<PAGE> 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.
<TABLE>
<CAPTION>
Class Outstanding at August 11, 1997
<S> <C>
Common Stock, $.01 par value 18,641,991
- ---------------------------- ------------------------------
</TABLE>
<PAGE> 2
GUILFORD PHARMACEUTICALS INC.
AND SUBSIDIARIES
GUILFORD PHARMACEUTICALS INC.
INDEX
<TABLE>
<CAPTION>
Page(s)
----
<S> <C> <C>
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
</TABLE>
2
<PAGE> 3
GUILFORD PHARMACEUTICALS INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, 1997
(UNAUDITED) DECEMBER 31, 1996
------------- -----------------
ASSETS
------
<S> <C> <C>
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
============= ==============
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
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
============= ==============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE> 4
GUILFORD PHARMACEUTICALS INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
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
============ ============ ============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE> 5
GUILFORD PHARMACEUTICALS INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK NOTES UNREALIZED
------------ ADDITIONAL RECEIVABLE GAIN ON
NUMBER PAID-IN ON COMMON ACCUMULATED AVAILABLE FOR
OF SHARES AMOUNT CAPITAL STOCK DEFICIT SALE SECURITIES
---------- ------ ------- ----- ------- ---------------
<S> <C> <C> <C> <C> <C> <C>
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
========== ====== ========= ======= ========= =====
</TABLE>
<TABLE>
<CAPTION>
TREASURY TOTAL
STOCK DEFERRED STOCKHOLDERS'
RESTRICTED COMPENSATION EQUITY
---------- ------------ ------
<S> <C> <C> <C>
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
======= ======= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE> 6
GUILFORD PHARMACEUTICALS INC.
AND SUBSIDIARIES
(UNAUDITED)
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
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
========== ============ ============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
6
<PAGE> 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
<PAGE> 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):
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
(Unaudited)
<S> <C> <C>
Finished products $ 445 $ 501
Work in process 567 432
Raw materials 417 600
------ ------
$1,429 $1,533
====== ======
</TABLE>
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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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:
<TABLE>
<CAPTION>
In Favor Opposed Abstained Broker Non-Votes
--------------------------------------------------------------
<S> <C> <C> <C>
10,421,285 127,802 20,858 6,246
</TABLE>
16
<PAGE> 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:
<TABLE>
<CAPTION>
Nominee For Against
------------------------------------------------------------
<S> <C> <C>
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
</TABLE>
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:
<TABLE>
<CAPTION>
For Against Abstained
-------------------------------------------
<S> <C> <C>
8,892,669 888,846 31,336
</TABLE>
Proposal to ratify the selection of KPMG Peat Marwick as the
Company's independent auditors for the fiscal year ending December
31, 1997.
<TABLE>
<CAPTION>
For Against Abstained
-------------------------------------------
<S> <C> <C>
9,796,468 4,125 12,358
</TABLE>
Item 5. Other Information:
None
17
<PAGE> 18
GUILFORD PHARMACEUTICALS INC.
AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K:
A. Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
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
</TABLE>
- -------------------------
* 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
<PAGE> 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
<PAGE> 1
Exhibit 10.43
LEASE AGREEMENT
BY AND BETWEEN
SN PROPERTIES INC.
AND
GUILFORD PHARMACEUTICALS INC.
FREEPORT CENTRE
BALTIMORE, MARYLAND
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Page
- ------- ----
<S> <C> <C>
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
</TABLE>
EXHIBIT A -- Description of the Building
EXHIBIT B -- Plan Showing Premises
<PAGE> 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.
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 26
WITNESS: TENANT:
GUILFORD PHARMACEUTICALS INC.
By:/s/ JOHN P. BRENNAN (SEAL)
- ----------------------------- ---------------------------
- 24 -
<PAGE> 27
FREEPORT CENTRE
EXHIBIT A
DESCRIPTION OF THE BUILDING
<PAGE> 28
FREEPORT CENTRE
EXHIBIT B
PLAN SHOWING PREMISES
<PAGE> 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
<PAGE> 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:
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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 -
<PAGE> 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
[ * ]
<PAGE> 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
[ * ]
<PAGE> 21
* CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND
EXCHANGE COMMISSION
Schedule B-1
EQUIPMENT LIST- NORDION NORTH AMERICA
[ * ]
<PAGE> 22
* CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND
EXCHANGE COMMISSION
Schedule B-2
EQUIPMENT LIST - NORDION EUROPE
[ * ]
<PAGE> 23
* CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND
EXCHANGE COMMISSION
Schedule C
PAYMENT SCHEDULE
[ * ]
<PAGE> 24
* CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND
EXCHANGE COMMISSION
Schedule D-1
SPECIFICATIONS FOR PRODUCTS - NORDION NORTH AMERICA
[ * ]
<PAGE> 25
* CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND
EXCHANGE COMMISSION
Schedule D -2
SPECIFICATIONS FOR PRODUCT - NORDION EUROPE
[ * ]
<PAGE> 26
* CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND
EXCHANGE COMMISSION
Schedule E-1
TESTING PROTOCOL FOR PRODUCTS - NORDION NORTH AMERICA
[ * ]
<PAGE> 27
* CONFIDENTIAL PORTION OMITTED AND SUPPLIED SEPARATELY TO THE SECURITIES AND
EXCHANGE COMMISSION
Schedule E-2
TESTING PROTOCOL FOR PRODUCTS - NORDION EUROPE
[ * ]
.
<PAGE> 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
[ * ]
<PAGE> 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
[ * ]
<PAGE> 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.
<PAGE> 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.
<PAGE> 1
Exhibit 10.45
GUILFORD PHARMACEUTICALS INC.
1993 EMPLOYEE SHARE OPTION AND RESTRICTED SHARE PLAN
NON-INCENTIVE SHARE OPTION AGREEMENT
<PAGE> 2
GUILFORD PHARMACEUTICALS INC.
1993 EMPLOYEE SHARE OPTION AND RESTRICTED SHARE PLAN
NON-INCENTIVE SHARE OPTION AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
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
</TABLE>
<PAGE> 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-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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-
<PAGE> 1
EXHIBIT 11.2
COMPUTATION OF PER SHARE EARNINGS (LOSS)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1997 1996 1997 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
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)
============== ============== ============== ==============
</TABLE>
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.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 20,985
<SECURITIES> 0
<RECEIVABLES> 1,058
<ALLOWANCES> 0
<INVENTORY> 1,429
<CURRENT-ASSETS> 59,981
<PP&E> 17,945
<DEPRECIATION> 2,901
<TOTAL-ASSETS> 153,677
<CURRENT-LIABILITIES> 6,027
<BONDS> 11,074
0
0
<COMMON> 186
<OTHER-SE> 136,390
<TOTAL-LIABILITY-AND-EQUITY> 153,677
<SALES> 1,767
<TOTAL-REVENUES> 2,391
<CGS> 615
<TOTAL-COSTS> 9,363
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 207
<INCOME-PRETAX> (5,278)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,278)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,278)
<EPS-PRIMARY> (.29)
<EPS-DILUTED> (.29)
</TABLE>
