Exhibit 10.1
CONSULTING SERVICES AND SEPARATION
AGREEMENT
THIS CONSULTING SERVICES AND SEPARATION AGREEMENT
(“Agreement”) is made and entered into as of
September 3, 2004 by and between GUILFORD PHARMACEUTICALS
INC. , 6611 Tributary Street, Baltimore, Maryland 21224
(“Guilford”) and CRAIG R. SMITH, M.D. , 6437
Cloister Gate Drive, Baltimore, Maryland 21212
(“Dr. Smith”).
In
consideration of the mutual agreements and other consideration
contained in this Agreement, the parties agree as
follows:
1. Resignation . Dr. Smith has voluntarily
resigned, and Guilford hereby accepts Dr. Smith’s
resignation, from his positions as President, Chief Executive
Officer and Chairman of Guilford, and from any executive or board
positions held at any subsidiary of Guilford, all such resignations
to be effective on the earlier of (i) the date designated by
the Board of Directors by written notice to Dr. Smith or
(ii) the date of the Company’s 2005 Annual Meeting of
Stockholders (the “Resignation Date”). During the
period of time between the date of this Agreement and the
Resignation Date, Guilford agrees to pay Dr. Smith’s
salary, benefits, expenses, and other compensation, if any, in the
same manner as other executive employees of Guilford and consistent
with Guilford’s policies concerning each. It is acknowledged
that Dr. Smith is not hereby resigning from his position as a
member of the Guilford Board of Directors. In the event
Dr. Smith voluntarily terminates his employment prior to the
Resignation Date, this Agreement shall be null and void, no
payments or benefits shall be due to Dr. Smith hereunder, and
the terms of Dr. Smith’s termination benefits, if any,
will be governed by the terms of the letter agreements between
Guilford and Dr. Smith dated July 14, 1993 and
September 6, 1996, together attached as Exhibit A (the
“Letter Agreements”).
2. Consulting Services, Contract Termination and Other
Benefits .
(a) Guilford
agrees to, and hereby does, enter into a consulting arrangement
with Dr. Smith for a period of one year commencing from the
Resignation Date by which Dr. Smith agrees, and hereby does
agree, to make himself available to Guilford for and at reasonable
times not to exceed forty (40) hours per week and in
reasonable places to consult with regard to various matters
including, but not limited to, product research and development,
clinical trials, and regulatory affairs, and to provide other
transitional services including, but not limited to, service on the
SNDC Board, Guilford Science Committee and other functions as
requested by Guilford’s Board and/or CEO. Guilford agrees to
reimburse Dr. Smith for all reasonable out-of-pocket costs
associated with the provision of consulting services including, but
not limited to, transportation costs, lodging, and meals for any
travel necessary to perform these services, subject to
Guilford’s policies concerning expense
reimbursement.
(b) As
a contract termination benefit intended to be consistent with the
benefits afforded by the Letter Agreements (and which the parties
acknowledge are, except as provided in Paragraph 1 and this
Paragraph 2(b), terminated as of the date hereof), beginning
on the first regular payroll date after the Resignation Date and
continuing for thirty-six months, at such times and in accordance
with Guilford’s usual payroll procedure,
Guilford agrees to continue to
pay to Dr. Smith his current base salary, subject to all
appropriate payroll taxes and withholding amounts. In addition,
Guilford agrees to continue in effect any health, life and
disability insurance coverage that Dr. Smith currently enjoys
through Guilford through the same thirty-six month period. In order
to provide this insurance benefit Guilford may elect to continue to
keep Dr. Smith on its payroll as an employee, or may elect to
secure individual coverage for Dr. Smith or any other means it
deems appropriate to provide the benefit. These payments and
benefits, and any continued vesting as described below, will cease
upon Dr. Smith’s commencement of full-time employment
during the thirty-six month period, it being understood that
part-time employment, membership on boards of directors or
part-time consulting arrangements, so long as they are not in
violation of the covenants in Paragraph 4 hereof and do not
materially impair Dr. Smith’s ability to perform the
consulting services provided for in Paragraph 2(a) hereof, do not
constitute full-time employment for purposes of this
Paragraph 2(b).
(c) As
further consideration for entering into the consulting arrangement
and for the covenants contained in this Agreement, Guilford
(i) agrees to grant to Dr. Smith on the Resignation Date
100,000 Restricted Stock Units under Guilford’s 2002 Stock
Option and Incentive Plan which shall vest as to 50,000 shares on
the first anniversary of the Resignation Date and 50,000 shares on
the second anniversary of the Resignation Date; (ii) shall pay
Dr. Smith a cash payment equal to 50% of his current annual
base salary amount, payable in two equal installments, the first
installment due on the later of the Resignation Date or
January 3, 2005, and the second installment due promptly
following the first anniversary of the Resignation Date, and
(iii) shall permit the continued vesting of any currently
unvested stock options in accordance with their terms during the
thirty-six month contract termination benefit period provided for
in Paragraph 2 (b) above. The Restricted Stock Unit grant
vesting, cash payment and stock option vesting provided for in
clauses (i), (ii) and (iii) of the preceding sentence to
occur on or after the first anniversary of the Resignation Date are
contingent upon Dr. Smith’s good faith performance of
the consulting services described in Paragraph 2(a) during the term
of the consulting period and adherence to the terms of the
covenants contained in Paragraph 4 below. The terms of the
Restricted Share Unit grant shall be governed by a Restricted Stock
Unit agreement of Guilford under the Plan attached hereto as
Exhibit B. Dr. Smith acknowledges that he has consulted
with his tax advisor with regard to the tax treatment to him of the
benefits provided hereby. Dr. Smith further acknowledges and
agrees that the consideration stated in this Paragraph 2(c) is in
excess of any amounts which he may be owed by Guilford under any
other employment contract or agreement or term of
employment.
3. Release . In consideration for the
additional agreements in Paragraphs 2(a), (b) and
(c) above, Dr. Smith, on behalf of Dr. Smith, Dr.
Smith’s heirs, executors, administrators, successors and
assigns, hereby releases, acquits and forever discharges Guilford
and any and all of its current or former subsidiaries and other
affiliated entities and benefit plans, as well as its and/or their
officers, directors, representatives, attorneys, agents, servants,
employees, stockholders, successors, predecessors and affiliates
(for purposes of this Paragraph 3, all incorporated in the
definition of the “Released Parties”) from any and all
claims, liabilities, demands, causes of action, costs, expenses,
attorneys fees, damages, indemnities and obligations of every kind
and nature, in law, in equity or otherwise, known or unknown,
suspected and unsuspected, disclosed and undisclosed,
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arising out of or in any way
related to agreements, acts or conduct at any time as of or prior
to the date of this agreement, including, but not limited to: all
such claims or demands arising from Dr. Smith’s
employment or the termination of Dr. Smith’s employment; all
such claims and demands related to salary, bonuses, commissions,
stock, stock options (except as provided above), expense
reimbursements, or any form of compensation; claims pursuant to any
federal, state or local law or cause of action including, but not
limited to, the Federal Civil Rights Acts of 1964, as amended, the
Maryland Fair Employment Practices Act, as amended, the Age
Discrimination in Employment Act of 1967, as amended, or any law or
legal principle of similar effect in any other relevant
jurisdiction; contract claims; tort claims; or claims of wrongful
discharge, discrimination, fraud, defamation, and emotional
distress. Dr. Smith further agrees not to sue or otherwise
institute or cause to be instituted or in any way voluntarily
participate in the prosecution of any complaints or charges against
any persons or entities released herein in any federal, state or
other court, administrative agency or other forum concerning any
claims released herein. Dr. Smith further agrees to deliver a
release identical to that contained in this Paragraph to the
Company on the Resignation Date, to cover all periods subsequent to
the date of this Agreement and prior to the Resignation Date, as a
condition to his receipt of the benefits provided for in Paragraphs
2 (a), (b) and (c) above. Notwithstanding the above,
Dr. Smith is not releasing any claims based upon
Guilford’s obligations under this Agreement for salary,
benefits, expense reimbursements, or other compensation during the
period from the Effective Date through the Resignation
Date.
4. Noncompetition .
(a) Dr. Smith
covenants and agrees that for the period beginning on the date
hereof and ending on the second anniversary of the Resignation
Date, he shall not (i) establish, accept employment with,
provide consulting or similar services to, or in any other way be
involved in an active manner with (whether as an employee,
director, consultant, adviser or owner), any entity in the
pharmaceutical or biotechnology industry involved in the
development or marketing of therapeutic products for commercial
uses in the neuroprotective, neuroregenerative, anesthetic or
anti-thrombotic fields, or any other fields that are the focus of
Guilford’s current drug development and commercialization
efforts or that are competitive with products currently under
development or marketed by Guilford, and associated research and
development, in any location in the United States or any other
country where Guilford or its subsidiaries or licensees is engaged
in marketing of any Guilford products; (ii) solicit, divert or
accept business from any customer, supplier, distributor, licensor,
licensee or manufacturer of or to Guilford and its subsidiaries or
its affiliates to the detriment of Guilford and its subsidiaries or
any of its affiliates, or otherwise interfere with the relationship
between Guilford and its subsidiaries and any customer, supplier,
distributor, licensor, licensee or manufacturer of or to Guilford
and its subsidiaries or its affiliates to the detriment of Guilford
and its subsidiaries or any of its affiliates; or (iii) solicit,
induce or attempt to solicit or induce any person who is an
employee of Guilford or any of its subsidiaries to perform work or
services for any individual or entity other than Guilford or any of
its subsidiaries. Dr. Smith agrees that the scope of this
Paragraph 4(a) is reasonable and reflective of Guilford’s
business. As used in the preceding sentence, “products
currently under development” shall mean those products which
may reasonably be expected to be pursued by Guilford based on such
factors
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as Guilford’s plans,
strategies, intentions, operations, investments, expenditures and
other activities prior to the end of the one year consulting period
provided for in Paragraph 2(a).
(b) In
the event the restrictions against engaging in a competitive
activity contained in Paragraph 4(a) hereof shall be determined by
any court of competent jurisdiction to be unenforceable by reason
of their extending for too great a period of time or over too great
a geographical area or by reason of their being too extensive in
any other respect, such court shall modify the terms thereof to the
minimum extent necessary to make such terms enforceable to the
fullest extent allowed, all as determined by such court in such
action.
(c) Dr. Smith
acknowledges and agrees that the covenants in this Paragraph 4 are
fair, reasonable in scope, and necessary to protect the legitimate
business interests of Guilford, including its interest in its
goodwill, trade secrets, confidential information, and information
concerning actual and prospective customers, suppliers,
distributors, manufacturers, investors, employees, and financing
providers. Dr. Smith acknowledges and agrees that he has
provided and will continue to provide unique and valuable services
to Guilford. Dr. Smith understands that the provisions of this
Paragraph 4 may affect or limit Dr. Smith’s ability
to earn a livelihood in a business similar to or competitive with
the business engaged in by Guilford, but Dr. Smith
nevertheless believes and represents that Dr. Smith shall have
sufficient assets, skills, and employment opportunities in
non-competitive positions or roles and that he shall have received
sufficient consideration, remuneration and other benefits from
Guilford to make enforceable the restrictions and limitations
contained in this Paragraph 4.
(d) Dr. Smith
acknowledges that Guilford will have no adequate remedy at law and
would be irreparably harmed if Dr. Smith breaches or threatens
to breach any of the provisions of this Paragraph 4 and,
therefore, agrees that Guilford shall be entitled to seek
injunctive relief to prevent any breach or threatened breach
thereof and to seek specific performance of the terms of this
Paragraph 4 (in addition to any other legal or equitable
remedy Guilford may have, including without limitation termination
of this Agreement by Guilford and repayment by Dr. Smith of
payments under this Agreement, or forfeiture of unvested restricted
stock granted hereunder). Nothing in this Agreement shall be
construed as prohibiting Guilford or Dr. Smith from pursuing
any other remedies or defenses at law or in equity that it may have
under and in respect of this Agreement.
5. Additional Covenants . Except as pursuant to
a court order or subpoena, Dr. Smith agrees not to make any
statements, orally or in writing, regardless of whether such
statements are truthful, or take any actions, which (i) in any
way disparage Guilford, or harm the reputation and/or goodwill of
Guilford, or (ii) in any way, directly or indirectly,
knowingly cause, or encourage or condone the making of such
statements or the taking of such actions by anyone else. Guilford
will instruct its directors and officers, as well as other members
of Guilford’s management not to make any statements, orally
or in writing, regardless of whether such statements are truthful,
or take any actions, which (i) in any way disparage
Dr. Smith, or which harm Dr. Smith’s reputation, or
(ii) in any way, directly or indirectly, knowingly cause or
encourage or condone the making of such statements or the taking of
such actions by anyone else. In addition, Dr. Smith is party
to and bound by
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