8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 31, 2004

GUILFORD PHARMACEUTICALS INC.

(Exact name of registrant as specified in its charter)

Delaware	0-23736	52-1841960
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

6611 Tributary Street Baltimore, Maryland	21224
(Address of principal executive offices)	(Zip Code)

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

(Former name or former address, if changed since last report)

       Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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INFORMATION TO BE INCLUDED IN THE REPORT

Item 1.01. Entry into a Material Definitive Agreement.

     On September 3, 2004, we entered into a Consulting Services and Separation Agreement, attached as Exhibit 10.1 to this Report, with our Chairman, President and CEO, Craig R. Smith, M.D., in connection with Dr. Smith’s announced resignation from those positions. See Item 5.02 of this Report for a description of that Agreement.

Item 5.02. Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers.

     On September 1, 2004, we issued a news release (See Exhibit 99.1 below) announcing that Dr. Smith has voluntarily resigned from his positions as President, Chief Executive Officer and Chairman. His resignations are to be effective on the earlier of the date designated by the Board of Directors, expected to be the date his successor is hired, or our 2005 annual meeting. Dr. Smith is not resigning from the Board of Directors and will remain on the Board of Directors.

     We have also entered into a Consulting Services and Separation Agreement with Dr. Smith, which is attached as Exhibit 10.1 to this Current Report. This Agreement supersedes our existing employment agreements with Dr. Smith dated July 14, 1993 and September 9, 1996. Under the terms of this Agreement, Dr. Smith will provide consulting services to us for a period of one year following his resignation date. We will continue to pay Dr. Smith’s current base salary for a 36 month period following his resignation date as well as provide current life, health and disability insurance benefits. These payments will terminate upon Dr. Smith’s full-time employment. Dr. Smith will continue to vest in all currently unvested stock options through this 36 month period. In addition, we will pay for Dr. Smith’s reasonable expenses in providing consulting services and we will grant to Dr. Smith 100,000 restricted stock units under our 2002 Stock Award and Incentive Plan on his resignation date, which vest in equal amounts on the first and second anniversary of his resignation date, and will pay to Dr. Smith a cash payment equal to 50% of his current annual base salary payable in two equal installments, the first installment due on the later of his resignation date or January 3, 2005, and the second installment due promptly following the first anniversary of his resignation date. This Agreement also contains a two year non compete provision and customary releases.

     The Board of Directors has commenced a search for a successor to Dr. Smith.

Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

     On August 31, 2004, the Board of Directors amended Section 3 and Section 5 of our Amended and Restated Bylaws to redefine the role of the chairman of the board of directors In the prior Bylaws the Chairman of the Board was the chief executive officer of the corporation . As amended, the Chairman need not be an officer of the corporation, but is the presiding officer at all meetings of the Board of Directors and stockholders. Certain conforming changes were made to reflect this change. The Board of Directors did not make any changes to the other sections of our

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Amended and Restated Bylaws. We have filed the full text of our Amended and Restated Bylaws, as so amended, as Exhibit 3.1 to this Current Report on Form 8-K.

Item 9.01. Financial Statements and Exhibits.

(c)

3.1	Amended and Restated Bylaws of Guilford Pharmaceuticals Inc. (Filed herewith).
10.1.	Consulting Services and Separation Agreement dated September 3, 2004 by and between Guilford Pharmaceuticals Inc. and Craig R. Smith, M.D. (Filed herewith).
99.1	Press release announcing the resignation of Craig R. Smith, M.D. as Chairman of the Board and Chief Executive Officer dated September 1, 2004. (Filed herewith).

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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 hereunto duly authorized.

	Guilford Pharmaceuticals Inc.
Date: September 3, 2004	By:	/s/ Asher M. Rubin
		Asher M. Rubin
		Vice President, General Counsel and Secretary

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EX-3.1

Exhibit 3.1

AMENDED AND RESTATED BYLAWS
OF

GUILFORD PHARMACEUTICALS INC.

      The following Amended and Restated Bylaws were adopted by the board of directors on August 31, 2004 and became effective September 1, 2004.

1. Offices.

     1.1 Registered Office. The registered office of the Corporation shall be in the City of Dover, County of Kent, State of Delaware, and the registered agent in charge thereof shall be the Prentice Hall Corporation Systems, Inc., 32 Loockerman Square, Suite L-100, Dover, Delaware 19901.

     1.2 Other Offices. The Corporation may also have offices at such other places, both within and without the State of Delaware, as the board of directors may from time to time determine or the business of the Corporation may require.

2. Meetings of Stockholders.

     2.1 Place of Meetings. All meetings of the stockholders for the election of directors shall be held in Baltimore, Maryland, at such place as may be fixed from time to time by the board of directors, or at such other place, within or without the State of Delaware, as shall be designated from time to time by the board of directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof. Meetings of stockholders for any other purpose may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof.

     2.2 Annual Meetings. Annual meetings of stockholders, shall be held at such date, time and place as shall be designated from time to time by the board of directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof, at which stockholders shall elect a board of directors and transact such other business as may properly be brought before the meeting.

     2.3 Special Meetings. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, may only be called by a majority of the Board of Directors or by the Chairman of the Board of Directors. Such request shall include a statement of the purpose or purposes of the proposed meeting.

     2.4 Notice of Meetings. Written notice of the annual meeting, stating the place,

** Underlined words and those marked with a ^ indicate amended portions.

date and hour of the meeting, shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting. Written notice of a special meeting of stockholders, stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting.

     2.5 Business at Special Meetings. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.

     2.6 List of Stockholders. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders.

     2.7 Quorum at Meetings. Except as otherwise provided by statute or by the certificate of incorporation, the holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business. If, however, such quorum shall not be present or represented at any such meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time to another time and place, without notice other than announcement at the meeting of such other time and place. At the adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

     2.8 Voting and Proxies. Unless otherwise provided in the certificate of incorporation, and subject to the provisions of Section 6.4 of these bylaws, each stockholder shall be entitled to one vote on each matter, in person or by proxy, for each share of the Corporation’s capital stock having voting power which is held by such stockholder. No proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it

** Underlined words and those marked with a ^ indicate amended portions.

states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the Corporation generally.

     2.9 Required Vote. When a quorum is present at any meeting of stockholders, all matters shall be determined, adopted and approved by the vote (which need not be by ballot) of the holders of a majority of the stock having voting power, present in person or represented by proxy, unless the proposed action is one upon which, by express provision of statutes or of the certificate of incorporation, a different vote is specified and required, in which case such express provision shall govern and control the decision of such question. Notwithstanding the foregoing, candidates for election as members of the board of directors who receive the highest number of votes, up to the number of directors to be chosen, shall stand elected, and an absolute majority of the votes cast shall not be a prerequisite to the election of any candidate to the board of directors.

     2.10. Stockholder Actions. Unless otherwise restricted by the Certificate of Incorporation, any action required or permitted to be taken by the stockholders may be taken without a meeting without prior vote, if consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize to take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.

     2.11. Nomination of Directors. Only persons who are nominated in accordance with the procedures set forth in this Section 2.11 shall be eligible for election as directors. Nominations of persons for election to the Board of Directors of the Corporation may be made (a) at a meeting of stockholders (a “Stockholders’ Meeting”) by or at the direction of the independent directors or a committee thereof, or by any stockholder of the Corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Section 2.11, or (b) at any time by the independent directors, or a committee thereof, if such nominee is to fill a vacancy on the Board, as set forth in Section 3.3 of these bylaws. Such nominations, other than those made by or at the direction of the independent directors, or a committee thereof, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder’s notice shall be delivered to or mailed and received at the principal executive offices of the Corporation at least 45 days before the date on which the Corporation mailed its notice of the annual meeting of stockholder and proxy materials for the previous year’s annual meeting of stockholders; provided, however, that if the Corporation did not hold an annual meeting of stockholders the previous year, or if the date of the current year’s meeting has changed more than 30 days from the prior year, the stockholder’s notice must be received not later than the close of business on the 10th day following the day on which notice of the date of the meeting is mailed or public disclosure of the date of the meeting is made. Such stockholder’s notice shall set forth (a) as to each person whom the stockholder proposes to

** Underlined words and those marked with a ^ indicate amended portions.

nominate for election or re-election as a director, (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person, (iii) the class and number of shares of the Corporation which are beneficially owned by such person, and (iv) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including without limitation such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and (b) as to the stockholder giving the notice (i) the name and address, as they appear on the Corporation’s books, of such stockholder and (ii) the class and number of shares of the Corporation which are beneficially owned by such stockholder. At the request of the independent directors, or a committee thereof, any person nominated by the Board of Directors for election as a director shall furnish to the Secretary of the Corporation that information required to be set forth in a stockholder’s notice of nomination which pertains to the nominee. No later than the tenth day following the date of receipt of a stockholder nomination submitted pursuant to this Section 2.11, the Chairman of the Board of Directors of the Corporation shall, if the facts warrant, determine and notify in writing the stockholder making such nomination that such nomination was not made in accordance with the time limits and/or other procedures prescribed by the bylaws. If no such notification is mailed to such stockholder within such ten-day period, such nomination shall be deemed to have been made in accordance with the provisions of this Section 2.11. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 2.11. The term “independent,” as used in this Section 2.11 shall have the meaning set forth in Section 3.7 below.

     2.12. Business at Annual Meeting. At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before the meeting by a stockholder. For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder’s notice shall be delivered to or mailed and received at the principal executive offices of the Corporation at least 45 days before the date on which the Corporation mailed its notice of the annual meeting of stockholder and proxy materials for the previous year’s annual meeting of stockholders; provided, however, that if the Corporation did not hold an annual meeting of stockholders the previous year, or if the date of the current year’s meeting has changed more than 30 days from the prior year, the stockholder’s notice must be received not later than the close of business on the 10th day following the day on which notice of the date of the meeting is mailed or public disclosure of the date of the meeting is made. A stockholder’s notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the

** Underlined words and those marked with a ^ indicate amended portions.

name and address, as they appear on the Corporation’s books, of the stockholder proposing such business, (c) the class and number of shares of the Corporation which are beneficially owned by the stockholder, and (d) any material interest of the stockholder in such business. No later than the tenth day following the date of receipt of a shareholder notice pursuant to this Section 2.12, the Chairman of the Board of Directors of the Corporation shall, if the facts warrant, determine and notify in writing the stockholder submitting such notice that such notice was not made in accordance with the time limits and/or other procedures prescribed by the Bylaws. If no such notification is mailed to such shareholder within such ten-day period, such stockholder notice containing a matter of business shall be deemed to have been made in accordance with the provisions of this Section 2.12. Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this Section 2.12.

3. Directors.

     ^3.1. Powers. The business and affairs of the Corporation shall be managed by or under the direction of the board of directors, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the certificate of incorporation or by these bylaws directed or required to be exercised or done by the stockholders.

     3.2. Number and Election. The number of directors which shall constitute the whole board shall be nine (9), or such other number that is determined by the board of directors, but in no instance shall the number of directors be greater than the number authorized by the    Company^ ’s certificate of incorporation.

     3.3. Vacancies. Vacancies and newly created directorships resulting from any increase in the authorized number of directors shall be filled in the manner specified in these bylaws and the certificate of incorporation of the Corporation as in effect from time to time.

     3.4. Meetings

           3.4.1. Place of Meetings. The board of directors of the Corporation may hold meetings, both regular and special, either within or without the State of Delaware.

           3.4.2. First Meeting of Each Board. The first meeting of each newly elected board of directors shall be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the board of directors, or as shall be specified in a written waiver of notice signed by all of the directors.

           3.4.3. Regular Meetings. Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board of directors.

** Underlined words and those marked with a ^ indicate amended portions.

           3.4.4. Special Meetings. Special meetings of the board may be called by the ^chairman on one day^’s notice to each director, personally, or by telephone, mail, facsimile, electronic mail, or telegram; special meetings shall be called by the ^chairman or ^secretary in like manner on like notice on the written request of one-half of the total number of directors.

           3.4.5. Quorum and Vote at Meeting. At all meetings of the board, one director if a board of one director is authorized, or such greater number of directors as is not less than a majority of the total number of directors, shall constitute a quorum for the transaction of business. The vote of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum shall not be present at any meeting of the board of directors, the directors present thereat may adjourn the meeting to another time and place, without notice other than announcement at the meeting of such other time and place.

           3.4.6.^ Telephonic Meetings. Members of the board of directors or any committee designated by the board may participate in a meeting of such board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this section shall constitute presence in person at such meeting.

           3.4.7. Action Without Meeting. Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be taken without a meeting, if all members of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board of directors or committee.

           3.4.8. Executive Sessions. The independent directors shall have regularly scheduled meetings, which may be held without notice, at such time and at such place as shall be determined by the independent directors. The term ^“independent^” shall have the meaning set forth in Section 3.7 of these bylaws.^ The chairman, if independent, shall preside at any such meeting, or the chairman shall appoint one of the independent directors to serve as the ^presiding director during the meetings of independent directors. The ^presiding director may appoint a secretary to record the proceedings of any meeting of the independent directors.

     3.5. Committees of Directors. The board of directors may designate 1 or more committees, each committee to consist of 1 or more directors of the Corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the

** Underlined words and those marked with a ^ indicate amended portions.

absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. Any such committee of the Corporation, to the extent provided in the resolution of the board of directors, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to the following matters: (i) approving or adopting, or recommending to the stockholders, any action or matter expressly required by the General Corporation Law of the State of Delaware, as amended, to be submitted to stockholders for approval or (ii) adopting, amending or repealing any bylaw of the Corporation. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors. Unless otherwise specified in the resolution of the board of directors designating the committee or in these bylaws, at all meetings of each such committee of directors, a majority of the total number members of the committee shall constitute a quorum for the transaction of business, and the vote of a majority of the members of the committee present at any meeting at which there is a quorum shall be the act of the committee. Each committee shall keep regular minutes of its meeting and report the same to the board of directors, when required.

     3.6. Compensation of Directors. Unless otherwise restricted by the certificate of incorporation, the board of directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the board of directors and may be paid a fixed sum for attendance at each meeting of the board of directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be paid like compensation for attending committee meetings.

     3.7. Independent Directors. A majority of the directors shall be^ “ independent,^ ” as the term is defined by Rule 4200(a)(15) of the NASDAQ National Marketplace Rules.

     3.8. Chairman. A chairman shall be elected by a majority of the full board of directors. The chairman shall preside at all meetings of the board of directors and any meetings of stockholders the chairman may attend and shall have such other duties as may from time to time be assigned to him by these bylaws or the board of directors.

     3.9. Vice Chairman. The Board may elect from the board of directors present one or more vice chairmen. In the absence of the chairman or in the event of the chairman’s inability or refusal to act, the vice chairman shall perform the duties of the chairman (except to the extent that the vice chairman is

** Underlined words and those marked with a ^ indicate amended portions.

authorized to perform such duties), and when so acting shall have all the powers of, and be subject to all the restrictions upon, the chairman.

4. Notices of Meetings.

     4.1 Notice Procedure. Whenever, whether under the provisions of any statute or of the certificate of incorporation or of these bylaws, notice is required to be given to any director or stockholder, such requirement shall not be construed to require the giving of personal notice. Such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same is deposited in the United States mail. Notice to directors may also be given by facsimile, electronic mail, telegram, or telephone.

     4.2 Waivers of Notice. Whenever the giving of any notice is required by statute, the certificate of incorporation or these bylaws, a waiver thereof, in writing, signed by the person or persons entitled to said notice, whether before or after the event as to which such notice is required, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors or members of a committee of directors need be specified in any written waiver of notice, unless so required by the certificate of incorporation, by statute or by these bylaws.

5. Officers.

     ^ 5.1. Positions .. The officers of the Corporation shall be a ^ president and a secretary, and such other officers as the board of directors or ^president may appoint, including one or more vice ^ presidents^, a treasurer, assistant secretaries and assistant treasurers^. The president shall ^ have the duties and powers as shall be determined from time to time by the board ^of directors and all other officers shall have such duties and powers as shall be determined from time to time by the board of directors or the president. Any number of offices may be held by the same person, unless the certificate of incorporation or these bylaws otherwise provide; ^PROVIDED, HOWEVER , that in no event shall the ^ president and the secretary be the same person.

     ^ 5.2. Appointment. The officers of the Corporation who shall be designated as Executive Officers of the Corporation shall be chosen by the board of directors at its first meeting after each annual meeting of stockholders.

** Underlined words and those marked with a ^ indicate amended portions.

^ 5.3. Compensation. The compensation of all Executive Officers of the Corporation shall be fixed by the board of directors or a duly appointed committee thereof.

^ 5.4. Term of Office.^ Each Executive Officer shall hold office until his or her successor is chosen and qualifies or until his or her earlier resignation, death or removal. Any officer may resign at any time upon written notice to the Corporation. Any officer elected or appointed by the board of directors or ^the ^president may be removed at any time, with or without cause, ^by the affirmative vote of a majority of the board of directors^ or ^the ^president, in his or her discretion. Any vacancy occurring in any office of the Corporation shall be filled ^by the board of directors or (in the case of all officers other than the chairman) by the ^president.

^ 5.5. Fidelity Bonds. The Corporation may secure the fidelity of any or all of its officers or agents by bond or otherwise.

^ 5.6. President. Unless otherwise determined by the board of directors, the president shall be the chief executive officer of the Corporation, shall ^have general and active management of the business of the Corporation, subject to the authority of the board of directors and shall ensure that all orders and resolutions of the board of directors are carried into effect^^ . The president shall have the authority to execute bonds, mortgages and other contracts requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the Corporation.

^ 5.7. Vice ^President or Vice Presidents. If the directors or president shall appoint a vice ^president or one or more vice presidents, such vice ^president or vice presidents shall perform such duties and have such powers as may be vested in such vice ^president or vice presidents by the board of directors or by the ^president. The vice president shall report to the ^president and be subject to his authority and direction.

^ 5.8. Secretary. The secretary shall attend all meetings of the board of directors and all meetings of the stockholders, and shall record all the proceedings of the meetings of the stockholders and of the board of directors in a book to be kept for that purpose, and shall perform like duties for the standing committees, when required. The secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or by the president, under whose supervision the secretary shall be. The secretary shall have custody of the corporate seal of the Corporation, and the secretary, or an assistant secretary, shall have the authority to affix the same to any instrument requiring it, and when so affixed it may be attested by the signature of the secretary or by the signature of such assistant secretary. The board of directors or the ^president may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by such officer^’s signature. The secretary or an assistant secretary may also attest all instruments signed by the ^president or any vice president.

** Underlined words and those marked with a ^ indicate amended portions.

^ 5.9. Assistant Secretary. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors or by the ^ president (or if there shall have been no such determination, then in the order of their election), shall, in the absence of the secretary or in the event of the secretary^ ’s inability or refusal to act, perform the duties and exercise the powers of the secretary, and shall perform such other duties and have such other powers as the board of directors or the ^ president may from time to time prescribe.

^ 5.10. Treasurer ..

     ^ 5.10.1. Duties . The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation, and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the board of directors or by the ^president. The treasurer shall disburse the funds of the Corporation as ordered by the board of directors or by the ^president, taking proper vouchers for such disbursements, and shall render to the ^president, and to the board of directors at its regular meetings, or when the board of directors so requires, an account of all transactions as treasurer and of the financial condition of the Corporation.

           ^ 5.10.2. Bond. If required by the board of directors^, the treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of the treasurer^’s office and for the restoration to the Corporation, in case of the treasurer^’s death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind, in the treasurer^’s possession or under the treasurer^’s control and belonging to the Corporation.

           ^5.11. Assistant Treasurer. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the board of directors or by the ^president (or if there shall have been no such determination, then in the order of their election), shall, in the absence of the treasurer or in the event of the treasurer^’s inability or refusal to act, perform the duties and exercise the powers of the treasurer, and shall perform such other duties and have such other powers as the board of directors or the ^president may from time to time prescribe.

6. Capital Stock.

     6.1 Certificates of Stock: Uncertificated Shares. The shares of the Corporation shall be represented by certificates, provided that the board of directors may provide by resolution or resolutions that some or all of any or all classes or series of the Corporation’s stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the board of directors, every holder

** Underlined words and those marked with a ^ indicate amended portions.

of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the Corporation by the chairman or vice chairman, or the president or vice president, and by the treasurer and/or assistant treasurer, or the secretary or an assistant secretary of such Corporation representing the number of shares registered in certificate form. Any or all the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar whose signature or facsimile signature appears on a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue.

     6.2 Lost Certificates. The board of directors may direct a new certificate or certificates of stock or uncertificated shares to be issued in place of any certificate or certificates theretofore issued by the Corporation and alleged to have been lost, stolen or destroyed. When authorizing such issuance of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance bound to thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or such owner’s legal representative, to advertise the same in such manner as the board shall require and/or to give the Corporation a bond, in such sum as the board may direct, as indemnity against any claim that may be made against the Corporation on account of the issuance of such new certificate or uncertificated shares.

     6.3 Transfers. The transfer of stock and certificates that represent the stock and the transfer of uncertificated shares shall be effected in accordance with the laws of the State of Delaware. Any restriction on the transfer of a security imposed by the corporation shall be noted conspicuously on the security.

     6.4 Fixing Record Date. In order that the Corporation may determine State of 1 the stockholders entitled to notice of, or to vote at, any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any lawful action, the board of directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting; nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of, or to vote at, a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting.

     6.5 Registered Stockholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, to receive notifications, to vote as such owner, and to exercise all the rights and powers of an owner; and the Corporation shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person,

** Underlined words and those marked with a ^ indicate amended portions.

whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware.

7. Indemnification.

           Indemnification of certain person by the Corporation shall be as specified in or determined pursuant to the Certificate of incorporation of the Corporation as is in effect from time to time.

8. General Provisions.

     8.1 Dividends. Dividends upon the capital stock of the Corporation, subject to the provisions of the certificate of incorporation and the laws of the Sate of Delaware, may be declared by the board of directors at any regular or special meeting. Subject to the provisions of the General Corporation Law of the State of Delaware, such dividends may be paid either out of surplus, as defined in he General Corporation Law of the State of Delaware, or in the event that there shall be no such surplus, out of the net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. Dividends may be paid in cash, in property, or in shares of the Corporation’s capital stock, subject to the provisions, if any, of the certificate of incorporation.

     8.2 Reserves. The directors of the Corporation may set apart, out of the funds of the Corporation available for dividends, a reserve or reserves for any proper purpose and may abolish any such reserve.

     8.3 Execution of Instruments. All checks or demands for money and notes of the Corporation shall be signed by such officer of officers or such other person or persons as the board of directors may from time to time designate.

     8.4 Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the board of directors.

     8.5 Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words “Corporate Seal, Delaware”. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or otherwise reproduced.

     Section 9. Amendments. These Bylaws may be altered, amended or repealed and new bylaws may be adopted by a majority of the Board of Directors.

** Underlined words and those marked with a ^ indicate amended portions.

EX-10.1

Exhibit 10.1

CONSULTING SERVICES AND SEPARATION AGREEMENT

     THIS CONSULTING SERVICES AND SEPARATION AGREEMENT (“Agreement”) is made and entered into as of September 3, 2004 by and between GUILFORD PHARMACEUTICALS INC., 6611 Tributary Street, Baltimore, Maryland 21224 (“Guilford”) and CRAIG R. SMITH, M.D., 6437 Cloister Gate Drive, Baltimore, Maryland 21212 (“Dr. Smith”).

     In consideration of the mutual agreements and other consideration contained in this Agreement, the parties agree as follows:

     1. Resignation. Dr. Smith has voluntarily resigned, and Guilford hereby accepts Dr. Smith’s resignation, from his positions as President, Chief Executive Officer and Chairman of Guilford, and from any executive or board positions held at any subsidiary of Guilford, all such resignations to be effective on the earlier of (i) the date designated by the Board of Directors by written notice to Dr. Smith or (ii) the date of the Company’s 2005 Annual Meeting of Stockholders (the “Resignation Date”). During the period of time between the date of this Agreement and the Resignation Date, Guilford agrees to pay Dr. Smith’s salary, benefits, expenses, and other compensation, if any, in the same manner as other executive employees of Guilford and consistent with Guilford’s policies concerning each. It is acknowledged that Dr. Smith is not hereby resigning from his position as a member of the Guilford Board of Directors. In the event Dr. Smith voluntarily terminates his employment prior to the Resignation Date, this Agreement shall be null and void, no payments or benefits shall be due to Dr. Smith hereunder, and the terms of Dr. Smith’s termination benefits, if any, will be governed by the terms of the letter agreements between Guilford and Dr. Smith dated July 14, 1993 and September 6, 1996, together attached as Exhibit A (the “Letter Agreements”).

     2. Consulting Services, Contract Termination and Other Benefits.

          (a) Guilford agrees to, and hereby does, enter into a consulting arrangement with Dr. Smith for a period of one year commencing from the Resignation Date by which Dr. Smith agrees, and hereby does agree, to make himself available to Guilford for and at reasonable times not to exceed forty (40) hours per week and in reasonable places to consult with regard to various matters including, but not limited to, product research and development, clinical trials, and regulatory affairs, and to provide other transitional services including, but not limited to, service on the SNDC Board, Guilford Science Committee and other functions as requested by Guilford’s Board and/or CEO. Guilford agrees to reimburse Dr. Smith for all reasonable out-of-pocket costs associated with the provision of consulting services including, but not limited to, transportation costs, lodging, and meals for any travel necessary to perform these services, subject to Guilford’s policies concerning expense reimbursement.

          (b) As a contract termination benefit intended to be consistent with the benefits afforded by the Letter Agreements (and which the parties acknowledge are, except as provided in Paragraph 1 and this Paragraph 2(b), terminated as of the date hereof), beginning on the first regular payroll date after the Resignation Date and continuing for thirty-six months, at such times and in accordance with Guilford’s usual payroll procedure,

Guilford agrees to continue to pay to Dr. Smith his current base salary, subject to all appropriate payroll taxes and withholding amounts. In addition, Guilford agrees to continue in effect any health, life and disability insurance coverage that Dr. Smith currently enjoys through Guilford through the same thirty-six month period. In order to provide this insurance benefit Guilford may elect to continue to keep Dr. Smith on its payroll as an employee, or may elect to secure individual coverage for Dr. Smith or any other means it deems appropriate to provide the benefit. These payments and benefits, and any continued vesting as described below, will cease upon Dr. Smith’s commencement of full-time employment during the thirty-six month period, it being understood that part-time employment, membership on boards of directors or part-time consulting arrangements, so long as they are not in violation of the covenants in Paragraph 4 hereof and do not materially impair Dr. Smith’s ability to perform the consulting services provided for in Paragraph 2(a) hereof, do not constitute full-time employment for purposes of this Paragraph 2(b).

          (c) As further consideration for entering into the consulting arrangement and for the covenants contained in this Agreement, Guilford (i) agrees to grant to Dr. Smith on the Resignation Date 100,000 Restricted Stock Units under Guilford’s 2002 Stock Option and Incentive Plan which shall vest as to 50,000 shares on the first anniversary of the Resignation Date and 50,000 shares on the second anniversary of the Resignation Date; (ii) shall pay Dr. Smith a cash payment equal to 50% of his current annual base salary amount, payable in two equal installments, the first installment due on the later of the Resignation Date or January 3, 2005, and the second installment due promptly following the first anniversary of the Resignation Date, and (iii) shall permit the continued vesting of any currently unvested stock options in accordance with their terms during the thirty-six month contract termination benefit period provided for in Paragraph 2 (b) above. The Restricted Stock Unit grant vesting, cash payment and stock option vesting provided for in clauses (i), (ii) and (iii) of the preceding sentence to occur on or after the first anniversary of the Resignation Date are contingent upon Dr. Smith’s good faith performance of the consulting services described in Paragraph 2(a) during the term of the consulting period and adherence to the terms of the covenants contained in Paragraph 4 below. The terms of the Restricted Share Unit grant shall be governed by a Restricted Stock Unit agreement of Guilford under the Plan attached hereto as Exhibit B. Dr. Smith acknowledges that he has consulted with his tax advisor with regard to the tax treatment to him of the benefits provided hereby. Dr. Smith further acknowledges and agrees that the consideration stated in this Paragraph 2(c) is in excess of any amounts which he may be owed by Guilford under any other employment contract or agreement or term of employment.

     3. Release. In consideration for the additional agreements in Paragraphs 2(a), (b) and (c) above, Dr. Smith, on behalf of Dr. Smith, Dr. Smith’s heirs, executors, administrators, successors and assigns, hereby releases, acquits and forever discharges Guilford and any and all of its current or former subsidiaries and other affiliated entities and benefit plans, as well as its and/or their officers, directors, representatives, attorneys, agents, servants, employees, stockholders, successors, predecessors and affiliates (for purposes of this Paragraph 3, all incorporated in the definition of the “Released Parties”) from any and all claims, liabilities, demands, causes of action, costs, expenses, attorneys fees, damages, indemnities and obligations of every kind and nature, in law, in equity or otherwise, known or unknown, suspected and unsuspected, disclosed and undisclosed,

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arising out of or in any way related to agreements, acts or conduct at any time as of or prior to the date of this agreement, including, but not limited to: all such claims or demands arising from Dr. Smith’s employment or the termination of Dr. Smith’s employment; all such claims and demands related to salary, bonuses, commissions, stock, stock options (except as provided above), expense reimbursements, or any form of compensation; claims pursuant to any federal, state or local law or cause of action including, but not limited to, the Federal Civil Rights Acts of 1964, as amended, the Maryland Fair Employment Practices Act, as amended, the Age Discrimination in Employment Act of 1967, as amended, or any law or legal principle of similar effect in any other relevant jurisdiction; contract claims; tort claims; or claims of wrongful discharge, discrimination, fraud, defamation, and emotional distress. Dr. Smith further agrees not to sue or otherwise institute or cause to be instituted or in any way voluntarily participate in the prosecution of any complaints or charges against any persons or entities released herein in any federal, state or other court, administrative agency or other forum concerning any claims released herein. Dr. Smith further agrees to deliver a release identical to that contained in this Paragraph to the Company on the Resignation Date, to cover all periods subsequent to the date of this Agreement and prior to the Resignation Date, as a condition to his receipt of the benefits provided for in Paragraphs 2 (a), (b) and (c) above. Notwithstanding the above, Dr. Smith is not releasing any claims based upon Guilford’s obligations under this Agreement for salary, benefits, expense reimbursements, or other compensation during the period from the Effective Date through the Resignation Date.

     4. Noncompetition.

          (a) Dr. Smith covenants and agrees that for the period beginning on the date hereof and ending on the second anniversary of the Resignation Date, he shall not (i) establish, accept employment with, provide consulting or similar services to, or in any other way be involved in an active manner with (whether as an employee, director, consultant, adviser or owner), any entity in the pharmaceutical or biotechnology industry involved in the development or marketing of therapeutic products for commercial uses in the neuroprotective, neuroregenerative, anesthetic or anti-thrombotic fields, or any other fields that are the focus of Guilford’s current drug development and commercialization efforts or that are competitive with products currently under development or marketed by Guilford, and associated research and development, in any location in the United States or any other country where Guilford or its subsidiaries or licensees is engaged in marketing of any Guilford products; (ii) solicit, divert or accept business from any customer, supplier, distributor, licensor, licensee or manufacturer of or to Guilford and its subsidiaries or its affiliates to the detriment of Guilford and its subsidiaries or any of its affiliates, or otherwise interfere with the relationship between Guilford and its subsidiaries and any customer, supplier, distributor, licensor, licensee or manufacturer of or to Guilford and its subsidiaries or its affiliates to the detriment of Guilford and its subsidiaries or any of its affiliates; or (iii) solicit, induce or attempt to solicit or induce any person who is an employee of Guilford or any of its subsidiaries to perform work or services for any individual or entity other than Guilford or any of its subsidiaries. Dr. Smith agrees that the scope of this Paragraph 4(a) is reasonable and reflective of Guilford’s business. As used in the preceding sentence, “products currently under development” shall mean those products which may reasonably be expected to be pursued by Guilford based on such factors

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as Guilford’s plans, strategies, intentions, operations, investments, expenditures and other activities prior to the end of the one year consulting period provided for in Paragraph 2(a).

          (b) In the event the restrictions against engaging in a competitive activity contained in Paragraph 4(a) hereof shall be determined by any court of competent jurisdiction to be unenforceable by reason of their extending for too great a period of time or over too great a geographical area or by reason of their being too extensive in any other respect, such court shall modify the terms thereof to the minimum extent necessary to make such terms enforceable to the fullest extent allowed, all as determined by such court in such action.

          (c) Dr. Smith acknowledges and agrees that the covenants in this Paragraph 4 are fair, reasonable in scope, and necessary to protect the legitimate business interests of Guilford, including its interest in its goodwill, trade secrets, confidential information, and information concerning actual and prospective customers, suppliers, distributors, manufacturers, investors, employees, and financing providers. Dr. Smith acknowledges and agrees that he has provided and will continue to provide unique and valuable services to Guilford. Dr. Smith understands that the provisions of this Paragraph 4 may affect or limit Dr. Smith’s ability to earn a livelihood in a business similar to or competitive with the business engaged in by Guilford, but Dr. Smith nevertheless believes and represents that Dr. Smith shall have sufficient assets, skills, and employment opportunities in non-competitive positions or roles and that he shall have received sufficient consideration, remuneration and other benefits from Guilford to make enforceable the restrictions and limitations contained in this Paragraph 4.

          (d) Dr. Smith acknowledges that Guilford will have no adequate remedy at law and would be irreparably harmed if Dr. Smith breaches or threatens to breach any of the provisions of this Paragraph 4 and, therefore, agrees that Guilford shall be entitled to seek injunctive relief to prevent any breach or threatened breach thereof and to seek specific performance of the terms of this Paragraph 4 (in addition to any other legal or equitable remedy Guilford may have, including without limitation termination of this Agreement by Guilford and repayment by Dr. Smith of payments under this Agreement, or forfeiture of unvested restricted stock granted hereunder). Nothing in this Agreement shall be construed as prohibiting Guilford or Dr. Smith from pursuing any other remedies or defenses at law or in equity that it may have under and in respect of this Agreement.

     5. Additional Covenants. Except as pursuant to a court order or subpoena, Dr. Smith agrees not to make any statements, orally or in writing, regardless of whether such statements are truthful, or take any actions, which (i) in any way disparage Guilford, or harm the reputation and/or goodwill of Guilford, or (ii) in any way, directly or indirectly, knowingly cause, or encourage or condone the making of such statements or the taking of such actions by anyone else. Guilford will instruct its directors and officers, as well as other members of Guilford’s management not to make any statements, orally or in writing, regardless of whether such statements are truthful, or take any actions, which (i) in any way disparage Dr. Smith, or which harm Dr. Smith’s reputation, or (ii) in any way, directly or indirectly, knowingly cause or encourage or condone the making of such statements or the taking of such actions by anyone else. In addition, Dr. Smith is party to and bound by

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the provisions of a Patent and Confidentiality Agreement, dated as of                     between Dr. Smith and Guilford, which shall survive this Agreement.

     6. No Admission. Each party understands and agrees that nothing contained in this Agreement is to be considered an admission any party of any wrongdoing under any federal, state or local statute, regulation, public policy, tort law, contract law, or the common law.

     7. Acknowledgement. Dr. Smith acknowledges that he has read and understands this Agreement and executes it knowingly, voluntarily and without coercion. Dr. Smith acknowledges that he is being advised herein in writing to consult with an attorney prior to executing this Agreement, that he has consulted with an attorney, and he has been given a period of at least twenty-one days within which to consider and execute this Agreement, unless he voluntarily chooses to execute this Agreement before the end of the twenty-one day period by executing the attached Election to Execute Prior to Expiration of Twenty-One Day Consideration Period. Dr. Smith understands that he has seven days following his execution of this Agreement to revoke this Agreement. This Agreement shall become effective on the eighth day after it is executed and has not been revoked. For any revocation to be effective, written notice of revocation must be delivered to Guilford, attention Marge Contessa, Senior Vice President of Human Resources, Guilford Pharmaceuticals Inc., 6611 Tributary Street, Baltimore, Maryland 21224, no later than 5:00 p.m. on the seventh calendar day after Dr. Smith signs this Agreement. If Dr. Smith revokes this Agreement, it shall not be effective or enforceable and he shall not receive the benefits described herein. No payments shall be earned or made under the terms of this Agreement until the seven-day revocation period described in this paragraph has expired without revocation by Dr. Smith.

     8. Modifications. This Agreement may not be modified in any way except in a written agreement signed by both Dr. Smith and an authorized representative of Guilford.

     9. Successors and Assigns. Guilford will require any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all the business and/or assets of Guilford, as the case may be, expressly, absolutely and unconditionally to assume and agree to perform this Agreement in the same manner and to the same extent that Guilford would be required to perform it if no such succession or assignment had taken place.

     10. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Maryland without giving effect to its conflict of law provisions. The parties agree to submit to the exclusive jurisdiction of the state and federal courts situated in Baltimore, Maryland for all disputes arising under or relating to this Agreement.

     11. Entire Agreement. This Agreement, together with the attached Exhibit B, constitutes the entire agreement and understanding between Guilford and Dr. Smith relating to Dr. Smith’s consulting services to, and arrangements with respect to his

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separation from, Guilford and, except as provided in this Paragraph 10 and in Paragraphs 1, 2(b) and 5, specifically supersedes the Letter Agreements and any other employment agreements or employment arrangements between the parties. Dr. Smith acknowledges and agrees that in executing this Agreement, Dr. Smith has not relied on any promises or representations other than those set forth in this Agreement.

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     IN WITNESS THEREOF, Dr. Smith and Guilford, after carefully reading the provisions of this Agreement, herein declare that they understand such provisions and willingly accept and agree thereto by executing this Agreement.

		Guilford Pharmaceuticals Inc.
/s/ Craig R. Smith, M.D.		By:	/s/ Asher M. Rubin
Craig R. Smith, M.D.			Asher M. Rubin
Date:	September 3, 2004	Title:	Vice President, General Counsel and Secretary
		Date:	September 3, 2004

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Exhibit A

Letter agreements dated July 14, 1993 and September 6, 1996

July 14, 1993

Craig R. Smith, M.D.
278 Stonegate Drive
Devon, Pennsylvania 19333

Dear Craig:

On behalf of Guilford Pharmaceuticals Inc. (the “Company”), I am pleased to offer you employment with the Company on the following terms:

1. You will be employed as the President and Chief Executive Officer of the Company, effective as of September 1, 1993, and you will also be appointed a member of the Company’s Board of Directors. You will devote your full working time and attention to such position.

2. In consideration of your services and employment the Company will pay you a salary of $16,666.67 per month, payable semi-monthly. As an officer of the Company, you shall also be entitled to receive such bonuses, if any, as are payable pursuant to any executive, key employee or bonus plan as the Board of Directors may, in its sole discretion, from time to time adopt, and the Board will at one of its early meetings consider establishment of a bonus plan based on achievement of specific objectives set by the Board. The Board will review your salary annually.

3. The Company will offer and sell to you shares of its Common Stock on the following basis:

(a)	You shall be entitled to purchase 390,000 shares of Common Stock of the Company, which will represent 12.7% of the outstanding stock on a fully diluted basis after giving effect to the proposed issuance and/or reservation of stock in the next two months to Scios Nova (2,133,333 shares/70.6%), Dr. Sol Snyder (390,000 shares/12.7%), Johns Hopkins University (60,000 shares/2%) and a management pool (60,000 shares/2%).
(b)	The purchase price for the shares of Common Stock shall be the fair market value as of the date of purchase, which is deemed to be $0.10 per share, payable in cash or by promissory note. If you would like to purchase by promissory note, the note will be secured by your shares, will bear interest at the minimum Applicable Federal Rate (“AFR”) and will be due upon the earlier of five years or the termination of your employment. The loan would be forgiven at the rate of -1/4 of the original principal plus accrued interest for each year of continuous employment with the Company (25% forgiven on each anniversary of your commencement date, so that the entire loan would be forgiven after four years).
(c)	The shares purchased will be subject to a right of repurchase by the Company, at the original purchase price, plus interest at the AFR applied to your note (except to the extent such interest has already been forgiven as provided above), in the event your employment with the Company is terminated for cause of if you leave the Company other than for good reason, as such terms are defined below. This repurchase right will terminate at the rate of 1/48th of the shares for each month of completed employment, so that at the end of four years, the repurchase right will no longer apply to any of the shares.

4. You will serve at the discretion of the Company’s Board of Directors. However, in the event your employment is terminated by the Company other than for cause, you would be entitled to severance in the form of a continuation of your then-current base salary, as follows:

• Three months salary if the termination occurs in the first twelve months of your employment; and

• Six months salary if the termination occurs thereafter.

Such payments would cease upon your commencement of full-time employment during the payment period. During the severance period, the Company would also continue in effect any health, life and disability insurance coverage that had been established by the Board. Remaining benefits of employment, including your eligibility for any bonus program, would cease at termination and not continue to accrue during the severance period.

For purposes of paragraphs 3 and 4 the following terms shall be defined as follows:

(a)	“Cause” shall mean termination by reason of (i) deliberate misrepresentation or fraud in connection with your operation of the Company; (ii) deliberate material injury or attempting to cause material injury to the Company; (iii) willful breach of duty in the course of your employment; or (iv) continued failure to substantially perform the duties of your employment causing material damage or injury to the Company 20 days after there is delivered to you by the Board a written demand for substantial performance which sets forth the specific respects in which it believes you have not substantially performed your duties.
(b)	“Good reason” shall mean termination by you arising from a failure by the Company to comply with any material provision of this Agreement not cured within 20 days after notice is given by you to the Chairman of the Board; and
(c)	“Material” shall mean causing injury to the Company, including but not limited to financial injury to the Company, injury to the reputation of the Company or injury to investor confidence in the Company and its management.

5. To assist you in relocating to the Baltimore area, the Company will pay the direct costs of moving your household possessions from Devon, Pennsylvania to the Baltimore, Maryland area and will pay you $65,000 upon commencement of employment as a fixed amount to cover all lodging, meals and other expenses incidental to your relocation. This amount will not be grossed up to cover taxes payable by you. In addition, the Company will arrange for an interest-free $175,000 bridge loan to assist you in putting a down payment on a new home in the Baltimore area. The Company will also reimburse you for the actual costs of your mortgage payments on your Devon home up to a maximum of $2,900 per month commencing as of the date you purchase a new home in Baltimore and continuing until the earlier of (i) six months from such date or (ii) the date your current home is sold. The bridge loan will be advanced upon your purchase of a new home prior to the sale of your current home and will be secured by a second deed of trust on your current residence. The loan will be repaid after the earlier of the date your current residence is sold or 60 days after the date your employment terminates. You will use your best efforts to sell your home as quickly as practical. Any income tax to you arising from the Company’s forgiveness of interest on the bridge loan, net of the corresponding imputed interest deduction, will be paid by the Company. You will be responsible for all other taxes arising from payments by the Company.

6. Until such time as the Company has established its own medical plan, which we anticipate will take not longer than four months, the Company will at your option either (i) reimburse you for continuing COBRA payments under Centocor’s plan or (ii) arrange at the Company’s expense for Scios Nova to provide you and your dependents with coverage under its medical plan. Additional coverage for life, disability, officer and director and other insurance will be provided when and if established by the Company upon the direction of you and the other members of the Board of Directors.

7. You will be entitled to vacation accrual under such policy as you and the other members Board of Directors may establish.

8. In accordance with the Immigration Reform Act of 1986, on the first day of employment you will be required to present documentation (a driver’s license and either a social security card or a birth certificate) that proves your identity and authorization to work. Employment is contingent on your being able to meet this requirement.

9. You will be asked to sign a Patent and Confidential Information Agreement in connection with your employment by the Company, which will be sent to you under separate cover.

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10. Finally, please note that this offer is conditioned upon Sol Snyder entering into new consulting agreements with the Company and with Scios Nova, drafts of which are being prepared. In the event this extends beyond September 1, the start date of your employment will be extended.

Craig, I believe you will make a vital contribution to the establishment and growth of the Company, and I look forward to your acceptance of this offer.

Sincerely,

GUILFORD PHARMACEUTICALS INC.

/s/ Richard L. Casey
Richard L. Casey
Chairman of the Board

I have reviewed and hereby accept the above offer of employment with the Company.

/s/ Craig R. Smith, M.D.	Date: July 14, 1993
Craig R. Smith, M.D.

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September 9, 1996

Craig R. Smith, M.D.
6 Blenmont Court
Phoenix, Maryland 21131

Dear Craig:

     Reference is made to your employment letter agreement with the Company effective July 14, 1993 (the “Employment Agreement”). At the August 20, 1996 meeting of the Company’s Board of Directors, the Board resolved, effective August 20, 1996, to extend from six months to thirty-six months the period under your Employment Agreement for which you are entitled to severance (in the form of a continuation of your then-current base salary) in the event either (i) your employment with the Company is terminated other than for “cause” (as defined in the Employment Agreement) or (ii) you terminate your employment with the Company for “good reason” (as defined in the Employment Agreement). All other terms of your Employment Agreement remain unchanged.

     To evidence your agreement to the foregoing, please sign and date this letter agreement as specified below.

Very truly yours,
GUILFORD PHARMACEUTICALS INC.
By:	/s/ Andrew R. Jordan
Name:	Andrew R. Jordan
Title:	Vice President and Chief Financial Officer

AGREED AND ACCEPTED:

/s/ Craig R. Smith, M.D.

Craig R. Smith, M.D.
Date: 9/12/96

Exhibit B

Form of Restricted Stock Unit Agreement

GUILFORD PHARMACEUTICALS INC.
2002 STOCK AWARD AND INCENTIVE PLAN

RESTRICTED STOCK UNIT AGREEMENT

     Guilford Pharmaceuticals Inc., a Delaware corporation (the “Company”), hereby grants restricted stock units relating to shares of its common stock, $.01 par value (the “Stock”), to the individual named below as the Grantee, subject to the vesting conditions set forth in the attachment. Additional terms and conditions of the grant are set forth in this cover sheet, in the attachment and in the Guilford Pharmaceuticals Inc. 2002 Stock Award and Incentive Plan (the “Plan”).

Grant Date:                                       , 20                   

Name of Grantee:                                                          

Grantee’s Social Security Number:                    -                   -                   

Number of Restricted Stock Units Covered by Grant:                    

     By signing this cover sheet, you agree to all of the terms and conditions described in this Agreement and in the Plan, a copy of which will be provided on request. You acknowledge that you have carefully reviewed the Plan and agree that the Plan will control in the event any provision of this Agreement should appear to be inconsistent with the terms of the Plan.

Grantee:
		(Signature)
Company:
		(Signature)
	Title:

Attachment

This is not a stock certificate or a negotiable instrument.

GUILFORD PHARMACEUTICALS INC.
2002 STOCK AWARD AND INCENTIVE PLAN

RESTRICTED STOCK UNIT AGREEMENT

Restricted Stock Unit Transferability	This grant is an award of stock units in the number of units set forth on the cover sheet, subject to the vesting conditions described below (“Restricted Stock Units”). Your Restricted Stock Units may not be transferred, assigned, pledged or hypothecated, whether by operation of law or otherwise, nor may the Restricted Stock Units be made subject to execution, attachment or similar process.
Vesting	Your Restricted Stock Unit grant vests as to fifty percent (50%) of the total number of Restricted Stock Units shown on the cover sheet on the first anniversary of the Grant Date and an additional fifty percent (50%) of the Restricted Stock Units under this Restricted Stock Unit grant will become vested on the second anniversary of the Grant Date, provided you have performed, in good faith, the consulting services described in Paragraph 2(a) of the Consulting Services and Separation Agreement between you and the Company dated August    , 2004 during the term of the consulting period and have adhered to the terms of the covenants contained in Paragraph 4 of the Consulting Services and Separation Agreement. The resulting aggregate number of vested Restricted Stock Units will be rounded down to the nearest whole number of Restricted Stock Units. One hundred percent (100%) of the total number of Restricted Stock Units under this Restricted Stock Unit grant will become vested upon your death or total and permanent disability prior to the second anniversary of the Grant Date.
Delivery of Stock Pursuant to Vested Units	A certificate for the vested shares of Stock represented by the Restricted Stock Units shall be delivered to you on the first and second anniversaries of the Grant Date; provided, that, if any such anniversary of the Grant Date occurs during a period in which you are (i) subject to a lock-up agreement restricting your ability to sell Stock in the open market or (ii) are restricted from selling Stock in the open market because a trading window is not available, delivery of such vested shares will be delayed until the date immediately following the expiration of the lock-up agreement or the opening of a trading window.
Forfeiture of Unvested Units	In the event that you fail to perform, in good faith, the consulting services described in Paragraph 2(a) of the

2

	Consulting Services and Separation Agreement between you and the Company dated August    , 2004 during the term of the consulting period or have not adhered to the terms of the covenants contained in Paragraph 4 of the Consulting Services and Separation Agreement, you will forfeit all of the Restricted Stock Units that have not yet vested.
Withholding Taxes	You agree, as a condition of this grant, that you will make acceptable arrangements to pay any withholding or other taxes that may be due as a result of vesting in Restricted Stock Units or your acquisition of Stock under this grant. In the event that the Company determines that any federal, state, local or foreign tax or withholding payment is required relating to this grant, the Company will have the right to:
	(i) require that you arrange such payments to the Company, (ii) withhold such amounts from other payments due to you from the Company or any Affiliate, or (iii) cause an immediate forfeiture of shares of Stock subject to the Restricted Units granted pursuant to this Agreement in an amount equal to the withholding or other taxes due.
Retention Rights	This Agreement does not give you the right to be retained or employed by the Company (or any Affiliates) in any capacity. The Company (and any Affiliate) reserve the right to terminate your Service at any time and for any reason.
Shareholder Rights	You do not have any of the rights of a shareholder with respect to the Restricted Stock Units unless and until the Stock relating to the Restricted Stock Units has been delivered to you. You will, however, be entitled to receive, upon the Company’s payment of a cash dividend on outstanding Stock, a cash payment for each Restricted Stock Unit that you hold as of the record date for such dividend equal to the per-share dividend paid on the Stock.
Adjustments	In the event of a stock split, a stock dividend or a similar change in the Company stock, the number of Restricted Stock Units covered by this grant will be adjusted (and rounded down to the nearest whole number) in accordance with the terms of the Plan.
Applicable Law	This Agreement will be interpreted and enforced under the laws of the State of Maryland, other than any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction.

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Consent to Electronic Delivery

The Company may choose to deliver certain statutory materials relating to the Plan in electronic form. By accepting this grant you agree that the Company may deliver the Plan prospectus and the Company’s annual report to you in an electronic format. If at any time you would prefer to receive paper copies of these documents, as you are entitled to receive, the Company would be pleased to provide copies. Please contact Marge Contessa 410-631-6644 to request paper copies of these documents.

The Plan

The text of the Plan is incorporated in this Agreement by reference. This Agreement, the Plan, and an applicable employment agreement with the Company, if any, constitute the entire understanding between you and the Company regarding this grant of Restricted Stock Units. Any prior agreements, commitments or negotiations concerning this grant are superseded. The Plan will control in the event any provision of this Agreement should appear to be inconsistent with the terms of the Plan.

     By signing the cover sheet of this Agreement, you agree to all of the terms and conditions described above and in the Plan.

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ELECTION TO EXECUTE PRIOR TO EXPIRATION
OF TWENTY-ONE DAY CONSIDERATION PERIOD

     I, Craig R. Smith, M.D., understand that I have at least twenty-one days within which to consider and execute the foregoing Consulting Services and Separation Agreement. However, after having an opportunity to consult counsel, I have freely and voluntarily elected to execute the Consulting Services and Separation Agreement before the twenty-one day period has expired.

/s/ Craig R. Smith, M.D.
Craig R. Smith, M.D.
Date:	September 3, 2004

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

GUILFORD PHARMACEUTICALS ANNOUNCES CRAIG R. SMITH, M.D. WILL
RETIRE AS CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER

BALTIMORE, MD — September 1, 2004 — Guilford Pharmaceuticals Inc. (Nasdaq: GLFD) today announced that Craig R. Smith, M.D. will retire as Chairman, President, and Chief Executive Officer. The Board of Directors has begun a search for a successor. Dr. Smith will remain Chairman, President, and Chief Executive Officer until the date of the Company’s next Annual Meeting, unless a successor is identified earlier. After his retirement Dr. Smith will continue as a member of the Board of Directors and will serve as a consultant to the Company for at least one year.

Dr. Smith said, “I am grateful for the opportunity to build a new pharmaceutical company and develop new drugs that can improve human health care. As a physician, I appreciate the profound influence new therapies can have on the lives of patients and their families. From a personal perspective, the opportunity to contribute to the field of therapeutics and build a new company in Baltimore has been very rewarding.”

George L. Bunting, Jr., lead independent Director, speaking for the Board, said, “Craig Smith was a co-founder of Guilford and its first employee. Under his leadership the Company has grown into a fully integrated pharmaceutical company with two marketed products, two products in Phase III, and a rich pipeline of early stage development and research programs. We are enormously grateful to Craig for all of his contributions to our company and are pleased that he has agreed to remain on the Board and serve as a consultant to effect a smooth transition to new leadership.”

Dr. Smith continued, “After my retirement from Guilford, I intend to continue my business and scientific activities on a limited basis through consulting and service on the Boards of Directors of emerging biotechnology and pharmaceutical companies. I am very proud of Guilford’s accomplishments over the past twelve years. It has been an honor and privilege to work with all the talented and dedicated employees that make our company great.”

About Guilford

Guilford Pharmaceuticals Inc. is a pharmaceutical company engaged in the research, development and commercialization of proprietary drugs that target the hospital and neurology markets. Presently, Guilford markets two commercial products, GLIADEL^® Wafer (poliferprosan 20 with carmustine implant), for the treatment of braid cancer, and AGGRASTAT^® Injection (tirofiban hydrochloride), a glycoprotein GP IIb/IIIa receptor antagonist, for the treatment of acute coronary syndrome (ACS). Guilford’s product pipeline includes AQUAVAN^® Injection, a novel sedative/anesthetic and drugs for treating peripheral nerve injury. For full prescribing information, please visit www.guilfordpharm.com under Products/Marketed Products.

Conference Call

Guilford will host a conference call at 10:30 a.m. ET on Wednesday, September 1, 2004. The dial in number for participants in the U.S. and Canada is (800) 811-8824 and for international callers is (913) 981-4903. An audio replay of the conference call will be available for 24 hours beginning at approximately 12:30 p.m. ET on September 1, 2004. To access the replay, U.S. and Canadian residents should dial (888) 203-1112, and international callers should dial (719) 457-0820, referencing passcode 849055. A webcast of this conference call will also be available from Guilford’s website at ww.guilfordpharm.com.

This press release contains forward-looking statements that involve risks and uncertainties, including those described in the section entitled “Risk Factors” contained in the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 9, 2004, that could cause the Company’s actual results and experience to differ materially from anticipated results and expectations expressed in these forward-looking statements. Among other things, there can be no assurance that the Company will be able to increase sales of GLIADEL^® Wafer or AGGRASTAT^® Injection, or that the Company will be able to successfully develop and commercialize any of its product candidates, including AQUAVAN^® Injection. Further, the Company may not be successful in its attempt to attract and retain a new Chief Executive Officer at the time that Dr. Smith retires.

###

Contact: Staccy Jurchison/410-631-5022/jurchisons@guilfordpharm.com

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