EX-10.1






GUILFORD PHARMACEUTICALS INC. EMPLOYEE RETENTION PLAN



1. Purpose and Effective Date. This Guilford Pharmaceuticals Inc. Employee Retention Plan (this
“Plan”) is effective as of the 6th day of April 2005 (the “Effective Date”). The Plan
is a discretionary retention bonus program for the benefit of those employees (“Participants”) of
Guilford Pharmaceuticals Inc. (the “Company”) who are selected for participation by the
Compensation Committee of the Company’s Board of Directors. This Plan is intended to qualify as a
compensation or bonus plan that is exempt from the application of the Employee Retirement Income
Security Act of 1974, as amended, by reason of Section 3 of such Act.



2. Definitions. Capitalized terms used in this Plan without definition shall have the meanings
given such terms in this Section 2.



a. “2005 Incentive Compensation Plan” means the incentive compensation plan adopted by the
Committee in respect of the Company’s 2005 performance.



b. “Additional Incentive Bonus” means the additional percentage of an Participant’s annual
incentive bonus that a Participant may be entitled to under this Plan.



c. “Base Salary” means a Participant’s annual base salary as in effect on the Effective Date
and with respect to any Participant who may be added after the Effective Date, such Participant’s
annual base salary on the date the Participant is added.



d. “Cause” means (i) being convicted of a crime involving fraud or theft against the Company
or of a felony involving moral turpitude, (ii) having improperly disclosed material trade secrets
or other proprietary information of the Company, other than in good faith performance of duties,
(iii) having willingly failed to, or refused to attempt in good faith to, perform material legally
assigned duties with regard to the Company (other than as a result of a Disability), or (iv) having
engaged in gross negligence or willful misconduct with regard to the Company that causes
substantial and material harm to the business and operations of the Company.




e. “Change in Control” means the occurrence of any of the following



(i) if 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 forty percent (40%) or more of the combined voting power
of the Company’s then outstanding securities, unless, if in a transaction in which a “person”
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 less than fifty percent
(50%) of the combined voting power of the Company’s then outstanding securities, prior to the
acquisition by such person of securities of the Company which causes such person to have such
beneficial ownership, the full Board of Directors 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 this Agreement despite such beneficial ownership;



(ii) if the Company consolidates with, or merges with or into another entity or sells,
assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of its assets
to any person, or any entity consolidates with, or merges with or into, the Company (a
“Transaction”), in any such event pursuant to a Transaction in which the owners of outstanding
voting stock of the Company immediately prior to such Transaction do not represent at least a
majority of the voting power in the surviving entity after the Transaction in approximately in the
same proportions; or




(iii) if the shareholders of the Company approve a plan of liquidation or dissolution.



f. “Disability” means any medically determinable physical or mental impairment that can be
expected to last for a continuous period of not less than 90 consecutive days , and that renders
the Participant unable to perform the duties of his or her position with the Company. The date of
the determination of Disability is the date on which the Participant is certified as having
incurred a Disability by a physician reasonably acceptable to the Company.



g. “Good Reason” means with respect to any Participant the occurrence of any one of the
following events: (i) assignment to the Participant of any duties materially and adversely
inconsistent with the Participant’s then current position (or such other position to which he or
she may have been promoted), or any other action that results in a material and adverse change in
the Participant’s position, status, title or responsibilities, (ii) any reduction in the
Participant’s annual base salary as in effect on the Effective Date (or, if later, the date a
Participant becomes a Participant) or (iii) any change that would require the Participant’s place
of employment to be located outside a radius of 50 miles of the Participant’s then current place of
employment, and if, in the case of each of the events described by clauses (i) through (iii)
without the Participant’s consent, the Company fails to cure the event within 30 days after written
notice to the Chief Executive Officer of the Company from the Participant; provided, however, that
if the event is intentional, knowing or repeated, the Participant shall not be required to provide
written notice or an opportunity to cure.



h. “RSU,” or “RSUs” means restricted stock units of the Company granted under the Company’s
2002 Stock Award and Incentive Plan.



i. “Stay Bonus” means the amount of the cash bonus payable to a Participant in accordance with
the terms of this Plan.



3. Eligibility and Participation. Eligibility and participation shall be in the sole discretion of
the Committee, and the Chief Executive Officer of the Company will notify those employees selected
by the Committee to participate in this Plan and the tier into which each is placed. The
Participants are divided into five tiers, based on their positions within the Company and the
potential Stay Bonus payable to them as described in Section 4.



4. Stay Bonus. This Plan is designed to encourage Participants to remain with the Company and
perform in a satisfactory manner during a prescribed period that begins on the Effective Date and
ends on December 6, 2005, for Tier I and II participants, and on April 6, 2006, for Tier III, IV
and V participants (in either case, the “Stay Bonus Period”). The maximum Stay Bonus payable to
Participants who remain for the entire Stay Bonus Period is a specified percentage of Base Salary,
which differs depending on the tier in which the Participant participates. Except as otherwise
indicated in this Plan, the Stay Bonus is earned and payable based on satisfactory service (as
determined in the sole good faith judgment of the Committee) throughout the Stay Bonus Period.



a. Stay Bonus. The Stay Bonus for each tier is the specified percentage of Base Salary as
follows (each an “Applicable Percentage”):



	 	 	 	 	 
	Tier	 	Percentage of Base Salary
	Tier 1

	 	 	25	%
	 
	 	 	 	 
	Tier 2

	 	 	25	%
	 
	 	 	 	 
	Tier 3

	 	 	15	%
	 
	 	 	 	 
	Tier 4

	 	 	12.5	%
	 
	 	 	 	 
	Tier 5

	 	 	10	%







b. Service Requirements; Pro-rata Bonus for Early Termination. Except as otherwise
specified in this Plan, if (i) the Participant remains employed by the Company for the entire Stay
Bonus Period and continues to satisfy all of the conditions for participation, or (ii) a
Participant’s employment with the Company is terminated by the Company other than for cause, the
Participant dies or suffers a Disability, or the Participant terminates his or her employement with
the Company for Good Reason, (in any case, a “Terminated Participant”) then such Participant shall
receive a Stay Bonus which shall be equal to the product of the Applicable Percentage
multiplied by such Participant’s Base Salary.



c. Form of Payment. The Stay Bonus payable to a Participant shall be paid in a lump sum and
shall be subject to payroll taxes and other withholdings according to the Company’s standard
payroll practices. The payment shall be made in connection with the Company’s first regular payroll
period occurring after the conclusion of the applicable Stay Bonus Period. If a Stay Bonus is owed
to a Terminated Participant, it will be paid to the Terminated Participant in connection with the
Company’s first regular payroll period occurring after the Terminated Participant’s employment has
been terminated.



d. Additional Participants. The Committee, in its sole discretion, reserves the right to
select additional Participants who are not participants in this Plan as of the Effective Date in
order to obtain or retain their services and avoid the disruption and cost of attrition among
employees with important knowledge or skills.



e. Tier I Participants. In addition to the Stay Bonus, each Tier I Participant shall be
entitled to an Additional Incentive Bonus equal to 50% of the Tier I Participant’s annual incentive
target bonus if the Committee determines that the Tier I Participant has achieved 100% of
his or her target bonus under the Company’s 2005 Incentive Compensation Plan. The Additional
Incentive Bonus shall be payable on account of the Tier I Participant’s 2005 performance and shall
be paid in accordance with the Company’s regular 2005 Incentive Compensation Plan incentive
payments. The Additional Incentive Bonus shall not be payable if (i) there is a Change of Control,
(ii) the Tier I Participant’s employment is terminated for any reason prior to the expiration of
the performance period, or (iii) the Tier I Participant dies or suffers a Disability.



5. RSUs. Subject to the approval by the Company’s stockholders of an amendment to the Company’s
2002 Stock Award and Incentive Plan at the Company’s 2005 Annual Meeting of Stockholders, the
Committee shall grant on May 18, 2005 to each person who is a Participant on the Effective Date,
the RSUs set forth in the chart below.



	 	 	 	 	 
	Tier	 	RSUs
	Tier 1

	 	 	8,000 – 18,000*	 
	 
	 	 	 	 
	Tier 2

	 	 	8,000 – 12,000*	 
	 
	 	 	 	 
	Tier 3

	 	 	2,500	 
	 
	 	 	 	 
	Tier 4

	 	 	1,000	 
	 
	 	 	 	 
	Tier 5

	 	 	750	 







*designates that the RSUs award shall be within the specified range, at the discretion of the
Committee.



Each such RSU grant shall be on the terms and conditions set forth on Attachment A to this
Plan. Additional Participants after the Effective Date shall be entitled to receive RSU grants in
the discretion of the Committee. If the amendment referred to above is not approved, then any right
to grants of RSUs under this Plan shall be void and of no further effect.



6. Termination of Participation.



a. Events. A Participant’s participation in this Plan shall automatically terminate,
without notice to or consent by such Participant, upon the first to occur of either of the
following events with respect to such Participant: (1) termination of employment by the Company for
Cause, or (2) termination of employment by the Participant other than for Good Reason.



b. Effect of Termination for Cause or Resignation without Good Reason. In the event a
Participant’s employment is terminated by the Company for Cause or a Participant terminates his or
her employment with the Company other than for Good Reason, the Participant shall forfeit his or
her entire right to any payment under this Plan.



7. Change in Control. If there is a Change in Control of the Company, 100% of the Stay Bonus
shall vest with respect to all Participants and shall be payable immediately upon the
consummation of the transaction pursuant to which the Company undergoes the Change in Control.



8. Binding Authority. The decisions of the Committee shall be final and conclusive for all
purposes of this Plan and shall not be subject to any appeal or review.



9. Source of Payments. All Stay Bonus payments will be paid in cash from the general funds of the
Company; no separate fund will be established.



10. Amendment. This Plan may be amended by the Committee at any time and without notice to or the
consent of Participants if and so long as the rights and benefits of the Participants are not
materially and adversely affected by such amendment.



11. Severability. If any term or condition of this Plan shall be invalid or unenforceable, the
remainder of this Plan shall not be affected thereby and shall continue in effect and application
to the full extent permitted by law.



12. No Employment Rights. Neither the establishment nor the terms of this Plan shall be held or
construed to confer upon any employee the right to a continuation of employment by the Company, nor
constitute a contract of employment, express or implied. Subject to any applicable employment
agreement, the Company reserves the right to dismiss or otherwise deal with any employee, including
the Participants, to the same extent as though this Plan had not been adopted. Nothing in this Plan
is intended to alter the “at-will” status of Participants, it being understood that, except to the
extent otherwise expressly set forth to the contrary in a written employment agreement, the
employment of any Participant can be terminated at any time by either the Company or the employee
with or without notice, with or without cause.



13. Transferability of Rights. The Company shall have the right to transfer its obligations under
this Plan, with respect to one or more Participants, to any person, including any purchaser of all
or any part of the Company’s business. No Participant or spouse shall have any right to commute,
encumber, transfer or otherwise dispose of or alienate any present or future right or expectancy
that the Participant may have at any time to receive payments of benefits hereunder, which benefits
and the rights thereto are expressly declared to be non-assignable and nontransferable, except to
the extent required by law. Any attempt by a Participant to transfer or assign a benefit or any
rights granted hereunder shall (after consideration of such facts as the Company deems pertinent)
be grounds for terminating any rights of the Participant to any portion of this Plan benefits not
previously paid.



14. Extension of Plan. The Company, in the discretion of the Committee, reserves the right to
extend the terms of this Plan for such additional periods as it deems necessary to those members of
its workforce that it deems necessary. The terms and conditions under which additional Stay Bonuses
may be awarded shall be determined, if at all, upon this Plan’s extension.



15. Governing Law. This Plan shall be construed, administered and enforced according to the laws
of the State of Maryland (without giving effect to principles of conflicts of interest).



IN WITNESS WHEREOF, this Plan has been adopted by the Compensation Committee of the Board of
Directors Guilford Pharmaceuticals Inc. as of the Effective Date.




GUILFORD PHARMACEUTICALS INC.




By:      




George L. Bunting, Jr.


Chairman of the Board of Directors and



Chairman of the Compensation Committee



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Attachment A




GUILFORD PHARMACEUTICALS INC.

FORM OF RESTRICTED STOCK UNIT AGREEMENT




Guilford Pharmaceuticals Inc., a Delaware corporation (the “Company”), hereby grants units
relating to its common stock, $.01 par value, (the “Stock”) to the Grantee named below, subject to
the vesting conditions set forth in the attachment.



Capitalized terms used in this Restricted Stock Unit Agreement without definition shall have
the meanings given to such terms in the Guilford Pharmaceuticals Inc. Employee Retention Plan.



Grant Date:      -      , 2005



Name of Grantee:



Grantee’s Social Security Number:      -     -     



Number of Restricted Stock Units Covered by Grant:



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



Grantee:



(Signature)




Company:



(Signature)




Title:



Attachment



This is not a stock certificate or a negotiable instrument.



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GUILFORD PHARMACEUTICALS INC.

FORM OF RESTRICTED STOCK UNIT AGREEMENT




	 	 	 
	Nontransferability

	 	This grant is an award of

Restricted Stock Units in the

number set forth on the cover

sheet and subject to the vesting

conditions described below

(“Restricted Stock Units”). Your

Restricted Stock Units may not be

transferred, assigned, pledged or

hypothecated, whether by

operation of law or otherwise,

nor may the Restricted Stock

Units be made subject to

execution, attachment or similar

process.
	 
	 	 
	Issuance and Vesting

	 	Subject to the terms and

conditions set forth in this

Restricted Stock Unit Agreement,

this Restricted Stock Unit grant

shall become vested 100% on April

5, 2006 (the “Vesting Date”).

This Restricted Stock Unit grant

shall be forfeited if, prior to

the Vesting Date, your employment

with the Company is terminated

for Cause or you terminate your

employment with the Company for

other than Good Reason, your

death or Disability.

The vesting of this Restricted

Stock Unit grant shall be

accelerated as to 100% of the

grant if there is a Change of

Control.
	 
	 	 
	Delivery of Shares Pursuant to

Restricted Stock Units

	 	A certificate for the shares of

Stock represented by the

Restricted Stock Units shall be

delivered to you, or to your

eligible beneficiary or your

estate, at such time as the

Restricted Stock Units become

vested; provided, that, if

required by Section 409A of the

Internal Revenue Code and the

regulations thereunder, delivery

of the shares shall not be made

earlier than six months after

your separation from service

within the meaning of Section

409A. The date that certificates

are required to be delivered to

you under this subsection is the

“Payout Date.”

If the Payout Date provided for

in the preceding paragraph would

otherwise occur during a period

in which you are: (a) subject to

a lock-up agreement restricting

your ability to sell shares of

Stock in the open market or (b)

restricted from selling shares of

Stock in the open market because

you are not then eligible to sell

under the Company’s insider

trading or similar plan as then

in effect (whether because a

trading window is not open or you

are otherwise restricted from

trading), the Payout Date will be

delayed until the first date on

which you are no longer

prohibited from selling shares of

Stock due to a lock-up agreement

or insider trading plan

restriction.
	 
	 	 
	Withholding Taxes

	 	You agree, as a condition of this

grant, that you will make

acceptable arrangements to pay

any withholding or other taxes

that may be due as a result of

the vesting of Stock acquired

under this grant. In the event

that the Company determines that

any federal, state, local or

foreign tax or withholding

payment is required relating to

the vesting of shares arising

from this grant, the Company

shall have the right to: (i)

require that you arrange for such

payments to the Company, or (ii)

withhold such amounts from other

payments due to you from the

Company. In the alternative and

only if the Company grants its

approval, you may elect to

satisfy the minimum required

withholding requirements by

forfeiting to the Company shares

of Stock acquired pursuant to

this Agreement in an amount equal

to the withholding or other taxes

due.
	 
	 	 
	Shareholder Rights

	 	You do not have any of the rights

of a shareholder with respect to

the Restricted Stock Units unless

and until the Shares relating to

the Restricted Stock Units has

been delivered to you.
	 
	 	 
	Adjustments

	 	In the event of a stock split, a

stock dividend or a similar

change in the Company stock, the

maximum number of Restricted

Stock Units covered by this grant

shall be adjusted (and rounded

down to the nearest whole

number). Your Restricted Stock

Units shall be subject to the

terms of the agreement of merger,

liquidation or reorganization in

the event the Company is subject

to such corporate activity in the

same manner as common stock of

the Company, but shall be subject

to the vesting and distribution

provisions hereof.
	 
	 	 
	Applicable Law

	 	This Agreement will be

interpreted and enforced under

the laws of the State of

Delaware, other than any

conflicts or choice of law rule

or principle that might otherwise

refer construction or

interpretation of this Agreement

to the substantive law of another

jurisdiction.
	 
	 	 
	Administration

	 	The interpretation and

construction by the Board of

Directors of the Company of any

provision of this Agreement shall

be final, binding and conclusive.
	 
	 	 








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