives, we are eligible to receive certain milestone and other payments from Amgen. We view these potential payments as significant future revenue and/or capital raising opportunities. As we discuss here and in the 1999 Form 10-K, we cannot be sure that Amgen will achieve the designated milestones and that we will receive any or all of the milestone payments for which we are eligible

11

under our existing collaboration with Amgen. We also cannot be sure that we will be able to enter into collaborations in the future with others for the research, development, and/or commercialization of our technologies.

      Because we have not marketed, sold and distributed a drug before, we cannot be certain of the level of revenue we will be able to achieve from our commercialization of GLIADEL® Wafer following our assumption of these activities as of January 1, 2001. Additionally, prior to the GLIADEL® Wafer Repurchase, we had received milestone and other payments from Aventis; for example, in March and September 2000, we earned non-refundable milestone payments of $1.0 million each from Aventis upon receipt of approval to market and sell GLIADEL® Wafer for the recurrent surgery indication in Spain and the U.K. After the GLIADEL® Wafer Repurchase, we will not be receiving such payments from Aventis.

      In order to assist us in selling and marketing GLIADEL® Wafer, we have entered into an agreement with Cardinal Health Sales and Marketing Services, a division of Redkey, Inc. (“Cardinal”). Under the agreement with Cardinal, Cardinal will hire and train sales representatives to market and sell GLIADEL® Wafer to potential customers.

      Since the commercial launch of GLIADEL® Wafer in the United States in February 1997 through September 30, 2000, we have recognized an aggregate of $23.7 million in product sales and royalties. Of this amount, $15.5 million represents revenues from sales of GLIADEL® Wafer to Aventis and to Orion Pharma. The additional $8.2 million are royalties paid to us from Aventis on its sales of GLIADEL® Wafer to third parties, such as hospitals.

      As we discuss below and in the 1999 Form 10-K, a number of factors subject our future sales of GLIADEL® Wafer to significant risk and uncertainty. We cannot be sure our sales of GLIADEL® Wafer will increase over time or even continue at the current rate. Until the GLIADEL® Wafer Repurchase, we have not had responsibility for the sales, marketing and distribution of GLIADEL® Wafer. Increasing sales of the GLIADEL® Wafer are contingent upon, among other things, the following:

• developing internally or outsourcing a sales, marketing and distribution network for GLIADEL® Wafer;

• making certain international regulatory filings and obtaining clearances to market GLIADEL® Wafer for the recurrent surgery indication or the first surgery indication pursuant to such filings;

• obtaining authorization from the U.S. Food and Drug Administration (“FDA”) and international health regulatory authorities to expand the labeled indications for GLIADEL® Wafer; and

• obtaining permission to sell GLIADEL® Wafer in those countries that require pricing approval at prices that are acceptable to those countries and to us.

      Additionally, we cannot control the timing and extent of governmental clearances, nor can we be sure that we will attain any of these regulatory objectives. We also cannot be certain of the degree of acceptance of GLIADEL® Wafer by neurosurgeons, payors and patients in the U.S. and internationally, based on previously available clinical data, data from the recently announced Phase III first surgery trial and actual clinical experience with the marketed drug. Even if the market were to increasingly accept the product, we cannot be certain that our sales, marketing and distribution efforts will be successful.

      In August 1997, we entered into a collaboration with Amgen to research, develop, and commercialize our FKBP neuroimmunophilin compound technology. Under our agreement with Amgen, Amgen paid us $35 million in 1997. Of this amount, $15 million was in the form of a one-time, non-refundable rights fee upon signing the agreement. Amgen paid us the remaining $20 million for the purchase of 640,095 shares of our common stock and warrants to purchase up to an additional 700,000 shares of our common stock. These warrants are exercisable for five years and have an exercise price of $35.15 per share. We also granted to Amgen certain rights to register shares of our common stock with the SEC for sale in the public markets.

      As part of this collaboration, Amgen agreed to fund up to a total of $13.5 million to support our research relating to the FKBP neuroimmunophilin ligand technology. This research funding began on October 1, 1997 and was payable quarterly over three years, with the last quarterly payment received July 1, 2000. As of September 30, 2000, we had recognized an aggregate of $13.5 million in research support from Amgen under our collaboration arrangement.

      Our agreement also requires that Amgen make milestone payments to us if Amgen achieves specified regulatory and product development milestones. If Amgen is able to meet all of these milestones for each of 10 different specified clinical indications (i.e., uses), then these payments could total up to an additional $386 million in the aggregate. Amgen is also required to pay us royalties on its sales to third parties of any product(s) that result from our collaboration.

12

      As we discuss below and in the 1999 Form 10-K, we cannot be sure that Amgen will be successful in its efforts to develop one or more FKBP neuroimmunophilin compounds into products that the FDA and international regulatory authorities will approve as safe and effective drugs for neurological or other uses. Consequently, we cannot be sure that we will earn any of the milestone payments related to these regulatory and product development activities.

      In addition to revenues related to net product sales and royalties from GLIADEL^® Wafer, the only other significant revenues we recognized for the nine-month period ended September 30, 2000 consisted of:

• non-refundable milestone payments of $1.0 million each from Aventis in March and September 2000, based upon Aventis’ receipt of specified regulatory approval to market and sell GLIADEL^® Wafer for the recurrent surgery indication in Spain and the U.K.; and

• $3.4 million relating to research support for the FKBP neuroimmunophilin ligand technology from Amgen.

      As a result of our recent reacquisition of the marketing rights for GLIADEL^® Wafer, we will not be receiving any future milestone payments from Aventis. As we discuss below and in greater detail in the 1999 Form 10-K, whether Amgen will ever make milestone or royalty payments to us in the future is subject to significant risk and uncertainty. We cannot be sure that we will recognize any significant revenues from Amgen in the future.

      For the three- and nine-month periods ended September 30, 2000, we incurred a net loss of $11.6 million and $31.2 million, respectively. Since inception through September 30, 2000, we have an accumulated deficit of $114.1 million. Our accumulated deficit is equal to the sum of our cumulative profits and losses since inception in July 1993.

      We do not expect 2000 to be profitable. We cannot be sure that we will ever achieve or sustain profitability in the future. Furthermore, our revenues and expenses have fluctuated significantly in the past because of the nature and timing of their sources. We expect fluctuations in our revenues and expenses to continue, and thus our operating results should also vary significantly from quarter-to-quarter and year-to-year. A variety of factors cause these fluctuations, including:

• the timing and amount of sales of GLIADEL^® Wafer;

• the timing and realization of milestone and other payments from our corporate partners;

• the timing and amount of expenses relating to our research and development, product development, and manufacturing activities;

• the extent and timing of costs related to our activities to obtain, extend, enforce and/or defend our patent and other rights to our intellectual property; and

• the cost of developing a sales, marketing and distribution network for our GLIADEL^® Wafer product.

      We expect that expenses in all areas of our business will continue to increase. These areas include research and product development, pre-clinical testing, human clinical trials, regulatory affairs, operations, manufacturing, and sales general and administrative activities. In addition, we expect the number of employees working at our company to continue to increase. At September 30, 2000, we had 245 full-time employees, which compares to 228 at December 31, 1999.

      Our ability to achieve consistent profitability in the future will depend on many factors, including:

• the level of future sales of GLIADEL^® Wafer;

• our ability to arrange for sales, marketing and distribution of GLIADEL^® Wafer in the U.S. and internationally, either by ourselves or through outsourcing such activities to third party vendors such as Cardinal;

• our ability, either alone or with others, to develop our product candidates successfully, including NIL-A with Amgen, PACLIMER™ Microspheres, LIDOMER™ Microspheres and any other product candidates;

• the extent of any human clinical trials and related costs necessary to develop our product candidates;

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• our ability, either alone or with others, to obtain required regulatory approvals to market our product candidates;

• our ability and that of our corporate partners to manufacture products at reasonable cost;

• our ability and that of our collaborators to market, sell and distribute products successfully;

• our ability to enter into acceptable collaborative arrangements for our technologies and license agreements for new technologies of others in the future; and

• our ability to invent or acquire new technologies and/or in-license new technologies from others and to obtain, acquire, defend, and/or enforce patents on new and existing technologies.

      Future product sales of GLIADEL^® Wafer are subject to many risks and uncertainties including the following:

• we have never marketed or sold our products directly before and we may not be successful in our efforts to market, sell and distribute GLIADEL^® Wafer through Cardinal, or otherwise.

• neurosurgeons and their patients may not accept GLIADEL^® Wafer for a number of reasons, including the fact that GLIADEL^® Wafer represents a relatively new and unfamiliar approach to the treatment of brain cancer and their possible assessment that benefits of this therapy do not outweigh its costs.

• we may not be successful in our attempts to obtain any additional regulatory and marketing approvals to market GLIADEL^® Wafer and sell GLIADEL^® Wafer at acceptable prices.

• BCNU, the chemotherapeutic agent we use in GLIADEL^® Wafer, is currently only available from two suppliers, and thus this material may not be available for GLIADEL^® Wafer manufacture.

• our current manufacturing plants for GLIADEL^® Wafer are located in close proximity to each other in Baltimore, Maryland, and thus, are subject to the risk that natural disasters or other factors may adversely affect their operation and interrupt GLIADEL^® Wafer manufacture.

      For a discussion of these and other risks, you should read the “Risk Factors” section included in this quarterly report, particularly those paragraphs specifically addressing the risks we note above.

      As we note in the “Risk Factors”, there is no guarantee that Amgen or we will be able to successfully develop any FKBP neuroimmunophilin compounds or other product candidates into safe and effective drug(s) for neurological or other uses. Consequently, we may not earn additional milestone payments related to Amgen’s development activities or revenues related to product sales. In particular, the research, development, and commercialization of early-stage technology, like the FKBP neuroimmunophilin ligand technology, are subject to significant risks and uncertainty. These risks involve those relating to, among other things:

• selection of appropriate lead compounds;

• successful completion of pre-clinical and clinical development activities;

• the need to obtain regulatory clearances in the United States and elsewhere to market and sell drug products;

• formulation of final product dosage forms;

• scale-up from laboratory bench quantities to commercial quantities at a reasonable cost;

• successful manufacture of drug products at an acceptable cost;

• successful commercialization of such products at an acceptable price; and

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• the successful prosecution, enforcement, and defense of patent and other intellectual property rights.

      For a discussion of these and other risks, you should read the “Risk Factors” section included in this quarterly report, particularly those paragraphs specifically addressing the risks we note above.

Results of Operations

      In this section we discuss our revenues, costs and expenses, and other income and expenses, as well as the factors affecting each of them for the three- and nine-month periods ended September 30, 2000 and 1999.

Revenues

      Our revenues for the three- and nine-month periods ended September 30, 2000 and 1999 primarily came from the following sources:

• net product sales of GLIADEL^® Wafer to our marketing and distribution partners;

• royalty payments from Aventis on its sales of GLIADEL^® Wafer to others, primarily hospitals;

• non-refundable milestone payments from Aventis; and

• quarterly research funding from Amgen.

      We recognized total revenues of $3.0 million and $6.9 million for the three-month periods ended September 30, 2000 and 1999, respectively, and $8.5 million and $13.4 million for the nine-month periods ended September 30, 2000 and 1999, respectively.

      These revenues consisted primarily of the following:

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2000		1999		2000		1999
		(in thousands)				(in thousands)
Revenues from Aventis relating to GLIADEL® Wafer:
	Net product sales	$	285	$	565	$	1,492	$	3,432
	License fees and royalties		521		542		1,603		1,785
	Non refundable milestones payments		1,000		4,500		2,000		4,500
Revenues from Amgen:
	Research funding under collaborative     agreements		1,125		1,125		3,375		3,375

GLIADEL^® Wafer Net Product Sales

      During the three-month period ended September 30, 2000, we supplied GLIADEL^® Wafer to our marketing and sales partners. We earned $0.3 million and $0.6 million for the three-month periods ended September 30, 2000 and 1999, respectively, and $1.5 million and $3.4 million for the nine-month periods ended September 30, 2000 and 1999, respectively, from the net product sales of GLIADEL^® Wafer to our marketing and distribution partners, Aventis (for the entire world, except Scandinavia and Japan) and Orion Corporation Pharma (for Scandinavia only). The decrease in revenues attributable to net product sales of GLIADEL^® Wafer to Aventis for the three- and nine-month periods ended September 30, 2000 compared to the three- and nine-month periods ended September 30, 1999 is the result of Aventis managing existing inventory requirements to meet their current sales requirement.

Royalties on GLIADEL^® Wafer Sales to Third Parties

      During the three-month and nine-moth periods ended September 30, 2000, Aventis paid us a royalty on its sales of GLIADEL^® Wafer. These royalty payments are a function of the demand for the product in the market. Net royalty revenues on Aventis’ sales of

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GLIADEL^® Wafer to third parties were $0.5 million and $0.5 million for the three month periods ended September 30, 2000 and 1999, respectively, and $1.6 million and $1.8 million for the nine-month periods ended September 30, 2000 and 1999, respectively. As we discuss in greater detail in the “Risk Factors” section of this quarterly report, a number of factors subject our future sales of GLIADEL^® Wafer to significant risk and uncertainty. Additional factors such as, our ability to sell, market and distribute the GLIADEL^® Wafer through CORD and Cardinal may also affect GLIADEL^® Wafer sales. We cannot be sure that GLIADEL^® Wafer sales will increase from, or even remain at, current levels or will ever generate significant revenues for us in the future.

Cost of Sales

      Our cost of net product sales excluding unabsorbed manufacturing overhead, as a percentage of net product sales revenue were 49% and 54% for the three-month periods ended September 30, 2000 and 1999, respectively, and 53% and 51% for the nine-month periods ended September 30, 2000 and 1999, respectively. The cost to manufacture GLIADEL^® Wafer at current market levels can vary materially with production volume. Production volume in turn is dependent upon purchase orders. As a result of the reacquisition of GLIADEL^® Wafer, we did not manufacture GLIADEL^® Wafer during the three-month period ended September 30, 2000. Therefore, the fixed costs associated with our manufacturing capabilities were shown on our Consolidated Statement of Operations as "Cost of Sales — unabsorbed manufacturing overhead". To the extent that GLIADEL^® Wafer production levels increase in the future, we anticipate that the unit cost to manufacture GLIADEL^® Wafer may decrease, although we cannot be sure that GLIADEL^® Wafer product sales will ever reach levels necessary for us to realize such a reduction in the per unit cost of manufacturing GLIADEL^® Wafer. To the extent that GLIADEL^® Wafer production levels decrease, we anticipate that the unit cost to manufacture GLIADEL^® Wafer will increase. Based on our experience to date, we would expect the cost of net product sales of GLIADEL^® Wafer to fluctuate from quarter to quarter, based on production volumes.

Research and Development Expenses

      Our research and development expenses were $12.2 million and $11.0 million for the three-month periods ended September 30, 2000 and 1999, respectively, and $34.1 million and $30.7 million for the nine-month periods ended September 30, 2000 and 1999, respectively. The increase in our research and development expenses for the three- and nine-month periods ended September 30, 2000 when compared to the corresponding periods of 1999, can be attributed largely to our propofol, pro-drug development program which did not exist in 1999.

      In order to continue to advance our research and development programs, we anticipate that our research and development expenses will increase in future periods.

      At September 30, 2000, we employed 206 individuals on a full-time basis in the areas of research, development and manufacturing compared to 193 and 192 at December 31, 1999 and September 30, 1999, respectively.

General and Administrative Expenses

      Our general and administrative expenses increased to $3.1 million from $2.2 million when comparing the three-month periods ended September 30, 2000 and 1999, respectively, and increased to $8.6 million from $8.4 million when comparing the nine-month periods ended September 30, 2000 and 1999, respectively. The increase when comparing the three-month periods is attributable to recruiting costs as we replace and expand certain senior management positions. The increase during the nine-month period ended September 30, 2000, when compared to the corresponding period in 1999 is attributable to higher personnel costs as we increased staff in certain administrative departments.

      At September 30, 2000, we employed 39 individuals on a full-time basis in general and administrative areas compared to 35 and 33 at December 31, 1999 and September 30, 1999, respectively.

Termination of Proposed Merger with Gliatech Inc.

      On August 28, 2000, we terminated an Agreement and Plan of Merger entered into on May 29, 2000 with Gliatech. The parties mutually agreed that, in light of Gliatech’s need to focus on certain of its ongoing regulatory and product development matters, the parties elected not to proceed with the proposed merger. We incurred costs related to the proposed merger with Gliatech of $0.3 million and $1.4 million for the three and nine-month periods ended September 30, 2000, respectively.

Other Income and Expense

      Other income and expense consists primarily of investment income on our monetary investments and interest expense on our debt and other financial obligations. Our investment income was $1.9 million and $1.6 million for the three-month periods ended

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September 30, 2000 and 1999, respectively, and $6.0 million and $5.6 million for the nine-month periods ended September 30, 2000 and 1999, respectively. The increase experienced during the three-month and nine-month periods is a result of higher average invested balances.

      We incurred interest expense of $ 0.1 and $0.2 for the three-month periods ended September 30, 2000 and 1999, respectively, and $0.4 and $0.5 for the nine-month periods ended September 30, 2000 and 1999, respectively. These expenses resulted from loans from a commercial bank that helped fund the construction of certain of our manufacturing, administrative, and research and development facilities and the purchase of certain furniture and equipment. Because we continued to repay these loans, resulting in a lower average principal balance, interest expense decreased in the three- and nine-month periods ended September 30, 2000 as compared to the corresponding periods of 1999.

Liquidity and Capital Resources

      Our cash, cash equivalents, and investments were approximately $117.1 million at September 30, 2000. Of this amount, we pledged $19.6 million as collateral for certain of our loans and other financial lease obligations. In addition to these restricted investments, we are required to maintain, in the aggregate, unrestricted cash, cash equivalents, and investments of $40.0 million at all times under the terms of certain of its financial obligations.

      Our total debt decreased to $7.7 million at September 30, 2000 compared to $9.4 million at December 31, 1999. This decrease is a result of our continued repayment of principal under our loans with a commercial bank.

      We incurred capital expenditures of $0.5 million and $1.3 million during the three- and nine-month periods ended September 30, 2000, respectively, which resulted primarily from the purchase of equipment to support our ongoing research and development and production activities.

      During 1998, we entered into arrangements with certain equipment leasing companies that permit us to lease up to an aggregate of $10.8 million in equipment, including certain computer hardware, and furniture and fixtures. As of September 30, 2000, we had leased approximately $8.7 million in equipment under these arrangements. Depending on the type of equipment covered and certain other factors, the term of any lease we enter under these arrangements can range from two to four years. At September 30, 2000, $2.1 million was available under these arrangements to lease additional equipment. Although these lease arrangements expire on December 31, 2000, we expect to be able to extend any unused portions and will seek to develop additional lines as necessary.

      We expect our existing financing arrangements, our internal capital resources, and potential external sources of funds to provide for our current equipment needs at least through the end of 2001. If we decide to expand our research and development programs beyond current expectations or if we engage in acquisitions, our capital equipment requirements could increase, and thus, we may require additional capital funding.

      In order to meet our anticipated future facilities needs, in 1997 we initiated a project to design, construct, and lease a new research and development facility. To accomplish this, in February 1998 we entered into an operating lease and other related agreements with a commercial bank and related entities in connection with such a facility. This new facility, which was completed in 1999, was constructed adjacent to our current headquarters in Baltimore, Maryland. This facility is owned by a trust affiliated with a commercial bank (the “Trust”) and provides approximately 73,000 square feet of research and development capacity. The initial lease term expires in February 2005. At the end of the initial lease term, we may re-lease the facility, purchase the building, or arrange for the sale of the building to a third party. In the event the building is sold to a third party, we will be obligated to pay the lessor any shortfall between the sales price and 83% of the lessor’s net investment in the facility. We anticipate that this new research and development facility, along with our current facility, will support our research, development, commercialization, and administrative activities through at least the end of 2001.

      During 1998 and 1999, we entered into a series of interest rate swap transactions with a commercial bank covering $20.0 million in financial obligations under our lease with the Trust and $10.0 million with the commercial bank covering our bond and term loans. As a result, we fixed the interest rates on our financial lease obligations and debt at approximately 6% in the aggregate. Certain of the interest rate swap agreements provide the commercial bank with a call provision exercisable during 2003.

      During 1998, we established an unsecured, revolving line of credit for $5.0 million with a commercial bank. Borrowings under this line of credit carry an interest rate of LIBOR plus 0.55% and are available on demand. We may draw on this line of credit from time to

17

time to meet our short-term working capital needs. There were no amounts drawn upon or outstanding during the three- and nine-month periods ended September 30, 2000 and 1999.

      We believe that our existing resources are sufficient to fund our current activities though at least December 31, 2001. However, we expect to need significantly greater capital in the near future to:

• cover the costs of setting up a commercial operations function to take over the selling, marketing, and distributing of GLIADEL^® Wafer

• increase pre-clinical and clinical development activities for development candidates such as:

• PACLIMER™ Microspheres (for ovarian and other cancers),

• GPI-5693 (our lead NAALADase inhibitor initially targeting diabetic neuropathic pain),

• GPI-1571 (our propofol pro-drug for sedation), and

• LIDOMER™ Microspheres (our delayed release lidocaine analgesic product candidate targeting post-surgical pain).

      As a result, we currently intend to seek funds in the capital markets in the near term by filing a shelf registration statement for up to 3,500,000 shares of our common stock. We cannot predict with certainty the amount or timing of our sale of common stock under this shelf registration statement because this action depends upon market conditions that we cannot control.

Recently Issued Accounting Pronouncements

      In December 1999, the staff of the SEC issued Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (“SAB 101”). SAB 101 summarizes certain of the staff’s views in applying generally accepted accounting principles to revenue recognition in the financial statements, including recognition of non-refundable fees received upon entering into arrangements. In June 2000, the SEC issued Staff Accounting Bulletin No. 101B which delays the implementation date of SAB 101 until no later than the fourth fiscal quarter of fiscal year beginning after December 15, 1999. Accordingly, the Company is evaluating SAB 101 and the effect it will have on its consolidated financial statements and current revenue recognition policy.

Outlook

      For the fourth quarter of 2000, we expect to only record revenue from royalties related to sales of GLIADEL^® Wafer to third parties. We expect the total amount of royalty revenue to be consistent with royalty revenues reported for each of the first three quarters of 2000. As a result of our reacquisition of GLIADEL^® Wafer, we will no longer be receiving milestone payments, nor will we be recording additional revenue from net product sales of GLIADEL^® Wafer to Aventis.

      Expenses in the fourth quarter are currently projected to increase over those in the third quarter between $1.5 million to $2.0 million, primarily due to costs of establishing our commercial operations.

      As a result of the increase in expenses and decrease in revenues, we expect our operating loss for the fourth quarter to be between $14.0 million and $16.0 million. Although we cannot be certain, we do not expect to continue to incur losses at that rate during 2001.

      In 2001, we expect sales of GLIADEL^® Wafer to be between $17.0 million and $22.0 million. Revenue from GLIADEL^® Wafer may be greater if we receive a first surgery label in the United States and internationally, especially if GLIADEL^® Wafer were to achieve “standard of care” acceptance by the neurosurgical community.

      We expect that our total expenses for 2001, other than expenses associated with our commercial operations group, will increase by approximately $10.0 million to $12.0 million over the total expenses for 2000. This increase would result from an increase in clinical development costs as we advance four product candidates (PACLIMER™ Microspheres, GPI-5693, GPI-15715 and LIDOMER™ Microspheres) through clinical development.

      We plan to seek additional revenues from partnering activities in 2001. Specifically, we are attempting to license GLIADEL^® Wafer in Japan and, possibly conclude a corporate partnership for non-U.S. rights for the NAALADase program. If we are successful in these efforts (and subject to our ability to recognize revenue from these types of transactions under the current accounting literature),

18

we would hope to achieve $15.0 million to $20.0 million in revenues from these corporate partners.

      We currently anticipate that research and development expenses in 2001 will increase by approximately $10.0 million when compared to 2000. As we stated above, most of this increase will be related to increased clinical trial costs. We anticipate that general and administrative costs will increase by approximately $2.0 million compared to 2000. Sales, marketing and distribution costs will be part of the operating statement for the full year in 2001. We would expect such costs to be between $12 million to $14 million for 2001. Cost of sales as a percentage of net sales will range from 14% to 16%, commencing in 2001, as a result of our recording the full value of sales of GLIADEL^® Wafer. We expect our capital expenditures in 2001 will be between $2.0 million and $2.5 million.

      Over the next few months, if our progress remains on target, we expect to begin clinical development of two new programs, GPI-5693 and GPI-15715. During 2001, we expect to file and hope to obtain a supplemental New Drug Application for GLIADEL^® Wafer for first surgery from the FDA, and to re-launch GLIADEL^® Wafer directly though our own contract marketing and sales organization. We also expect to report results from our PACLIMER™ Microspheres Phase I clinical trial and neuroimmunophilin Phase II clinical trial.

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GUILFORD PHARMACEUTICALS INC.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

      A substantial portion of our assets are investment grade debt instruments such as direct obligations of the U.S. Treasury, securities of federal agencies which carry the direct or implied guarantee of the U.S. government, bank certificates of deposit and corporate securities, including commercial paper and corporate debt instruments. The market value of such investments fluctuates with current market interest rates. In general, as rates increase, the market value of a debt instrument would be expected to decrease. The opposite is also true. To minimize such market risk, we have in the past and, to the extent possible, will continue in the future to hold such debt instruments to maturity at which time the debt instrument will be redeemed at its stated or face value. Due to the short duration and conservative nature of these instruments, we do not believe that we have a material exposure to interest rate risk related to our investment portfolio. The investment portfolio at September 30, 2000 was $94.1 million and the weighted-average interest rate was approximately six percent (6%).

      Substantially all of our financial obligations have variable rates of interest. As a hedge against fluctuations in interest rates, we have entered into certain interest rate swap agreements with a commercial bank (“counter party”), to exchange substantially all of our variable rates of interest on certain financial lease obligations and debt for fixed rates. Our borrowings under our bond and term loans and financial obligations under certain lease arrangements are approximately $26.3 million. Pursuant to these borrowing arrangements, we are obligated to pay variable interest rates on substantially all of these obligations of LIBOR plus between 5/8% and 3/4%. The interest rate swap agreements have a total notional principal amount of approximately $27.1 million as of September 30, 2000. Pursuant to these interest rate swap agreements, we pay a fixed rate of interest to the counter party of approximately 6% and receives from the counter party a variable rate of interest of LIBOR plus 5/8%. The differential to be paid or received as interest rates change is charged or credited, as appropriate, to operations. Thereby, we have effectively fixed the interest rates on our financial obligations at an annual rate of approximately 6% in the aggregate. These interest rate swap agreements have approximately the same maturity as the financial obligations and expire on various dates through February 2005. The commercial bank has the right to terminate certain of the agreements having a total notional principal amount of $20.0 million during February 2003. We do not speculate on the future direction of interest rates nor do we use these derivative financial instruments for trading purposes. In the event of non-performance by the counter party, we could be exposed to market risk related to interest rates.

      The aggregate fair value of these interest rate swap agreements was approximately $0.6 million at September 30, 2000. Current market pricing models were used to estimate these fair values.

      We describe our exposure to interest rate risk in Notes 4 and 7, “Interest Rate Swap Agreements” and “Indebtedness,” respectively, to the footnotes to our consolidated financial statements, which we have included as Exhibit 13.01 to our annual report on Form 10-K for the year ended December 31, 1999, which we filed with the SEC on March 30, 2000.

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PART II. OTHER INFORMATION

Item 1.  Legal Proceedings:

      None

Item 2.  Changes In Securities:

      On October 23, 2000, we issued 300,000 shares of common stock valued at approximately $8.0 million to Aventis, in consideration for the reacquisition of worldwide sale, marketing and distribution rights of GLIADEL® Wafer (except in Scandinavia, where GLIADEL® Wafer is marketed by Orion Pharma). In connection with this issuance, we relied on the exemption from registration under the Securities Act of 1933 provided in Section 4 (2) of the Act.

Item 3.  Defaults Upon Senior Securities:

      None

Item 4.  Submission of Matters to a Vote of Security Holders:

      None

Item 5.  Other Information:

RISK FACTORS

      An investment in our stock is very speculative and involves a high degree of risk. You should consider the following important factors, as well as the other information in this report and our SEC filings, carefully before purchasing our stock.

We have a history of losses and our future profitability is uncertain.

      We may not be able to achieve or sustain significant revenues or earn a profit in the future. We founded Guilford in July 1993, and since that time, with the sole exception of 1996, we have not earned a profit in any year. Our losses result mainly from the large amount of money that we have spent on research and development. As of September 30, 2000, we had an accumulated deficit of approximately $114.1 million. We expect to have significant additional losses over the next several years.

      Most of our product candidates are in research or early stages of pre-clinical and clinical development. Except for GLIADEL®Wafer, none of our products or product candidates has been sold to the public. Up to this point in this time, nearly all of our revenues have come from:

• payments from Aventis from the sale and distribution of GLIADEL®Wafer,

• one-time signing fees from our corporate partners under agreements supporting the research, development and commercialization of our product candidates,

• one-time payments from our corporate partners when we achieve regulatory or development milestones, and

• research funding under our agreement with Amgen.

      We recently reacquired from Aventis the right to sell, market and distribute GLIADEL®Wafer so we will not receive any future payments from Aventis for GLIADEL®Wafer. We do not expect revenues from GLIADEL®Wafer to be sufficient to support all our anticipated future activities. Whether we will ever be able to generate significant revenues from GLIADEL®Wafer continues to be uncertain, especially in light of our inexperience in the sales, marketing and distribution area. In addition, we do not expect to generate revenues from the sale of our product candidates for the next several years, if ever.

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      We may never recognize significant additional revenues from Amgen because of the significant risks. These risks are part of each of the following activities:

• new product development,

• the conduct of pre-clinical animal studies and human clinical trials,

• applying for and obtaining regulatory approval to market and sell product candidates,

• expanding the processes for making product candidates from the relatively small quantities and qualities needed for research and development purposes to the commercial scale manufacture needed to support marketing and sales of new products, and

• commercialization of new products.

      We discuss these and other risks in greater detail below in this “Risk Factors” section.

      Many factors will dictate our ability to achieve sustained profitability in the future, including:

• our ability to successfully sell, market and distribute GLIADEL^®Wafer,

• receipt of regulatory clearance to market and sell GLIADEL^®Wafer for patients undergoing initial surgery for malignant glioma in the United States as well as in Europe and other countries,

• receipt of regulatory clearance to market and sell GLIADEL^®Wafer for the recurrent indication in Europe and other countries,

• the successful development and commercialization of product candidates that result from our collaboration with Amgen, and

• our ability to enter into additional collaborative arrangements and license agreements with other corporate partners for our product candidates and earlier stage technologies as we develop them.

      We will need to conduct substantial additional research, development and clinical trials. We will also need to receive necessary regulatory clearances both in the United States and foreign countries. We expect that these research, development and clinical trial activities, and regulatory clearances, together with future general and administrative activities, will result in significant expenses for the foreseeable future.

We depend on a single product, GLIADEL^®Wafer, for revenues.

      Our short-term prospects depend to a large extent on sales of GLIADEL^®Wafer, our only commercial product. We commercially launched GLIADEL^®Wafer in the United States in February 1997. We currently do not know whether the product will ever gain broad market acceptance or the extent of the marketing efforts necessary to achieve broad market acceptance. If GLIADEL^®Wafer fails to gain market acceptance, the revenues we receive from sales of GLIADEL^®Wafer would be unlikely to increase.

      On October 23, 2000, we reacquired from Aventis the right to market, sell and distribute GLIADEL^®Wafer. Until then, Aventis held exclusive worldwide (excluding Scandinavia and Japan) marketing, sales and distribution rights for GLIADEL^®Wafer. Under that arrangement, Aventis paid us royalties and also made designated one-time milestone payments upon achieving specified domestic and international regulatory approvals. For example, Aventis made a $1.0 million payments to us in each of March and September 2000. After the reacquisition, Aventis is no longer obligated to make any payments to us.

      We have clearance from the FDA to market GLIADEL^®Wafer in the United States for only a limited subset of patients who suffer from brain cancer. Our clearance is for those patients for whom surgical tumor removal, commonly referred to as “resection,” is called for and who have “recurrent” forms of a type of brain cancer called glioblastoma multiforme. A recurrent form of glioblastoma multiforme is one in which the cancer has returned after initial surgery to remove a brain tumor. The number of patients undergoing recurrent surgery for glioblastoma multiforme is very limited, and we believe the total number of patients on an annual basis who have glioblastoma multiforme in the United States is approximately 10,000.

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      In order to expand the medical uses, commonly referred to as “indications,” for which we may market GLIADEL^®Wafer, we must successfully complete additional lengthy clinical trials. Thereafter, we will have to apply to the FDA and international health regulatory authorities for clearance to market GLIADEL^®Wafer for patients undergoing initial surgery for glioblastoma multiforme and potentially other types of brain cancer. We may not be able to successfully complete these clinical trials or receive the desired regulatory clearance. If GLIADEL^®Wafer fails to receive regulatory clearance, that failure would limit our ability to market GLIADEL^®Wafer for use in patients beyond the current narrow indication and reduces the likelihood of increasing the revenues that we receive from sales of GLIADEL^®Wafer.

      In addition, we have filed for marketing clearance for the current indication for GLIADEL^®Wafer in a number of foreign countries, and as of the date of this quarterly report, we have received international regulatory approvals to market and sell GLIADEL^®Wafer in only 21 countries, including France, Spain, Germany and the U.K. We may not be able to obtain any other international regulatory approvals for GLIADEL^®Wafer. If we fail to obtain those approvals, the geographic market for GLIADEL^®Wafer would remain limited, which reduces the likelihood of increasing the revenues that we receive from sales of GLIADEL^®Wafer. Regardless of the number of foreign regulatory approvals that we have received, international sales to date comprise a small percentage of total sales of GLIADEL^®Wafer.

      GLIADEL^®Wafer is also a very fragile product and can easily break into many pieces if it is not handled with great care. Product recalls due to excessive breakage of the GLIADEL^®Wafers or for other reasons could also have a negative effect on our business, financial condition and results of operations.

We have never marketed or sold our products directly before and we may not be successful in our efforts to market, sell and distribute GLIADEL^®Wafer. Additionally, we expect to incur significant expense in marketing, selling and distributing GLIADEL^®Wafer.

      We currently do not have a sales force, and we have no experience in marketing or selling a product. From GLIADEL^® Wafer’s commercial launch until December 31, 2000, Aventis marketed, sold and distributed GLIADEL^®Wafer. Our recent reacquisition of the right to market, sell and distribute GLIADEL^®Wafer marks an important change in our business. We currently do not have, and have never had, direct sales capability. We have also never engaged in significant marketing efforts. Our limited experience in developing, maintaining and expanding a direct specialty sales force may restrict our success in selling GLIADEL^®Wafer.

      Alternatively, we may contract with third parties for the sale, marketing and distribution of GLIADEL^®Wafer. We recently entered into an agreement with Cardinal to hire and train sales representatives to market and sell GLIADEL^®Wafer.

Our operating results are likely to fluctuate from quarter to quarter, which could cause the price of our common stock to decline.

      Our revenues and expenses have fluctuated significantly in the past. This fluctuation has in turn caused our operating results to vary significantly from quarter to quarter and year to year. We expect the fluctuations in our revenues and expenses to continue and thus our operating results should also continue to vary significantly. These fluctuations are due to a variety of factors, including:

• the timing and amount of sales of GLIADEL^®Wafer,

• the timing and realization of milestone and other payments from our corporate partners

• the timing and amount of expenses relating to our research and development, product development, and manufacturing activities, and

• the extent and timing of costs related to our activities to obtain patents on our inventions and to extend, enforce and/or defend our patent and other rights to our intellectual property.

      Because of these fluctuations, it is possible that our operating results for a particular quarter or quarters will not meet the expectations of public market analysts and investors, causing the market price of our common stock to decline. We believe that

23

period-to-period comparisons of our operating results are not a good indication of our future performance and you should not rely on those comparisons to predict our future operating or share price performance.

The market price of our stock may be negatively affected by market volatility.

      The market price of our stock has been and is likely to continue to be highly volatile. Furthermore, the stock market generally and the market for stocks of companies with lower market capitalizations and small biotechnology companies, like us, have from time to time experienced and likely will again experience significant price and volume fluctuations that are unrelated to the operating performance of a particular company.

      From time to time, stock market professionals publish research reports covering our business and our future prospects. For a number of factors, we may be unable to meet the expectations of securities analysts or investors and our stock price may decline. These factors include:

• announcements by us or our competitors of clinical results, technological innovations, product sales, new products or product candidates,

• developments or disputes concerning patent or proprietary rights,

• regulatory developments affecting our products,

• period-to-period fluctuations in the results of our operations, and

• market conditions for emerging growth companies and biopharmaceutical companies.

• revenues received from GLIADEL^® Wafer

• expenditures of Guilford

      In the past, following periods of volatility in the market price of the securities of companies in our industry, securities class action litigation has often been instituted against those companies. If we face such litigation in the future, it would result in substantial costs and a diversion of management’s attention and resources, which would negatively impact our business.

Our collaboration with Amgen may be a significant source of future revenue for us. The success of this collaboration depends on a number of factors, most of which are outside of our control.

      The achievement of the milestones that trigger payments by Amgen to us depend on a number of factors. We do not control many of these factors, including:

• the selection of one or more appropriate lead compounds,

• successful design and completion of pre-clinical and clinical development activities,

• application for and obtaining regulatory clearances to market potential products,

• commercialization of products, and

• the successful preservation and extension of the patent and other intellectual property rights licensed to Amgen.

      Moreover, under the terms of our collaboration with Amgen, we have no control over the development activities regarding the FKBP neuroimmunophilin ligand technology, which are within the sole discretion of Amgen. Our agreement with Amgen also does not specify a binding timetable for achieving development and commercialization goals with respect to the FKBP neuroimmunophilin ligand technology. Even if Amgen determines to conduct clinical trials on a product candidate resulting from our collaboration, Amgen still may not be able successfully to complete those clinical trials and then receive clearance from the FDA or foreign regulatory authorities to market and sell any such products.

      The FKBP neuroimmunophilin ligand technology we have licensed to Amgen represents a new approach to the treatment of certain types of neurological and other diseases and conditions. We and Amgen have very limited experience in taking the kinds of compounds likely to result from our work and formulating them into final drug products appropriate for sale to the public. In addition,

24

both of us have limited experience with the transition of these compounds from the quantity and quality needed to support research and development efforts to the quantities needed to support commercial scale distribution. Also, both we and Amgen have limited experience with the manufacture of compounds of this type for commercial sale. Amgen may not be successful in scaling-up and manufacturing adequate quantities needed for commercial sale. For a more complete description of the kinds of risks associated with product manufacture, you should read the section entitled “We have limited manufacturing capabilities” below.

      Even if Amgen is able to obtain all regulatory approvals necessary to market a product resulting from our collaboration, our agreement does not specify any minimum sales requirements for Amgen. Thus, any royalty amounts that Amgen pays us in the future will depend entirely on the sales and marketing efforts of Amgen, an activity over which we will have no control. In addition, our agreement with Amgen does not prevent Amgen from pursuing technologies for product candidates that compete with the FKBP neuroimmunophilin ligand technology in the future.

Our manufacturing capabilities are limited by the size of our facilities, our inexperience manufacturing large quantities of product and the potential inability to locate a third party manufacturer for our product candidates.

      To commercialize GLIADEL^®Wafer, we must be able to manufacture this product in sufficient quantities, in compliance with regulatory requirements, and at acceptable costs. We manufacture GLIADEL^®Wafer at our two manufacturing facilities in Baltimore, Maryland, which consist of production laboratories and redundant cleanrooms. We estimate that the facilities currently have the capacity to manufacture approximately 8,000 GLIADEL^®Wafer treatments per year.

      We have manufactured only limited quantities of GLIADEL^®Wafer in our facilities. We cannot be sure that we will be able to continue to satisfy applicable regulatory standards, including FDA requirements, and other requirements relating to the manufacture of GLIADEL^®Wafer in the facilities.

      We also face risks inherent in the operation of a facility for manufacture of GLIADEL^®Wafer. These risks include:

• unforeseen plant shutdowns due to personnel, equipment or other factors, and

• the possible inability of the facilities to produce GLIADEL^®Wafer in quantities sufficient to meet demand.

      Any delay in the manufacture of GLIADEL^®Wafer could result in delays in product shipment. Delays in product shipment would have a negative effect on our business and operating results.

      Currently, we have no manufacturing capabilities for any of our product candidates. Consequently, in order to complete the commercialization process of any of our product candidates, we must either acquire, build or expand our internal manufacturing capabilities or rely on third parties to manufacture these product candidates. We cannot be sure that we or our corporate partners, including Amgen, will be able to (1) acquire, build or expand facilities that will meet quality, quantity and timing requirements or (2) enter into manufacturing contracts with others on acceptable terms. If we or our corporate partners are unable, to accomplish these tasks, it would impede our efforts to bring our product candidates to market, which would adversely affect our business. Moreover, if we decide to manufacture one or more of our product candidates ourselves, we would incur substantial start-up expenses and need to expand our facilities and hire additional personnel.

      Third-party manufacturers must also comply with FDA, Drug Enforcement Administration, and other regulatory requirements for their facilities. In addition, manufacture of product candidates on a limited basis for investigational use in animal studies or human clinical trials does not guarantee that large-scale, commercial production is viable. Small changes in methods of manufacture can affect the safety, efficacy, controlled release or other characteristics of a product. Changes in methods of manufacture, including commercial scale-up, can, among other things, require the performance of new clinical studies.

Revenues from our products, specifically GLIADEL^®Wafer, depend in part on reimbursement from health care payors, which is uncertain.

      The continuing efforts of government and insurance companies, health maintenance organizations and other payors of health care costs to contain or reduce costs of health care may affect our future revenues and profitability. These efforts may also affect the future revenues and profitability of our potential customers, suppliers and collaborative partners, in turn affecting demand for our products. For example, in certain foreign markets, pricing or profitability of prescription pharmaceuticals is subject to government

25

control. In the United States, given recent federal and state government initiatives directed at lowering the total cost of health care, the U.S. Congress and state legislatures will likely continue to focus on health care reform, the cost of prescription pharmaceuticals and on the reform of the Medicare and Medicaid systems. While we cannot predict whether any such legislative or regulatory proposals will be adopted, the announcement or adoption of such proposals could have a negative effect on our business and operating results.

      Our ability to commercialize our products successfully will depend in part on the extent to which private health insurers, organizations such as HMOs and governmental authorities can obtain appropriate reimbursement levels for the cost of our products and related treatment. Third-party payors are increasingly challenging the prices charged for medical products and services. Also, the trend toward managed health care in the United States and the concurrent growth of organizations such as HMOs, which could control or significantly influence the purchase of health care services and products, as well as legislative proposals to reform health care or reduce government insurance programs, may all result in lower prices for or rejection of our products. The cost containment measures that health care payors and providers are instituting and the effect of any health care reform could materially and adversely affect our ability to operate profitably.

      Furthermore, even if reimbursement is available, we cannot be sure that it will be available at price levels sufficient to realize an appropriate return on our investment in GLIADEL^®Wafer or our other product candidates.

We face technological uncertainties in connection with the research, development and commercialization of new products.

      The research, development and commercialization of pharmaceutical drugs inherently involve significant risk. Before we or our corporate partners can be in a position to market, distribute and sell a new product, each of us will have to:

• expend substantial capital and effort to develop our product candidates further, which includes conducting extensive and expensive pre-clinical animal studies and human clinical trials,

• apply for and obtain regulatory approval to market and sell such product candidates, and

• conduct other costly activities related to preparation for product launch, among many other activities.

      In some of our research programs, we are using compounds that we consider to be “prototype” compounds in the research phase of our work. By prototype compounds we mean compounds that we are using primarily to establish that a relevant scientific mechanism of biological or chemical action could have commercial application in diagnosing, treating or preventing disease. We generally do not consider our prototype compounds to be lead compounds acceptable for further development into a product(s) because of factors that render them unsuitable as drug candidates. These factors include the ability for the compound to be metabolized, absorbed, distributed and excreted from the body. In order to develop commercial products, we will need to conduct research using other compounds that share the key aspects of the prototype compounds but do not have the unsuitable characteristics. This may not always be possible.

      In addition, our product candidates are subject to the risks of failure inherent in the development of products based on new and unproved technologies. These risks include the possibility that:

• our new approaches will not result in any products that gain market acceptance,

• a product candidate will prove to be unsafe or ineffective, or will otherwise fail to receive and maintain regulatory clearances necessary for marketing,

• a product, even if found to be safe and effective, could still be difficult to manufacture on the large scale necessary for commercialization or otherwise not be economical to market,

• a product will unfavorably interact with other types of commonly used medications, thus restricting the circumstances in which it may be used,

• proprietary rights of third parties will preclude us from manufacturing or marketing a new product, or

• third parties will market superior or more cost-effective products.

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      As a result, our activities, either directly or through corporate partners, may not result in any commercially viable products.

We depend on collaborations with third parties for the development and commercialization of our products.

      Our resources are limited, particularly because we are developing our technologies for a variety of different diseases. Our business strategy requires that we enter into various arrangements with:

• corporate partners, such as Amgen,

• academic investigators at universities, such as Johns Hopkins and others,

• licensors of technologies, such as Johns Hopkins, Massachusetts Institute of Technology and RTI,

• licensees of our technologies, such as Daiichi Radioisotope Laboratories, Ltd. and others.

Our success depends in large part upon the efforts of our third party collaborators.

      Our business strategy includes finding larger pharmaceutical companies to collaborate with us to support the research, development and commercialization of our product candidates. In trying to attract corporate partners to collaborate with us in the research, development and commercialization process, we face serious competition from other small biopharmaceutical companies and even the in-house research and development staffs of the larger pharmaceutical companies themselves. If we are unable to enter into such arrangements with corporate partners, our ability to proceed with the research, development, manufacture or sale of product candidates may be severely limited. For example, we are actively seeking corporate partners to assist in the development of DOPASCAN^®Injection as well as our NAALADase and PARP inhibitor neuroprotective drug programs, but we may not find suitable corporate partners for these programs. It is common in many corporate partnerships in our industry for the larger partner to have responsibility for conducting pre-clinical studies and human clinical trials and/or preparing and submitting applications for regulatory approval of potential pharmaceutical or other products. That is the case with our collaboration with Amgen. It is possible that this will also be the case with future arrangements into which we may enter. If one of our collaborative partners fails to develop or commercialize successfully any of our product candidates, we would not be able to remedy this failure would and the failure could negatively affect our business.

      Furthermore, larger pharmaceutical companies often explore multiple technologies and products for the same medical conditions. Therefore, they are likely to enter into collaborations with our competitors for products addressing the same medical conditions targeted by our technologies. Thus our collaborators, including Amgen, may pursue alternative technologies or product candidates in order to develop treatments for the diseases or disorders targeted by our collaborative arrangements. Our collaborators may pursue these alternatives either on their own or in collaboration with others, including our competitors. Depending on how other product candidates advance, a corporate partner may slow down or abandon its work on our product candidates or terminate its collaborative arrangement with us in order to focus on these other prospects.

We may be unable to obtain the additional capital needed to operate and grow our business.

      We will require substantial funds in order to cover the costs of setting up a commercial operations function to take over the commercialization of GLIADEL^®Wafer from Aventis, continue our research and development programs and pre-clinical and clinical testing, and to manufacture and market our products. We may be unable to obtain any future funds that we may require on acceptable terms, or at all. Under our operating lease with a trust affiliated with First Union National Bank for our new research and development facility, we are required to hold, in the aggregate, unrestricted cash, cash equivalents and investments of $40 million at all times during the term of the lease. In addition, we are required to maintain specified amounts of cash, $19.1 million restricted at December 31, 1999, as collateral at First Union under this arrangement and other loan agreements with First Union. These requirements may limit our ability to access our capital in the future.

      Our capital requirements depend on numerous factors, including:

• the progress of our research and development programs,

• the progress of pre-clinical and clinical testing,

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• the time and costs involved in obtaining regulatory approvals,

• the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights,

• competing technological and market developments,

• changes in our existing research relationships with universities and others,

• our ability to establish collaborative arrangements with large pharmaceutical companies and others,

• the requirements and timing of entering into technology licensing agreements and other similar arrangements, and

• the progress of efforts to scale-up manufacturing processes.

      We may use our existing resources before we may otherwise expect because of changes in our research and development and commercialization plans or other factors affecting our operating expenses or capital expenditures, including potential acquisitions of other businesses, assets or technologies.

      Our ability to raise future capital on acceptable terms depends on conditions in the public and private equity markets and our performance, as well as the overall performance of other companies in the biopharmaceutical and biotechnology sectors.

We may be unable to protect our proprietary rights, permitting competitors to duplicate our products and services.

      Any success that we have will depend in large part on our ability to:

• obtain, maintain and enforce intellectual property protection for our products and processes,

• license rights to patents from third parties,

• maintain trade secret protection, and

• operate without infringing upon the proprietary rights of others.

      Intellectual property for our technologies and products will be a crucial factor in our ability to develop and commercialize our products. Large pharmaceutical companies consider a strong patent estate critical when they evaluate whether to enter into a collaborative arrangement to support the research, development and commercialization of a technology. Without the prospect of reasonable intellectual property protection, it would be difficult for a corporate partner to justify the time and money that is necessary to complete the development of a product.

      The rules and criteria for receiving and enforcing a patent for pharmaceutical and biotechnological inventions are in flux and are unclear in many respects. The range of protection given these types of patents is uncertain, and a number of our product candidates are subject to this uncertainty.

      Many others, including companies, universities and other research organizations, work in the areas of our business, and we cannot be sure that the claims contained in our issued patents will be interpreted as broadly as we would like in light of the inventions of these other parties. In addition, we cannot be sure that the claims set forth in our pending patent applications will issue in the form submitted. These claims may be narrowed or stricken, and the applications may not ever ultimately result in valid and enforceable patents. Thus, we cannot be sure that our patents and patent applications will adequately protect our product candidates.

      We are aware of at least one company, which has asserted publicly that it has submitted patent applications claiming the use of certain of its immunosuppressive compounds and multidrug resistance compounds for nerve growth applications. That company has also stated that it has issued U.S. patents and pending U.S. applications that it states claim compounds that are useful in nerve growth applications. We cannot give any assurance as to the ability of our patents and patent applications to adequately protect our neurotrophic product candidates. Also, our neurotrophic product candidates may infringe or be dominated by patents that have issued or may issue in the future to third parties.

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      In order to protect our intellectual property position with respect to our neuroimmunophilin ligands, we filed an opposition in 1998 in an effort to prevent the final issuance of a European patent to the company we discuss in the above paragraph. While we do not believe the claims of this European patent are valid, any final issuance could result in future litigation if this company were to allege that we infringed the claims of this patent in Europe.

      Furthermore, any or all of the patent applications assigned or licensed to us from third parties may not be granted. We may not develop additional products or processes that are patentable. Any patents issued to us, or licensed by us, may not provide us with any competitive advantages or adequate protection for our products. Others may successfully challenge, circumvent or invalidate any of our existing or future patents or intellectual property.

      Our policy is to control the disclosure and use of our know-how and trade secrets by entering into confidentiality agreements with our employees, consultants and third parties. There is a risk, however, that:

• these parties will not honor our confidentiality agreements,

• others will independently develop equivalent or competing technology,

• disputes will arise concerning the ownership of intellectual property or the applicability of confidentiality obligations, or

• disclosure of our trade secrets will occur regardless of these contractual protections.

      In our business, we often work with consultants and research collaborators at universities and other research organizations. To the extent that any of these consultants or research collaborators uses intellectual property owned by others as part of their work with us, disputes may arise between us and these other parties as to which one of us has the rights to intellectual property related to or resulting from the work done.

      We support and collaborate in research conducted in universities, such as Johns Hopkins, and in governmental research organizations, such as the National Institutes of Health. We may not be able to acquire exclusive rights to the inventions or technical information that result from work performed by university personnel or at these organizations. Also, disputes may arise as to which party should have rights in research programs that we conduct on our own or in collaboration with others that are derived from or related to the work performed at the university or governmental research organization. In addition, in the event of a contractual breach by us, some of our collaborative research contracts provide that we must return the technology rights, including any patents or patent applications, to the contracting university or governmental research organization.

      Questions of infringement of intellectual property rights, including patent rights, may involve highly technical and subjective analyses. Some or all of our existing or future products or technologies may now or in the future infringe the rights of other parties. These other parties might initiate legal action against us to enforce their claims, and our defense of the claims might not be successful.

      We may incur substantial costs if we must defend against charges of infringement of patent or proprietary rights of third parties. We may also incur substantial costs if we find it necessary to protect our own patent or proprietary rights by bringing suit against third parties, including suits involving our neurotrophic product candidates. We could also lose rights to develop or market products or be required to pay monetary damages or royalties to license proprietary rights from third parties. In response to actual or threatened litigation, we may seek licenses from third parties or attempt to redesign our products or processes to avoid infringement. We may not be able to obtain licenses on acceptable terms, or at all, or successfully redesign our products or processes.

      In addition to the risk that we could be a party to patent infringement litigation, the U.S. Patent and Trademark Office, or its foreign counterparts, could require us to participate in patent interference proceedings that it declares. These proceedings are often expensive and time-consuming, even if we were to prevail in such a proceeding. We may also be forced to initiate legal proceedings to protect our patent position or other proprietary rights. These proceedings typically are costly, protracted, and offer no assurance of success.

      Under our collaboration, Amgen is responsible for preparing, filing, prosecuting, maintaining and defending patent applications and patents relating to the FKBP neuroimmunophilin ligand technology. We cannot be sure that Amgen will pursue these activities in the same manner or as vigorously as we would if we had that responsibility. Furthermore, Amgen has the option to take the lead in bringing actions to enforce patent rights relating to the FKBP neuroimmunophilin ligand technology and to defend against third party

29

infringement suits regarding that technology. While Amgen and Guilford have agreed to consult with each other on such matters, in the event of disagreement, Amgen’s decisions will control.

We rely on licensed intellectual property for GLIADEL®Wafer and our other product candidates.

      We have licensed intellectual property, including patents, patent applications and know-how, from universities and others, including intellectual property underlying GLIADEL®Wafer, DOPASCAN®Injection and the neuroimmunophilin ligand technology. Some of our product development programs depend on our ability to maintain rights under these licenses. Under the terms of our license agreements, we are generally obligated to:

• exercise diligence in the research and development of these technologies,

• achieve specified development and regulatory milestones,

• expend minimum amounts of resources in bringing potential products to market,

• make specified royalty and milestone payments to the party from which we have licensed the technology, and

• reimburse patent costs to these parties.

      In addition, these license agreements require us to abide by record-keeping and periodic reporting obligations. Each licensor has the power to terminate its agreement if we fail to meet our obligations under that license. We may not be able to meet our obligations under these license agreements, which could deprive us of access to key technology. Furthermore, these obligations may conflict with our obligations under other agreements that we have.

      If we default under any of these license agreements, we may lose our right to market and sell any products based on the licensed technology. Losing our marketing and sales rights would have a significant negative effect on our business, financial condition and results of operations. Our license agreements require that we pay a royalty on sales of GLIADEL®Wafer to the university that licensed us the technology underlying that product. In addition, we will have to pay milestone and/or royalty payments in connection with the successful development and commercialization of DOPASCAN®Injection and any products that result from the NIL and PARP technologies.

      In the future, to support our product development efforts, we may need research materials or scientific information that researchers at universities or other organizations generate. We may not be able to obtain this scientific information or research materials in a timely manner or at all.

We depend on a single source of supply for several of our key product components.

      Currently, we can only purchase some of the key components for GLIADEL®Wafer and our product candidates from single source suppliers. These vendors are subject to many strict regulatory requirements regarding the supply of these components. We cannot be sure that these suppliers will comply, or have complied, with applicable regulatory requirements or that they will otherwise continue to supply us with the key components we require. If suppliers are unable or refuse to supply us, or will supply us only at a prohibitive cost, we may not be able to access additional sources at acceptable prices, on a timely basis, if ever.

      The current formulation of GLIADEL®Wafer utilizes the chemotherapeutic agent BCNU, which is also known as “carmustine.” Currently we have the option to procure BCNU from only two sources in the United States, and we are not aware of any supplier outside of the United States. We currently obtain BCNU from one of these two U.S. suppliers on a purchase order basis and not through any long-term supply agreement. If we fail to receive key supplies necessary for the manufacture of GLIADEL on a timely basis at a reasonable cost, delays in product shipment could result. Delays of this type would have a negative effect on our business.

      The manufacture of DOPASCAN®Injection requires that a precursor compound be labeled with a radioactive isotope of iodine, known as Iodine-123, to form the final product. Only a limited number of companies worldwide are capable of performing the necessary “radioiodination” of the precursor and distribution of the final product. Currently, we do not have any arrangement for the manufacture and supply of DOPASCAN®Injection nor do we have the internal capability to manufacture DOPASCAN®Injection

30

ourselves. Consequently, we will not be in a position to commence Phase III or other clinical trials for DOPASCAN^®Injection until we locate a qualified supplier.

      We have assessed the companies that we believe are currently capable of manufacturing a product like DOPASCAN^®Injection. Based on this assessment, we believe a significant risk exists that we may not be able to find a manufacturer who can meet the quality and cost requirements required to conduct the Phase III clinical trials that will be necessary to support application to the FDA for regulatory approval. Our inability to contract with a suitable manufacturer for the clinical and commercial supply of DOPASCAN^®Injection on acceptable terms would prevent us from developing this product candidate further.

The U.S. Government holds rights which may permit it to license to third parties technology we currently hold the exclusive right to use.

      The U.S. government holds rights that govern aspects of specific technologies licensed to us by third party licensors. These government rights in inventions conceived or reduced to practice under a government-funded program may include a non-exclusive, royalty-free, worldwide license for the government to practice or have practiced resulting inventions for any governmental purpose. In addition, the U.S. government has the right to grant to others licenses that may be exclusive under any of these inventions if the government determines that:

• adequate steps have not been taken to commercialize such inventions,

• the grant is necessary to meet public health or safety needs, or

• the grant is necessary to meet requirements for public use under federal regulations.

      The U.S. government also has the right to take title to a subject invention if we fail to disclose the invention, and may elect to take title within specified time limits. The U.S. government may acquire title in any country in which we do not file a patent application within specified time limits.

      Federal law requires any licensor of an invention partially funded by the federal government to obtain a commitment from any exclusive licensee, such as us, to manufacture products using the invention substantially in the United States. Further, these rights include the right of the government to use and disclose technical data relating to licensed technology that was developed in whole or in part at government expense. Our principal technology license agreements contain provisions recognizing these rights.

      We have entered into a contract with the U.S. Army, funded by the Office of National Drug Control Policy, to provide financial support for research being conducted by us on a potential cocaine inhibitor. That contract permits the U.S. government to obtain unlimited rights to data developed in the course of our performance if we do not use the data within five years after termination of the contract to conduct further laboratory investigation and/or clinical trials aimed at developing a commercial product to combat drug abuse.

Pre-clinical and clinical trial results for our products may not be favorable.

      In order to obtain regulatory approval for the commercial sale of any of our product candidates, we must conduct both pre-clinical studies and human clinical trials. These studies and trials must demonstrate that the product is safe and effective for the clinical use for which we are seeking approval. Together with Aventis, we commenced a Phase III clinical trial for GLIADEL in December 1997 in patients undergoing initial surgery for the brain cancer malignant glioma. The results of this or other clinical trials we may conduct in the future may not be successful. Adverse results from this or any future trial would have a negative effect on our business.

      We also face the risk that we will not be permitted to undertake or continue clinical trials for any of our product candidates in the future. Even if we are able to conduct such trials, we may not be able to demonstrate satisfactorily that the products are safe and effective and thus qualify for the regulatory approvals needed to market and sell them. Results from pre-clinical studies and early clinical trials are often not accurate indicators of results of later-stage clinical trials that involve larger human populations.

We are subject to extensive governmental regulation, which may change and harm our business.

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      Our research, pre-clinical development and clinical trials, and the manufacturing and marketing of our product candidates, are subject to extensive regulation by numerous governmental authorities in the United States and other countries, including the FDA and the DEA. Controlled drugs such as GLIADEL®Wafer and radiolabeled drugs such as DOPASCAN are subject to additional requirements. Except for GLIADEL®Wafer, none of our product candidates has received marketing clearance from the FDA. In addition, none of our product candidates has received clearance from any foreign regulatory authority for commercial sale, except for GLIADEL®Wafer, which has received marketing clearance in a limited number of foreign countries.

      As a condition to approval of our product candidates under development, the FDA could require additional pre-clinical, clinical or other studies. Any requirement that we perform additional pre-clinical, clinical or other studies, or purchase clinical or other data from other companies could delay, or increase the expense of, approval of our product candidates, which could have a negative effect on our business.

      In order to obtain FDA approval of a new drug product for a specific clinical use, we must demonstrate to the satisfaction of the FDA that the product is safe and effective for its intended use. We must also demonstrate that the product is capable of being manufactured in accordance with applicable regulatory standards. Significant risks exist that:

• we will not be able to satisfy the FDA’s requirements with respect to any of our drug product candidates or with respect to the proposed expanded labeling for GLIADEL®Wafer for patients undergoing initial surgery for malignant glioma, or

• even if the FDA does approve our product candidates or expanded labeling, the FDA will approve less than the full scope of uses or labeling that we seek.

      Failure to obtain regulatory drug approvals on a timely basis could have a material adverse effect on our business.

      Even if we are able to obtain necessary FDA approval, the FDA may nevertheless require post-marketing testing and surveillance to monitor the approved product and continued compliance with regulatory requirements. The FDA may withdraw product approvals if we or our corporate partners do not maintain compliance with regulatory requirements. The FDA may also withdraw product approvals if problems concerning safety or efficacy of the product occur following approval.

      The process of obtaining FDA and other required approvals or licenses and of meeting other regulatory requirements to test and market drugs, including controlled substances and radiolabeled drugs, is rigorous and lengthy. We have expended, and will continue to expend, substantial resources. We will need to conduct clinical trials and other studies on all of our product candidates before we are in a position to file a new drug application for marketing and sales approval. Unsatisfactory clinical trial results and other delays in obtaining regulatory approvals or licenses would prevent the marketing of the products we are developing. Until we receive the necessary approvals or licenses and meet other regulatory requirements, we will not receive revenues or royalties related to product sales.

      In addition to the requirements for product approval, before a pharmaceutical product may be marketed and sold in some foreign countries, the proposed pricing for the product must be approved as well. Products may be subject to price controls or limits on reimbursement. The requirements governing product pricing and reimbursement vary widely from country to country and can be implemented disparately at the national level. We cannot guarantee that any country which has price controls or reimbursement limitations for pharmaceuticals will allow favorable reimbursement and pricing arrangements for our products or those of our corporate partners.

      Where applicable, we hope to capitalize on current FDA regulations and the new provisions of the FDA Modernization Act of 1997. These regulations or provisions permit “fast track”, expedited or accelerated approval or more limited “treatment use” of, and cost recovery for, certain experimental drugs under limited circumstances. The fast track and treatment provisions, and FDA’s accelerated, expedited and treatment regulations apply generally only to:

• drug products intended to treat severely debilitating or serious or life-threatening diseases, and

• drug products that provide meaningful therapeutic benefit to patients over existing treatments, that potentially address an unmet medical need, or that are for diseases for which no satisfactory or comparable therapy exists.

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      The FDA Modernization Act contains provisions patterned after the accelerated approval regulations and other provisions pertaining to expanded access, i.e., treatment uses. Since some of the new statutory provisions and current FDA regulations are different from one another, we are uncertain as to how they will apply, if at all, to our drug candidates. Our drug candidates may not qualify for fast track, accelerated or expedited approvals or for treatment use and cost recovery.

      Because controlled drug products and radiolabeled drugs are subject to special regulations in addition to those applicable to other drugs, the DEA and the Nuclear Regulatory Commission may regulate some of our products and product candidates, including DOPASCAN®Injection, as controlled substances and as radiolabeled drugs. The NRC licenses persons who use nuclear materials and establishes standards for radiological health and safety. The DEA is responsible for the manufacture, distribution and dispensing of controlled substances, including the equipment and raw materials used in their manufacture and packaging in order to prevent such articles from being diverted into illicit channels of commerce. Registration is required and other activities involving controlled substances are subject to a variety of record keeping and security requirements, and to permits and authorizations and other requirements. States often have requirements for controlled substances as well. The DEA grants certain exceptions from the requirements for permits and authorizations to export or import materials related to or involving controlled substances. Our potential future inability to obtain exceptions from the DEA for shipment abroad or other activities could have a negative effect on us.

      We have obtained registrations for our facilities from the DEA. We have also obtained exceptions from the DEA with respect to various of our activities involving DOPASCAN®Injection, including the shipment of specified quantities of a precursor of this product candidate to an overseas collaborative partner. However, we cannot be sure that these exceptions will be sufficient to cover our future activities or that the DEA will not revoke the exceptions. We also cannot be sure that we will be able to meet the other requirements to test, manufacture and market controlled substances or radiolabeled drugs, or that we will be able to obtain additional necessary approvals, permits, authorizations, registrations or licenses to meet state, federal and international regulatory requirements to manufacture and distribute these products. The FDA Modernization Act required the FDA to issue and finalize within one and one-half years regulations governing the approval of radiolabeled drugs. The FDA issued final regulations in May 1999. These cover general factors relevant to safety and effectiveness, possible indications for radiopharmaceuticals, and the evaluation criteria for safety and effectiveness. We do not know and cannot predict how these and other provisions may affect the potential for approval of DOPASCAN®Injection.

Our competitors are pursuing alternative approaches to the same issues we are working on. Our products use novel alternative technologies and therapeutic approaches which have not been widely studied.

      Many of our product development efforts focus on novel alternative therapeutic approaches and new technologies that have not been widely studied. Applications for these approaches and technologies include, among other things, the treatment of brain cancer, the diagnosis and monitoring of Parkinson’s disease, the promotion of nerve growth and the prevention of neuronal damage. These approaches and technologies may not be successful. We are applying these approaches and technologies in our attempt to discover new treatments for conditions that are also the subject of research and development efforts of many other companies. Our competitors may succeed in developing technologies or products that are more effective or economical than those we are developing. Rapid technological change or developments by others may result in our technology or product candidates becoming obsolete or noncompetitive.

Our business is dependent on our ability to keep pace with the latest technological changes.

      The technological areas in which we work continue to evolve at a rapid pace. Our future success depends upon maintaining our ability to compete in the research, development and commercialization of products and technologies in our areas of focus. Competition from pharmaceutical, chemical and biotechnology companies, universities and research institutions is intense and expected to increase. Many of these competitors have substantially greater research and development capabilities and experience and manufacturing, marketing, financial and managerial resources than we do.

      Acquisitions of competing companies by large pharmaceutical companies or other companies could enhance the financial, marketing and other resources available to these competitors. These competitors may develop products that are superior to those we are developing. We are aware of the development by other companies and research scientists of alternative approaches to:

• the treatment of malignant glioma,

• the diagnosis of Parkinson’s disease,

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• the promotion of nerve growth and repair,

• the treatment and prevention of neuronal damage, and

• the treatment of cocaine addiction.

      Our competitors may develop products that render our products or technologies noncompetitive or obsolete. In addition, we may not be able to keep pace with technological developments.

      Our products must compete with others to gain market acceptance.

      Any product candidate that we develop and for which we gain regulatory approval, including GLIADEL®Wafer, must then compete for market acceptance and market share. An important factor will be the timing of market introduction of competitive products. Accordingly, the relative speed with which we and competing companies can develop products, complete the clinical testing and approval processes, and supply commercial quantities of the products to the market will be an important element of market success.

      Significant competitive factors include:

• capabilities of our collaborators,

• product efficacy and safety,

• timing and scope of regulatory approval,

• product availability,

• marketing and sale capabilities,

• reimbursement coverage from insurance companies and others,

• the amount of clinical benefit of our product candidates relative to their cost,

• the method of administering a product,

• price, and

• patent protection.

      Our competitors may develop more effective or more affordable products or achieve earlier product development completion, patent protection, regulatory approval or product commercialization than we do. Our competitors’ achievement of any of these goals could have a material adverse effect on our business.

      We have limited clinical and regulatory compliance capabilities. We have limited resources in the areas of product testing and regulatory compliance. Consequently, in order to carry our products through the necessary regulatory approvals and prepare our product candidates for commercialization and marketing, we will have to:

• expend capital to acquire and expand such capabilities,

• reach collaborative arrangements with third parties to provide these capabilities, or

• contract with third parties to provide these capabilities.

We are subject to risks of product liability both because of our product line and our limited insurance coverage.

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      We may potentially become subject to large liability claims and significant defense costs as a result of the design, manufacture or marketing of our products, including GLIADEL®Wafer, or the conduct of clinical trials involving these products. A product liability-related claim or recall could have a negative effect on us. We currently maintain only $15 million of product liability insurance covering clinical trials and product sales. This existing coverage or any future insurance coverage we obtain may not be adequate. Furthermore, our insurance may not cover a claim made against us.

      Product liability insurance varies in cost. It can be difficult to obtain, and we may not be able to purchase it in the future on terms acceptable to us, or at all. We also may not be able to otherwise protect against potential product liability claims. If this occurs, it could prevent or inhibit the clinical development and/or commercialization of any products we are developing.

We depend on qualified personnel and consultants, especially Craig R. Smith, M.D. and Solomon H. Snyder, M.D.

      We depend heavily on the principal members of our management and scientific staff, including Craig R. Smith, M.D., our Chief Executive Officer, and Solomon H. Snyder, M.D., who is a member of our Board of Directors and a consultant to our company. Both Dr. Smith and Dr. Snyder have extensive experience in the biotechnology industry and provide us with unique access to their contacts in the scientific community. The loss of the services of either of these individuals or other members of our senior management team could have a negative effect on our business.

      We have entered into a consulting agreement with Dr. Snyder and an employment agreement with Dr. Smith, each of which provides protection for our proprietary rights. Nevertheless, either Dr. Snyder or Dr. Smith may terminate his relationship with us at any time. Accordingly, we cannot be sure that either of these individuals or any of our other employees or consultants will remain with us. In the future they may take jobs or consulting positions with our competitors. These employees or consultants may also choose to organize competing companies or ventures.

      Our planned activities will require individuals with expertise in many areas including:

• medicinal chemistry and other research specialties,

• pre-clinical testing,

• clinical trial management,

• regulatory affairs,

• manufacturing, and

• business development.

      These planned activities will require additional personnel, including management personnel, and will also require existing management personnel to develop added expertise. Recruiting and retaining qualified personnel, collaborators, advisors and consultants will be critical to our activities. We may not be able to attract and retain the personnel necessary for the development of our business. Furthermore, many pharmaceutical, biotechnology and health care companies and academic and other research institutions compete intensely for experienced scientists. If we are not able to hire the necessary experienced scientists or develop the necessary expertise, this inability could have a negative effect on us. In addition, we also depend on the support of our collaborators at research institutions and our consultants.

Our business involves using hazardous and radioactive materials and animal testing, all of which may result in environmental liability.

      Our research and development processes involve the controlled use of hazardous and radioactive materials. We and our collaborative partners are subject to extensive laws governing the use, manufacture, storage, handling and disposal of hazardous and radioactive materials. There is a risk of accidental contamination or injury from these materials. Also, we cannot control whether our collaborative partners comply with the governing standards. If we or our collaborative partners do not comply with the governing laws and regulations, we could face significant fines and penalties that could have a negative effect on our business, operations or finances. In addition, we and/or our collaborative partners could be held liable for damages, fines or other liabilities, which could

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exceed our resources.

      However, we may have to incur significant costs to comply with environmental laws and regulations in the future. In addition, future environmental laws or regulations may have a negative effect on our operations, business or assets.

      Many of the research and development efforts we sponsor involve the use of laboratory animals. Changes in laws, regulations or accepted clinical procedures may adversely affect these research and development efforts. Social pressures that would restrict the use of animals in testing or actions against us or our collaborators by groups or individuals opposed to testing using animals could also adversely affect these research and development efforts.

Effecting a change of control of Guilford would be difficult, which may discourage offers for shares of our common stock.

      Our certificate of incorporation and the Delaware General Corporation Law contain provisions that may delay or prevent an attempt by a third party to acquire control of us. These provisions include the requirements of Section 203 of the Delaware General Corporation Law. In general, Section 203 prohibits designated types of business combinations, including mergers, for a period of three years between us and any third party who owns 15% or more of our common stock. This provision does not apply if:

• our Board of Directors approves of the transaction before the third party acquires 15% of our stock,

• the third party acquires at least 85% of our stock at the time its ownership goes past the 15% level, or

• our Board of Directors and two-thirds of the shares of our common stock not held by the third party vote in favor of the transaction.

      We have also adopted a stockholder rights plan intended to deter hostile or coercive attempts to acquire us. Under the plan, if any person or group acquires more than 20% of our common stock without approval of the Board of Directors under specified circumstances, our other stockholders have the right to purchase shares of our common stock, or shares of the acquiring company, at a substantial discount to the public market price. The plan thus makes an acquisition much more costly to a potential acquirer.

      Our certificate of incorporation also authorizes us to issue up to 4,700,000 shares of preferred stock in one or more different series with terms fixed by the Board of Directors. Stockholder approval is not necessary to issue preferred stock in this manner. Issuance of these shares of preferred stock could have the effect of making it more difficult for a person or group to acquire control of us. No shares of our preferred stock are currently outstanding. While our Board of Directors has no current intentions or plans to issue any preferred stock, issuance of these shares could also be used as an anti-takeover device.

Item 6.  Exhibits and Reports on Form 8-K:

      A. Exhibits

Exhibit No.	Description
27.01	Financial Data Schedule
10.61	Rights Reversion Agreement dated October 23, 2000, by and between Aventis Pharmaceutical Products Inc., Rhone-Poulenc Rorer Inc., GPI Holdings, Inc. and Guilford Pharmaceuticals Inc.
10.62	Agreement dated October 24, 2000, by and between Cardinal Health Sales and Marketing Services, a division of RedKey Inc. and Guilford Pharmaceuticals Inc.

      B. Reports on Form 8-K

      On August 29, 2000, we filed a Current Report on Form 8-K, the sole purpose of which was to report the termination of the proposed merger with Gliatech Inc.

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SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Guilford Pharmaceuticals Inc.

Date: November 14, 2000	/s/ CRAIG R. SMITH, M.D. Craig R. Smith, M.D. Chairman of the Board, President and Chief Executive Officer
Date: November 14, 2000	/s/ ANDREW R. JORDAN Andrew R. Jordan Senior Vice President and Chief Financial Officer (Principal Accounting Officer)

37 EX-10.61 2 w42341ex10-61.txt RIGHTS REVERSION AGREEMENT 1 EXHIBIT 10.61 EXECUTION COPY RIGHTS REVERSION AGREEMENT This RIGHTS REVERSION AGREEMENT (the "Agreement") is dated as of October 23, 2000, by and between AVENTIS PHARMACEUTICALS PRODUCTS INC., a Delaware corporation with its principal office at Route 202-206, Bridgewater, New Jersey 08807, formerly known as Rhone-Poulenc Rorer Pharmaceuticals Inc. ("APPI"), and RHONE-POULENC RORER INC., a Pennsylvania corporation with its principal office at 500 Arcola Road, Collegeville, Pennsylvania 19426 ("RPR Inc.") on the one hand, and GPI POLYMER HOLDINGS, INC. (formerly named GPI Holdings, Inc.), a Delaware corporation with its principal office at 222 Delaware Avenue, P.O. Box 2306, Wilmington, Delaware 19899 ("GPI Holdings"), and GUILFORD PHARMACEUTICALS INC., a Delaware corporation with its principal office at 6611 Tributary Street, Baltimore, Maryland 21224 ("GPI"), on the other hand. RECITALS WHEREAS, APPI, GPI Holdings and GPI are parties to that certain Marketing, Sales and Distribution Rights Agreement dated as of June 13, 1996, as amended on September 25, 1998 (the "Marketing Rights Agreement"), pursuant to which APPI, on the one hand, and GPI Holdings and GPI (collectively, "Guilford"), on the other hand, entered into a strategic alliance whereby, among other things: (i) GPI Holdings granted APPI the exclusive right throughout the Territory (as defined in the Marketing Rights Agreement) to market, advertise, promote, sell and distribute the Product (as defined in the Marketing Rights Agreement) for use in the Field (as defined in the Marketing Rights Agreement); (ii) GPI agreed to assign APPI the New Drug Application for the GLIADEL Product (as defined in the Marketing Rights Agreement) if and when approved by the FDA; (iii) APPI agreed to use commercially reasonable efforts to obtain Regulatory Approval (as defined in the Marketing Rights Agreement) for the GLIADEL Product throughout the Territory for use in the Field and if, as and when obtained, to market, advertise, sell and distribute the GLIADEL Product throughout the Territory for use in the Field; (iv) GPI agreed to manufacture and supply the Product (as defined in the Marketing Rights Agreement) to APPI pursuant to the 1996 Manufacturing and Supply Agreement (as defined below); (v) Guilford and APPI agreed to collaborate on the development of certain further PCPP:SA/BCNU products for use in the Field, including products with BCNU doses higher than 3.85%, all of which were to be included within the grant of exclusive RIGHTS REVERSION AGREEMENT 1 2 marketing, advertising, promotion, sale and distribution rights in the Territory for use in the Field made by GPI Holdings to APPI under the Marketing Rights Agreement; and (vi) Guilford granted to APPI a right of first offer covering all future drug-polymer cancer chemotherapeutic products that are developed directly by Guilford (and not pursuant to any collaboration with another party) specifically for the indication of brain cancer and for which Guilford controls the intellectual property rights covering the active chemotherapeutic agent incorporated into the polymer; and WHEREAS, GPI Holdings and GPI desire to reacquire the rights they granted to APPI under the Marketing Rights Agreement and related agreements on the terms and conditions contained herein and APPI desires to assign its rights in the Product under the Marketing Rights Agreement back to GPI Holdings and GPI on the terms and conditions set forth herein, whereby, among other things: (i) Guilford shall issue three hundred thousand (300,000) shares of GPI Common Stock to APPI pursuant to the terms and conditions of the Stock Purchase Agreement attached hereto; (ii) Pursuant to the terms and conditions of the Registration Rights Agreement attached hereto, APPI shall obtain certain rights to require GPI to register the GPI Common Stock issued to APPI pursuant to the Stock Purchase Agreement; (iii) The parties shall cooperate during the Transition Period (as defined below) to effect the transfer of all Regulatory Filings (as defined below), Regulatory Approvals (as defined below) and data generated to support the foregoing, as well as all Know-How (as defined below) and marketing and sales data that relate to the Product (as defined below), from APPI to Guilford; (iv) The parties shall continue to perform pursuant to the Marketing Rights Agreement and related agreements contemplated thereby through the Transition Period, except to the extent provided otherwise by this Agreement; and (v) Upon the completion of the Transition Period, the Marketing Rights Agreement, the related agreements contemplated thereby, and the parties' rights and obligations thereunder shall terminate, except to the extent otherwise provided by this Agreement; WHEREAS, RPR Inc. and GPI are parties to that certain Stock Purchase Agreement dated as of June 13, 1996, (the "1996 Stock Purchase Agreement"), pursuant to which RPR Inc. acquired shares of GPI's common stock, and RPR Inc. and GPI desire to modify the terms of the 1996 Stock Purchase Agreement on the terms and conditions set forth herein; WHEREAS, RPR Inc. and GPI are parties to that certain Loan Agreement dated as of June 13, 1996, (the "1996 Loan Agreement"), pursuant to which RPR Inc. extended a line of RIGHTS REVERSION AGREEMENT 2 3 credit to GPI, and RPR Inc. and GPI desire to terminate the 1996 Loan Agreement on the terms and conditions set forth herein; NOW THEREFORE, in consideration of the mutual covenants and consideration set forth herein, the parties hereto, intending to be legally bound, hereby agree as follows: ARTICLE 1 DEFINITIONS 1.1 "Act" shall mean the Federal Food, Drug and Cosmetic Act, as amended, and the regulations promulgated under such Act. 1.2 "Affiliate" shall mean, when used with respect to a Person, any other Person directly or indirectly controlling, controlled by, or under common control with the subject Person. For purposes of this Agreement, "control" means the direct or indirect ownership of over 50% of the outstanding voting securities of a Person, or the right to receive over 50% of the profits or earnings of a Person, or the right to control the policy decisions of a Person. 1.3 "Agreement" shall have the meaning set forth in the introductory paragraph of this agreement. 1.4 "ANDA" shall mean an "Abbreviated New Drug Application," as defined in the Act, and all supplements thereto. 1.5 "APPI" shall have the meaning set forth in the introductory paragraph of this Agreement. 1.6 "Aventis" shall mean APPI and RPR Inc. collectively. 1.7 "Closing" shall have the meaning set forth in Section 2.1. 1.8 "Closing Date" shall have the meaning set forth in Section 2.1. 1.9 "FDA" shall mean the Food and Drug Administration of the United States Department of Health and Human Services, or any successor agency thereto. 1.10 "Field" shall mean the treatment of tumors of the central nervous system and the treatment of cerebral edema. 1.11 "First Amendment to the Marketing Rights Agreement" shall mean that certain Amendment No. 1 to Marketing, Sale and Distribution Rights Agreement by and among APPI and Guilford, dated as of September 25, 1998. 1.12 "First Surgery Trial" has the meaning set forth in the First Amendment to the Marketing Rights Agreement. 1.13 "GLIADEL Product" shall mean Guilford's GLIADEL(R) wafer, PCPP:SA with 3.85% BCNU, and any and all Improvements thereto. RIGHTS REVERSION AGREEMENT 3 4 1.14 "GPI" shall have the meaning set forth in the introductory paragraph of this Agreement. 1.15 "GPI Holdings" shall have the meaning set forth in the introductory paragraph of this Agreement. 1.16 "Guilford" shall have the meaning set forth in the first recital of this Agreement. 1.17 "High Dose GLIADEL Product" shall mean any PCPP:SA product with a BCNU dose higher than 3.85% which is (i) reasonably expected to have a more advantageous efficacy profile than the GLIADEL Product and (ii) now or hereafter owned or controlled by Guilford, and all Improvements to any such product. 1.18 "Improvement" to a product shall mean any and all inventions, discoveries, developments, modifications and improvements, whether or not patented or patentable, to such product. 1.19 "IND" shall mean an "Investigational New Drug Application," as defined in the Act. 1.20 "Interim Agreement" shall mean that certain Interim Agreement, dated as of October 5, 2000, by and among APPI and Guilford. 1.21 "Know-How" shall mean all scientific and technical data, instructions, processes, formulae, specifications, ingredient sources, manufacturing procedures, methods and other information relating to the design, composition, formulation, pre-clinical evaluation, clinical evaluation, manufacture, use, sale, packaging, formulation or administration of the Product, including, but not limited to, NDAs (and similar applications filed in jurisdictions other than the U.S.), pharmacological, toxicological, analytical, stability and clinical data, specifications and drug master files and/or health registration dossiers and any other premarket application or registration owned or controlled at any time during the term hereof by either party. 1.22 "Licensed Trademark" shall mean GPI Holdings' GLIADEL trademark and all goodwill associated with such trademark. 1.23 "Marketing Rights Agreement" shall have the meaning set forth in the first recital of this Agreement. 1.24 "NDA" shall mean a "New Drug Application," as defined in the Act, and all supplements thereto. 1.25 "1996 Loan Agreement" shall have the meaning set forth in the fourth recital of this Agreement. 1.26 "1996 Stock Purchase Agreement" shall have the meaning set forth in the third recital of this Agreement. RIGHTS REVERSION AGREEMENT 4 5 1.27 "1996 Manufacturing and Supply Agreement" shall mean that certain Manufacturing and Supply Agreement, dated as of June 13, 1996 between GPI and APPI, as amended by Amendment No. 1 dated June 7, 1999 and Amendment No. 2 dated June 26, 2000. 1.28 "Other PCPP:SA/BCNU Products" shall mean all PCPP:SA-based polymer products containing BCNU, other than the GLIADEL Product, that are now or hereafter during the term of this Agreement owned or controlled by Guilford, including, without limitation, High Dose GLIADEL Product, and all Improvements to any of the foregoing. 1.29 "Person" shall mean any corporation, partnership, joint venture, other entity or natural person. 1.30 "Product" shall mean the GLIADEL Product and all Other PCPP:SA/BCNU Products. 1.31 "Registration Rights Agreement" shall mean a Registration Rights Agreement between GPI and APPI dated as of the Closing Date in the form attached hereto and made a part hereof as Exhibit A. 1.32 "Regulatory Approval" shall mean, with respect to any country, (i) filing for and receipt of all governmental and regulatory registrations and approvals (including, but not limited to, approvals of all final Product labeling) required for the marketing and sale of the Product for the indication for which it is being marketed in such country, and (ii) the receipt of reimbursement approvals and a reimbursement price acceptable to Guilford from the national health system or other appropriate governmental or regulatory authorities in such country, except in those countries where such reimbursement approvals and reimbursement price are not granted by a government or regulatory authority (such as the United States). 1.33 "Regulatory Filings" shall mean all applications, filings, materials, studies, data and documents of any nature whatsoever filed with, prepared in connection with or necessary to support any Regulatory Approval process in any country or territory. 1.34 "Stock Purchase Agreement" shall mean the Stock Purchase Agreement dated as of even date herewith between GPI and APPI, the form of which is attached hereto and made a part hereof as Exhibit B. 1.35 "Territory" shall mean the entire world, excluding Denmark, Finland, Norway, Sweden and Japan. 1.36 "Transaction Agreements" shall mean, collectively, this Agreement, the Registration Rights Agreement and the Stock Purchase Agreement. 1.37 "Transition Date" shall mean December 31, 2000. 1.38 "Transition Period" shall mean the period commencing on Closing Date and ending on the Transition Date. RIGHTS REVERSION AGREEMENT 5 6 ARTICLE 2 CLOSING 2.1 Time and Place of the Closing. Subject to the terms and upon satisfaction or waiver of the conditions set forth herein, including the conditions to Closing set forth in this Article 2, the closing of the transactions contemplated herein (the "Closing") shall occur on October 23, 2000, or such other date as the parties may agree (the "Closing Date"). The Closing shall take place at the offices of Wilmer, Cutler & Pickering, 2445 M Street, N.W., Washington, D.C. 20037-1420, at 4:00 p.m. on the Closing Date. 2.2 Conditions to Guilford's Obligations to Close. The obligations of Guilford to carry out the terms of this Agreement are subject to the fulfillment on or before the Closing Date of each of the following conditions, any of which may be waived by Guilford: 2.2.1 Representations and Warranties. The representations and warranties of Aventis contained in Article 3 shall be true, correct and complete in all material respects on and as of the Closing Date with the same effect as if made on and as of such Closing Date. 2.2.2 Simultaneous Closing. Contemporaneously with the Closing hereof, the "Closing" of the Stock Purchase Agreement (as such term is defined therein) shall take place. 2.2.3 Closing Deliveries by APPI. Contemporaneously with the Closing hereof APPI shall tender its execution and delivery of the Registration Rights Agreement. 2.3 Conditions to Aventis' Obligations to Close. The obligations of Aventis to carry out the terms of this Agreement are subject to the fulfillment on or before the Closing Date of each of the following conditions, any of which may be waived by Aventis: 2.3.1 Representations and Warranties. The representations and warranties of Guilford contained in Article 3 shall be true, correct and complete in all material respects on and as of the Closing Date with the same effect as if made on and as of such Closing Date. 2.3.2 Simultaneous Closing. Contemporaneously with the Closing hereof, the "Closing" of the Stock Purchase Agreement (as such term is defined therein) shall take place. 2.3.3 Closing Deliveries by Guilford. Contemporaneously with the Closing hereof, Guilford shall tender its execution and delivery of the Registration Rights Agreement. ARTICLE 3 REPRESENTATIONS AND WARRANTIES 3.1 Aventis Representations and Warranties. APPI and RPR Inc. hereby represent and warrant to Guilford that: 3.1.1 Corporate Power. Each of APPI and RPR Inc. has the corporate power and authority to execute, deliver and perform the Transaction Agreements. The execution, RIGHTS REVERSION AGREEMENT 6 7 delivery and performance of the Transaction Agreements by APPI and RPR Inc. have been duly authorized by all necessary corporate action of APPI and RPR Inc., respectively; 3.1.2 Validity. Each of the Transaction Agreements, when executed and delivered by Aventis, shall be the legal, valid and binding obligation of Aventis, enforceable against Aventis in accordance with its terms, except as such enforceability may be limited by bankruptcy law and other similar laws affecting creditors' rights generally and by general principles of equity; 3.1.3 Non-Contravention. The execution, delivery and performance of the Transaction Agreements by Aventis do not and will not (i) conflict with, or constitute a breach or default under, or require the consent of any third party under, Aventis' charter documents or any material license, loan or other agreement, contract, commitment or instrument to which Aventis is a party or any of its assets are bound, (ii) violate any provision of law, statute, rule or regulation or any ruling, writ, injunction, order, judgment or decree of any court, administrative agency or other governmental body, or (iii) require the consent, approval or authorization of, or notice, declaration, filing or registration with, any third party or any governmental or regulatory authority; 3.1.4 No Litigation. There is no action or proceeding pending or, in so far as Aventis knows, threatened against Aventis or any of its Affiliates before any court, administrative agency or other tribunal which could impact upon Aventis' right, power and authority to enter into any of the Transaction Agreements or to carry out its obligations under any of the Transaction Agreements; 3.1.5 Joint Inventions. There are no Joint Inventions (as such term is defined in Section IV(H)(3) of the Marketing Rights Agreements); 3.1.6 Licensed Trademark. (a) The only trademark that has been used by the parties pursuant to the provisions of Section III(A)(2) of the Marketing Rights Agreement is GPI Holdings' GLIADEL trademark; (b) APPI has not granted a sublicense to any third party to use the Licensed Trademark; 3.1.7 Distribution Rights. APPI has not granted marketing, sales, sales agency and/or distribution rights to any third party with respect to any rights conferred upon APPI under the Marketing Rights Agreement; 3.1.8 Subcontractors. Except as set forth on Schedule 3.1.8 or Schedule 5.6.4, APPI has not subcontracted any third parties to seek Regulatory Approvals or to conduct clinical trials or studies with respect to the Product; 3.1.9 Liability to Third Party Agents. Except as set forth in Sections 5.4 and 5.6.4, Guilford shall have no liability or obligation to any of the parties set forth on Schedule 3.1.8 as a result of the transactions contemplated by this Agreement; and RIGHTS REVERSION AGREEMENT 7 8 3.1.10 Ownership Rights. APPI owns the Know-How, Regulatory Filings, Regulatory Approvals and marketing and sales data to be transferred to Guilford pursuant to Article 6 free and clear of any encumbrances, license or security interest or other similar right of third parties. 3.2 Guilford Representations and Warranties. GPI and GPI Holdings each hereby represents and warrants to Aventis that: 3.2.1 Corporate Power. Each of GPI and GPI Holdings has the corporate power and authority to execute, deliver and perform each of the Transaction Agreements. The execution, delivery and performance of each of the Transaction Agreements by GPI and GPI Holdings have been duly authorized by all necessary corporate action of GPI and GPI Holdings, respectively; 3.2.2 Validity. Each of the Transaction Agreements, when executed and delivered by Guilford, shall be the legal, valid and binding obligation of Guilford, enforceable against Guilford in accordance with its terms, except as such enforceability may be limited by bankruptcy law and other similar laws affecting creditors' rights generally and by general principles of equity; 3.2.3 Non-Contravention. The execution, delivery and performance of the Transaction Agreements by Guilford do not and will not (i) conflict with, or constitute a breach or default under, or require the consent of any third party under, Guilford's charter documents or any material license, loan or other agreement, contract, commitment or instrument to which Guilford is a party or any of its assets are bound, (ii) violate any provision of law, statute, rule or regulation or any ruling, writ, injunction, order, judgment or decree of any court, administrative agency or other governmental body, or (iii) require the consent, approval or authorization of, or notice, declaration, filing or registration with, any third party or any governmental or regulatory authority; and 3.2.4 No Litigation. There is no action or proceeding pending or, in so far as Guilford knows, threatened against Guilford or any of its Affiliates before any court, administrative agency or other tribunal which could impact upon Guilford's right, power and authority to enter into any of the Transaction Agreements or to carry out its obligations under any of the Transaction Agreements. 3.2.5 Joint Inventions. There are no Joint Inventions (as such term is defined in Section IV(H)(3) of the Marketing Rights Agreements). 3.2.6 Licensed Trademark. The only trademark that has been used by the parties pursuant to the provisions of Section III(A)(2) of the Marketing Rights Agreement is GPI Holdings' GLIADEL trademark. 3.3 Knowledge. Where a representation or warranty contained in this Article 3 is stated to be to a party's knowledge, this shall mean to the actual knowledge of all of the officers and appropriate key personnel of such party, after reasonable inquiry. RIGHTS REVERSION AGREEMENT 8 9 3.4 No Other Warranties. EXCEPT FOR THE EXPRESS WARRANTIES CONTAINED IN THIS AGREEMENT, NEITHER GUILFORD NOR AVENTIS MAKE ANY WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, IN FACT OR IN LAW, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT. 3.5 Survival of Warranties. The provisions of this Article 3 shall survive the expiration or sooner termination of the term of this Agreement. ARTICLE 4 MODIFICATION OF CERTAIN EXISTING OBLIGATIONS AS OF THE CLOSING DATE 4.1 Marketing Rights Agreement. Unless expressly provided otherwise by this Agreement, between the Closing Date and the Transition Date all rights and obligations of any party under the Marketing Rights Agreement shall remain in full force and effect. Effective upon the Closing Date, the parties agree that the Marketing Rights Agreement shall be modified as follows: 4.1.1 Exclusive Right. For purposes of clarification, it is understood that Section III(A)(1) shall not be interpreted to restrict Guilford from exercising its rights or performing its obligations under Articles 4, 5 and 9 of this Agreement. 4.1.2 Licensed Trademark. Guilford shall no longer be prohibited pursuant to Section III(A)(2) from using the Licensed Trademark itself or from granting other Persons rights to use the Licensed Trademark. 4.1.3 Assignment of Rights. Notwithstanding Section III(A)(3) of the Marketing Rights Agreement, APPI shall no longer have the right to grant any exclusive or non-exclusive marketing, sales, sales agency and/or distribution rights, with respect to any rights conferred upon APPI under the Marketing Rights Agreement, to any non-Affiliated third party. 4.1.4 Studies and Regulatory Approvals. Except as contemplated by Section 5.6.4 of this Agreement, APPI shall no longer be obligated pursuant to Sections III(B)(1), (2) or (3) to conduct clinical trials or studies or take other steps and actions regarding Regulatory Approval in the U.S. of the Product, nor will APPI take such actions except in coordination with, and, following transfer of the NDA and IND as contemplated by Section 5.1.2 of this Agreement, with the prior approval not to be unreasonably withheld or delayed of, Guilford. APPI shall no longer be obligated pursuant to Section III(C)(2) to pursue Regulatory Approval of the Product other than in support of Regulatory Filings made prior to the date of this Agreement in Italy, Canada and Australia, which support shall be conducted by APPI in accordance with Section 5.5 of this Agreement. 4.1.5 Right of Review. Following transfer of the NDA and IND as contemplated by Section 5.1.2, APPI shall have no further right pursuant to Section III(B)(4) to review and comment on strategies and protocols of the clinical trials and studies and regulatory submissions made by Guilford related to the GLIADEL Product for the indication of the treatment of form(s) of malignant glioma in the United States. RIGHTS REVERSION AGREEMENT 9 10 4.1.6 Milestone Payments. APPI shall no longer be obligated pursuant to Section III(D) to make any further payments to GPI or GPI Holdings in consideration of obtaining Regulatory Approvals relating to the GLIADEL Product. 4.1.7 Governance and Operations Committees. The provisions of Sections III(G) and (H) of the Marketing Rights Agreement with respect to the establishment and meeting of the Governance Committee and Operations Committee shall be of no further force and effect. 4.1.8 Joint Development Activities. APPI shall no longer be obligated to sponsor and fund any development activities pursuant to Section III(I). 4.1.9 Right of First Offer. The right of first offer granted to APPI pursuant to Section III(J) shall be revoked and APPI shall have no rights with respect to the any Qualifying Product Candidate (as such term is defined in the First Amendment to the Marketing Rights Agreement). 4.1.10 Confidentiality. The second sentence of Section IV(A)(1) shall be amended and restated to read as follows: "The Receiving Party shall, during the term of this Agreement, and for seven (7) years after the expiration or sooner termination of the term of this Agreement, make no use of such confidential information except (x) to advance the purposes of this Agreement in accordance with its provisions or (y) to advance the purposes of that certain Rights Reversion Agreement between the parties dated as of October 23, 2000 in accordance with its provisions, which purposes shall include the transition of the development, commercialization and sale of the Product to Guilford from APPI and Guilford's corresponding disclosure of such confidential information to potential distributors, vendors of regulatory services and other third party agents of Guilford. Each party shall use the same efforts to keep secret and prevent the disclosure of such confidential information to third parties as it would use with respect to its own confidential information." 4.1.11 Termination. (a) APPI shall no longer have the right pursuant to Section IV(D)(2) to terminate the Marketing Rights Agreement in the event of a Change of Control (as such term is defined in the Marketing Rights Agreement). (b) APPI shall no longer have the right pursuant to Section IV(D)(5) or Section IV(F)(4) to sell out its stock of any Product it possesses or has committed to purchase in the event of a termination of the Marketing Rights Agreement, and the disposition of such Product upon termination of the Marketing Rights Agreement shall instead be governed by Section 5.6.2 of this Agreement. 4.1.12 Events of Default. A breach by either party of any material provision of the 1996 Loan Agreement, or defaults in the performance or observance of any material provision of such agreement, shall no longer constitute an "Event of Default" under the Marketing Rights Agreement pursuant to Section IV(E). RIGHTS REVERSION AGREEMENT 10 11 4.1.13 Inventions. APPI shall no longer have the right pursuant to Section IV(H)(1) to require Guilford (a) to file, prosecute or maintain patents or patent applications on any GPI Inventions (as such term is defined in the Marketing Rights Agreement) or (b) to cooperate with APPI to prepare, review or execute any such patent applications or other papers as may be necessary to enable the protection of the GPI Inventions (as such term is defined in the Marketing Rights Agreement) by patent and, notwithstanding the survival provisions in Section IV(H)(9) and Section IV(D)(4), such rights shall terminate and be of no further force and effect as of the Closing Date. 4.1.14 Infringement. (a) If, as a result of the manufacture, use or sale of the Product, Guilford is sued for patent infringement or threatened with such a lawsuit or other action by a third party, Guilford shall no longer have the obligation, pursuant to Section IV(I)(1), (x) to meet with APPI to analyze the infringement claim and the avoidance of the same, or (y) to obtain the prior written consent of APPI prior to the settlement of any such claim, suit, threatened suit or action and, notwithstanding the survival provisions in Section IV(I)(3) and Section IV(D)(4), such obligations shall terminate and be of no further force and effect as of the Closing Date. (b) If, as a result of the manufacture, use or sale of the Product, Guilford or APPI or any of its Affiliates is sued for patent infringement or threatened with such a lawsuit or other action by a third party, and as a result it is necessary to obtain a license from such third party, Guilford shall no longer have the obligation, pursuant to Section IV(I)(1), to involve APPI in efforts to obtain and negotiate a license from such third party and, notwithstanding the survival provisions in Section IV(I)(3) and Section IV(D)(4), such obligations shall terminate and be of no further force and effect as of the Closing Date. (c) Notwithstanding the survival provisions in Section IV(I)(3) and Section IV(D)(4), the provisions of Section (IV)(I)(2) relating to infringement of a patent involving the Product by a third party shall terminate and be of no further force and effect as of the Closing Date. 4.1.15 Certain Covenants of Guilford. (a) The obligations of Guilford and its Affiliates pursuant to Section IV(J)(iv), which prohibit Guilford and its Affiliates from appointing any distributor other than APPI in the Territory during the term of the Marketing Rights Agreement, shall be deemed modified to the extent necessary to permit Guilford and its Affiliates to solicit, interview, appoint and contract with distributors and prepare them to begin distribution of the Product in the Territory; provided, however, that any such distributors shall not actually begin distribution of the Product in the Territory until the Transition Date. (b) The obligations of Guilford and its Affiliates pursuant to Section IV(J)(v), which require Guilford and its Affiliates to refer to APPI any leads concerning prospective customers in the Territory which come to the attention of GPI during the term of the Marketing Rights Agreement, shall terminate and be of no further force and effect as of the Closing Date. RIGHTS REVERSION AGREEMENT 11 12 4.2 Manufacturing and Supply Agreement. Unless expressly provided otherwise by this Agreement, during the Transition Period all rights and obligations of any party under the 1996 Manufacturing and Supply Agreement shall remain in full force and effect. Effective upon the Closing Date, the parties agree that the 1996 Manufacturing and Supply Agreement shall be modified as follows: 4.2.1 Definition of Territory. The definition of "Territory" shall be amended and restated to read as follows: "Territory" shall mean the entire world, excluding Denmark, Finland, Norway, Sweden and Japan. 4.2.2 Forecasts. APPI shall no longer be obligated to provide forecasts or orders for Product pursuant to Sections II(B)(1) and II(B)(2). 4.2.3 Ownership of Trademarks. Notwithstanding any provision in Section II(D)(3) to the contrary, Guilford shall be the exclusive owner of and have all rights to (i) the Licensed Trademark, together with the goodwill symbolized by such trademark, and (ii) copyrights, plans, ideas, names, slogans, artwork and all other intellectual property, if any, in each case exclusive to the GLIADEL Product; provided, however, for clarification the foregoing shall exclude any corporate or division name of Rhone-Poulenc Rorer Pharmaceuticals Inc., Aventis or their respective Affiliates, any logos of Rhone-Poulenc Rorer Pharmaceuticals Inc., Aventis or their respective Affiliates, any trademark of Rhone-Poulenc Rorer Pharmaceuticals Inc., Aventis or their respective Affiliates and all NDC numbers of Aventis or its Affiliates. 4.2.4 Termination. APPI shall no longer have the right pursuant to Section III(D)(3) to terminate the 1996 Manufacturing and Supply Agreement in the event of a Change of Control (as such term is defined in the 1996 Manufacturing and Supply Agreement). 4.2.5 Events of Default. A breach by either party of any material provision of the 1996 Loan Agreement, or defaults in the performance or observance of any material provision of such agreement, shall no longer constitute an "Event of Default" under the 1996 Manufacturing and Supply pursuant to Section III(E). 4.2.6 Remedies. APPI shall no longer have the right pursuant to Section III(F)(4) to sell out its stock of any Product it possesses or has committed to purchase in the event of a termination of the 1996 Manufacturing and Supply Agreement, and the disposition of such Product upon termination of the 1996 Manufacturing and Supply shall instead be governed by Section 5.6.2 of this Agreement. 4.2.7 Certain Covenants of GPI. The obligations of Guilford and its Affiliates pursuant to Section III(I)(iv), which require Guilford and its Affiliates to refer to APPI any leads concerning prospective customers in the Territory which come to the attention of GPI during the term of the 1996 Manufacturing and Supply Agreement, shall terminate and be of no further force and effect as of the Closing Date. 4.3 1996 Stock Purchase Agreement. Unless expressly provided otherwise by this Agreement, all rights and obligations of any party under the 1996 Stock Purchase Agreement RIGHTS REVERSION AGREEMENT 12 13 shall remain in full force and effect. Effective upon the Closing Date, the parties agree that the 1996 Stock Purchase Agreement shall be modified as follows: 4.3.1 Additional Shares. RPR Inc. shall no longer have any right or obligation to purchase, and GPI shall no longer have any right or obligation to sell, the Additional Shares (as defined in the 1996 Stock Purchase Agreement) and as a result, there shall be no Second Closing Date (as defined in the 1996 Stock Purchase Agreement). 4.3.2 Covenants to Perform. The respective covenants of APPI and GPI to perform the agreements to be performed by them under the Transaction Documents (as defined in the 1996 Stock Purchase Agreement) shall be modified to include only those agreements to be performed by them under the Transaction Documents as amended hereby or as may be amended by the parties in the future. 4.3.3 Standstill. The standstill provisions set forth in Section 7.01 of the 1996 Stock Purchase Agreement shall no longer be of any force or effect, and such matters shall be governed by Section 7.01 of the Stock Purchase Agreement. 4.3.4 Lock Up. The lock up provisions set forth in Section 7.02 of the 1996 Stock Purchase Agreement shall no longer be of any force or effect. 4.4 1996 Loan Agreement. Effective upon the Closing Date, the parties agree that the 1996 Loan Agreement shall be terminated and be of no further force and effect and as a result RPR Inc. shall have no further obligation to advance any funds to GPI pursuant to the 1996 Loan Agreement. 4.5 Interim Agreement. Effective upon the Closing Date, the parties agree that the Interim Agreement shall no longer be of any force or effect, and the matters contained therein shall be governed by this Agreement. ARTICLE 5 OBLIGATIONS DURING TRANSITION PERIOD Unless expressly provided otherwise by this Agreement, during the Transition Period all rights and obligations of any party under the Marketing Rights Agreement shall remain in full force and effect. In addition, during the Transition Period: 5.1 Cooperation. 5.1.1 General Access. APPI shall grant Guilford full access to documents, meetings and any other communications (both internal and with any third parties) regarding clinical trials, registration efforts, and marketing, sales and distribution activities, each with respect to the Product. APPI shall work jointly with Guilford with respect to the foregoing activities and will cooperate with and reasonably assist Guilford in Guilford's efforts to build its commercial operations with respect to the Product. Such assistance will include, for example, promptly supplying Guilford with copies of marketing and sales records, reports, plans and other RIGHTS REVERSION AGREEMENT 13 14 information that is related to the Product and that is in APPI's possession or control. APPI shall deliver such information in electronic or hard copy versions, as Guilford may reasonably request. 5.1.2 Transfer of NDA and IND. Immediately following the Closing, the parties shall file with the FDA the information required pursuant to 21 C.F.R. Section 314.72 for the transfer of the NDA and IND for the GLIADEL Product from APPI to Guilford. APPI shall file the information required of a former owner as set forth in Exhibit C hereto, and Guilford shall file the information required of a new owner as set forth in Exhibit D hereto. APPI may retain an archival copy of such NDA and IND, including information required to be kept under applicable regulations. 5.1.3 Transition of NDA Activities. The parties will agree upon procedures to ensure a smooth transition from APPI to Guilford on or before the Transition Date of the activities required to be undertaken by the holder of the NDA (and corresponding foreign Regulatory Filings) for the GLIADEL Product, including, without limitation, adverse experience reporting, quarterly and annual FDA reports, complaint and sample tracking, product recalls and communication with health care professionals and customers. 5.2 Communications with Regulatory Authorities. 5.2.1 FDA. Upon transfer of the NDA for the GLIADEL Product to Guilford, Guilford shall assume all responsibility for communication with the FDA that relates to the Product, except as contemplated by Section 5.6.5 hereof. Guilford shall not purport to represent APPI in any such communication with the FDA or attribute any statements to APPI or any of its Affiliates in any such communication. 5.2.2 Foreign Regulatory Authorities. During the Transition Period, APPI shall give Guilford reasonable prior written notice and the right to attend any meeting between APPI and any foreign regulatory authority relating to the Product and provide Guilford with a true and complete copy of each communication that will be made during the Transition Period between APPI and any foreign regulatory authority that relates to the Product, and the right to review and participate in any response to any such communication. APPI shall be responsible for making presentations to any foreign regulatory authority that relate to the Product during any joint meetings and for responding to questions and comments from such foreign regulatory authority with respect to its Regulatory Filing, but shall solicit and reasonably consider the input of Guilford prior to making such a presentation or response; provided, however, that APPI shall not be required to take any action that APPI determines in good faith would jeopardize its standing and reputation with any foreign regulatory authority or violate any applicable provision of law, statute, rule or regulation. APPI and Guilford shall promptly provide the other with notes from any in-person or teleconference meeting with any foreign regulatory authority related to the Product at which the other is not present. Notwithstanding the foregoing, upon a transfer in accordance with Article 6 of a foreign Regulatory Approval or Regulatory Filing prior to the Transition Date, (i) Guilford shall assume all responsibility for presentations to and communications with the relevant regulatory authority that relates to the Product and (ii) APPI shall be relieved of any responsibility therefor, except as contemplated by Section 5.6.5 hereof. Guilford shall not purport to represent APPI in any meeting with any foreign regulatory authority or attribute any statements to APPI or any of its Affiliates in any such communication. RIGHTS REVERSION AGREEMENT 14 15 5.3 Joint Transition Team. Upon the Closing Date, the parties shall establish a Joint Transition Team which shall remain in place during the Transition Period and which shall be responsible for the smooth and effective implementation of the transition activities contemplated by this Agreement and for developing and executing a plan to effect the transfers to take place pursuant to Article 6. The members of the Joint Transition Team shall be as set forth on Schedule 5.3. Any replacements or proxies for the foregoing persons shall be equivalently senior personnel. The parties shall cause their respective members of the Joint Transition Team to make themselves available as reasonably necessary to carry out such implementation. Any impasse among the members of the Joint Transition Team that is not resolved within seven (7) business days shall be referred to dispute resolution pursuant to Section 12.14.2. 5.4 First Surgery Trial. Guilford will have the right to direct, and will be responsible for directing, the completion of the First Surgery Trial data analysis and final study report, and APPI will instruct PPD Development to follow Guilford's reasonable direction with respect thereto. APPI will not (i) make any public statements, written or verbal or (ii) engage in any communications with the FDA or any corresponding foreign regulatory authority, in either case relating to the First Surgery Trial and its results, except (A) pursuant to a request for information from such regulatory authority, (B) as required under applicable law, statute, rule or regulation, or (C) as determined in good faith by APPI to be necessary in order to not jeopardize APPI's standing and reputation with any such regulatory authority; provided, however, that (1) unless, with respect to clauses (A) and (B), it is not reasonably practicable, APPI shall coordinate with Guilford with respect to any such communications, including, providing to Guilford a reasonable prior opportunity to review and comment on any such communications and considering in good faith the comments of Guilford prior to dissemination of any such communications, and (2) in each case, APPI shall provide Guilford with a copy of the final version of any such communication made in writing or a written summary of any such communication made verbally after dissemination of any such communication. The provisions contained in the preceding sentence shall survive the termination or expiration of this Agreement. APPI shall be liable for all bills of PPD Development and any other creditors relating to the First Surgery Trial accrued for the completion of the data analysis and final study report; provided, however, that Guilford shall be responsible for any charges incurred by APPI relating to additional work to or changes from the current plan for completion of the First Surgery Trial that may be requested by Guilford of PPD Development or such other creditors. Notwithstanding any provision in the Marketing Rights Agreement to the contrary, Guilford shall have the right to direct the communication of the data, analyses and results of the First Surgery Trial to its consultants and the FDA and, in coordination with APPI, to investigators. Guilford will be responsible for leading the Trial Executive Committee and will decide upon the modalities of dissemination of the First Surgery Trial results (e.g., investigators, IDMC, Congresses, press releases and publications). Guilford will provide to APPI a reasonable prior opportunity to review and comment on the substance of any and all such communications, and Guilford shall consider in good faith comments of APPI prior to such dissemination; provided, however, that Guilford shall not have to provide APPI such opportunity to review and comment on communications the substance of which has previously been provided to APPI pursuant to the foregoing. Guilford shall not purport to represent APPI or attribute any statements to APPI or any of its Affiliates in any of the foregoing communications or other actions. If Guilford breaches its obligations pursuant to the preceding sentence or if any third party refers to APPI or any of its Affiliates in a public statement relating to the First Surgery Trial, then APPI shall be entitled to make a clarifying disclosure; provided, RIGHTS REVERSION AGREEMENT 15 16 however, that any such clarifying disclosure made by APPI relating to the First Surgery Trial and its results shall be subject to APPI's obligations in the second sentence of this Section 5.4 to coordinate such communications with Guilford. 5.5 Registration Efforts. During the Transition Period, as contemplated by Section 4.1.4 hereof, APPI shall continue to seek Regulatory Approvals in accordance with the terms of the Marketing Rights Agreement for recurrent indication in Italy, Canada and Australia, except to the extent that Guilford assumes such responsibility in which event Guilford shall be responsible for the conduct and cost of any such activities. In the event Guilford assumes such responsibility, APPI shall assist Guilford in seeking such Regulatory Approval by supplying Guilford with copies of relevant documents and communications, informing Guilford of the status of the applicable Regulatory Filings. Notwithstanding any provision in the Marketing Rights Agreement to the contrary, the parties agree that during the Transition Period, or until such earlier time as Guilford may assume responsibility for such activities, APPI's activities with respect to seeking the foregoing Regulatory Approvals shall be subject to reasonable coordination with Guilford; provided, however, that (i) APPI shall not be required to take any action that APPI determines in good faith would jeopardize its standing and reputation with any foreign regulatory authority or violate any applicable provision of law, statute, rule or regulation, and (ii) no request of Guilford shall increase any obligation or cost to APPI beyond that required by the applicable terms of the Marketing Rights Agreement. APPI shall have no other obligation (or right) to seek Regulatory Approvals in accordance with the terms of the Marketing Rights Agreement, including no obligation (or right) to prepare and file with the FDA (and corresponding foreign regulatory authorities) the Supplemental NDA (and corresponding foreign Regulatory Filings) with respect to the results of the First Surgery Trial, and APPI may terminate internal efforts and arrangements with third parties related to such activities. Any such Regulatory Filings, if made, shall be the sole responsibility of Guilford, and all costs and expenses related to preparation and filing of any such Regulatory Filings, including without limitation the costs and expenses of third parties (such as Quintiles, Inc.), which are incurred by Guilford shall be paid for by Guilford. 5.6 Ongoing APPI Commercial Operations. APPI shall continue the commercialization and sale of the Product in accordance with the terms of the Marketing Rights Agreement and shall carry out its corresponding activities and obligations, as follows: 5.6.1 No Purchase of Inventory. Notwithstanding its obligation pursuant to Section III(A)(3) of the Marketing Rights Agreement to maximize sales of the Product, and notwithstanding any purchase forecasts or orders it has provided pursuant to the 1996 Manufacturing and Supply Agreement, APPI shall not be required to purchase from Guilford any further Product. 5.6.2 Disposition of Unsold Inventory. Subject to Section 5.6.1, APPI shall use commercially reasonable efforts to market, sell and distribute the Product and to maximize sales of the Product in accordance with the terms of Section III(A)(3) of Marketing Rights Agreement; provided, however, that to the extent that, in spite of such efforts, APPI is unable to sell all of its inventory of Product during the Transition Period, promptly after the Transition Date it shall destroy (and certify as so destroyed) any remaining inventory, other than such inventory located at Dagenham or Frankfurt with a remaining shelf life of at least six months at the Transition Date RIGHTS REVERSION AGREEMENT 16 17 which Guilford shall purchase on the Transition Date for $1000 per dose, with shipment to a site within the European Union designated by Guilford at Guilford's expense. 5.6.3 Packaging and Labeling. The parties acknowledge that certain inventory of Product in the possession of Guilford existing as of the date hereof may contain packaging and labeling with the names, logos, trademarks and NDC numbers of APPI or any of its Affiliates. Guilford may distribute such existing inventory until the end of the six-month period following the Transition Date; provided, however, that Guilford (i) shall not distribute any such Product that is within three months of its expiration date and (ii) shall not, and shall have no right to, use such names, logos, trademarks or NDC numbers for any other purpose and shall acquire no right, title or interest therein. 5.6.4 Marketing and Sales Activities. Guilford shall direct the planning and conduct or, if it shall so determine, the cancellation, of: (i) the GLIADEL presentation at the Society for Neurooncology scheduled to start on November 8, 2000 in Chicago, Illinois; and (ii) the November conference in Puerto Rico to educate neurosurgeons about the results of the First Surgery Trial. APPI shall use reasonable efforts to assist Guilford in the conduct of such meetings. APPI will continue to support, or Guilford at its discretion may assume, the existing Unrestricted Education Grants, media plan, public relations plan and the GO Project Grant through the Transition Date (except to the extent that Guilford may request APPI to cease any such activities). Guilford will reimburse APPI promptly upon receipt of an invoice from APPI for its out-of-pocket expenses incurred for each of the foregoing meetings, grants and plans, including without limitation any such expenses related to canceled meetings, grants or plans. For informational purposes, APPI's budget estimates for the foregoing activities are as follows: Puerto Rico, $760,000; Unrestricted Education Grants, $110,000; media plan, $33,575; public relations plan, $10,000; and GO Project Grant, $132,375. Furthermore, Guilford shall assume the conduct of the grant-in-aid studies set forth in Schedule 5.6.4 designated as committed at its sole expense (but only to the extent of the total committed amount for such studies as set forth in Schedule 5.6.4; provided, that, Guilford shall be responsible for any additional costs resulting from changes to such studies requested or directed by Guilford) and APPI shall be relieved of the obligation to conduct any activities so assumed by Guilford and shall terminate any grant-in-aid studies not set forth in Schedule 5.6.4; provided, however, that with respect to any grant-in-aid studies not set forth in Schedule 5.6.4, APPI shall refer to Guilford any inquiries from parties conducting those studies concerning resumption of their work. 5.6.5 Regulatory Activities. During the Transition Period, APPI shall, in consultation with and as reasonably requested by Guilford, discharge all regulatory obligations relating to the Product, including assisting Guilford in preparing NDA annual reports and other required supplemental filings with the FDA and preparing such reports and filings with corresponding foreign regulatory authorities, performing activities related to European Union importation, and collecting and reporting adverse events. 5.7 APPI Employees. APPI shall provide sufficient human and corporate resources to fulfill its obligations under the Marketing Rights Agreement and under this Agreement. RIGHTS REVERSION AGREEMENT 17 18 5.8 Ordinary Course of Business. During the Transition Period, APPI shall continue to act in the ordinary course of business, consistent with its past practices, with respect to the sale of the Product, including, but not limited to, the terms and conditions of sale of the Product. ARTICLE 6 TRANSFERS ON OR BEFORE THE TRANSITION DATE On or before the Transition Date, or with respect to any item below on such earlier date as is reasonably practicable following notice by Guilford to APPI, APPI shall transfer to Guilford the following: 6.1 Know How and Clinical Data. All Know-How, including all clinical and other data, analyses and reports (a) used, obtained or generated to support APPI's pursuit of Regulatory Approvals (whether or not actually used) or (b) that otherwise relates to the Product, provided to Guilford in the most appropriate format available to support regulatory filings; provided, however, that to the extent APPI requires access to such data to comply with applicable legal requirements pertaining to APPI's performance under the Marketing Rights Agreement or this Agreement, subject to Article 9, Guilford shall allow APPI a right of access (including the right to take copies of records) and right of reference to all such data; 6.2 Other Regulatory Filings and Approvals. All Regulatory Filings (for purposes of this Section 6.2, including both filed and draft versions) (other than the NDA and IND filed with the FDA to be transferred in accordance with Section 5.1.2 hereof) and Regulatory Approvals; provided, however, that if legal requirements beyond APPI's control prevent APPI from transferring any Regulatory Filing or Regulatory Approval to GPI Holdings, APPI shall allow Guilford a right of reference to any such Regulatory Filing or Regulatory Approval; provided, further, that Guilford shall take such action prior to the Transition Date as is necessary to enable such transfer of all Regulatory Filings and Regulatory Approvals and APPI shall close all Regulatory Filings and Regulatory Approvals as of the Transition Date; provided, however, that if, despite Guilford taking such action, the relevant regulatory authority has not effectuated transfer of the relevant Regulatory Filing or Regulatory Approval as of the Transition Date, then upon the written request of Guilford (including reasonable evidence of Guilford having taken the necessary actions to enable such transfer) APPI shall continue to support such Regulatory Filing or Regulatory Approval in accordance with the terms of this Agreement for a reasonable period of time after the Transition Date, not to exceed 45 days, subject to prompt reimbursement by Guilford to APPI for any and all reasonable costs or expenses (whether internal or out-of-pocket) related to such continuation of support and to the continuation during such period of time of the provisions of this Agreement related to Guilford's obligations to coordinate with, and where applicable seek approval from, APPI with respect to communications with the relevant regulatory authority and other disclosures and provided that APPI shall have no further obligations with respect to the Product in such country or countries, including sales, marketing or distribution; and 6.3 Marketing and Sales Information. All marketing and sales data in the possession or control of APPI that relate to the Product, including, without limitation, customer lists, RIGHTS REVERSION AGREEMENT 18 19 marketing, distribution and sales plans, methods and systems, sales figures and sales projections and training materials. ARTICLE 7 OBLIGATIONS AFTER THE TRANSITION PERIOD Effective as of the Transition Date, the Marketing Rights Agreement shall terminate and, except for those rights and obligations of any party under the Marketing Rights Agreement that expressly survive the termination of such agreement pursuant to either the terms of the Marketing Rights Agreement (as modified by this Agreement) or the terms of this Agreement, all rights and obligations of any party under the Marketing Rights Agreement, including all licenses granted to APPI by GPI or GPI Holdings thereunder, shall cease to be of further effect. After the Transition Period, APPI shall, for a period of six months: 7.1 Regulatory Approval Information. Provide to Guilford such information in APPI's possession as may be reasonably requested by Guilford to obtain Regulatory Approvals throughout the Territory for use in the Field. 7.2 Adverse Event Reporting. Continue to inform GPI of all material written customer complaints, adverse reaction information or notifications, correspondence, etc. with respect to the use of the Product that may come to its attention; 7.3 Infringement of Third Parties. Notify GPI should it become aware of the Product infringing any patents, patent rights, patent applications, inventions, trademarks, service marks or tradenames, copyrights, confidential information, trade secrets or any other proprietary rights or processes of any other Person; and 7.4 Infringement by Third Parties. Notify GPI should it become aware that there is infringement of a patent involving the Product by any third party. ARTICLE 8 MODIFICATION OF CERTAIN OBLIGATIONS EFFECTIVE UPON THE TRANSITION DATE 8.1 Marketing Rights Agreement. Effective as of the Transition Date, the Marketing Rights Agreement shall terminate and, except for those rights and obligations of any party under the Marketing Rights Agreement that expressly survive the termination of such agreement pursuant to either the terms of such agreement (as modified by this Agreement) or the terms of this Agreement, all rights and obligations of any party under the Marketing Rights Agreement shall cease to be of further effect. As to those rights and obligations of any party under the Marketing Rights Agreement that do expressly survive the termination thereof, the parties agree that effective as of the Transition Date they shall be modified as follows: 8.1.1 Product Liability. The first and second sentences of Section IV(C)(2) shall be amended and restated to read as follows: "The parties desire to separately allocate between themselves the risks and costs of any product liability claims from third parties with respect to the Product RIGHTS REVERSION AGREEMENT 19 20 (whether related to the safety or efficacy of the Product or arising out of alleged defects in material, design or workmanship of the Product or the use, marketing, advertising, promotion, or distribution of the Product, but excluding those claims (1) for which GPI and GPI Holdings are obligated to defend, indemnify and hold the RPR Indemnitees harmless under Section IV(C)(1)(a), and (2) for which RPR is obligated to defend, indemnify and hold the GPI Indemnitees harmless under Section IV(C)(1)(b)) (hereafter, a "Product Liability Claim"). Any losses, obligations, liabilities, penalties and damages (including but not limited to compensatory and punitive damages), costs and expenses (including reasonable attorneys' fees), arising out of a Product Liability Claim (x) if related to Product that is sold prior to the Transition Date (as defined in the Rights Reversion Agreement between Aventis and Guilford dated as of October 23, 2000), shall be shared equally by APPI and Guilford and (y) if related to Product that is sold on or after the Transition Date, shall be borne by Guilford." 8.1.2 Confidentiality and Press Releases. (a) The third sentence of Section IV(A)(1) shall be amended and replaced to read as follows: "Information disclosed by the Disclosing Party shall remain the sole and absolute property of the Disclosing Party, subject to (x) the rights granted in this Agreement and the transactions contemplated herein and (y) the rights granted in that certain Rights Reversion Agreement between Aventis and Guilford dated as of October 23, 2000 and the transactions contemplated therein, including the transfer of certain information by APPI to Guilford thereunder and the corresponding change in the nature of such information from the proprietary and confidential information of APPI to the proprietary and confidential information of Guilford. Nothing in this Agreement shall limit the use or disclosure by a party of its own proprietary or confidential information, including the information to be transferred by APPI to Guilford under the Rights Reversion Agreement which upon such transfer shall become the confidential and proprietary information of Guilford." (b) Notwithstanding the survival provisions in Section IV(A)(5) and Section IV(D)(4), Section IV(A)(2) providing APPI with the right to disclose information to its wholesalers and other direct customers as necessary to effectively market and distribute the Product shall terminate and be of no further force and effect as of the Transition Date. (c) Notwithstanding the survival provisions in Section IV(A)(5) and Section IV(D)(4), Section IV(A)(3) relating to the coordination of press releases and other public announcements by the parties shall terminate and be of no further force and effect as of the Transition Date. 8.1.3 Joint Inventions. Notwithstanding the survival provisions in Section IV(H)(9) and Section IV(D)(4) of the Marketing Rights Agreement, Sections IV(H)(3) through RIGHTS REVERSION AGREEMENT 20 21 IV(H)(8), regarding Joint Inventions, shall terminate and be of no further force and effect as of the Transition Date. 8.2 1996 Manufacturing and Supply Agreement. Effective as of the Transition Date, the 1996 Manufacturing and Supply Agreement shall terminate and, except for those rights and obligations of any party under the 1996 Manufacturing and Supply Agreement that expressly survive the termination of such agreement pursuant to either the terms of such agreement (as modified by this Agreement) or the terms of this Agreement, all rights and obligations of any party under the 1996 Manufacturing and Supply Agreement shall cease to be of further effect. As to those rights and obligations of any party under the 1996 Manufacturing and Supply Agreement that do expressly survive the termination thereof, the parties agree that they shall be modified as follows: 8.2.1 Recalls. The third to last sentence of Section II(G) shall be amended and restated to read as follows: "If neither party is responsible for such breach and the Product subject to corrective or market action was sold prior to the Transition Date (as defined in the Rights Reversion Agreement between Aventis and Guilford dated as of October 23, 2000), then both parties will share equally the costs. If neither party is responsible for such breach and the Product subject to corrective or market action was sold after to the Transition Date, then Guilford shall bear the costs." 8.2.2 Product Liability. The first and second sentences of Section III(C)(2) shall be amended and restated to read as follows: "The parties desire to separately allocate between themselves the risks and costs of any product liability claims from third parties with respect to the Product (whether related to the safety or efficacy of the Product or arising out of the alleged defects in material, design or workmanship of the Product or the use, marketing, advertising, promotion, or distribution of the Product, but excluding those claims (1) for which GPI and GPI Holdings are obligated to defend, indemnify and hold the RPR Indemnitees harmless under Article III.C.1.a., and (2) for which RPR is obligated to defend, indemnify and hold the GPI Indemnitees harmless under Article III.C.1.b) (hereafter, a "Product Liability Claim"). Any losses, obligations, liabilities, penalties and damages (including but not limited to compensatory and punitive damages), costs and expenses (including reasonable attorneys' fees), arising out of a Product Liability Claim (x) if related to Product that is sold prior to the Transition Date (as defined in the Rights Reversion Agreement between APPI and Guilford dated as of October 23, 2000), shall be shared equally by APPI and Guilford and (y) if related to Product that is sold on or after the Transition Date, shall be borne by Guilford." 8.3 Returns. Effective as of the Transition Date, Guilford shall be responsible for all obligations with respect to returned units of Product; provided, that, until the end of the three-month period following the Transition Date, APPI shall reimburse Guilford at the rate of $1,000 RIGHTS REVERSION AGREEMENT 21 22 per box of Product for returned units of Product bearing lot numbers of Product sold to APPI under the 1996 Manufacturing and Supply Agreement for up to 36 boxes of Product. 8.4 Regulatory Responsibilities. Effective as of the Transition Date, Guilford shall assume all regulatory responsibilities for the Product, including, without limitation, adverse experience reporting, quarterly and annual FDA reports, complaint and sample tracking, product recalls and communication with health care professionals and customers, and assume all fee obligations for holders of NDAs (and corresponding foreign Regulatory Filings) for the GLIADEL Product. ARTICLE 9 CONFIDENTIALITY; PRESS RELEASES 9.1 Confidentiality. 9.1.1 Pursuant to this Agreement, each of Aventis and Guilford (in such capacity, the "Disclosing Party") have disclosed and will be disclosing to the other party (in such capacity, the "Receiving Party") certain proprietary information, technical data, trade secrets and know-how of the Disclosing Party including, without limitation, Know-How, Product research and plans, designs, methods, formulations, ingredients, samples, processes, machines, processing and control information, Product performance data, manuals, INDs, NDAs, Regulatory Filings, the content of any unpublished patent applications, drawings, formulae, devices, structures, models, prototypes, data, test results, photographs, film, techniques, apparatus, tapes, disks, unpublished trademarks, trade names and copyrights, customer lists, supplier lists, markets, operating methods and procedures, marketing distribution and sales methods and systems, sales figures, projections, finances and other business information. 9.1.2 The Receiving Party shall, during the term of this Agreement, and for seven (7) years after the expiration or sooner termination of the term of this Agreement, make no use of such confidential information except (x) to advance the purposes of the Marketing Rights Agreement in accordance with its provisions or (y) to advance the purposes of this Agreement in accordance with its provisions, which purposes shall include the transition of the development, commercialization and sale of the Product to Guilford from APPI and Guilford's corresponding disclosure of such confidential information to potential distributors, vendors of regulatory services and such other third party agents as may be used by Guilford to develop, commercialize and sell the Product. Each party shall use the same efforts to keep secret and prevent the disclosure of such confidential information to third parties as it would use with respect to its own confidential information. 9.1.3 Information disclosed by the Disclosing Party shall remain the sole and absolute property of the Disclosing Party, subject to the rights granted in this Agreement and the transactions contemplated herein, including the transfer of certain information by APPI to Guilford hereunder and the corresponding change in the nature of such information from the proprietary and confidential information of APPI to the proprietary and confidential information of Guilford. Nothing in this Agreement shall limit the use or disclosure by a party of its own proprietary or confidential information, including the information to be transferred by APPI to RIGHTS REVERSION AGREEMENT 22 23 Guilford hereunder which upon such transfer shall become the confidential and proprietary information of Guilford. 9.1.4 The above restrictions on the use and disclosure of information shall not apply to any information which: (a) is already known to the Receiving Party at the time of disclosure, as demonstrated by competent proof; (b) is or becomes generally available to the public other than through any act or omission of the Receiving Party in breach of this Agreement; (c) is acquired by the Receiving Party from a third party who is not, directly or indirectly, under an obligation of confidentiality to the Disclosing Party with respect to same; (d) is required to be disclosed pursuant to applicable law, rule or regulation; (e) is required to be disclosed to government regulatory authorities to obtain Regulatory Approval for the Product or to respond to a regulatory or governmental inquiry concerning the Product; or (f) is developed independently by the Receiving Party without use, direct or indirect, of information that is required to be held confidential hereunder. In the event that Confidential Information is required to be disclosed pursuant to subsection (d) or (e) of this Section 9.1.4, the Receiving Party shall promptly inform the Disclosing Party of the circumstances requiring disclosure of the information prior to disclosure to afford the Disclosing Party an opportunity to seek an appropriate protective order or other means of seeking confidential treatment for such information. 9.2 Permitted Disclosure. Notwithstanding the provisions of Section 9.1 of this Agreement, APPI shall be permitted to disclose information to its wholesalers and other direct customers as necessary to effectively market and distribute the Product as provided in Section IV(A)2 of the Marketing Rights Agreement until such provision is terminated pursuant to Section 8.1.2(b) of this Agreement. 9.3 Press Releases. Notwithstanding the provisions of Section 9.1 of this Agreement, Section IV(A)(3) of the Marketing Rights Agreement relating to the coordination of press releases and other public announcements by the parties shall govern this Agreement and the Marketing Rights Agreement until such provision is terminated pursuant to Section 8.1.2(c) of this Agreement. In furtherance of the foregoing, APPI acknowledges that the transactions contemplated by this Agreement are material to Guilford and Guilford has an obligation to disclose such transactions, and that Guilford may in its sole discretion issue a press release in the form set forth as Exhibit E hereto; provided, however, that any other disclosure by any of the parties relating to the transactions contemplated by this Agreement shall be subject to the prior review and approval, not to be unreasonably withheld or delayed, of the other parties. In addition, Guilford may issue press releases and make other public statements with respect to the results of the First Surgery Trial, and Guilford's analyses and conclusions with respect thereto, and Guilford's plans for Regulatory Filings based thereon, subject to providing APPI a reasonable prior opportunity to review and comment on any and all such releases and subject to Guilford considering in good faith comments of APPI prior to such release; provided, however, that Guilford's obligation to provide such opportunity to APPI to review and comment shall terminate upon the termination of this Agreement and, notwithstanding Section 9.5, shall not survive such termination. In any such disclosures, Guilford will not purport to attribute any interpretations of the First Surgery Trial to APPI or purport to represent APPI or any of its Affiliates, without APPI's prior written consent. Either party may use prior press releases issued RIGHTS REVERSION AGREEMENT 23 24 in accordance with this Section 9.3, or the content thereof, after the date of such release without prior notice or approval from the other party. 9.4 Use of Name. Neither party shall use the name of the other for marketing, advertising, promotional claims without the prior written consent of the other party. In communications with regulatory authorities, neither party shall purport to attribute any statements to the other party or purport to represent the other party without the prior written consent of the other party. 9.5 Survival. The provisions of this Article 9 shall survive the expiration or sooner termination of the term of this Agreement. ARTICLE 10 INDEMNIFICATION In order to distribute among themselves the responsibility for claims arising out of this Agreement, and except as otherwise specifically provided for herein, the parties agree as follows: 10.1 Guilford Indemnification Obligation. Each of GPI and GPI Holdings, jointly and severally, shall defend, indemnify and hold Aventis, its Affiliates, and their respective officers, directors, agents, employees and shareholders (collectively, "Aventis Indemnitees") harmless, from and against, any and all losses, obligations, liabilities, penalties and damages (including but not limited to compensatory and punitive damages), costs and expenses (including, reasonable attorneys' fees), which the Aventis Indemnitees may incur or suffer, and all deficiencies, actions (including without limitation, any proceedings to establish insurance coverage), claims, suits, legal, administrative, arbitration, governmental or other proceedings or investigations, and judgments, reasonable costs and expenses (including reasonable legal fees) which any of them may face arising out of (i) any breach by GPI or GPI Holdings of any representation or warranty made by GPI or GPI Holdings in this Agreement or any breach by GPI or GPI Holdings in the performance or observation of any covenant, agreement, obligation or provision in this Agreement to be performed or observed by GPI or GPI Holdings; (ii) any negligent or otherwise tortious act or omission by GPI or GPI Holdings in connection with the performance or observation of any covenant, agreement, obligation or provision in this Agreement to be performed or observed by GPI or GPI Holdings; and (iii) the enforcement by the Aventis Indemnitees of their rights under this Section 10.1. 10.2 Aventis Indemnification Obligation. Aventis shall defend, indemnify and hold each of GPI and GPI Holdings, its respective Affiliates, and their respective officers, directors, agents, employees and shareholders (collectively, "GPI Indemnitees") harmless, from and against, any and all losses, obligations, liabilities, penalties, and damages (including but not limited to compensatory and punitive damages), costs and expenses (including reasonable attorneys' fees), which the GPI Indemnitees may incur or suffer, and all deficiencies, actions (including, without limitation, any proceedings to establish insurance coverage), claims, suits, legal, administrative, arbitration, governmental or other proceedings or investigations, and judgments, reasonable costs and expenses (including, reasonable legal fees) which any of them may face arising out of (i) any breach by APPI or RPR Inc. of any representation or warranty RIGHTS REVERSION AGREEMENT 24 25 made by APPI or RPR Inc. in this Agreement or any breach by APPI or RPR Inc. in the performance or observation of any covenant, agreement, obligation or provision in this Agreement to be performed or observed by APPI or RPR Inc.; (ii) any negligent or otherwise tortious act or omission by APPI or RPR Inc. in connection with the performance or observation of any covenant, agreement, obligation or provision in this Agreement to be performed or observed by APPI or RPR Inc.; (iii) the enforcement by the GPI Indemnitees of their rights under this Section 10.2. 10.3 General Provisions. If any action, claim, suit, proceeding or investigation arises as to which a right of indemnification provided in this Article 10 applies, the GPI Indemnitee or the Aventis Indemnitee, as the case may be (the "Indemnified Party"), shall promptly notify the party obligated under this Article 10 to indemnify the Indemnified Party (the "Indemnifying Party") thereof in writing, and allow the Indemnifying Party and its insurers the opportunity to assume direction and control of the defense against such action, claim, suit, proceeding or investigation, at its sole expense, including without limitation, the settlement thereof at the sole option of the Indemnifying Party or its insurers to the extent that Indemnified Party's liability is not thereby invoked. The Indemnified Party shall cooperate with the Indemnifying Party and its insurer in the disposition of any such matter and the Indemnified Party will have the right and option to participate in the defense of any action, claim, suit, proceeding or investigation as to which this Article 10 applies, with separate counsel at its election and cost. If the Indemnifying Party fails or declines to assume the defense of any such action, claim, suit, proceeding or investigation within thirty (30) days after notice thereof, the Indemnified Party may assume the defense thereof for the account and at the risk of the Indemnifying Party. The Indemnifying Party shall pay promptly to the Indemnified Party any losses, obligations, liabilities, penalties, damages, judgments, reasonable costs and expenses (including reasonable legal fees) to which the indemnity under this Article 10 relates, as incurred. 10.4 Survival. The provisions of this Article 10 shall survive the expiration or sooner termination of the term of this Agreement. ARTICLE 11 TERM AND EXPIRATION 11.1 Term. The term of this Agreement shall commence on the date hereof and shall expire at the end of the six-month period following the Transition Date. The expiration of this Agreement shall have no effect on any transactions completed under this Agreement prior to such expiration and, for example, any agreement terminated or amended by this Agreement shall remain so amended or terminated upon the expiration of this Agreement. 11.2 Survival. The following shall survive the expiration or sooner termination of the term of this Agreement: (a) any payment obligations of the parties under this Agreement accruing prior to the date of expiration or termination, and (b) any other provision herein expressly surviving expiration or termination or necessary to interpret the rights and obligations of the parties in connection with the expiration or termination of the term of this Agreement and those matters that expressly survive termination of the 1996 Stock Purchase Agreement (as modified by this Agreement). RIGHTS REVERSION AGREEMENT 25 26 11.3 Events of Default. 11.3.1 The occurrence of any one or more of the following acts, events or occurrences shall constitute an "Event of Default" under this Agreement: either party breaches any material provision of this Agreement, the Marketing Rights Agreement, the Registration Rights Agreement, the 1996 Manufacturing and Supply Agreement or the 1996 Stock Purchase Agreement and fails to remedy such breach or default within sixty (60) days after the receipt of notice thereof. 11.3.2 Notwithstanding the foregoing Section 11.3.1, in the event of a breach or default which cannot be remedied within such sixty (60) day period (other than a failure to make payment as required herein), so long as the breaching/defaulting party is using commercially reasonable efforts to remedy such breach or default, an Event of Default shall not have occurred until four (4) months after notice of such breach or default and only if such breach or default is not cured during such period. 11.4 Remedies. 11.4.1 Immediately upon the occurrence of any Event of Default by Guilford pursuant to Section 11.3, Aventis shall have the right to terminate this Agreement, exercisable by delivering written notice thereof to Guilford, and to pursue any and all remedies available to it at law or in equity including, without limitation, the right to seek to recover from Guilford any and all damages and losses of any nature whatsoever (including, without limitation, consequential damages, lost profits and direct damages). 11.4.2 Immediately upon the occurrence of any Event of Default by Aventis pursuant to Section 11.3, Guilford shall have the right to terminate this Agreement, exercisable by delivering written notice thereof to Aventis, and to pursue any and all remedies available to it at law or in equity including, without limitation, the right to seek to recover from Aventis any and all damages and losses of any nature whatsoever (including, without limitation, consequential damages, lost profits and direct damages). 11.5 Force Majeure. The obligations of Guilford and Aventis hereunder shall be subject to any delays or non-performance caused by: acts of God, earthquakes, fires, floods, explosion, sabotage, riot, accidents; regulatory, governmental or military action or inaction; strikes, lockouts or labor trouble; perils of the sea; or failure or delay in performance by third parties, including suppliers and service providers; or any other cause beyond the reasonable control of either party. The party which is not performing its obligations under this Agreement as a result of any such event of force majeure shall use commercially reasonable efforts to resume compliance with this Agreement as soon as possible. ARTICLE 12 MISCELLANEOUS 12.1 Further Assurances. Guilford and Aventis will each, at and after the Closing Date, without further consideration, do, execute, acknowledge, deliver and file, or will cause to be done, executed, acknowledged, delivered and filed, all such further acts, deeds, assignments, RIGHTS REVERSION AGREEMENT 26 27 transfers, conveyances, powers of attorney and assurances as may be reasonably required (i) for transferring, conveying and assigning to Guilford, or to its respective successors or assigns, the items to be transferred pursuant to Article 6 hereof and (ii) to otherwise implement the transactions contemplated by this Agreement. 12.2 HSR Filings. Guilford and Aventis shall cooperate with one another in (i) determining whether any filing of Notification and Report Forms under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, is required in connection with the consummation of the transactions contemplated by the Transaction Agreements and (ii) preparing and making any such filing and furnishing information required in connection therewith as soon as is reasonably practicable, but in any event within five business days after the signing of this Agreement. If such a filing is required, each party shall be responsible for preparing and making its own filing and each party shall be responsible for paying its own filing and other fees, costs and expenses associated with making the filing. 12.3 Independent Contractors. In making and performing this Agreement, Guilford, on the one had, and Aventis, on the other hand, are acting and shall act as independent contractors. Nothing in this Agreement shall be deemed to create an agency, joint venture or partnership relationship between Guilford, on the one hand, and Aventis, on the other hand. Neither Guilford nor Aventis shall have the authority to obligate the other in any respect, and neither Guilford nor Aventis shall hold itself out as having any such authority. All personnel of GPI Holdings shall be solely employees of GPI Holdings and shall not represent themselves as employees of GPI or Aventis. All personnel of GPI shall be solely employees of GPI and shall not represent themselves as employees of GPI Holdings or Aventis. All personnel of Aventis shall be solely employees of Aventis and shall not represent themselves as employees of GPI or GPI Holdings. 12.4 Assignment. Neither Guilford nor Aventis may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the other parties hereto; provided, however, a party may assign its rights and obligations hereunder to an Affiliate, provided that the assigning party shall remain responsible for all obligations to the non-assigning parties hereunder. 12.5 Binding Effect; Benefits. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective permitted successors and assigns. Nothing contained herein shall give to any other Person any benefit of any legal or equitable right, remedy or claim. 12.6 Amendments. This Agreement may be modified, amended or supplemented only by an instrument in writing executed by each of Guilford and Aventis. 12.7 Waivers. No term or provision hereof will be considered waived by any party, and no breach excused by any party, unless such waiver or consent is in writing signed on behalf of the party against whom the waiver is asserted. No consent by any party to, or waiver of, a breach by any party, whether express or implied will constitute a consent to, waiver of, or excuse of any other, different or subsequent breach by any party. RIGHTS REVERSION AGREEMENT 27 28 12.8 Notices. All notices, claims, certificates, requests, demands and other communications hereunder shall be in writing and shall be delivered personally or sent by facsimile transmission, nationally-recognized express courier, or United States registered or certified mail, return receipt requested, addressed as follows: If to GPI to: Guilford Pharmaceuticals Inc. 6611 Tributary Street Baltimore, Maryland 21224 Attention: Secretary Fax: 410-631-6819 If to GPI Holdings to: GPI Holdings, Inc. 222 Delaware Avenue P.O. Box 2306 Wilmington, Delaware 19899 Attention: President Fax: 302-888-6865 RIGHTS REVERSION AGREEMENT 28 29 If to APPI to: Aventis Pharmaceuticals Products Inc. Route 202-206 Bridgewater, New Jersey 08807 Attention: Senior Vice President, Corporate Development Fax: 908-231-3619 With a copy to: Aventis Pharmaceuticals Products Inc. Route 202-206 Bridgewater, New Jersey 08807 Attention: Vice President, Legal Corporate Development Fax: 908-231-2243 If to RPR Inc. to: Rhone-Poulenc Rorer Inc. C/o Aventis Pharmaceuticals Products Inc. Route 202-206 Bridgewater, New Jersey 08807 Attention: Senior Vice President, Corporate Development Fax: 908-231-3619 With a copy to: Aventis Pharmaceuticals Products Inc. Route 202-206 Bridgewater, New Jersey 08807 Attention: Vice President, Legal Corporate Development Fax: 908-231-2243 or to such other address as the party to whom notice is to be given may have furnished to the other parties in writing in accordance herewith. Any such communication shall be deemed to have been received (i) when delivered, if delivered personally, (ii) when sent (with confirmation received), if sent by facsimile transmission prior to 5:00 p.m. on a business day, (iii) on the first business day after dispatch (with confirmation received), if sent by facsimile transmission on a day other than a business day or after 5:00 p.m. on a business day; (iv) upon the date of delivery indicated in the records of such courier, if sent by courier; or (v) upon the date of delivery indicated on the return receipt, if sent by United States certified or registered mail. 12.9 Counterparts. This Agreement shall become binding when any two or more counterparts hereof, individually or taken together, shall bear the signatures of each of the parties hereto. This Agreement may be executed in any number of counterparts, each of which shall be RIGHTS REVERSION AGREEMENT 29 30 deemed an original as against the party whose signature appears thereon, but all of which taken together shall constitute but one and the same instrument. 12.10 Headings. The article and section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 12.11 Governing Law. This Agreement, and any claims, disputes or causes of action relating to or arising out of this Agreement, shall be construed in accordance with and governed by the laws of the State of Delaware, without giving effect to the conflict of laws principles thereof. 12.12 Severability. Any of the provisions of this Agreement which are determined to be invalid or unenforceable in any jurisdiction shall be ineffective to the extent of such invalidity or unenforceability in such jurisdiction, without rendering invalid or unenforceable the remaining provisions hereof or affecting the validity or enforceability of any of the provisions of this Agreement in any other jurisdiction. 12.13 Exhibits. The following Exhibits are attached to this Agreement and made a part of this Agreement:

Exhibit Description of Exhibit ------- ---------------------- A Registration Rights Agreement B Stock Purchase Agreement C APPI NDA and IND Transfer Information and Forms D Guilford NDA and IND Transfer Information and Forms E Guilford Press Release

12.14 Disputes. 12.14.1 Notwithstanding anything contained in this Agreement to the contrary, if any dispute arises between the parties relating to or arising out of this Agreement, appropriate representatives of the parties shall first use commercially reasonable efforts to negotiate in good faith a resolution of the dispute as expeditiously as is reasonably practicable. 12.14.2 If such representatives of the parties are unable to resolve the dispute within seven (7) business days after each party has been apprised of the dispute, any party shall have the right, exercisable by delivering written notice thereof to the other parties, to refer the dispute to the Chief Executive Officer of GPI and the Senior Vice President of Corporate Development of Aventis. If any party exercises such right, such officers shall use commercially reasonable efforts to negotiate in good faith a resolution of the dispute as expeditiously as is reasonably practicable. 12.14.3 If the dispute is not resolved within 20 business days after the date that a party referred the matter to the Chief Executive Officer of GPI and the Senior Vice President of Corporate Development of Aventis (or such other period of time as the parties may mutually agree), each party shall have the right to initiate and pursue any remedy available to it RIGHTS REVERSION AGREEMENT 30 31 at law or in equity; provided, however, that all claims, disputes or causes of action relating to or arising out of this Agreement shall be brought, heard and resolved solely and exclusively by and in a federal or state court situated in Wilmington, New Castle County, Delaware. Each of the parties hereto agrees to submit to the jurisdiction of such courts and that such courts are a proper venue for resolving all claims, disputes or causes of action relating to or arising out of this Agreement. 12.15 Entire Agreement. This Agreement, the Registration Rights Agreement, the Marketing Rights Agreement, the Stock Purchase Agreement, the 1996 Manufacturing and Supply Agreement and the 1996 Stock Purchase Agreement, constitute the entire agreement between the parties relating to the subject matter of this Agreement and supersede all prior or simultaneous representations, discussions, negotiations and agreements relating to such subject matter, whether written or oral. [Execution Page to Follow] RIGHTS REVERSION AGREEMENT 31 32 IN WITNESS WHEREOF, duly authorized representatives of the parties hereto have duly executed this Agreement as of the date hereof. AVENTIS PHARMACEUTICALS PRODUCTS INC. By: /s/ Michael A. Yeomans ------------------------- Name: Michael A. Yeomans Title: Vice President RHONE-POULENC RORER INC. By: /s/ Charles D. Dalton ------------------------- Name: Charles D. Dalton Title: Vice President GUILFORD PHARMACEUTICALS INC. By: /s/ Craig R. Smith, M.D. --------------------------- Name: Craig R. Smith, M.D. Title: Chairman of the Board, President and Chief Executive Officer GPI POLYMER HOLDINGS, INC. (formerly named GPI Holdings, Inc.) By: /s/ Daniel P. McCollom ------------------------- Name: Daniel P. McCollom Title: Vice President RIGHTS REVERSION AGREEMENT 32 EX-10.62 3 w42341ex10-62.txt AGREEMENT, DATED OCTOBER 24, 2000 1 EXHIBIT 10.62 AGREEMENT This AGREEMENT ("Agreement") is dated as of October 24, 2000 by and between Cardinal Health Sales and Marketing Services ("Vendor"), a division of RedKey, Inc., an Ohio corporation, with its principal place of business at 7000 Cardinal Place, Dublin, Ohio, and Guilford Pharmaceuticals Inc. ("Company"), a Delaware corporation having a principal place of business at 6611 Tributary Street, Baltimore MD 21224. BACKGROUND INFORMATION Company develops, distributes and sells pharmaceutical products, and Vendor provides medical representatives who Detail (as hereinafter defined) pharmaceutical products for third parties. The Company desires Vendor to provide representatives to Detail certain products as determined and directed by Company in the Territory (as hereinafter defined), pursuant to the terms and conditions of this Agreement, and Vendor desires to provide the Representatives and perform such services pursuant to the terms and conditions set forth in this Agreement. The parties hereby agree as follows: ARTICLE I DEFINITIONS AND REFERENCES TO VENDOR 1.1. Definitions. The following terms when used in this Agreement shall, except where the context otherwise requires, have the following meanings: (a) "Act" means the Federal Food, Drug and Cosmetic Act, as amended, and the regulations promulgated thereunder from time to time. (b) "Affiliate" shall have the definition set forth in Rule 405 promulgated under the Securities Act of 1933, as amended. (c) "Agency" means any governmental regulatory authority in the Territory responsible for granting approvals for the sale or maintaining regulatory oversight of the Products, including, without limitation, the FDA (as hereinafter defined). (d) "Contract Year" means a period of twelve (12) consecutive months during the term of this Agreement, beginning on the Effective Date (as hereinafter defined). (e) "Detail" means an interactive, face-to-face visit by a Representative with a Target Customer (as hereinafter defined) or his or her legally empowered designee in the Territory, during which the FDA-approved indicated uses, safety, effectiveness, contraindications, side effects, warnings and other relevant characteristics of the Product (as hereinafter defined) is described by the Representative in a fair and balanced manner consistent with the requirements of the Act, and using, as necessary or desirable, the Product Labeling (as hereinafter defined) and the Product Promotional Materials (as hereinafter defined). 1 2 (f) "Effective Date" means the date this Agreement is fully executed by both parties. (g) "FDA" means the United States Food and Drug Administration and any successor agency having substantially the same functions. (h) "Manager" means an individual hired by and retained as an employee of Vendor to supervise activities of Representatives under this Agreement, including district sales managers, regional sales directors, a national sales director, and a project manager. (i) "PDMA" means the Prescription Drug Marketing Act of 1987, as amended, and the regulations promulgated thereunder from time to time. (j) "Product Detail" means Detail of a Product between Target Customer and Representative. When used as a verb, "Detail" or "Detailing" shall mean to engage in a Detail as defined in this Section 1.l(e). (k) "Product Labeling" means all labels and other written, printed, or graphic matter provided by the Company including (i) any container or wrapper utilized with a Product, or (ii) any written material accompanying a Product, including, without limitation, Product package inserts. (l) "Product Launch Date" means the first Monday following completion of the Training Program (as defined in Section 6.1). (m) "Product Promotional Materials" means all written, printed or graphic material provided by the Company, including Product Labeling, intended for use by Representatives during a Detail, including visual aids, file cards, premium items, clinical studies, reprints, drug information updates and any other promotional support items that Company deems necessary or appropriate to conduct the Program. Product Promotional Materials shall include FDA approved indicated uses, safety, effectiveness, contraindications, side effects, warnings and other relevant characteristics of each of the Products. (n) "Products" means the pharmaceutical products to be detailed by Representatives and marketed by Company as set forth on attached Schedule 1.1(l) and such other products as may be mutually agreed between the parties and added to Schedule 1.1(l). (o) "Program" means the program of Detailing to be conducted by the Representatives pursuant to this Agreement and during the term of this Agreement, as defined in Section 14.1. (p) "Representative" and "Representatives" mean an individual hired by and retained as an employee of Vendor to conduct Detailing of Products in connection with the Program. As sometimes used herein, Representative shall also include Managers. 2 3 (q) "Target" or "Target Customer" means a physician or other specialist identified by Company. (r) "Territory" means the geographical area specified in the attached Schedule 1.1(p). (s) "Vendor" means Cardinal Health Sales and Marketing Services, a division of RedKey, Inc., an Ohio corporation. References herein to Vendor shall be deemed to include the Representatives and Managers. ARTICLE II APPOINTMENT OF VENDOR; GENERAL SCOPE OF ACTIVITIES 2.1. Furnishing Representatives. Vendor shall recruit and hire, within twelve (12) weeks after the Effective Date, at least twenty (20), or such greater number of Representatives (not to exceed thirty (30)) as shall be designated by Company within five (5) weeks of the Effective Date, to engage in Product Detail activities in the Territory. Such Representatives shall conform to the Representatives Profile set forth on Schedule 2.1. Vendor shall assign Representatives for such Target Customers, in such numbers, and in such Territories as shall be designated by Company (or recommended by Vendor pursuant to Section 2.9) during the term of this Agreement. Each Representative shall make Product Details on his or her assigned Target Customers based on the general direction given by Company's designated management team and as mutually agreed to by Vendor. The duties of such Representatives shall be exclusively to Detail the Products and perform other related activities deemed necessary for the establishment and maintenance of new and existing customers of the Products in the Territory defined as set forth on Schedule 1.1(p). Company shall at all times retain the right to promote the Products by whomever, wherever and to whomever it chooses. 2.2 Furnishing Managers. Vendor shall recruit and hire Managers to supervise the activities of Representatives and to perform this Agreement in such numbers and for such Territories (when relevant) as mutually agreed upon by Vendor and Company. 2.3. Scope of Activities. The parties shall perform the following activities as applicable to each in connection with the Program: (a) Vendor will recruit, interview and hire as its employees Representatives and Managers conforming to the Representatives Profile set forth on Schedule 2.1. Vendor shall have the sole authority to reject any applicant for employment as a Representative or Manager. Company may, at its sole cost and expense, participate with Vendor in the interviewing of Managers, and the Company shall have the right to approve the hire of Managers, and may nominate acceptable Managers for consideration for the Vendor to hire; provided, however, that in the event Vendor rejects an applicant for Manager and thereafter hires such applicant at the request of Company, Company shall indemnify for and hold Vendor harmless from any Damages (as defined in Section 16.1) arising as a result of such Manager's wrongful or negligent acts or omissions. 3 4 (b) Vendor shall have sole and exclusive authority to discipline or terminate the employment of Representatives and the Managers. Company may reasonably request that a Representative or Manager be terminated or reassigned if such Representative's or Manager's activities or conduct are not adequately achieving the performance goals of the Product, or if the Representative or Manager fails to comply with all applicable laws, regulations, and Company requirements for Detailing the Product. Reassignment in this context under this Agreement may mean reassignment to another part of the Territory, or reassignment to another contract sales force for another Vendor account. Vendor shall use its best efforts to comply with such request; provided that such action complies with applicable laws and is in accordance with Vendor's policies and procedures as determined by Vendor. In the event Vendor determines that its policies and procedures or applicable laws prohibit the termination or reassignment of any Representative so requested by Company, it shall notify Company of such determination and submit a corrective action plan for Company approval. (c) Vendor shall cause each Representative to attend and successfully complete the Training Program (as defined in Section 6.1) conducted jointly by Company or its agents and Vendor for each of the Products prior to participating in the Program. Any such Representative who shall not successfully complete all such requirements shall be removed and replaced by another Representative who shall comply with such requirements. (d) Vendor shall from time to time and in any case every six (6) weeks if so requested by Company, beginning with the Product Launch Date conduct random profiles of activities during the Program consisting of satisfaction surveys sent to customers with whom Representatives have interacted and share the results of such profiles with Company on a regular and prompt basis. Vendor shall reasonably assist the Company should Company decide to conduct such random profiles itself. (e) Vendor's District Managers shall, as part of their activities under this Agreement, routinely accompany Representatives on Details, conduct field evaluations of the Representatives and the Program, including time supervision, territory management, and reporting, and be available to review such evaluations with the Company's coordinator of the Program. At Company's request, Vendor shall permit Company or its designated representative to review Vendor's evaluations relating to the foregoing and to accompany the Representatives on such Details. (f) Company shall provide Vendor, without cost, sufficient quantities of the Product Promotional Materials and Product Labeling for the performance and supervision of Detailing. Company shall be solely responsible for the preparation, content, and method of distribution of the Product Promotional Materials and the Product Labeling. In connection with the Detailing of the Products, the Representatives shall use only the Product Labeling and the Product Promotional Materials provided by Company; and under no circumstances shall Vendor or the Representatives develop, create, or use any other promotional material or literature for the Detailing of the Products. Company shall advise Vendor immediately of any inaccuracy or incompleteness of the Product Promotional Materials or the Product Labeling, and upon such notice Vendor and the Representatives shall immediately cease the use of any portion or all of the Product Promotional Materials or Product Labeling so identified by Company. 4 5 (g) Vendor shall instruct the Representatives to limit their verbal statements and claims regarding the Products, including efficacy and safety, to those that are consistent with the Product Labeling and the Product Promotional Materials. The Representatives shall not add, delete, or modify claims of efficacy or safety in the Detailing of the Products, nor make any changes (including underlining or otherwise highlighting any language or adding any notes thereto) in the Product Promotional Materials. Representatives shall not make any disparaging, untrue, or misleading statements about any of Company or its Affiliates, employees, competitors, or competing products. Representatives shall Detail the Products in strict adherence to all applicable laws, regulations, and professional requirements, including, but not limited to, the Act, the Medicare and Medicaid Anti-Kickback Statute, and the American Medical Association Gifts to Physicians from Industry Guidelines. (h) The Representatives shall remain under the direct authority and control of Vendor, but shall cooperate with Company and shall receive advice and direction related to Detail activities on the Products from Company and Vendor mutually. Company shall make all decisions with respect to the overall strategy in connection with the Detailing of the Products. Any Company personnel interacting with Vendor Representatives shall not discipline the Representatives or implement terms or conditions of employment or personnel policies and/or practices with respect to the Representatives or otherwise control the daily activities of Representatives. Company shall use commercially reasonable efforts to advise Vendor, and to the extent necessary, to share with Vendor copies of reports, memoranda, and other data relating to Company's observations or assessment of the Representative's performance under this Agreement. (i) Vendor shall supply Representatives and Managers with fleet vehicles for their use in performing and supervising the Detailing, and Company shall reimburse Vendor for all of its reasonable, budgeted, documented out-of-pocket costs related to such vehicles, including but not limited to costs related to owning, leasing, maintaining, insuring, and/or operating such vehicles (including fuel costs). Company shall reimburse Vendor for all reasonable, budgeted, documented out-of-pocket costs and expenses (i.e., airline tickets and other travel expenses, hotel, rent-a-car, business meals, travel meals, etc.) of Representatives and Managers in connection with performing services pursuant to this Agreement. Company and Vendor shall establish a mutually acceptable budget for the costs and expenses referenced in this subparagraph for each Territory, and Vendor shall obtain prior approval for any such costs or expenses that exceed the budget. All such costs and expenses in excess of such budget shall be for the Vendor's account, unless Company agrees otherwise. (j) Company and Vendor shall work together, using their respective proprietary databases, to establish a database of Target Customers in the Territory. Company and Vendor shall confer throughout the term of the Agreement regarding additions to and deletions from the Target Customer database. Company. (k) Representatives and Managers shall comply with Vendor's drug policy, a copy of which is attached hereto and incorporated by reference herein as Schedule 2.3(k). 5 6 2.4. Orders for Products. Company shall be solely responsible for establishing the terms and conditions of the sale of the Products, including without limitation, the price at which the Products will be sold, whether sales of the Products will be subject to any discounts, the method of distribution of the Products, and whether any credit will be granted or refused in connection with the sale or return of any Product. Company shall be exclusively responsible for accepting and filling all purchase orders for the Products, billing and returns for the Products, and all other activities in connection with the sale and delivery of the Products, other than Detailing. If Vendor or the Representatives receive an order for the Products, they shall immediately transmit such order to Company for further handling and communications with the submitter of the order, including acceptance or rejection, which shall be in Company's sole discretion. 2.5. Representatives' Activity. Subject to Company's obligations and representations and warranties in this Agreement, any negligent or wrongful act or omission on the part of the Representatives (both individually and as a group) that occur during the term of this Agreement and that arise during the course and within the scope of their employment with Vendor pursuant to this Agreement shall be deemed to be negligent or wrongful acts or omissions of Vendor; provided, however, that any acts or omissions of the Representatives pursuant to the direction, control or supervision of Company or its employees or agents shall not be deemed to be negligent or wrongful acts or omissions of Vendor. Wrongful acts or omissions shall include in this context under this Agreement failure to comply with applicable laws and regulations or Vendor's policies and procedures or Companies policies and procedures that have been communicated in writing to Vendor and the Representative. Each party shall notify the other in writing as promptly as practicable of any such material alleged negligent or wrongful acts or omissions on the part of the Representatives of which it becomes aware along with a plan to remedy such acts or omissions, and Company shall provide Vendor with a reasonable opportunity to remedy such acts or omissions, and if indicated, to replace the involved Representatives. 2.6 Performance Appraisal. From time to time at Company's request and in any case at 3 months and 6 months after the Product Launch Date, and every six (6) months thereafter, Vendor and Company shall jointly conduct a performance appraisal of each Representative. Without limiting its rights under this Agreement, including Section 2.3(b) and Section 2.5, Company shall have the right to request the reassignment of any Representative who is achieving less than 80% of the sales targets established for that Representative for a given quarter. From time to time at Company's request, Vendor shall make available to Company for review the primary call data and records. 2.7 Vacancies/Turnover. In the event of a Representative vacancy due to resignation, reassignment, termination or hiring by the Company pursuant to Section 3.3 of a Representative, Vendor shall, at Company's request, use its best efforts to fill any such vacancy within a four (4) week period. All recruiting and other related expenses for filling a vacancy shall be borne by Vendor; provided, however, that Company shall reimburse Vendor all recruiting and other related expenses for filling any vacancy occurring pursuant to Company's request for reassignment or termination other than: (i) a request pursuant to the last sentence of Section 2.5, the penultimate sentence of Section 2.6, or Section 14.7; (ii) due to the Representative's failure 6 7 to conform (or to continue to conform) to the Representatives Profile set forth in Schedule 2.1; or (iii) due to the failure of the Representative to Detail in conformity with applicable law or regulations, or to follow Vendor's policies and procedures. If Company desires to interview any candidates, Company shall bear its own cost of attending any final interview conducted by Vendor or the costs of any separate interview arranged for by Company. 2.8 Adjustments to Number of Representatives. No more than every six (6) months, Company may initiate a review by the parties of the adequacy or appropriateness of the number of Representatives, and may designate plans, to be instituted over a period of no longer than ninety (90) days, for an increase or decrease in the number of Representatives based on the market performance of the Product, the Detailing of the Product by Representatives who may be hired by Company as contemplated in Section 3.3 or other parties, or other factors, provided that Vendor may, upon thirty (30) days prior written notice, terminate this Agreement in the event that the total number of Representatives under this Agreement reaches ()twenty (20) Representatives, with no vacancies authorized to be filled by Company. 2.9 Territory Design. At the request of Company, Vendor shall design and implement (or redesign and re-implement) a Territory design (including sizing, deployment, alignment and mapping) of Representatives which Vendor recommends as optimal for the Detailing of the Products (for the fee set forth in Schedule 3.1. D, attached hereto). ARTICLE III COMPENSATION 3.1. Amount and Time of Payment. (a) For services hereunder, Company shall pay to Vendor the fees set forth in Schedule 3.1 attached hereto and incorporated by reference (the "Services Fee"), which shall be payable as follows:

Time Period - Contract Year Payment Amount --------------------------- -------------- 1st Contract Year A total of $2,000,000.00, payable in twelve equal monthly installments of $166,666.66. 2nd Contract Year Service Fees, plus the Deferred Fees (as hereinafter defined). 3rd Contract Year Service Fees, plus the Deferred Fees (as hereinafter defined).

At the conclusion of the first Contract Year, Vendor and Company shall calculate the actual Service Fee for that first contract year. The "Deferred Fees" shall be the amount of the first year Service Fee plus any other amount due under this Agreement less the $2,000,000.00 payment 7 8 (i) The Deferred Fees shall be repaid by Company over the second (2nd) and third (3rd) Contract Years, provided Company is not in breach of this Agreement and the Agreement remains in full force and effect. Company shall pay the Deferred Fees in equal monthly installments of principal plus accrued Interest, beginning on the first day of the thirteenth (13th) month of the Agreement and continuing on the first (1st) day of each calendar month thereafter until all outstanding principal and accrued interest has been paid in full, which in no event shall exceed the first day of the thirty-sixth (36th) month of this Agreement. (ii) The Deferred Fees shall accrue interest beginning the first day of Contract Year two (2) at the rate of the 3-month LIBOR plus 175 basis points, adjusted quarterly ("Interest"). (b) Vendor shall submit monthly invoices to Company for all Service Fees and any other amounts due under this Agreement and Company shall pay such amounts within thirty (30) days of the invoice date. (c) Notwithstanding any other right or remedy, in the event of Company's default or a breach of this Agreement and failure of Company to cure same within fifteen (15) days of notice to such effect by Vendor, all unpaid principal and accrued but unpaid interest shall be accelerated and immediately due and payable by Company. (d) Without limiting Vendor's rights under law or equity, Vendor and its Affiliates, parent or related entities, may exercise a right of set off against Company for any and all amounts due under this Agreement including, but not limited to, the Deferred Fees, against any amounts owed to Company by Vendor, or its Affiliates, parent, or related entity, if , during the term of this Agreement, Company defaults on any of its loan covenants with its third party lenders, or their assignees, which default remains uncorrected for a period of ten (10) days beyond any applicable cure period. (e) If this Agreement is terminated prior to expiration of the Initial Term, all Deferred Fees shall become immediately due and payable by Company. (f) In the event the duration of this Agreement is extended for the Renewal Term, as defined in Section 14.1, Company shall pay Vendor a Service Fee for the Renewal Term as further negotiated by the parties. 3.2. Early Termination Fee. If during the first 12 months following the Effective Date, Vendor terminates this Agreement pursuant to Sections 2.8, 14.2, 14.3, 14.6 or 14.7, or Company terminates this Agreement pursuant to Sections 14.4 or 14.7, Company shall pay Vendor, as reimbursement for Vendor's expenses in preparing to perform and performing this Agreement, as well as for Vendor's expectancy interest under this Agreement, a fee equal to the amount set forth on Schedule 3.2 attached hereto (the "Early Termination Fee"). Company and Vendor acknowledge that Vendor's damages upon termination of this Agreement would be difficult to ascertain and not susceptible of ready proof, and that the Early Termination Fee is 8 9 agreed to as a reasonable estimation of Vendor's damages upon early termination of the Agreement, and not as a penalty. 3.3. Company's Hiring of Representatives or Managers. (a) Company acknowledges that Vendor has incurred or will incur costs and expenses in connection with recruiting, hiring, and training the Representatives and Managers. During the term of this Agreement, in the event Company hires as its own employee or as an independent contractor or agent any one or more of the Representatives, Company shall pay Vendor the fee(s) set forth in the attached Schedule 3.3. The provisions of this Section 3.3(a) shall not apply to any Representatives hired by Vendor who were employees of Company as of the date of this Agreement. (b) Beginning twelve (12) months following the Effective Date for Representatives and beginning six (6) months following the Effective Date for Managers, Company shall have the right to identify those Representatives or Managers, that Company desires to hire (collectively, the "Targeted Employees") and to negotiate with any Targeted Employee concerning the terms on which Company might hire that Targeted Employee. Vendor agrees not to interfere with the Company's solicitation and hiring of the Targeted Employees , and Vendor will assist Company in the transition of Targeted Employees from Vendor to Company, provided, however, that in the event such Targeted Employer declines employment with Company, then Vendor shall have the right to discuss other employment opportunities with such Targeted Employer that would commence after expiration of the Term of the Agreement and any renewal. For a period of twelve months after any termination of this Agreement, Vendor agrees not to solicit for hire as an employee, agent or independent contractor any Targeted Employee hired by Company during the term of this Agreement. 3.4. Reimbursement of Expenses. Except as provided in Section 3.1(a), all expenses of Vendor for which Company is obligated to reimburse Vendor under this Agreement, including but not limited to travel expenses and vehicle expenses under Section 2.2(i), shall be paid by Company within 30 days after Vendor has submitted a statement itemizing such expenses. Vendor shall use its best efforts to submit such expense statements to Company monthly. 3.5 Past Due Amounts. Failure of the Company to timely make any payment to Vendor under this Agreement within fifteen (15) days of the due date will constitute a material breach of this Agreement by Company. All amounts owing by Company to Vendor pursuant to this Agreement that are not timely paid by Company will bear interest at the rate of 10% per annum from the due date. 3.6 Bonus Potential. (a) Upon execution of this Agreement and no later than each anniversary of the Effective Date, Company and Vendor shall use good faith efforts to jointly determine or revise, as the case may be, unit sales forecast (the "Unit Sales Forecast") for each year following the Product Launch Date during the Initial Term and any Renewal Term (each such year, a "Detailing Year") for the purpose of evaluating the Representatives and determining eligibility 9 10 for a potential Bonus. The Bonus for a given Detailing Year will be based upon Actual Unit Sales over the Forecasted Unit Sales, as further set forth on Schedule 3.6 attached hereto, as the same may be amended by the written agreement of the parties from time to time. (b) Company shall reimburse Vendor for the Bonus for any Representative actually paid by Vendor to the Representative in accordance with Schedule 3.6 no later than sixty (60) days following the close of a Detailing Year relating to which such Bonus was paid. ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS 4.1. By Vendor. Vendor represents, warrants, and covenants to Company, as of execution of this Agreement and during the term of this Agreement, as follows: (a) that Vendor and the Representatives shall perform the Detailing in a professional, timely, competent and efficient manner; (b) that Vendor shall comply with all laws, rules and regulations that apply to the performance of services under this Agreement, including but not limited to the PDMA, the Medicare and Medicaid Anti-Kickback Act (42 U.S.C. Section 1320a-7b(a)), the Civil False Claims Act (31 U.S.C. Section 3729(a)), Sections 1128A, 1128B, and 1877 of the Social Security Act (42 U.S.C. Sections 1320a-7a, -7b, and 1395nn), the Health Care Fraud Act (18 U.S.C. Section 1347), and the Criminal False Claims Act (18 U.S.C. Section 287), as amended from time to time, as well as similar applicable state laws; (c) when on Company's premises or on the premises of Company's customers, Vendor and the Representatives shall comply with all of Company's or Company's customer's policies regarding the conduct of visitors of which Vendor and the Representatives are aware, a copy of which Vendor acknowledges receiving; (d) that the Representatives and Managers shall be exclusively assigned to Detailing and supervision of the Detailing of the Products, and no other activities unrelated to the Program; (e) that Vendor is under no obligation to any third party that would prevent the execution of this Agreement or interfere with its performance under this Agreement; (f) That Vendor is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Ohio; and (g) That Vendor has the full right, power and authority to execute, deliver and perform this Agreement and that this Agreement has been duly executed and delivered by Vendor and constitutes its legal, valid and binding obligation, enforceable in accordance with its terms. 10 11 4.2. By Company. Company represents, warrants, and covenants to Vendor, as of execution of this Agreement and during the term of this Agreement, as follows: (a) that Company is under no obligation to any third party that would prevent the execution of this Agreement or interfere with its performance under this Agreement; (b) that Company shall comply with all laws, rules and regulations that apply to the Products and their sale, the Program, and this Agreement, including but not limited to the Act, the PDMA, the Medicare and Medicaid Anti-Kickback Act (42 U.S.C. Section 1320a-7b(a)), the Civil False Claims Act (31 U.S.C. Section 3729(a)), Sections 1128A, 1128B, and 1877 of the Social Security Act (42 U.S.C. Sections 1320a-7a, -7b, and 1395nn), the Health Care Fraud Act (18 U.S.C. Section 1347), and the Criminal False Claims Act (18 U.S.C. Section 287), as amended from time to time, as well as similar applicable state laws; (c) that the Product Labeling and Product Promotional Materials are accurate, complete, and in compliance with the Act and all rules and regulations of the FDA; (d) that, subject to FDA approval, the Products may be lawfully Detailed and sold; (e) that Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware; and (f) that Company has the full right, power and authority to execute, deliver and perform this Agreement and that this Agreement has been duly executed and delivered by Company and constitutes its legal, valid and binding obligation, enforceable in accordance with its terms. ARTICLE V STATUS OF VENDOR AND THE REPRESENTATIVES 5.1. Vendor Independent Contractor. Vendor is being retained and shall perform hereunder strictly as an independent contractor. Representatives and Managers of Vendor performing services hereunder shall not be, and shall not be considered to be, employees of Company for any purpose, and shall at all times remain employees of Vendor, subject to Section 3.3. Neither party shall have any responsibility for the hiring, termination, compensation, benefits or other conditions of employment of the other party's employees, except as otherwise provided in this Agreement. 5.2. No Company Benefits. While employees of Vendor, the Managers and Representatives are not eligible to participate in any benefits programs or sales bonuses offered by Company to its employees, or in any pension plans, profit sharing plans, insurance plans or any other employee benefit plans offered from time to time by Company to its employees, provided that the Representatives shall be eligible to participate in Company sales contests if so requested by Company and approved by Vendor, and former employees of Company hired by Vendor shall not be required to forfeit any Company benefits. Vendor acknowledges and agrees 11 12 that Company does not, and will not, maintain or procure any worker's compensation or unemployment compensation insurance for or on behalf of the Managers or Representatives while they are employees of Vendor. Vendor acknowledges and agrees that it shall be solely responsible for paying all salaries, wages, benefits and other compensation which its employees (including Representatives and Managers) may be entitled to receive in connection with the performance of the services hereunder. Notwithstanding the foregoing, Vendor agrees that Company shall have the right to approve the initial salary payable to any Representative hired by Vendor who is an employee of Company as of the date of this Agreement. 5.3 Sales, Use and Excise Taxes. If any state or local government or other taxing authority determines that sales, use or excise Taxes ("Taxes") are applicable to Vendor's services performed hereunder, Vendor shall promptly accrue and Company shall pay such Taxes on behalf of Vendor to the appropriate taxing authorities. In addition, Company shall be responsible for the payment of any applicable Taxes related to Company's supply to Vendor of Product Promotional Materials and Product Samples. 5.4. No Joint Venture. Nothing contained in this Agreement shall be construed as creating a joint venture or, except as otherwise provided herein, as granting to either party the authority to bind or contract any obligations in the name of or on the account of the other party or to make any guarantees or warranties on behalf of the other party. ARTICLE VI TRAINING 6.1. Training Programs. (a) Company and Vendor shall conduct a training program (of approximately five (5) days duration) for the Representatives and Managers prior to the commencement of the Program (but after Company makes pre-stocking shipments of Products) (the "Training Program"). The Company shall prepare and conduct its portion of the Training Program on such medical and technical information about the Products. Vendor shall prepare and conduct its portion of the Training Program on sales skills, data gathering, regulatory requirements and applicable laws, recalls, electronic equipment, and Vendor's policies and procedures. Except as provided in Schedule 3.1, each party shall be responsible for its own costs in connection with the preparation and conducting its portion of the Training Program. (b) In order to qualify for assignment in a Territory, a Representative must demonstrate thorough knowledge of the Products by passing Company approved Product tests at a level of proficiency agreed upon by Company and Vendor. 6.2. Training Materials. With the advice and assistance of Company, Vendor shall prepare written training materials for the Training Program and an up-to-date programmed learning unit for the Products, to be sent to each Representative for "at home" study a minimum of five (5) days prior to the commencement of the Training Program. Company shall provide vendor with clinical and other information about the Products in order to prepare such written training materials and programmed learning unit. 12 13 6.3. Company Assistance. During the term of this Agreement Company shall assist Vendor's Representatives and Managers with respect to the Training Program and additional orientation and ongoing training for the Representatives. ARTICLE VII SAMPLES 7.1. Provision of Samples. Company shall provide samples of the Products to the Representatives at Company's option and at its expense. Company shall determine the quantity and types of samples to be provided to the Representatives and the method of distribution of the samples. In the event Company elects to have Vendor manage the storage and distribution of samples, Vendor shall pass on to Company the actual invoice costs for storage, distribution and other related costs and use prudent business sense in costs incurred. All samples shall be stored and handled by Company and Vendor in compliance with the PDMA and applicable law. 7.2 Sample Accountability. Vendor shall prepare and provide to Company for approval a sample accountability program applicable to the samples provided by Company. 7.3. Return of Samples. Within 30 days following the termination or expiration of this Agreement or within 30 days from the termination or removal from the Program of a Representative (unless such Representative has been hired or retained by Company), Vendor shall cause the Representatives to return to Company all unused Product samples provided to Vendor or the Representatives by Company. Company shall pay or reimburse Vendor for all costs and expenses in connection with the storage and shipment of returned samples. ARTICLE VIII TRADEMARKS AND INTELLECTUAL PROPERTY RIGHTS The Products shall be Detailed by Vendor's Representatives under trademarks owned by Company or an Affiliate of Company. This Agreement does not constitute a grant to Vendor of any property right or interest in the Products or any trademarks which Company or an Affiliate of Company uses with respect to the Products or to the name or business style of Company. Vendor and the Representatives shall use the Product Promotional Materials only for the purposes of this Agreement, and all copyright and other intellectual property rights in the Product Promotional Materials shall remain with Company. ARTICLE IX COMMUNICATIONS; MONITORING THE PROGRAM 9.1. Communications from Third Parties. Subject to Article XI, Vendor and its Representatives shall use their best efforts to advise Company of all comments, statements, requests and inquiries of the medical profession or any other third parties relating to the Products that are not addressed by either Product Labeling or the Product Promotional Materials, of which Vendor becomes aware. All responses to such communications to the medical profession or such other third parties shall be handled solely by Company. Vendor shall provide reasonable 13 14 assistance to Company to the extent requested by Company, and at Company's cost and expense, to fully respond to such communications. 9.2. Government Agencies. Subject to Article XI, all communications with government agencies, including the FDA, concerning the Products shall be the sole responsibility of Company. Vendor shall assist Company with respect to such communications with government agencies to the extent requested by Company, and at Company's cost and expense. Vendor shall use its best efforts to provide Company with any documents or information reasonably requested by Company for purposes of responding to any communications with government agencies within 24 hours of Company's request. 9.3. Customer Communications. In addition to Detailing, Vendor shall assist Company with respect to customer communications (as reasonably requested by Company and at Company's cost and expense) within the Territory and shall regularly advise Company of market, economic, regulatory and other developments of which Vendor may become aware which may affect the sale of the Products in the Territory. 9.4. Appointment of Coordinators. The parties shall each appoint an authorized coordinator of the Program ("Coordinators") between whom all communications required or desired to be given will be sent and between whom Detailing activities will be coordinated. Within 30 days of signing this Agreement, each party will notify the other as to the name of its Coordinator. Each party may replace its Coordinator at any time, upon notice to the other party. 9.5. Review of Results. The parties shall confer periodically, but at least once per month via telephone conference and once per calendar quarter in person, if requested by either party, to review and discuss the actual results compared to the marketing plans for Detailing of the Products, and share data, reports and other documents relative to such results. A report similar to the Form of Management Report set forth in Schedule 9.5 attached hereto, shall be generated by Vendor and provided to Company. Vendor shall, upon Company's request, include the participation of Representatives and/or Managers in such review. ARTICLE X INSURANCE 10.1. Vendor Insurance Coverage. Vendor shall maintain insurance coverage as follows: (a) Workers' Compensation insurance with statutory limits of liability and Employer's Liability insurance with a limit of $500,000; (b) Commercial General Liability insurance, including completed operations and products liability, with a combined single limit of $2,500,000; (c) Automobile liability insurance with a combined single limit of $1,000,000. 14 15 10.2. Company Insurance Coverage. Company shall maintain Commercial General Liability insurance with a combined single limit of at least $6,000,000 and Products Liability insurance with a limit of at least $10,000,000. 10.3 Certificates of Insurance.All of the foregoing insurance shall be maintained with responsible carriers and such terms of coverage shall be evidenced by certificates of insurance furnished by one party to the other. Such certificates of insurance shall provide for at least 30 days' written notice to the other party prior to cancellation or modification of any of the material terms of such coverage, and include the other party as an additional insured. ARTICLE XI ADVERSE REACTION REPORTING AND REGULATORY MATTERS 11.1. Immediate Notification. Vendor and Company agree to notify the other party as soon as reasonably practicable of any information that each may obtain or learn concerning any Product or package complaint or any serious unexpected side effect, injury, toxicity, or sensitivity reaction or any unexpected incidence of severity thereof associated with the clinical uses, studies, investigations, tests and marketing of the Products, whether or not determined to be attributable to the Products. "Serious" and "unexpected," as used herein, shall have the meanings set forth in 21 CFR 314.80(a).Each party shall also notify the other in a timely manner of any other adverse experience, i.e., any unfavorable and unintended change in the structure (signs), function (symptoms) or chemistry (laboratory data) of the body temporally associated with the use of the Products, whether or not considered related thereto. 11.2. Threatened Agency Action. Vendor and Company shall each immediately notify the other party of any information that each may obtain or learn regarding any threatened or pending action by an Agency which may affect the Products. Vendor shall, at the request of Company and at the cost and expense of Company, cooperate with Company in formulating a procedure for taking appropriate action in response to such information. Unless compelled by law, Vendor shall not respond to an Agency without the prior written consent of Company. 11.3. Training. Vendor and Company shall develop appropriate instructions in the Training Program for Representatives as to handling of information received or obtained subject to Sections 11.1 and 11.2. ARTICLE XII RETURN/RECALL 12.1. Returned Products. (a) Company shall be responsible for handling all returned Products, including shipment and compensation or credit for the returned Products. Any Products inadvertently returned to Vendor shall be shipped to Company or at its direction, in compliance with Company's returned goods policy, and Vendor shall advise the customer who made the return that the Products have been returned to Company. Company shall reimburse Vendor's shipping and other costs in connection with the handling of such returned Products within 30 15 16 days of delivery to Company of Vendor's statement for such costs. Upon request Vendor shall provide Company with documentation relating to such costs. (b) At Company's request, Vendor shall assist Company in obtaining and receiving any Products that have been recalled, and any costs incurred by Vendor with respect to participating in any such recall shall be reimbursed by Company within 30 days of delivery to Company of Vendor's statement for such costs. ARTICLE XIII CONFIDENTIAL INFORMATION 13.1. Confidential Information. Vendor acknowledges and agrees that it will have access to, or become acquainted with, Confidential Information of Company in the course of the performance of services under this Agreement. For the purposes of this Agreement, "Confidential Information" shall mean any information of Company or any Affiliate thereof, which gives Company an advantage over its competitors who do not possess such information and constitutes valuable trade secrets and/or proprietary data which was revealed to Vendor as a result of entering into or performing its obligations under this Agreement, including but not limited to, information which relates to Products, the Program, Target Customers, designs, methods, discoveries, improvements, documents, trade secrets, proprietary rights, business affairs, customer information or employee information. Provided, however, that Confidential Information shall not include any information that: (a) Was known to Vendor prior to execution of this Agreement. without an obligation to keep it confidential; (b) Was lawfully obtained by Vendor from a third party without any obligation of confidentiality; (c) Is, at the time of disclosure, in the public knowledge; (d) Becomes part of the public knowledge after disclosure by publication or otherwise, except by breach of this Agreement; (e) Is developed by Vendor independently and apart from this Agreement; or (f) Is otherwise knowledge possessed by Vendor or its employees as the result of their industry experience or education. 13.2 Handling of Confidential Information. Except as otherwise required by law, Vendor shall keep all Confidential Information in confidence and shall not, at any time during or for a period of five (5) years from the termination of this Agreement, without Company's prior written consent, disclose or otherwise make available, directly or indirectly, any Confidential Information to anyone other than Vendor employees and Representatives who need to know the same in the performance of the services hereunder. Vendor shall use the Confidential Information only in connection with the performance of the services hereunder and for no other 16 17 purpose. Vendor shall inform its employees and Representatives of the trade secret, proprietary and confidential nature of the Confidential Information. 13.3 Prior Confidentiality Agreements. With respect to all Confidential Information of Company which has previously been or which may be disclosed to Vendor under the Confidentiality Agreement dated as of April 15, 2000 between the parties hereto or the letter agreement dated April 28, 2000 between Company and Cardinal Health (including the parties encompassed by said term by footnote) (together, the "Prior Confidentiality Agreements") or this Agreement, Company shall have the cumulative benefit of Vendor's confidentiality covenants under the Prior Confidentiality Agreements and this Agreement, and neither of the Prior Confidentiality Agreements nor this Agreement shall be deemed to supersede or control over the other such agreements to the disadvantage of Company with respect to its Confidential Information. ARTICLE XIV TERM AND TERMINATION 14.1. Term. This Agreement shall take effect on the date on which both parties execute this Agreement (the "Effective Date"), but the Program shall continue in effect until the date thirty-six (36) months after the Product Launch Date (the "Initial Term"), unless terminated earlier as set forth herein. Notwithstanding the foregoing, Company may, at its option upon written notice to Vendor at least 120 days prior to the expiration of the Initial Term, and with the written consent of Vendor, extend the Initial Term for one additional year (the "Renewal Term"). If Company desires to exercise renewal term, parties shall negotiate in good faith provisions of Section 3.1(b) regarding compensation. References in this Agreement to the term of this Agreement include both the Initial Term and the Renewal Term, if applicable. 14.2. Bankruptcy: Insolvency. Either party may terminate this Agreement upon notice to the other upon the occurrence of: (a) the entry of a decree or order for relief by a court of proper jurisdiction in an involuntary case of the other party under the Federal Bankruptcy Code, as now constituted or hereafter amended, or any other applicable federal or state insolvency or other similar laws, and the continuance of any such decree or order in effect for a period of sixty (60) consecutive days; or (b) the filing by the other party of a petition for relief under the Federal Bankruptcy Code, as now constituted or hereafter amended, or any other applicable federal or state insolvency or similar laws. 14.3 Termination For Breach. Either party may terminate this Agreement upon 30 days prior written notice if the other party breaches a material provision of this Agreement and fails to cure the breach within 15 days after written notice from the non-breaching party. Provided, however, that such cure period shall be five (5) days in the case of material breach under Section 3.5. 14.4 Termination Due To Delay in Product Launch. If the Product Launch Date does not occur within 120 days after the Effective Date, either party may terminate this Agreement upon 60 days written notice to the other. 17 18 14.5 Termination Due To Regulatory And Other Problems. If the Product is not being marketed due to regulatory problems, court or administrative proceedings, product liability claims, recalls, raw materials shortages, or similar factors beyond the control of Company, then either party may terminate this Agreement upon 30 days written notice to the other. If the Agreement is not terminated pursuant to this Section 14.5, (a) the provisions of Sections 2.3, 2.4, 2.5, 2.6 and 2.7 shall be of no force or effect until the Company recommences the marketing of the Product; and (b) Company shall not be permitted to terminate this Agreement pursuant to Section 14.3 until the Company recommences the marketing of the Product. 14.6 Termination Due To Assignment or Change in Control. In the event of a Change of Control (defined herein), the party that has had a Change In Control (the "Affected Party") shall give Notice to the other party (the "Non-Affected Party") within 30 days of the occurrence of such Change In Control. If the Change In Control involves a material and direct competitor of the Non-Affected Party, the Non-Affected Party may terminate this Agreement by written notice to the Affected Party within 60 days after receipt of the Notice of a Change In Control. If the Change In Control does not involve a material and direct competitor of the Non-Affected Party, this Agreement may not be terminated by the Non-Affected Party. For purposes of this Section, "Change In Control" includes a purchase, assignment or transfer of a controlling interest in the Affected Party or substantially all of its business and assets and any merger or consolidation involving the Affected Party or any Affiliate of the Affected Party that requires a vote of the stockholders of the Ultimate Parent of the Affected Party. "Ultimate Parent" for Vendor is Cardinal Health, Inc. and the Ultimate Parent for Company is its stockholders. 14.7. Termination Due to Discontinuation of Product. Company may terminate this Agreement on 30 days' prior written notice if Company elects to discontinue the promotion, sale or distribution of the Product from the marketplace. This provision shall not be available if Company simply wants to change the party or parties or means for Detailing the Product. 14.8 Termination: Phase Out. In the event that this Agreement is terminated pursuant to Sections 14.2 through 14.7 and at Company's request, the parties shall discuss in good faith an appropriate phase-out of Vendor's Detailing activities. 14.9. Termination: Continuing Rights. The termination or expiration of this Agreement shall not affect Company's obligation to reimburse or pay Vendor any amount then due and owing under this Agreement. Further, the termination or expiration of this Agreement shall not affect any rights or obligations of any party under this Agreement which are intended by the parties to survive such termination. The Service Fee paid by Company for the month in which this Agreement is terminated shall be prorated based on the number of days in that month, and Vendor shall refund any overpayment to Company. 14.10 Termination: Return of Materials. Within 60 days following the termination or expiration of this Agreement, Vendor shall return to Company all Confidential Information, Product Promotional Materials, marketing plans, forms, territory lists, reports and any and all other tangible items provided to Vendor by Company. 18 19 ARTICLE XV RECORDKEEPING; AUDIT RIGHTS 15.1. Vendor Record Keeping: Inspection by Company. Vendor shall keep accurate records in sufficient detail as to: (i) Detailing activities by Representatives; and (ii) costs and expenses for which Company must reimburse Vendor under this Agreement. Upon Company's reasonable request made during or within three (3) year after the term of this Agreement, and at Company's expense, Vendor shall permit Company's designated employees or agents to have access during ordinary business hours to records of such matters. Company and its designated employees or agents shall maintain in confidence all such cost and expense records of Vendor. ARTICLE XVI INDEMNIFICATION 16.1 Definitions. As used in this Article 16 and this Agreement, "Damages" shall mean all liabilities, damages, assessments, levies, losses, fines, penalties, costs, and expenses, including, without limitation, reasonable attorneys', accountants', investigators', and experts' fees and expenses, sustained or incurred as a result of any claims, suits, liabilities, or actions of any nature. 16. 2. Indemnification by Vendor. Subject to the extent of any indemnification from Company pursuant to Section 16.3 hereof, Vendor shall indemnify and hold Company, its Affiliates, directors, officers, employees and agents harmless from and against any and all Damages, except to the extent such damages arise from the negligence or intentional wrongful actions of Company, arising directly or indirectly from: (a) Vendor's breach of or failure to comply with any of its obligations under this Agreement; (b) any inaccuracy in or breach or failure of any representation, warranty, or covenant made by Vendor in this Agreement; (c) any negligent or wrongful act or omission on the part of Vendor or its employees or agents; (d) Vendor's violation of or failure to comply with all applicable laws, including but not limited to the Act, the PDMA, the Medicare and Medicaid Anti-Kickback Act (42 U.S.C. Section 1320a-7b(a)), the Civil False Claims Act (31 U.S.C. Section 3729(a)), Sections 1128A, 1128B, and 1877 of the Social Security Act (42 U.S.C. Sections 1320a-7a, -7b, and 1395nn), the Health Care Fraud Act (18 U.S.C. Section 1347), and the Criminal False Claims Act (18 U.S.C. Section 287), as amended from time to time, as well as similar applicable state laws; (e) Detailing of the Products, except to the extent such Damages arise from a negligent or wrongful act or omission of Company; or 19 20 (f) any federal or state claim or assessment for nonpayment or late payment by Vendor of any tax or contribution based on the status of any Representatives as employees of Vendor. 16.3. Indemnification by Company. Subject to the extent of any indemnification from Vendor pursuant to Section 16.2 hereof, Company shall indemnify and hold Vendor and its Affiliates, directors, officers, employees and agents harmless from and against any and all Damages, except to the extent such damages arise from the negligence or intentional wrongful actions of Vendor, arising directly or indirectly from: (a) Company's breach of or failure to comply with any of its obligations under this Agreement; (b) any inaccuracy in or breach or failure of any representation, warranty, or covenant made by Company in this Agreement; (c) any negligent or wrongful act or omission on the part of Company or its employees or agents; (d) Company's violation of or failure to comply with all applicable laws, including but not limited to the Act, the PDMA, the Medicare and Medicaid Anti-Kickback Act (42 U.S.C. Section 1320a-7b(a)), the Civil False Claims Act (31 U.S.C. Section 3729(a)), Sections 1128A, 1128B, and 1877 of the Social Security Act (42 U.S.C. Sections 1320a-7a, -7b, and 1395nn), the Health Care Fraud Act (18 U.S.C. Section 1347), and the Criminal False Claims Act (18 U.S.C. Section 287), as amended from time to time, as well as similar applicable state laws; (e) Detailing of the Products, except to the extent such Damages arise from a negligent or wrongful act or omission of Vendor; (f) the accuracy or completeness of the Product Labels, Product Promotional Materials, or the Training Program; (g) any claims or liabilities for injury to or death of persons, regardless of when such claim or liability is asserted or incurred, resulting from or arising out of the manufacture, use, sale of the Products, or a manufacturing design or defect of the Products, or any failure to warn or inadequacy of warning regarding the Products; (h) Company's failure to pay when due or to reimburse Vendor for any Taxes (as defined in Section 5.3); (i) any negligent or wrongful acts or omissions on the part of Company with respect to Vendor's employees or Representatives or those individuals who have made application to be Representatives of Vendor; or 20 21 (j) any federal or state claim or assessment for nonpayment or late payment by Company of any tax or contribution based on the status of any former Representatives as employees or agents of Company. 16.4. Indemnification Procedures. A party that intends to claim indemnification under this Article 16 "(the "Indemnitee") shall promptly notify the other party (the "Indemnitor") in writing of any action, claim or liability in respect of which the Indemnitee or any of its employees or agents are entitled to indemnification. The Indemnitee shall permit, and shall cause its employees and agents to permit, the Indemnitor at its discretion, to settle any such action, claim or liability and agrees to the complete control of such defense or settlement by the Indemnitor. Provided, however, that such settlement or defense does not adversely affect the Indemnitee's rights hereunder or impose any obligations on the Indemnitee in addition to those set forth in this Agreement. The Indemnitee, its employees, and agents, shall cooperate fully with the Indemnitor and its legal representatives in the investigation and defense of any action, claim or liability subject to indemnification. The Indemnitee shall have the right, but not the obligation, to be represented by counsel of its own selection and at its own expense in connection with any indemnified claim. 16.5. Limitation on Vendor Liability. It is understood that Vendor is not an insurer and that the sums payable hereunder to Vendor by Company are based upon the value of services offered and the scope of liability undertaken, and such sums are not related to any potential liability of Company. Vendor makes no warranty, expressed or implied, that the services it furnishes will avert or prevent occurrences or the consequences therefrom which may result in loss or damage to Company. In the event of any Damages of which Vendor is liable, Company agrees that Vendor's liability to indemnify Company shall be limited to the greater of: (i) Two Million Five Hundred Thousand and 00/100 Dollars ($2,500,000.00) or (ii) the total amount paid by Company to Vendor under this Agreement. Each party hereby waives any and all rights to subrogation that any insurer of such party may have against the other party. Except as hereinabove provided, each party agrees that the other party shall not be liable for any losses or damages, irrespective of origin, to person or property, whether directly or indirectly caused by performance or non-performance of obligations imposed by this Agreement or by the negligent acts or omissions of the other party , its agents, employees or Representatives. 16.6 No Consequential Damages. Notwithstanding any provision of this Agreement to the contrary, neither party shall be liable to the other for any consequential damages (other than liability for personal injury as provided in this Article 16), including lost profits. ARTICLE XVII MISCELLANEOUS 17.1. No Waiver: Cumulative Remedies. No failure or delay on the part of either party in exercising any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder. No waiver of any provision hereof shall be effective unless in writing and signed by the party giving such waiver. 21 22 The remedies herein provided are cumulative and not exclusive of any remedies provided by law. 17.2. Captions. Article and Section headings used in this Agreement are for convenience only and shall not affect the construction of this Agreement. 17.3. Governing Law. This Agreement shall be construed and the respective rights of the parties hereto determined according to the substantive laws of the State of Ohio, exclusive of conflict of laws principles. 17.4. Severability. If any provision of this Agreement or any other document delivered under this Agreement is prohibited or unenforceable in any jurisdiction, it shall be ineffective in such jurisdiction only to the extent of such prohibition or unenforceability, and such prohibition or unenforceability shall not invalidate the balance of such provision to the extent it is not prohibited or enforceable nor the remaining provisions hereof, nor render unenforceable such provision in any other jurisdiction. In the event any provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the parties hereto shall use their best efforts to substitute a valid, legal and enforceable provision which, insofar as practical, implements the purposes hereof. 17.5. Entire Agreement: Modification. This Agreement contains the entire and exclusive agreement between the parties in respect of the subject matter hereof and supersedes and cancels all previous agreements, negotiations, commitments and writings between the parties hereto in respect of the subject matter hereof. Except as provided herein, this Agreement may not be changed or modified in any manner or released, discharged, abandoned or otherwise terminated unless in writing and signed by the duly authorized officers or representatives of the parties. 17.6. Notices. Any notice or request required or desired to be given in connection with this Agreement shall be deemed to have been sufficiently given if sent by pre-paid registered or certified mail or national express courier (such as Federal Express or UPS) or facsimile transmission to the intended recipient at the address set forth below or such other address as may have been furnished in writing by the intended recipient to the sender, and carrier documentation evidencing delivery to the receiving party or facsimile answerback is obtained. The date of mailing or facsimile transmission of a valid notice as described above shall be deemed to be the effective date on which notice was given. All notices shall be addressed to: If to Company, to: Guilford Pharmaceuticals, Inc. 6611 Tributary Street Baltimore MD 21224 Fax: 410-631-6899 22 23 Attention: General Counsel and Chief Financial Officer to Vendor, to: Cardinal Health Sales and Marketing Services, a division of RedKey, Inc. 7000 Cardinal Place Dublin, Ohio 43017 Fax: (614) 757-6000 Attention: President 17.7. Execution in Counterparts. This Agreement may be executed in counterparts, each of which, when executed and delivered, shall be deemed to be an original and all of which together shall constitute one and the same document. 17.8. Assignment. This Agreement may not be assigned or transferred by a party without the prior written consent of the other party hereto. 17.9. Public Announcements. Any public announcement, press release or similar publicity with respect to this Agreement or the transaction contemplated hereby shall be at such time and in such manner as the parties shall mutually agree, provided that nothing herein shall prevent either party from making such public announcements as it deems necessary in order to comply with applicable laws and regulations, including disclosure requirements of federal securities laws and requirements of federal food and drug laws. 17.10. Maintenance of Records. Vendor and Company each agree that throughout the term of this Agreement and for a period of six years after the termination of this Agreement, each will maintain records and otherwise establish procedures to assure compliance with all regulatory, professional, and other applicable legal requirements which relate to the Detailing and marketing of the Products and if applicable, with the other services and activities to be performed hereunder. 17.11. Force Majeure. Failure of either party hereto to fulfill or perform its obligations under this Agreement shall not subject such party to any liability if such failure is caused or occasioned by, without limitation, acts of God, acts of the public enemy, fire, explosion, flood, drought, war, riot, sabotage, embargo, strikes or other labor disputes (which strikes or disputes need not be settled), compliance with any order, regulation, or request of government, or by any other event or circumstance of like or different character to the foregoing beyond the reasonable control and without the fault or negligence of such party (a "Force Majeure Event") provided such party uses reasonable efforts to remove such Force Majeure Event and gives the other party prompt notice of the existence of such Force Majeure Event. Provided, further, that 23 24 no Force Majeure Event shall serve to delay or excuse any payment by one party to the other then due and owing. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized officers. CARDINAL HEALTH SALES GUILFORD PHARMACEUTICALS INC. AND MARKETING SERVICES, a division of RedKey, Inc. By /s/ Don Wetherhold By /s/ John P. Brennan -------------------------- ---------------------------- Name: Don Wetherhold Name: John P. Brennan ---------------------- ------------------------ Title: President Title: Sr. Vice President ---------------------- ------------------------ Date: October 24, 2000 Date: October 25, 2000 ---------------------- ------------------------ 24 EX-27.01 4 w42341ex27-01.txt FINANCILA DATA SCHEDULE

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EX-10.61

   1

                                                                   EXHIBIT 10.61

                                                                  EXECUTION COPY

                           RIGHTS REVERSION AGREEMENT

         This RIGHTS REVERSION AGREEMENT (the "Agreement") is dated as of
October 23, 2000, by and between AVENTIS PHARMACEUTICALS PRODUCTS INC., a
Delaware corporation with its principal office at Route 202-206, Bridgewater,
New Jersey 08807, formerly known as Rhone-Poulenc Rorer Pharmaceuticals Inc.
("APPI"), and RHONE-POULENC RORER INC., a Pennsylvania corporation with its
principal office at 500 Arcola Road, Collegeville, Pennsylvania 19426 ("RPR
Inc.") on the one hand, and GPI POLYMER HOLDINGS, INC. (formerly named GPI
Holdings, Inc.), a Delaware corporation with its principal office at 222
Delaware Avenue, P.O. Box 2306, Wilmington, Delaware 19899 ("GPI Holdings"), and
GUILFORD PHARMACEUTICALS INC., a Delaware corporation with its principal office
at 6611 Tributary Street, Baltimore, Maryland 21224 ("GPI"), on the other hand.

                                    RECITALS

         WHEREAS, APPI, GPI Holdings and GPI are parties to that certain
Marketing, Sales and Distribution Rights Agreement dated as of June 13, 1996, as
amended on September 25, 1998 (the "Marketing Rights Agreement"), pursuant to
which APPI, on the one hand, and GPI Holdings and GPI (collectively,
"Guilford"), on the other hand, entered into a strategic alliance whereby, among
other things:

                  (i)      GPI Holdings granted APPI the exclusive right
         throughout the Territory (as defined in the Marketing Rights Agreement)
         to market, advertise, promote, sell and distribute the Product (as
         defined in the Marketing Rights Agreement) for use in the Field (as
         defined in the Marketing Rights Agreement);

                  (ii)     GPI agreed to assign APPI the New Drug Application
         for the GLIADEL Product (as defined in the Marketing Rights Agreement)
         if and when approved by the FDA;

                  (iii)    APPI agreed to use commercially reasonable efforts to
         obtain Regulatory Approval (as defined in the Marketing Rights
         Agreement) for the GLIADEL Product throughout the Territory for use in
         the Field and if, as and when obtained, to market, advertise, sell and
         distribute the GLIADEL Product throughout the Territory for use in the
         Field;

                  (iv)     GPI agreed to manufacture and supply the Product (as
         defined in the Marketing Rights Agreement) to APPI pursuant to the 1996
         Manufacturing and Supply Agreement (as defined below);

                  (v)      Guilford and APPI agreed to collaborate on the
         development of certain further PCPP:SA/BCNU products for use in the
         Field, including products with BCNU doses higher than 3.85%, all of
         which were to be included within the grant of exclusive

RIGHTS REVERSION AGREEMENT             1
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         marketing, advertising, promotion, sale and distribution rights in the
         Territory for use in the Field made by GPI Holdings to APPI under the
         Marketing Rights Agreement; and

                  (vi)     Guilford granted to APPI a right of first offer
         covering all future drug-polymer cancer chemotherapeutic products that
         are developed directly by Guilford (and not pursuant to any
         collaboration with another party) specifically for the indication of
         brain cancer and for which Guilford controls the intellectual property
         rights covering the active chemotherapeutic agent incorporated into the
         polymer; and

         WHEREAS, GPI Holdings and GPI desire to reacquire the rights they
granted to APPI under the Marketing Rights Agreement and related agreements on
the terms and conditions contained herein and APPI desires to assign its rights
in the Product under the Marketing Rights Agreement back to GPI Holdings and GPI
on the terms and conditions set forth herein, whereby, among other things:

         (i)      Guilford shall issue three hundred thousand (300,000) shares
                  of GPI Common Stock to APPI pursuant to the terms and
                  conditions of the Stock Purchase Agreement attached hereto;

         (ii)     Pursuant to the terms and conditions of the Registration
                  Rights Agreement attached hereto, APPI shall obtain certain
                  rights to require GPI to register the GPI Common Stock issued
                  to APPI pursuant to the Stock Purchase Agreement;

         (iii)    The parties shall cooperate during the Transition Period (as
                  defined below) to effect the transfer of all Regulatory
                  Filings (as defined below), Regulatory Approvals (as defined
                  below) and data generated to support the foregoing, as well as
                  all Know-How (as defined below) and marketing and sales data
                  that relate to the Product (as defined below), from APPI to
                  Guilford;

         (iv)     The parties shall continue to perform pursuant to the
                  Marketing Rights Agreement and related agreements contemplated
                  thereby through the Transition Period, except to the extent
                  provided otherwise by this Agreement; and

         (v)      Upon the completion of the Transition Period, the Marketing
                  Rights Agreement, the related agreements contemplated thereby,
                  and the parties' rights and obligations thereunder shall
                  terminate, except to the extent otherwise provided by this
                  Agreement;

         WHEREAS, RPR Inc. and GPI are parties to that certain Stock Purchase
Agreement dated as of June 13, 1996, (the "1996 Stock Purchase Agreement"),
pursuant to which RPR Inc. acquired shares of GPI's common stock, and RPR Inc.
and GPI desire to modify the terms of the 1996 Stock Purchase Agreement on the
terms and conditions set forth herein;

         WHEREAS, RPR Inc. and GPI are parties to that certain Loan Agreement
dated as of June 13, 1996, (the "1996 Loan Agreement"), pursuant to which RPR
Inc. extended a line of

RIGHTS REVERSION AGREEMENT             2
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credit to GPI, and RPR Inc. and GPI desire to terminate the 1996 Loan Agreement
on the terms and conditions set forth herein;

         NOW THEREFORE, in consideration of the mutual covenants and
consideration set forth herein, the parties hereto, intending to be legally
bound, hereby agree as follows:

                                    ARTICLE 1
                                   DEFINITIONS

         1.1      "Act" shall mean the Federal Food, Drug and Cosmetic Act, as
amended, and the regulations promulgated under such Act.

         1.2      "Affiliate" shall mean, when used with respect to a Person,
any other Person directly or indirectly controlling, controlled by, or under
common control with the subject Person. For purposes of this Agreement,
"control" means the direct or indirect ownership of over 50% of the outstanding
voting securities of a Person, or the right to receive over 50% of the profits
or earnings of a Person, or the right to control the policy decisions of a
Person.

         1.3      "Agreement" shall have the meaning set forth in the
introductory paragraph of this agreement.

         1.4      "ANDA" shall mean an "Abbreviated New Drug Application," as
defined in the Act, and all supplements thereto.

         1.5      "APPI" shall have the meaning set forth in the introductory
paragraph of this Agreement.

         1.6      "Aventis" shall mean APPI and RPR Inc. collectively.

         1.7      "Closing" shall have the meaning set forth in Section 2.1.

         1.8      "Closing Date" shall have the meaning set forth in Section
2.1.

         1.9      "FDA" shall mean the Food and Drug Administration of the
United States Department of Health and Human Services, or any successor agency
thereto.

         1.10     "Field" shall mean the treatment of tumors of the central
nervous system and the treatment of cerebral edema.

         1.11     "First Amendment to the Marketing Rights Agreement" shall mean
that certain Amendment No. 1 to Marketing, Sale and Distribution Rights
Agreement by and among APPI and Guilford, dated as of September 25, 1998.

         1.12     "First Surgery Trial" has the meaning set forth in the First
Amendment to the Marketing Rights Agreement.

         1.13     "GLIADEL Product" shall mean Guilford's GLIADEL(R) wafer,
PCPP:SA with 3.85% BCNU, and any and all Improvements thereto.

RIGHTS REVERSION AGREEMENT             3
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         1.14     "GPI" shall have the meaning set forth in the introductory
paragraph of this Agreement.

         1.15     "GPI Holdings" shall have the meaning set forth in the
introductory paragraph of this Agreement.

         1.16     "Guilford" shall have the meaning set forth in the first
recital of this Agreement.

         1.17     "High Dose GLIADEL Product" shall mean any PCPP:SA product
with a BCNU dose higher than 3.85% which is (i) reasonably expected to have a
more advantageous efficacy profile than the GLIADEL Product and (ii) now or
hereafter owned or controlled by Guilford, and all Improvements to any such
product.

         1.18     "Improvement" to a product shall mean any and all inventions,
discoveries, developments, modifications and improvements, whether or not
patented or patentable, to such product.

         1.19     "IND" shall mean an "Investigational New Drug Application," as
defined in the Act.

         1.20     "Interim Agreement" shall mean that certain Interim Agreement,
dated as of October 5, 2000, by and among APPI and Guilford.

         1.21     "Know-How" shall mean all scientific and technical data,
instructions, processes, formulae, specifications, ingredient sources,
manufacturing procedures, methods and other information relating to the design,
composition, formulation, pre-clinical evaluation, clinical evaluation,
manufacture, use, sale, packaging, formulation or administration of the Product,
including, but not limited to, NDAs (and similar applications filed in
jurisdictions other than the U.S.), pharmacological, toxicological, analytical,
stability and clinical data, specifications and drug master files and/or health
registration dossiers and any other premarket application or registration owned
or controlled at any time during the term hereof by either party.

         1.22     "Licensed Trademark" shall mean GPI Holdings' GLIADEL
trademark and all goodwill associated with such trademark.

         1.23     "Marketing Rights Agreement" shall have the meaning set forth
in the first recital of this Agreement.

         1.24     "NDA" shall mean a "New Drug Application," as defined in the
Act, and all supplements thereto.

         1.25     "1996 Loan Agreement" shall have the meaning set forth in the
fourth recital of this Agreement.

         1.26     "1996 Stock Purchase Agreement" shall have the meaning set
forth in the third recital of this Agreement.

RIGHTS REVERSION AGREEMENT             4
   5

         1.27     "1996 Manufacturing and Supply Agreement" shall mean that
certain Manufacturing and Supply Agreement, dated as of June 13, 1996 between
GPI and APPI, as amended by Amendment No. 1 dated June 7, 1999 and Amendment No.
2 dated June 26, 2000.

         1.28     "Other PCPP:SA/BCNU Products" shall mean all PCPP:SA-based
polymer products containing BCNU, other than the GLIADEL Product, that are now
or hereafter during the term of this Agreement owned or controlled by Guilford,
including, without limitation, High Dose GLIADEL Product, and all Improvements
to any of the foregoing.

         1.29     "Person" shall mean any corporation, partnership, joint
venture, other entity or natural person.

         1.30     "Product" shall mean the GLIADEL Product and all Other
PCPP:SA/BCNU Products.

         1.31     "Registration Rights Agreement" shall mean a Registration
Rights Agreement between GPI and APPI dated as of the Closing Date in the form
attached hereto and made a part hereof as Exhibit A.

         1.32     "Regulatory Approval" shall mean, with respect to any country,
(i) filing for and receipt of all governmental and regulatory registrations and
approvals (including, but not limited to, approvals of all final Product
labeling) required for the marketing and sale of the Product for the indication
for which it is being marketed in such country, and (ii) the receipt of
reimbursement approvals and a reimbursement price acceptable to Guilford from
the national health system or other appropriate governmental or regulatory
authorities in such country, except in those countries where such reimbursement
approvals and reimbursement price are not granted by a government or regulatory
authority (such as the United States).

         1.33     "Regulatory Filings" shall mean all applications, filings,
materials, studies, data and documents of any nature whatsoever filed with,
prepared in connection with or necessary to support any Regulatory Approval
process in any country or territory.

         1.34     "Stock Purchase Agreement" shall mean the Stock Purchase
Agreement dated as of even date herewith between GPI and APPI, the form of which
is attached hereto and made a part hereof as Exhibit B.

         1.35     "Territory" shall mean the entire world, excluding Denmark,
Finland, Norway, Sweden and Japan.

         1.36     "Transaction Agreements" shall mean, collectively, this
Agreement, the Registration Rights Agreement and the Stock Purchase Agreement.

         1.37     "Transition Date" shall mean December 31, 2000.

         1.38     "Transition Period" shall mean the period commencing on
Closing Date and ending on the Transition Date.

RIGHTS REVERSION AGREEMENT             5
   6

                                    ARTICLE 2
                                     CLOSING

         2.1      Time and Place of the Closing. Subject to the terms and upon
satisfaction or waiver of the conditions set forth herein, including the
conditions to Closing set forth in this Article 2, the closing of the
transactions contemplated herein (the "Closing") shall occur on October 23,
2000, or such other date as the parties may agree (the "Closing Date"). The
Closing shall take place at the offices of Wilmer, Cutler & Pickering, 2445 M
Street, N.W., Washington, D.C. 20037-1420, at 4:00 p.m. on the Closing Date.

         2.2      Conditions to Guilford's Obligations to Close. The obligations
of Guilford to carry out the terms of this Agreement are subject to the
fulfillment on or before the Closing Date of each of the following conditions,
any of which may be waived by Guilford:

                  2.2.1    Representations and Warranties. The representations
and warranties of Aventis contained in Article 3 shall be true, correct and
complete in all material respects on and as of the Closing Date with the same
effect as if made on and as of such Closing Date.

                  2.2.2    Simultaneous Closing. Contemporaneously with the
Closing hereof, the "Closing" of the Stock Purchase Agreement (as such term is
defined therein) shall take place.

                  2.2.3    Closing Deliveries by APPI. Contemporaneously with
the Closing hereof APPI shall tender its execution and delivery of the
Registration Rights Agreement.

         2.3      Conditions to Aventis' Obligations to Close. The obligations
of Aventis to carry out the terms of this Agreement are subject to the
fulfillment on or before the Closing Date of each of the following conditions,
any of which may be waived by Aventis:

                  2.3.1    Representations and Warranties. The representations
and warranties of Guilford contained in Article 3 shall be true, correct and
complete in all material respects on and as of the Closing Date with the same
effect as if made on and as of such Closing Date.

                  2.3.2    Simultaneous Closing. Contemporaneously with the
Closing hereof, the "Closing" of the Stock Purchase Agreement (as such term is
defined therein) shall take place.

                  2.3.3    Closing Deliveries by Guilford.  Contemporaneously
with the Closing hereof, Guilford shall tender its execution and delivery of the
Registration Rights Agreement.

                                   ARTICLE 3
                         REPRESENTATIONS AND WARRANTIES

         3.1      Aventis Representations and Warranties. APPI and RPR Inc.
hereby represent and warrant to Guilford that:

                  3.1.1    Corporate Power. Each of APPI and RPR Inc. has the
corporate power and authority to execute, deliver and perform the Transaction
Agreements. The execution,

RIGHTS REVERSION AGREEMENT             6
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delivery and performance of the Transaction Agreements by APPI and RPR Inc. have
been duly authorized by all necessary corporate action of APPI and RPR Inc.,
respectively;

                  3.1.2    Validity. Each of the Transaction Agreements, when
executed and delivered by Aventis, shall be the legal, valid and binding
obligation of Aventis, enforceable against Aventis in accordance with its terms,
except as such enforceability may be limited by bankruptcy law and other similar
laws affecting creditors' rights generally and by general principles of equity;

                  3.1.3    Non-Contravention. The execution, delivery and
performance of the Transaction Agreements by Aventis do not and will not (i)
conflict with, or constitute a breach or default under, or require the consent
of any third party under, Aventis' charter documents or any material license,
loan or other agreement, contract, commitment or instrument to which Aventis is
a party or any of its assets are bound, (ii) violate any provision of law,
statute, rule or regulation or any ruling, writ, injunction, order, judgment or
decree of any court, administrative agency or other governmental body, or (iii)
require the consent, approval or authorization of, or notice, declaration,
filing or registration with, any third party or any governmental or regulatory
authority;

                  3.1.4    No Litigation. There is no action or proceeding
pending or, in so far as Aventis knows, threatened against Aventis or any of its
Affiliates before any court, administrative agency or other tribunal which could
impact upon Aventis' right, power and authority to enter into any of the
Transaction Agreements or to carry out its obligations under any of the
Transaction Agreements;

                  3.1.5    Joint Inventions. There are no Joint Inventions (as
such term is defined in Section IV(H)(3) of the Marketing Rights Agreements);

                  3.1.6    Licensed Trademark.

                           (a)      The only trademark that has been used by the
parties pursuant to the provisions of Section III(A)(2) of the Marketing Rights
Agreement is GPI Holdings' GLIADEL trademark;

                           (b)      APPI has not granted a sublicense to any
third party to use the Licensed Trademark;

                  3.1.7    Distribution Rights. APPI has not granted marketing,
sales, sales agency and/or distribution rights to any third party with respect
to any rights conferred upon APPI under the Marketing Rights Agreement;

                  3.1.8    Subcontractors. Except as set forth on Schedule 3.1.8
or Schedule 5.6.4, APPI has not subcontracted any third parties to seek
Regulatory Approvals or to conduct clinical trials or studies with respect to
the Product;

                  3.1.9    Liability to Third Party Agents. Except as set forth
in Sections 5.4 and 5.6.4, Guilford shall have no liability or obligation to any
of the parties set forth on Schedule 3.1.8 as a result of the transactions
contemplated by this Agreement; and


RIGHTS REVERSION AGREEMENT             7
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                  3.1.10   Ownership Rights. APPI owns the Know-How, Regulatory
Filings, Regulatory Approvals and marketing and sales data to be transferred to
Guilford pursuant to Article 6 free and clear of any encumbrances, license or
security interest or other similar right of third parties.

         3.2      Guilford Representations and Warranties.  GPI and GPI Holdings
each hereby represents and warrants to Aventis that:

                  3.2.1    Corporate Power. Each of GPI and GPI Holdings has the
corporate power and authority to execute, deliver and perform each of the
Transaction Agreements. The execution, delivery and performance of each of the
Transaction Agreements by GPI and GPI Holdings have been duly authorized by all
necessary corporate action of GPI and GPI Holdings, respectively;

                  3.2.2    Validity. Each of the Transaction Agreements, when
executed and delivered by Guilford, shall be the legal, valid and binding
obligation of Guilford, enforceable against Guilford in accordance with its
terms, except as such enforceability may be limited by bankruptcy law and other
similar laws affecting creditors' rights generally and by general principles of
equity;

                  3.2.3    Non-Contravention. The execution, delivery and
performance of the Transaction Agreements by Guilford do not and will not (i)
conflict with, or constitute a breach or default under, or require the consent
of any third party under, Guilford's charter documents or any material license,
loan or other agreement, contract, commitment or instrument to which Guilford is
a party or any of its assets are bound, (ii) violate any provision of law,
statute, rule or regulation or any ruling, writ, injunction, order, judgment or
decree of any court, administrative agency or other governmental body, or (iii)
require the consent, approval or authorization of, or notice, declaration,
filing or registration with, any third party or any governmental or regulatory
authority; and

                  3.2.4    No Litigation. There is no action or proceeding
pending or, in so far as Guilford knows, threatened against Guilford or any of
its Affiliates before any court, administrative agency or other tribunal which
could impact upon Guilford's right, power and authority to enter into any of the
Transaction Agreements or to carry out its obligations under any of the
Transaction Agreements.

                  3.2.5    Joint Inventions. There are no Joint Inventions (as
such term is defined in Section IV(H)(3) of the Marketing Rights Agreements).

                  3.2.6    Licensed Trademark. The only trademark that has been
used by the parties pursuant to the provisions of Section III(A)(2) of the
Marketing Rights Agreement is GPI Holdings' GLIADEL trademark.

         3.3      Knowledge. Where a representation or warranty contained in
this Article 3 is stated to be to a party's knowledge, this shall mean to the
actual knowledge of all of the officers and appropriate key personnel of such
party, after reasonable inquiry.

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         3.4      No Other Warranties. EXCEPT FOR THE EXPRESS WARRANTIES
CONTAINED IN THIS AGREEMENT, NEITHER GUILFORD NOR AVENTIS MAKE ANY WARRANTIES OR
REPRESENTATIONS, EXPRESS OR IMPLIED, IN FACT OR IN LAW, INCLUDING ANY IMPLIED
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR
NON-INFRINGEMENT.

         3.5      Survival of Warranties. The provisions of this Article 3 shall
survive the expiration or sooner termination of the term of this Agreement.

                                   ARTICLE 4
       MODIFICATION OF CERTAIN EXISTING OBLIGATIONS AS OF THE CLOSING DATE

         4.1      Marketing Rights Agreement. Unless expressly provided
otherwise by this Agreement, between the Closing Date and the Transition Date
all rights and obligations of any party under the Marketing Rights Agreement
shall remain in full force and effect. Effective upon the Closing Date, the
parties agree that the Marketing Rights Agreement shall be modified as follows:

                  4.1.1    Exclusive Right. For purposes of clarification, it is
understood that Section III(A)(1) shall not be interpreted to restrict Guilford
from exercising its rights or performing its obligations under Articles 4, 5 and
9 of this Agreement.

                  4.1.2    Licensed Trademark. Guilford shall no longer be
prohibited pursuant to Section III(A)(2) from using the Licensed Trademark
itself or from granting other Persons rights to use the Licensed Trademark.

                  4.1.3    Assignment of Rights. Notwithstanding Section
III(A)(3) of the Marketing Rights Agreement, APPI shall no longer have the right
to grant any exclusive or non-exclusive marketing, sales, sales agency and/or
distribution rights, with respect to any rights conferred upon APPI under the
Marketing Rights Agreement, to any non-Affiliated third party.

                  4.1.4    Studies and Regulatory Approvals. Except as
contemplated by Section 5.6.4 of this Agreement, APPI shall no longer be
obligated pursuant to Sections III(B)(1), (2) or (3) to conduct clinical trials
or studies or take other steps and actions regarding Regulatory Approval in the
U.S. of the Product, nor will APPI take such actions except in coordination
with, and, following transfer of the NDA and IND as contemplated by Section
5.1.2 of this Agreement, with the prior approval not to be unreasonably withheld
or delayed of, Guilford. APPI shall no longer be obligated pursuant to Section
III(C)(2) to pursue Regulatory Approval of the Product other than in support of
Regulatory Filings made prior to the date of this Agreement in Italy, Canada and
Australia, which support shall be conducted by APPI in accordance with Section
5.5 of this Agreement.

                  4.1.5    Right of Review. Following transfer of the NDA and
IND as contemplated by Section 5.1.2, APPI shall have no further right pursuant
to Section III(B)(4) to review and comment on strategies and protocols of the
clinical trials and studies and regulatory submissions made by Guilford related
to the GLIADEL Product for the indication of the treatment of form(s) of
malignant glioma in the United States.

RIGHTS REVERSION AGREEMENT             9
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                  4.1.6    Milestone Payments. APPI shall no longer be obligated
pursuant to Section III(D) to make any further payments to GPI or GPI Holdings
in consideration of obtaining Regulatory Approvals relating to the GLIADEL
Product.

                  4.1.7    Governance and Operations Committees. The provisions
of Sections III(G) and (H) of the Marketing Rights Agreement with respect to the
establishment and meeting of the Governance Committee and Operations Committee
shall be of no further force and effect.

                  4.1.8    Joint Development Activities. APPI shall no longer be
obligated to sponsor and fund any development activities pursuant to Section
III(I).

                  4.1.9    Right of First Offer. The right of first offer
granted to APPI pursuant to Section III(J) shall be revoked and APPI shall have
no rights with respect to the any Qualifying Product Candidate (as such term is
defined in the First Amendment to the Marketing Rights Agreement).

                  4.1.10   Confidentiality. The second sentence of Section
IV(A)(1) shall be amended and restated to read as follows:

                  "The Receiving Party shall, during the term of this Agreement,
                  and for seven (7) years after the expiration or sooner
                  termination of the term of this Agreement, make no use of such
                  confidential information except (x) to advance the purposes of
                  this Agreement in accordance with its provisions or (y) to
                  advance the purposes of that certain Rights Reversion
                  Agreement between the parties dated as of October 23, 2000 in
                  accordance with its provisions, which purposes shall include
                  the transition of the development, commercialization and sale
                  of the Product to Guilford from APPI and Guilford's
                  corresponding disclosure of such confidential information to
                  potential distributors, vendors of regulatory services and
                  other third party agents of Guilford. Each party shall use the
                  same efforts to keep secret and prevent the disclosure of such
                  confidential information to third parties as it would use with
                  respect to its own confidential information."

                  4.1.11   Termination.

                           (a)      APPI shall no longer have the right pursuant
to Section IV(D)(2) to terminate the Marketing Rights Agreement in the event of
a Change of Control (as such term is defined in the Marketing Rights Agreement).

                           (b)      APPI shall no longer have the right pursuant
to Section IV(D)(5) or Section IV(F)(4) to sell out its stock of any Product it
possesses or has committed to purchase in the event of a termination of the
Marketing Rights Agreement, and the disposition of such Product upon termination
of the Marketing Rights Agreement shall instead be governed by Section 5.6.2 of
this Agreement.

                  4.1.12   Events of Default. A breach by either party of any
material provision of the 1996 Loan Agreement, or defaults in the performance or
observance of any material provision of such agreement, shall no longer
constitute an "Event of Default" under the Marketing Rights Agreement pursuant
to Section IV(E).

RIGHTS REVERSION AGREEMENT             10
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                  4.1.13   Inventions. APPI shall no longer have the right
pursuant to Section IV(H)(1) to require Guilford (a) to file, prosecute or
maintain patents or patent applications on any GPI Inventions (as such term is
defined in the Marketing Rights Agreement) or (b) to cooperate with APPI to
prepare, review or execute any such patent applications or other papers as may
be necessary to enable the protection of the GPI Inventions (as such term is
defined in the Marketing Rights Agreement) by patent and, notwithstanding the
survival provisions in Section IV(H)(9) and Section IV(D)(4), such rights shall
terminate and be of no further force and effect as of the Closing Date.

                  4.1.14   Infringement.

                           (a)      If, as a result of the manufacture, use or
sale of the Product, Guilford is sued for patent infringement or threatened with
such a lawsuit or other action by a third party, Guilford shall no longer have
the obligation, pursuant to Section IV(I)(1), (x) to meet with APPI to analyze
the infringement claim and the avoidance of the same, or (y) to obtain the prior
written consent of APPI prior to the settlement of any such claim, suit,
threatened suit or action and, notwithstanding the survival provisions in
Section IV(I)(3) and Section IV(D)(4), such obligations shall terminate and be
of no further force and effect as of the Closing Date.

                           (b)      If, as a result of the manufacture, use or
sale of the Product, Guilford or APPI or any of its Affiliates is sued for
patent infringement or threatened with such a lawsuit or other action by a third
party, and as a result it is necessary to obtain a license from such third
party, Guilford shall no longer have the obligation, pursuant to Section
IV(I)(1), to involve APPI in efforts to obtain and negotiate a license from such
third party and, notwithstanding the survival provisions in Section IV(I)(3) and
Section IV(D)(4), such obligations shall terminate and be of no further force
and effect as of the Closing Date.

                           (c)      Notwithstanding the survival provisions in
Section IV(I)(3) and Section IV(D)(4), the provisions of Section (IV)(I)(2)
relating to infringement of a patent involving the Product by a third party
shall terminate and be of no further force and effect as of the Closing Date.

                  4.1.15   Certain Covenants of Guilford.

                           (a)      The obligations of Guilford and its
Affiliates pursuant to Section IV(J)(iv), which prohibit Guilford and its
Affiliates from appointing any distributor other than APPI in the Territory
during the term of the Marketing Rights Agreement, shall be deemed modified to
the extent necessary to permit Guilford and its Affiliates to solicit,
interview, appoint and contract with distributors and prepare them to begin
distribution of the Product in the Territory; provided, however, that any such
distributors shall not actually begin distribution of the Product in the
Territory until the Transition Date.

                           (b)      The obligations of Guilford and its
Affiliates pursuant to Section IV(J)(v), which require Guilford and its
Affiliates to refer to APPI any leads concerning prospective customers in the
Territory which come to the attention of GPI during the term of the Marketing
Rights Agreement, shall terminate and be of no further force and effect as of
the Closing Date.

RIGHTS REVERSION AGREEMENT             11
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         4.2      Manufacturing and Supply Agreement. Unless expressly provided
otherwise by this Agreement, during the Transition Period all rights and
obligations of any party under the 1996 Manufacturing and Supply Agreement shall
remain in full force and effect. Effective upon the Closing Date, the parties
agree that the 1996 Manufacturing and Supply Agreement shall be modified as
follows:

                  4.2.1    Definition of Territory. The definition of
"Territory" shall be amended and restated to read as follows:

                  "Territory" shall mean the entire world, excluding Denmark,
                  Finland, Norway, Sweden and Japan.

                  4.2.2    Forecasts. APPI shall no longer be obligated to
provide forecasts or orders for Product pursuant to Sections II(B)(1) and
II(B)(2).

                  4.2.3    Ownership of Trademarks. Notwithstanding any
provision in Section II(D)(3) to the contrary, Guilford shall be the exclusive
owner of and have all rights to (i) the Licensed Trademark, together with the
goodwill symbolized by such trademark, and (ii) copyrights, plans, ideas, names,
slogans, artwork and all other intellectual property, if any, in each case
exclusive to the GLIADEL Product; provided, however, for clarification the
foregoing shall exclude any corporate or division name of Rhone-Poulenc Rorer
Pharmaceuticals Inc., Aventis or their respective Affiliates, any logos of
Rhone-Poulenc Rorer Pharmaceuticals Inc., Aventis or their respective
Affiliates, any trademark of Rhone-Poulenc Rorer Pharmaceuticals Inc., Aventis
or their respective Affiliates and all NDC numbers of Aventis or its Affiliates.

                  4.2.4    Termination. APPI shall no longer have the right
pursuant to Section III(D)(3) to terminate the 1996 Manufacturing and Supply
Agreement in the event of a Change of Control (as such term is defined in the
1996 Manufacturing and Supply Agreement).

                  4.2.5    Events of Default. A breach by either party of any
material provision of the 1996 Loan Agreement, or defaults in the performance or
observance of any material provision of such agreement, shall no longer
constitute an "Event of Default" under the 1996 Manufacturing and Supply
pursuant to Section III(E).

                  4.2.6    Remedies. APPI shall no longer have the right
pursuant to Section III(F)(4) to sell out its stock of any Product it possesses
or has committed to purchase in the event of a termination of the 1996
Manufacturing and Supply Agreement, and the disposition of such Product upon
termination of the 1996 Manufacturing and Supply shall instead be governed by
Section 5.6.2 of this Agreement.

                  4.2.7    Certain Covenants of GPI. The obligations of Guilford
and its Affiliates pursuant to Section III(I)(iv), which require Guilford and
its Affiliates to refer to APPI any leads concerning prospective customers in
the Territory which come to the attention of GPI during the term of the 1996
Manufacturing and Supply Agreement, shall terminate and be of no further force
and effect as of the Closing Date.

         4.3      1996 Stock Purchase Agreement. Unless expressly provided
otherwise by this Agreement, all rights and obligations of any party under the
1996 Stock Purchase Agreement

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shall remain in full force and effect. Effective upon the Closing Date, the
parties agree that the 1996 Stock Purchase Agreement shall be modified as
follows:

                  4.3.1    Additional Shares. RPR Inc. shall no longer have any
right or obligation to purchase, and GPI shall no longer have any right or
obligation to sell, the Additional Shares (as defined in the 1996 Stock Purchase
Agreement) and as a result, there shall be no Second Closing Date (as defined in
the 1996 Stock Purchase Agreement).

                  4.3.2    Covenants to Perform. The respective covenants of
APPI and GPI to perform the agreements to be performed by them under the
Transaction Documents (as defined in the 1996 Stock Purchase Agreement) shall be
modified to include only those agreements to be performed by them under the
Transaction Documents as amended hereby or as may be amended by the parties in
the future.

                  4.3.3    Standstill. The standstill provisions set forth in
Section 7.01 of the 1996 Stock Purchase Agreement shall no longer be of any
force or effect, and such matters shall be governed by Section 7.01 of the Stock
Purchase Agreement.

                  4.3.4    Lock Up. The lock up provisions set forth in Section
7.02 of the 1996 Stock Purchase Agreement shall no longer be of any force or
effect.

         4.4      1996 Loan Agreement. Effective upon the Closing Date, the
parties agree that the 1996 Loan Agreement shall be terminated and be of no
further force and effect and as a result RPR Inc. shall have no further
obligation to advance any funds to GPI pursuant to the 1996 Loan Agreement.

         4.5      Interim Agreement. Effective upon the Closing Date, the
parties agree that the Interim Agreement shall no longer be of any force or
effect, and the matters contained therein shall be governed by this Agreement.

                                   ARTICLE 5
                      OBLIGATIONS DURING TRANSITION PERIOD

         Unless expressly provided otherwise by this Agreement, during the
Transition Period all rights and obligations of any party under the Marketing
Rights Agreement shall remain in full force and effect. In addition, during the
Transition Period:

         5.1      Cooperation.

                  5.1.1    General Access. APPI shall grant Guilford full access
to documents, meetings and any other communications (both internal and with any
third parties) regarding clinical trials, registration efforts, and marketing,
sales and distribution activities, each with respect to the Product. APPI shall
work jointly with Guilford with respect to the foregoing activities and will
cooperate with and reasonably assist Guilford in Guilford's efforts to build its
commercial operations with respect to the Product. Such assistance will include,
for example, promptly supplying Guilford with copies of marketing and sales
records, reports, plans and other

RIGHTS REVERSION AGREEMENT             13
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information that is related to the Product and that is in APPI's possession or
control. APPI shall deliver such information in electronic or hard copy
versions, as Guilford may reasonably request.

                  5.1.2    Transfer of NDA and IND. Immediately following the
Closing, the parties shall file with the FDA the information required pursuant
to 21 C.F.R. Section 314.72 for the transfer of the NDA and IND for the GLIADEL
Product from APPI to Guilford. APPI shall file the information required of a
former owner as set forth in Exhibit C hereto, and Guilford shall file the
information required of a new owner as set forth in Exhibit D hereto. APPI may
retain an archival copy of such NDA and IND, including information required to
be kept under applicable regulations.

                  5.1.3    Transition of NDA Activities. The parties will agree
upon procedures to ensure a smooth transition from APPI to Guilford on or before
the Transition Date of the activities required to be undertaken by the holder of
the NDA (and corresponding foreign Regulatory Filings) for the GLIADEL Product,
including, without limitation, adverse experience reporting, quarterly and
annual FDA reports, complaint and sample tracking, product recalls and
communication with health care professionals and customers.

         5.2      Communications with Regulatory Authorities.

                  5.2.1    FDA. Upon transfer of the NDA for the GLIADEL Product
to Guilford, Guilford shall assume all responsibility for communication with the
FDA that relates to the Product, except as contemplated by Section 5.6.5 hereof.
Guilford shall not purport to represent APPI in any such communication with the
FDA or attribute any statements to APPI or any of its Affiliates in any such
communication.

                  5.2.2    Foreign Regulatory Authorities. During the Transition
Period, APPI shall give Guilford reasonable prior written notice and the right
to attend any meeting between APPI and any foreign regulatory authority relating
to the Product and provide Guilford with a true and complete copy of each
communication that will be made during the Transition Period between APPI and
any foreign regulatory authority that relates to the Product, and the right to
review and participate in any response to any such communication. APPI shall be
responsible for making presentations to any foreign regulatory authority that
relate to the Product during any joint meetings and for responding to questions
and comments from such foreign regulatory authority with respect to its
Regulatory Filing, but shall solicit and reasonably consider the input of
Guilford prior to making such a presentation or response; provided, however,
that APPI shall not be required to take any action that APPI determines in good
faith would jeopardize its standing and reputation with any foreign regulatory
authority or violate any applicable provision of law, statute, rule or
regulation. APPI and Guilford shall promptly provide the other with notes from
any in-person or teleconference meeting with any foreign regulatory authority
related to the Product at which the other is not present. Notwithstanding the
foregoing, upon a transfer in accordance with Article 6 of a foreign Regulatory
Approval or Regulatory Filing prior to the Transition Date, (i) Guilford shall
assume all responsibility for presentations to and communications with the
relevant regulatory authority that relates to the Product and (ii) APPI shall be
relieved of any responsibility therefor, except as contemplated by Section 5.6.5
hereof. Guilford shall not purport to represent APPI in any meeting with any
foreign regulatory authority or attribute any statements to APPI or any of its
Affiliates in any such communication.

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         5.3      Joint Transition Team. Upon the Closing Date, the parties
shall establish a Joint Transition Team which shall remain in place during the
Transition Period and which shall be responsible for the smooth and effective
implementation of the transition activities contemplated by this Agreement and
for developing and executing a plan to effect the transfers to take place
pursuant to Article 6. The members of the Joint Transition Team shall be as set
forth on Schedule 5.3. Any replacements or proxies for the foregoing persons
shall be equivalently senior personnel. The parties shall cause their respective
members of the Joint Transition Team to make themselves available as reasonably
necessary to carry out such implementation. Any impasse among the members of the
Joint Transition Team that is not resolved within seven (7) business days shall
be referred to dispute resolution pursuant to Section 12.14.2.

         5.4      First Surgery Trial. Guilford will have the right to direct,
and will be responsible for directing, the completion of the First Surgery Trial
data analysis and final study report, and APPI will instruct PPD Development to
follow Guilford's reasonable direction with respect thereto. APPI will not (i)
make any public statements, written or verbal or (ii) engage in any
communications with the FDA or any corresponding foreign regulatory authority,
in either case relating to the First Surgery Trial and its results, except (A)
pursuant to a request for information from such regulatory authority, (B) as
required under applicable law, statute, rule or regulation, or (C) as determined
in good faith by APPI to be necessary in order to not jeopardize APPI's standing
and reputation with any such regulatory authority; provided, however, that (1)
unless, with respect to clauses (A) and (B), it is not reasonably practicable,
APPI shall coordinate with Guilford with respect to any such communications,
including, providing to Guilford a reasonable prior opportunity to review and
comment on any such communications and considering in good faith the comments of
Guilford prior to dissemination of any such communications, and (2) in each
case, APPI shall provide Guilford with a copy of the final version of any such
communication made in writing or a written summary of any such communication
made verbally after dissemination of any such communication. The provisions
contained in the preceding sentence shall survive the termination or expiration
of this Agreement. APPI shall be liable for all bills of PPD Development and any
other creditors relating to the First Surgery Trial accrued for the completion
of the data analysis and final study report; provided, however, that Guilford
shall be responsible for any charges incurred by APPI relating to additional
work to or changes from the current plan for completion of the First Surgery
Trial that may be requested by Guilford of PPD Development or such other
creditors. Notwithstanding any provision in the Marketing Rights Agreement to
the contrary, Guilford shall have the right to direct the communication of the
data, analyses and results of the First Surgery Trial to its consultants and the
FDA and, in coordination with APPI, to investigators. Guilford will be
responsible for leading the Trial Executive Committee and will decide upon the
modalities of dissemination of the First Surgery Trial results (e.g.,
investigators, IDMC, Congresses, press releases and publications). Guilford will
provide to APPI a reasonable prior opportunity to review and comment on the
substance of any and all such communications, and Guilford shall consider in
good faith comments of APPI prior to such dissemination; provided, however, that
Guilford shall not have to provide APPI such opportunity to review and comment
on communications the substance of which has previously been provided to APPI
pursuant to the foregoing. Guilford shall not purport to represent APPI or
attribute any statements to APPI or any of its Affiliates in any of the
foregoing communications or other actions. If Guilford breaches its obligations
pursuant to the preceding sentence or if any third party refers to APPI or any
of its Affiliates in a public statement relating to the First Surgery Trial,
then APPI shall be entitled to make a clarifying disclosure; provided,

RIGHTS REVERSION AGREEMENT             15
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however, that any such clarifying disclosure made by APPI relating to the First
Surgery Trial and its results shall be subject to APPI's obligations in the
second sentence of this Section 5.4 to coordinate such communications with
Guilford.

         5.5      Registration Efforts. During the Transition Period, as
contemplated by Section 4.1.4 hereof, APPI shall continue to seek Regulatory
Approvals in accordance with the terms of the Marketing Rights Agreement for
recurrent indication in Italy, Canada and Australia, except to the extent that
Guilford assumes such responsibility in which event Guilford shall be
responsible for the conduct and cost of any such activities. In the event
Guilford assumes such responsibility, APPI shall assist Guilford in seeking such
Regulatory Approval by supplying Guilford with copies of relevant documents and
communications, informing Guilford of the status of the applicable Regulatory
Filings. Notwithstanding any provision in the Marketing Rights Agreement to the
contrary, the parties agree that during the Transition Period, or until such
earlier time as Guilford may assume responsibility for such activities, APPI's
activities with respect to seeking the foregoing Regulatory Approvals shall be
subject to reasonable coordination with Guilford; provided, however, that (i)
APPI shall not be required to take any action that APPI determines in good faith
would jeopardize its standing and reputation with any foreign regulatory
authority or violate any applicable provision of law, statute, rule or
regulation, and (ii) no request of Guilford shall increase any obligation or
cost to APPI beyond that required by the applicable terms of the Marketing
Rights Agreement. APPI shall have no other obligation (or right) to seek
Regulatory Approvals in accordance with the terms of the Marketing Rights
Agreement, including no obligation (or right) to prepare and file with the FDA
(and corresponding foreign regulatory authorities) the Supplemental NDA (and
corresponding foreign Regulatory Filings) with respect to the results of the
First Surgery Trial, and APPI may terminate internal efforts and arrangements
with third parties related to such activities. Any such Regulatory Filings, if
made, shall be the sole responsibility of Guilford, and all costs and expenses
related to preparation and filing of any such Regulatory Filings, including
without limitation the costs and expenses of third parties (such as Quintiles,
Inc.), which are incurred by Guilford shall be paid for by Guilford.

         5.6      Ongoing APPI Commercial Operations. APPI shall continue the
commercialization and sale of the Product in accordance with the terms of the
Marketing Rights Agreement and shall carry out its corresponding activities and
obligations, as follows:

                  5.6.1    No Purchase of Inventory. Notwithstanding its
obligation pursuant to Section III(A)(3) of the Marketing Rights Agreement to
maximize sales of the Product, and notwithstanding any purchase forecasts or
orders it has provided pursuant to the 1996 Manufacturing and Supply Agreement,
APPI shall not be required to purchase from Guilford any further Product.

                  5.6.2    Disposition of Unsold Inventory. Subject to Section
5.6.1, APPI shall use commercially reasonable efforts to market, sell and
distribute the Product and to maximize sales of the Product in accordance with
the terms of Section III(A)(3) of Marketing Rights Agreement; provided, however,
that to the extent that, in spite of such efforts, APPI is unable to sell all of
its inventory of Product during the Transition Period, promptly after the
Transition Date it shall destroy (and certify as so destroyed) any remaining
inventory, other than such inventory located at Dagenham or Frankfurt with a
remaining shelf life of at least six months at the Transition Date

RIGHTS REVERSION AGREEMENT             16
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which Guilford shall purchase on the Transition Date for $1000 per dose, with
shipment to a site within the European Union designated by Guilford at
Guilford's expense.

                  5.6.3    Packaging and Labeling. The parties acknowledge that
certain inventory of Product in the possession of Guilford existing as of the
date hereof may contain packaging and labeling with the names, logos, trademarks
and NDC numbers of APPI or any of its Affiliates. Guilford may distribute such
existing inventory until the end of the six-month period following the
Transition Date; provided, however, that Guilford (i) shall not distribute any
such Product that is within three months of its expiration date and (ii) shall
not, and shall have no right to, use such names, logos, trademarks or NDC
numbers for any other purpose and shall acquire no right, title or interest
therein.

                  5.6.4    Marketing and Sales Activities. Guilford shall direct
the planning and conduct or, if it shall so determine, the cancellation, of: (i)
the GLIADEL presentation at the Society for Neurooncology scheduled to start on
November 8, 2000 in Chicago, Illinois; and (ii) the November conference in
Puerto Rico to educate neurosurgeons about the results of the First Surgery
Trial. APPI shall use reasonable efforts to assist Guilford in the conduct of
such meetings. APPI will continue to support, or Guilford at its discretion may
assume, the existing Unrestricted Education Grants, media plan, public relations
plan and the GO Project Grant through the Transition Date (except to the extent
that Guilford may request APPI to cease any such activities). Guilford will
reimburse APPI promptly upon receipt of an invoice from APPI for its
out-of-pocket expenses incurred for each of the foregoing meetings, grants and
plans, including without limitation any such expenses related to canceled
meetings, grants or plans. For informational purposes, APPI's budget estimates
for the foregoing activities are as follows: Puerto Rico, $760,000; Unrestricted
Education Grants, $110,000; media plan, $33,575; public relations plan, $10,000;
and GO Project Grant, $132,375. Furthermore, Guilford shall assume the conduct
of the grant-in-aid studies set forth in Schedule 5.6.4 designated as committed
at its sole expense (but only to the extent of the total committed amount for
such studies as set forth in Schedule 5.6.4; provided, that, Guilford shall be
responsible for any additional costs resulting from changes to such studies
requested or directed by Guilford) and APPI shall be relieved of the obligation
to conduct any activities so assumed by Guilford and shall terminate any
grant-in-aid studies not set forth in Schedule 5.6.4; provided, however, that
with respect to any grant-in-aid studies not set forth in Schedule 5.6.4, APPI
shall refer to Guilford any inquiries from parties conducting those studies
concerning resumption of their work.

                  5.6.5    Regulatory Activities. During the Transition Period,
APPI shall, in consultation with and as reasonably requested by Guilford,
discharge all regulatory obligations relating to the Product, including
assisting Guilford in preparing NDA annual reports and other required
supplemental filings with the FDA and preparing such reports and filings with
corresponding foreign regulatory authorities, performing activities related to
European Union importation, and collecting and reporting adverse events.

         5.7      APPI Employees. APPI shall provide sufficient human and
corporate resources to fulfill its obligations under the Marketing Rights
Agreement and under this Agreement.

RIGHTS REVERSION AGREEMENT             17
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         5.8      Ordinary Course of Business. During the Transition Period,
APPI shall continue to act in the ordinary course of business, consistent with
its past practices, with respect to the sale of the Product, including, but not
limited to, the terms and conditions of sale of the Product.

                                   ARTICLE 6
                   TRANSFERS ON OR BEFORE THE TRANSITION DATE

         On or before the Transition Date, or with respect to any item below on
such earlier date as is reasonably practicable following notice by Guilford to
APPI, APPI shall transfer to Guilford the following:

         6.1      Know How and Clinical Data. All Know-How, including all
clinical and other data, analyses and reports (a) used, obtained or generated to
support APPI's pursuit of Regulatory Approvals (whether or not actually used) or
(b) that otherwise relates to the Product, provided to Guilford in the most
appropriate format available to support regulatory filings; provided, however,
that to the extent APPI requires access to such data to comply with applicable
legal requirements pertaining to APPI's performance under the Marketing Rights
Agreement or this Agreement, subject to Article 9, Guilford shall allow APPI a
right of access (including the right to take copies of records) and right of
reference to all such data;

         6.2      Other Regulatory Filings and Approvals. All Regulatory Filings
(for purposes of this Section 6.2, including both filed and draft versions)
(other than the NDA and IND filed with the FDA to be transferred in accordance
with Section 5.1.2 hereof) and Regulatory Approvals; provided, however, that if
legal requirements beyond APPI's control prevent APPI from transferring any
Regulatory Filing or Regulatory Approval to GPI Holdings, APPI shall allow
Guilford a right of reference to any such Regulatory Filing or Regulatory
Approval; provided, further, that Guilford shall take such action prior to the
Transition Date as is necessary to enable such transfer of all Regulatory
Filings and Regulatory Approvals and APPI shall close all Regulatory Filings and
Regulatory Approvals as of the Transition Date; provided, however, that if,
despite Guilford taking such action, the relevant regulatory authority has not
effectuated transfer of the relevant Regulatory Filing or Regulatory Approval as
of the Transition Date, then upon the written request of Guilford (including
reasonable evidence of Guilford having taken the necessary actions to enable
such transfer) APPI shall continue to support such Regulatory Filing or
Regulatory Approval in accordance with the terms of this Agreement for a
reasonable period of time after the Transition Date, not to exceed 45 days,
subject to prompt reimbursement by Guilford to APPI for any and all reasonable
costs or expenses (whether internal or out-of-pocket) related to such
continuation of support and to the continuation during such period of time of
the provisions of this Agreement related to Guilford's obligations to coordinate
with, and where applicable seek approval from, APPI with respect to
communications with the relevant regulatory authority and other disclosures and
provided that APPI shall have no further obligations with respect to the Product
in such country or countries, including sales, marketing or distribution; and

         6.3      Marketing and Sales Information. All marketing and sales data
in the possession or control of APPI that relate to the Product, including,
without limitation, customer lists,

RIGHTS REVERSION AGREEMENT             18
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marketing, distribution and sales plans, methods and systems, sales figures and
sales projections and training materials.

                                   ARTICLE 7
                     OBLIGATIONS AFTER THE TRANSITION PERIOD

         Effective as of the Transition Date, the Marketing Rights Agreement
shall terminate and, except for those rights and obligations of any party under
the Marketing Rights Agreement that expressly survive the termination of such
agreement pursuant to either the terms of the Marketing Rights Agreement (as
modified by this Agreement) or the terms of this Agreement, all rights and
obligations of any party under the Marketing Rights Agreement, including all
licenses granted to APPI by GPI or GPI Holdings thereunder, shall cease to be of
further effect. After the Transition Period, APPI shall, for a period of six
months:

         7.1      Regulatory Approval Information.  Provide to Guilford such
information in APPI's possession as may be reasonably requested by Guilford to
obtain Regulatory Approvals throughout the Territory for use in the Field.

         7.2      Adverse Event Reporting.  Continue to inform GPI of all
material written customer complaints, adverse reaction information or
notifications, correspondence, etc. with respect to the use of the Product that
may come to its attention;

         7.3      Infringement of Third Parties. Notify GPI should it become
aware of the Product infringing any patents, patent rights, patent applications,
inventions, trademarks, service marks or tradenames, copyrights, confidential
information, trade secrets or any other proprietary rights or processes of any
other Person; and

         7.4      Infringement by Third Parties.  Notify GPI should it become
aware that there is infringement of a patent involving the Product by any third
party.

                                   ARTICLE 8
     MODIFICATION OF CERTAIN OBLIGATIONS EFFECTIVE UPON THE TRANSITION DATE

         8.1      Marketing Rights Agreement. Effective as of the Transition
Date, the Marketing Rights Agreement shall terminate and, except for those
rights and obligations of any party under the Marketing Rights Agreement that
expressly survive the termination of such agreement pursuant to either the terms
of such agreement (as modified by this Agreement) or the terms of this
Agreement, all rights and obligations of any party under the Marketing Rights
Agreement shall cease to be of further effect. As to those rights and
obligations of any party under the Marketing Rights Agreement that do expressly
survive the termination thereof, the parties agree that effective as of the
Transition Date they shall be modified as follows:

                  8.1.1    Product Liability.  The first and second sentences of
Section IV(C)(2) shall be amended and restated to read as follows:

                  "The parties desire to separately allocate between themselves
                  the risks and costs of any product liability claims from third
                  parties with respect to the Product

RIGHTS REVERSION AGREEMENT             19
   20

                  (whether related to the safety or efficacy of the Product or
                  arising out of alleged defects in material, design or
                  workmanship of the Product or the use, marketing, advertising,
                  promotion, or distribution of the Product, but excluding those
                  claims (1) for which GPI and GPI Holdings are obligated to
                  defend, indemnify and hold the RPR Indemnitees harmless under
                  Section IV(C)(1)(a), and (2) for which RPR is obligated to
                  defend, indemnify and hold the GPI Indemnitees harmless under
                  Section IV(C)(1)(b)) (hereafter, a "Product Liability Claim").
                  Any losses, obligations, liabilities, penalties and damages
                  (including but not limited to compensatory and punitive
                  damages), costs and expenses (including reasonable attorneys'
                  fees), arising out of a Product Liability Claim (x) if related
                  to Product that is sold prior to the Transition Date (as
                  defined in the Rights Reversion Agreement between Aventis and
                  Guilford dated as of October 23, 2000), shall be shared
                  equally by APPI and Guilford and (y) if related to Product
                  that is sold on or after the Transition Date, shall be borne
                  by Guilford."

                  8.1.2    Confidentiality and Press Releases.

                           (a)      The third sentence of Section IV(A)(1) shall
be amended and replaced to read as follows:

                           "Information disclosed by the Disclosing Party shall
                           remain the sole and absolute property of the
                           Disclosing Party, subject to (x) the rights granted
                           in this Agreement and the transactions contemplated
                           herein and (y) the rights granted in that certain
                           Rights Reversion Agreement between Aventis and
                           Guilford dated as of October 23, 2000 and the
                           transactions contemplated therein, including the
                           transfer of certain information by APPI to Guilford
                           thereunder and the corresponding change in the nature
                           of such information from the proprietary and
                           confidential information of APPI to the proprietary
                           and confidential information of Guilford. Nothing in
                           this Agreement shall limit the use or disclosure by a
                           party of its own proprietary or confidential
                           information, including the information to be
                           transferred by APPI to Guilford under the Rights
                           Reversion Agreement which upon such transfer shall
                           become the confidential and proprietary information
                           of Guilford."

                           (b)      Notwithstanding the survival provisions in
Section IV(A)(5) and Section IV(D)(4), Section IV(A)(2) providing APPI with the
right to disclose information to its wholesalers and other direct customers as
necessary to effectively market and distribute the Product shall terminate and
be of no further force and effect as of the Transition Date.

                           (c)      Notwithstanding the survival provisions in
Section IV(A)(5) and Section IV(D)(4), Section IV(A)(3) relating to the
coordination of press releases and other public announcements by the parties
shall terminate and be of no further force and effect as of the Transition Date.

                  8.1.3    Joint Inventions.  Notwithstanding the survival
provisions in Section IV(H)(9) and Section IV(D)(4) of the Marketing Rights
Agreement, Sections IV(H)(3) through

RIGHTS REVERSION AGREEMENT             20
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IV(H)(8), regarding Joint Inventions, shall terminate and be of no further force
and effect as of the Transition Date.

         8.2      1996 Manufacturing and Supply Agreement. Effective as of the
Transition Date, the 1996 Manufacturing and Supply Agreement shall terminate
and, except for those rights and obligations of any party under the 1996
Manufacturing and Supply Agreement that expressly survive the termination of
such agreement pursuant to either the terms of such agreement (as modified by
this Agreement) or the terms of this Agreement, all rights and obligations of
any party under the 1996 Manufacturing and Supply Agreement shall cease to be of
further effect. As to those rights and obligations of any party under the 1996
Manufacturing and Supply Agreement that do expressly survive the termination
thereof, the parties agree that they shall be modified as follows:

                  8.2.1    Recalls.  The third to last sentence of Section II(G)
shall be amended and restated to read as follows:

                  "If neither party is responsible for such breach and the
                  Product subject to corrective or market action was sold prior
                  to the Transition Date (as defined in the Rights Reversion
                  Agreement between Aventis and Guilford dated as of October 23,
                  2000), then both parties will share equally the costs. If
                  neither party is responsible for such breach and the Product
                  subject to corrective or market action was sold after to the
                  Transition Date, then Guilford shall bear the costs."

                  8.2.2    Product Liability.  The first and second sentences of
Section III(C)(2) shall be amended and restated to read as follows:

                  "The parties desire to separately allocate between themselves
                  the risks and costs of any product liability claims from third
                  parties with respect to the Product (whether related to the
                  safety or efficacy of the Product or arising out of the
                  alleged defects in material, design or workmanship of the
                  Product or the use, marketing, advertising, promotion, or
                  distribution of the Product, but excluding those claims (1)
                  for which GPI and GPI Holdings are obligated to defend,
                  indemnify and hold the RPR Indemnitees harmless under Article
                  III.C.1.a., and (2) for which RPR is obligated to defend,
                  indemnify and hold the GPI Indemnitees harmless under Article
                  III.C.1.b) (hereafter, a "Product Liability Claim"). Any
                  losses, obligations, liabilities, penalties and damages
                  (including but not limited to compensatory and punitive
                  damages), costs and expenses (including reasonable attorneys'
                  fees), arising out of a Product Liability Claim (x) if related
                  to Product that is sold prior to the Transition Date (as
                  defined in the Rights Reversion Agreement between APPI and
                  Guilford dated as of October 23, 2000), shall be shared
                  equally by APPI and Guilford and (y) if related to Product
                  that is sold on or after the Transition Date, shall be borne
                  by Guilford."

         8.3      Returns. Effective as of the Transition Date, Guilford shall
be responsible for all obligations with respect to returned units of Product;
provided, that, until the end of the three-month period following the Transition
Date, APPI shall reimburse Guilford at the rate of $1,000

RIGHTS REVERSION AGREEMENT             21
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per box of Product for returned units of Product bearing lot numbers of Product
sold to APPI under the 1996 Manufacturing and Supply Agreement for up to 36
boxes of Product.

         8.4      Regulatory Responsibilities. Effective as of the Transition
Date, Guilford shall assume all regulatory responsibilities for the Product,
including, without limitation, adverse experience reporting, quarterly and
annual FDA reports, complaint and sample tracking, product recalls and
communication with health care professionals and customers, and assume all fee
obligations for holders of NDAs (and corresponding foreign Regulatory Filings)
for the GLIADEL Product.

                                   ARTICLE 9
                         CONFIDENTIALITY; PRESS RELEASES

         9.1      Confidentiality.

                  9.1.1    Pursuant to this Agreement, each of Aventis and
Guilford (in such capacity, the "Disclosing Party") have disclosed and will be
disclosing to the other party (in such capacity, the "Receiving Party") certain
proprietary information, technical data, trade secrets and know-how of the
Disclosing Party including, without limitation, Know-How, Product research and
plans, designs, methods, formulations, ingredients, samples, processes,
machines, processing and control information, Product performance data, manuals,
INDs, NDAs, Regulatory Filings, the content of any unpublished patent
applications, drawings, formulae, devices, structures, models, prototypes, data,
test results, photographs, film, techniques, apparatus, tapes, disks,
unpublished trademarks, trade names and copyrights, customer lists, supplier
lists, markets, operating methods and procedures, marketing distribution and
sales methods and systems, sales figures, projections, finances and other
business information.

                  9.1.2    The Receiving Party shall, during the term of this
Agreement, and for seven (7) years after the expiration or sooner termination of
the term of this Agreement, make no use of such confidential information except
(x) to advance the purposes of the Marketing Rights Agreement in accordance with
its provisions or (y) to advance the purposes of this Agreement in accordance
with its provisions, which purposes shall include the transition of the
development, commercialization and sale of the Product to Guilford from APPI and
Guilford's corresponding disclosure of such confidential information to
potential distributors, vendors of regulatory services and such other third
party agents as may be used by Guilford to develop, commercialize and sell the
Product. Each party shall use the same efforts to keep secret and prevent the
disclosure of such confidential information to third parties as it would use
with respect to its own confidential information.

                  9.1.3    Information disclosed by the Disclosing Party shall
remain the sole and absolute property of the Disclosing Party, subject to the
rights granted in this Agreement and the transactions contemplated herein,
including the transfer of certain information by APPI to Guilford hereunder and
the corresponding change in the nature of such information from the proprietary
and confidential information of APPI to the proprietary and confidential
information of Guilford. Nothing in this Agreement shall limit the use or
disclosure by a party of its own proprietary or confidential information,
including the information to be transferred by APPI to

RIGHTS REVERSION AGREEMENT             22
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Guilford hereunder which upon such transfer shall become the confidential and
proprietary information of Guilford.

                  9.1.4    The above restrictions on the use and disclosure of
information shall not apply to any information which: (a) is already known to
the Receiving Party at the time of disclosure, as demonstrated by competent
proof; (b) is or becomes generally available to the public other than through
any act or omission of the Receiving Party in breach of this Agreement; (c) is
acquired by the Receiving Party from a third party who is not, directly or
indirectly, under an obligation of confidentiality to the Disclosing Party with
respect to same; (d) is required to be disclosed pursuant to applicable law,
rule or regulation; (e) is required to be disclosed to government regulatory
authorities to obtain Regulatory Approval for the Product or to respond to a
regulatory or governmental inquiry concerning the Product; or (f) is developed
independently by the Receiving Party without use, direct or indirect, of
information that is required to be held confidential hereunder. In the event
that Confidential Information is required to be disclosed pursuant to subsection
(d) or (e) of this Section 9.1.4, the Receiving Party shall promptly inform the
Disclosing Party of the circumstances requiring disclosure of the information
prior to disclosure to afford the Disclosing Party an opportunity to seek an
appropriate protective order or other means of seeking confidential treatment
for such information.

         9.2      Permitted Disclosure. Notwithstanding the provisions of
Section 9.1 of this Agreement, APPI shall be permitted to disclose information
to its wholesalers and other direct customers as necessary to effectively market
and distribute the Product as provided in Section IV(A)2 of the Marketing Rights
Agreement until such provision is terminated pursuant to Section 8.1.2(b) of
this Agreement.

         9.3 Press Releases. Notwithstanding the provisions of Section 9.1 of
this Agreement, Section IV(A)(3) of the Marketing Rights Agreement relating to
the coordination of press releases and other public announcements by the parties
shall govern this Agreement and the Marketing Rights Agreement until such
provision is terminated pursuant to Section 8.1.2(c) of this Agreement. In
furtherance of the foregoing, APPI acknowledges that the transactions
contemplated by this Agreement are material to Guilford and Guilford has an
obligation to disclose such transactions, and that Guilford may in its sole
discretion issue a press release in the form set forth as Exhibit E hereto;
provided, however, that any other disclosure by any of the parties relating to
the transactions contemplated by this Agreement shall be subject to the prior
review and approval, not to be unreasonably withheld or delayed, of the other
parties. In addition, Guilford may issue press releases and make other public
statements with respect to the results of the First Surgery Trial, and
Guilford's analyses and conclusions with respect thereto, and Guilford's plans
for Regulatory Filings based thereon, subject to providing APPI a reasonable
prior opportunity to review and comment on any and all such releases and subject
to Guilford considering in good faith comments of APPI prior to such release;
provided, however, that Guilford's obligation to provide such opportunity to
APPI to review and comment shall terminate upon the termination of this
Agreement and, notwithstanding Section 9.5, shall not survive such termination.
In any such disclosures, Guilford will not purport to attribute any
interpretations of the First Surgery Trial to APPI or purport to represent APPI
or any of its Affiliates, without APPI's prior written consent. Either party may
use prior press releases issued

RIGHTS REVERSION AGREEMENT             23
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in accordance with this Section 9.3, or the content thereof, after the date of
such release without prior notice or approval from the other party.

         9.4      Use of Name. Neither party shall use the name of the other for
marketing, advertising, promotional claims without the prior written consent of
the other party. In communications with regulatory authorities, neither party
shall purport to attribute any statements to the other party or purport to
represent the other party without the prior written consent of the other party.

         9.5      Survival. The provisions of this Article 9 shall survive the
expiration or sooner termination of the term of this Agreement.

                                   ARTICLE 10
                                 INDEMNIFICATION

         In order to distribute among themselves the responsibility for claims
arising out of this Agreement, and except as otherwise specifically provided for
herein, the parties agree as follows:

         10.1     Guilford Indemnification Obligation. Each of GPI and GPI
Holdings, jointly and severally, shall defend, indemnify and hold Aventis, its
Affiliates, and their respective officers, directors, agents, employees and
shareholders (collectively, "Aventis Indemnitees") harmless, from and against,
any and all losses, obligations, liabilities, penalties and damages (including
but not limited to compensatory and punitive damages), costs and expenses
(including, reasonable attorneys' fees), which the Aventis Indemnitees may incur
or suffer, and all deficiencies, actions (including without limitation, any
proceedings to establish insurance coverage), claims, suits, legal,
administrative, arbitration, governmental or other proceedings or
investigations, and judgments, reasonable costs and expenses (including
reasonable legal fees) which any of them may face arising out of (i) any breach
by GPI or GPI Holdings of any representation or warranty made by GPI or GPI
Holdings in this Agreement or any breach by GPI or GPI Holdings in the
performance or observation of any covenant, agreement, obligation or provision
in this Agreement to be performed or observed by GPI or GPI Holdings; (ii) any
negligent or otherwise tortious act or omission by GPI or GPI Holdings in
connection with the performance or observation of any covenant, agreement,
obligation or provision in this Agreement to be performed or observed by GPI or
GPI Holdings; and (iii) the enforcement by the Aventis Indemnitees of their
rights under this Section 10.1.

         10.2     Aventis Indemnification Obligation. Aventis shall defend,
indemnify and hold each of GPI and GPI Holdings, its respective Affiliates, and
their respective officers, directors, agents, employees and shareholders
(collectively, "GPI Indemnitees") harmless, from and against, any and all
losses, obligations, liabilities, penalties, and damages (including but not
limited to compensatory and punitive damages), costs and expenses (including
reasonable attorneys' fees), which the GPI Indemnitees may incur or suffer, and
all deficiencies, actions (including, without limitation, any proceedings to
establish insurance coverage), claims, suits, legal, administrative,
arbitration, governmental or other proceedings or investigations, and judgments,
reasonable costs and expenses (including, reasonable legal fees) which any of
them may face arising out of (i) any breach by APPI or RPR Inc. of any
representation or warranty

RIGHTS REVERSION AGREEMENT             24
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made by APPI or RPR Inc. in this Agreement or any breach by APPI or RPR Inc. in
the performance or observation of any covenant, agreement, obligation or
provision in this Agreement to be performed or observed by APPI or RPR Inc.;
(ii) any negligent or otherwise tortious act or omission by APPI or RPR Inc. in
connection with the performance or observation of any covenant, agreement,
obligation or provision in this Agreement to be performed or observed by APPI or
RPR Inc.; (iii) the enforcement by the GPI Indemnitees of their rights under
this Section 10.2.

         10.3     General Provisions. If any action, claim, suit, proceeding or
investigation arises as to which a right of indemnification provided in this
Article 10 applies, the GPI Indemnitee or the Aventis Indemnitee, as the case
may be (the "Indemnified Party"), shall promptly notify the party obligated
under this Article 10 to indemnify the Indemnified Party (the "Indemnifying
Party") thereof in writing, and allow the Indemnifying Party and its insurers
the opportunity to assume direction and control of the defense against such
action, claim, suit, proceeding or investigation, at its sole expense, including
without limitation, the settlement thereof at the sole option of the
Indemnifying Party or its insurers to the extent that Indemnified Party's
liability is not thereby invoked. The Indemnified Party shall cooperate with the
Indemnifying Party and its insurer in the disposition of any such matter and the
Indemnified Party will have the right and option to participate in the defense
of any action, claim, suit, proceeding or investigation as to which this Article
10 applies, with separate counsel at its election and cost. If the Indemnifying
Party fails or declines to assume the defense of any such action, claim, suit,
proceeding or investigation within thirty (30) days after notice thereof, the
Indemnified Party may assume the defense thereof for the account and at the risk
of the Indemnifying Party. The Indemnifying Party shall pay promptly to the
Indemnified Party any losses, obligations, liabilities, penalties, damages,
judgments, reasonable costs and expenses (including reasonable legal fees) to
which the indemnity under this Article 10 relates, as incurred.

         10.4     Survival.  The provisions of this Article 10 shall survive the
expiration or sooner termination of the term of this Agreement.

                                   ARTICLE 11
                               TERM AND EXPIRATION

         11.1     Term. The term of this Agreement shall commence on the date
hereof and shall expire at the end of the six-month period following the
Transition Date. The expiration of this Agreement shall have no effect on any
transactions completed under this Agreement prior to such expiration and, for
example, any agreement terminated or amended by this Agreement shall remain so
amended or terminated upon the expiration of this Agreement.

         11.2     Survival. The following shall survive the expiration or sooner
termination of the term of this Agreement: (a) any payment obligations of the
parties under this Agreement accruing prior to the date of expiration or
termination, and (b) any other provision herein expressly surviving expiration
or termination or necessary to interpret the rights and obligations of the
parties in connection with the expiration or termination of the term of this
Agreement and those matters that expressly survive termination of the 1996 Stock
Purchase Agreement (as modified by this Agreement).

RIGHTS REVERSION AGREEMENT             25
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         11.3     Events of Default.

                  11.3.1   The occurrence of any one or more of the following
acts, events or occurrences shall constitute an "Event of Default" under this
Agreement: either party breaches any material provision of this Agreement, the
Marketing Rights Agreement, the Registration Rights Agreement, the 1996
Manufacturing and Supply Agreement or the 1996 Stock Purchase Agreement and
fails to remedy such breach or default within sixty (60) days after the receipt
of notice thereof.

                  11.3.2   Notwithstanding the foregoing Section 11.3.1, in the
event of a breach or default which cannot be remedied within such sixty (60) day
period (other than a failure to make payment as required herein), so long as the
breaching/defaulting party is using commercially reasonable efforts to remedy
such breach or default, an Event of Default shall not have occurred until four
(4) months after notice of such breach or default and only if such breach or
default is not cured during such period.

         11.4     Remedies.

                  11.4.1   Immediately upon the occurrence of any Event of
Default by Guilford pursuant to Section 11.3, Aventis shall have the right to
terminate this Agreement, exercisable by delivering written notice thereof to
Guilford, and to pursue any and all remedies available to it at law or in equity
including, without limitation, the right to seek to recover from Guilford any
and all damages and losses of any nature whatsoever (including, without
limitation, consequential damages, lost profits and direct damages).

                  11.4.2   Immediately upon the occurrence of any Event of
Default by Aventis pursuant to Section 11.3, Guilford shall have the right to
terminate this Agreement, exercisable by delivering written notice thereof to
Aventis, and to pursue any and all remedies available to it at law or in equity
including, without limitation, the right to seek to recover from Aventis any and
all damages and losses of any nature whatsoever (including, without limitation,
consequential damages, lost profits and direct damages).

         11.5     Force Majeure. The obligations of Guilford and Aventis
hereunder shall be subject to any delays or non-performance caused by: acts of
God, earthquakes, fires, floods, explosion, sabotage, riot, accidents;
regulatory, governmental or military action or inaction; strikes, lockouts or
labor trouble; perils of the sea; or failure or delay in performance by third
parties, including suppliers and service providers; or any other cause beyond
the reasonable control of either party. The party which is not performing its
obligations under this Agreement as a result of any such event of force majeure
shall use commercially reasonable efforts to resume compliance with this
Agreement as soon as possible.

                                   ARTICLE 12
                                  MISCELLANEOUS

         12.1     Further Assurances.  Guilford and Aventis will each, at and
after the Closing Date, without further consideration, do, execute, acknowledge,
deliver and file, or will cause to be done, executed, acknowledged, delivered
and filed, all such further acts, deeds, assignments,

RIGHTS REVERSION AGREEMENT             26
   27

transfers, conveyances, powers of attorney and assurances as may be reasonably
required (i) for transferring, conveying and assigning to Guilford, or to its
respective successors or assigns, the items to be transferred pursuant to
Article 6 hereof and (ii) to otherwise implement the transactions contemplated
by this Agreement.

         12.2     HSR Filings. Guilford and Aventis shall cooperate with one
another in (i) determining whether any filing of Notification and Report Forms
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, is
required in connection with the consummation of the transactions contemplated by
the Transaction Agreements and (ii) preparing and making any such filing and
furnishing information required in connection therewith as soon as is reasonably
practicable, but in any event within five business days after the signing of
this Agreement. If such a filing is required, each party shall be responsible
for preparing and making its own filing and each party shall be responsible for
paying its own filing and other fees, costs and expenses associated with making
the filing.

         12.3     Independent Contractors. In making and performing this
Agreement, Guilford, on the one had, and Aventis, on the other hand, are acting
and shall act as independent contractors. Nothing in this Agreement shall be
deemed to create an agency, joint venture or partnership relationship between
Guilford, on the one hand, and Aventis, on the other hand. Neither Guilford nor
Aventis shall have the authority to obligate the other in any respect, and
neither Guilford nor Aventis shall hold itself out as having any such authority.
All personnel of GPI Holdings shall be solely employees of GPI Holdings and
shall not represent themselves as employees of GPI or Aventis. All personnel of
GPI shall be solely employees of GPI and shall not represent themselves as
employees of GPI Holdings or Aventis. All personnel of Aventis shall be solely
employees of Aventis and shall not represent themselves as employees of GPI or
GPI Holdings.

         12.4     Assignment. Neither Guilford nor Aventis may assign or
otherwise transfer any of its rights or obligations hereunder without the prior
written consent of the other parties hereto; provided, however, a party may
assign its rights and obligations hereunder to an Affiliate, provided that the
assigning party shall remain responsible for all obligations to the
non-assigning parties hereunder.

         12.5     Binding Effect; Benefits. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective permitted
successors and assigns. Nothing contained herein shall give to any other Person
any benefit of any legal or equitable right, remedy or claim.

         12.6     Amendments.  This Agreement may be modified, amended or
supplemented only by an instrument in writing executed by each of Guilford and
Aventis.

         12.7     Waivers. No term or provision hereof will be considered waived
by any party, and no breach excused by any party, unless such waiver or consent
is in writing signed on behalf of the party against whom the waiver is asserted.
No consent by any party to, or waiver of, a breach by any party, whether express
or implied will constitute a consent to, waiver of, or excuse of any other,
different or subsequent breach by any party.

RIGHTS REVERSION AGREEMENT             27
   28

         12.8     Notices. All notices, claims, certificates, requests, demands
and other communications hereunder shall be in writing and shall be delivered
personally or sent by facsimile transmission, nationally-recognized express
courier, or United States registered or certified mail, return receipt
requested, addressed as follows:

         If to GPI to:

         Guilford Pharmaceuticals Inc.
         6611 Tributary Street
         Baltimore, Maryland  21224
         Attention: Secretary
         Fax: 410-631-6819

         If to GPI Holdings to:

         GPI Holdings, Inc.
         222 Delaware Avenue
         P.O. Box 2306
         Wilmington, Delaware 19899
         Attention: President
         Fax: 302-888-6865

RIGHTS REVERSION AGREEMENT             28
   29

         If to APPI to:

         Aventis Pharmaceuticals Products Inc.
         Route 202-206
         Bridgewater, New Jersey 08807
         Attention:  Senior Vice President, Corporate Development
         Fax:  908-231-3619

         With a copy to:

         Aventis Pharmaceuticals Products Inc.
         Route 202-206
         Bridgewater, New Jersey 08807
         Attention:  Vice President, Legal Corporate Development
         Fax:  908-231-2243

         If to RPR Inc. to:

         Rhone-Poulenc Rorer Inc.
         C/o Aventis Pharmaceuticals Products Inc.
         Route 202-206
         Bridgewater, New Jersey 08807
         Attention:  Senior Vice President, Corporate Development
         Fax:  908-231-3619

         With a copy to:

         Aventis Pharmaceuticals Products Inc.
         Route 202-206
         Bridgewater, New Jersey 08807
         Attention:  Vice President, Legal Corporate Development
         Fax:  908-231-2243

or to such other address as the party to whom notice is to be given may have
furnished to the other parties in writing in accordance herewith. Any such
communication shall be deemed to have been received (i) when delivered, if
delivered personally, (ii) when sent (with confirmation received), if sent by
facsimile transmission prior to 5:00 p.m. on a business day, (iii) on the first
business day after dispatch (with confirmation received), if sent by facsimile
transmission on a day other than a business day or after 5:00 p.m. on a business
day; (iv) upon the date of delivery indicated in the records of such courier, if
sent by courier; or (v) upon the date of delivery indicated on the return
receipt, if sent by United States certified or registered mail.

         12.9     Counterparts.  This Agreement shall become binding when any
two or more counterparts hereof, individually or taken together, shall bear the
signatures of each of the parties hereto. This Agreement may be executed in any
number of counterparts, each of which shall be

RIGHTS REVERSION AGREEMENT             29
   30

deemed an original as against the party whose signature appears thereon, but all
of which taken together shall constitute but one and the same instrument.

         12.10    Headings. The article and section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.

         12.11    Governing Law. This Agreement, and any claims, disputes or
causes of action relating to or arising out of this Agreement, shall be
construed in accordance with and governed by the laws of the State of Delaware,
without giving effect to the conflict of laws principles thereof.

         12.12    Severability. Any of the provisions of this Agreement which
are determined to be invalid or unenforceable in any jurisdiction shall be
ineffective to the extent of such invalidity or unenforceability in such
jurisdiction, without rendering invalid or unenforceable the remaining
provisions hereof or affecting the validity or enforceability of any of the
provisions of this Agreement in any other jurisdiction.

         12.13    Exhibits. The following Exhibits are attached to this
Agreement and made a part of this Agreement:



         Exhibit           Description of Exhibit
         -------           ----------------------
                        
         A                 Registration Rights Agreement
         B                 Stock Purchase Agreement
         C                 APPI NDA and IND Transfer Information and Forms
         D                 Guilford NDA and IND Transfer Information and Forms
         E                 Guilford Press Release


         12.14    Disputes.

                  12.14.1  Notwithstanding anything contained in this Agreement
to the contrary, if any dispute arises between the parties relating to or
arising out of this Agreement, appropriate representatives of the parties shall
first use commercially reasonable efforts to negotiate in good faith a
resolution of the dispute as expeditiously as is reasonably practicable.

                  12.14.2  If such representatives of the parties are unable to
resolve the dispute within seven (7) business days after each party has been
apprised of the dispute, any party shall have the right, exercisable by
delivering written notice thereof to the other parties, to refer the dispute to
the Chief Executive Officer of GPI and the Senior Vice President of Corporate
Development of Aventis. If any party exercises such right, such officers shall
use commercially reasonable efforts to negotiate in good faith a resolution of
the dispute as expeditiously as is reasonably practicable.

                  12.14.3  If the dispute is not resolved within 20 business
days after the date that a party referred the matter to the Chief Executive
Officer of GPI and the Senior Vice President of Corporate Development of Aventis
(or such other period of time as the parties may mutually agree), each party
shall have the right to initiate and pursue any remedy available to it

RIGHTS REVERSION AGREEMENT             30
   31

at law or in equity; provided, however, that all claims, disputes or causes of
action relating to or arising out of this Agreement shall be brought, heard and
resolved solely and exclusively by and in a federal or state court situated in
Wilmington, New Castle County, Delaware. Each of the parties hereto agrees to
submit to the jurisdiction of such courts and that such courts are a proper
venue for resolving all claims, disputes or causes of action relating to or
arising out of this Agreement.

         12.15    Entire Agreement. This Agreement, the Registration Rights
Agreement, the Marketing Rights Agreement, the Stock Purchase Agreement, the
1996 Manufacturing and Supply Agreement and the 1996 Stock Purchase Agreement,
constitute the entire agreement between the parties relating to the subject
matter of this Agreement and supersede all prior or simultaneous
representations, discussions, negotiations and agreements relating to such
subject matter, whether written or oral.

                           [Execution Page to Follow]

RIGHTS REVERSION AGREEMENT             31
   32


         IN WITNESS WHEREOF, duly authorized representatives of the parties
hereto have duly executed this Agreement as of the date hereof.


                                    AVENTIS PHARMACEUTICALS PRODUCTS INC.


                                    By:    /s/ Michael A. Yeomans
                                           -------------------------
                                    Name:  Michael A. Yeomans
                                    Title: Vice President


                                    RHONE-POULENC RORER INC.


                                    By:    /s/ Charles D. Dalton
                                           -------------------------
                                    Name:  Charles D. Dalton
                                    Title: Vice President


                                    GUILFORD PHARMACEUTICALS INC.


                                    By:    /s/ Craig R. Smith, M.D.
                                           ---------------------------
                                    Name:  Craig R. Smith, M.D.
                                    Title: Chairman of the Board, President and
                                            Chief Executive Officer


                                    GPI POLYMER HOLDINGS, INC.
                                    (formerly named GPI Holdings, Inc.)


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

RIGHTS REVERSION AGREEMENT             32

EX-10.62

   1

                                                                   EXHIBIT 10.62

                                    AGREEMENT

         This AGREEMENT ("Agreement") is dated as of October 24, 2000 by and
between Cardinal Health Sales and Marketing Services ("Vendor"), a division of
RedKey, Inc., an Ohio corporation, with its principal place of business at 7000
Cardinal Place, Dublin, Ohio, and Guilford Pharmaceuticals Inc. ("Company"), a
Delaware corporation having a principal place of business at 6611 Tributary
Street, Baltimore MD 21224.

                             BACKGROUND INFORMATION
         Company develops, distributes and sells pharmaceutical products, and
Vendor provides medical representatives who Detail (as hereinafter defined)
pharmaceutical products for third parties. The Company desires Vendor to provide
representatives to Detail certain products as determined and directed by Company
in the Territory (as hereinafter defined), pursuant to the terms and conditions
of this Agreement, and Vendor desires to provide the Representatives and perform
such services pursuant to the terms and conditions set forth in this Agreement.

         The parties hereby agree as follows:

                                    ARTICLE I
                      DEFINITIONS AND REFERENCES TO VENDOR

         1.1.     Definitions.  The following terms when used in this Agreement
shall, except where the context otherwise requires, have the following meanings:

                  (a)      "Act" means the Federal Food, Drug and Cosmetic Act,
as amended, and the regulations promulgated thereunder from time to time.

                  (b)      "Affiliate" shall have the definition set forth in
Rule 405 promulgated under the Securities Act of 1933, as amended.

                  (c)      "Agency" means any governmental regulatory authority
in the Territory responsible for granting approvals for the sale or maintaining
regulatory oversight of the Products, including, without limitation, the FDA (as
hereinafter defined).

                  (d)      "Contract Year" means a period of twelve (12)
consecutive months during the term of this Agreement, beginning on the Effective
Date (as hereinafter defined).

                  (e)      "Detail" means an interactive, face-to-face visit by
a Representative with a Target Customer (as hereinafter defined) or his or her
legally empowered designee in the Territory, during which the FDA-approved
indicated uses, safety, effectiveness, contraindications, side effects, warnings
and other relevant characteristics of the Product (as hereinafter defined) is
described by the Representative in a fair and balanced manner consistent with
the requirements of the Act, and using, as necessary or desirable, the Product
Labeling (as hereinafter defined) and the Product Promotional Materials (as
hereinafter defined).

                                       1
   2

                  (f)      "Effective Date" means the date this Agreement is
fully executed by both parties.

                  (g)      "FDA" means the United States Food and Drug
Administration and any successor agency having substantially the same functions.

                  (h)      "Manager" means an individual hired by and retained
as an employee of Vendor to supervise activities of Representatives under this
Agreement, including district sales managers, regional sales directors, a
national sales director, and a project manager.

                  (i)      "PDMA" means the Prescription Drug Marketing Act of
1987, as amended, and the regulations promulgated thereunder from time to time.

                  (j)      "Product Detail" means Detail of a Product between
Target Customer and Representative. When used as a verb, "Detail" or "Detailing"
shall mean to engage in a Detail as defined in this Section 1.l(e).

                  (k)      "Product Labeling" means all labels and other
written, printed, or graphic matter provided by the Company including (i) any
container or wrapper utilized with a Product, or (ii) any written material
accompanying a Product, including, without limitation, Product package inserts.

                  (l)      "Product Launch Date" means the first Monday
following completion of the Training Program (as defined in Section 6.1).

                  (m)      "Product Promotional Materials" means all written,
printed or graphic material provided by the Company, including Product Labeling,
intended for use by Representatives during a Detail, including visual aids, file
cards, premium items, clinical studies, reprints, drug information updates and
any other promotional support items that Company deems necessary or appropriate
to conduct the Program. Product Promotional Materials shall include FDA approved
indicated uses, safety, effectiveness, contraindications, side effects, warnings
and other relevant characteristics of each of the Products.

                  (n)      "Products" means the pharmaceutical products to be
detailed by Representatives and marketed by Company as set forth on attached
Schedule 1.1(l) and such other products as may be mutually agreed between the
parties and added to Schedule 1.1(l).

                  (o)      "Program" means the program of Detailing to be
conducted by the Representatives pursuant to this Agreement and during the term
of this Agreement, as defined in Section 14.1.

                  (p)      "Representative" and "Representatives" mean an
individual hired by and retained as an employee of Vendor to conduct Detailing
of Products in connection with the Program. As sometimes used herein,
Representative shall also include Managers.

                                       2
   3

                  (q)      "Target" or "Target Customer" means a physician or
other specialist identified by Company.

                  (r)      "Territory" means the geographical area specified in
the attached Schedule 1.1(p).

                  (s)      "Vendor" means Cardinal Health Sales and Marketing
Services, a division of RedKey, Inc., an Ohio corporation. References herein to
Vendor shall be deemed to include the Representatives and Managers.

                                   ARTICLE II
               APPOINTMENT OF VENDOR; GENERAL SCOPE OF ACTIVITIES

         2.1.     Furnishing Representatives. Vendor shall recruit and hire,
within twelve (12) weeks after the Effective Date, at least twenty (20), or such
greater number of Representatives (not to exceed thirty (30)) as shall be
designated by Company within five (5) weeks of the Effective Date, to engage in
Product Detail activities in the Territory. Such Representatives shall conform
to the Representatives Profile set forth on Schedule 2.1. Vendor shall assign
Representatives for such Target Customers, in such numbers, and in such
Territories as shall be designated by Company (or recommended by Vendor pursuant
to Section 2.9) during the term of this Agreement. Each Representative shall
make Product Details on his or her assigned Target Customers based on the
general direction given by Company's designated management team and as mutually
agreed to by Vendor. The duties of such Representatives shall be exclusively to
Detail the Products and perform other related activities deemed necessary for
the establishment and maintenance of new and existing customers of the Products
in the Territory defined as set forth on Schedule 1.1(p). Company shall at all
times retain the right to promote the Products by whomever, wherever and to
whomever it chooses.

         2.2      Furnishing Managers. Vendor shall recruit and hire Managers to
supervise the activities of Representatives and to perform this Agreement in
such numbers and for such Territories (when relevant) as mutually agreed upon by
Vendor and Company.

         2.3.     Scope of Activities.  The parties shall perform the following
activities as applicable to each in connection with the Program:

                  (a)      Vendor will recruit, interview and hire as its
employees Representatives and Managers conforming to the Representatives Profile
set forth on Schedule 2.1. Vendor shall have the sole authority to reject any
applicant for employment as a Representative or Manager. Company may, at its
sole cost and expense, participate with Vendor in the interviewing of Managers,
and the Company shall have the right to approve the hire of Managers, and may
nominate acceptable Managers for consideration for the Vendor to hire; provided,
however, that in the event Vendor rejects an applicant for Manager and
thereafter hires such applicant at the request of Company, Company shall
indemnify for and hold Vendor harmless from any Damages (as defined in Section
16.1) arising as a result of such Manager's wrongful or negligent acts or
omissions.

                                       3
   4

                  (b)      Vendor shall have sole and exclusive authority to
discipline or terminate the employment of Representatives and the Managers.
Company may reasonably request that a Representative or Manager be terminated or
reassigned if such Representative's or Manager's activities or conduct are not
adequately achieving the performance goals of the Product, or if the
Representative or Manager fails to comply with all applicable laws, regulations,
and Company requirements for Detailing the Product. Reassignment in this context
under this Agreement may mean reassignment to another part of the Territory, or
reassignment to another contract sales force for another Vendor account. Vendor
shall use its best efforts to comply with such request; provided that such
action complies with applicable laws and is in accordance with Vendor's policies
and procedures as determined by Vendor. In the event Vendor determines that its
policies and procedures or applicable laws prohibit the termination or
reassignment of any Representative so requested by Company, it shall notify
Company of such determination and submit a corrective action plan for Company
approval.

                  (c)      Vendor shall cause each Representative to attend and
successfully complete the Training Program (as defined in Section 6.1) conducted
jointly by Company or its agents and Vendor for each of the Products prior to
participating in the Program. Any such Representative who shall not successfully
complete all such requirements shall be removed and replaced by another
Representative who shall comply with such requirements.

                  (d)      Vendor shall from time to time and in any case every
six (6) weeks if so requested by Company, beginning with the Product Launch Date
conduct random profiles of activities during the Program consisting of
satisfaction surveys sent to customers with whom Representatives have interacted
and share the results of such profiles with Company on a regular and prompt
basis. Vendor shall reasonably assist the Company should Company decide to
conduct such random profiles itself.

                  (e)      Vendor's District Managers shall, as part of their
activities under this Agreement, routinely accompany Representatives on Details,
conduct field evaluations of the Representatives and the Program, including time
supervision, territory management, and reporting, and be available to review
such evaluations with the Company's coordinator of the Program. At Company's
request, Vendor shall permit Company or its designated representative to review
Vendor's evaluations relating to the foregoing and to accompany the
Representatives on such Details.

                  (f)      Company shall provide Vendor, without cost,
sufficient quantities of the Product Promotional Materials and Product Labeling
for the performance and supervision of Detailing. Company shall be solely
responsible for the preparation, content, and method of distribution of the
Product Promotional Materials and the Product Labeling. In connection with the
Detailing of the Products, the Representatives shall use only the Product
Labeling and the Product Promotional Materials provided by Company; and under no
circumstances shall Vendor or the Representatives develop, create, or use any
other promotional material or literature for the Detailing of the Products.
Company shall advise Vendor immediately of any inaccuracy or incompleteness of
the Product Promotional Materials or the Product Labeling, and upon such notice
Vendor and the Representatives shall immediately cease the use of any portion or
all of the Product Promotional Materials or Product Labeling so identified by
Company.

                                       4
   5

                  (g)      Vendor shall instruct the Representatives to limit
their verbal statements and claims regarding the Products, including efficacy
and safety, to those that are consistent with the Product Labeling and the
Product Promotional Materials. The Representatives shall not add, delete, or
modify claims of efficacy or safety in the Detailing of the Products, nor make
any changes (including underlining or otherwise highlighting any language or
adding any notes thereto) in the Product Promotional Materials. Representatives
shall not make any disparaging, untrue, or misleading statements about any of
Company or its Affiliates, employees, competitors, or competing products.
Representatives shall Detail the Products in strict adherence to all applicable
laws, regulations, and professional requirements, including, but not limited to,
the Act, the Medicare and Medicaid Anti-Kickback Statute, and the American
Medical Association Gifts to Physicians from Industry Guidelines.

                  (h)      The Representatives shall remain under the direct
authority and control of Vendor, but shall cooperate with Company and shall
receive advice and direction related to Detail activities on the Products from
Company and Vendor mutually. Company shall make all decisions with respect to
the overall strategy in connection with the Detailing of the Products. Any
Company personnel interacting with Vendor Representatives shall not discipline
the Representatives or implement terms or conditions of employment or personnel
policies and/or practices with respect to the Representatives or otherwise
control the daily activities of Representatives. Company shall use commercially
reasonable efforts to advise Vendor, and to the extent necessary, to share with
Vendor copies of reports, memoranda, and other data relating to Company's
observations or assessment of the Representative's performance under this
Agreement.

                  (i)      Vendor shall supply Representatives and Managers with
fleet vehicles for their use in performing and supervising the Detailing, and
Company shall reimburse Vendor for all of its reasonable, budgeted, documented
out-of-pocket costs related to such vehicles, including but not limited to costs
related to owning, leasing, maintaining, insuring, and/or operating such
vehicles (including fuel costs). Company shall reimburse Vendor for all
reasonable, budgeted, documented out-of-pocket costs and expenses (i.e., airline
tickets and other travel expenses, hotel, rent-a-car, business meals, travel
meals, etc.) of Representatives and Managers in connection with performing
services pursuant to this Agreement. Company and Vendor shall establish a
mutually acceptable budget for the costs and expenses referenced in this
subparagraph for each Territory, and Vendor shall obtain prior approval for any
such costs or expenses that exceed the budget. All such costs and expenses in
excess of such budget shall be for the Vendor's account, unless Company agrees
otherwise.

                  (j)      Company and Vendor shall work together, using their
respective proprietary databases, to establish a database of Target Customers in
the Territory. Company and Vendor shall confer throughout the term of the
Agreement regarding additions to and deletions from the Target Customer
database. Company.

                  (k)      Representatives and Managers shall comply with
Vendor's drug policy, a copy of which is attached hereto and incorporated by
reference herein as Schedule 2.3(k).

                                       5
   6

         2.4.     Orders for Products. Company shall be solely responsible for
establishing the terms and conditions of the sale of the Products, including
without limitation, the price at which the Products will be sold, whether sales
of the Products will be subject to any discounts, the method of distribution of
the Products, and whether any credit will be granted or refused in connection
with the sale or return of any Product. Company shall be exclusively responsible
for accepting and filling all purchase orders for the Products, billing and
returns for the Products, and all other activities in connection with the sale
and delivery of the Products, other than Detailing. If Vendor or the
Representatives receive an order for the Products, they shall immediately
transmit such order to Company for further handling and communications with the
submitter of the order, including acceptance or rejection, which shall be in
Company's sole discretion.

         2.5.     Representatives' Activity. Subject to Company's obligations
and representations and warranties in this Agreement, any negligent or wrongful
act or omission on the part of the Representatives (both individually and as a
group) that occur during the term of this Agreement and that arise during the
course and within the scope of their employment with Vendor pursuant to this
Agreement shall be deemed to be negligent or wrongful acts or omissions of
Vendor; provided, however, that any acts or omissions of the Representatives
pursuant to the direction, control or supervision of Company or its employees or
agents shall not be deemed to be negligent or wrongful acts or omissions of
Vendor. Wrongful acts or omissions shall include in this context under this
Agreement failure to comply with applicable laws and regulations or Vendor's
policies and procedures or Companies policies and procedures that have been
communicated in writing to Vendor and the Representative. Each party shall
notify the other in writing as promptly as practicable of any such material
alleged negligent or wrongful acts or omissions on the part of the
Representatives of which it becomes aware along with a plan to remedy such acts
or omissions, and Company shall provide Vendor with a reasonable opportunity to
remedy such acts or omissions, and if indicated, to replace the involved
Representatives.

         2.6      Performance Appraisal. From time to time at Company's request
and in any case at 3 months and 6 months after the Product Launch Date, and
every six (6) months thereafter, Vendor and Company shall jointly conduct a
performance appraisal of each Representative. Without limiting its rights under
this Agreement, including Section 2.3(b) and Section 2.5, Company shall have the
right to request the reassignment of any Representative who is achieving less
than 80% of the sales targets established for that Representative for a given
quarter. From time to time at Company's request, Vendor shall make available to
Company for review the primary call data and records.

         2.7      Vacancies/Turnover. In the event of a Representative vacancy
due to resignation, reassignment, termination or hiring by the Company pursuant
to Section 3.3 of a Representative, Vendor shall, at Company's request, use its
best efforts to fill any such vacancy within a four (4) week period. All
recruiting and other related expenses for filling a vacancy shall be borne by
Vendor; provided, however, that Company shall reimburse Vendor all recruiting
and other related expenses for filling any vacancy occurring pursuant to
Company's request for reassignment or termination other than: (i) a request
pursuant to the last sentence of Section 2.5, the penultimate sentence of
Section 2.6, or Section 14.7; (ii) due to the Representative's failure

                                       6
   7

to conform (or to continue to conform) to the Representatives Profile set forth
in Schedule 2.1; or (iii) due to the failure of the Representative to Detail in
conformity with applicable law or regulations, or to follow Vendor's policies
and procedures. If Company desires to interview any candidates, Company shall
bear its own cost of attending any final interview conducted by Vendor or the
costs of any separate interview arranged for by Company.

         2.8      Adjustments to Number of Representatives. No more than every
six (6) months, Company may initiate a review by the parties of the adequacy or
appropriateness of the number of Representatives, and may designate plans, to be
instituted over a period of no longer than ninety (90) days, for an increase or
decrease in the number of Representatives based on the market performance of the
Product, the Detailing of the Product by Representatives who may be hired by
Company as contemplated in Section 3.3 or other parties, or other factors,
provided that Vendor may, upon thirty (30) days prior written notice, terminate
this Agreement in the event that the total number of Representatives under this
Agreement reaches ()twenty (20) Representatives, with no vacancies authorized to
be filled by Company.

         2.9      Territory Design. At the request of Company, Vendor shall
design and implement (or redesign and re-implement) a Territory design
(including sizing, deployment, alignment and mapping) of Representatives which
Vendor recommends as optimal for the Detailing of the Products (for the fee set
forth in Schedule 3.1. D, attached hereto).

                                   ARTICLE III
                                  COMPENSATION

         3.1.     Amount and Time of Payment.

                  (a)      For services hereunder, Company shall pay to Vendor
the fees set forth in Schedule 3.1 attached hereto and incorporated by reference
(the "Services Fee"), which shall be payable as follows:



                  Time Period - Contract Year                         Payment Amount
                  ---------------------------                         --------------
                                                                
                  1st Contract Year                                   A total of $2,000,000.00,
                                                                      payable in twelve equal
                                                                      monthly installments of
                                                                      $166,666.66.

                  2nd Contract Year                                   Service Fees, plus the
                                                                      Deferred Fees (as hereinafter
                                                                      defined).



                  3rd Contract Year                                   Service Fees, plus the
                                                                      Deferred Fees (as hereinafter
                                                                      defined).



                  At the conclusion of the first Contract Year, Vendor and
Company shall calculate the actual Service Fee for that first contract year. The
"Deferred Fees" shall be the amount of the first year Service Fee plus any other
amount due under this Agreement less the $2,000,000.00 payment

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                           (i)      The Deferred Fees shall be repaid by Company
over the second (2nd) and third (3rd) Contract Years, provided Company is not in
breach of this Agreement and the Agreement remains in full force and effect.
Company shall pay the Deferred Fees in equal monthly installments of principal
plus accrued Interest, beginning on the first day of the thirteenth (13th) month
of the Agreement and continuing on the first (1st) day of each calendar month
thereafter until all outstanding principal and accrued interest has been paid in
full, which in no event shall exceed the first day of the thirty-sixth (36th)
month of this Agreement.

                           (ii)     The Deferred Fees shall accrue interest
beginning the first day of Contract Year two (2) at the rate of the 3-month
LIBOR plus 175 basis points, adjusted quarterly ("Interest").

                  (b)      Vendor shall submit monthly invoices to Company for
all Service Fees and any other amounts due under this Agreement and Company
shall pay such amounts within thirty (30) days of the invoice date.

                  (c)      Notwithstanding any other right or remedy, in the
event of Company's default or a breach of this Agreement and failure of Company
to cure same within fifteen (15) days of notice to such effect by Vendor, all
unpaid principal and accrued but unpaid interest shall be accelerated and
immediately due and payable by Company.

                  (d)      Without limiting Vendor's rights under law or equity,
Vendor and its Affiliates, parent or related entities, may exercise a right of
set off against Company for any and all amounts due under this Agreement
including, but not limited to, the Deferred Fees, against any amounts owed to
Company by Vendor, or its Affiliates, parent, or related entity, if , during the
term of this Agreement, Company defaults on any of its loan covenants with its
third party lenders, or their assignees, which default remains uncorrected for a
period of ten (10) days beyond any applicable cure period.

                  (e)      If this Agreement is terminated prior to expiration
of the Initial Term, all Deferred Fees shall become immediately due and payable
by Company.

                  (f)      In the event the duration of this Agreement is
extended for the Renewal Term, as defined in Section 14.1, Company shall pay
Vendor a Service Fee for the Renewal Term as further negotiated by the parties.

         3.2.     Early Termination Fee. If during the first 12 months following
the Effective Date, Vendor terminates this Agreement pursuant to Sections 2.8,
14.2, 14.3, 14.6 or 14.7, or Company terminates this Agreement pursuant to
Sections 14.4 or 14.7, Company shall pay Vendor, as reimbursement for Vendor's
expenses in preparing to perform and performing this Agreement, as well as for
Vendor's expectancy interest under this Agreement, a fee equal to the amount set
forth on Schedule 3.2 attached hereto (the "Early Termination Fee"). Company and
Vendor acknowledge that Vendor's damages upon termination of this Agreement
would be difficult to ascertain and not susceptible of ready proof, and that the
Early Termination Fee is

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agreed to as a reasonable estimation of Vendor's damages upon early termination
of the Agreement, and not as a penalty.

         3.3.     Company's Hiring of Representatives or Managers.

                  (a)      Company acknowledges that Vendor has incurred or will
incur costs and expenses in connection with recruiting, hiring, and training the
Representatives and Managers. During the term of this Agreement, in the event
Company hires as its own employee or as an independent contractor or agent any
one or more of the Representatives, Company shall pay Vendor the fee(s) set
forth in the attached Schedule 3.3. The provisions of this Section 3.3(a) shall
not apply to any Representatives hired by Vendor who were employees of Company
as of the date of this Agreement.

                  (b)      Beginning twelve (12) months following the Effective
Date for Representatives and beginning six (6) months following the Effective
Date for Managers, Company shall have the right to identify those
Representatives or Managers, that Company desires to hire (collectively, the
"Targeted Employees") and to negotiate with any Targeted Employee concerning the
terms on which Company might hire that Targeted Employee. Vendor agrees not to
interfere with the Company's solicitation and hiring of the Targeted Employees ,
and Vendor will assist Company in the transition of Targeted Employees from
Vendor to Company, provided, however, that in the event such Targeted Employer
declines employment with Company, then Vendor shall have the right to discuss
other employment opportunities with such Targeted Employer that would commence
after expiration of the Term of the Agreement and any renewal. For a period of
twelve months after any termination of this Agreement, Vendor agrees not to
solicit for hire as an employee, agent or independent contractor any Targeted
Employee hired by Company during the term of this Agreement.

         3.4.     Reimbursement of Expenses. Except as provided in Section
3.1(a), all expenses of Vendor for which Company is obligated to reimburse
Vendor under this Agreement, including but not limited to travel expenses and
vehicle expenses under Section 2.2(i), shall be paid by Company within 30 days
after Vendor has submitted a statement itemizing such expenses. Vendor shall use
its best efforts to submit such expense statements to Company monthly.

         3.5      Past Due Amounts. Failure of the Company to timely make any
payment to Vendor under this Agreement within fifteen (15) days of the due date
will constitute a material breach of this Agreement by Company. All amounts
owing by Company to Vendor pursuant to this Agreement that are not timely paid
by Company will bear interest at the rate of 10% per annum from the due date.

         3.6      Bonus Potential.

                  (a)      Upon execution of this Agreement and no later than
each anniversary of the Effective Date, Company and Vendor shall use good faith
efforts to jointly determine or revise, as the case may be, unit sales forecast
(the "Unit Sales Forecast") for each year following the Product Launch Date
during the Initial Term and any Renewal Term (each such year, a "Detailing
Year") for the purpose of evaluating the Representatives and determining
eligibility

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for a potential Bonus. The Bonus for a given Detailing Year will be based upon
Actual Unit Sales over the Forecasted Unit Sales, as further set forth on
Schedule 3.6 attached hereto, as the same may be amended by the written
agreement of the parties from time to time.

                  (b)      Company shall reimburse Vendor for the Bonus for any
Representative actually paid by Vendor to the Representative in accordance with
Schedule 3.6 no later than sixty (60) days following the close of a Detailing
Year relating to which such Bonus was paid.

                                   ARTICLE IV
                    REPRESENTATIONS, WARRANTIES AND COVENANTS

         4.1.     By Vendor. Vendor represents, warrants, and covenants to
Company, as of execution of this Agreement and during the term of this
Agreement, as follows:

                  (a)      that Vendor and the Representatives shall perform the
Detailing in a professional, timely, competent and efficient manner;

                  (b)      that Vendor shall comply with all laws, rules and
regulations that apply to the performance of services under this Agreement,
including but not limited to the PDMA, the Medicare and Medicaid Anti-Kickback
Act (42 U.S.C. Section 1320a-7b(a)), the Civil False Claims Act (31 U.S.C.
Section 3729(a)), Sections 1128A, 1128B, and 1877 of the Social Security Act (42
U.S.C. Sections 1320a-7a, -7b, and 1395nn), the Health Care Fraud Act (18 U.S.C.
Section 1347), and the Criminal False Claims Act (18 U.S.C. Section 287), as
amended from time to time, as well as similar applicable state laws;

                  (c)      when on Company's premises or on the premises of
Company's customers, Vendor and the Representatives shall comply with all of
Company's or Company's customer's policies regarding the conduct of visitors of
which Vendor and the Representatives are aware, a copy of which Vendor
acknowledges receiving;

                  (d)      that the Representatives and Managers shall be
exclusively assigned to Detailing and supervision of the Detailing of the
Products, and no other activities unrelated to the Program;

                  (e)      that Vendor is under no obligation to any third party
that would prevent the execution of this Agreement or interfere with its
performance under this Agreement;

                  (f)      That Vendor is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Ohio; and

                  (g)      That Vendor has the full right, power and authority
to execute, deliver and perform this Agreement and that this Agreement has been
duly executed and delivered by Vendor and constitutes its legal, valid and
binding obligation, enforceable in accordance with its terms.

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         4.2.     By Company. Company represents, warrants, and covenants to
Vendor, as of execution of this Agreement and during the term of this Agreement,
as follows:

                  (a)      that Company is under no obligation to any third
party that would prevent the execution of this Agreement or interfere with its
performance under this Agreement;

                  (b)      that Company shall comply with all laws, rules and
regulations that apply to the Products and their sale, the Program, and this
Agreement, including but not limited to the Act, the PDMA, the Medicare and
Medicaid Anti-Kickback Act (42 U.S.C. Section 1320a-7b(a)), the Civil False
Claims Act (31 U.S.C. Section 3729(a)), Sections 1128A, 1128B, and 1877 of the
Social Security Act (42 U.S.C. Sections 1320a-7a, -7b, and 1395nn), the Health
Care Fraud Act (18 U.S.C. Section 1347), and the Criminal False Claims Act (18
U.S.C. Section 287), as amended from time to time, as well as similar applicable
state laws;

                  (c)      that the Product Labeling and Product Promotional
Materials are accurate, complete, and in compliance with the Act and all rules
and regulations of the FDA;

                  (d)      that, subject to FDA approval, the Products may be
lawfully Detailed and sold;

                  (e)      that Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware;
and

                  (f)      that Company has the full right, power and authority
to execute, deliver and perform this Agreement and that this Agreement has been
duly executed and delivered by Company and constitutes its legal, valid and
binding obligation, enforceable in accordance with its terms.

                                    ARTICLE V
                    STATUS OF VENDOR AND THE REPRESENTATIVES

         5.1.     Vendor Independent Contractor. Vendor is being retained and
shall perform hereunder strictly as an independent contractor. Representatives
and Managers of Vendor performing services hereunder shall not be, and shall not
be considered to be, employees of Company for any purpose, and shall at all
times remain employees of Vendor, subject to Section 3.3. Neither party shall
have any responsibility for the hiring, termination, compensation, benefits or
other conditions of employment of the other party's employees, except as
otherwise provided in this Agreement.

         5.2.     No Company Benefits. While employees of Vendor, the Managers
and Representatives are not eligible to participate in any benefits programs or
sales bonuses offered by Company to its employees, or in any pension plans,
profit sharing plans, insurance plans or any other employee benefit plans
offered from time to time by Company to its employees, provided that the
Representatives shall be eligible to participate in Company sales contests if so
requested by Company and approved by Vendor, and former employees of Company
hired by Vendor shall not be required to forfeit any Company benefits. Vendor
acknowledges and agrees

                                       11
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that Company does not, and will not, maintain or procure any worker's
compensation or unemployment compensation insurance for or on behalf of the
Managers or Representatives while they are employees of Vendor. Vendor
acknowledges and agrees that it shall be solely responsible for paying all
salaries, wages, benefits and other compensation which its employees (including
Representatives and Managers) may be entitled to receive in connection with the
performance of the services hereunder. Notwithstanding the foregoing, Vendor
agrees that Company shall have the right to approve the initial salary payable
to any Representative hired by Vendor who is an employee of Company as of the
date of this Agreement.

         5.3      Sales, Use and Excise Taxes. If any state or local government
or other taxing authority determines that sales, use or excise Taxes ("Taxes")
are applicable to Vendor's services performed hereunder, Vendor shall promptly
accrue and Company shall pay such Taxes on behalf of Vendor to the appropriate
taxing authorities. In addition, Company shall be responsible for the payment of
any applicable Taxes related to Company's supply to Vendor of Product
Promotional Materials and Product Samples.

         5.4.     No Joint Venture. Nothing contained in this Agreement shall be
construed as creating a joint venture or, except as otherwise provided herein,
as granting to either party the authority to bind or contract any obligations in
the name of or on the account of the other party or to make any guarantees or
warranties on behalf of the other party.

                                   ARTICLE VI
                                    TRAINING

         6.1.     Training Programs.

                  (a)      Company and Vendor shall conduct a training program
(of approximately five (5) days duration) for the Representatives and Managers
prior to the commencement of the Program (but after Company makes pre-stocking
shipments of Products) (the "Training Program"). The Company shall prepare and
conduct its portion of the Training Program on such medical and technical
information about the Products. Vendor shall prepare and conduct its portion of
the Training Program on sales skills, data gathering, regulatory requirements
and applicable laws, recalls, electronic equipment, and Vendor's policies and
procedures. Except as provided in Schedule 3.1, each party shall be responsible
for its own costs in connection with the preparation and conducting its portion
of the Training Program.

                  (b)      In order to qualify for assignment in a Territory, a
Representative must demonstrate thorough knowledge of the Products by passing
Company approved Product tests at a level of proficiency agreed upon by Company
and Vendor.

         6.2.     Training Materials. With the advice and assistance of Company,
Vendor shall prepare written training materials for the Training Program and an
up-to-date programmed learning unit for the Products, to be sent to each
Representative for "at home" study a minimum of five (5) days prior to the
commencement of the Training Program. Company shall provide vendor with clinical
and other information about the Products in order to prepare such written
training materials and programmed learning unit.

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         6.3.     Company Assistance. During the term of this Agreement Company
shall assist Vendor's Representatives and Managers with respect to the Training
Program and additional orientation and ongoing training for the Representatives.

                                   ARTICLE VII
                                     SAMPLES

         7.1.     Provision of Samples. Company shall provide samples of the
Products to the Representatives at Company's option and at its expense. Company
shall determine the quantity and types of samples to be provided to the
Representatives and the method of distribution of the samples. In the event
Company elects to have Vendor manage the storage and distribution of samples,
Vendor shall pass on to Company the actual invoice costs for storage,
distribution and other related costs and use prudent business sense in costs
incurred. All samples shall be stored and handled by Company and Vendor in
compliance with the PDMA and applicable law.

         7.2      Sample Accountability. Vendor shall prepare and provide to
Company for approval a sample accountability program applicable to the samples
provided by Company.

         7.3.     Return of Samples. Within 30 days following the termination or
expiration of this Agreement or within 30 days from the termination or removal
from the Program of a Representative (unless such Representative has been hired
or retained by Company), Vendor shall cause the Representatives to return to
Company all unused Product samples provided to Vendor or the Representatives by
Company. Company shall pay or reimburse Vendor for all costs and expenses in
connection with the storage and shipment of returned samples.

                                  ARTICLE VIII
                   TRADEMARKS AND INTELLECTUAL PROPERTY RIGHTS

         The Products shall be Detailed by Vendor's Representatives under
trademarks owned by Company or an Affiliate of Company. This Agreement does not
constitute a grant to Vendor of any property right or interest in the Products
or any trademarks which Company or an Affiliate of Company uses with respect to
the Products or to the name or business style of Company. Vendor and the
Representatives shall use the Product Promotional Materials only for the
purposes of this Agreement, and all copyright and other intellectual property
rights in the Product Promotional Materials shall remain with Company.

                                   ARTICLE IX
                     COMMUNICATIONS; MONITORING THE PROGRAM

         9.1.     Communications from Third Parties. Subject to Article XI,
Vendor and its Representatives shall use their best efforts to advise Company of
all comments, statements, requests and inquiries of the medical profession or
any other third parties relating to the Products that are not addressed by
either Product Labeling or the Product Promotional Materials, of which Vendor
becomes aware. All responses to such communications to the medical profession or
such other third parties shall be handled solely by Company. Vendor shall
provide reasonable

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assistance to Company to the extent requested by Company, and at Company's cost
and expense, to fully respond to such communications.

         9.2.     Government Agencies. Subject to Article XI, all communications
with government agencies, including the FDA, concerning the Products shall be
the sole responsibility of Company. Vendor shall assist Company with respect to
such communications with government agencies to the extent requested by Company,
and at Company's cost and expense. Vendor shall use its best efforts to provide
Company with any documents or information reasonably requested by Company for
purposes of responding to any communications with government agencies within 24
hours of Company's request.

         9.3.     Customer Communications. In addition to Detailing, Vendor
shall assist Company with respect to customer communications (as reasonably
requested by Company and at Company's cost and expense) within the Territory and
shall regularly advise Company of market, economic, regulatory and other
developments of which Vendor may become aware which may affect the sale of the
Products in the Territory.

         9.4.     Appointment of Coordinators. The parties shall each appoint an
authorized coordinator of the Program ("Coordinators") between whom all
communications required or desired to be given will be sent and between whom
Detailing activities will be coordinated. Within 30 days of signing this
Agreement, each party will notify the other as to the name of its Coordinator.
Each party may replace its Coordinator at any time, upon notice to the other
party.

         9.5.     Review of Results. The parties shall confer periodically, but
at least once per month via telephone conference and once per calendar quarter
in person, if requested by either party, to review and discuss the actual
results compared to the marketing plans for Detailing of the Products, and share
data, reports and other documents relative to such results. A report similar to
the Form of Management Report set forth in Schedule 9.5 attached hereto, shall
be generated by Vendor and provided to Company. Vendor shall, upon Company's
request, include the participation of Representatives and/or Managers in such
review.

                                    ARTICLE X
                                    INSURANCE

         10.1.    Vendor Insurance Coverage. Vendor shall maintain insurance
coverage as follows:

                  (a)      Workers' Compensation insurance with statutory limits
of liability and Employer's Liability insurance with a limit of $500,000;

                  (b)      Commercial General Liability insurance, including
completed operations and products liability, with a combined single limit of
$2,500,000;

                  (c)      Automobile liability insurance with a combined single
limit of $1,000,000.

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         10.2.    Company Insurance Coverage. Company shall maintain Commercial
General Liability insurance with a combined single limit of at least $6,000,000
and Products Liability insurance with a limit of at least $10,000,000.

         10.3     Certificates of Insurance.All of the foregoing insurance shall
be maintained with responsible carriers and such terms of coverage shall be
evidenced by certificates of insurance furnished by one party to the other. Such
certificates of insurance shall provide for at least 30 days' written notice to
the other party prior to cancellation or modification of any of the material
terms of such coverage, and include the other party as an additional insured.

                                   ARTICLE XI
                ADVERSE REACTION REPORTING AND REGULATORY MATTERS

         11.1.    Immediate Notification. Vendor and Company agree to notify the
other party as soon as reasonably practicable of any information that each may
obtain or learn concerning any Product or package complaint or any serious
unexpected side effect, injury, toxicity, or sensitivity reaction or any
unexpected incidence of severity thereof associated with the clinical uses,
studies, investigations, tests and marketing of the Products, whether or not
determined to be attributable to the Products. "Serious" and "unexpected," as
used herein, shall have the meanings set forth in 21 CFR 314.80(a).Each party
shall also notify the other in a timely manner of any other adverse experience,
i.e., any unfavorable and unintended change in the structure (signs), function
(symptoms) or chemistry (laboratory data) of the body temporally associated with
the use of the Products, whether or not considered related thereto.

         11.2.    Threatened Agency Action. Vendor and Company shall each
immediately notify the other party of any information that each may obtain or
learn regarding any threatened or pending action by an Agency which may affect
the Products. Vendor shall, at the request of Company and at the cost and
expense of Company, cooperate with Company in formulating a procedure for taking
appropriate action in response to such information. Unless compelled by law,
Vendor shall not respond to an Agency without the prior written consent of
Company.

         11.3.    Training. Vendor and Company shall develop appropriate
instructions in the Training Program for Representatives as to handling of
information received or obtained subject to Sections 11.1 and 11.2.

                                   ARTICLE XII
                                  RETURN/RECALL

         12.1.    Returned Products.

                  (a)      Company shall be responsible for handling all
returned Products, including shipment and compensation or credit for the
returned Products. Any Products inadvertently returned to Vendor shall be
shipped to Company or at its direction, in compliance with Company's returned
goods policy, and Vendor shall advise the customer who made the return that the
Products have been returned to Company. Company shall reimburse Vendor's
shipping and other costs in connection with the handling of such returned
Products within 30

                                       15
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days of delivery to Company of Vendor's statement for such costs. Upon request
Vendor shall provide Company with documentation relating to such costs.

                  (b)      At Company's request, Vendor shall assist Company in
obtaining and receiving any Products that have been recalled, and any costs
incurred by Vendor with respect to participating in any such recall shall be
reimbursed by Company within 30 days of delivery to Company of Vendor's
statement for such costs.

                                  ARTICLE XIII
                            CONFIDENTIAL INFORMATION

         13.1.    Confidential Information. Vendor acknowledges and agrees that
it will have access to, or become acquainted with, Confidential Information of
Company in the course of the performance of services under this Agreement. For
the purposes of this Agreement, "Confidential Information" shall mean any
information of Company or any Affiliate thereof, which gives Company an
advantage over its competitors who do not possess such information and
constitutes valuable trade secrets and/or proprietary data which was revealed to
Vendor as a result of entering into or performing its obligations under this
Agreement, including but not limited to, information which relates to Products,
the Program, Target Customers, designs, methods, discoveries, improvements,
documents, trade secrets, proprietary rights, business affairs, customer
information or employee information. Provided, however, that Confidential
Information shall not include any information that:

                  (a)      Was known to Vendor prior to execution of this
Agreement. without an obligation to keep it confidential;

                  (b)      Was lawfully obtained by Vendor from a third party
without any obligation of confidentiality;

                  (c)      Is, at the time of disclosure, in the public
knowledge;

                  (d)      Becomes part of the public knowledge after disclosure
by publication or otherwise, except by breach of this Agreement;

                  (e)      Is developed by Vendor independently and apart from
this Agreement; or

                  (f)      Is otherwise knowledge possessed by Vendor or its
employees as the result of their industry experience or education.

         13.2     Handling of Confidential Information. Except as otherwise
required by law, Vendor shall keep all Confidential Information in confidence
and shall not, at any time during or for a period of five (5) years from the
termination of this Agreement, without Company's prior written consent, disclose
or otherwise make available, directly or indirectly, any Confidential
Information to anyone other than Vendor employees and Representatives who need
to know the same in the performance of the services hereunder. Vendor shall use
the Confidential Information only in connection with the performance of the
services hereunder and for no other

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purpose. Vendor shall inform its employees and Representatives of the trade
secret, proprietary and confidential nature of the Confidential Information.

         13.3     Prior Confidentiality Agreements. With respect to all
Confidential Information of Company which has previously been or which may be
disclosed to Vendor under the Confidentiality Agreement dated as of April 15,
2000 between the parties hereto or the letter agreement dated April 28, 2000
between Company and Cardinal Health (including the parties encompassed by said
term by footnote) (together, the "Prior Confidentiality Agreements") or this
Agreement, Company shall have the cumulative benefit of Vendor's confidentiality
covenants under the Prior Confidentiality Agreements and this Agreement, and
neither of the Prior Confidentiality Agreements nor this Agreement shall be
deemed to supersede or control over the other such agreements to the
disadvantage of Company with respect to its Confidential Information.

                                   ARTICLE XIV
                              TERM AND TERMINATION

         14.1.    Term. This Agreement shall take effect on the date on which
both parties execute this Agreement (the "Effective Date"), but the Program
shall continue in effect until the date thirty-six (36) months after the Product
Launch Date (the "Initial Term"), unless terminated earlier as set forth herein.
Notwithstanding the foregoing, Company may, at its option upon written notice to
Vendor at least 120 days prior to the expiration of the Initial Term, and with
the written consent of Vendor, extend the Initial Term for one additional year
(the "Renewal Term"). If Company desires to exercise renewal term, parties shall
negotiate in good faith provisions of Section 3.1(b) regarding compensation.
References in this Agreement to the term of this Agreement include both the
Initial Term and the Renewal Term, if applicable.

         14.2.    Bankruptcy: Insolvency. Either party may terminate this
Agreement upon notice to the other upon the occurrence of: (a) the entry of a
decree or order for relief by a court of proper jurisdiction in an involuntary
case of the other party under the Federal Bankruptcy Code, as now constituted or
hereafter amended, or any other applicable federal or state insolvency or other
similar laws, and the continuance of any such decree or order in effect for a
period of sixty (60) consecutive days; or (b) the filing by the other party of a
petition for relief under the Federal Bankruptcy Code, as now constituted or
hereafter amended, or any other applicable federal or state insolvency or
similar laws.

         14.3     Termination For Breach. Either party may terminate this
Agreement upon 30 days prior written notice if the other party breaches a
material provision of this Agreement and fails to cure the breach within 15 days
after written notice from the non-breaching party. Provided, however, that such
cure period shall be five (5) days in the case of material breach under Section
3.5.

         14.4     Termination Due To Delay in Product Launch. If the Product
Launch Date does not occur within 120 days after the Effective Date, either
party may terminate this Agreement upon 60 days written notice to the other.

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         14.5     Termination Due To Regulatory And Other Problems. If the
Product is not being marketed due to regulatory problems, court or
administrative proceedings, product liability claims, recalls, raw materials
shortages, or similar factors beyond the control of Company, then either party
may terminate this Agreement upon 30 days written notice to the other. If the
Agreement is not terminated pursuant to this Section 14.5, (a) the provisions of
Sections 2.3, 2.4, 2.5, 2.6 and 2.7 shall be of no force or effect until the
Company recommences the marketing of the Product; and (b) Company shall not be
permitted to terminate this Agreement pursuant to Section 14.3 until the Company
recommences the marketing of the Product.

         14.6     Termination Due To Assignment or Change in Control. In the
event of a Change of Control (defined herein), the party that has had a Change
In Control (the "Affected Party") shall give Notice to the other party (the
"Non-Affected Party") within 30 days of the occurrence of such Change In
Control. If the Change In Control involves a material and direct competitor of
the Non-Affected Party, the Non-Affected Party may terminate this Agreement by
written notice to the Affected Party within 60 days after receipt of the Notice
of a Change In Control. If the Change In Control does not involve a material and
direct competitor of the Non-Affected Party, this Agreement may not be
terminated by the Non-Affected Party. For purposes of this Section, "Change In
Control" includes a purchase, assignment or transfer of a controlling interest
in the Affected Party or substantially all of its business and assets and any
merger or consolidation involving the Affected Party or any Affiliate of the
Affected Party that requires a vote of the stockholders of the Ultimate Parent
of the Affected Party. "Ultimate Parent" for Vendor is Cardinal Health, Inc. and
the Ultimate Parent for Company is its stockholders.

         14.7.    Termination Due to Discontinuation of Product. Company may
terminate this Agreement on 30 days' prior written notice if Company elects to
discontinue the promotion, sale or distribution of the Product from the
marketplace. This provision shall not be available if Company simply wants to
change the party or parties or means for Detailing the Product.

         14.8     Termination: Phase Out. In the event that this Agreement is
terminated pursuant to Sections 14.2 through 14.7 and at Company's request, the
parties shall discuss in good faith an appropriate phase-out of Vendor's
Detailing activities.

         14.9.    Termination: Continuing Rights. The termination or expiration
of this Agreement shall not affect Company's obligation to reimburse or pay
Vendor any amount then due and owing under this Agreement. Further, the
termination or expiration of this Agreement shall not affect any rights or
obligations of any party under this Agreement which are intended by the parties
to survive such termination. The Service Fee paid by Company for the month in
which this Agreement is terminated shall be prorated based on the number of days
in that month, and Vendor shall refund any overpayment to Company.

         14.10    Termination: Return of Materials. Within 60 days following the
termination or expiration of this Agreement, Vendor shall return to Company all
Confidential Information, Product Promotional Materials, marketing plans, forms,
territory lists, reports and any and all other tangible items provided to Vendor
by Company.

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                                   ARTICLE XV
                           RECORDKEEPING; AUDIT RIGHTS

         15.1.    Vendor Record Keeping: Inspection by Company. Vendor shall
keep accurate records in sufficient detail as to: (i) Detailing activities by
Representatives; and (ii) costs and expenses for which Company must reimburse
Vendor under this Agreement. Upon Company's reasonable request made during or
within three (3) year after the term of this Agreement, and at Company's
expense, Vendor shall permit Company's designated employees or agents to have
access during ordinary business hours to records of such matters. Company and
its designated employees or agents shall maintain in confidence all such cost
and expense records of Vendor.

                                   ARTICLE XVI
                                 INDEMNIFICATION

         16.1     Definitions. As used in this Article 16 and this Agreement,
"Damages" shall mean all liabilities, damages, assessments, levies, losses,
fines, penalties, costs, and expenses, including, without limitation, reasonable
attorneys', accountants', investigators', and experts' fees and expenses,
sustained or incurred as a result of any claims, suits, liabilities, or actions
of any nature.

         16. 2.   Indemnification by Vendor. Subject to the extent of any
indemnification from Company pursuant to Section 16.3 hereof, Vendor shall
indemnify and hold Company, its Affiliates, directors, officers, employees and
agents harmless from and against any and all Damages, except to the extent such
damages arise from the negligence or intentional wrongful actions of Company,
arising directly or indirectly from:

                  (a)      Vendor's breach of or failure to comply with any of
its obligations under this Agreement;

                  (b)      any inaccuracy in or breach or failure of any
representation, warranty, or covenant made by Vendor in this Agreement;

                  (c)      any negligent or wrongful act or omission on the part
of Vendor or its employees or agents;

                  (d)      Vendor's violation of or failure to comply with all
applicable laws, including but not limited to the Act, the PDMA, the Medicare
and Medicaid Anti-Kickback Act (42 U.S.C. Section 1320a-7b(a)), the Civil False
Claims Act (31 U.S.C. Section 3729(a)), Sections 1128A, 1128B, and 1877 of the
Social Security Act (42 U.S.C. Sections 1320a-7a, -7b, and 1395nn), the Health
Care Fraud Act (18 U.S.C. Section 1347), and the Criminal False Claims Act (18
U.S.C. Section 287), as amended from time to time, as well as similar applicable
state laws;

                  (e)      Detailing of the Products, except to the extent such
Damages arise from a negligent or wrongful act or omission of Company; or

                                       19
   20

                  (f)      any federal or state claim or assessment for
nonpayment or late payment by Vendor of any tax or contribution based on the
status of any Representatives as employees of Vendor.

         16.3.    Indemnification by Company. Subject to the extent of any
indemnification from Vendor pursuant to Section 16.2 hereof, Company shall
indemnify and hold Vendor and its Affiliates, directors, officers, employees and
agents harmless from and against any and all Damages, except to the extent such
damages arise from the negligence or intentional wrongful actions of Vendor,
arising directly or indirectly from:

                  (a)      Company's breach of or failure to comply with any of
its obligations under this Agreement;

                  (b)      any inaccuracy in or breach or failure of any
representation, warranty, or covenant made by Company in this Agreement;

                  (c)      any negligent or wrongful act or omission on the part
of Company or its employees or agents;

                  (d)      Company's violation of or failure to comply with all
applicable laws, including but not limited to the Act, the PDMA, the Medicare
and Medicaid Anti-Kickback Act (42 U.S.C. Section 1320a-7b(a)), the Civil False
Claims Act (31 U.S.C. Section 3729(a)), Sections 1128A, 1128B, and 1877 of the
Social Security Act (42 U.S.C. Sections 1320a-7a, -7b, and 1395nn), the Health
Care Fraud Act (18 U.S.C. Section 1347), and the Criminal False Claims Act (18
U.S.C. Section 287), as amended from time to time, as well as similar applicable
state laws;

                  (e)      Detailing of the Products, except to the extent such
Damages arise from a negligent or wrongful act or omission of Vendor;

                  (f)      the accuracy or completeness of the Product Labels,
Product Promotional Materials, or the Training Program;

                  (g)      any claims or liabilities for injury to or death of
persons, regardless of when such claim or liability is asserted or incurred,
resulting from or arising out of the manufacture, use, sale of the Products, or
a manufacturing design or defect of the Products, or any failure to warn or
inadequacy of warning regarding the Products;

                  (h)      Company's failure to pay when due or to reimburse
Vendor for any Taxes (as defined in Section 5.3);

                  (i)      any negligent or wrongful acts or omissions on the
part of Company with respect to Vendor's employees or Representatives or those
individuals who have made application to be Representatives of Vendor; or

                                       20
   21

                  (j)      any federal or state claim or assessment for
nonpayment or late payment by Company of any tax or contribution based on the
status of any former Representatives as employees or agents of Company.

         16.4.    Indemnification Procedures. A party that intends to claim
indemnification under this Article 16 "(the "Indemnitee") shall promptly notify
the other party (the "Indemnitor") in writing of any action, claim or liability
in respect of which the Indemnitee or any of its employees or agents are
entitled to indemnification. The Indemnitee shall permit, and shall cause its
employees and agents to permit, the Indemnitor at its discretion, to settle any
such action, claim or liability and agrees to the complete control of such
defense or settlement by the Indemnitor. Provided, however, that such settlement
or defense does not adversely affect the Indemnitee's rights hereunder or impose
any obligations on the Indemnitee in addition to those set forth in this
Agreement. The Indemnitee, its employees, and agents, shall cooperate fully with
the Indemnitor and its legal representatives in the investigation and defense of
any action, claim or liability subject to indemnification. The Indemnitee shall
have the right, but not the obligation, to be represented by counsel of its own
selection and at its own expense in connection with any indemnified claim.

         16.5.    Limitation on Vendor Liability. It is understood that Vendor
is not an insurer and that the sums payable hereunder to Vendor by Company are
based upon the value of services offered and the scope of liability undertaken,
and such sums are not related to any potential liability of Company. Vendor
makes no warranty, expressed or implied, that the services it furnishes will
avert or prevent occurrences or the consequences therefrom which may result in
loss or damage to Company. In the event of any Damages of which Vendor is
liable, Company agrees that Vendor's liability to indemnify Company shall be
limited to the greater of: (i) Two Million Five Hundred Thousand and 00/100
Dollars ($2,500,000.00) or (ii) the total amount paid by Company to Vendor under
this Agreement. Each party hereby waives any and all rights to subrogation that
any insurer of such party may have against the other party. Except as
hereinabove provided, each party agrees that the other party shall not be liable
for any losses or damages, irrespective of origin, to person or property,
whether directly or indirectly caused by performance or non-performance of
obligations imposed by this Agreement or by the negligent acts or omissions of
the other party , its agents, employees or Representatives.

         16.6     No Consequential Damages. Notwithstanding any provision of
this Agreement to the contrary, neither party shall be liable to the other for
any consequential damages (other than liability for personal injury as provided
in this Article 16), including lost profits.

                                  ARTICLE XVII
                                  MISCELLANEOUS

         17.1.    No Waiver: Cumulative Remedies. No failure or delay on the
part of either party in exercising any right, power or remedy hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further exercise thereof or
the exercise of any other right, power or remedy hereunder. No waiver of any
provision hereof shall be effective unless in writing and signed by the party
giving such waiver.

                                       21
   22

The remedies herein provided are cumulative and not exclusive of any remedies
provided by law.

         17.2.    Captions. Article and Section headings used in this Agreement
are for convenience only and shall not affect the construction of this
Agreement.

         17.3.    Governing Law. This Agreement shall be construed and the
respective rights of the parties hereto determined according to the substantive
laws of the State of Ohio, exclusive of conflict of laws principles.

         17.4.    Severability. If any provision of this Agreement or any other
document delivered under this Agreement is prohibited or unenforceable in any
jurisdiction, it shall be ineffective in such jurisdiction only to the extent of
such prohibition or unenforceability, and such prohibition or unenforceability
shall not invalidate the balance of such provision to the extent it is not
prohibited or enforceable nor the remaining provisions hereof, nor render
unenforceable such provision in any other jurisdiction. In the event any
provisions of this Agreement shall be held to be invalid, illegal or
unenforceable, the parties hereto shall use their best efforts to substitute a
valid, legal and enforceable provision which, insofar as practical, implements
the purposes hereof.

         17.5.    Entire Agreement: Modification. This Agreement contains the
entire and exclusive agreement between the parties in respect of the subject
matter hereof and supersedes and cancels all previous agreements, negotiations,
commitments and writings between the parties hereto in respect of the subject
matter hereof. Except as provided herein, this Agreement may not be changed or
modified in any manner or released, discharged, abandoned or otherwise
terminated unless in writing and signed by the duly authorized officers or
representatives of the parties.

         17.6.    Notices. Any notice or request required or desired to be given
in connection with this Agreement shall be deemed to have been sufficiently
given if sent by pre-paid registered or certified mail or national express
courier (such as Federal Express or UPS) or facsimile transmission to the
intended recipient at the address set forth below or such other address as may
have been furnished in writing by the intended recipient to the sender, and
carrier documentation evidencing delivery to the receiving party or facsimile
answerback is obtained. The date of mailing or facsimile transmission of a valid
notice as described above shall be deemed to be the effective date on which
notice was given.

         All notices shall be addressed to:

                  If to Company, to:
                  Guilford Pharmaceuticals, Inc.
                  6611 Tributary Street
                  Baltimore MD 21224
                  Fax: 410-631-6899

                                       22
   23

                  Attention:
                  General Counsel and
                  Chief Financial Officer


                  to Vendor, to:
                  Cardinal Health Sales and Marketing Services,
                  a division of RedKey, Inc.
                  7000 Cardinal Place
                  Dublin, Ohio 43017
                  Fax: (614) 757-6000

                  Attention:
                  President

         17.7.    Execution in Counterparts. This Agreement may be executed in
counterparts, each of which, when executed and delivered, shall be deemed to be
an original and all of which together shall constitute one and the same
document.

         17.8.    Assignment. This Agreement may not be assigned or transferred
by a party without the prior written consent of the other party hereto.

         17.9.    Public Announcements. Any public announcement, press release
or similar publicity with respect to this Agreement or the transaction
contemplated hereby shall be at such time and in such manner as the parties
shall mutually agree, provided that nothing herein shall prevent either party
from making such public announcements as it deems necessary in order to comply
with applicable laws and regulations, including disclosure requirements of
federal securities laws and requirements of federal food and drug laws.

         17.10.   Maintenance of Records. Vendor and Company each agree that
throughout the term of this Agreement and for a period of six years after the
termination of this Agreement, each will maintain records and otherwise
establish procedures to assure compliance with all regulatory, professional, and
other applicable legal requirements which relate to the Detailing and marketing
of the Products and if applicable, with the other services and activities to be
performed hereunder.

         17.11.   Force Majeure. Failure of either party hereto to fulfill or
perform its obligations under this Agreement shall not subject such party to any
liability if such failure is caused or occasioned by, without limitation, acts
of God, acts of the public enemy, fire, explosion, flood, drought, war, riot,
sabotage, embargo, strikes or other labor disputes (which strikes or disputes
need not be settled), compliance with any order, regulation, or request of
government, or by any other event or circumstance of like or different character
to the foregoing beyond the reasonable control and without the fault or
negligence of such party (a "Force Majeure Event") provided such party uses
reasonable efforts to remove such Force Majeure Event and gives the other party
prompt notice of the existence of such Force Majeure Event. Provided, further,
that

                                       23
   24

no Force Majeure Event shall serve to delay or excuse any payment by one party
to the other then due and owing.

         IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers.

CARDINAL HEALTH SALES                       GUILFORD PHARMACEUTICALS INC.
AND MARKETING SERVICES,
a division of RedKey, Inc.


By /s/ Don Wetherhold                       By /s/ John P. Brennan
   --------------------------                  ----------------------------

Name:  Don Wetherhold                       Name:  John P. Brennan
       ----------------------                      ------------------------

Title: President                            Title: Sr. Vice President
       ----------------------                      ------------------------

Date:  October 24, 2000                     Date:  October 25, 2000
       ----------------------                      ------------------------

                                       24

EX-27.01

 

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