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                                    AGREEMENT

        This AGREEMENT ("Agreement") is dated as of September 24, 2002 by and
between RedKey, Inc., an Ohio corporation, doing business as Cardinal Health
Sales and Marketing Services ("Vendor"), with its principal place of business at
7000 Cardinal Place, Dublin, Ohio, and Nastech Pharmaceuticals, Inc.
("Company"), a Delaware corporation, with its principal place of business at
3450 Monte Villa Parkway, Bothell, WA 98021.

                             BACKGROUND INFORMATION

        Company is engaged in research, development, manufacturing and
commercialization of nasally administered forms of pharmaceuticals and Vendor
provides medical representatives who Detail (as hereinafter defined)
pharmaceutical products for third parties. Company expects to acquire all
manufacturing, sales and distribution rights to the Products (as defined herein)
pursuant to an Asset Purchase Agreement between the Company and Schwarz Pharma,
Inc. (the "Asset Purchase Agreement"). After the closing of the transaction
contemplated in the Asset Purchase Agreement, Company desires the Vendor to
provide representatives to Detail certain products as determined and directed by
Company in the geographical territory hereinafter specified, pursuant to the
terms and conditions of this Agreement, and Vendor desires to provide the
Syndicated Representatives (as hereinafter defined) and perform such services
pursuant to the terms and conditions set forth in this Agreement.

        The parties hereby agree as follows:

                                    ARTICLE I
                      DEFINITIONS AND REFERENCES TO VENDOR

        1.1. Definitions. The following terms when used in this Agreement shall
have the following meanings:

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

               (b) "Affiliate" means any corporate or non-corporate business
entity that controls, is controlled by, or is under common control with a party
to this Agreement. A corporation or non-corporate business entity shall be
regarded as in control of another corporation if it owns or directly or
indirectly controls more than fifty percent (50%) of the voting stock of the
other corporation, or (i) in the absence of the ownership of more than fifty
percent (50%) of the voting stock of a corporation or (ii) in the case of a
non-corporate business entity, if it possesses directly or indirectly, the power
to direct or cause the direction of the management and policies of such
corporation or non-corporate business entity, as applicable.

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


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               (d) "Commencement Date" has the meaning set forth in Section
14.1.

               (e) "Detail" means an interactive, face-to-face visit by a
Syndicated Representative with a Target Customer or his or her legally empowered
designee in the Territory, during which the FDA-approved indicated uses, safety,
effectiveness, contraindications, side effects, warnings and other relevant
characteristics of one of the Products (as defined herein) are described by the
Syndicated Representative in a fair and balanced manner consistent with the
requirements of the Act, and using, as necessary or desirable, the Product
Labeling (as defined herein) and the Product Promotional Materials (as defined
herein). "Product Detail" means Detail of a Product between Target Customer and
Syndicated Representative. When used as a verb, "Detail" or "Detailing" shall
mean to engage in a Detail as defined in this Section 1.l(e).

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

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

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

               (i) "Program" means the program of Detailing to be conducted by
the Syndicated Representatives pursuant to this Agreement and during the term of
this Agreement.

               (j) "Promotional Materials" means all written, printed or graphic
material provided by the Company, intended for use by Syndicated Representatives
performing the Detailing, including visual aids, file cards, premium items,
clinical studies, reprints and any other promotional support items that Company
deems necessary or appropriate to conduct the Program. Promotional Materials
shall include FDA approved indicated uses, safety, effectiveness,
contraindications, side effects, warnings and other relevant characteristics
related to the Products.

               (k) "Syndicated Representative" means an individual hired by and
retained as an employee of Vendor to conduct Detailing of the Product in
connection with the Program and who is shared by more than one of Vendor's
clients

               (l) "Secondary Detail" means the second product discussed by the
Syndicated Representative in each Detail.

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


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               (n) "Territory" means the United States of America.

               (o) "Training Program" has the meaning set forth in Section 6.1.

               (p) "Vendor" means Cardinal Health Sales and Marketing Services.

                                   ARTICLE II
               APPOINTMENT OF VENDOR; GENERAL SCOPE OF ACTIVITIES

        2.1. Furnishing Syndicated Representatives. Vendor shall provide fifty
(50) Syndicated Representatives to engage in Detailing and such other activities
in the Territory as directed by Company to Vendor. The duties of such Syndicated
Representatives shall be to Detail the Product as a Secondary Detail. Company
acknowledges that the Syndicated Representatives will be Detailing the Products
in addition to promoting products of other clients of Vendor. The Syndicated
Representatives shall make a minimum of thirty-six thousand (36,000) Details per
year in total.

        2.2. Scope of Activities. The parties shall perform the following
activities, as applicable, in connection with the Program:

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

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

               (c) Company shall provide Vendor, at no cost to Vendor, with
sufficient quantities of the Product Promotional Materials and Product Labeling
for the performance and supervision of Detailing. Company shall be solely
responsible for the preparation, content, and method of distribution of the
Product Promotional Materials and the Product Labeling. In connection with the
Detailing of the Products, the Syndicated Representatives shall use only the
Product Labeling and the Product Promotional Materials provided by Company; and
under no


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circumstances shall Vendor or the Syndicated Representatives develop, create, or
use any other promotional material or literature for the Detailing of the
Products. Company shall advise Vendor immediately of any inaccuracy or
incompleteness of the Product Promotional Materials or the Product Labeling, and
upon such notice Vendor and the Syndicated Representatives shall immediately
cease the use of any portion or all of the Product Promotional Materials or
Product Labeling so identified by Company.

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

               (e) The Syndicated Representatives shall remain under the direct
authority and control of Vendor, but shall cooperate with the members of Company
and shall receive advice and direction related to Detail activities on the
Products from Company and Vendor mutually. Company shall make all decisions with
respect to the overall strategy in connection with the Detailing of the
Products. Any Company personnel interacting with Syndicated Representatives
shall not discipline the Syndicated Representatives or implement terms or
conditions of employment or personnel policies and/or practices with respect to
the Syndicated Representatives or otherwise control the daily activities of
Syndicated Representatives. Company shall provide Vendor with copies of all
reports, memoranda, audits and other data it develops pertaining to the
Syndicated Representatives, Detailing, and the Program within fifteen (15) days
of the preparation of such documents; provided, however, that any such documents
claiming negligent or wrongful acts or omissions of Syndicated Representatives
shall, as provided in Section 2.4, be sent to Vendor as promptly as practicable.

               (f) Company shall reimburse Vendor for all reasonable and
documented travel expenses of Syndicated Representatives in connection with
participation in training programs and planning meetings requested by Company
pursuant to this Agreement, including, but not limited to, airline, lodging,
meals and such other usual and customary travel expenses, at the corporate rates
available to Vendor, incurred in accordance with Vendor's expense guidelines and
processed through Vendor's expense reporting system. Such reimbursement shall
include a three and one-half percent (3.5%) administrative fee. A copy of
Vendor's Expense Guidelines is attached as Schedule 2.2(f).

               (g) Syndicated Representatives shall comply with Vendor's drug
policy, a copy of which is attached hereto and incorporated herein by reference
as Schedule 2.2 (g).


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               (h) Details by each Syndicated Representative will be reported to
Company on a monthly basis, in a manner agreed upon by the parties, in a paper
or electronic format.

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

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

        2.5. Vacancies/Turnover. In the event of a vacancy due to resignation,
reassignment or termination of a Syndicated Representative, Vendor shall use its
best efforts to fill any such vacancy within a six (6) week period. All
recruiting and other related expenses for filling a vacancy shall be borne by
Vendor; provided, however, that Company shall be responsible for all recruiting
and other related expenses for filling any vacancy occurring pursuant to
Company's request for reassignment or termination other than a request pursuant
to the last sentence of Section 2.4 or resulting from the Syndicated
Representative's failure to comply with any one or more of the provisions of
Section 2.2. In addition, if Company desires to interview any candidates,
Company shall bear its own cost of attending any final interview conducted by
Vendor or the costs of any separate interview arranged for by Company.

        2.6. Project Manager. Vendor shall appoint a Project Manager to serve as
a liaison between Vendor, Syndicated Representatives and Company regarding the
performance by Vendor and Company of their respective obligations under this
Agreement.


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        2.7 Management Reports. Vendor shall provide Company with monthly
reports in the form set forth in Schedule 2.7 within fifteen (15) days after the
end of each month during the term of this Agreement. At the request of Company,
Vendor shall furnish Company such documentation as Company reasonably requests
for purposes of verifying the accuracy of any monthly report.

        2.8 Condition Precedent to Effectiveness. Notwithstanding anything
contained in the Agreement to the contrary, the respective rights and
obligations of the parties contained in this Agreement shall be expressly
conditioned upon the closing of the transactions contemplated in the Asset
Purchase Agreement (the "Asset Purchase"), which is expected to occur on or
around September 30, 2002. In the event such closing does not occur, this
Agreement shall be terminated pursuant to Section 14.7 hereof.

                                   ARTICLE III
                                  COMPENSATION

        3. 1. Compensation; Incentive; Expenses.

               (a) For each Syndicated Representative, Company shall pay to
Vendor the Service Fees set forth on Schedule 3.1(a) attached hereto and
incorporated by reference.

               (b) Vendor shall submit a monthly invoice to Company for any
Service Fees due and owing under Subsection 3.1(a) above, or any other amounts
due under this Agreement, and Company shall pay such invoice in full within
thirty (30) days after receipt of the invoice.

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

        3.3. Past Due Amounts. Failure of the Company to timely make any payment
to Vendor under this Agreement will constitute a material breach of this
Agreement by Company. All amounts owing by Company to Vendor pursuant to this
Agreement that are not timely paid by Company will bear interest at the rate of
one percent (1%) per month (or the highest rate allowed by law if such rate is
less than one percent (1%) from the due date.

        3.4. Company's Termination, Removal or Hiring of Syndicated
Representatives. Company may request termination or removal from the Program of
any Syndicated Representative at any time in Company's reasonable discretion,
subject to Section 2.5. Company shall not hire Syndicated Representatives.


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                                   ARTICLE IV
                    REPRESENTATIONS, WARRANTIES AND COVENANTS

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

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

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

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

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

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

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

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

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

               (d) that the manufacture, sale, and distribution of the Products
do not and will not during the term of this Agreement, infringe any patent or
other proprietary rights of third parties, and the Products have all necessary
governmental approvals and may be lawfully


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Detailed and sold by Company and the Syndicated Representatives.

                                    ARTICLE V
               STATUS OF VENDOR AND THE SYNDICATED REPRESENTATIVES

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

        5.2. No Company Benefits. As employees of Vendor, Syndicated
Representatives are not eligible to participate in any benefits programs or
sales bonuses offered by Company to its employees, or in any pension plans,
profit sharing plans, insurance plans or any other employee benefit plans
offered from time to time by Company to its employees, provided that the
Syndicated Representatives shall be eligible to participate in Company sales
contests if so requested by Company and approved by Vendor. Vendor acknowledges
and agrees that Company does not, and will not, maintain or procure any worker's
compensation or unemployment compensation insurance for or on behalf of the
Managers or Syndicated Representatives while they are employees of Vendor.
Vendor acknowledges and agrees that it shall be solely responsible for paying
all salaries, wages, benefits and other compensation which its employees
(including Syndicated Representatives) may be entitled to receive in connection
with the performance of the services hereunder.

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

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

                                   ARTICLE VI
                                    TRAINING

        6.1. Training Programs.

               (a) Company shall conduct a training program for the Syndicated
Representatives prior to the commencement of the Program, which shall include
such medical


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and technical information about the Products and such sales training as Company,
along with Vendor, deems necessary and appropriate (the "Training Program"). The
Training Program shall also include instruction on compliance with applicable
laws. Vendor shall assist Company with the Training Program only to the extent
requested by Company and at a charge as reasonably determined by Vendor.

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

        6.2. Training Materials. With the advice and assistance, as necessary,
of Vendor, Company shall prepare written training materials for the Training
Program and an up-to-date programmed learning unit for the Products, to be sent
to each Syndicated Representative for "at home" study a minimum of five (5) days
prior to the commencement of the Training Program.

                                   ARTICLE VII
                                   [RESERVED]

                                  ARTICLE VIII
                   TRADEMARKS AND INTELLECTUAL PROPERTY RIGHTS

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

                                   ARTICLE IX
                     COMMUNICATIONS; MONITORING THE PROGRAM

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

        9.2. Government Agencies. All communications with government agencies,
including the FDA, concerning the Products shall be the sole responsibility of
Company. Vendor shall assist Company with respect to such communications with
government agencies to the extent


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requested by Company, and at Company's cost and expense. Vendor shall use its
best efforts to provide Company with any documents or information reasonably
requested by Company for purposes of responding to any communications with
government agencies within seventy-two (72) hours of Company's request.

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

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

        9.5. Review of Results. The parties shall meet periodically, but at
least once per calendar quarter, to review and discuss the actual results
compared to the marketing plans for Detailing of the Products. Company shall
regularly and promptly share with Vendor all reports, audits and other data it
develops relative to the Program.

                                    ARTICLE X
                                    INSURANCE

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

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

               (b) Commercial General Liability insurance, including completed
operations and products liability, with a combined single limit of $1,000,000;

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

        10.2. Company Insurance Coverage. Company shall maintain Commercial
General Liability insurance (primary and secondary coverage combined), including
completed operations and products liability, with a combined single limit of at
least $5,000,000.

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


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of the material terms of such coverage, and include a loss payable clause naming
the other party as a beneficiary of such insurance or as an additional insured.

                                   ARTICLE XI
                ADVERSE REACTION REPORTING AND REGULATORY MATTERS

        11.1. Immediate Notification. Vendor and Company agree to notify the
other party as soon as reasonably practicable of any information that each may
obtain or learn concerning any Product or package complaint or any serious
unexpected side effect, injury, toxicity, or sensitivity reaction or any
unexpected incidence or severity thereof associated with the clinical uses,
studies, investigations, tests and marketing of the Products, whether or not
determined to be attributable to the Products. "Serious" as used in this Section
11.1 refers to an experience which results in death, permanent or substantial
disability, in-patient hospitalization, prolongation of existing in-patient
hospitalization, a congenital anomaly or cancer, or a result of an overdose or
life threatening condition. "Unexpected" as used in this Section 11.1 refers to
(i) conditions or developments not previously submitted to governmental Agencies
or encountered during clinical studies of the Products and not reflected in the
Product Promotional Materials or the Product Labeling, or (ii) conditions or
developments occurring with greater frequency, severity, or specificity than
shown by information previously submitted to governmental Agencies or
encountered during clinical studies of the Products and not reflected in the
Product Promotional Materials or the Product Labeling. Each party shall also
notify the other in a timely manner of any other adverse experience, i.e., any
unfavorable and unintended change in the structure (signs), function (symptoms)
or chemistry (laboratory data) of the body temporally associated with the use of
the Products, whether or not considered related thereto.

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

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

                                   ARTICLE XII
                                  RETURN/RECALL

        12.1. Returned Products.

               (a) Company shall be responsible for handling all returned
Products, including shipment and compensation or credit for the returned
Products. Any Products inadvertently returned to Vendor shall be shipped to
Company or at its direction, in compliance with Company's returned goods policy,
and Vendor shall advise the customer who made the return


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that the Products have been returned to Company. Company shall reimburse
Vendor's shipping and other actual costs in connection with the handling of such
returned Products within thirty (30) days of delivery to Company of Vendor's
statement for such costs. Upon request Vendor shall provide Company with
documentation relating to such costs.

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

                                  ARTICLE XIII
                            CONFIDENTIAL INFORMATION

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

               (a) Was known to the receiving party formation prior to execution
of this Agreement without an obligation to keep it confidential;

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

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

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

               (e) Is developed by or for the receiving party independently and
apart from this Agreement, as evidenced by written records; or

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

        13.2 Handling of Confidential Information. Except as otherwise required
by law, each party shall keep all Confidential Information in confidence and
shall not, at any time during or for a period of five (5) years from the
termination of this Agreement, without the disclosing


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party's prior written consent, disclose or otherwise make available, directly or
indirectly, any Confidential Information to anyone other than the receiving
party's employees who need to know the same in the performance of the services
hereunder. Each party shall use the Confidential Information only in connection
with the performance of the services hereunder and for no other purpose. Each
party shall inform its employees of the trade secret, proprietary and
confidential nature of the Confidential Information.

                                   ARTICLE XIV
                              TERM AND TERMINATION

        14.1. Term. This Agreement shall take effect on the date on which both
parties execute this Agreement ("Commencement Date") and continue for a period
of twelve (12) months from the Product Launch Date (the "Initial Term"), unless
terminated earlier as set forth herein or extended by mutual agreement of the
parties. The Service Fees shall be subject to renegotiation for any renewal
term.

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

        14.3 Termination by Either Party. Subject to each party's continuing
obligations, either party may terminate this Agreement for any reason or no
reason upon ninety (90) days advance written notice to the other.

        14.4. Termination: Phase Out. In the event that this Agreement is
terminated pursuant to Sections 14.2 or 14.3, and at Company's request, the
parties shall discuss in good faith an appropriate phase-out of Vendor's
Detailing activities. Vendor shall continue its duties in a professional and
diligent manner during any such phase-out.

        14.5. Termination: Continuing Rights. The termination or expiration of
this Agreement shall not affect Company's obligation to reimburse or pay Vendor
any amount then due and owing under this Agreement. Further, the termination or
expiration of this Agreement shall not affect any rights or obligations of any
party under this Agreement which are intended by the parties to survive such
termination.

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


                                       13


<PAGE>
        14.7 Failure of Asset Purchase Closing. This Agreement shall
automatically terminate if the Asset Purchase has not been closed by October 31,
2002. In the event this Agreement is terminated pursuant to this paragraph,
neither party shall have any liability to the other pursuant to this Agreement;
provided, however, in such event, Company shall reimburse Vendor the amount set
forth on Schedule 14.7.

                                   ARTICLE XV
                           RECORDKEEPING; AUDIT RIGHTS

        15.1. Vendor Record Keeping: Inspection by Company. Vendor shall keep
accurate records in sufficient detail as to costs and expenses for which Company
must reimburse Vendor under this Agreement. Upon Company's reasonable request
made during or within one (1) year after the term of this Agreement, and at
Company's expense, Vendor shall permit Company's designated employees or agents
to have access during ordinary business hours to records of such costs and
expenses in order to verify the accuracy of amounts reimbursed by Company to
Vendor. Company and its designated employees or agents shall maintain in
confidence all such cost and expense records of Vendor.

                                   ARTICLE XVI
                                 INDEMNIFICATION

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

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

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

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

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

               (d) Vendor's violation of or failure to comply with all
applicable laws relating to the promotion, distribution and sale of the
Products, including but not limited to the Act, the


                                       14


<PAGE>
PDMA, the Medicare and Medicaid Anti-Kickback Act (42 U.S.C. Section
1320a-7b(a)), the Civil False Claims Act (31 U.S.C. Section 3729(a)), Sections
1128A, 1128B, and 1877 of the Social Security Act (42 U.S.C. Sections 1320a-7a,
-7b, and 1395nn), the Health Care Fraud Act (18 U.S.C. Section 1347), and the
Criminal False Claims Act (18 U.S.C. Section 287), as amended from time to time,
as well as similar applicable state laws;

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

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

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

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

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

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

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

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

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

               (g) Company's failure to pay when due or to reimburse Vendor for
any Taxes


                                       15


<PAGE>
(as defined in Section 5.3);

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

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

               (j) the use by Vendor, in the performance of its duties hereunder
and as specified or directed by Company, of any trademark, trade name,
copyright, patent or other rights which use actually or allegedly infringes on
the rights of any third party; or

               (k) Detailing of the Products, except to the extent such Damages
arise from a negligent or wrongful act or omission or a breach of this Agreement
by Vendor.

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

        16.5. Limitation on Vendor Liability. It is understood that Vendor is
not an insurer and that the sums payable hereunder to Vendor by Company are
based upon the value of services offered and the scope of liability undertaken,
and such sums are not related to any potential liability of Company. Vendor
makes no warranty, expressed or implied, that the services it furnishes will
avert or prevent occurrences or the consequences therefrom which may result in
loss or damage to Company. In the event of any Damages of which Vendor is
liable, Company agrees that Vendor's liability to indemnify Company shall not
exceed Vendor's required insurance coverage amounts as set forth in Section
10.1.

                                  ARTICLE XVII
                                  MISCELLANEOUS

        17.1. No Waiver: Cumulative Remedies. No failure or delay on the part of
either party in exercising any right, power or remedy hereunder shall operate as
a waiver thereof; nor shall


                                       16


<PAGE>
any single or partial exercise of any such right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy hereunder. No waiver of any provision hereof shall be effective unless in
writing and signed by the party giving such waiver. The remedies herein provided
are cumulative and not exclusive of any remedies provided by law.

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

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

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

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

        17.6. Notices. Any notice or request required or desired to be given in
connection with this Agreement shall be deemed to have been sufficiently given
if sent by pre-paid registered or certified mail or facsimile transmission to
the intended recipient at the address set forth below or such other address as
may have been furnished in writing by the intended recipient to the sender. The
date of mailing or facsimile transmission shall be deemed to be the effective
date on which notice was given, provided that all facsimile transmissions shall
contain a provision requiring the intended recipient to confirm receipt and no
facsimile transmission shall be effective unless confirmation of its receipt is
received within twenty-four hours of its transmission.

        All notices shall be addressed to:

               If to Company, to:
               Nastech Pharmaceuticals, Inc.
               3450 Monte Villa Parkway
               Bothell, WA 98021


                                       17


<PAGE>
               Fax: (425) 908-3650

               Attention:
               Steven C. Quay, M.D., Ph.D.
               Chairman of the Board, President & CEO

               If to Vendor, to:

               Cardinal Health Sales and Marketing Services
               7000 Cardinal Place
               Dublin, Ohio 43017
               Fax: (614) 757-6000
               Attention:
               President

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

        17.8. Assignment. This Agreement may not be assigned or transferred by a
party without the prior written consent of the other party hereto. Any such
assignment shall not materially or adversely affect the rights or obligations of
either party to this Agreement.

        17.9. Public Announcements. Any public announcement, press release, or
similar publicity with respect to this Agreement or the transaction contemplated
herein shall be at such time and in such manner as the parties shall mutually
agree, provided that nothing herein shall prevent either party from making such
public announcements as required by law.

        17.10. Maintenance of Records. Vendor and Company each agree that
throughout the term of this Agreement and for a period of six (6) years after
the termination of this Agreement, each will maintain records and otherwise
establish procedures to assure compliance with all regulatory, professional, and
other applicable legal requirements which relate to the Detailing and marketing
of the Products and if applicable, with the other services and activities to be
performed hereunder.

        17.11. Force Majeure. Failure of either party hereto to fulfill or
perform its obligations under this Agreement shall not subject such party to any
liability if such failure is caused or occasioned by, without limitation, acts
of God, acts of the public enemy, fire, explosion, flood, drought, war, riot,
sabotage, embargo, strikes or other labor disputes (which strikes or disputes
need not be settled), compliance with any order, regulation, or request of
government, or by any other event or circumstance of like or different character
to the foregoing beyond the reasonable control and without the fault or
negligence of such party (a "Force Majeure Event"), provided such party uses
reasonable efforts to remove such Force Majeure Event and gives the other party
prompt notice of the existence of such Force Majeure Event, provided, further,
that no Force Majeure Event shall serve to delay or excuse any payment by one
party to the other then due and owing.


                                       18


<PAGE>
        17.12 Setoff. Without limiting Vendor's rights under law or in equity,
Vendor and its Affiliates, parent or related entities, collectively or
individually, may exercise a right of set-off against any and all amounts due
Company. For purposes of this Section 17.12, Vendor, its Affiliates, parent or
related entity shall be deemed to be a single creditor.

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

REDKEY, INC. dba                            NASTECH PHARMACEUTICALS, INC.
CARDINAL HEALTH SALES AND
MARKETING SERVICES

By:       /s/ Don M. Wetherhold              By:    /s/ Gregory Weaver
          --------------------------                ----------------------------

Name:     Don M. Wetherhold                  Name:  Gregory L. Weaver
          --------------------------                ----------------------------

Title:    President                          Title: Chief Financial Officer
          --------------------------                ----------------------------

Date:     September 27, 2002                 Date:  September 24, 2002
          --------------------------                ----------------------------


                                       19


<PAGE>
                                 SCHEDULE 1.1(h)
                                    PRODUCTS

                                  Nascobal Gel

                                 Nascobal Spray


                                       20


<PAGE>
                                 SCHEDULE 2.2(f)
                               EXPENSE GUIDELINES

A copy of Vendor's standard Expense Guidelines is attached hereto.


<PAGE>
                                SCHEDULE 2.2.(g)
                              VENDOR'S DRUG POLICY


<PAGE>
                                  SCHEDULE 2.7
                            FORM OF MANAGEMENT REPORT


<TABLE>
<CAPTION>
Report Name                 Description                                              Frequency
--------------------------- -----------------------------------------------          --------------
<S>                         <C>                                                      <C>
Territory Assignment        Lists the individuals covering each region               Monthly
Report                      and territory.  If a territory is vacant, the
                            report will indicate the date when the territory
                            became vacant and what alternate coverage is being
                            applied (i.e. District Manager, Adjacent Rep, etc.)

                            In addition, the report will indicate the current
                            turnover rate.

Territory Coverage Report   For each territory, the report provides the              Monthly
                            call statistics:                                         Quarterly

                            -   Percentage of call to target audience

                            -   Percentage of samples delivered to target
                                audience

                            -   Average number of calls/day (calculated on a six
                                month moving average).

                            The report is summarized at the Regional and
                            National levels.

Sales Statistics Report     For each territory, based on third party data            Monthly
                            provided by Company, the report will show:               Quarterly

                            -   New Rx

                            -   Total Rx

                            -   Percent Change for New Rx

                            -   Percent Change for Total Rx

                            -   New Market Share Percent Change

                            -   Total Market Change Percent Change

                            The report is summarized at the Regional and
                            National levels.

Coupon Report               For each Territory, the report will document             Monthly
                            all the coupon distribution activities.  The
                            report will reflect the following:

                            For each Product:

                            - Period beginning balance

                            - Total coupon shipments received

                            - Total coupons disbursed

                            - Period ending balance

                            - Total coupons disbursed by target physician

                            - Physicians not receiving coupons

                            The report is summarized at the Regional
                            and National levels.
</TABLE>


<PAGE>
                                 SCHEDULE 3.1(a)

                     SYNDICATED REPRESENTATIVE'S SERVICE FEE

Company shall pay to Vendor a service fee equal to Twenty-Four Dollars ($24) per
Detail (the "Service Fee") based on the actual number of Details performed by
the Syndicated Representatives. Vendor shall invoice Company on a monthly basis
for three thousand (3,000) Details (based on a minimum of thirty-six thousand
(36,000) Details per year). On a quarterly basis, Vendor will reconcile the
actual number of Details during such contract quarter and invoice Company for
the difference between the actual number of Details and three thousand (3,000)
Details per month.

In addition to the Service Fee, Company shall be responsible for paying any
Syndicated Representative bonus incentives that are mutually agreed to by
Company and Vendor.

Company shall reimburse Vendor for all reasonable and documented travel expenses
of Syndicated Representatives in connection with participation in training
programs and planning meetings requested by Company pursuant to this Agreement,
including, but not limited to, airline, lodging, meals and such other usual and
customary travel expenses, incurred in accordance with Vendor's expense
guidelines. Such reimbursement shall include a five percent (5%) administrative
fee.


<PAGE>
                                  SCHEDULE 14.7
                            REIMBURSEMENT BY COMPANY

In the event this Agreement is terminated pursuant to Section 14.7 hereof,
Company shall reimburse Vendor Fifty Thousand Dollars ($50,000).