-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NRc4urtfkRsYNCRMmU8u9NwI3CI01yM5yKZH4pCHHqb78UgRmG9h4h4uGl+EaLcD SP0hncYm5PH4ABxBQDDgJA== 0000950133-97-002865.txt : 19970814 0000950133-97-002865.hdr.sgml : 19970814 ACCESSION NUMBER: 0000950133-97-002865 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970813 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GUILFORD PHARMACEUTICALS INC CENTRAL INDEX KEY: 0000918066 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 521841960 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-23736 FILM NUMBER: 97659378 BUSINESS ADDRESS: STREET 1: 6611 TRIBUTARY ST CITY: BALTIMORE STATE: MD ZIP: 21224 BUSINESS PHONE: 4106316300 10-Q 1 GUILFORD PHARMACEUTICALS FORM 10-Q 1 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 JUNE 30, 1997 ------------- COMMISSION FILE NUMBER 0-23736 ------- 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, BALTIMORE, MARYLAND 21224 (Address of principal executive offices) (Zip Code) - -------------------------------------------------------------------------------- 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 issuer's classes of common stock, as of the latest practicable date.
Class Outstanding at August 11, 1997 Common Stock, $.01 par value 18,641,991 - ---------------------------- ------------------------------
2 GUILFORD PHARMACEUTICALS INC. AND SUBSIDIARIES GUILFORD PHARMACEUTICALS INC. INDEX
Page(s) ---- PART I. FINANCIAL INFORMATION (UNAUDITED) Item 1. Financial Statements Consolidated Balance Sheets June 30, 1997 and December 31, 1996 3 Consolidated Statements of Operations Three and six months ended June 30, 1997 and 1996 4 Consolidated Statement of Stockholders' Equity Six months ended June 30, 1997 5 Consolidated Statements of Cash Flows Three and six months ended June 30, 1997 and 1996 6 Notes to Consolidated Financial Statements 7-9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10-15 Item 3. Quantitative and Qualitative Disclosures About Market Risk 15 PART II. OTHER INFORMATION 16-18 SIGNATURES 19
2 3 GUILFORD PHARMACEUTICALS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
JUNE 30, 1997 (UNAUDITED) DECEMBER 31, 1996 ------------- ----------------- ASSETS ------ Current assets: Cash and cash equivalents $ 20,985 $ 16,560 Short-term investments 33,135 20,097 Short-term investments - restricted 2,441 1,608 Accounts receivable - net 1,058 - Collaborative research receivable 405 376 Inventory 1,429 1,533 Other current assets 528 435 ------------- -------------- Total current assets 59,981 40,609 Investments 68,911 30,653 Investments - restricted 9,377 8,521 Property and equipment, net 15,044 13,455 Other assets 364 421 ------------- -------------- $ 153,677 $ 93,659 ============= ============== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Accounts payable $ 1,660 $ 2,038 Bond payable - current portion 941 941 Term loan payable - current portion 991 540 Accrued payroll related costs 1,199 1,238 Accrued consulting and contracted research 421 935 Accrued expenses and other current liabilities 815 1,185 ------------- -------------- Total current liabilities 6,027 6,877 Long-term liabilities: Bond payable, less current portion 6,118 6,588 Term loan payable, less current portion 4,956 4,317 ------------- -------------- Total liabilities 17,101 17,782 Stockholders' equity: Preferred stock, par value $.01 per share Authorized 4,700,000 shares, none issued - - Series A junior participating preferred stock, par value $.01 per share. Authorized 300,000 shares, none issued - - Common stock, par value $.01 per share. Authorized 40,000,000 shares 18,609,282 and 13,979,490 issued and outstanding at June 30, 1997 and December 31, 1996 186 140 Additional paid-in capital 163,731 90,880 Notes receivable on common stock (99) (129) Accumulated deficit (26,488) (14,874) Unrealized gain on available for sale securities 211 62 Treasury stock, at cost 28,872 shares (727) - Deferred compensation (238) (202) ------------- -------------- Total stockholders' equity 136,576 75,877 ------------- -------------- $ 153,677 $ 93,659 ============= ==============
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 3 4 GUILFORD PHARMACEUTICALS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE DATA)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, 1997 1996 1997 1996 ------------ ------------ ------------ ------------ Revenues: Contract revenue $ - $ 7,500 $ - $ 7,500 Product sales 1,767 - 3,825 - License fees and royalties 455 - 656 100 Revenues under collaborative agreements 169 9 169 19 ------------ ------------ ------------ ------------ Total revenues 2,391 7,509 4,650 7,619 Costs and Expenses: Cost of Sales 615 1,523 - Research and development 6,948 3,561 13,611 7,133 General and administrative 1,800 1,853 3,626 3,197 ------------ ------------ ------------ ------------ Total costs and expenses 9,363 5,414 18,760 10,330 ------------ ------------ ------------ ------------ Operating income (loss) (6,972) 2,095 (14,110) (2,711) Other income (expense): Interest income 1,871 795 2,860 1,153 Other income 30 1 36 1 Interest expense (207) (116) (400) (187) ------------ ------------ ------------ ------------ Net income (loss) $ (5,278) $ 2,775 $ (11,614) $ (1,744) ============ ============ ============ ============ Earnings (loss) per common share and common equivalent share: $ (0.29) $ 0.18 $ (0.72) $ (0.15) ============ ============ ============ ============ Weighted average common and common equivalent shares outstanding 17,952,888 15,355,139 16,105,431 12,023,354 ============ ============ ============ ============
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 4 5 GUILFORD PHARMACEUTICALS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE DATA)
COMMON STOCK NOTES UNREALIZED ------------ ADDITIONAL RECEIVABLE GAIN ON NUMBER PAID-IN ON COMMON ACCUMULATED AVAILABLE FOR OF SHARES AMOUNT CAPITAL STOCK DEFICIT SALE SECURITIES ---------- ------ ------- ----- ------- --------------- BALANCE, DECEMBER 31, 1996 13,979,490 $ 140 $ 90,880 $ (129) $ (14,874) $ 62 Other issuances of common stock 892,292 9 1,637 Issuance of common stock in secondary public offering at $20.00 per share, net of offering costs 3,737,500 37 70,449 Purchase of common stock Amortization of stock option compensation 765 Amortization of deferred compensation Reduction in notes receivable on common stock 30 Unrealized gain on available for sale securities 149 Net loss for the period (11,614) ---------- ------ --------- ------- --------- ----- BALANCE, JUNE 30, 1997 18,609,282 $ 186 $ 163,731 $ (99) $ (26,488) $ 211 ========== ====== ========= ======= ========= =====
TREASURY TOTAL STOCK DEFERRED STOCKHOLDERS' RESTRICTED COMPENSATION EQUITY ---------- ------------ ------ BALANCE, DECEMBER 31, 1996 $ - $ (202) $ 75,877 Other issuances of common stock (211) 1,435 Issuance of common stock in secondary public offering at $20.00 per share, net of offering costs 70,486 Purchase of common stock (727) (727) Amortization of stock option compensation 765 Amortization of deferred compensation 175 175 Reduction in notes receivable on common stock 30 Unrealized gain on available for sale securities 149 Net loss for the period (11,614) ------- ------- --------- BALANCE, JUNE 30, 1997 $ (727) $ (238) $ 136,576 ======= ======= =========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 5 6 GUILFORD PHARMACEUTICALS INC. AND SUBSIDIARIES (UNAUDITED) CONSOLIDATED STATEMENT OF CASH FLOWS (IN THOUSANDS, EXCEPT SHARE DATA)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, --------------------------- ------------------------- 1997 1996 1997 1996 ---- ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (5,278) $ 2,775 $ (11,614) $ (1,744) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 605 259 1,199 490 Noncash compensation expense 373 75 940 107 Changes in assets and liabilities: Accounts receivable - trade (39) - (1,058) - Collaborative research receivable (169) - (29) - Licensing fee receivable - 100 556 Inventory 36 - 104 - Other current assets (83) 12 (93) 158 Other assets (32) 32 57 7 Accounts payable (522) (804) (378) 1,097 Advance from Gell Pharmaceuticals Inc. - 189 - 97 Accrued expenses and other liabilities 13 (352) (924) (563) ---------- ------------ ------------ ------------ Net cash provided by (used in) operating activities (5,096) 2,286 (11,796) 205 ---------- ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Investment in purchases of property and equipment (1,417) (3,965) (2,783) (7,001) Maturities of held-to-maturity investments 10,534 13,813 18,934 20,498 Maturities of available-for-sale investments 12,668 - 16,121 - Purchases of held-to-maturity investments (14,263) (57,000) (22,420) (62,196) Purchases of available-for-sale investments (58,332) - (65,821) - Restricted investments 143 - 351 12 ---------- ------------ ------------ ------------ Net cash used in investing activities (50,667) (47,152) (55,618) (48,687) ---------- ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuances of common stock 70,897 13,216 71,218 50,457 Purchase of treasury stock (72) - (727) - Proceeds from bond and term loan issuances 592 3,291 1,090 4,293 Equity proceeds from Gell Pharmaceuticals, Inc. relating to the put option - 217 698 449 Payment of notes receivable on common stock 30 - 30 - Principal payments on bond payable (235) (78) (470) (78) ---------- ------------ ------------ ------------ Net cash provided by financing activities 71,212 16,646 71,839 55,121 ---------- ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents 15,449 (28,220) 4,425 6,639 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF PERIOD 5,536 39,119 16,560 4,260 ---------- ------------ ------------ ------------ CASH AND CASH EQUIVALENTS AT THE END OF PERIOD $ 20,985 $ 10,899 $ 20,985 $ 10,899 ========== ============ ============ ============ Supplemental disclosures of cash flow information: Net interest paid $ 203 $ 106 $ 394 $ 217 Income taxes paid $ - $ - $ 179 $ - Unrealized gain or on available for sale securities $ 394 $ - $ 149 $ - Collateral transferred from unrestricted to restricted investments, net $ 421 $ 1,049 $ 856 $ 1,751 ========== ============ ============ ============
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 6 7 GUILFORD PHARMACEUTICALS INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1997 (UNAUDITED) 1. BASIS OF PRESENTATION 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 generally accepted accounting principles 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 notes thereto included in the Company's annual report on Form 10-K/A for the year ended December 31, 1996. In the opinion of the Company's management, any adjustments contained in the accompanying unaudited consolidated financial statements are of a normal recurring nature, necessary to present fairly its financial position, results of operations, changes in stockholders' equity and cash flows for the respective periods as set forth in the Index to Financial Information. Interim results are not necessarily indicative of results for the full fiscal year. Net loss per share data for the periods ending June 30, 1996 have been adjusted to reflect a three-for-two stock split declared on October 15, 1996. 2. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Guilford Pharmaceuticals Inc. and its subsidiaries, all of which are wholly-owned. All significant intercompany transactions have been eliminated. 3. ACCOUNTING POLICIES NET EARNINGS (LOSS) PER SHARE The computation of net earnings (loss) per share is based on the weighted average common shares outstanding during the periods, and to include, when their effect is dilutive, common stock equivalents consisting of warrants, stock options and put rights. 7 8 GUILFORD PHARMACEUTICALS INC. AND SUBSIDIARIES In February 1997, the Financial Accounting Standards Board ("FASB") issued Statement No. 128, "Earnings Per Share" ("SFAS 128"). SFAS 128 is effective for financial statements for periods ending after December 15, 1997. SFAS 128 requires companies to change the method currently used to compute earnings per share and to restate all prior periods for comparability. Under SFAS 128, primary and fully diluted earnings per share are eliminated and SFAS 128 requires presentation of basic and diluted earnings per share. The adoption of SFAS 128 is not expected to have a material impact on the Company's earnings per share due to the fact that the Company is and expects to be in a loss position and, consequently, common equivalent shares from stock options are excluded as their effect is anti-dilutive. RECENT ACCOUNTING PRONOUNCEMENTS The FASB has recently issued three new accounting standards, Statement No. 129, "Disclosure of Information about Captial Structure", Statement No. 130, "Reporting Comprehensive Income" and Statement No. 131, "Disclosures about Segments of an Enterprise and Related Information", and if adopted will be effective for periods presented after December 31, 1997. The Company is evaluating the effect of these new statements. 4. INVENTORIES Inventories consist of the following (in thousands):
June 30, 1997 December 31, 1996 (Unaudited) Finished products $ 445 $ 501 Work in process 567 432 Raw materials 417 600 ------ ------ $1,429 $1,533 ====== ======
Inventories include products and materials that can be either held for sale to third parties as well as used in the Company's research and development activities. The amount of products or materials identified as intended for research and development activities is expensed as soon as such inventory is specifically identified for non-commercial use. 8 9 GUILFORD PHARMACEUTICALS INC. AND SUBSIDIARIES 5. PRODUCT SALES & ROYALTIES Pursuant to the Company's Marketing, Sales and Distribution Rights Agreement (together with related agreements, the "RPR Agreements") with Rhone-Poulenc Rorer Pharmaceuticals Inc. ("RPR"), the Company recognized revenues of $2.2 million ($1.8 million in product sales and $455,000 in royalty revenues) and of $4.5 million ($3.8 million in product sales and $656,000 in royalty revenues), respectively, for the three and six months ended June 30, 1997 relating to sales of GLIADEL(R) Wafer ("GLIADEL"). GLIADEL was commercially launched in the United States on February 25, 1997. Under the RPR Agreements, Guilford receives a combined transfer price of 20% and royalty of 15% (which escalates up to 20% on incremental sales based on achieving certain levels of total annual GLIADEL sales) of the net sales of GLIADEL. 6. INCOME TAXES As of December 31, 1996, the Company had net operating loss ("NOL") carryforwards available in the United States for federal income tax purposes of approximately $10.3 million, which will begin to expire at various dates between 2008 to 2010. NOL carryforwards are subject to ownership change limitations and may also be subject to various other limitations on the amounts to be utilized. Additionally, through December 31, 1996, the Company had foreign tax credit carryforwards of $61,000 expiring in 2000 and 2001, and general business tax credit carryforwards of $450,000 expiring between 2008 and 2011. Realization of net deferred tax assets related to the Company's NOL carryforwards and other items is dependent on future earnings, which are uncertain. Accordingly, a valuation allowance has been established equal to net deferred tax assets which may not be realized in the future, resulting in net deferred tax assets of approximately $179,000 at June 30, 1997. 7. EQUITY TRANSACTION In April 1997, the Company completed a follow-on public offering of approximately 3.7 million shares of its common stock, resulting in net proceeds to the Company of approximately $71 million. 8. AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION On April 1, 1997, the Company's stockholders approved an amendment to the Company's Amended and Restated Certificate of Incorporation, as amended, increasing the number of authorized shares of common stock from 20 million to 40 million shares. 9. COMMITMENTS The Company has entered into an operating lease for 16,200 square feet of lab and office space commencing on June 22, 1997 and ending on December 31, 1998. The Company is obligated to pay minimum future rental payments of $255,500 and $486,000 for the years ending December 31, 1997 and 1998, respectively. 9 10 GUILFORD PHARMACEUTICALS INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Any statements made by Guilford Pharmaceuticals Inc. (together with its subsidiaries, "Guilford" or the "Company") 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. The following discussion contains forward-looking statements, including, but not limited to, those concerning the commencement and completion of clinical trials, the Company's strategic plans, anticipated expenditures and the need for additional funds, which involve risks and uncertainties. The Company's actual results may differ significantly from the results discussed in the forward-looking statements. Information concerning factors that could affect such results are set forth herein and in the Company's filings with the Securities and Exchange Commission, including the section entitled "Risk Factors" in the Company's Registration Statement on Form S-3, declared effective April 7, 1997 (the "April 1997 Form S-3"). * * * GENERAL Guilford, founded in 1993, is a biopharmaceutical company engaged in the development and commercialization of novel products in two principal areas: (i) targeted and controlled drug delivery systems using proprietary biodegradable polymers for the treatment of cancer and other diseases; and (ii) therapeutic and diagnostic products for neurological diseases and conditions. Since its inception, the Company has initially focused its efforts on commercializing its first product, GLIADEL(R)Wafer ("GLIADEL"), a proprietary biodegradable polymer for delivering the chemotherapeutic agent, BCNU, for brain cancer and developing its second product candidate, DOPASCAN(R) Injection ("DOPASCAN"), a radiolabeled imaging agent for the diagnosis and monitoring of Parkinson's disease. In September 1996, the U.S. Food and Drug Administration ("FDA") cleared the Company's New Drug Application for GLIADEL as an adjunct to surgery in patients with recurrent glioblastoma multiforme for whom surgery is indicated. On February 25, 1997, GLIADEL was commercially launched in the United States by the Company's worldwide marketing partner (except in Scandinavia), Rhone-Poulenc Rorer Pharmaceuticals Inc. ("RPR"). In addition, the Company has in-licensed and developed itself certain technologies that may be useful in connection with the prevention and treatment of certain neurological diseases and conditions and has accelerated research and development activities with respect to certain of these technologies. While the Company reported net earnings of $5.1 million for fiscal 1996 (primarily the result of nonrecurring milestones and licensing fees), the Company incurred net operating losses from its inception through the first quarter of 1996 and again in the fourth quarter of 1996. For the three and six months ended June 30, 1997, the Company incurred a net operating loss of $5.3 million and $11.6 million, respectively, and through June 30, 1997, the Company had an accumulated deficit of $26.5 million. Through December 31, 1996, substantially all the Company's revenues had been recognized as non-recurring research and development or rights and milestone payments under the Company's collaborations. In the first quarter of 1997, the Company launched its first commercial product, GLIADEL, and has recognized $4.5 million in product sales and royalties for the first six months of 1997. Of this $4.5 million amount, $3.8 million represent sales of GLIADEL to RPR and 10 11 GUILFORD PHARMACEUTICALS INC. AND SUBSIDIARIES $656,000 represents royalties on RPR sales to third parties. As noted below and in the April 1997 Form S-3, further sales of GLIADEL are subject to significant risk and uncertainty, and there can be no assurance that both sales to RPR and sales to third parties will increase or continue at the current rate in future periods. Except for GLIADEL, the Company's product candidates are not expected to generate revenues for at least the next several years, if at all. The Company does not anticipate that 1997 will be profitable, and there can be no assurance that the Company will ever achieve or sustain profitability in the future. Furthermore, the Company expects to experience quarter-to-quarter and year-to-year fluctuations in its operating results based upon the timing and amount of sales of GLIADEL, the timing and realization of milestone and other payments under the Company's agreements with RPR and other existing and potential collaborations, expenditures relating to the Company's research and development, clinical and manufacturing activities, and the extent and timing of costs related to the Company's patenting activities and other activities undertaken in connection with the preservation and extension of the Company's intellectual property rights. The Company expects that expenses related to research and product development, preclinical testing, clinical trials, regulatory matters, operations, manufacturing and general and administrative expenses will continue to increase as the Company commercializes GLIADEL through its marketing partners and conducts research and development activities to develop its other technologies and potential products. The Company has experienced substantial personnel growth since its inception and had 34, 78, and 140 full-time employees at December 31, 1994, 1995, and 1996, respectively. As of June 30, 1997 the Company had 180 full-time employees. The Company's ability to achieve consistent profitability in the future will depend, among other things, upon future sales of GLIADEL as well as the Company's ability, either alone or with others, to develop its product candidates successfully, conduct clinical trials, obtain required regulatory clearances, manufacture at reasonable cost and successfully market its product candidates and enter into collaborative arrangements and license agreements on acceptable terms. For discussion of these and other risks, see the "Risk Factors" section of the April 1997 Form S-3, particularly those paragraphs specifically addressing the aforementioned risks. Future sales of GLIADEL are subject to certain risks, including the following. The Company's agreements with RPR do not impose any minimum purchase requirements on the part of RPR, and there can be no assurance that RPR will be successful in marketing and selling GLIADEL. In particular, prior to the commercial launch of GLIADEL in the United States in February 1997, RPR's oncology sales force had no prior experience marketing and selling a product to neurosurgeons. Furthermore, GLIADEL represents a novel approach to the treatment of brain cancer, and there can be no assurance of broad acceptance by the medical or patient communities. The Company currently relies on a single supplier for BCNU, the chemotherapeutic agent used in GLIADEL, and on its own single manufacturing facility to produce GLIADEL. Inability to secure timely, sufficient, or GMP quality supply of BCNU, unforeseen plant shutdowns due to personnel or plant or equipment problems, risks associated with regulatory compliance (including the need to manufacture GLIADEL in accordance with the FDA's Good Manufacturing Practice (GMP) regulations), and the potential inability to meet future product demand, among others, could adversely affect the timing and extent of any future revenues related to GLIADEL sales. For 11 12 GUILFORD PHARMACEUTICALS INC. AND SUBSIDIARIES discussion of these and other risks, see the "Risk Factors" section of the April 1997 Form S-3, particularly those paragraphs specifically addressing the aforementioned risks. RESULTS OF OPERATIONS Comparison of the Three and Six Month Periods Ended June 30, 1997 and 1996 The Company recognized $2.4 million and $4.7 million, respectively, in revenues for the three and six months ended June 30, 1997, all of which resulted from product sales of and royalties relating to GLIADEL and amounts reimbursed by RPR relating to the Company's efforts to develop a high dose GLIADEL product. For the same periods in 1996 the Company recognized $7.5 million and $7.6 million, respectively, in revenues, primarily related to a one-time rights payment made to the Company by RPR under the Company's agreements with RPR respecting the marketing, sales and distribution of GLIADEL. Revenues received by the Company respecting GLIADEL sales consist of two main components: (i) transfer price payments related to sales of product directly to RPR and (ii) royalty payments made by RPR to the Company on product sales to end-users. GLIADEL was commercially launched in the United States by RPR on February 25, 1997. The majority of the revenues received by the Company in the first six months of 1997 has consisted of transfer price payments related to sales of GLIADEL to RPR in order for RPR to build up an initial inventory of the product. Going forward, the Company expects that sales of GLIADEL to RPR will more closely reflect end-user sales made by RPR. As noted above and in the April 1997 Form S-3, future GLIADEL sales are subject to a number of risks and uncertainties, and there can be no assurance that GLIADEL sales will generate significant revenues for the Company. Cost of sales for the three and six months ended June 30, 1997 were $615,000, and $1.5 million, respectively. Included in these amounts is approximately $103,000 and $265,000, respectively, representing both royalty payments made to a third party from which the Company, has licensed certain technologies related to GLIADEL and certain costs specifically related to the commercial product launch of GLIADEL in the United States. To the extent GLIADEL production levels increase, the Company expects that per unit product costs may decrease as economies of scale are achieved. There can be no assurance, however, that GLIADEL product sales will ever reach levels necessary for the Company to realize significant costs savings related to manufacturing economies of scale. Research and development expenses increased to $6.9 million and $13.6 million, respectively, for the three and six months ended June 30, 1997 as compared to $3.6 million and $7.1 million, respectively, for the same periods in 1996. The increase in these costs was primarily attributable to expenses related to increased personnel costs and contracted research, consulting and laboratory supplies. In the second quarter of 1997, the Company continued to accelerate its 12 13 GUILFORD PHARMACEUTICALS INC. AND SUBSIDIARIES neuroimmunophilin, pre-synaptic glutamate inhibitors, polymer, and other research and development programs, completed work on the study report on the Phase IIb clinical trials of DOPASCAN in the United States, and continued with Phase I clinical trials for a high dose formulation of GLIADEL. The Company also entered into an agreement with a third party manufacturer for the development and supply of DOPASCAN for the Company's planned Phase III clinical trials for that product candidate. In addition, in the three and six months ended June 30, 1997, research and development expenses included charges relating to certain consulting agreements entered into in April 1996, consisting of non-cash compensation expense of $348,000 and $765,000, respectively, and cash compensation expense of $31,000, and $60,000, respectively. For the three and six month periods ended June 30, 1996, non-cash compensation expense related to these agreements of $45,000, and cash compensation expense of $48,000 were recorded. These agreements are intended to enhance the Company's ability to develop new polymer technologies and products for the delivery of chemotherapeutics in indications where local tumor recurrence is likely and controlled release may be more effective than current therapies. The Company expects it will be required to record varying amounts quarterly of up to an additional $1.4 million in the aggregate of non-cash compensation charges in research and development expenses through 2001 relating to these agreements. The Company anticipates that its research and development expenses will continue to increase significantly in future periods. General and administrative expenses were $1.8 million and $3.6 million for the three and six months ended June 30, 1997 as compared to $1.9 million and $3.2 million, respectively for the same periods in 1996. The increase in general and administrative expenses of $429,000 for the six months ended June 30, 1996 compared to the same period in 1997 was attributable to higher personnel costs related to an increase in the number of employees necessary to support the Company's research and development and commercialization activities. Additionally, indirect personnel costs, including recruiting and relocation costs, have increased as the total number of employees has increased. Increases in costs related to patenting and other activities related to establishment and preservation of the Company's intellectual property rights and costs related to operations as a public company also contributed to increased general and administrative expenditures over this period. The decrease of $53,000 in general and administrative expense from the three months ended June 30, 1996 to the same period in 1997 reflects a stabilization in the number of personnel in general and administrative areas and a decrease in the latter period of certain consulting and professional fees incurred by the Company. In general, the Company anticipates that its general and administrative expenses will increase in future periods. Other income and expense relates primarily to interest income and interest expense. Interest income increased to $1.9 million and $2.9 million, respectively, for the three and six months ended June 30, 1997 as compared to $795,000 and $1.2 million for the same periods in 1996. The increase was primarily attributable to an increase in the average invested capital during the three and six months ended June 30, 1997 as compared to the same periods in 1996. The increase in average invested capital was primarily due to the public sale of the Company's common stock in April, 1997 (see Note 7 to the Consolidated Financial Statements) and milestone/licensing fee revenues from RPR recognized in the third quarter of 1996. For the three and six months ended June 30, 1997, the Company incurred interest expense of $207,000 and $400,000, respectively, relating to borrowings 13 14 GUILFORD PHARMACEUTICALS INC. AND SUBSIDIARIES under its loan agreements with Signet Bank providing for the construction of manufacturing, administrative and research and development facilities and the purchase of related equipment. Interest expense was $116,000 and $187,000, respectively, for the three and six months ended June 30, 1996. The increase in interest expense for the 1997 periods as compared to those in 1996 resulted from greater outstanding principal balances during the later periods under these loan agreements. LIQUIDITY AND CAPITAL RESOURCES The Company's cash and investments were $134.8 million at June 30, 1997. Included in this amount is $11.8 million of restricted cash held as collateral with respect to certain of the Company's indebtedness. The increase in cash and investments of $57.4 million from December 31, 1996 to June 30, 1997 was primarily due to the public sale in April 1997 of an aggregate of approximately 3.7 million shares of the Company's Common Stock, resulting in net proceeds to the Company of approximately $71 million. The Company incurred capital expenditures of $1.4 million for the three months ended June 30, 1997 compared to $4.0 million for the same period in 1996. The capital expenditures made in the 1997 period were primarily for purchases of capital equipment, consisting of laboratory, manufacturing, and computer equipment, and the construction of the Company's manufacturing plant for GLIADEL and other polymers under development. The capital expenditures made in the 1996 period were primarily for the construction of the Company's polymer manufacturing plant and tenant improvements for research and development laboratories and administrative offices. In addition, funds were used to purchase capital equipment, consisting of laboratory, manufacturing and computer equipment. Construction of the Company's research and development laboratories and administrative offices was substantially completed in November 1996. The Company had available approximately $700,000 at June 30, 1997 under its existing loan agreements with Signet Bank to finance the remaining tenant improvements related to the construction of laboratories and related areas. To finance capital equipment, the Company finalized a $5.0 million operating lease arrangement with General Electric Capital Corporation in September 1996 for the financing of certain equipment. Such financing, along with other sources of funds, is expected to provide for the Company's equipment needs at least through the third quarter of 1997. At June 30, 1997, $1.8 million was available under this arrangement with General Electric Capital Corporation to lease additional equipment. During the remainder of 1997 and 1998, the Company expects to make additional capital expenditures of approximately $3.7 million to expand the Company's GLIADEL manufacturing and other polymer development plant capacity if, among other factors, demand for GLIADEL supports such expansion. The Company expects to use the funds available under its $7.5 million loan agreement with RPR to fund the expansion. As of January 2, 1997, $4.0 million became available under the loan agreement; the remainder is available no earlier than 12 nor later than 18 months following funding of the initial tranche. Any 14 15 GUILFORD PHARMACEUTICALS INC. AND SUBSIDIARIES principal amounts borrowed under this loan agreement are due five years from the date borrowed and will carry an interest rate equal to the lowest rate paid by RPR from time to time on its most senior indebtedness. No amounts were outstanding under this loan at June 30, 1997. The Company will require substantial funds in order to continue its research and development programs and preclinical and clinical testing and to manufacture and, where applicable, market its products. The Company's capital requirements depend on numerous factors, including the progress of its research and development programs, the progress of preclinical and clinical testing, 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 the Company's existing research relationships, the ability of the Company to establish collaborative arrangements, the development of collaborative and licensing agreements and other arrangements and the progress of manufacturing scale-up efforts. The Company believes that its existing resources, including the net proceeds of its April 1997 public stock offering and the interest earned thereon, will be sufficient to fund the Company's activities until at least the end of the first quarter of 2000. There can be no assurance, however, that changes in the Company's research and development and commercialization plans or other factors affecting the Company's operating expenses including potential acquisitions will not result in the expenditure of these proceeds and the Company's other resources before that time. The Company anticipates that it will fund future capital requirements through a combination of its existing working capital, revenues (including product sales, royalty income, and milestones/licensing fees) generated under its agreements with RPR relating to GLIADEL, public or private financing (as necessary), additional collaborative or other research and development agreements, commercialization and marketing arrangements with corporate partners or other potential sources. The Company's ability to raise future capital on acceptable terms is dependent on conditions in the public and private equity markets and the performance of the Company, as well as the overall performance of other companies in the biopharmaceutical and biotechnology sectors. There can be no assurance that any required future financing arrangements will be available on acceptable terms, or at all. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not Applicable 15 16 GUILFORD PHARMACEUTICALS INC. AND SUBSIDIARIES PART II. - OTHER INFORMATION Item 1. Legal Proceedings: None Item 2. Changes In Securities: None Item 3. Defaults in Senior Securities: None Item 4. Submission of Matters to a Vote of Security Holders A. April 1, 1997 Special Meeting of Stockholders The Company held a Special Meeting of Stockholders on April 1, 1997 to consider and act on a proposal to amend the Company's Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock from 20,000,000 shares to 40,000,000 shares. The vote was as follows:
In Favor Opposed Abstained Broker Non-Votes -------------------------------------------------------------- 10,421,285 127,802 20,858 6,246
16 17 GUILFORD PHARMACEUTICALS INC. AND SUBSIDIARIES B. May 21, 1997 Annual Meeting of Stockholders The Company's Annual Meeting of Stockholder was held on May 21, 1997. The following individuals were elected to the Company's Board of Directors to hold office for the ensuing year:
Nominee For Against ------------------------------------------------------------ Craig R. Smith, M.D. 9,751,226 61,625 Solomon H. Snyder, M.D. 9,751,226 61,625 Richard L. Casey 9,751,226 61,615 W. Leigh Thompson, M.D., Ph.D. 9,751,226 61,625 Elizabeth M. Greetham 9,751,226 61,625 George L. Bunting, Jr. 9,751,226 61,625
In addition, the following proposals were approved as follows: Proposal to amend the Company's 1993 Employee Share Option and Restricted Share Plan, as amended:
For Against Abstained ------------------------------------------- 8,892,669 888,846 31,336
Proposal to ratify the selection of KPMG Peat Marwick as the Company's independent auditors for the fiscal year ending December 31, 1997.
For Against Abstained ------------------------------------------- 9,796,468 4,125 12,358
Item 5. Other Information: None 17 18 GUILFORD PHARMACEUTICALS INC. AND SUBSIDIARIES Item 6. Exhibits and Reports on Form 8-K: A. Exhibits
Exhibit No. Description - ----------- ----------- 3.03 Certificate of Amendment to Amended and Restated Certificate of Incorporation (incorporated by reference to Current Report on Form 8-K filed April 4, 1997) 10.43 Lease Agreement, dated June 9, 1997 between SN Properties Inc. and the Company 10.44* Development and Phase III Clinical Trial Supply Agreement, dated May 22, 1997 between MDS Nordion Inc. and MDS Nordion S.A., on the one hand, and the Company, on the other hand 10.45 Non-Qualified Stock Option Agreement , dated April 1, 1997 with David R. Savello, Ph.D. 10.46 Amendment to Directors' Stock Option Plan 11.2 Statement Re: Computation of Earnings (Loss) Per Share 27.2 Financial Data Schedule
- ------------------------- * Confidential Treatment has been requested with respect to certain portions of this document. B. Report on Form 8-K On April 4, 1997, the Company filed a current report on Form 8-K, the purpose of which was to further update the description of the common stock of the Company contained in its Form 8-A, filed under the Securities Exchange Act of 1934, as revised and supplemented by amendments or reports filed for the purpose of updating that description. The description of the common stock was modified to reflect the filing of the amendment, on April 1, 1997, to the Company's Amended and Restated Certificate of Incorporation increasing the number of authorized shares of common stock from 20,000,000 shares to 40,000,000 shares. A copy of that amendment was filed as an exhibit to the Form 8-K. 18 19 GUILFORD PHARMACEUTICALS INC. AND SUBSIDIARIES 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: August 13, 1997 /s/ Craig R. Smith, M.D. ------------------------------------------------- Craig R. Smith, M.D. President and CEO Date: August 13, 1997 /s/ Andrew R. Jordan ------------------------------------------------- Andrew R. Jordan Senior Vice President and Chief Financial Officer (Principal Accounting Officer) 19 EX-10.43 2 LEASE AGREEMENT 1 Exhibit 10.43 LEASE AGREEMENT BY AND BETWEEN SN PROPERTIES INC. AND GUILFORD PHARMACEUTICALS INC. FREEPORT CENTRE BALTIMORE, MARYLAND 2 TABLE OF CONTENTS
Article Page - ------- ---- I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 II. PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 III. TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 IV. BASE RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 V. OPERATING CHARGES AND REAL ESTATE TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 VI. USE OF PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 VII. ASSIGNMENT AND SUBLETTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 VIII. MAINTENANCE AND REPAIRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 IX. ALTERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 X. SIGNS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 XI. SECURITY DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 XII. INSPECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 XIII. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 XIV. SERVICES AND UTILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 XV. LIABILITY OF LANDLORD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 XVI. RULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 XVII. DAMAGE OR DESTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 XVIII. CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 XIX. DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 XX. BANKRUPTCY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 XXI. SUBORDINATION; NON-DISTURBANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 XXII. HOLDING OVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 XXIII. COVENANTS OF LANDLORD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 XXIV. COMMON AREAS AND PARKING AREAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 XXV. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
EXHIBIT A -- Description of the Building EXHIBIT B -- Plan Showing Premises 3 LEASE AGREEMENT (Freeport Centre) THIS LEASE, made this 9th day of June, 1997, by and between SN PROPERTIES INC., a Delaware corporation having an address at 2450 Bayshore Parkway Mountain View, California 94403 ("Landlord"), and GUILFORD PHARMACEUTICALS INC., a Delaware corporation having an address at 6611 Tributary Street, Baltimore, Maryland ("Tenant"), WITNESSETH, THAT WHEREAS: (1) Landlord is the owner of the "Building" as hereinafter described in Exhibit A attached hereto, and Ground Lessee of the parcel of land described in Exhibit A. By a Lease Agreement dated August 11, 1982, as amended by a First Amendment of Lease dated September 27, 1989, and by a Second Amendment of Lease dated February 22nd, 1995 (said Lease, as so amended, referred to herein as the "Ground Lease"), the Landlord has leased from The Mayor and City Council of Baltimore all of that real property in Baltimore City, Maryland, which is referred to in the Ground Lease (the "Land"); and (2) The parties hereto desire that Tenant lease from Landlord on the terms and subject to the conditions set forth herein the "Premises" as hereinafter defined. NOW, THEREFORE, IN CONSIDERATION of the entry into this Lease by the parties hereto and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged by each party hereto, Landlord hereby leases the Premises to Tenant and Tenant hereby leases the Premises from Landlord, ON THE TERMS AND SUBJECT TO THE CONDITIONS set forth here: I. DEFINITIONS (a) "Building": the Building described in Exhibit A attached hereto. (b) Premises: the Premises consisting of approximately Sixteen Thousand Two Hundred (16,200) square feet (the "Premises Square Footage") as described in Article II below. (c) Lease Term: See Article III below. (d) Lease Commencement Date: the later of (i) June 1, 1997 or (ii) the business day immediately following completion of the Repairs. 4 (e) Base Rent: during each month of the Lease Term, Tenant shall pay the Base Rent which is Two Dollars and Fifty Cents ($2.50) multiplied by the Premises Square Footage of the Premises (i.e., $40,500.00 per month). The Base Rent shall be due and payable in equal monthly installments in advance on the first day of each month during the Lease Year. If the Lease Commencement Date is not the first day of a month, then the Base Rent from the Lease Commencement Date until the first day of the following month shall be prorated on a per diem basis at the rate of one-thirtieth (1/30th) of the monthly installment of the Base Rent payable during the first month, and Tenant shall pay such prorated installment of the Base Rent on the Lease Commencement Date. (f) Tenant Name and Address for Notices: Andrew R. Jordan, Chief Financial Officer, Guilford Pharmaceuticals Inc., 6611 Tributary Street, Baltimore, Maryland 21224, with a copy to Thomas C. Seoh, General Counsel, Guilford Pharmaceuticals Inc., 6611 Tributary Street, Baltimore, Maryland 21224. II. PREMISES A. Tenant leases the Premises from Landlord for the term and upon the conditions and covenants herein. The Premises are outlined on Exhibit B. Tenant will have the non-exclusive right to use the common and public areas of the Building and the public areas, including the parking areas (collectively "Common Areas"). The lease of the Premises does not include the right to use the roof of the Building. B. All existing telephone lines will be available for Tenant's use, so long as Tenant pays for the cost of monthly telephone service. Landlord also agrees that Tenant shall during the Lease Term have access to and rights to use and administer the operation of the System 75PBX switch located in the Building. C. Tenant leases the Premises on the assumption the Premises are in a condition for use as functional laboratory space and conforming with applicable safety regulations. For purposes of this Lease "applicable safety regulations" shall have the meaning set forth on Schedule II.C, attached hereto and incorporated herein by reference. Landlord is engaged in making certain repairs (the "Repairs") to the Premises which are due to be completed on or before June 15, 1997. Tenant shall have the right for a period of ten (10) days commencing at the later of the date such Repairs are actually completed or June 15, 1997 to conduct inspections of the Premises to confirm that the Premises meet the conditions required by the preceding sentences. If Tenant notifies Landlord in writing that it believes the Premises do not meet such conditions, Landlord shall within five (5) days elect in writing whether to correct such conditions or to decline to correct such conditions, and within - 2 - 5 five (5) days thereafter Tenant shall elect either to accept the Premises with the correction, or to terminate this Lease with no obligation to Landlord hereunder, including to pay any rental amounts and Landlord shall, subject to Article XI, promptly return to Tenant any security deposit theretofore paid by Tenant to Landlord hereunder. Failure of Tenant to send such notice shall be deemed to be an election to accept the Premises with the correction. Landlord has agreed to make and in such event Landlord shall promptly correct such conditions. III. TERM A. The Lease Term shall commence on the Lease Commencement Date hereof. The Lease shall be for a term extending until midnight on December 31, 1998. If Tenant is not in default and is actually occupying the Premises, Tenant may renew the Lease on the Premises for an initial renewal period of three (3) months, exercisable by Tenant at least sixty (60) days prior to December 31, 1998. If Tenant is not in default and is actually occupying the Premises, Tenant may renew the Lease on the Premises for a subsequent renewal period of three (3) additional months, exercisable by Tenant at least sixty (60) days prior to March 31, 1999. IV. BASE RENT A. During each month of the Lease Term, Tenant shall pay the Base Rent. B. The Base Rent shall be due and payable in equal monthly installments in advance on the first day of each month during the Lease Term. C. All sums payable by Tenant under this Lease shall be paid to Landlord in legal tender of the United States, at the address to which notices to Landlord are to be given or to such other party or such other address as Landlord may designate in writing. Landlord's acceptance of rent after it shall have become due and payable shall not excuse a delay upon any subsequent occasion or constitute a waiver of any rights. V. OPERATING CHARGES AND REAL ESTATE TAXES A. Tenant shall not be responsible for operating charges or real estate taxes. - 3 - 6 VI. USE OF PREMISES A. Tenant shall use the Premises solely for laboratory and general office purposes and for no other use or purpose. To the best of Landlord's knowledge, the Premises may be used for the permitted use and if the Premises may not be used for the permitted use, Tenant may immediately terminate this Lease on written notice. Tenant shall not use the Premises for any unlawful purpose or in any manner that will in Landlord's opinion constitute waste, nuisance or unreasonable annoyance to Landlord or any tenant of the Building. Tenant shall, excepting structural changes and improvements, comply with all present and future laws, ordinances, regulations and orders concerning the specific use and occupancy of the Premises and all machinery, equipment and furnishings therein. If any such law, ordinance, regulation or order requires an occupancy or use permit for the Premises, then Tenant shall obtain and keep current such permit at Tenant's expense and promptly deliver a copy thereof to Landlord. Use of the Premises is subject to all covenants, conditions and restrictions of record. B. Tenant shall pay all personal property taxes on Tenant's personal property. C. (a) Tenant shall not cause or permit any Hazardous Material to be generated, used, released, stored or disposed of in or about the Building; provided, however, that Tenant may use and store reasonable quantities of such materials as may be reasonably necessary for Tenant to conduct normal business operations in the Premises as permitted by Article VI.A. Hazardous Materials shall mean (a) "hazardous wastes," as defined by the Resource Conservation and Recovery Act of 1976, as amended from time to time, (b) "hazardous substances," as defined by the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time, (c) "toxic substances," as defined by the Toxic Substances Control Act, as amended from time to time, (d) "hazardous materials," as defined by the Hazardous Materials Transportation Act, as amended from time to time, (e) oil or other petroleum products, (f) chlorofluorocarbons, and (g) any substance whose presence could be detrimental to the Building or hazardous to health or the environment, including, without limitation, any flammable, combustible, dangerous or explosive liquid or material. Notwithstanding the termination of this Lease, Tenant shall indemnify and hold Landlord, its employees and agents harmless from and against any damage, injury, loss, liability, charge, demand or claim based on or arising out of the presence or removal of, or failure to remove, any Hazardous Material generated, used, released, stored or disposed of by Tenant or any Invitee (as defined in Section VIII. A.) in or about the Building. Landlord or Landlord's other tenants shall be responsible for Hazardous Materials in all other portions of the Building. - 4 - 7 (b) Tenant shall notify Landlord in writing immediately after Tenant becomes aware of the fact that (i) any provision of this Section VI.C. has been violated, (ii) there has been a leak, spill, deposit, release, discharge or disposal (collectively, a "Leak") of any Hazardous Material in or about the Building, (iii) radon gas or urea formaldehyde has been detected in or about the Building, or (iv) any portion of the Building is subject to a third party claim or action, or threat thereof, arising in connection with any Hazardous Material or arising in connection with Tenant's operations in or about the Building (in which case Tenant shall also provide Landlord with copies of all correspondence to or from third parties regarding such claims or actions). (c) If Tenant shall violate any provision of this Section, then, in addition to all of Landlord's other rights and remedies set forth in this Lease, Landlord shall have the right to cause Tenant to immediately commence and diligently pursue remediation of any Leak in or about the Building and the right to enter the Premises at any time for the purpose of remediating any such Leak after reasonable notice to Tenant if Tenant does not promptly take remedial action. All costs and expenses incurred by Landlord in connection with any such remediation or entry shall be paid by Tenant as additional rent due hereunder. VII. ASSIGNMENT AND SUBLETTING Tenant shall not assign this Lease or any of Tenant's rights or obligations hereunder, or sublet or permit anyone to occupy the Premises or any part thereof, without Landlord's prior written consent, which consent may be granted or withheld in Landlord's reasonable discretion. No assignment or transfer of this Lease may be effected by operation of law or otherwise without Landlord's prior written consent. Any assignment, subletting or occupancy, Landlord's consent thereto or Landlord's collection or acceptance of rent from any assignee, subtenant or occupant shall not be construed as a waiver or release of Tenant from liability for the performance of any obligation to be performed under this Lease by Tenant. Any assignment, subletting or occupancy, Landlord's consent thereto or Landlord's collection or acceptance of rent from any assignee, subtenant or occupant shall not be construed as relieving Tenant or any assignee, subtenant or occupant from the obligation of obtaining Landlord's prior written consent to any subsequent assignment, subletting or occupancy. Tenant assigns to Landlord any rent due from any assignee, subtenant or occupant of Tenant as security for Tenant's performance of its obligations pursuant to this Lease. VIII. MAINTENANCE AND REPAIRS A. Except for structural repairs which shall be the obligation of Landlord unless necessitated by Tenant and which are - 5 - 8 not covered by Landlord's insurance, Tenant shall keep and maintain the Premises and all fixtures and equipment located therein in clean, safe and sanitary condition, shall take good care thereof and make all repairs thereto, shall suffer no waste or injury thereto, and at the expiration or earlier termination of the Lease Term, shall surrender the Premises in the same order and condition in which they were on the Lease Commencement Date, ordinary wear and tear and unavoidable damage by the elements excepted. Except as otherwise provided in Article XVII, all injury, breakage and damage to the Premises and to any other part of the Building or the Land caused by any act or omission of any invitee, agent, employee, subtenant, assignee, contractor, client, family member, licensee, customer or guest of Tenant (collectively, "Invitees") or Tenant, shall be repaired by and at Tenant's expense (to the extent not covered by Landlord's insurance), except that Landlord shall have the right at Landlord's option to make any such repair and to charge Tenant for all costs and expenses incurred in connection therewith. Landlord shall provide and install replacement tubes for Building standard fluorescent light fixtures; all other bulbs and tubes for the Premises shall be provided and installed at Tenant's expense. IX. ALTERATIONS A. Landlord is under no obligation to make any structural or other alterations, decorations, additions, improvements or other changes (collectively "Alterations") in or to the Premises. B. Tenant shall not make or permit anyone to make any Alterations in or to the Premises or the Building, without Landlord's prior written consent, which consent may be granted or withheld in Landlord's sole and absolute discretion provided Landlord agrees not to unreasonably withhold its consent to requested Alterations to decorative features and non-structural alterations which do not affect or alter mechanical, electrical or plumbing systems of the Building. Any Alteration made by Tenant shall be made: (a) in a good, workmanlike, first-class and prompt manner; (b) using new materials only; (c) by a licensed contractor and in accordance with plans and specifications approved in advance in writing by Landlord; (d) in accordance with all applicable legal requirements and requirements of any insurance company insuring the Building or portion thereof; (e) after having obtained any required consent of the holder of any Mortgage (as defined in Section XXI.A.); (f) after Tenant has obtained public liability and workmen's compensation insurance policies approved in writing by Landlord; and (g) after delivering to Landlord written, unconditional waivers of mechanics' and materialmen's liens against the Premises and the Building from all proposed contractors, subcontractors, laborers and material suppliers for all work and materials in connection with such Alteration. If any lien (or a petition to establish such lien) is filed in connection with any - 6 - 9 Alteration, then such lien (or petition) shall be discharged by Tenant at Tenant's expense within twenty (20) days thereafter by the payment thereof or filing of a bond acceptable to Landlord. If Landlord gives its consent to the making of any Alteration, then such consent shall not be deemed to constitute Landlord's consent to subject its interest in the Premises, the Building or the Land to any mechanic's or materialman's lien which may be filed in connection therewith. C. If any Alteration is made without Landlord's prior written consent, then Landlord shall have the right at Tenant's expense to remove and correct such Alteration and restore the Premises and the Building to their condition immediately prior thereto or to require Tenant to do the same. Provided Tenant delivers a specific notice so requesting prior to the making of an Alteration, Landlord will respond to such notice as to whether Tenant shall be required to remove the Alteration at the end of the Term. All Alterations to the Premises or the Building made by either party shall immediately become Landlord's property and shall remain upon and be surrendered with the Premises as a part thereof at the expiration or earlier termination of the Lease Term; provided, however, that if Tenant is not in default under this Lease, then Tenant shall have the right to remove, prior to the expiration or earlier termination of the Lease Term, all movable furniture, furnishings and equipment installed in the Premises solely at Tenant's expense, and except that Tenant shall be required to remove all Alterations to the Premises or the Building which Landlord designates in writing for removal. After notice and the right of Tenant to perform such obligations, Landlord shall have the right to repair at Tenant's expense all damage and injury to the Premises or the Building caused by such removal or to require Tenant to do the same. If any such furniture, furnishing or equipment is not removed by Tenant prior to the expiration or earlier termination of the Lease Term, then the same shall become Landlord's property and shall be surrendered with the Premises as a part thereof; provided, however, that Landlord shall have after ten (10) days written notice the right to remove from the Premises at Tenant's expense such furniture, furnishing or equipment and any Alteration which Landlord designates in writing for removal. X. SIGNS A. Landlord will list Tenant's name in the Building directory, if any. No other sign, advertisement or notice referring to Tenant shall be painted, affixed or otherwise displayed on any part of the exterior or interior of the Building (including windows and doors) without the prior written approval of Landlord, which may be granted or withheld in Landlord's sole and absolute discretion. If any such item that has not been approved by Landlord is so displayed, then Landlord shall have the right to remove such item at Tenant's expense or to require Tenant to do the same. - 7 - 10 XI. SECURITY DEPOSIT Tenant shall pay to Landlord within ten (10) days of execution and delivery hereof a security deposit in the amount of one month's rent to be held by Landlord as security for Tenant's full and faithful performance of Tenant's obligations under this Lease. Provided Tenant has fulfilled its obligations under this Lease and turns the Premises over to Landlord at the end of the Lease Term (or upon termination of this Lease by Tenant under Section II.C) in the condition required by this Lease, Landlord shall promptly return Tenant's security deposit. XII. INSPECTION A. After at least twenty-four (24) hours advance notice to Tenant, Tenant shall permit Landlord and its designees to enter the Premises during normal business hours accompanied by a representative of Tenant, without charge therefor and without diminution of the rent payable by Tenant, to inspect the Premises, to exhibit the Premises to brokers, prospective tenants, lenders, purchasers and others, and to make such alterations and repairs as Landlord may deem necessary. In connection with any such entry, Landlord shall use reasonable efforts not to unreasonably disrupt or interfere with Tenant's normal business operations in the Premises. XIII. INSURANCE A. Tenant shall not conduct or permit to be conducted any activity or place any item in or about the Building or Common Areas which may increase the rate of any insurance on the Building or Common Areas. If any increase in the rate of such insurance is due to any such activity or item, then (whether or not Landlord has consented to such activity or item) Tenant shall pay as additional rent hereunder the amount of such increase. The statement of any insurance company or insurance rating organization (or other organization exercising similar functions in connection with the prevention of fires or the correction of hazardous conditions) that such an increase is due to any such activity or item shall be conclusive evidence thereof. B. Throughout the Lease Term, Tenant shall maintain with a company licensed to do business in the jurisdiction in which the Building is located, approved by Landlord and having a rating equal to or exceeding A:XI from Best's Insurance Guide: (a) commercial general liability insurance (written on an occurrence basis) including contractual liability coverage insuring the obligations assumed by Tenant pursuant to Section XV.B., premises and operations coverage, broad form property damage coverage and independent contractors coverage, and containing an endorsement for personal injury, (b) all-risk property insurance, (c) comprehensive - 8 - 11 automobile liability insurance (covering automobiles owned by Tenant), (d) worker's compensation insurance, and (e) employer's liability insurance. Such commercial general liability insurance shall be in minimum amounts typically carried by prudent tenants engaged in similar operations, but in no event shall be in an amount less than Two Million and 00/100 Dollars ($2,000,000.00). Tenant's liability policy shall be primary and non-contributory with respect to liabilities assumed under the Lease. Such automobile liability insurance shall be in an amount not less than One Million and 00/100 Dollars ($1,000,000.00) for each accident. Such worker's compensation insurance shall carry minimum limits as defined in the laws of the jurisdiction in which the Building is located (as the same may be amended from time to time). Such employer's liability insurance shall be in an amount not less than One Million and 00/100 Dollars ($1,000,000.00) for each accident, One Million and 00/100 Dollars ($1,000,000.00) disease-policy limit, and One Million and 00/100 Dollars ($1,000,000.00) disease-each employee. All such insurance shall name Landlord its parent or affiliates, the manager of the Building, and the holder of any Mortgage as additional insureds or loss payees (as applicable) except for the coverages set forth in clauses (c) through and including (e) above; contain an endorsement specifying that such insurance shall remain in full force and effect notwithstanding that the insured may have waived its right of action against any person prior to the occurrence of a loss; with respect to the coverage set forth in clause (b) above only, provide that the insurer waives all right of recovery by way of subrogation against Landlord, its trustees, agents and employees (said Landlord, its trustees, agents and employees being hereinafter collectively referred to as "Landlord Entities"); and contain an endorsement prohibiting cancellation, failure to renew, reduction in amount of insurance or change of coverage (1) as to the interests of Landlord or the holder of any Mortgage by reason of any act or omission of Tenant, and (2) without the insurer's giving Landlord thirty (30) days' prior written notice of such proposed action. Further, with respect to the coverage set forth in clause (a) above, Tenant agrees, within ninety (90) days following the execution and delivery of this Lease, to request of its insurers that each such insurer consent to waiving all right of recovery by way of subrogation against the Landlord Entities; provided, however, that Tenant shall not be required to secure such consent if it shall be conditioned on payment of an increased premium by Tenant under its existing policies or other increased cost under such policies, unless Landlord agrees to pay such increase in premium or other increased costs. Landlord reserves the right from time to time to require Tenant to obtain higher minimum amounts of insurance. Tenant shall deliver a certificate of such insurance and receipts evidencing payment of the premium for such insurance (and, upon request, copies of all required insurance policies, including endorsements and declarations) to Landlord on or before the Lease Commencement Date and at least annually thereafter. - 9 - 12 C. Landlord shall carry property damage insurance on the Building in such amounts as Landlord shall determine. XIV. SERVICES AND UTILITIES A. Landlord will furnish to the Premises air-conditioning and heating during the seasons they are required in Landlord's reasonable judgment but in any event between the hours of 8:00 a.m. and 6:00 p.m. Mondays through Fridays and 9:00 a.m. to 1:00 p.m. on Saturdays and Sundays. XV. LIABILITY OF LANDLORD A. Landlord, its employees and agents, if any, shall not be liable to Tenant, any Invitee or any other person or entity for any damage (including indirect and consequential damage), injury, loss or claim (including claims for the interruption of or loss to business) based on or arising out of any cause whatsoever (except as otherwise provided in this Section), including without limitation the following unless due to the negligence of Landlord: repair to any portion of the Premises or the Building or Common Areas; interruption in the use of the Premises or Common Areas or any equipment therein; any accident or damage resulting from any use or operation (by Landlord, Tenant or any other person or entity) of elevators or heating, cooling, electrical, sewerage or plumbing equipment or apparatus; termination of this Lease by reason of damage to the Premises or the Building or Common Areas; fire, robbery, theft, vandalism, mysterious disappearance or any other casualty; actions of any other tenant of the Building or of any other person or entity; failure or inability to furnish any service specified in this Lease; and leakage in any part of the Premises or the Building or Common Areas from water, rain, ice or snow that may leak into, or flow from, any part of the Premises or the Building or Common Areas, or from drains, pipes or plumbing fixtures in the Premises or the Building or Common Areas. If any condition exists which may be the basis of a claim of constructive eviction, then Tenant shall give Landlord written notice thereof and a reasonable opportunity to correct such condition, and in the interim Tenant shall not claim that it has been constructively evicted or is entitled to a rent abatement. Any property stored or placed by Tenant or Invitees in or about the Premises or the Building or Common Areas shall be at the sole risk of Tenant, and Landlord shall not in any manner be held responsible therefor. If any employee of Landlord receives any package or article delivered for Tenant, then such employee shall be acting as Tenant's agent for such purpose and not as Landlord's agent. For purposes of this Article, the term "Building" shall be deemed to include the Land. B. Tenant shall reimburse Landlord for, and shall indemnify, defend upon request and hold Landlord, its employees and agents harmless from and against all costs, damages, claims, lia- - 10 - 13 bilities and expenses (including attorneys' fees), losses and court costs suffered by or claimed against Landlord, directly or indirectly, based on or arising out of, in whole or in part, (a) use and occupancy of the Premises or the business conducted therein, (b) any act or omission of Tenant or any Invitee, (c) any breach of Tenant's obligations under this Lease, including failure to surrender the Premises upon the expiration or earlier termination of the Lease Term, or (d) any entry by Tenant or any Invitee upon the Land prior to the Lease Commencement Date. C. If any landlord hereunder transfers the Land or Building or such landlord's interest therein, then such landlord shall not be liable for any obligation or liability based on or arising out of any event or condition occurring on or after the date of such transfer provided no such transfer shall permit the transferee to disturb Tenant's peaceful occupancy and holding of the Premises. Within five (5) days after any such transferee's request, Tenant shall attorn to such transferee and execute, acknowledge and deliver any requisite or appropriate document submitted to Tenant confirming such attornment. D. Tenant shall not have the right to offset or deduct the amount allegedly owed to Tenant pursuant to any claim against Landlord from any rent or other sum payable to Landlord. Tenant's sole remedy for recovering upon such claim shall be to institute an independent action against Landlord, which action shall not be consolidated with any action of Landlord. XVI. RULES A. Tenant and Invitees shall abide by and observe any reasonable rules which apply to all tenants on a non-discriminatory basis that Landlord may promulgate from time to time for the operation and maintenance of the Building and Common Areas, provided that notice thereof is given and such rule is not inconsistent with the provisions of this Lease. Nothing contained in this Lease shall be construed as imposing upon Landlord any duty to enforce such rules or any condition or covenant contained in any other lease against any other tenant. XVII. DAMAGE OR DESTRUCTION A. If the Premises or the Building are totally or partially damaged or destroyed thereby rendering the Premises totally or partially inaccessible or unusable, then Landlord shall diligently repair and restore the Premises and the Building to substantially the same condition they were in prior to such damage or destruction; provided, however, that if in Landlord's reasonable judgment restoration cannot be completed within thirty (30) days after the occurrence of such damage or destruction (taking into account the time needed for effecting a satisfactory settlement - 11 - 14 with any insurance company involved, removal of debris, preparation of plans and issuance of all required governmental permits), then Landlord or Tenant shall have the right, at its sole option, to terminate this Lease as of the thirtieth (30th) day after such damage or destruction by giving written notice of termination. XVIII. CONDEMNATION A. If any portion of the Premises or occupancy thereof shall be taken or condemned by any governmental or quasi-governmental authority for any public or quasi-public use or purpose or sold under threat of such a taking or condemnation (collectively, "condemned"), then this Lease shall terminate on the date title thereto vests in such authority and rent shall be apportioned as of such date. B. All awards, damages and other compensation paid by such authority on account of such condemnation shall belong to Landlord, and Tenant assigns to Landlord all rights to such awards, damages and compensation. Tenant shall not make any claim against Landlord or the authority for any portion of such award, damages or compensation attributable to damage to the Premises, value of the unexpired portion of the Lease Term, loss of profits or goodwill, leasehold improvements or severance damages. Nothing contained herein, however, shall prevent Tenant from pursuing a separate claim against the authority for the value of furnishings and trade fixtures installed in the Premises at Tenant's expense and for relocation expenses, provided that such claim shall in no way diminish the award, damages or compensation payable to or recoverable by Landlord in connection with such condemnation. XIX. DEFAULT A. Each of the following shall constitute an Event of Default: (a) Tenant's failure to make when due any payment of the Base Rent, or other sum, which failure continues for ten (10) days after written notice from Landlord; (b) Tenant's failure to perform or observe any other covenant or condition of this Lease which failure continues for twenty (20) days after Tenant's receipt of written notice thereof; provided, however, that if such cure cannot be effected within such twenty (20) day period and Tenant begins such cure and is pursuing such cure in good faith and with diligence and continuity during such twenty (20) day period, then Tenant shall have such additional time up to an additional forty-five (45) days as is reasonably necessary to effect such cure; (c) Tenant's failure to occupy continuously the Premises; (d) an Event of Bankruptcy as specified in Article XX with respect to Tenant; or (e) Tenant's dissolution or liquidation. - 12 - 15 B. If there shall be an Event of Default, including an Event of Default prior to the Lease Commencement Date, then the provisions of this Section shall apply. Landlord shall have the right, at its sole option, to terminate this Lease. In addition, with or without terminating this Lease, Landlord may re-enter, terminate Tenant's right of possession and take possession of the Premises. The provisions of this Article shall operate as a notice to quit, any other notice to quit or of Landlord's intention to re-enter the Premises being expressly waived. If necessary, Landlord may proceed to recover possession of the Premises under and by virtue of the laws of the jurisdiction in which the Building is located, or by such other proceedings, including re-entry and possession, as may be applicable. If Landlord elects to terminate this Lease and/or elects to terminate Tenant's right of possession, then everything contained in this Lease to be done and performed by Landlord shall cease, without prejudice, however, to Tenant's liability for all rent and other sums accrued through the later of termination or Landlord's recovery of possession. Whether or not this Lease and/or Tenant's right of possession is terminated Landlord shall have the right to terminate any renewal or expansion right contained in this Lease and to grant or withhold any consent or approval pursuant to this Lease in its sole and absolute discretion and Landlord shall not be obligated to pay or credit to Tenant any amount due from Landlord to Tenant pursuant to this Lease. Landlord may relet the Premises or any part thereof, alone or together with other premises, for such term(s) (which may be greater or less than the period which otherwise would have constituted the balance of the Lease Term) and on such terms and conditions (which may include concessions or free rent and alterations of the Premises) as Landlord, in its sole discretion, may determine, but Landlord shall not be liable for, nor shall Tenant's obligations be diminished by reason of, Landlord's failure to relet the Premises or collect any rent due upon such reletting. Whether or not this Lease is terminated, Tenant nevertheless shall remain liable for any Base Rent, or damages which may be due or sustained prior to such default, all costs, fees and expenses (including without limitation reasonable attorneys' fees, brokerage fees and expenses incurred in placing the Premises in the condition in which the Premises were in upon commencement of the Lease Term hereunder) incurred by Landlord in pursuit of its remedies and in renting the Premises to others from time to time. Tenant shall also be liable for additional damages which at Landlord's election shall be either: (a) an amount equal to the Base Rent which would have become due during the remainder of the Lease Term, less the amount of rental, if any, which Landlord receives during such period from others to whom the Premises may be rented, in which case such damages shall be computed and payable in monthly installments, in advance, on the first day of each calendar month following Tenant's default and continuing until the date on which the Lease Term would have expired but for Tenant's default; provided, however, that if at the time of any reletting of the Premises there exists other space in the Building available for leasing, then the Premises shall be deemed the last space rented, - 13 - 16 even though the Premises may be relet prior to the date such other space is leased. Separate suits may be brought to collect any such damages for any month(s), and such suits shall not in any manner prejudice Landlord's right to collect any such damages for any subsequent month(s), or Landlord may defer any such suit until after the expiration of the Lease Term, in which event such suit shall be deemed not to have accrued until the expiration of the Lease Term; or (b) an amount equal to the present value (as of the date of Tenant's default) of the Base Rent and additional rent which would have become due during the remainder of the Lease Term, which damages shall be payable to Landlord in one lump sum on demand. For purpose of this Section, present value shall be computed by discounting at a rate equal to one (1) whole percentage point above the discount rate then in effect at the Federal Reserve Bank nearest to the Building. Tenant waives any right of redemption, re-entry or restoration of the operation of this Lease under any present or future law, including any such right which Tenant would otherwise have if Tenant shall be dispossessed for any cause. C. Landlord's rights and remedies set forth in this Lease are cumulative and in addition to Landlord's other rights and remedies at law or in equity, including those available as a result of any anticipatory breach of this Lease. Landlord's exercise of any such right or remedy shall not prevent the concurrent or subsequent exercise of any other right or remedy. Landlord's delay or failure to exercise or enforce any of Landlord's rights or remedies or Tenant's obligations shall not constitute a waiver of any such rights, remedies or obligations. Landlord shall not be deemed to have waived any default unless such waiver expressly is set forth in an instrument signed by Landlord. If Landlord waives in writing any default, then such waiver shall not be construed as a waiver of any covenant or condition set forth in this Lease except as to the specific circumstances described in such written waiver. Neither Tenant's payment of a lesser amount than the sum due hereunder nor Tenant's endorsement or statement on any check or letter accompanying such payment shall be deemed an accord and satisfaction, and Landlord may accept the same without prejudice to Landlord's right to recover the balance of such sum or to pursue any other remedy available to Landlord. Notwithstanding any request or designation by Tenant, Landlord may apply any payment received from Tenant to any payment then due. Landlord's re-entry and acceptance of keys shall not be considered an acceptance of a surrender of this Lease. D. If more than one natural person and/or entity shall execute this Lease as Tenant, then the liability of each such person or entity shall be joint and several. Similarly, if Tenant is a general partnership or other entity the partners or members of which are subject to personal liability, then the liability of each such partner or member shall be joint and several. - 14 - 17 E. If Tenant fails to make any payment to any third party or to do any act herein required to be made or done by Tenant, then Landlord may after ten (10) days prior written notice to Tenant which period shall be extended for non-monetary defaults for such period during which Tenant is proceeding in good faith to cure such default, but not to exceed forty-five (45) days, but shall not be required to, make such payment or do such act. Landlord's taking such action shall not be considered a cure of such failure by Tenant or prevent Landlord from pursuing any remedy it is otherwise entitled to in connection with such failure. If Landlord elects to make such payment or do such act, then all expenses incurred, plus interest thereon at a rate per annum (the "Default Rate") equal to five (5) whole percentage points higher than the prime rate published from time to time in the Money Rates section of the Wall Street Journal, from the date incurred to the date of payment thereof by Tenant, shall constitute additional rent. F. If Tenant fails to make any payment of the Base Rent or any other sum payable to Landlord on or before the date such payment is due and payable, then Tenant shall pay a late charge of five percent (5%) of the amount of such payment, provided that such late charge shall not be payable for the first instance only of such failure within any twelve (12) month period. In addition, such payment and such late fee shall bear interest at the Default Rate from the date such payment was due to the date of payment thereof. XX. BANKRUPTCY A. An Event of Bankruptcy is: (a) Tenant's, any Guarantor's or any general partner (a "General Partner") of Tenant's becoming insolvent, as that term is defined in Title 11 of the United States Code (the "Bankruptcy Code"), or under the insolvency laws of any state (the "Insolvency Laws"); (b) appointment of a receiver or custodian for any property of Tenant, any Guarantor or a General Partner, or the institution of a foreclosure or attachment action upon any property of Tenant, any Guarantor or a General Partner; (c) filing of a voluntary petition by Tenant, any Guarantor or a General Partner under the provisions of the Bankruptcy Code or Insolvency Laws; (d) filing of an involuntary petition against Tenant, any Guarantor or a General Partner as the subject debtor under the Bankruptcy Code or Insolvency Laws, which either (1) is not dismissed within sixty (60) days after filing, or (2) results in the issuance of an order for relief against the debtor; or (e) Tenant's, any Guarantor's or a General Partner's making or consenting to an assignment for the benefit of creditors or a composition of creditors. At any time upon not less than five (5) days' prior written notice, Tenant shall submit such information regarding the financial condition of Tenant, any Guarantor(s) and any General Partner(s) as Landlord may request. Tenant - 15 - 18 warrants that all such information heretofore or hereafter submitted is and shall be correct and complete. B. Upon occurrence of an Event of Bankruptcy, Landlord shall have all rights and remedies available pursuant to Article XIX; provided, however, that while a case (the "Case") in which Tenant is the subject debtor under the Bankruptcy Code is pending, Landlord's right to terminate this Lease shall be subject, to the extent required by the Bankruptcy Code, to any rights of Tenant or its trustee in bankruptcy (collectively, "Trustee") to assume or assign this Lease pursuant to the Bankruptcy Code. Trustee shall not have the right to assume or assign this Lease unless Trustee promptly (a) cures all defaults under this Lease, (b) compensates Landlord for damages incurred as a result of such defaults, (c) provides adequate assurance of future performance on the part of Tenant as debtor in possession or Tenant's assignee, and (d) complies with all other requirements of the Bankruptcy Code. If Trustee fails to assume or assign this Lease in accordance with the requirements of the Bankruptcy Code within sixty (60) days after the initiation of the Case, then Trustee shall be deemed to have rejected this Lease. Adequate assurance of future performance shall require that the following minimum criteria be met: (1) Tenant's gross receipts in the ordinary course of business during the thirty (30) days preceding the Case must be greater than ten (10) times the next monthly installment of the Base Rent and additional rent; (2) Both the average and median of Tenant's monthly gross receipts in the ordinary course of business during the seven (7) months preceding the Case must be greater than ten (10) times the next monthly installment of the Base Rent and additional rent; (3) Trustee must pay its estimated pro rata share of the cost of all services performed or provided by Landlord (whether directly or through agents or contractors and whether or not previously included as part of the Base Rent) in advance of the performance or provision of such services; (4) Trustee must agree that Tenant's business shall be conducted in a first-class manner, and that no liquidating sale, auction or other non-first-class business operation shall be conducted in the Premises; (5) Trustee must agree that the use of the Premises as stated in this Lease shall remain unchanged and that no prohibited use shall be permitted; (6) Trustee must agree that the assumption or assignment of this Lease shall not violate or affect the rights of other tenants in the Building and the Complex; (7) Trustee must pay at the time the next monthly installment of the Base Rent is due, in addition to such installment, an amount equal to the monthly installments of the Base Rent and additional rent due for the next six (6) months thereafter, such amount to be held as a security deposit; (8) Trustee must agree to pay, at any time Landlord draws on such security deposit, the amount necessary to restore such security deposit to its original amount; and (9) All assurances of future performance specified in the Bankruptcy Code must be provided. - 16 - 19 XXI. SUBORDINATION; NON-DISTURBANCE A. This Lease is subject and subordinate to the lien, provisions, operation and effect of all mortgages, deeds of trust, ground leases or other security instruments which may now or hereafter encumber the Building or the Land (collectively "Mortgages"), to all funds and indebtedness intended to be secured thereby, and to all renewals, extensions, modifications, recastings or refinancings thereof. The holder of any Mortgage to which this Lease is subordinate shall have the right (subject to any required approval of the holders of any superior Mortgage) at any time to declare this Lease to be superior to the lien, provisions, operation and effect of such Mortgage and Tenant shall execute, acknowledge and deliver all documents required by such holder in confirmation thereof. B. In confirmation of the foregoing subordination, Tenant shall at Landlord's request promptly execute any requisite or appropriate document. Tenant appoints Landlord as Tenant's attorney-in-fact to execute any such document for Tenant. Tenant waives the provisions of any statute or rule of law now or hereafter in effect which may give or purport to give Tenant any right to terminate or otherwise adversely affect this Lease or Tenant's obligations in the event any such foreclosure proceeding is prosecuted or completed or in the event the Land, the Building or Landlord's interest therein is sold at a foreclosure sale or by deed in lieu of foreclosure. If this Lease is not extinguished upon such sale or by the purchaser following such sale, then, at the request of such purchaser, Tenant shall attorn to such purchaser and shall recognize such purchaser as the landlord under this Lease. Upon such attornment such purchaser shall not be (a) bound by any payment of the Base Rent or additional rent more than one (1) month in advance, (b) bound by any amendment of this Lease made without the consent of the holder of each Mortgage existing as of the date of such amendment, (c) liable for damages for any breach, act or omission of any prior landlord, or (d) subject to any offsets or defenses which Tenant might have against any prior landlord. Within five (5) days after the request of such purchaser, Tenant shall execute, acknowledge and deliver any requisite or appropriate document submitted to Tenant confirming such attornment. C. If any lender providing construction or permanent financing or any refinancing for the Land or the Building requires, as a condition of such financing or refinancing, that modifications to this Lease be obtained, and provided that such modifications (a) are reasonable, (b) do not adversely affect in a material manner Tenant's use of the Premises as herein permitted, and (c) do not increase the rent and other sums to be paid by Tenant, then Landlord may submit to Tenant an amendment to this Lease incorporating such required modifications, and Tenant shall not unreasonably withhold its approval to any such requested modifications and shall notify Landlord of any such modifications which Tenant believes are - 17 - 20 unreasonable within fifteen (15) days after receipt of request for approval. Tenant shall upon approval execute, acknowledge and deliver such amendment to Landlord within five (5) days after Tenant's receipt thereof. D. In the event of any act or omission by Landlord which would give Tenant the right to cancel or terminate this Lease, or to abate the payment of rent, or offset against the payment of rent or to claim a partial or total eviction, Tenant will not exercise any such right until (i) it shall have given written notice of the act or omission to Landlord and to the holder(s) of Mortgages whose names and addresses have been furnished to Tenant, and (ii) a reasonable period of time, in light both of the time required to affect a remedy and of the impact of the act or omission on Tenant's business operations on the Premises, for remedying the act or omission has elapsed following the giving of the notice (which reasonable period of time shall in no event be less than the period to which would be entitled under this Lease or otherwise, after similar notice to effect such remedy plus thirty (30), during which time Landlord and such holder(s), or either of them, their agents or employees, will be entitled to enter upon the Premises and do therein whatever may be necessary to remedy the act or omission. E. In the event Landlord sells or otherwise transfers title to the Building (and/or the Land underlying the Building; or assigns the Landlord's right, title and interest in, to and under the Ground Lease) at public or private auction, or otherwise, Landlord agrees to sell or otherwise transfer title to the Building and/or Land, as aforesaid, subject to Tenant's rights under this Lease and the advertisement of sale or transfer shall make specific reference to this Lease so as to place any potential purchaser on notice of Tenant's rights under this Lease. XXII. HOLDING OVER A. Tenant acknowledges that it is extremely important that Landlord have substantial advance notice of the date on which Tenant will vacate the Premises, because Landlord will (a) require an extensive period to locate a replacement tenant and (b) plan its entire leasing and renovation program for the Building in reliance on its lease expiration dates. Tenant also acknowledges that if Tenant fails to surrender the Premises at the expiration or earlier termination of the Lease Term, then it will be conclusively presumed that the value to Tenant of remaining in possession, and the loss that will be suffered by Landlord as a result thereof, far exceed the Base Rent and additional rent that would have been payable had the Lease Term continued during such holdover period. Therefore, if Tenant does not immediately surrender the Premises upon the expiration or earlier termination of the Lease Term, then the rent shall be increased to equal the greater of (1) fair market rent for the Premises, or (2) one and one-half (1 1/2) times the Base - 18 - 21 Rent, additional rent and other sums that would have been payable pursuant to the provisions of this Lease if the Lease Term had continued during such holdover period. Such rent shall be computed on a monthly basis and shall be payable on the first day of such holdover period and the first day of each calendar month thereafter during such holdover period until the Premises have been vacated. Landlord's acceptance of such rent shall not in any manner adversely affect Landlord's other rights and remedies, including Landlord's right to evict Tenant and to recover damages. During any such holdover period, Tenant shall be deemed to be forcibly detaining the Premises as a tenant at sufferance under applicable state law. If Landlord is required to take any action to regain possession of the Premises, then Tenant shall reimburse Landlord for all expenses, including, without limitation, attorneys' fees incurred by Landlord in connection with such action. The provisions in the two (2) immediately preceding sentences shall not excuse Tenant's rental obligations under this Article. XXIII. COVENANTS OF LANDLORD A. Landlord covenants that if Tenant shall perform timely all of its obligations hereunder, then subject to the provisions of this Lease Tenant shall during the Lease Term peaceably and quietly occupy and enjoy the full possession of the Premises without hindrance by Landlord or any party claiming through or under Landlord. B. Landlord reserves the following rights: (a) to change the street address and name of the Building; (b) to change the arrangement and location of entrances, passageways, doors, doorways, corridors, elevators, stairs, toilets or other public parts of the Building or Common Areas; (c) to erect, use and maintain pipes, conduits and structural supports in and through the Premises provided Landlord shall use reasonable efforts not to interfere with Tenant's business on the Premises; (d) to grant to anyone the exclusive right to conduct any particular business in the Building or Common Areas not inconsistent with Tenant's permitted use of the Premises; (e) the exclusive right to use and/or lease the roof areas, the sidewalks and other exterior areas; (f) to resubdivide the Land or to combine the Land with other lands; (g) to relocate any parking area; and (h) to construct improvements (including kiosks) on the Land and in the Common Areas of the Building. Landlord may exercise any or all of the foregoing rights without being deemed to be guilty of an eviction, actual or constructive, or a disturbance of Tenant's business or use or occupancy of the Premises. Tenant shall have the right of approval, not to be unreasonably withheld or delayed, and which shall be deemed to have been granted if notice of disapproval is not given within ten (10) days after request for approval of any such change or modification which would adversely impact Tenant's occupancy or enjoyment of the Premises. - 19 - 22 XXIV. COMMON AREAS AND PARKING AREAS A. Tenant and its employees shall observe reasonable safety precautions in the use of any Common Areas and shall at all times abide by all traffic and parking control signs posted by Landlord and all rules and regulations governing the use of common areas promulgated by Landlord. B. Landlord does not assume any responsibility, and shall not be held liable, for any damage or loss to any automobile or personal property in or about any Common Areas, or for any injury sustained by any person in or about any common area. C. Included in the Common Areas are surface parking areas located near the Building. Subject to all of the terms and conditions of this Lease, Tenant shall have the right, on a non-exclusive basis, to use such parking areas for parking by its employees and visitors. Tenant's, tenant's employees' and tenant's visitors' rights to parking space shall be limited to the use of a reasonable proportion of all available spaces, such determination to be made by Landlord. XXV. GENERAL PROVISIONS A. Tenant acknowledges that neither Landlord nor any broker, agent or employee of Landlord has made any representation or promise with respect to the Premises or the Building except as herein expressly set forth, and no right, privilege, easement or license is being acquired by Tenant except as herein expressly set forth. B. Nothing contained in this Lease shall be construed as creating a partnership or joint venture between Landlord and Tenant or to create any other relationship other than that of landlord and tenant. C. Landlord and Tenant each warrants that in connection with this Lease it has not employed or dealt with any broker, agent or finder, other than the other party hereto. Landlord and Tenant, as the case may be (the "Indemnifying Party") shall indemnify and hold the other party hereto harmless from and against any claim for brokerage or other commissions asserted by any broker, agent or finder employed by the Indemnifying Party or with whom the Indemnifying Party has dealt. D. At any time and from time to time upon five (5) days' prior written notice, Tenant and each subtenant, assignee or occupant of Tenant shall execute, acknowledge and deliver to Landlord and/or any other person or entity designated by Landlord, a written statement certifying: (a) that this Lease is unmodified and in full force and effect (or if there have been modifications, that this Lease is in full force and effect as modified and stating the modifications); (b) the dates to which the rent and any other - 20 - 23 charges have been paid; (c) whether or not Landlord is in default in the performance of any obligation, and if so, specifying the nature of such default; (d) the address to which notices are to be sent; (e) that this Lease is subject and subordinate to all Mortgages encumbering the Building or the Land; (f) that Tenant has accepted the Premises and that all work thereto has been completed (or if such work has not been completed, specifying the incomplete work); and (g) such other matters as Landlord may reasonably request. Any such statement may be relied upon by any owner of the Building or the Land, any prospective purchaser of the Building or the Land, any holder or prospective holder of a Mortgage or any other person or entity. Tenant acknowledges that time is of the essence to the delivery of such statements and that Tenant's failure to deliver timely such statements may cause substantial damages resulting from, for example, delays in obtaining financing secured by the Land or the Building. E. LANDLORD AND TENANT WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT IN CONNECTION WITH ANY MATTER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, THE LANDLORD-TENANT RELATIONSHIP, TENANT'S USE OR OCCUPANCY OF THE PREMISES OR ANY CLAIM OF INJURY OR DAMAGE. TENANT CONSENTS TO SERVICE OF PROCESS AND ANY PLEADING RELATING TO ANY SUCH ACTION AT THE PREMISES; PROVIDED, HOWEVER, THAT NOTHING HEREIN SHALL BE CONSTRUED AS REQUIRING SUCH SERVICE AT THE PREMISES. LANDLORD, TENANT, ALL GUARANTORS AND ALL GENERAL PARTNERS WAIVE ANY OBJECTION TO THE VENUE OF ANY ACTION FILED IN ANY COURT SITUATED IN THE JURISDICTION IN WHICH THE BUILDING IS LOCATED AND WAIVE ANY RIGHT UNDER THE DOCTRINE OF FORUM NON CONVENIENS OR OTHERWISE, TO TRANSFER ANY SUCH ACTION FILED IN ANY SUCH COURT TO ANY OTHER COURT. F. All notices or other required communications shall be in writing and shall be deemed duly given when delivered in person (with receipt therefor), or when sent by certified or registered mail, return receipt requested, postage prepaid, to the following addresses: (a) if to Landlord, SN Properties Inc., c/o John H. Newman, Vice President of Legal Affairs, Scios Nova, Inc., 2450 Bayshore Parkway Mountain View, California 94043, with copy to Kevin McPherson, Director of Finance, Scios Nova, Inc., 2450 Bayshore Parkway Mountain View, California 94043; (b) if to Tenant, to Andrew R. Jordan, Chief Financial Officer, Guilford Pharmaceuticals Inc., 6611 Tributary Street, Baltimore, Maryland 21224 with a copy to Thomas C. Seoh, General Counsel, Guilford Pharmaceuticals Inc., 6611 Tributary Street, Baltimore, Maryland 21224. Either party may change its address for the giving of notices by notice given in accordance with this Section. If Landlord or the holder of any Mortgage notifies Tenant that a copy of each notice to Landlord shall be sent to such holder at a specified address, then Tenant shall send (in the manner specified in this Section and at the same time such notice is sent to Landlord) a copy of each such notice to such holder, and no such - 21 - 24 notice shall be considered duly sent unless such copy is so sent to such holder. G. Each provision of this Lease shall be valid and enforceable to the fullest extent permitted by law. If any provision of this Lease or the application thereof to any person or circumstance shall to any extent be invalid or unenforceable, then such provision shall be deemed to be replaced by the valid and enforceable provision most substantively similar to such invalid or unenforceable provision, and the remainder of this Lease and the application of such provision to persons or circumstances other than those as to which it is invalid or unenforceable shall not be affected thereby. H. Feminine, masculine or neuter pronouns shall be substituted for those of another form, and the plural or singular shall be substituted for the other number, in any place in which the context may require such substitution. I. The provisions of this Lease shall be binding upon and inure to the benefit of the parties and each of their respective representatives, successors and assigns, subject to the provisions herein restricting assignment or subletting. J. This Lease contains and embodies the entire agreement of the parties hereto and supersedes all prior agreements, negotiations, letters of intent, proposals, representations, warranties, understandings and discussions between the parties hereto. Any representation, inducement, warranty, understanding or agreement that is not contained in this Lease shall be of no force or effect. This Lease may be modified or changed in any manner only by an instrument signed by both parties. K. This Lease shall be governed by the laws of the jurisdiction in which the Building is located. L. Article and section headings are used for convenience and shall not be considered when construing this Lease. M. The submission of an unsigned copy of this document to Tenant shall not constitute an offer or option to lease the Premises. This Lease shall become effective and binding only upon execution and delivery by both Landlord and Tenant. N. This Lease may be executed in multiple counterparts, each of which shall be deemed an original and all of which together constitute one and the same document. O. This Lease shall not be recorded. P. Landlord reserves the right to make reasonable changes and modifications to the plans and specifications for the Building or Common Areas without Tenant's consent, provided such - 22 - 25 changes or modifications do not materially and adversely change the character of the Building or Common Areas. Q. Except as otherwise provided in this Lease, any additional rent or other sum owed by Tenant to Landlord, and any cost, expense, damage or liability incurred by Landlord for which Tenant is liable, shall be considered additional rent payable pursuant to this Lease and paid by Tenant no later than ten (10) days after the date Landlord notifies Tenant of the amount thereof. R. Tenant's liabilities existing as of the expiration or earlier termination of the Lease Term shall survive such expiration or earlier termination. S. If Landlord is in any way delayed or prevented from performing any obligation due to fire, act of God, governmental act or failure to act, strike, labor dispute, inability to procure materials or any cause beyond Landlord's reasonable control (whether similar or dissimilar to the foregoing events), then the time for performance of such obligation shall be excused for the period of such delay or prevention and extended for a period equal to the period of such delay or prevention. T. Landlord's title is and always shall be paramount to the interest of Tenant, and nothing herein contained shall empower Tenant to do any act which can, shall, or may encumber Landlord's title. U. The deletion of any printed, typed or other portion of this Lease shall not be deemed to reflect the parties' intention to contradict such deleted portion. Such deleted portion shall be deemed not to have been inserted in this Lease. V. The person executing and delivering this Lease on Tenant's behalf and on Landlord's behalf warrants that such person is duly authorized to so act. IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease under seal as of the day and year first above written. WITNESS or ATTEST: SN PROPERTIES INC. By:/s/ JOHN NEWMAN (SEAL) - ----------------------------- --------------------------- - Landlord - - 23 - 26 WITNESS: TENANT: GUILFORD PHARMACEUTICALS INC. By:/s/ JOHN P. BRENNAN (SEAL) - ----------------------------- --------------------------- - 24 - 27 FREEPORT CENTRE EXHIBIT A DESCRIPTION OF THE BUILDING 28 FREEPORT CENTRE EXHIBIT B PLAN SHOWING PREMISES 29 SCHEDULE II.C. For purposes of the Lease Agreement "applicable safety regulations" shall mean the following coeds and standards: - Building Officials & Code Administration (BOCA) National Code - National Fire Protection Association (NFPA) Codes - National Electrical Codes - American Society pf Heating, Refrigeration and Air Conditioning Engineers (ASHRAE) Codes - American National Standards Institute (ANSI) Standards - Code of Federal Regulations: Title 29, Section 1910 (Occupational and Health Standards), Subparts: D (Walking-Working Surfaces), E (means of Egress), G (Occupational Health and Environmental Control), L (Fire Protection), O (Machinery and Machine Guarding), Q (Welding, Cutting and Brazing) and S (Electrical) - Code of Maryland Regulations, Title 5 (Occupational Safety and Health) - local statues pertaining to building and occupancy requirements Specifically, with respect to fume hood, the Landlord should ensure, at minimum, that the hoods are performing to meet the ANSI standard Z9.5-1992. Fire detection, suppression and alert systems should be maintained and functioning as specified in NFPA Codes. Other pieces of safety-related equipment owned by, or lease to, the Landlord that remain on the Premises, such as fire cabinets, eye washes and emergency showers, etc., also shall be properly maintained by Landlord. B-2 EX-10.44 3 CLINICAL TRIAL SUPPLY AGREEMENT 1 * CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION Exhibit 10.44 DEVELOPMENT AND PHASE III CLINICAL TRIAL SUPPLY AGREEMENT This DEVELOPMENT AND PHASE III CLINICAL TRIAL SUPPLY AGREEMENT is dated and effective as of May 22, 1997 by and between GUILFORD PHARMACEUTICALS INC., of 6611 Tributary Street, Baltimore, Maryland 21224 U.S.A, together with its subsidiaries and affiliates in which it owns more than 50% of the voting equity, "Guilford", on the one hand, and MDS NORDION INC., of 447 March Road, P.O. Box 13500, Kanata, Ontario K2K 1X8 Canada ("Nordion North America") and its wholly-owned subsidiary MDS NORDION S.A., of Zoning Industriel - B-6220, Fleurus, Belgium ("Nordion Europe"), on the other hand. As used herein the term "Nordion" shall include Nordion North America and Nordion Europe. WHEREAS, Guilford is the exclusive worldwide licensee of patent rights relating to GPI-200 (formerly referred to as I-123 radiolabeled RTI-55, or I-123 B-CIT) and is developing same as an imaging diagnostic for Parkinson's disease under the name, DOPASCAN(R) Injection (the "Product"); and WHEREAS, Guilford and Nordion North America are parties to a Development and Supply Agreement, dated as of October 12, 1995 (the "U.S. Phase II Agreement"), pursuant to which Nordion North America validated certain equipment, developed the process and filed a Type II Drug Master File with the U.S. Food & Drug Administration ("FDA") in respect of, and supplied Product in connection with, a U.S. Phase II multi-center clinical trial for the Product sponsored by Guilford; and WHEREAS, Guilford and Nordion North America and Nordion Europe are parties to a DOPASCAN Supply Agreement, dated as of July 10, 1996 (the "European Phase II Agreement"), pursuant to which Nordion Europe validated certain equipment, developed the process and filed an Exportation Dossier with appropriate European regulatory authorities in respect of, and agreed to supply Products in connection with, a European Phase II multi-center clinical trial for the Product sponsored by Guilford scheduled to commence in April 1997; and WHEREAS, Guilford seeks a third party contractor to supply Product for Phase III clinical trials to be conducted in the United States and Canada ("North American Phase III Clinical Trials") and Europe ("European Phase III Clinical Trials"; the North American and European Phase III Clinical Trials collectively referred to as the "Phase III Clinical Trials"); and WHEREAS, Guilford desires to retain Nordion, and Nordion desires to be retained by Guilford, to perform certain development work and to synthesize and supply the Product for Phase III Clinical Trials on the terms and conditions contained herein; NOW, THEREFORE, in consideration of the agreements, mutual representations and covenants contained herein, the parties hereto agree as follows: 2 * CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION 1. Scope of Work. (a) Nordion North America and Nordion Europe will, using due care and commercially reasonable best efforts, (i) perform the work (the "Development Work") specified to be performed by each in this Agreement relating to equipment procurement, configuration and validation in order to establish two (2) GMP (as defined below) facilities (one in North America and one in Europe), each with deliverable capacity of at least [ * ] Batches (as defined below) of [ * ] to [ * ] Vials (as defined below) per week, (ii) perform regulatory documentation respecting the supply of the Product for use in the North American and European Phase III Clinical Trials, respectively, as specified in Schedules A-1 and A-2, attached hereto, utilizing the equipment specified in Schedules B-1 and B-2, attached hereto (the procurement of each piece of which is subject to the prior approval of Guilford) ("Equipment"), (iii) implement and maintain the policies and procedures and take the other actions as set forth on Schedule G attached hereto, and as may be requested by Guilford from time to time, and (iv) during the term of this Agreement, provide monthly written reports (each due on the last business day of each month) on the progress of its performance under this Agreement, and discuss same from time to time with Guilford as Guilford may request, but no less frequently than once every two weeks. The parties understand and agree that the Development Work and the supply of Product contemplated by this Agreement are to support Guilford's product, clinical and regulatory development plans respecting the Product, and ultimately for obtaining clearance from the FDA and other governmental authorities in Canada and Europe for marketing of the Product and to establish facilities, manufacturing processes and quality control/quality assurance procedures and systems that will be found in compliance with GMP (as defined below) and other applicable regulations in the event of an inspection by the FDA and/or other regulatory authorities in Canada or Europe. For purposes of this Agreement, "Europe" and "European" shall refer to each of the countries of the European Economic Area (Belgium, Italy, Denmark, Luxembourg, France, Netherlands, Germany, Portugal, Greece, Spain, Ireland, United Kingdom, Sweden, Finland, Austria, Iceland, Liechtenstein and Norway) and Switzerland. Nordion will comply with all applicable U.S., Canadian and European Good Laboratory Practices ("GLP"), U.S., Canadian and European Good Manufacturing Practices ("GMP") and other applicable U.S., Canadian and European regulations in order for the Development Work and the supplied Product to meet all applicable regulatory requirements for supply of the Product for, and the conduct and completion of, the Phase III Clinical Trials. Guilford shall prepare any FDA Chemistry, Manufacturing and Controls ("CMC") section of any filing with FDA for the Product and shall have reasonable access to all information contained in the Drug Master Files and Exportation Dossier (and necessary or desirable amendments thereto) relating to the Product and shall be entitled to copies thereof at no additional cost. Nordion Europe shall also prepare any European equivalent to the FDA CMC section for any filing with European regulatory authorities for the Product in the following European countries: Belgium, Austria, Germany, France, England and Denmark; and Nordion Europe will prepare such submissions in accordance with European Pharmacopeia requirements and monographs. Nordion hereby covenants and agrees to update and amend all Drug Master Files relating to the Product on a timely basis in accordance with Schedules A-1 and A-2 and in compliance with all applicable regulations. In addition, promptly - 2 - 3 * CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION following completion of the Development Work to be performed by it (but in no event more than 90 days thereafter), each of Nordion North America and Nordion Europe shall submit to Guilford a Phase III Development Report reasonably acceptable to Guilford in form and content sufficient for satisfactory examination by the FDA and other Canadian and European regulatory authorities. For purposes of guidance, Guilford would generally deem acceptable a Phase III Development Report containing substantially equivalent categories of information, in substantially equivalent detail, as was contained in the Nordion Europe Phase II Development Report under the European Phase II Agreement. (b) Guilford will be responsible, either directly or at Guilford's election through a third party, for supplying Nordion with sufficient quantities of GPI-202 (formerly referred to as RTI-89) and the appropriate reference standards as listed in Schedules F-1 and F-2, respectively, attached hereto from time to time for Nordion to timely perform its obligations under this Agreement, at no charge to Nordion, F.O.B. Nordion's Vancouver, B.C. manufacturing facility, for supply for the North American Phase III Clinical Trials and F.O.B. Nordion's Fleurus, Belgium manufacturing facility, for supply for the European Phase III Clinical Trials. (c) Title to any and all Equipment procured by Nordion hereunder and other items that may be procured hereunder at the direction of, and funded by, Guilford shall vest exclusively in Guilford, which shall have unencumbered rights, title and interest in all such Equipment and other items at all times. For purposes of this subsection 1(c), the term "Equipment" shall also include any equipment procured by Nordion under the U.S. Phase II Agreement and the European Phase II Agreement (lists of which have been previously supplied to Guilford). Nordion shall deliver to Guilford copies of all receipts for, written descriptions of and series numbers for all Equipment and other items that may be procured hereunder at the direction of, and funded by, Guilford. 2. Schedule. Nordion shall use commercially reasonable best efforts to perform and complete the Development Work, and the various components thereof, such that the Product shall be available for shipment in compliance with all applicable laws and regulations for the Phase III Clinical Trials on or before [ * ], pursuant to the timetable set forth in Schedules A-1 and A-2, respectively, attached hereto, it being understood that Guilford has a strategic objective to start the North American Phase III Clinical Trials by the [ * ], provided that such deadlines will be adjusted appropriately due to delay caused by Guilford or force majeure under Section 10 below. The parties agree that, in view of the Development Work and the importance to Guilford of the supply of Products pursuant to this Agreement, time and quality are of the essence in this Agreement. 3. Consideration. (a) As complete and exclusive consideration for the performance of the Development Work set forth on Schedules A-1 and A-2, respectively, attached hereto and the other activities and covenants set forth on Schedule G attached hereto, Guilford agrees to pay Nordion the amounts, at the times, set forth on Schedule C attached hereto (the "Consideration"), which shall be earned and payable in accordance with that Schedule, as well as amounts related to the procurement and - 3 - 4 * CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION installation of the Equipment as provided in Section 3(b) below. As a condition to the payment of any of the Consideration upon the attainment of milestones set forth on Schedule C, attached hereto, an authorized representative of Nordion appointed in writing by an authorized corporate officer of Nordion (and in this connection Nordion hereby notifies Guilford that Mr. Jerry Porter shall be an authorized representative of Nordion for this purpose) shall certify in writing to Guilford that such milestone has been completed in accordance with the terms of this Agreement, such certification to be accompanied by applicable supporting documentation (e.g., invoices of Equipment or reports embodying the completed milestone). Guilford shall pay to Nordion the applicable milestone amount within thirty (30) days following receipt of any such certification and accompanying documentation, provided that Guilford may (without prejudice to any subsequent Audit and resulting adjustment, if any, which Guilford may conduct under the terms of this Agreement), during such thirty (30) calendar day period visit and review the relevant site to verify the achievement of the relevant milestones. If there is a dispute over the completion of the applicable milestone, the parties will try to resolve the dispute in good faith pursuant to the terms of Section 24 below to determine whether the relevant milestone has been met. (b) In addition to the [ * ] Consideration for the Development Work set forth in Schedule C attached hereto, Nordion will procure and install the Equipment as listed on Schedule B-1 and Schedule B-2 attached hereto, estimated to cost [ * ]. Within ten (10) business days of the signing of this Agreement, Guilford will deliver to Nordion an initial advance of [ * ] (the "First Advance"), which amount will be held by Nordion for the benefit of Guilford and shall be used solely to procure the Equipment as contemplated by this Agreement. As and when such funds need to be disbursed in order to procure the Equipment, Nordion will fax Guilford seeking authorization for Nordion to expend monies out of such funds, together with documentation (whether invoice, specifications or otherwise) relating to the Equipment reasonably sufficient for Guilford to confirm that such Equipment is necessary or desirable for the purposes of this Agreement. Upon return fax authorization signed by a representative of Guilford, Nordion will disburse funds from such advance for the relevant Equipment. When the First Advance has been or is about to be depleted, Nordion will notify Guilford, and Guilford will deliver the remaining [ * ] (the "Second Advance") which will be retained and disbursed in the same manner as the First Advance. During or following procurement of the Equipment, Guilford retains the right to review and audit the procurement of the Equipment. Any unused funds advanced by Guilford to Nordion as aforesaid will be returned to Guilford following completion of the installation of the Equipment. 4. Production and Supply for Phase III Clinical Trials. (a) During the term of this Agreement, following satisfactory completion of the Development Work, Guilford agrees to purchase from Nordion, and (i) Nordion North America agrees to produce and supply, Guilford's entire requirement of Product for the North American Phase III Clinical Trials, and (ii) Nordion Europe agrees to produce and supply Guilford's entire requirement of Product for the European Phase III Clinical Trials. In the event of termination of this Agreement by Guilford for other than "good reason" ("good reason" being breach of this Agreement by Nordion or failure by Nordion, other than due to the fault of Guilford, to timely achieve the - 4 - 5 * CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION objectives of the Development Work set forth in this Agreement) prior to completion of the Development Work by Nordion, Guilford will pay to Nordion within thirty (30) days of such termination a cancellation fee of [ * ]. In the event of termination of this Agreement by Guilford for other than "good reason" following completion of the Development Work by Nordion, Guilford must elect in writing within thirty (30) days of such termination either to: (i) order and take delivery of at least [ * ] Batches from Nordion North America and [ * ] Batches from Nordion Europe (inclusive of Batches already ordered by Guilford), on the terms contained in Section 5, on or before the later of [ * ]; or (ii) pay the aforesaid [ * ] cancellation fee (reduced proportionately to the extent Guilford actually takes delivery of and pays for Batches less than [ * ] Batches). In case Guilford elects to pay the cancellation fee instead of ordering the minimum number of Batches, such fee will be paid within ten (10) days of such election. Nordion warrants that all Product supplied by Nordion shall meet the specifications set forth in Schedules D-1 and D-2, respectively, attached hereto as delivered at the clinical sites (the "Specifications") and further represents and warrants that the Specifications and the methodologies used to synthesize the Product for use in Phase III Clinical Trials shall meet all applicable U.S., Canadian and European regulatory requirements in order to conduct such clinical trials and to support Guilford's (or its designee's) application for clearance to market the Product in the U.S., Canada and Europe. Nordion will use its commercially reasonable best efforts to supply Product in the quantities, at the times and at the locations designated by Guilford in connection with the Phase III Clinical Trials. (b) Guilford or its designate shall forward orders to Nordion North America, Attention: Customer Service in the case of the North American Phase III Clinical Trials and to Nordion Europe in the case of the European Phase III Clinical Trials, in each case setting out the recipient of the Product, shipping address, protocol number, IND number, either the applicable U.S. Nuclear Regulatory Commission Materials License Number or state equivalent of the receiving institution, IRS number and contact name, address and telephone and fax numbers of the receiving institution, quantity and other applicable instructions and information. Nordion shall process such orders and ship the requested Product by major overnight courier (such as Federal Express, DHL, UPS, etc.) in the case of shipments made by Nordion North America (with title and risk relating to the Product transferring, as between Nordion North America and Guilford, with Nordion North America's delivery of Product to such common carrier), and in accordance with Annex D-2 attached hereto in the case of shipments made by Nordion Europe (with title and risk relating to the Product transferring, as between Nordion Europe and Guilford, with Nordion Europe's delivery of Product to mutually agreed carriers in the Nordion Logistics Network as contemplated in said Annex D-2), in all cases appropriately packaged and documented for arrival at the place and time designated in Guilford's order, provided that Guilford gives at least 48 hours notice of such shipment. Upon Nordion's request, Guilford will obtain and provide to Nordion, prior to shipment by Nordion, documentation evidencing proper legal authority for the receipt and possession of the Product by the recipient. (c) With respect to clinical supply for the North American and European Phase III Clinical Trials, Nordion commits to manufacture and deliver to the clinical sites Product in batches of at least [ * ] shippable vials ([ * ] vials gross, net of [ * ] vials for quality control and other - 5 - 6 * CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION purposes) per batch (each, a "Batch"), each vial containing a single patient dose of the Product (each, a "Vial") as specified in the following sentence, utilizing [ * ] Ci of I-123 per Batch. Each Vial shall constitute one dose of Product suitable for administration at the clinical site, meeting the radioactivity (5 mCi) and other Specifications at "Reference" (i.e., noon, Pacific Time at the clinical site on the day immediately following Product synthesis, in the case of shipments by Nordion North America, and noon Central European time on the day immediately following Product synthesis, in the case of shipments by Nordion Europe). This number of Vials per Batch for the Phase III North American and European Clinical Trials constitutes a [ * ] labeling yield with I-123. Nordion will use its commercially reasonable best efforts to raise this to [ * ] labeling yield as contemplated in Section 4(k) below. If Nordion manufactures a Batch which yields more than [ * ] shippable Vials, without Guilford having requested such excess, such additional Vials shall be included at no additional cost as part of that Batch. If Nordion manufactures a Batch which, despite Nordion's good faith efforts, yields less than [ * ] shippable Vials, Nordion will nevertheless manufacture at its cost additional Product to make up such shortfall if Guilford has earmarked clinical subjects (up to [ * ], or such larger number previously agreed by the parties) in excess of the shippable Vials yielded by the ordered Batch. If Nordion manufactures a Batch which, despite Nordion's good faith efforts, yields less than [ * ] shippable Vials, Nordion will not be required to manufacture additional Product at its cost to make up such shortfall if Guilford did not have [ * ] clinical subjects earmarked for such Batch. Prior to (and where appropriate, following) each shipment, Nordion shall (i) test each Batch in accordance with the protocol set forth on Schedules E-1 and E-2, respectively, attached hereto and as may be modified by Guilford from time to time with Nordion's consent, such consent not to be unreasonably withheld, (ii) furnish Guilford (attention: Manager of Product Quality Assurance) immediately upon manufacture of each Batch and quality control release and shipment thereof with a certificate of analysis, test result sheets, Product reconciliation and yield information, copies of label specimens, all investigations and deviations, and sterility test results (such test results due within 21 days of Batch release) (collectively, the "Batch Documentation") and other documents in form and content satisfactory to Guilford, and (iii) retain all relevant records pertaining thereto as may be required by GMP and other applicable regulations. Any changes to Schedules E-1 and E-2 requested by Nordion shall be subject to the prior written approval of Guilford and all such changes much comply with all local regulatory requirements and monographs. (d) In addition to the monthly written reports and the semi-weekly discussions contemplated in Section 1(a) above, Nordion will at Guilford's request during the term of this Agreement meet with Guilford and/or its designated representatives at one or both of Nordion's Product manufacturing sites no less frequently than once each calendar quarter to conduct a project review of Nordion's progress and performance under this Agreement. (e) Guilford shall have the right, at reasonable times and upon reasonable prior notice, to inspect Nordion's development and manufacturing facilities in order to confirm Nordion's compliance with GLP, GMP and testing protocols, conduct quality control/quality assurance audits - 6 - 7 * CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION of the Development Work and/or the supply of Product under this Agreement and otherwise in connection with regulatory matters relating to the conduct of the Phase III Clinical Trials ("Audits"). Guilford may conduct such Audits itself or through a third party, in which latter case such third party shall execute an appropriate confidentiality agreement undertaking to keep confidential any confidential or proprietary information about Guilford or Nordion learned in connection with such Audit. In the event that Guilford observes a condition which causes it to believe that any of the Product or its method of development and production, tests, record keeping or other matters is not in compliance with GLP, GMP or other regulatory standards applicable to the development of the Product and the conduct of the Phase III Clinical Trials, appropriate representatives of Nordion and Guilford shall immediately meet (by conference telephone call or otherwise as appropriate) to discuss the concerns and any additions or modifications to bring the facilities, procedures or other matters into compliance. The parties agree to use their commercially reasonable best efforts to take all steps necessary to bring the production of the Product into full compliance with all applicable regulations and administrative requirements as quickly as possible. In the event the parties cannot resolve the issue of compliance, a duly qualified third party expert in applicable regulatory requirements acceptable to both parties and bound by confidentiality, shall be engaged to resolve the issue, and the decision by such third party expert shall be binding. The cost incurred with respect to said expert shall be borne equally by Nordion and Guilford. In the event the parties cannot agree on such an expert within 10 days of either party's receipt of written notification to the other of the inability to resolve such issue of compliance, the parties agree that a qualified internal or external expert named by The Weinberg Group, Inc. of Washington, D.C., bound by confidentiality, shall be accepted by the parties to make such determination. (f) Nordion agrees to permit the FDA, Canadian regulatory authorities, European regulatory authorities and/or Guilford (and/or its designated agents) to inspect Nordion's Product development, manufacturing and related facilities in Vancouver and Fleurus and to cooperate fully with the FDA, Canadian regulatory authorities, European regulatory authorities and/or Guilford in connection with the conduct of the Phase III Clinical Trials and the regulatory filings relating thereto, including furnishing, at Nordion's cost, information to the FDA or such Canadian or European regulatory authority at Guilford's, the FDA's or the Canadian or European regulatory authority's request, as the case may be. The parties acknowledge and agree that representatives of Guilford will not take part in any inspection by the FDA, Canadian regulatory authorities or European regulatory authorities unless so requested by the inspecting regulatory authority. (g) Without limiting any rights or remedies available to Guilford, in the event that Product not meeting the Specifications or otherwise defective is shipped by Nordion, Guilford, at the request of Nordion, shall have the right to cause such Product to be returned to Nordion or destroyed, and Nordion shall on 24 hours notice as requested by Guilford or its designate re-ship conforming Product, all at Nordion's sole cost and expense. (h) Guilford, either directly or through a third party, shall supply sufficient quantities of GPI-202 and reference standards, as set forth in Section 1(b) above. - 7 - 8 * CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION (i) Nordion will use due care in and be responsible for the setup, operation, calibration and maintenance of the Equipment, normal wear and tear excepted. (j) In furtherance of the obligations set forth in paragraphs (e) and (f) of this Section 4 above, Nordion agrees to implement the policies and procedures and to take the actions set forth on Schedule G attached. Nordion further agrees that Guilford may, with Nordion's consent, such consent not to be unreasonably withheld, modify the terms of Schedule-G from time to time upon written notice to Nordion of consecutively numbered amendments to such schedule (i.e., G-1, G-2, etc.) in the event that Guilford deems it necessary or advisable to modify such policies and procedures or other actions to ensure that Nordion is able to meet its obligations under paragraph (d) and (e) above. The parties further acknowledge that the policies and procedures and other actions set forth in Schedule G (as it may be amended from time to time pursuant to the foregoing provisions) are designed to ensure that the Vancouver and Fleurus facilities of Nordion are found to be in compliance with GMP and other applicable regulations in the event of an inspection by the FDA and/or Canadian or European regulatory agencies, whether prior to or following clearance of a New Drug Application ("NDA") or other Canadian or European authorizations for marketing of the Product. (k) Nordion agrees to use its commercially reasonable best efforts during the Development Work or the supply of Phase III Product to achieve a labeling yield of [ * ] per batch utilizing [ * ] Ci of I-123, for a batch size of [ * ] shippable Vials ([ * ] Vials gross, net of [ * ] Vials for quality control) (the "Target Commercial Yield"). Nordion based its charge to Guilford for the Development Work on the assumption of [ * ] hours labor, [ * ] Ci of I-123 and [ * ] of out-of-pocket costs (excluding the Equipment). If Nordion is unable to achieve the planned results of the Development Work because of technical difficulties, or the Target Commercial Yield, after incurring [ * ] of the foregoing labor hours and Ci of I-123 and Guilford desires Nordion to continue trying to achieve the results of the Development Work or the Target Commercial Yield, Guilford will pay Nordion [ * ] per hour for each excess hour of applied labor and [ * ] for each Ci of I-123 (or pro rata portion thereof) in excess of said [ * ] of the assumed labor hours and I-123, and any out-of-pocket expenses in excess of said [ * ]. In addition, while the parties presently contemplate that the Equipment listed on Schedules B-1 and B-2 will be sufficient to successfully complete the Development Work and timely supply Product for the Phase III Clinical Trials, the parties will discuss any additional equipment needs and if mutually agreed, Guilford will pay for such additional equipment. 5. Price. (a) Independent of any of the Consideration paid by Guilford to Nordion, Guilford shall pay to Nordion during the Phase III Clinical Trials the following purchase prices based on quantities of Product shipped as follows: [ * ] per each Batch of a minimum of [ * ] shippable Vials (i.e., net of Vials needed for quality control or other purposes). In addition to the foregoing amounts, Guilford shall pay for up to 1 Ci of I-123 for each conforming Batch at a rate of [ * ] per [ * ] Ci of I-123 actually used to manufacture such Batch. Any excess amounts of I-123 used to manufacture - 8 - 9 * CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION a Batch (unless due to Guilford's request for a Batch in excess of [ * ] shippable Vials) shall be at Nordion's expense. Such prices shall be exclusive of any additional shipping, handling, customs and all other charges attendant to delivery of Product at the clinical sites as contemplated in this Agreement, which charges shall be for the account of Guilford, provided that it is understood by the parties that the issue of for whose account such shipping, handling and other expenses will be in a commercial supply agreement respecting the Product, if any, shall be subject to any mutual agreement in a definitive commercial supply agreement. (b) Guilford agrees to pay for each Batch of Product manufactured pursuant to its order no later than 30 days following receipt of Nordion's duly completed invoice therefor and the Batch Documentation. 6. Commercial Supply Agreement. In the event that Guilford determines in its sole and exclusive discretion to file, and thereafter files, an NDA with the FDA or a dossier with the regulatory agency for any of the United Kingdom, France, Germany or Italy for marketing clearance for the Product during the term of this Agreement, the parties shall during a period of ninety (90) days following the first filing of any such regulatory submission (whether or not such ninety (90) day period extends beyond the term set in Section 7 below), engage in exclusive negotiations respecting a definitive commercial supply agreement for the Product. If the parties fail to agree, execute and exchange a definitive supply agreement within such 90 day negotiation period, Guilford shall thereafter be free to negotiate or enter into a supply agreement for the Product with any other party. 7. Term. This Agreement shall commence as of the date first appearing above and (unless earlier terminated in accordance with the terms hereof) shall expire on December 31, 2000. 8. Termination. (a) Prior to completion by Nordion of the Development Work, this Agreement may be terminated upon 30 days' written notice by Guilford for any reason. Upon receipt of any such termination notice, Nordion shall use its commercially reasonable best efforts to wind down the Development Work as quickly and economically as possible. Upon any such termination: (i) Nordion shall be entitled to all payments earned and due (or to become due) to Nordion as set forth in Schedule C attached hereto through such date of termination; (ii) Guilford shall reimburse Nordion for all direct out-of-pocket expenditures relating to performance of the Work not covered by clause (i) above, including any cancellation fees or penalties unavoidably incurred by Nordion, against supporting documentation in reasonable detail; and (iii) Guilford shall pay Nordion any cancellation fee which may be payable pursuant to Section 4(a) above. (b) Following completion of the Development Work, this Agreement may be terminated upon 30 days' written notice by Guilford in the event Guilford elects for any reason in its sole discretion to terminate the Phase III Clinical Trials, provided, however, that in the event - 9 - 10 * CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION Guilford determines to terminate either the North American Phase III Clinical Trials or the European Phase III, Guilford may, in its sole discretion, may terminate this Agreement under this subsection 8(b) solely with respect to Nordion North America or Nordion Europe, as the case may be. In the event of any such termination following completion of the Development Work, Guilford shall pay Nordion any cancellation fee which may be payable pursuant to Section 4(a) above. (c) This Agreement may be terminated by either party (i) upon material breach by the other and failure to cure within 30 days following written notice of demand to cure and (ii) following an Extended Force Majeure Event, and in each such case, without prejudice to any and all rights, remedies and defenses available to the parties hereto; provided, however, that Guilford, in its sole discretion, may terminate this Agreement under this subsection 8(c), solely with respect to either Nordion North America or Nordion Europe, in the event of an uncured material breach on the part of, or an Extended Force Majeure Event affecting, Nordion North America or Nordion Europe, respectively. For purposes of this subsection, "material breach" shall include, but not be limited to, the failure of Nordion to implement and maintain the policies and procedures or take the actions set forth on Schedule G attached hereto. (d) This Agreement may be terminated by either Guilford or Nordion North America in the event the other party (i) applies for or consents to the appointment of a receiver, conservator, trustee, liquidator, custodian or other judicial representative for itself or any substantial portion of its assets or properties; (ii) admits in writing its inability to pay its debts as they become due; (iii) makes an assignment for the benefit of its creditors; (iv) has an order for relief filed by a bankruptcy court for or against it or is adjudicated insolvent; or (v) files a voluntary petition admitting bankruptcy or an arrangement with creditors or takes advantage of any bankruptcy, insolvency, readjustment or debt, dissolution or liquidation law or statute, or files an answer admitting the material allegations of a petition filed against it in any proceeding; (vi) or a decree is entered by any court of competent jurisdiction approving a petition seeking reorganization or appointing a receiver, conservator, trustee, liquidator, custodian or other judicial representative, and such order, judgment or decree continues in effect for a period of sixty (60) consecutive days. (e) The accrued rights and obligations of the parties shall not be affected by any termination of this Agreement. Furthermore, upon termination of this Agreement for any reason by any party, and irrespective of any claims, rights or remedies Guilford or Nordion may have against the other under this Agreement, Nordion agrees to deliver immediately to Guilford: (i) subject to Section 20, below, all work product (including partial results, drafts and notes, in all tangible media including electronic format, works in progress and patents, know-how and other intellectual property) created or worked on by Nordion in, and relating directly to, the performance of its obligations under this Agreement; (ii) any inventory of Product or precursors thereto; (iii) any materials received from Guilford or other sources in order for Nordion to perform its obligations under this Agreement; (iv) all Equipment procured by Nordion (shipped in accordance with Guilford's instructions at Guilford's cost and risk), provided that, in the event removal of any semi-automatic dispenser purchased and commissioned by Nordion pursuant to this Agreement is not practical, the parties shall negotiate in good faith regarding a fair disposition of same; and (v) a - 10 - 11 * CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION report in reasonable detail outlining the status of the foregoing, and to do all things and execute documents as Guilford may request to transfer the Drug Master Files to Guilford or its designate, all so that such termination or the pursuit of any such claims, rights and remedies shall not interfere with the timely development of the Product by Guilford in its absolute discretion. 9. Indemnities. (a) Guilford, on the one hand, and Nordion, on the other, shall indemnify and hold harmless the other and such other's directors, officers, shareholders, employees, agents and representatives ("Indemnitees") from and against all losses, costs (including reasonable attorney fees and expenses, including allocated in-house legal costs) or damages suffered or incurred by Indemnitees (whether in respect of damage to or destruction of property, personal injury or death or claims therefor by third parties or otherwise) which may be caused by or arise from the breach of its obligations under this Agreement or its negligence or that of its directors, officers, employees, agents, or representatives; provided, however, that such recovery shall by reduced proportionately to the extent such losses, costs or damages are caused by the negligence, gross negligence, willful misconduct, or inaction of any Indemnitee. (b) If Nordion is subject to allegations of or sued for patent infringement or infringement of other intellectual property rights anywhere in the world with respect to its pre-clinical and clinical manufacture and distribution of the Product pursuant to the terms of this Agreement initiated by a third party asserting infringement of its rights respecting the Product, or if Guilford is subject to allegations of or sued for patent infringement or infringement of other intellectual property rights anywhere in the world initiated by a third party asserting infringement of its rights respecting the manufacturing methods or materiel (other than GPI-202 or the reference standards furnished to Nordion by Guilford) used by Nordion in its manufacture of the Product, then Guilford or Nordion, as the case may be, will indemnify the other and hold such indemnified party harmless and defend against such suits. Such indemnification is conditioned upon prompt notification by the indemnified party to the indemnifying party of such suit. The indemnifying party shall, at its expense and sole discretion, have control of such litigation and all matters related thereto, including settlement. The foregoing in this subsection 9(b) notwithstanding, Guilford shall not be liable to Nordion under such indemnity if such suit is based on the manufacture or use of the Product by Nordion in a manner not specified by the terms of this Agreement (e.g., manufacture of the Product not in compliance with the Specifications). (c) This Section 9 will survive any termination of this Agreement. 10. Force Majeure. Neither party shall be held liable to the other for default or delay in the performance of its obligations under this Agreement due to an act of God, accident, fire, flood, storm, riot, sabotage, explosion, strike, labor disturbance, national defense requirements, governmental law, ordinance rule or regulation, whether valid or invalid, inability to obtain electricity or other types of energy, raw materials, labor, equipment or transportation, or any other event beyond its reasonable control. A party shall give the other immediate notice of any - 11 - 12 * CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION occurrence, and cessation, of any such event of force majeure and shall use its commercially reasonable best efforts to resolve any such occurrence as quickly as possible. In the event that Nordion is not able to perform its obligations under this Agreement for a period of 30 consecutive days (or 45 days out of any 90 consecutive day period) due to force majeure (an "Extended Force Majeure Event"), Guilford may, at its sole and exclusive option, terminate this Agreement pursuant to the provisions of subsection 8(c) above. 11. Confidentiality. (a) Nordion acknowledges that it may be provided with and develop confidential and/or proprietary information relating to Guilford, the Product, the Development Work, and related matters in the course of its performance under this Agreement. During the term of this Agreement and thereafter for a period of fifteen (15) years, Nordion agrees not, either directly or indirectly, to use for its own benefit or disclose to any person, company, business or other entity or otherwise publicly disclose any information received or derived from Guilford except to the extent such information: (i) was in the public domain at the time Nordion learned of such information under this Agreement; (ii) comes into the public domain through no fault of Nordion; (iii) except for information previously disclosed to Nordion pursuant to the U.S. Phase II Agreement, the European Phase II Agreement or other agreements between Nordion and Guilford (which agreements shall govern the disclosure of such information), was in Nordion's possession at the time it learned of such information under this Agreement, and that can be demonstrated with sufficient documentary evidence to that effect; (iv) is obtained by Nordion from third parties not directly or indirectly under an obligation of confidentiality to Guilford, and Nordion can so demonstrate with sufficient documentary evidence to that effect; (v) is developed independently by Nordion without reference to such information, and that can be so demonstrated with sufficient documentary evidence to that effect; or (vi) is required to be disclosed by law or requested by the FDA or other regulatory authorities in connection with Guilford's development, or clinical use, of the Product; provided, however, that Nordion shall promptly notify Guilford of any disclosure required by this clause (vi) in order to give Guilford a reasonable opportunity to challenge such disclosure or to request confidential treatment for such information. (b) Nordion may provide Guilford from time to time under this Agreement with confidential and/or proprietary information relating to Nordion and its development and manufacturing processes and other matters. Guilford will keep such information (other than information subject to the exceptions set forth in clauses 11(a)(i) through (vi) above, but with "Guilford" and "Nordion" substituted for each other in (i) through (vi)) confidential; provided, however, that nothing herein shall be deemed to limit Guilford, either directly or through third parties, in any way from developing and commercializing the Product and using the information and work commissioned by Guilford and furnished by Nordion relating to the performance of the Development Work and the supply of Product pursuant to this Agreement in connection with Guilford's development and commercialization of the Product, conduct of the Phase III Clinical Trials and regulatory filings with the FDA and any other regulatory authorities respecting the Product. - 12 - 13 * CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION (c) If either Nordion or Guilford breaches its obligations under this Section 11, the other shall not thereby be released from its obligations under this Section 11. Confidential information disclosed by one party hereto to the other which is specific shall not be deemed to be within any of the above exceptions listed in (i) through (vi) in Section 11(a) above merely because it is embraced by more general information coming within one of the exceptions. Any combination of features disclosed to a receiving party shall not be deemed to be within any exception merely because individual features thereof fall within one of the exceptions. The provisions of this Section 11 shall survive any termination of this Agreement. 12. Non-Competition. During the term of this Agreement, Nordion will not perform development or manufacture and supply services, whether as principal, agent, third party contractor or otherwise for any company, business or other entity in any manner which directly competes with the Product. A product shall be deemed to "directly compete" with the Product only in the event it can be used or developed as an I-123 imaging diagnostic for Parkinson's disease and involves binding to the dopamine transporter. 13. Independent Contractor. Nothing in this Agreement shall constitute Nordion as an employee or agent of Guilford and at all times Nordion shall, for all purposes, be an independent contractor. 14. Notices. Any notice given pursuant to this Agreement will be written and personally delivered, sent by facsimile against answerback, or mailed by registered or certified mail or via a major recognized overnight courier service, postage prepaid and return receipt requested, to the parties addressed as follows: if to Guilford: Guilford Pharmaceuticals Inc. 6611 Tributary Street Baltimore, Maryland 22124 Attention: General Counsel Fax No.: (410) 631-6899 if to Nordion or to Nordion North America: MDS Nordion Inc. 447 March Road, P.O. Box 13500 Kanata, Ontario K2K 1X8 CANADA Attention: Vice President, General Counsel & Corporate Secretary Fax No.: (613) 592-8121 to Nordion Europe: - 13 - 14 * CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION MDS Nordion S.A. Zoning Industrial B-6220 Fleurus, Belgium Attention: Managing Director Fax No.: 011-32-71-829221 All payments to Nordion shall be paid in U.S. dollars and shall be sent pursuant to the instructions on the invoice. All notices shall be effective upon the day of delivery, if personally delivered or faxed against answerback; the next business day following dispatch, if sent on a business day by overnight courier; or three business days after dispatch, if mailed. 15. Governing Law; Jurisdiction. In the event that an unresolved dispute arises over the enforcement, interpretation, construction, or breach of this Agreement, it shall be litigated in the U.S. District Court for Maryland or the Maryland State Circuit Courts located in Baltimore City, Maryland, U.S.A., and Nordion hereby irrevocably submits to the exclusive jurisdiction of such courts for all purposes with respect to any legal action or proceeding in connection with this Agreement. This Agreement shall be construed in accordance with and governed by the laws of the State of Maryland (without regard to any rules or principles of conflicts of law that might look to any jurisdiction outside Maryland). 16. Entire Agreement. This Agreement, the Schedules and the Annexes attached hereto constitute the entire understanding and agreement of the parties respecting payment by Guilford for services provided by Nordion to Guilford relating to the Development Work and supply of the Product for Phase III Clinical Trials and supersede any and all prior agreements or arrangements, written or oral, between the parties relating thereto. The foregoing notwithstanding, this Agreement in no way shall be construed to amend, modify or supersede prior agreements between Nordion and Guilford, including without limitation, the U.S. Phase II Agreement and the European Phase II Agreement, with respect to the supply of the Product for other clinical trials or respecting other activities. 17. Amendments; Waivers. Unless otherwise provided in this Agreement, this Agreement may not be amended or supplemented in any way except by a written document signed by the party against whom such amendment or supplement is sought to be enforced. The failure on the part of either party to enforce, or any delay in enforcing, any right, power or remedy that such party may have under this Agreement shall not constitute a waiver of any such right, power or remedy, or release the other party from any obligations under this Agreement, except by a written document signed by the party against whom such waiver or release is sought to be enforced. 18. Severability. In the event that any term of this Agreement is held to be invalid, illegal, or unenforceable, such invalidity, illegality, or unenforceability shall not affect any other - 14 - 15 * CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION portion of this Agreement, and there shall be deemed substituted therefor such term as will most fully realize the intent of the parties as expressed in this Agreement to the fullest extent permitted by applicable law, the parties hereby declaring their intent that this Agreement be construed in such fashion as to maintain its existence, validity, and enforceability to the greatest extent possible. 19. Successors and Assigns; No Assignment. This Agreement shall be binding upon the respective successors and assigns of the parties hereto and shall inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns; provided, however that this Agreement may not be assigned by Guilford, on the one hand, or Nordion, on the other hand, without the prior written consent of Guilford or Nordion North America, as the case may be; provided further, however, that Nordion North America will not unreasonably withhold, delay or condition its consent in the event Guilford desires to assign this Agreement (a) in connection with the transfer or sale of all or substantially all of its assets or business, the sale or transfer of all or substantially the assets relating to Guilford's DOPASCAN(R) Injection development program, or Guilford's merger or consolidation with another company or entity or (b) in whole or in part to any corporate affiliate of Guilford (in any case, such consent to be considered given hereunder in the event that within ten (10) days of the receipt of Guilford's notice of its desire to assign this Agreement in whole or in part, Nordion North America does not respond in writing that it is withholding such consent and listing the reasons for withholding such consent). 20. Intellectual Property. All work product provided or created or inventions (patentable or patented), improvements or developments made or invented by Nordion directly relating to the Product and its precursors and intermediate components and the radiolabeling thereof, and their development, synthesis or manufacture in the course of performance under this Agreement and the European Phase II Agreement (collectively, "Product Technology"), shall be and remain the property of Guilford and work made for hire commissioned by Guilford, which shall retain the intellectual property rights therein, subject to Nordion's perpetual, worldwide, royalty-free right to utilize such Product Technology for any application to any product; provided , however, that Nordion (including its successors and assigns) shall not have the right to utilize any and all Product Technology which constitutes a patentable invention(s) (whether or not a patent application is actually filed with respect to any such patentable invention(s)) in a manner that "directly competes", as defined in Section 12 above, with the Product for a period beginning on the date of this Agreement and ending five (5) years after the expiration or earlier termination of this Agreement; and provided further, that with respect to [ * ] (the "[ * ] Technology"), Nordion (including its successors and assigns) shall not have the right to utilize such [ * ]Technology in a manner that "directly competes", as defined in Section 12 above, with the Product for a period beginning on the date of this Agreement and ending upon [ * ]. Nordion will execute all documents and do all things as Guilford may reasonably request to further vest and perfect Guilford's interest in same. Guilford acknowledges that Nordion possesses at the time of execution of this Agreement proprietary information, trade secrets and know how relating to radiolabeling techniques and processes and that Nordion may develop new radiolabeling techniques and processes in the course of performing under this Agreement. Except to the extent set out in the first sentence of this Section 20, such technology shall be and remain the sole property of Nordion. This Section 20 shall survive the expiration or - 15 - 16 * CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION earlier termination of this Agreement. In addition, the provisions of this Section 20 shall be deemed to modify and supersede those of section 19 of the European Phase II Agreement with respect to Product Technology developed under the European Phase II Agreement. 21. Subcontractors and Assignees. Nordion shall not have the right to subcontract or assign a third party to perform its development and manufacturing obligations under this Agreement without the prior written consent of Guilford, which consent Guilford shall have the right to withhold for any reason in its sole discretion, provided that the parties understand that Nordion may without such consent use subcontractors or consultants, bound by appropriate confidentiality obligations, to assist or support its performance of this Agreement (e.g., without limitation, consulting with academic experts regarding technical issues and utilizing a contract service to perform confirming analyses). 22. Counterparts. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument. 23. Headings. The headings of this Agreement are for reference only and shall not limit or otherwise affect the meaning of the terms and conditions of this Agreement. 24. Dispute Resolution. 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. If such representatives of the parties are unable to resolve the dispute within 15 business days after each party has been apprised of the dispute, either party shall have the right, exercisable by delivering written notice thereof to the other party, to refer the dispute to the Senior Vice President, Drug Development (or if not available, a higher ranking officer) of Guilford and the Vice President, Technology and Business Development (or if not available, a higher ranking officer) of Nordion (together, the "Senior Executives"). If either party exercises such right, the Senior Executives shall use commercially reasonable efforts to negotiate in good faith a resolution of the dispute as expeditiously as is reasonably practicable. If the dispute is not resolved within 20 business days after the date that a party referred the matter to the Senior Executives (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 at law or in equity under Section 15 of this Agreement. 25. Product Liability Insurance. Guilford, at its own expense, shall establish and maintain during the term of this Agreement, reasonable product liability insurance coverage for the Phase III North American and European Clinical Trials with a limit of liability of not less than $10 million. Guilford will furnish Nordion with a Certificate of Insurance evidencing Nordion's inclusion as an additional insured on said insurance policy or policies. In the event of claims being made by reason of personal injury against one party hereto on which the other party is or may be liable, the policy of insurance shall cover each of the parties hereto against whom a claim is made, always subject to the terms and limits of the policy. Nothing contained in this paragraph shall be - 16 - 17 * CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION deemed to limit in any way the indemnification provisions contained in this Agreement. - 17 - 18 * CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION IN WITNESS WHEREOF, this Agreement has been executed by the parties as of the date first above written. GUILFORD PHARMACEUTICALS INC. MDS NORDION INC. By:/s/ David R. Savello By:/s/ David J.R. Evans ---------------------------- ------------------------------------ Name: David R. Savello Name: David J.R. Evans Title: Senior Vice President, Drug Title: Vice President, Technology & Development Business Development MDS NORDION S.A. By:/s/ Brian P. Armstrong ------------------------------------ Name: Brian P. Armstrong Title: Managing Director - 18 - 19 * CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION Schedule A-1 DEVELOPMENT WORK - NORDION NORTH AMERICA DOPASCAN PHASE III DEVELOPMENT PROGRAM SUMMARY OF THE SCOPE OF WORK [ * ] 20 * CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION Schedule A-2 DEVELOPMENT WORK - NORDION EUROPE DOPASCAN PHASE III DEVELOPMENT PROGRAM SUMMARY OF THE SCOPE OF WORK [ * ] 21 * CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION Schedule B-1 EQUIPMENT LIST- NORDION NORTH AMERICA [ * ] 22 * CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION Schedule B-2 EQUIPMENT LIST - NORDION EUROPE [ * ] 23 * CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION Schedule C PAYMENT SCHEDULE [ * ] 24 * CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION Schedule D-1 SPECIFICATIONS FOR PRODUCTS - NORDION NORTH AMERICA [ * ] 25 * CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION Schedule D -2 SPECIFICATIONS FOR PRODUCT - NORDION EUROPE [ * ] 26 * CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION Schedule E-1 TESTING PROTOCOL FOR PRODUCTS - NORDION NORTH AMERICA [ * ] 27 * CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION Schedule E-2 TESTING PROTOCOL FOR PRODUCTS - NORDION EUROPE [ * ] . 28 * CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION Schedule F-1 NON-RADIOACTIVE REFERENCE STANDARDS TO BE SUPPLIED BU GUILFORD TO NORDION NORTH AMERICA [ * ] 29 * CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION Schedule F-2 NON-RADIOACTIVE REFERENCE STANDARDS TO BE SUPPLIED BU GUILFORD TO NORDION EUROPE [ * ] 30 * CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION Schedule G POLICIES, PROCEDURES AND OTHER ACTIONS Each of Nordion North America and Nordion Europe covenant to implement the following policies and procedures and to take the following other actions set forth below: A. 1. Nordion will be responsible for the manufacturing and quality control of the Product in accordance with the chemical and pharmaceutical documentation pertaining to the Phase III Clinical Trials. 2. Nordion will be responsible for the quality control of any starting material used in the manufacture of the Product. 3. Nordion agrees to be subject to GMP inspections by health authorities. B. 1. A program for sanitization and environmental monitoring for viable and non-viable organisms, during each day of Product manufacture, shall be implemented to the satisfaction of Guilford for Phase III manufacturing. 2. Proper calibration and validation of all major pieces of equipment shall be performed to the satisfaction of Guilford throughout Phase III. 3. Immediate notification of the Guilford Manager of Product Quality Assurance of all Product non-conformance issues will be implemented by Nordion. 4. Proper investigation of all Product complaints (including shipping problems) will be performed by Nordion within 60 days of receipt. Immediate notification of all Product complaints to the Guilford Manager of Product Quality Assurance and copies of completed investigations will be provided within 10 business days of completion. 5. Prior notification to the Guilford Manager of Product Quality Assurance regarding use of revised master batch records or revised Product specifications. 6. As permitted by Section 4(d) of the Agreement, Nordion permits the Guilford Director, Corporate Quality Assurance to audit its facilities, to have access to the suppliers audit reports and, if required, to perform joint suppliers audit with Nordion. 7. Nordion must maintain a formal supplier qualification and management program. 31 * CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION 8. In case of an interruption in the manufacturing of the Product for at least 2 months, Nordion is required to perform stability testing on the first Batch produced following the interruption in order to insure that the Product will meet Specifications throughout its shelf-life. If a confirmed result indicates the Product has failed to remain within Specifications for a Batch that has been released, Nordion is required to notify Guilford immediately. Notification will include discussion of problems, data available and path forward. In addition, a copy of the investigation report or information on corrective action(s) should be sent to the Guilford Manager of Product Quality Assurance as soon as they become available. 9. It shall be the responsibility of Guilford and Nordion to develop an effective system for promptly and at any time, recalling Product from the distribution network. Nordion has the responsibility to provide any data or information to Guilford that could result in a Product recall. The parties will consult on the necessity of recall or withdrawal. It shall be the responsibility of Guilford to notify competent regulatory authority and clinical investigators of a Product recall. It shall be the responsibility of Guilford to advise clinical investigators how to return or dispose of recalled Product. 10. Nordion production personnel GMP training must be reviewed, updated and tracked as required. 11. The release of each Batch of Product is the responsibility of Nordion, to be performed by certain "Designated Employees" of Nordion based on the control of starting materials, production records, in process controls and controls on the Product. 12. All manufacturing, quality control and analytical records and documentation and reference samples shall be kept by Nordion and shall be made available for inspection by Guilford upon request. Nordion shall be responsible for updating the foregoing documentation and records in light of scientific advancement and developments regarding relevant standards, regulations and official monographs. 13. Contacts: GUILFORD: Tina Eaton, Guilford Manager of Product Quality Assurance, Phone: (410) 631-6357, Pager No.: (410) 743-7049, Fax No.: (410) 631-5020; Frank Butler, Guilford Director of Corporate Quality Assurance, Phone: (410)631-6368, Fax. No.: (410) 631-6338; or such other person(s) as Guilford may substitute by written notice to Nordion. NORDION: Brian Abeysekera, Ph.D., Manager, Quality, Safety & Regulatory Affairs (Phone: (604) 228-8952 (ext. 103);Fax. No.: (604) 222-2724) and Robert Contineau, Ph.D., (Phone: 32-71-82-9721; Fax. No.: 32-71-82-9221) shall be the Designated Employees for Nordion North America and Nordion Europe, respectively. Nordion may substitute other persons as Designated Employees by written notice to Guilford. EX-10.45 4 NON-QUALIFIED STOCK OPTION AGREEMENT 1 Exhibit 10.45 GUILFORD PHARMACEUTICALS INC. 1993 EMPLOYEE SHARE OPTION AND RESTRICTED SHARE PLAN NON-INCENTIVE SHARE OPTION AGREEMENT 2 GUILFORD PHARMACEUTICALS INC. 1993 EMPLOYEE SHARE OPTION AND RESTRICTED SHARE PLAN NON-INCENTIVE SHARE OPTION AGREEMENT TABLE OF CONTENTS
PAGE 1. GRANT OF OPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 3. EXERCISE OF OPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 3.1 Time of Exercise of Option . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3.2 Exercise of Optionee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3.3 Termination of Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3.4 Death . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3.5 Disability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3.6 Termination of Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3.7 Limitations on Exercise of Option . . . . . . . . . . . . . . . . . . . . . . . 3 4. VESTING UPON A CHANGE OF CONTROL . . . . . . . . . . . . . . . . . . . . . . . . . . 3 4.1 Termination of Employment After a Change in Control . . . . . . . . . . . . . . 3 4.2 Definition of "Cause" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 4.3 Definition of "Good Reason" . . . . . . . . . . . . . . . . . . . . . . . . . . 4 4.4 Definition of "Change in Control" . . . . . . . . . . . . . . . . . . . . . . . 4 5. METHOD OF EXERCISE OF OPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 6. PARACHUTE LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 7. TRANSFERABILITY OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 7.1 GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 7.2 FAMILY TRANSFERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 8. RIGHTS AS STOCKHOLDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 9. EFFECT OF CHANGES IN CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . 6 9.1 Changes in Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 9.2 Reorganization in Which the Company Is the Surviving Entity . . . . . . . . . . 7 9.3 Reorganization in Which the Company is Not the Surviving Entity or or Sale of Assets or Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 7 9.4 Adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 10. REQUIREMENTS OF LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 10.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 10.2 Rule 16b-3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 11. WITHHOLDING OF TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 12. DISCLAIMER OF RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 13. INTERPRETATION OF THIS OPTION AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 9 14. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 15. BINDING EFFECT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 16. NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 17. ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3 GUILFORD PHARMACEUTICALS INC. 1993 EMPLOYEE SHARE OPTION AND RESTRICTED SHARE PLAN NON-INCENTIVE SHARE OPTION AGREEMENT This Share Option Agreement (the "Share Option Agreement") is made as of the 1st day of April, 1997 by and between Guilford Pharmaceuticals Inc. (the "Company") and David R. Savello, Ph.D., an employee of the Company or its subsidiaries (the "Optionee"). WHEREAS, the Board of Directors of the Company has duly adopted the 1993 Employee Share Option and Restricted Share Plan, as amended (the "Plan"), subject to approval by the stockholders of the Company which authorizes the Company to grant to eligible individuals options for the purchase of shares of common stock of the Company, $.01 par value (the "Shares"); and WHEREAS, the Company has determined that it is desirable and in its best interests to grant to the Optionee, pursuant to the Plan, an option to purchase a certain number of Shares in order to provide the Optionee with an incentive to advance the interests of the Company, all according to the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the parties hereto do hereby agree as follows: 1. GRANT OF OPTION. Subject to the terms of the Plan (attached hereto as Exhibit A, the terms of which are incorporated by reference herein), and to the approval of additional authorized Shares under the Plan by the stockholders of the Company if required by the Plan, the Company hereby grants to the Optionee the right and option (the "Option") to purchase from the Company, on the terms and subject to the conditions hereinafter set forth, 25,000 Shares. This Option shall not constitute an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). The Date of Grant of this Option is April 1, 1997, the later of (i) the date on which the grant of the Option was approved by the Compensation Committee of the Board of Directors of the Company (the "Committee") or (ii) the date on which the Optionee began employment with the Company. 2. PRICE. The purchase price (the "Option Price") for the Shares subject to the Option granted by this Option Agreement is $20.75 per Share, which price is not less than 100 percent of the Fair Market Value of the Shares, as determined by the Company, on the Date of Grant of this Option. 3. EXERCISE OF OPTION. Except as otherwise provided herein, the Option granted pursuant to this Option Agreement shall be subject to exercise as follows: -1- 4 3.1 TIME OF EXERCISE OF OPTION. Subject to the condition precedent that the Optionee remain continuously employed by the Company as a full-time employee of the Company and/or any "subsidiary corporation" thereof within the meaning of Section 424(f) of the Code (a "Subsidiary") for a period of four (4) consecutive years from the Date of Grant (the "Vesting Period"), the Optionee may exercise the Option (subject to the limitations on exercise set forth in this Agreement and in the Plan), at any time during the six-month period following the date on which the Optionee's full-time employment with the Company or a Subsidiary is terminated (regardless of whether such termination is voluntary, resulted from the death or disability of the Optionee, or is with or without cause) (the "Exercise Period") with respect to one hundred percent (100%) of the Shares specified in Section 1 above. The foregoing notwithstanding, no single exercise of the Option shall be for less than 100 Shares, unless the number of Shares purchased is the total number at the time available for purchase under this Option. 3.2 EXERCISE BY OPTIONEE. During the lifetime of the Optionee, only the Optionee (or, in the event of the Optionee's legal incapacity or incompetency, the Optionee's guardian or legal representative) may exercise the Option. 3.3 TERMINATION OF EMPLOYMENT. Following completion the Vesting Period and termination of Optionee's employment, the Optionee may exercise the Option only during the Exercise Period, after which the Option shall terminate, except as provided in Sections 3.4 and 3.5. 3.4 DEATH. In the event of the Optionee's death following completion of the Vesting Period, the personal representative or legatees or distributees of the Optionee's estate, as the case may be, shall have the right (subject to the limitations on exercise set forth in Section 3.7 below) to exercise all or any part of the Option, during the Exercise Period and for six months thereafter and prior to the termination of the Option as set forth in Section 3.6. 3.5 DISABILITY. If, following completion of the Vesting Period, the Optionee's termination of employment is by reason of "permanent and total disability" (within the meaning of Section 22(e)(3) of the Code), the Optionee or the guardian or legal representative shall have the right (subject to the limitations on exercise set forth in Section 3.7 below) to exercise all or any part of the Option, at any time during the Exercise Period and for six months thereafter and prior to the termination of the Option as set forth in Section 3.6. -2- 5 3.6 TERMINATION OF OPTION. The Option shall terminate following completion of the Exercise Period unless such termination falls within the scope of Section 3.4 or 3.5 or the Optionee dies or becomes Permanently and totally disabled during the Exercise Period, in which event the Option shall terminate six months after completion of the Exercise Period. 3.7 LIMITATIONS ON EXERCISE OF OPTION. Notwithstanding the foregoing Subsections of this Section, the Option may be exercised, in whole or in part, only to the extent that additional authorized Shares are not required to be approved under the Plan by the stockholders of the Company, or after the occurrence of an event referred to in Section 9 below which results in termination of the Option. In no event may the Option be exercised for a fractional Share. 4. VESTING UPON A CHANGE OF CONTROL 4.1 TERMINATION OF EMPLOYMENT AFTER A CHANGE IN CONTROL. In the event the Optionee's employment is terminated within one year after a "Change in Control" (as defined below) by the Company other than for "Cause" (as defined below) or by the Optionee who is employed at the "director" level or higher (as set forth in the Company s organizational chart of employees) for "Good Reason" (as defined below), all non-vested Options held by the Optionee under the Plan shall immediately vest. 4.2 DEFINITION OF "CAUSE". "Cause" for termination of Optionee's employment by the Company hereunder shall be deemed to exist if (a) Optionee is found guilty by a court of having committed fraud or theft against the Company and such conviction is affirmed on appeal or the time for appeal has expired; (b) Optionee is found guilty by a court of having committed a crime involving moral turpitude and such conviction is affirmed on appeal or the time for appeal has expired; (c) in the reasonable judgment of the Board, Optionee has compromised trade secrets or other proprietary information of the Company; (d) in the reasonable judgment of the Board, Optionee has willfully failed or refused to perform material assigned duties; or (e) in the reasonable judgment of the Board, Optionee has engaged in gross or willful misconduct that causes substantial and material harm to the business and operations of the Company, the continuation of which will continue to substantially and materially harm the business and operations of the Company in the future. In determining whether duties have been adequately performed, the acts or omissions shall be measured against standards generally prevailing in the pharmaceutical industry; provided, that it shall be the Company's burden to prove the alleged acts and omissions and the prevailing standards the Company shall have alleged are violated by such acts and/or omissions. -3- 6 4.3 DEFINITION OF "GOOD REASON". "Good Reason" shall mean with respect to employees of the Company at the "director" level or higher (as set forth in the Company s organizational chart of employees) (1) any proposed reduction in an Optionee's base salary, provided that the base salary may be reduced (and such reduction would not constitute "Good Reason") by up to 10% due to a reduction in compensation generally applicable to executive officers of the Company; (2) Optionee has his responsibilities or areas of supervision within the Company substantially reduced; or (3) Optionee is required to move his office outside the metropolitan area in which the office of the Optionee was located immediately prior to the Change in Control, provided, however, that temporary assignments made for the good of the business of the Company shall not constitute such a move of office location. 4.4 DEFINITION OF "CHANGE IN CONTROL". A "Change in Control" shall be deemed to have occurred if (i) any "person" (including, without limitation, any individual, sole proprietorship, partnership, trust, corporation, association, joint venture, pool, syndicate, or other entity, whether or not incorporated), or any two or more persons acting as a syndicate or group or otherwise acting in concert with regard to the ownership of securities of the Company and thereby deemed collectively to be a "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), becomes, after the date hereof, the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing thirty percent (30%) or more of the combined voting power of the Company's then outstanding securities (but excluding for purposes of such computation all securities of the Company beneficially owned by such person as of February 22, 1995), unless, prior to the acquisition by such person of securities of the Company which causes such person to have such beneficial ownership, the full Board shall by at least a two-thirds vote have specifically approved such acquisition and determined that such acquisition shall not constitute a Change in Control for purposes of Options granted under the Plan despite such beneficial ownership; or (ii) during any two (2) year period, individuals who at the beginning of such period constitute the Board, together with any new directors elected or appointed during the period whose election or appointment resulted from a vacancy on the Board caused by the retirement, death, or disability of a director and whose election or appointment was approved by a vote of at least two-thirds (2/3rds) of the directors then still in office who were directors at the beginning of the period, cease for any reason to constitute a majority thereof. 5. METHOD OF EXERCISE OF OPTION. Subject to the terms and conditions of this Share Option Agreement, the Option may be exercised by delivering written notice of exercise to the Company, at its principal office, addressed to the attention of the Committee, which notice shall specify the number of Shares for which the Option is being exercised, and shall be accompanied by payment in full of the Option Price of the shares for which the Option is being exercised. Payment of the Option Price for the Shares purchased pursuant to the exercise of the Option shall be made either (i) in cash or in cash equivalents; (ii) through the tender to the Company of Shares (so long as any Shares so tendered that were originally acquired by the Optionee from the Company have been held by the Optionee for at -4- 7 least six (6) months prior to such tender), which Shares shall be valued, for purposes of determining the extent to which the Option Price has been paid thereby, at their Fair Market Value (as determined by the Committee in accordance with the Plan) on the date of exercise; or (iii) by a combination of the methods described in (i) and (ii). Payment in full of the Option Price need not accompany the written notice of exercise provided the notice of exercise directs that the Share certificate or certificates for the Shares for which the Option is exercised be delivered to a licensed broker acceptable to the Company as the agent for individual exercising the Option and, at the time such Share certificate or certificates are delivered, the broker tenders the Company cash (or cash equivalents acceptable to the Company) equal to the Option Price for the Shares purchased pursuant to the exercise of the Option plus the amount (if any) of federal and/or other taxes which the Company may, in its judgment, be required to withhold with respect to the exercise of the Option. If the person exercising the Option is not the Optionee, such person shall also deliver with the notice of exercise appropriate proof of his right to exercise the Option. An attempt to exercise the Option granted hereunder other than as set forth above shall be invalid and of no force and effect. Promptly after exercise of the Option as provided for above, the Company shall deliver to the person exercising the Option a certificate or certificates for the Shares being purchased. 6. PARACHUTE LIMITATIONS. Notwithstanding any other provision of this Share Option Agreement or of any other agreement, contract, or understanding heretofore or hereafter entered into by the Optionee with the Company, except an agreement, contract, or understanding hereafter entered into that expressly modifies or excludes application of this paragraph (an "Other Agreement"), and notwithstanding any formal or informal plan or other arrangement for the direct or indirect provision of compensation to the Optionee (including groups or classes of participants or beneficiaries of which the Optionee is a member), whether or not such compensation is deferred, is in cash, or is in the form of a benefit to or for the Optionee (a "Benefit Arrangement"), if the Optionee is a "disqualified individual," as defined in Section 280G(c) of the Code, this Option and any right to receive any payment or other benefit under this Option shall not become exercisable or vested (i) to the extent that such right to exercise, vesting, payment, or benefit, taking into account all other rights, payments, or benefits to or for the Optionee under this Option, all Other Agreements, and all Benefit Arrangements, would cause any payment or benefit to the Optionee under this Option to be considered a "parachute payment" within the meaning of Section 280G(b)(2) of the Internal Revenue Code as then in effect (a "Parachute Payment") and (ii) if, as a result of receiving a Parachute Payment, the aggregate after-tax amounts received by the Optionee from the Company under this Option, all Other Agreements, and all Benefit Arrangements would be less than the maximum after-tax amount that could be received by him without causing any such payment or benefit to be considered a Parachute Payment. In the event that the receipt of any such right to exercise, vesting, payment, or benefit under this Option, in conjunction with all other rights, payments, or benefits to or for the Optionee under any Other Agreement or any Benefit Arrangement would cause the Optionee to be considered to have received a Parachute Payment under this Option that would have the effect of decreasing the after-tax amount received by the Optionee as described in clause (ii) of the preceding sentence, then the Optionee shall have the right, in the Optionee's sole discretion, to designate those rights, payments, or benefits under this Option, any Other Agreements, and any Benefit Arrangements that should be reduced or eliminated so as to avoid having the payment or benefit to the Optionee under this Option be deemed to be a Parachute Payment. -5- 8 7. TRANSFERABILITY OPTIONS. 7.1 GENERAL. Except as provided in Section 7.1 below, (a) during the lifetime of the Optionee, only such Optionee (or, in the event of legal incapacity or incompetency, the Optionee's guardian or legal representative) may exercise the Option and (b) no Option shall be assignable or transferable by the Optionee to whom it is granted, other than by will or the laws of descent and distribution. 7.2 FAMILY TRANSFERS. Optionee may transfer this Option to (i) the spouse, children or grandchildren of the Optionee ("Immediate Family Members"), (ii) a trust or trusts for the exclusive benefit of such Immediate Family Members, or (iii) a partnership in which such Immediate Family Members are the only partners, provided that (x) there may be no consideration for any such transfer and (y) subsequent transfers of this Option are prohibited except those in accordance with this Section 7.2 or by will or the laws of descent and distribution. Following transfer, this Option shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that for purposes of this Option the term "Optionee" shall be deemed to refer the transferee. The events of termination of employment set forth in Section 3 above shall continue to be applied with respect to the original Optionee, following which the Option shall be exercisable by the transferee only to the extent, and for the periods specified in Section 3. 8. RIGHTS AS STOCKHOLDER. Neither the Optionee nor any executor, administrator, distributee or legatee of the Optionee's estate shall be, or have any of the rights or privileges of, a stockholder of the Company in respect of any Shares transferable hereunder unless and until such Shares have been fully paid and certificates representing such Shares have been endorsed, transferred and delivered, and the name of the Optionee (or of such personal representative, administrator, distributee or legatee of the Optionee's estate) has been entered as the stockholder of record on the books of the Company. 9. EFFECT OF CHANGES IN CAPITALIZATION. 9.1 CHANGES IN SHARES. If the number of outstanding Shares is increased or decreased or the Shares are changed into or exchanged for a different number or kind of Shares or other securities of the Company on account of any recapitalization, reclassification, stock split, reverse split, combination of Shares, exchange of Shares, stock dividend or other distribution payable in capital stock, or other increase or decrease in such Shares effected without receipt of consideration by the Company occurring after the date the Option is granted, a proportionate and appropriate adjustment shall be made by the Company in the number and kind of Shares subject to the Option, so that the proportionate interest of the Optionee immediately following such event shall, to the extent practicable, be the same as immediately prior to such event. Any such adjustment in the Option shall not change the aggregate Option Price payable with respect to Shares subject to the unexercised -6- 9 portion of the Option but shall include a corresponding proportionate adjustment in the Option Price per Share. 9.2 REORGANIZATION IN WHICH THE COMPANY IS THE SURVIVING ENTITY. Subject to Section 9.3, if the Company shall be the surviving entity in any reorganization, merger or consolidation of the Company with one or more other entities, the Option shall pertain to and apply to the securities to which a holder of the number of Shares subject to the Option would have been entitled immediately following such reorganization, merger or consolidation, with a corresponding proportionate adjustment of the Option Price per Share so that the aggregate Option Price thereafter shall be the same as the aggregate Option Price of the Shares remaining subject to the Option immediately prior to such reorganization, merger or consolidation. 9.3 REORGANIZATION IN WHICH THE COMPANY IS NOT THE SURVIVING ENTITY OR SALE OF ASSETS OR SHARES. Upon the dissolution or liquidation of the Company, or upon a merger, consolidation or reorganization of the Company with one or more other entities in which the Company is not the surviving entity, or upon a sale of substantially all of the assets of the Company to another entity, or upon any transaction (including, without limitation, a merger or reorganization in which the Company is the surviving entity) approved by the Board which results in any person or entity (or persons or entities acting as a group or otherwise in concert) owning 80 percent or more of the combined voting power of all classes of securities of the Company, the Option hereunder shall terminate, except to the extent provision is made in connection with such transaction for the continuation and/or the assumption of the Option, or for the substitution for the Option of new options covering the stock of a successor employer entity, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kinds of shares and exercise prices, in which event the Option shall continue in the manner and under the terms so provided. In the event of any such termination of the Option, the Optionee shall have the right (subject to the limitations on exercise set forth in Section 3.7 above), for 30 days immediately prior to the occurrence of such termination, to exercise the Option in whole or in part, whether or not the Optionee was otherwise entitled to exercise such Option at the time such termination occurs. The Company shall send written notice of an event that will result in such a termination to the Optionee not later than the time at which the Company gives notice thereof to its stockholders. 9.4 ADJUSTMENTS. Adjustments specified in this Section relating to Shares or securities of the Company shall be made by the Committee, whose determination in that respect shall be final, binding and conclusive. No fractional Shares or units of other securities shall be issued pursuant to any such adjustment, and any fractions resulting from any such adjustment shall be eliminated in each case by rounding downward to the nearest whole share or unit. -7- 10 10. REQUIREMENTS OF LAW. 10.1 GENERAL. The Company shall not be required to sell or issue any Shares under the Option if the sale or issuance of such Shares would constitute a violation by the individual exercising the Option or by the Company of any provision of any law or regulation of any governmental authority, including without limitation any federal or state securities laws or regulations. If at any time the Company shall determine, in its discretion, that the listing, registration or qualification of any Shares subject to the Option upon any securities exchange or under any state or federal law, or the consent or approval of any government regulatory body, is necessary or desirable as a condition of, or in connection with, the issuance or purchase of Shares hereunder, the Option may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company, and any delay caused thereby shall in no way affect the date of termination of the Option. Specifically in connection with the Securities Act of 1933 (as now in effect or as hereafter amended), unless a registration statement under such Act is in effect with respect to the Shares covered by the Option, the Company shall not be required to sell or issue such Shares unless the Company has received evidence satisfactory to it that the holder of the Option may acquire such Shares pursuant to an exemption from registration under such Act. Any determination in this connection by the Company shall be final, binding, and conclusive. The Company may, but shall in no event be obligated to, register any securities covered hereby pursuant to the Securities Act of 1933 (as now in effect or as hereafter amended). The Company shall not be obligated to take any affirmative action in order to cause the exercise of the Option or the issuance of shares pursuant thereto to comply with any law or regulation of any governmental authority. As to any jurisdiction that expressly imposes the requirement that the Option shall not be exercisable unless and until the Shares covered by the Option are registered or are subject to an available exemption from registration, the exercise of the Option (under circumstances in which the laws of such jurisdiction apply) shall be deemed conditioned upon the effectiveness of such registration or the availability of such an exemption. 10.2 RULE 16b-3. The intent of this Plan is to qualify for the exemption provided by Rule 16b-3 under the Exchange Act. To the extent any provision of the Plan or action by the Plan administrators does not comply with the requirements of Rule 16b-3, it shall be deemed inoperative, to the extent permitted by law and deemed advisable by the Plan administrators, and shall not affect the validity of the Plan. In the event Rule 16b-3 is revised or replaced, the Board may exercise discretion to modify this Plan in any respect necessary to satisfy the requirements of the revised exemption or its replacement 11. WITHHOLDING OF TAXES. The parties hereto recognize that the Company or a Subsidiary may be obligated to withhold federal and local income taxes and Social Security taxes to the extent that the Optionee realizes ordinary income in connection with the exercise of the Option. The Optionee agrees that the Company or a Subsidiary may withhold amounts needed to cover such taxes from payments -8- 11 otherwise due and owing to the Optionee, and also agrees that upon demand the Optionee will promptly pay to the Company or a Subsidiary having such obligation any additional amounts as may be necessary to satisfy such withholding tax obligation. Such payment shall be made in cash or cash equivalent. 12. DISCLAIMER OF RIGHTS. No provision in this Option Agreement shall be construed to confer upon the Optionee the right to be employed by the Company or any Subsidiary, or to interfere in any way with the right and authority of the Company or any Subsidiary either to increase or decrease the compensation of the Optionee at any time, or to terminate any employment or other relationship between the Optionee and the Company or any Subsidiary. 13. INTERPRETATION OF THIS OPTION AGREEMENT. All decisions and interpretations made by the Committee or the Board of Directors of the Company with regard to any question arising under the Plan or this Option Agreement shall be binding and conclusive on the Company and the Optionee and any other person entitled to exercise the Option as provided for herein. In the event that there is any inconsistency between the provisions of this Option Agreement and of the Plan, the provisions of the Plan shall govern. 14. GOVERNING LAW. This Option Agreement is executed pursuant to and shall be governed by the laws of the State of Maryland (but not including the choice of law rules thereof). 15. BINDING EFFECT Subject to all restrictions provided for in this Option Agreement and by applicable law relating to assignment and transfer of this Option Agreement and the option provided for herein, this Option Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors, and assigns. 16. NOTICE. Any notice hereunder by the Optionee to the Company shall be in writing and shall be deemed duly given if mailed or delivered to the Company at its principal office, addressed to the attention of the Committee, or if so mailed or delivered to such other address as the Company may hereafter designate by notice to the Optionee. Any notice hereunder by the Company to the Optionee shall be in writing and shall be deemed duly given if mailed or delivered to the Optionee at the address specified below by the Optionee for such purpose, or if so mailed or delivered to such other address as the Optionee may hereafter designate by written notice given to the Company. -9- 12 17. ENTIRE AGREEMENT. This Option Agreement constitutes the entire agreement and supersedes all prior understandings and agreements, written or oral, of the parties hereto with respect to the subject matter hereof. Neither this Option Agreement nor any term hereof may be amended, waived, discharged or terminated except by a written instrument signed by the Company and the Optionee; provided, however, that the Company unilaterally may waive any provision hereof in writing to the extent that such waiver does not adversely affect the interests of the Optionee hereunder, but no such waiver shall operate as or be construed to be a subsequent waiver of the same provision or a waiver of any other provision hereof. IN WITNESS WHEREOF, the parties hereto have duly executed this Option Agreement, or caused this Option Agreement to be duly executed on their behalf, as of the day and year first above written. ATTEST: GUILFORD PHARMACEUTICALS INC. /s/ Jordan P. Karp By: /s/ Craig R. Smith, M.D. - ------------------- ----------------------------------------- Title: President and CEO ----------------------------------------- OPTIONEE: /s/ David R. Savello. Ph.D. ------------------------------------------------ (signature) ADDRESS FOR NOTICE TO OPTIONEE: ------------------------------------------------ Number Street ------------------------------------------------ City State Zip Code -10- EX-10.46 5 AMENDMENT TO DIRECTORS' STOCK OPTION PLAN 1 Exhibit 10.46 Article 15 of the Directors' Stock Option Plan, as amended, is amended to read in its entirely as follows: "15. Transferability of Options 15.1 General. Except as provided in Section 15.2, each Option granted pursuant to this Plan shall, during Optionee's lifetime, be exercisable only by Optionee, and neither the Option nor any right thereunder shall be transferable by the Optionee by operation of law or otherwise other than by will or the laws of descent and distribution, and shall not be pledged or hypothecated (by operation of law or otherwise) or subject to execution, attachment or similar processes. 15.2 Family Transfers. The Committee may, in its discretion, authorize all or a portion of Options granted to an Optionee to be on terms which permit transfer by such Optionee to (i) the spouse, children or grandchildren of the Optionee "Immediate Family Members"), (ii) a trust or trusts for the exclusive benefit of such Immediate Family Members, or (iii) a partnership in which such Immediate Family members are the only partners, provided that (x) there may be no consideration for any such transfer, (y) the Stock Option Agreement pursuant to which such Options are granted must be approved by the Committee, and must expressly provide for transferability in a manner consistent with this Section, and (z) subsequent transfers of transferred Options shall be prohibited except those in accordance with Section 15.2 or by will or the laws of descent and distribution. Following transfer, any such Options shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that for purposes of Sections 10 hereof the term "Optionee" shall be deemed to refer the transferee. The provisions respecting the "Option Period" set forth in Section 9 hereof shall continue to be applied with respect to the original Optionee, following which the Options shall be exercisable by the transferee only to the extent, and for the periods specified in Section 9." -14- EX-11.2 6 STATEMENT RE: COMPUTATION OF NET LOSS PER SHARE 1 EXHIBIT 11.2 COMPUTATION OF PER SHARE EARNINGS (LOSS) (IN THOUSANDS, EXCEPT SHARE DATA)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, 1997 1996 1997 1996 -------------- -------------- -------------- -------------- Weighted average common shares outstanding 17,952,888 13,710,407 16,105,431 12,023,354 Dilutive incremental shares assumed to be outstanding related to stock options and warrants - 1,644,732 - Weighted average common and common equivalent shares used in the computation of -------------- -------------- -------------- -------------- net income (loss) per share 17,952,888 15,355,139 16,105,431 12,023,354 ============== ============== ============== ============== Net Income (loss) $ (5,278) $ 2,775 $ (11,614) $ (1,744) ============== ============== ============== ============== Net Income (loss) per share $ (0.29) $ 0.18 $ (0.72) $ (0.15) ============== ============== ============== ==============
Notes: (1) Both primary and fully diluted earnings per share are the same for the three months ended June 30, 1996. (2) For the three months ended June 30, 1997 and the six months ended June 30, 1996 and 1997, the computation of both primary and fully diluted earnings per share exclude common stock equivalents since their effect on earnings per share is antidilutive. EX-27.2 7 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 20,985 0 1,058 0 1,429 59,981 17,945 2,901 153,677 6,027 11,074 0 0 186 136,390 153,677 1,767 2,391 615 9,363 0 0 207 (5,278) 0 (5,278) 0 0 0 (5,278) (.29) (.29)
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