NEOTHERAPEUTICS, INC. - Investor Relations

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q (Mark One)

[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2002

OR

[ ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 000-28782

NEOTHERAPEUTICS, INC.(Exact Name of Registrant as Specified in its Charter)

Delaware 93-0979187

(State or other jurisdictionof incorporation or organization)

(I.R.S. EmployerIdentification No.)

157 Technology Drive

Irvine, California

92618(Address of Principal Executive Offices) (Zip Code)

Registrant’s Telephone Number, Including Area Code (949) 788-6700

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days.

Yes [X] No [ ]

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock as of the latest practicable date:

Class Outstanding at November 11, 2002

Common Stock, $.001 par value 1,615,094

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATIONITEM 1. Financial Statements

Statement Regarding Financial Information Condensed Consolidated Balance Sheets Condensed Consolidated Statements of Operations (unaudited) Condensed Consolidated Statements of Cash Flows (unaudited) Notes to Condensed Consolidated Financial Statements

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsITEM 3. Quantitative and Qualitative Disclosures About Market RiskITEM 4. Controls and Procedures

PART II — OTHER INFORMATIONITEM 1. Legal ProceedingsITEM 2. Changes in Securities and Use of ProceedsITEM 3. Defaults Upon Senior SecuritiesITEM 4. Submission of Matters to a Vote of Security HoldersITEM 5. Other Information (not previously reported in a Form 8-K)ITEM 6. Exhibits and Reports on Form 8-KITEM 7. SIGNATURES

EXHIBIT 4.1EXHIBIT 4.2EXHIBIT 10.2EXHIBIT 10.3EXHIBIT 10.6EXHIBIT 10.7EXHIBIT 10.8EXHIBIT 10.9EXHIBIT 10.10

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NEOTHERAPEUTICS, INC.

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Page No.

PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements Statement Regarding Financial Information 3

Condensed Consolidated Balance Sheets as of September 30, 2002 (unaudited) and December 31,

2001 4

Condensed Consolidated Statements of Operations for the three-months ended September 30,2002 and 2001 (unaudited) and for the nine-months ended September 30, 2002 and 2001(unaudited) 5

Condensed Consolidated Statements of Cash Flows for the nine-months ended September 30,2002 and 2001 (unaudited) 6-8

Notes to Condensed Consolidated Financial Statements (unaudited) 9 ITEM 2. Management’s Discussion And Analysis of Financial Condition and Results of Operations 18 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 32 ITEM 4. Controls and Procedures 32 PART II. OTHER INFORMATION 33 ITEM 1. Legal Proceedings 33 ITEM 2. Changes in Securities and Use of Proceeds 33 ITEM 3. Defaults Upon Senior Securities 33 ITEM 4. Submission of Matters to a Vote of Security Holders 34 ITEM 5. Other Information (not previously reported in a Form 8-K) 34 ITEM 6. Exhibits and Reports on Form 8-K 34

SIGNATURES 35

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NeoTherapeutics, Inc.

FORM 10-Q

For the Quarterly Period Ended September 30, 2002

PART I — FINANCIAL INFORMATION

ITEM 1. Financial Statements

Statement Regarding Financial Information

The condensed consolidated financial statements of NeoTherapeutics, Inc. (the “Company”) included herein have been prepared bymanagement, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information normallyincluded in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States hasbeen condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make theinformation presented not misleading. The Company recommends that you read the consolidated financial statements included herein inconjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for thefiscal year ended December 31, 2001, filed with the Securities and Exchange Commission. Due to the change in management and strategicdirection announced on August 20, 2002, the Company does not believe that results will be indicative of results for future periods.

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Condensed Consolidated Balance Sheets

September 30, December 31, 2002 2001 (Unaudited) Assets Current Assets: Cash and cash equivalents $ 41,440 $ 749,213 Marketable securities and short-term investments 254,982 6,407,388 Licensing fee receivable 2,000,000 — Other receivables 106,887 474,007 Prepaid expenses and refundable deposits 244,131 386,229 Total current assets 2,647,440 8,016,837 Property and Equipment, at cost: Equipment 4,881,278 5,397,052 Leasehold improvements 1,910,350 1,937,912 Accumulated depreciation and amortization (3,259,828) (2,646,103) Property and equipment, net 3,531,800 4,688,861 Other Assets — refundable deposits 98,614 119,164 Total assets $ 6,277,854 $ 12,824,862 Liabilities and Stockholders’ Equity Current Liabilities: Accounts payable and accrued expenses $ 3,053,135 $ 4,186,085 Accrued payroll and related taxes 358,825 236,223 Current portion of capitalized lease obligations 333,568 654,434 Note payable to related party — 135,574 Total current liabilities 3,745,528 5,212,316 Capital lease obligations, net of current portion 220,540 463,705 Deferred revenue and other non-current liabilities 230,377 361,831 Commitments and Contingencies (note 8) Stockholders’ Equity:

Preferred stock, par value $0.001 per share, 5,000,000 shares

authorized:

None issued or outstanding at September 30, 2002 and December 31,

2001 — —

Common stock, par value $0.001 per share, 50,000,000 shares

authorized:

Issued and outstanding, 1,590,112 and 951,086 shares at

September 30, 2002 and December 31, 2001, respectively 1,590 951 Additional paid in capital 141,863,690 134,682,093 Deferred compensation (283,473) (1,889,628) Notes receivable from directors and officers (225,000) (615,649) Accumulated other comprehensive income 1,117 87,065 Accumulated deficit (139,276,515) (125,477,822) Total stockholders’ equity 2,081,409 6,787,010 Total liabilities and stockholders’ equity $ 6,277,854 $ 12,824,862

The accompanying notes are an integral part of thesecondensed consolidated balance sheets.

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Condensed Consolidated Statements of Operations (unaudited)

Three-Months Ended Nine-Months Ended September 30, 2002 September 30, 2001 September 30, 2002 September 30, 2001 Revenues $ 2,008,334 $ 8,334 $ 2,219,307 $ 16,668 Operating expenses: Research and development 2,685,555 4,710,184 11,437,910 13,267,689 General and administrative 461,201 1,508,790 3,349,012 5,304,251 Restructuring expenses 1,381,088 — 1,381,088 — Total operating expenses 4,527,844 6,218,974 16,168,010 18,571,940 Loss from operations (2,519,510) (6,210,640) (13,948,703) (18,555,272)Other income, net 166,378 85,077 150,011 504,209 Minority interest — 146,547 — (48,453) Net loss $ (2,353,132) $ (5,979,016) $ (13,798,692) $ (18,099,516) Basic and diluted net loss per share $ (1.50) $ (7.02) $ (11.23) $ (24.23) Basic and diluted weighted average

common shares outstanding 1,564,664 851,129 1,228,911 746,866

The accompanying notes are an integral part of thesecondensed consolidated statements.

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Condensed Consolidated Statements of Cash Flows (unaudited)

Nine-Months Nine-Months Ended Ended September 30, 2002 September 30, 2001 Cash Flows From Operating Activities: Net loss $ (13,798,692) $ (18,099,516)Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 745,404 569,303 Impairment on investment in marketable security 50,904 — Amortization of employee stock option compensation 375,146 1,155,144 Minority interest in net loss — (162,380) Amortization of debt discount — 9,827 Issuance of common stock for services 102,000 22,750

Beneficial conversion feature related to preferred stock of consolidated

subsidiary — —

Amortization of discount on convertible debentures and beneficial

conversion feature — — Fair value of warrants issued for consulting services — — Issuance of common stock in settlement of litigation — —

Offset of retirement benefit obligation to an officer against a note receivable

from the officer 390,649 — Compensation expense for extension of debt conversion agreements, net — — Gain on sale of assets — — Changes in operating assets and liabilities:

(Increase) decrease in other receivables, prepaid expenses and

refundable deposits (1,490,782) 49,459 (Decrease) increase in accounts payable and accrued expenses (1,132,950) (1,137,249) Increase (decrease) in accrued payroll and related taxes 122,602 (1,024) (Decrease) increase in other non-current liabilities (131,454) 91,897 (Repayment of) proceeds from notes payable to related parties, net (135,574) (150,000)

Increase in employee expense reimbursement and accrued interest to

related parties — — Net cash used in operating activities (14,902,747) (17,651,789)Cash Flows From Investing Activities:

Redemption (purchases) of marketable securities and short-term investments,

net 6,015,555 (2,152,114) Purchases of property and equipment (59,121) (1,034,038) Increase (decrease) in other assets 20,550 (179,693) Payment of organization costs — — Proceeds from sale of equipment 470,779 — Issuance of notes receivable — — Net cash provided by (used in) investing activities 6,447,763 (3,365,845)


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Condensed Consolidated Statements of Cash Flows (unaudited) (continued)

Nine-Months Nine-Months Ended Ended September 30, 2002 September 30, 2001 Cash Flows From Financing Activities:

Proceeds from issuance of common stock and warrants, net of related offering costs

and expenses 8,454,242 21,772,736 Payments made on capital lease obligations (564,031) (506,703) Proceeds from issuance of common stock in consolidated Subsidiary — 1,000 Proceeds from preferred stock issuance, net of offering costs and expenses — —

Proceeds from sale of preferred stock of consolidated Subsidiary, net of issuance

costs and expenses — (4,684,193) Proceeds from exercise of stock options and warrants — — Proceeds from sale of convertible debentures, net of issuance costs — — Proceeds from long-term debt — —

Proceeds from notes receivables from officers and directors for exercise of stock

options — — Purchase of preferred stock of consolidated Subsidiary — — Payment of dividend on preferred stock of consolidated Subsidiary — (815,807) Purchase of common stock and warrants (143,000) — Purchase of Series C preferred stock — (300,000) Dividends paid to preferred stockholders — — Cash at acquisition — — Net cash provided by financing activities 7,747,211 15,467,033 Net (decrease) increase in cash and cash equivalents (707,773) (5,550,601) Cash and cash equivalents, beginning of period 749,213 6,158,375 Cash and cash equivalents, end of period $ 41,440 $ 607,774


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Condensed Consolidated Statements of Cash Flows (unaudited) (continued)

Nine-Months Nine-Months Ended Ended September 30, 2002 September 30, 2001 Schedule of Non-Cash Investing and Financing Activities: Unrealized loss (gain) on marketable securities $ 85,948 $ (101,295) Forfeiture of stock options in consolidated Subsidiary $ 818,124 $ —

Expiration of stock options granted to employees and non-employees below fair market

value $ 412,885 $ —

Stock and stock options granted to employees and non-employees below fair market

value $ — $ 2,391,118 Fixed assets financed by capital leases $ — $ 197,689 Conversion of subsidiary preferred stock into Company Series C preferred stock $ — $ — Conversion of preferred stock and convertible debentures into shares of common stock $ — $ 1,677,465 Retirement of preferred stock $ — $ 3,977 Reclassification of warrants and other $ — $ 453,348

Minority interest share of proceeds from issuance of common stock in consolidated

Subsidiary $ — $ (100) Financing of insurance policies and other assets $ — $ — Issuance of warrants in connection with equity and debt financings $ — $ — Dividends on preferred stock paid in shares of common stock $ — $ 6,808 Conversion of other accrued liabilities into shares of common stock $ — $ — Conversion of accrued interest into notes payable to related Parties $ — $ — Conversion of revenue participation units into shares of common stock $ — $ —


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Notes to Condensed Consolidated Financial Statements

September 30, 2002

(Unaudited)

1. Organization and Business and Basis of Presentation, Liquidity and Going Concern

Organization and Business

Organization

NeoTherapeutics, Inc., was incorporated in Colorado as Americus Funding Corporation (or AFC) in December 1987. In August 1996, AFCchanged its name to NeoTherapeutics, Inc. and in June 1997, the Company was reincorporated in the state of Delaware. NeoTherapeutics had fivesubsidiaries at September 30, 2002: NeoOncoRx, Inc., 90.48% owned by NeoTherapeutics and incorporated in California in November 2000;NeoTherapeutics GmbH, wholly owned by NeoTherapeutics and incorporated in Switzerland in April 1997; NeoGene Technologies, Inc., 88.4%owned by NeoTherapeutics and incorporated in California in October 1999; NeoTravel, Inc., wholly owned by NeoTherapeutics and incorporated inCalifornia in April 2001; and NeoJB LLC, organized in California in April 2002 and intended to be 80% owned by NeoTherapeutics. AdvancedImmunoTherapeutics, Inc., a previously wholly owned subsidiary of NeoTherapeutics, was merged into NeoTherapeutics in 2001. Unless thecontext otherwise requires, all references to the “Company”, “we”, “our”, “us” and “NeoTherapeutics” refer to all of the companies above as aconsolidated entity.

Business

We were a development stage pharmaceutical company through the second quarter ended June 30, 2002. Beginning in the third quarter endedSeptember 30, 2002, we are no longer a development stage enterprise in that we have commenced our planned principal operations of (1) in-licensing of oncology drug candidates and the further development of and strategic alliances for these drug candidates and (2) the discovery ofneurology drugs and out-licensing these drug candidates to strategic partners and have generated revenue from these operations.

Our functional genomics business is engaged in discovering gene functions and validating novel molecular targets for innovative drugdevelopment. On July 19, 2002, we adopted a formal plan to discontinue the operations of our functional genomics business. However, as part of achange in management and reassessment of the Company’s strategy in August 2002, we altered our plans to discontinue the operations andchanged the focus of the business to out-licensing the genomics technology and the administration of two Pfizer collaboration agreements. Wehave eliminated all further functional genomics research operations and the associated research funding commitments to the University ofCalifornia, Irvine.

We conduct our pharmaceutical activities as NeoTherapeutics and NeoOncoRx, and our functional genomics activities as NeoGeneTechnologies.

Basis of Presentation, Liquidity and Going Concern

Basis of Presentation

Our independent auditors issued a report on our consolidated financial statements included in our Annual Report on Form 10-K for the yearended December 31, 2001, that included an explanatory paragraph regarding our ability to continue as a going concern. We have prepared theaccompanying unaudited condensed consolidated financial statements under the assumption that we are a going concern. Accordingly, they donot include adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities thatwould be required if we were not able to continue as a going concern. Additionally, the accompanying unaudited condensed consolidated financialstatements are prepared on a consistent basis in accordance with accounting principles generally accepted in the United States (GAAP) for interimfinancial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the informationand footnotes required by GAAP

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Notes to Condensed Consolidated Financial Statements(continued)

September 30, 2002(Unaudited)

for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals and consolidation andelimination entries) considered necessary for a fair presentation have been included. Operating results for the three-month and nine-month periodsended September 30, 2002 are not necessarily indicative of the results that may be expected for the year ended December 31, 2002. The balancesheet at December 31, 2001 has been derived from the audited financial statements at that date but does not include all of the information andfootnotes required by GAAP for complete financial statements. For further information, refer to the consolidated financial statements and footnotesthereto included in our Annual Report on Form 10-K for the year ended December 31, 2001.

Certain quarterly amounts have been reclassified to conform to the current period presentation. All share and per share information has beenrestated to affect for the 25-for-1 reverse split of our outstanding common stock approved on September 5, 2002 and executed on September 6,2002.

Liquidity and Going Concern

On August 20, 2002, we announced a shift in our strategic focus from discovery and development of neurology drugs to the in-licensing ofoncology drug candidates and the further development of and strategic alliances for these drug candidates and the discovery of neurology drugsand out-licensing these drug candidates to strategic partners. As a result of these changes and the completion of a large Alzheimer’s diseaseclinical trial, our expense burn rate fell from approximately $7 million per quarter to approximately $5 million during the three-month period endedJune 30, 2002 to approximately $3 million (excluding the restructuring charge and the GPC Biotech license fee revenue) during the three-monthperiod ended September 30, 2002, and we expect it to continue to fall to approximately $1.5 million, or lower, per quarter beginning in the fourthquarter of 2002. The recent and the prospective reduction in the burn rate is principally due to reductions in clinical, research and administrativepersonnel, representing an approximate 77% reduction in personnel since December 2001, the termination of a facility lease for office space usedto administer the Alzheimer’s disease clinical trial, the reduction of expenses for the manufacturing of Neotrofin supplies, a reduction in ourresearch and fellowship grant commitments, and the elimination of the research operations of our functional genomics business.

During the three-month period ended September 30, 2002, we sold 258,824 shares of our common stock for net cash proceeds ofapproximately $1 million and issued warrants to purchase 120 shares of our common stock at an exercise price of $7.50 per share.

On September 5, 2002, our stockholders approved an amendment to our certificate of incorporation to effect a 25-for-1 reverse split of ouroutstanding common stock at a Special Meeting of Stockholders.

As of the filing of this quarterly report on Form 10-Q, approximately 2.3 million shares of our 50 million shares of authorized common stockare outstanding or subject to warrants or reserved under stock option plans.

On September 30, 2002, we entered into a co-development and license agreement with GPC Biotech AG for the development andcommercialization of our lead drug candidate, satraplatin. Under the co-development and licensing agreement, NeoTherapeutics may receive up to$22 million in license fees and milestone payments. The license fee consists of a total of $4 million; $2 million upon signing (which was received inOctober of 2002) and $1 million in cash and a $1 million equity investment within 30 days after the first dosing of a patient in a registrational study.GPC Biotech has agreed to make additional payments totaling up to $18 million upon achieving agreed upon milestones. However, there can be noassurance that any milestone will be achieved. Furthermore, GPC Biotech has agreed to fully fund development and commercialization expensesfor satraplatin. Upon commercial sale of satraplatin, if any, NeoTherapeutics will be entitled to receive royalty payments based upon net sales.

At September 30, 2002 our cash and investment balance was approximately $296,000. Subsequent to September 30, 2002 we received netcash proceeds from a licensing agreement with GPC Biotech AG of $2 million. We will not be able to continue as a going concern after December2002 unless we succeed in raising additional funds through public or private financings, including equity financings, or through other arrangements,merge with another company that has sufficient resources for us to continue our planned operations, or successfully out-license some or all of ourtechnology. We may not be successful in raising additional funds, selling the company, or out-licensing our technology, or we may not be able todo so at terms that are favorable to us. We do not know whether we will be able to secure sufficient new funds to continue our businesses. If weare not able to obtain sufficient funding within the

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time frame estimated by us, we will have to take other actions that we otherwise would not take, such as selling some or all of our intellectualproperty rights or further restructuring our operations, or a combination of these activities, including the possibility of a restructuring or liquidationprovided for by one of the sections of the United States Bankruptcy Code.

Our common stock was transferred from the Nasdaq National Market to the Nasdaq SmallCap Market where it began trading on October 16,2002 under the ticker symbol NEOT. To remain listed on this market, we must meet Nasdaq’s continued listing requirements. Among otherrequirements, Nasdaq rules require that a SmallCap Market company maintain a minimum stockholders equity of $2.5 million or a minimum marketvalue of listed securities of $35 million or a net income from continuing operations (in latest fiscal year or 2 of the last 3 fiscal years) of at least$500,000. We are currently not in compliance with this standard. There is no assurance that we will be able to regain compliance with this standardor maintain compliance with any of the other continued listing requirements. If we fail to do so, our common stock could be delisted from theNasdaq SmallCap Market. Please see “Risk Factors” under “Item 2 – Management’s Discussion and Results of Operations and FinancialCondition” for alternatives should our common stock be delisted.

In June 2002, we retained an investment banker and financial advisor to assist us in searching out strategic alternatives, including the saleor merger of the Company or any of our businesses. In September 2002, we terminated the services of the investment banker, however, wecontinue to discuss strategic alternatives with several pharmaceutical companies, including the out-licensing of some of our neurology technologyplatforms or oncology drug products, or a sale of the Company.

As shown in the accompanying condensed consolidated financial statements, we continue to incur significant losses and negative cash flowfrom operations. During the nine-month period ended September 30, 2002, we incurred a loss of approximately $13.8 million. Our burn rate duringthe three-month period ended September 30, 2002 was approximately $3.0 million, excluding the charges related to the restructuring and therevenue related to the GPC Biotech AG licensing agreement.

2. New Accounting Standards

In October 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 144,“Accounting for the Impairment or Disposal of Long-Lived Assets” (SFAS 144). This statement supersedes SFAS No. 121, “Accounting for theImpairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of” (SFAS 121), and amends Accounting Principles Board StatementNo. 30, “Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events andTransactions” (APB 30). SFAS 144 requires that long-lived assets that are to be disposed of by sale be measured at the lower of book value or fairvalue less costs to sell. SFAS 144 retains the fundamental provisions of SFAS 121 for (a) recognition and measurement of the impairment of long-lived assets to be held and used and (b) measurement of long-lived assets to be disposed of by sale. This statement also retains APB 30’srequirement that companies report discontinued operations separately from continuing operations. All provisions of SFAS 144 were effective for uson January 1, 2002. The adoption of SFAS 144 did not have an impact on our consolidated financial position or results of operations.

The FASB has issued SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 62, Amendment of FASB Statement No. 13, andTechnical Correction, which establishes a requirement to classify gains and losses on extinguishment of debt as income or loss from continuingoperations rather than as extraordinary items as previously required under SFAS 4. Extraordinary treatment will be required for certainextinguishments as provided in APB Opinion No. 30. SFAS 145 also amends SFAS 13 to require certain modifications to capital leases be treatedas a sale-leaseback and modifies the accounting for sub-leases when the original lessee remains a secondary obligor or guarantor. We do notanticipate the adoption of SFAS 145 to have a material impact on our financial condition or results of operations.

In June 2002, the FASB issued SFAS No. 146 “Accounting for Costs Associated with Exit or Disposal Activities” (SFAS 146). Thisstatement supercedes Emerging Issues Task Force (EITF) Issue No. 94-3 “Liability Recognition for Certain Employee Termination Benefits andOther Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)”. SFAS 146 requires that a liability for a cost associated withan exit or disposal activity be recognized when the liability is incurred. Under EITF 94-3, a liability is recognized at the date an entity commits toan exit plan. SFAS 146 also establishes that the liability should initially be

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measured and recorded at fair value. The provisions of SFAS 146 will be effective for any exit and disposal activities initiated after December 31,2002.

3. Joint Venture

On April 17, 2002, we formed a joint venture with J.B. Chemicals & Pharmaceuticals, Ltd. of Mumbai, India (“JBCPL”) and created a newentity, NeoJB, LLC, a Delaware limited liability company (“NeoJB”). We will own 80% of NeoJB and a JBCPL subsidiary will own 20% of NeoJB.The business operations of NeoJB will initially be to seek U.S. regulatory approval on JBCPL pharmaceutical products and to subsequently marketthese products in the U.S. and possibly other countries. We will initially fund 100% of NeoJB’s operating expenses. In conjunction with theformation of NeoJB, we granted a five-year warrant to JBCPL to purchase up to 4,000 shares of our common stock at an exercise price of $11.25per share, equal to the market price of our common stock on the date of grant. The fair value of the warrant was estimated to be $38,000 using theBlack-Scholes option pricing model with the following assumptions: dividend yield of 0%; expected volatility of 119.8%; risk free interest rate of5.0%; and an expected life of five years.

Minimal activity has occurred under this joint venture because we have not had sufficient funds available. Following the change inmanagement on August 19, 2002, we have continued to develop the joint venture but have not entered into any commitments at this time.

The Company is also reviewing other possible joint ventures to promote its strategic focus.

4. Marketable Securities

As of September 30, 2002, we had one investment of approximately $61,000 in WorldCom, Inc. corporate bonds that matures on May 15,2003. The fair market value of these corporate bonds at September 30, 2002 was approximately $7,000, based on a market quotation. In July2002, WorldCom Inc. and its subsidiaries filed a voluntary jointly administered petition under the U.S. Bankruptcy Code in the United StatesBankruptcy Court for the Southern District of New York. We believe that it is probable that we will be unable to collect all amounts due to usaccording to the contractual terms of the corporate bonds, therefore, we consider the impairment as other than temporary and recorded a loss forapproximately $51,000 in other expense during the three-month period ended June 30, 2002.

5. Deferred Revenue

As of September 30, 2002 and December 31, 2001, we had deferred revenue of $152,000 and $259,000, respectively, included in other non-current liabilities in our balance sheet.

During 2001 we received initial payments totaling $300,000 under two licensing agreements that we have between our functional genomicbusiness segment and Pfizer Inc. We are obligated to pay to the University of California, Irvine (“UCI”), 25% of all payments received from Pfizerunder our agreement with UCI. On May 10, 2002, we received the first milestone payment of $250,000 from Pfizer Inc. under our technology out-license agreement dated March 15, 2001 with Pfizer. This milestone payment became due at the time Pfizer formally approved the funding andimplementation of a research program with respect to a pharmaceutical lead based on the technology that we licensed to Pfizer. Under theseagreements, we entered into strategic alliances with Pfizer for investigating potential drug targets. We may receive additional payments from Pfizerif they achieve certain milestones as defined in the agreements. In accordance with our revenue recognition policy these initial payments, lessamounts owed to UCI, will be recognized as revenue over a three-year period from the date of inception of the respective agreement, whereassubstantive milestone payments will be recognized as revenue, less amounts owed to UCI, upon receipt. We recognized licensing revenue relatedto this agreement of $219,307 during the nine-month period ended September 30, 2002. The two Pfizer agreements will remain in effect, if we aresuccessful in our negotiations with UCI to extend the rights to the receptors underlying the two Pfizer agreements, following the reduction ofoperations at our NeoGene subsidiary.

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6. Co-Development and License Agreement with GPC Biotech AG

On September 30, 2002, we entered into a co-development and license agreement with GPC Biotech AG for the development andcommercialization of our lead drug candidate, satraplatin. Under the Co-Development and Licensing Agreement, NeoTherapeutics may receive upto $22 million in license fees and milestone payments. The license fee consists of a total of $4 million; $2 million upon signing (which wasreceived in October of 2002) and $1 million in cash and a $1 million equity investment within 30 days after the first dosing of a patient in aregistrational study. GPC Biotech has agreed to make additional payments totaling up to $18 million upon achieving agreed upon milestones.However, there can be no assurance that any milestone will be acquired. Furthermore, GPC Biotech has agreed to fully fund development andcommercialization expenses for satraplatin. Upon commercial sale of satraplatin, if any, NeoTherapeutics will be entitled to receive royaltypayments based upon net sales. In accordance with our revenue recognition policy this initial payment was recognized as revenue as theCompany has satisfied its commitments under the license agreement.

7. Restructuring Expenses

During the nine-month period ended September 30, 2002, we shifted our strategic focus from discovery and development of neurology drugsto the in-licensing of oncology drug candidates and the further development of and strategic alliances for these drug candidates and the discoveryof neurology drugs and out-licensing these drug candidates to strategic partners. As a result of this change in focus, we terminated all researchefforts related to Neotrofin and functional genomics as well as reduced the level of research activity related to neurology. As part of therestructuring, 21 employees were terminated resulting in severance related expenses of $59,000, two senior executives retired and entered intoretirement agreements with an associated expense of $704,000, the Company exchanged assets for certain payables to the University ofCalifornia, Irvine which resulted in a net loss of $312,000 and the Company incurred restructuring related administrative and legal expenses of$306,000 during the quarter. As of September 30, 2002, we had completed substantially all of the activities related to the restructuring except for areview of possible impairment related to the Company’s property, plant and equipment. We expect that this review will be completed byDecember 31, 2002.

Effective August 16, 2002, Dr. Alvin J. Glasky retired from his positions as Chairman of our Board of Directors, Chief Executive Officer andChief Science Officer. In connection with his retirement, we have entered into an agreement with Dr. Glasky which provides for the payment ofapproximately $113,000 in severance benefits through December 31, 2002, accrued vacation benefits and deferred salary of approximately$54,000, and an additional payment of approximately $106,000, representing the repayment of certain loans from Dr. Glasky to us, net of otheroffsets. In addition, in lieu of the payment of additional contractually obligated severance benefits of approximately $390,000, the Companyrelieved Dr. Glasky of his obligation to repay a loan in the amount of $390,000. As of September 30, 2002, $85,000 of unpaid severance benefitsdue to Dr. Glasky are reflected as accrued payroll and related taxes in the accompanying balance sheet as of September 30, 2002.

Effective August 21, 2002, Samuel Gulko retired from his positions as Senior Vice President Finance, Chief Financial Officer, Secretary,Treasurer and a Director. In connection with his retirement, we have entered into an agreement with Mr. Gulko, which provides for the payment ofapproximately $200,000 in severance benefits and accrued vacation benefits and deferred salary of approximately $34,000. In connection with hisretirement, Mr. Gulko repaid a loan from the Company in amount of $75,000.

8. Commitments and Contingencies

Research and Fellowship Grants

We periodically make non-binding commitments to various universities and not-for-profit research organizations to fund scientific researchand fellowship grants that may further our research programs. During the three-month period ended September 30, 2002, several grants wereterminated. At September 30, 2002, we had no non-binding commitments to pay research or fellowship grants. Grant expense for the nine-monthperiods ended September 30, 2002 and 2001, were approximately $351,000 and $600,000, respectively, and is included in research anddevelopment on the consolidated statement of operations.

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Debt and Capital Leases

As of June 30, 2002, we were not in compliance with one of our debt covenants under our Master Note and Security Agreement secured bycertain items of our lab equipment and computer software. An event of default had occurred because we had not maintained the required minimumbalance of cash or equivalents. During the three-months ended September 30, 2002, we executed a modification of the lease providing theleaseholder a security interest in the property and equipment and accounts of the Company and in return, the leaseholder waived its rights to anyremedies or actions due to the default. As a result of the waiver of the default, we have classified all of the amounts not due in one year as a non-current liability, “Capital lease obligations, net of current portion”, in our condensed consolidated balance sheet as of September 30, 2002.

Other

On June 29, 2001, we became obligated to issue shares of our common stock pursuant to a license agreement. Pursuant to the terms of theagreement, if at one year from the date of signing the agreement the value of the shares is less than $100,000 we will pay the licensor such sumin cash, our common stock, or other negotiable security as will bring their value up to $100,000. As of September 30, 2002, we accrued $94,000 inour balance sheet as a current liability under accounts payable and accrued expenses.

On September 30, 2002, the Company entered into a co-development and license agreement with GPC Biotech AG for the development andcommercialization of our lead drug candidate, satraplatin. Under the agreement, we became obligated to maintain certain contractual obligationsrelated to an underlying license agreement for satraplatin.

9. Stockholders’ Equity

Common Stock and Warrant Transactions

On March 12 and March 20, 2002, we sold an aggregate of 124,000 shares of our common stock under our shelf registration statement at anegotiated purchase price of $50.00 per share resulting in $6.2 million of gross cash proceeds. The investors also received warrants to purchaseup to 31,000 shares of our common stock at an exercise price of $68.75 per share. Under a preexisting agreement with a placement agent, a five-year warrant became exercisable with respect to 267 shares of our common stock at an exercise price of $50.00 per share. We also issued to twoother placement agents five-year warrants to purchase up to a total of 800 shares of our common stock at an exercise price of $68.75 per share.The fair value of these warrants was estimated to be $24,800 using the Black-Scholes option pricing model with the following assumptions:dividend yield of 0%; expected volatility of 75.4% risk free interest rate of 5.0%; and an expected life of five years. Offering costs, including cashcommissions paid to placement agents of these transactions, were approximately $360,000.

On June 5, 2002 we sold 32,000 shares of our common stock under our shelf registration statement at a negotiated purchase price of $8.75per share for gross cash proceeds of $280,000. The investor also received a warrant to purchase up to 8,000 shares of our common stock at anexercise price of $11.25 per share. The fair value of the warrant was estimated to be $56,000 using the Black-Scholes option pricing model withthe following assumptions: dividend yield of 0%; expected volatility of 119.8%; risk free interest rate of 5.0%; and an expected life of five years.Two placement agents received warrants to purchase up to a total of 112 shares of our common stock at an exercise price of $11.25 per share.The fair value of these warrants was estimated to be $784 using the Black-Scholes option pricing model with the following assumptions: dividendyield of 0%; expected volatility of 119.8%; risk free interest rate of 5.0%; and an expected life of five years. Offering costs including cashcommissions paid to placement agents of this transaction were approximately $16,800.

On June 7, 2002 we sold approximately 237,000 shares of our common stock under our shelf registration statement at a negotiatedpurchase price of $5.8125 per share for gross cash proceeds of approximately $1.4 million. The investors also received warrants to purchase up to23,742 shares of our common stock at an exercise price of $6.875 per share. The fair value of the warrant was estimated to be $130,581 using theBlack-Scholes option pricing model with the following assumptions: dividend yield of 0%; expected volatility of 119.8%; risk free interest rate of5.0%; and an expected life of five years. Two placement agents received

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warrants to purchase up to a total of 180 shares of our common stock at an exercise price of $6.875 per share. The fair value of the warrant wasestimated to be $990 using the Black-Scholes option pricing model with the following assumptions: dividend yield of 0%; expected volatility of119.8%; risk free interest rate of 5.0%; and an expected life of five years. Offering costs including cash commissions paid to placement agents ofthis transaction were approximately $27,000. In order to comply with Nasdaq rules, we partially rescinded the June 7 transaction, repurchasing16,000 shares of common stock at $5.8125 per share on July 25, 2002, and warrants to purchase 16,000 shares of common stock at $3.125 pershare on July 31, 2002, for a total cost to us of $143,000. In addition, the remaining warrants have been amended so that they may not beexercised before December 8, 2002.

On July 8, 2002, we sold 258,824 shares of our common stock under our shelf registration statement at a negotiated purchase price of $4.25per share for gross cash proceeds of approximately $1.1 million. The placement agents received warrants to purchase up to a total of 120 sharesof our common stock at an exercise price of $7.50 per share. The fair value of the warrants was estimated to be $360 using the Black-Scholesoption pricing model with the following assumptions: dividend yield of 0%; expected volatility of 119.8%; risk free interest rate of 5.0%; and anexpected life of five years. Offering costs including cash commissions paid to placement agents of this transaction were approximately $84,000.

On September 5, 2002, our stockholders approved an amendment to our certificate of incorporation to effect a 25-for-1 reverse split of ouroutstanding common stock. The reverse split became effective on September 6, 2002. All share and per share amounts have been adjusted toaffect for the 25-for-1 reverse stock split.

Comprehensive Loss

During the three months ended September 30, 2002 and 2001, comprehensive loss was $2,358,000 and $5,792,000, respectively. During thenine-month periods ended September 30, 2002 and 2001, comprehensive loss was $13,885,000 and $18,014,000, respectively. At September 30,2002 and 2001, accumulated other comprehensive income of $1,117 and $102,058, respectively, consisted of unrealized losses and gains on ourmarketable securities and short-term investments that are held as available-for-sale.

10. Equity Compensation

Below is a summary of NeoTherapeutics, Inc. stock option activity during the nine-month period ended September 30, 2002:

Weighted Average Shares Exercise Price Outstanding at December 31, 2001 116,679 $ 168.50 Granted 500,390 $ 9.48 Forfeited (11,574) $ 144.51 Outstanding at September 30, 2002 605,495 $ 37.53 Exercisable at September 30, 2002 169,948 $ 107.02

Included in the granted options are options to purchase an aggregate of 314,000 shares at an exercise price of $1.0555 per share granted toemployees on September 25, 2002 and options to purchase an aggregate of 60,000 shares at an exercise price of $1.00 per share granted toconsultants on September 27, 2002. These grants were made subject to stockholder approval of an increase in the number of shares subject toour 1997 Stock Incentive Plan. Upon stockholder approval, the options will be considered granted for accounting purposes and therefore mayresult in the recognition of deferred compensation, which would be amortized over the term of the options. Also included in granted options areoptions to purchase an aggregate of 59,400 shares at an exercise price of $4.75 per share granted to members of our Board of Directors, optionsto purchase an aggregate of 3,200 shares at an exercise price of $4.00 per share granted to a key employee, options to purchase an aggregate of11,150 shares at an exercise price of $9.75 per share granted to certain key employees and options to purchase an aggregate of 52,640 shares atan exercise price of $75.00 per share to certain key employees, which were awarded in 2001 subject to stockholder approval, but consideredgranted in 2002 upon approval of an increase in the size of the plan at our June 2002 stockholder meeting. We determined the exercise prices ofthese options based on the fair market value on the date of grant, except for the grant of 52,640 options, which we based on a 15% discount fromthe fair market value on the date of grant. An increase in the number of shares subject to our 1997 Stock Incentive Plan was approved on June 17,

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2002, by a vote of our stockholders. An additional increase in the number of shares subject to our 1997 Stock Incentive Plan will be proposed atthe next stockholder meeting in June of 2003.

We granted 54,080 stock options to employees in 2000 with exercise prices less than the fair market value of our common stock at themeasurement date. The intrinsic value of the option grants amounting to $959,850 was recorded as deferred compensation and is being amortizedto expense over the vesting period, in accordance with APB Opinion No. 25. During the nine-month periods ended September 30, 2002 and 2001,we recorded compensation expense of $111,441 and $484,581 respectively, as a result of such amortization.

NeoGene

Below is a summary of NeoGene stock option activity during the nine-month period ended September 30, 2002:

Weighted Average Shares Exercise Price Outstanding at December 31, 2001 137,654 $ 1.25 Forfeited (76,000) $ 1.00 Outstanding at September 30, 2002 61,654 $ 1.55 Exercisable at September 30, 2002 15,415 $ 1.55

We issued 140,654 stock options of our majority owned subsidiary NeoGene to our employees in 2001 with exercise prices less than the fairmarket value of NeoGene’s common stock at the measurement date. The intrinsic value of the option grants amounting to $2,391,118 wasrecorded as deferred compensation and is being amortized to expense over the vesting period, in accordance with APB Opinion No. 25. During thethree-month period ended June 30, 2002, our executive officers Alvin J. Glasky, Ph.D., Rajesh Shrotriya, M.D., and Samuel Gulko held NeoGenestock options to purchase up to 40,000, 10,000 and 20,000 shares of NeoGene common stock, respectively, at an exercise price of $1.00 pershare. On May 3, 2002, each of these officers, voluntarily and without any consideration, agreed to cancel their NeoGene stock options. Ourcondensed consolidated balance sheet as of December 31, 2001 includes deferred compensation resulting from the grant of all NeoGene stockoptions of $2,391,118, of which $1,190,000 is attributed to NeoGene stock options formerly held by these executive officers. The accounting effectof the option cancellation is reflected in our September 30, 2002 condensed consolidated financial statements as a reduction in deferredcompensation of approximately $818,000 and resulted in reduced amortization expense beginning on the date of cancellation. During November2002, the remaining two employees holding NeoGene options voluntarily and without any consideration, agreed to cancel their NeoGene stockoptions and therefore the remaining deferred compensation for NeoGene will be eliminated in the fourth quarter of 2002.

During the nine-month periods ended September 30, 2002 and 2001, we recorded compensation expense of $264,000 and $671,000,respectively, as a result of amortization prior to the cancellation of these options.

11. Notes Receivable from Directors and Officers

On June 6, 2002, the Board of Directors approved an amendment and restatement of all of the note receivables from officers and directors.The original interest rates that were between 7% and 9% were all changed to 4.5% and the maturity dates were extended to June 6, 2004. Thenotes remain secured by a pledge of the common stock purchased with the loan proceeds. These notes are classified in our balance sheet as anoffset to stockholders’ equity.

In connection with the retirement of Dr. Alvin J. Glasky and Samuel Gulko, the Company relieved Dr. Glasky of his obligation to repay a loanin the amount of approximately $390,000 in principal and accrued interest in lieu of the payment of additional contractually obligated severancebenefits and Mr. Gulko repaid a loan from the Company in the amount of $75,000 of principal and accrued interest.

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12. Segment Information

During the nine-month period ended September 30, 2002, we shifted our strategic focus from discovery and development of neurology drugsto the in-licensing of oncology drug candidates and the further development of and strategic alliances for these drug candidates and the discoveryof neurology drugs and out-licensing these drug candidates and the functional genomics technology to strategic partners. As a result of thesestrategic changes, the Company began to operate as one reporting segment in the third quarter of 2002.

13. Loss Per Share

Basic and diluted loss per share for the three-month period ended September 30, 2002 and 2001 are computed using the weighted averagecommon shares outstanding during the period, respectively.

14. Litigation

We are not aware of any litigation matters pending or threatened as of September 30, 2002 that will materially affect our condensedconsolidated financial statements. We are sometimes involved in matters of litigation that we consider ordinary routine litigation incidental to ourbusiness. Our policy is to accrue during a period, as a charge to operations, amounts related to legal matters if it is probable that a liability hasbeen incurred and the amount of loss can be reasonably estimated, as required by SFAS No. 5, Accounting for Contingencies.

15. Income Taxes

We did not provide any current or deferred federal or state income tax provision or benefit for the period presented because we haveexperienced operating losses since our inception. A valuation allowance has been recognized to fully offset the net deferred tax assets as ofSeptember 30, 2002 and December 31, 2001 as realization of such assets is uncertain.

16. Subsequent Events


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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains certain words, not limited to, “believes,” “may,” “will,” “expects,” “intends,” “estimates,”“anticipates,” “plans,” “seeks,” or “continues,” that are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements are based on the beliefs of the Company’smanagement as well as assumptions made by and information currently available to the Company’s management. Readers should not put unduereliance on these forward-looking statements. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannotbe predicted or quantified. Our actual results may differ materially from the results projected in the forward-looking statements. Factors that mightcause such a difference include, but are not limited to, those discussed below under “Subsequent Events Affecting Future Results,” “FinancialMarket Risks,” and “Risk Factors.”

You should read the following discussion of the financial condition and results of our operations in conjunction with the financial statementsand the notes to those statements included elsewhere in this report.

Related Party Transactions

During 1987 and 1988, Alvin J. Glasky, Ph.D., a former Chief Executive Officer who is also a major stockholder of ours, loaned a total of$270,650 to us for working capital purposes, of which $250,000 plus $2,000 of accrued interest was canceled in December 1988 in exchange forthe issuance of 28 Revenue Participation Units (or RPU’s). The RPU’s were converted into 4,480 shares of our common stock.

From 1989 through 1993, we borrowed an additional $757,900 from Dr. Glasky, which, together with accrued interest of $300,404,aggregated $1,058,304 on December 31, 1993, at which time we issued 8,000 shares of common stock to Dr. Glasky in exchange for cancellationof $500,000 of loans made to us. The remaining $257,900 in principal and $300,404 of accrued interest were converted to a $558,304 promissorynote. Interest was paid monthly at the annual rate of 9%. The note was partially repaid in 2000 when we advanced cash to Dr. Glasky to paypayroll taxes arising from his exercise of a warrant for 3,527 shares of common stock at $93.75 per share in August 2000. We made a furtherpartial repayment of the note in 2001. The outstanding balance was repaid on August 16, 2002, in connection with Dr. Glasky’s retirement as ourChairman, Chief Executive Officer and Chief Science Officer.

Assignment of Patents by Dr. Glasky

Dr. Glasky assigned us all of his rights in ten patents. In connection with the assignment of these patents to us, we entered into royaltyagreements with Dr. Glasky (or the “Glasky Agreements”), which expire concurrently with the expiration of the underlying patents and anyadditional patents derived from the underlying patents. Under each of the Glasky Agreements, as amended, we are obligated to pay Dr. Glasky aroyalty of two percent (2%) of all revenues derived by us from the use and sale by us of any products or methods included in the patents. In theevent of Dr. Glasky’s death, the family or estate is entitled to continue to receive, under each Glasky Agreement, royalties at a rate of two percent(2%) for the duration of the respective Glasky Agreement. Under the terms of the Glasky Agreements, Dr. Glasky may terminate the GlaskyAgreements and receive a reassignment of the patents if we file a petition under any bankruptcy or insolvency laws or otherwise commenceliquidation or winding up of our business.

McMaster University Agreement

On July 10, 1996, we entered into a license agreement with McMaster University (or McMaster) that allows us the use of certaintechnologies developed by McMaster covered in the patents filed jointly by us and McMaster (US Patent Nos. 5,447,939, 5,801,184, 6,027,936,6,338,963, and 6,350,752), all of which are also subject to the Glasky Agreements. Under the agreement, we paid a one time licensing fee of$15,000 and are obligated to pay to McMaster an annual royalty of five percent (5%) on net sales of products containing compounds developed byMcMaster. In July 1997, we began to make, and have continued making, annual minimum royalty payments of $25,000.

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Director and Officer Notes for the Exercise of Equity Instruments

We made loans to certain of our directors and officers for the exercise of stock options or for the purchase of stock. We loaned $286,560 in1998, and $435,649 in 2000. During 2000, one individual paid $61,560 back to us and during 2001, in connection with the settlement of a litigationmatter, we forgave a $45,000 note to one individual. During the three months ended September 30, 2002, loans made to Dr. Glasky totalingapproximately $390,000 were repaid by the offset of certain liabilities incurred in connection with Dr. Glasky’s retirement and Sam Gulko repaid hisloan in connection with his retirement. At September 30, 2002, $225,000 plus accrued interest remained due to us from directors and officers forthe exercise of stock options or for the purchase of shares of common stock. In June 2002, the original interest rates that were between 7% and9% were all changed to 4.5% and the maturity dates were extended to June 6, 2004. The notes remain secured by a pledge of the common stockpurchased with the loan proceeds. The principal balance of these notes are classified in our balance sheet as an offset to stockholders’ equity.Accrued interest related to these notes are classified in our balance sheet as an other asset. The loans to directors and offices are permitted underSection 13 of the Securities and Exchange Act of 1934, as amended by Section 402 of the Sarbanes-Oxley Act on July 30, 2002, because theywere outstanding on that date, however, their terms may not be renewed or materially modified in the future.

Critical Accounting Polices and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financialstatements, which have been prepared in accordance with accounting principles generally accepted in the United States (GAAP). The preparationof these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets,liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates,including cash requirements resulting from estimating: planned research and development activities and general and administrative requirements,the retention of key personnel, certain clinical trial results, maintained market need for our product candidates and other major businessassumptions.

We believe that our most significant accounting policies that affect our more significant judgments and estimates used in the preparation ofour condensed consolidated financial statements are as follows:

Basis of Presentation

Our independent auditors issued a report on our consolidated financial statements included in our Annual Report on Form 10-K for the yearended December 31, 2001, that included an explanatory paragraph regarding our ability to continue as a going concern. We have prepared theaccompanying unaudited condensed consolidated financial statements under the assumption that we are a going concern. Accordingly, they donot include adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities thatwould be required if we were not able to continue as a going concern. Additionally, the accompanying unaudited condensed consolidated financialstatements are prepared on a consistent basis in accordance with accounting principles generally accepted in the United States (GAAP) for interimfinancial information and with the instruction to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the informationand footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurringaccruals and consolidation and elimination entries) considered necessary for a fair presentation have been included. Operating results for thethree-month and nine-month periods ended September 30, 2002 are not necessarily indicative of the results that may be expected for the yearended December 31, 2002. The balance sheet at December 31, 2001 has been derived from the audited financial statements at that date but doesnot include all of the information and footnotes required by GAAP for complete financial statements. For further information, refer to theconsolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2001.

Certain quarterly amounts have been reclassified to conform to the current period presentation. All share and per share information has beenrestated to affect for the 25-for-1 reverse split of our common stock executed on September 6, 2002.

Liquidity and Going Concern

On August 20, 2002, we announced a shift in our strategic focus from discovery and development of neurology drugs to the in-licensing ofoncology drug candidates and the further development of and strategic alliances for these drug candidates and the discovery of neurology drugsand out-licensing these drug candidates to strategic partners. As a result of these changes and the completion of a large Alzheimer’s diseaseclinical trial, our burn rate fell from approximately $7 million per quarter

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to approximately $5 million during the three-month period ended June 30, 2002 to approximately $3 million (excluding the restructuring charge andthe GPC Biotech AG license fee revenue) during the three-month period ended September 30, 2002 and we expect it to continue to fall toapproximately $1.5 million, or lower, per quarter beginning in the fourth quarter of 2002. The recent and the prospective reduction in the burn rate isprincipally due to reductions in clinical, research and administrative personnel representing an approximate 77% reduction in personnel sinceDecember 2001, the termination of a facility lease for office space used to administer the Alzheimer’s disease clinical trial, the reduction ofexpenses for the manufacturing of Neotrofin supplies, a reduction in our research and fellowship grant commitments, and the elimination of theresearch operations of our functional genomics business.

During the three-month period ended September 30, 2002, we sold 258,824 shares of our common stock for net cash proceeds ofapproximately $1.0 million and issued warrants to purchase 120 shares of our common stock at an exercise price of $7.50 per share.

On September 5, 2002, our stockholders approved an amendment to our certificate of incorporation to effect a 25-for-1 reverse split of ouroutstanding common stock at a Special Meeting of our stockholders.

As of the filing of this quarterly report on Form 10-Q, approximately 2.3 million shares of our 50 million shares of authorized common stockare outstanding or subject to warrants or reserved under stock option plans.

On September 30, 2002, we entered into a co-development and license agreement with GPC Biotech AG for the development andcommercialization of our lead drug candidate, satraplatin. Under the co-development and licensing agreement, NeoTherapeutics may receive up to$22 million in license fees and milestone payments. The license fee consists of a total of $4 million; $2 million upon signing (which was received inOctober of 2002) and $1 million in cash and a $1 million equity investment within 30 days after the first dosing of a patient in a registrational study.GPC Biotech has agreed to make additional payments totaling up to $18 million upon achieving agreed upon milestones. However, there can be noassurance that this or any milestone will be achieved. Furthermore, GPC Biotech has agreed to fully fund development and commercializationexpenses for satraplatin. Upon commercial sale of satraplatin, if any, NeoTherapeutics will be entitled to receive royalty payments based upon netsales.

At September 30, 2002 our cash and investment balance was approximately $296,000. Subsequent to September 30, 2002 we received netcash proceeds from a licensing agreement with GPC Biotech AG of $2 million. We will not be able to continue as a going concern after December2002 unless we succeed in raising additional funds through public or private financings, including equity financings, or through other arrangements,merge with another company that has sufficient resources for us to continue our planned operations, or successfully out-license some or all of ourtechnology. We may not be successful in raising additional funds, selling the company, or out-licensing our technology, or we may not be able todo so at terms that are favorable to us. We do not know whether we will be able to secure sufficient new funds to continue our businesses. If weare not able to obtain sufficient funding within the time frame estimated by us, we will have to take other actions that we otherwise would not take,such as selling some or all of our intellectual property rights or further restructuring our operations or a combination of these activities including thepossibility of a restructuring or liquidation provided for by one of the sections of the United States Bankruptcy Code.

Our common stock was transferred from the Nasdaq National Market to the Nasdaq SmallCap Market where it began trading on October 16,2002 under the ticker symbol NEOT. To remain listed on this market, we must meet Nasdaq’s continued listing requirements. Among otherrequirements, Nasdaq rules require that a SmallCap Market company maintain a minimum stockholders' equity of $2.5 million or a minimummarket value of listed securities of $35 million or a net income from continuing operations (in latest fiscal year or 2 of the last 3 fiscal years) of atleast $500,000. We are currently not in compliance. There is no assurance that we will be able to regain compliance with this standard or maintaincompliance with any of the other continued listing requirements. If we fail to do so, our common stock could be delisted from the NasdaqSmallCap Market. Please see “Risk Factors” under “Item 2 – Management’s Discussion and Results of Operations and Financial Condition” foralternatives should our common stock be delisted.

In June 2002, we retained an investment banker and financial advisor to assist us in searching out strategic alternatives, including the saleor merger of the Company or any of our businesses. In September 2002, we terminated the services of the investment banker, however, wecontinue to discuss strategic alternatives with several pharmaceutical companies including the out-licensing of some of our neurology technologyplatforms or oncology drug products or a sale of the Company.

As shown in the accompanying condensed consolidated financial statements, we continue to incur significant losses and negative cash flowfrom operations. During the nine-month period ended September 30, 2002, we incurred a loss of approximately $13.8

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million. Our burn rate during the three-month period ended September 30, 2002 was approximately $3.0 million, excluding the charges related tothe restructuring and the revenue related to the GPC Biotech AG licensing agreement. We anticipate that our burn rate will be reduced toapproximately $1.5 million, or lower, per quarter starting with the fourth quarter.

Use of Estimates

The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reportedamounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, weevaluate our estimates, including, but not limited to, estimated cash requirements resulting from anticipated research and development activitiesand general and administrative requirements, the retention of key personnel, certain clinical trial results, maintained market need for our productcandidates and other major business assumptions. Based on these and other estimates, we have estimated that our current working capital plusfunds we are seeking to raise subsequent to the nine-month period ended September 30, 2002 will be sufficient for us to continue as a goingconcern and therefore have prepared the financial statements on that basis. Actual results could differ from our estimates. If these estimatesprove to be wrong, we may not be able to continue as a going concern.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and highly liquid investments of commercial paper and demand notes with original maturities of90 days or less.

Marketable Securities and Short-Term Investments

We classify investments in debt and equity securities among three categories: held-to-maturity, trading, and available-for-sale. As ofSeptember 30, 2002, all of our debt and equity securities holdings were categorized as available-for-sale. We carry available-for-sale securities atfair value, with unrealized gains and losses included as a component of accumulated other comprehensive income in stockholders’ equity. We usequoted market prices to determine the fair value of these investments.

Property and Equipment Purchased or Leased

We carry property and equipment at historical cost, less accumulated depreciation and amortization. When property and equipment aredisposed of, the related cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in income.Depreciation and amortization are computed using the straight-line method over the following estimated useful lives:

Equipment 5 to 7 yearsLeasehold Improvements The shorter of the estimated useful life or lease term

We assess the recoverability of the affected long-lived assets by determining whether the carrying value of such assets can be recoveredthrough undiscounted future operating cash flows. If impairment is indicated, we reduce the carrying value of the asset to fair value. While ourcurrent and historical operating and cash flow losses are potential indicators of impairment, we are in the process of determining whether the futurecash flows to be received from the long-lived assets subsequent to our restructuring will exceed the assets’ carrying value. We expect to completethis analysis in the fourth quarter of 2002.

Research and Development

Since our inception, virtually all of our activities have consisted of research and development efforts related to developing our technologies.Accordingly, the large majority of our transactions to date have related to research and development spending. We expense all such expendituresin the period incurred.

Stock-Based Compensation

We account for stock-based awards to employees in accordance with Accounting Principles Board Opinion No. 25, Accounting for StockIssued to Employees, and have adopted the disclosure-only alternative of SFAS No. 123, Accounting for Stock-Based Compensation (“SFAS123”). Options granted to non-employees, as defined, have been accounted for at fair market value in accordance with SFAS 123.

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Revenue Recognition

we have adopted a strategy of co-developing or licensing our drug product candidates. Accordingly, we have entered into collaborativeresearch and development agreements and have received funding for pre-clinical research and clinical trials. Payments under these agreements,which are non-refundable, are recorded as revenue as the related research expenditures are incurred pursuant to the terms of the agreement andprovided collectibility is reasonably assured. If no further commitments are required of us, the revenue is recognized when the license fee ispayable.

License fees comprise initial fees and milestone payments derived from collaborative licensing arrangements. Non-refundable milestonepayments continue to be recognized upon (i) the achievement of specified milestones when we have earned the milestone payment, (ii) themilestone payment is substantive in nature and the achievement of the milestone was not reasonably assured at the inception of the agreement.We defer payments for milestone events which are reasonably assured and recognize them ratably over the minimum remaining period of ourperformance obligations. Payments for milestones which are not reasonably assured are treated as the culmination of a separate earnings processand are recognized as revenue when the milestones are achieved.

Results of Operations

For the nine months ended September 30, 2002, we incurred a net loss of approximately $13.8 million. We expect that our operatingexpenses will decrease in the immediate future as compared to the same period last year due to the shift in our strategic focus and the reductionof the operations during the three months ended September 30, 2002. If we are able to raise sufficient additional funds, further development of ourin-licensed anti-cancer drug candidates will likely cause our operational expenses to increase over the next several years. We expect to incursignificant additional operating losses for AG the next several years unless such operating losses are offset, if at all, by licensing revenues underour agreement with GPC Biotech and strategic alliances with larger pharmaceutical companies that we are currently seeking. During the quarter,our functional genomics operations was reduced, restructured and merged with the pharmaceutical business, and we currently operate as onesegment. The following is unaudited financial information for the three and nine-months ended September 30, 2002:

Three-Months Ended Nine-Months Ended September 30, September 30, 2002 2001 2002 2001 Revenues 2,008,334 8,334 2,219,307 16,668 Research and development 2,685,555 4,710,184 11,437,910 13,267,689 General and administrative 461,201 1,508,790 3,349,012 5,304,251 Restructuring expenses 1,381,088 — 1,381,088 — Other Income, net 166,378 85,077 150,011 504,209

Results of Operations for the Three-Month Period Ended September 30, 2002 Compared to the Three-Month Period Ended September 30, 2001

Revenue for the three-month period ended September 30, 2002 resulted from the recognition of the first licensing fee of $2 million from theco-development and licensing agreement with GPC Biotech AG and the technology out-licensing agreements with Pfizer entered into during thesecond and fourth quarter of 2001. In 2001, we entered into strategic alliances with Pfizer for investigating potential drug targets. We are obligatedto pay to UCI 25% of all payments received under these agreements. In accordance with our revenue recognition policy the initial payments, lessamounts owed to UCI, will be recognized as revenue over a three-year period from the date of inception of the respective agreement as we haveoutstanding commitments under the agreement, whereas substantive milestone payments will be recognized as revenue upon receipt, lessamounts owed to UCI. The two Pfizer agreements will remain in effect, if we are successful in our negotiations with UCI to extend the rights to thereceptors underlying the two Pfizer agreements, following the reduction of operations at our NeoGene subsidiary.

Research and development expenses for the three-month period ended September 30, 2002 compared to the same period in 2001 decreaseddue primarily to the reduction of costs related to our clinical trial for Neotrofin in the treatment of patients with Alzheimer’s disease that ended inApril 2002, causing a decrease in outside clinical research site costs, a decrease in product manufacturing costs, a decrease in salary and relatedbenefit costs due to a reduction in research and development personnel, and a decrease in research grant expense due to a decrease in thecommitments maintained by us. In addition, as a result of a restructuring, all research activities

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related to Neotrofin and functional genomics were eliminated and our neurology pre-clinical research was reduced. During 2002, we incurred lowercompensation charges associated with stock and stock options granted to employees and officers below fair market value compared to 2001 as aresult of the reduction in the work force and the cancellation of certain options by three senior executives during the second quarter of 2002. Thesedecreases were partially offset by increases in cost related to our clinical trial for Neotrofin in the treatment of patients with neuropathy, generalbusiness expenses related to the development of our oncology related drug candidates and increases in occupancy and facility costs due to thebuilding sub-lease entered into in November 2001.

General and administrative expenses for the three-month period ended September 30, 2002 compared to the same period in 2001 decreaseddue primarily to a general decrease in personnel during the three-month period ended September 30, 2002, an early termination fee paid in 2001, alicense fee paid for the in-license of one of our oncology drug candidates in 2001, decreases in consulting expenses, travel and lodging expenses,officer relocation expenses, a decrease in business activities in our functional genomics business and a decrease in deferred compensationrelated to stock options in NeoGene granted to employees and officers below fair market value at an exercise price of $1.00 per share. Thedecrease was offset by an increase in depreciation expense due to the acquisition of property and equipment during the last quarter of 2001 andthe first six months of 2002.

Restructuring expenses were incurred during the three-month period ended September 30, 2002 as a result of a shift in our strategic focusfrom discovery and development of neurology drugs to the in-licensing of oncology drug candidates and the further development of and strategicalliances for these drug candidates, the discovery of neurology drugs and out-licensing of these drug candidates to strategic partners. As a resultof these changes, we laid off 21 employees, two senior executives retired and we incurred significant administrative and legal expenses. Therestructuring charge includes legal fees related to the restructuring in the amount of $231,000, a loss on the exchange of assets for certainpayables to the University of California, Irvine in the amount of $312,000, retirement benefits offset against a loan to Dr. Glasky, the Company’sformer CEO and current board member, in the amount of $390,000, $114,000 in severance benefits to Dr. Glasky, $200,000 in severance benefitsto Samuel Gulko, the Company’s former Chief Financial Officer, Board of Directors fees of $71,000 for special meetings related to the restructuringand personnel severance related expenses of $59,000.

Other income for the three-month period ended September 30, 2002 compared to the same period in 2001 increased due primarily to thereceipt of a $250,000 exclusivity payment from a party negotiating a potential corporate transaction with the Company. During the quarter, theexclusivity period expired and we are no longer in discussions with the party. The increase was offset by a decrease in interest income resultingfrom lower average marketable securities balances and lower interest rates.

Results of Operations for the Nine-Month Period Ended September 30, 2002 Compared to the Nine-Month Period Ended September 30, 2001

Revenue for the nine-month period ended September 30, 2002 resulted from the recognition of the first licensing fee of $2 million from theco-development and licensing agreement with GPC Biotech AG and the technology out-licensing agreements with Pfizer entered into during thesecond and fourth quarter of 2001. We received initial payments of $300,000 aggregate cash proceeds from entering into these agreements.Additionally, during the three-month period ended June 30, 2002, we received the first milestone payment of $250,000 from Pfizer under ourMarch 15, 2001 technology out-license agreement with them. This milestone payment became due at the time Pfizer formally approved the fundingand implementation of a research program with respect to a pharmaceutical lead based on our technology that we licensed to Pfizer. Under theseagreements, we entered into strategic alliances with Pfizer for investigating potential drug targets. We are obligated to pay UCI 25% of allpayments received under these agreements. In accordance with our revenue recognition policy the initial payments, less amounts owed to UCI,will be recognized as revenue over a three-year period from the date of inception of the respective agreement, whereas substantive milestonepayments will be recognized as revenue upon receipt, less amounts owed to UCI.

Research and development expenses for the nine-month period ended September 30, 2002 compared to the same period in 2001 decreasedprimarily to the reduction of costs related to our clinical trial for Neotrofin in the treatment of patients with Alzheimer’s disease that ended in April2002, causing a decrease in outside clinical research site costs, a decrease in product manufacturing costs, a decrease in salary and relatedbenefit costs due to a decrease in research and development personnel following the completion of the trial. In addition, as a result of arestructuring, all research activities related to Neotrofin and functional genomics were eliminated and our neurology pre-clinical research wasreduced during the three months ended September 30, 2002. The decrease was also a result of lower compensation charges associated with stockand stock options granted to employees and officers below fair market value during 2002 as a result of the reduction in force and the cancellationof certain options by three senior executives during the second quarter of

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2002. The decrease was partially offset by an increase in salaries and related benefit costs due to additions of research and developmentpersonnel in 2002 compared to the same period in 2001, an increase in depreciation related to acquisitions of equipment and leaseholdimprovements, an increase in lab supplies and outside contract research due to increased business activities in the first half of 2002 compared to2001, an increase in general business expenses related to the development of our oncology related drug candidates, increases in occupancy andfacility costs due to the building sub-lease entered into in November 2001, a charge of $102,997 for personnel severance related expenses in thesix month period ended June 30, 2002, and a license fee paid for the in-license of one of our oncology drug candidates in 2001. The decrease wasalso offset by costs related to our clinical trials for Neotrofin in the treatment of patients with Parkinson’s disease, spinal cord injuries andneuropathy. The clinical trials for the treatment of Parkinson’s disease and spinal cord injuries were completed in June and August of 2002,respectively. The clinical trial for the treatment of neuropathy should be completed during the fourth quarter of 2002.

General and administrative expenses for the nine-month period ended September 30, 2002 compared to the same period in 2001 decreasedprimarily to a general decrease in personnel during the nine-month period ended September 30, 2002, an early termination fee paid in 2001,decreases in consulting, travel and lodging expenses, officer relocation expenses, and a decrease in deferred compensation related to stockoptions in NeoGene granted to employees and officers below fair market value at an exercise price of $1.00 per share. These decreases werepartially offset by an increase in depreciation expense due to the acquisition of equipment during the fourth quarter of 2001 and the first six monthsof 2002, a charge of $76,763 related to personnel severance related expenses and an increase in corporate business expenses related to thedevelopment of our oncology related drug candidates.

Restructuring expenses were incurred during the three-month period ended September 30, 2002 as a result of a shift in our strategic focusfrom discovery and development of neurology drugs to the in-licensing of oncology drug candidates and the further development of and strategicalliances for these drug candidates, the discovery of neurology drugs and out-licensing of these drug candidates to strategic partners. As a resultof these changes, we laid off 21 employees, two senior executives retired and we incurred significant administrative and legal expenses. Therestructuring charge includes legal fees in the amount of $231,000, a loss on the exchange of assets for certain payables to the University ofCalifornia, Irvine in the amount of $312,000, retirement benefits offset against a loan to Dr. Glasky, the Company’s former CEO and current boardmember, in the amount of $390,000, $114,000 in severance benefits to Dr. Glasky, $200,000 in severance benefits to Samuel Gulko, theCompany’s former Chief Financial Officer, board of directors fees of $71,000 for special meetings related to the restructuring and personnelseverance related expenses of $59,000.

Other income for the nine-month period ended September 30, 2002 compared to the same period in 2001 decreased due primarily to adecrease in the fair market value of a marketable security investment that we determined to be other than temporary of approximately $51,000 anda decrease in interest income resulting from lower average marketable securities balances and lower interest rates. These decreases were offsetby a receipt of a $250,000 exclusivity payment from a party negotiating a potential corporate transaction with the Company. During the quarter, theexclusivity period expired and the Company is no longer in discussions with the party.

Subsequent Events Affecting Future Results

On October 9, 2002, we received payment on our receivable of $2 million for the first licensing fee due on our licensing agreement with GPCBiotech AG for satraplatin.


Financial Condition

From inception through September 30, 2002, we financed our operations primarily through sales of securities, borrowings, grants, deferredpayment of salaries and other expenses from related parties and payments received from technology out-license agreements.

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On September 30, 2002, the Company settled its outstanding obligations with its primary manufacturer of Neotrofin for a cash payment of$332,000 and the transfer of our rights in a patent to the manufacturer resulting in a reduction formulation expense of $409,000.

At September 30, 2002, we had a net working capital deficiency of approximately $1.1 million. Our working capital included cash and cashequivalents of approximately $41,000 and marketable securities and short-term investments of approximately $255,000. In comparison, atDecember 31, 2001, we had positive net working capital of approximately $2.8 million, which included cash and cash equivalents of approximately$0.75 million and short-term investments of approximately $6.4 million. The $3.9 million decrease in net working capital during the nine-monthperiod ended September 30, 2002 is attributable primarily to the loss of approximately $13.8 million, less non-cash compensation, the receivablefrom GPC Biotech and other items of approximately $2.2 million. Additionally, we used $0.6 million to pay capital lease obligations and otheritems. These uses of working capital were offset by net cash proceeds of approximately $8.3 million from the sale of shares of our common stock.

We devote substantially all of our efforts to research and development. We incurred net losses of approximately $13.8 million throughSeptember 30, 2002, and expect to incur substantial losses over the next several years. We have historically funded our operations with fundsfrom public offerings and private placement equity offerings. We will require substantial additional funds by December 2002, or sooner, in order tocontinue and complete the research and development activities currently contemplated and to commercialize our proposed products. Our futurecapital requirements and availability of capital will depend upon many factors, including continued scientific progress in research and developmentprograms, the scope and results of pre-clinical studies and clinical trials, the time and costs involved in obtaining regulatory approvals, the costinvolved in filing, prosecuting and enforcing patent claims, the effect of competing technological developments, the cost of manufacturing scale-up, the cost of commercialization activities, and other factors which may not be within our control.

Contractual and Commercial Obligations

Debt and Capital Leases

Future installments of debt principal on capital lease obligations are as follows:

Year Ending December 31: Amount2002 $ 89,000 2003 313,000 2004 152,000 $554,000

Facility, Property and Equipment Operating Leases

Minimum lease requirements for the remainder of the year ending December 31, 2002 and for the years ending December 31, 2003 through2006 under the property and equipment leases are as follows:

Year Ending December 31: Amount2002 $ 453,000 2003 944,000 2004 682,000 2005 406,000 2006 172,000 $2,657,000

Research and Fellowship Grants

We periodically make non-binding commitments to various universities and not-for-profit research organizations to fund scientific researchand fellowship grants that may further our research programs. During the three-month period ended September 30, 2002, several grants wereterminated. At September 30, 2002, we had no non-binding commitments to pay research or fellowship grants.

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Joint Ventures

In September 1999, we entered into a three-year joint venture agreement with the University of California, Irvine (or UCI) to assist in themarketing and commercialization of discoveries made by certain members of its functional genomics science department. We were obligatedunder the agreement to fund the joint venture for three years with minimum payments of $2.0 million over the life of the agreement, all of which hasbeen paid. During the three months ended September 30, 2002, we shifted our focus from the marketing and commercialization of discoveriesmade by the functional genomics team to the out-licensing of these discoveries and the administration of the two Pfizer collaboration agreementsthat will remain in effect, if we are successful in our negotiations with UCI to extend the rights to the receptors underlying the two Pfizeragreements. We have canceled the joint venture agreement.

On April 17, 2002, we formed a joint venture with J.B. Chemicals & Pharmaceuticals, Ltd. of Mumbai, India (“JBCPL”) and created a newentity, NeoJB, LLC, a Delaware limited liability company (“NeoJB”). We will own 80% of NeoJB and a JBCPL subsidiary will own 20% of NeoJB.The business operations of NeoJB will initially be to seek U.S. regulatory approval on JBCPL pharmaceutical products and to subsequently marketthese products in the U.S. and possibly other countries. We will initially fund 100% of NeoJB’s operating expenses. Minimal activity has occurredunder this joint venture because we have not had sufficient funds available. Following the change in management on August 19, 2002, we havecontinued to develop the joint venture but have not entered into any commitments at this time.

We are also reviewing other possible joint ventures to promote our strategic focus.

Financial Market Risks

We are exposed to certain market risks associated with interest rate fluctuations and credit risk on our marketable securities and borrowingarrangements. All investments in marketable securities and borrowing arrangements are entered into for purposes other than trading. The primaryobjective of our investment activities is to preserve principal while at the same time maximizing yields without significantly increasing risk. We donot utilize hedging contracts or similar instruments.

Our investments during the nine-month period ended September 30, 2002 and as of September 30, 2002 are fixed rate, short-term corporateand government notes and bonds, which are available for sale. Because the interest rates are fixed, changes in interest rates affect the fair marketvalue of these investments but do not affect the interest earnings. Because these financial instruments are considered “available for sale,” werecord all changes in fair market value in stockholders’ equity as “Accumulated other comprehensive income” until the investment is either sold ormatures, at which time the gain or loss, if any, is recognized as a realized gain or loss in the statement of operations. If a 10% change in interestrates were to have occurred on September 30, 2002, any decline in the fair value of our investments would not be material. In addition, we areexposed to certain market risks associated with the credit ratings of corporations whose bonds we have purchased. If these companies were toexperience a significant detrimental change in their credit ratings, the fair market value of these corporate bonds may significantly decrease. Ifthese companies were to default on their corporate bonds, we may lose part or all of the principal amount of our investment. We believe that weeffectively manage this market risk by diversifying our corporate bond investments by purchasing a few bonds of many large, well-known,companies in a variety of industries.

As of September 30, 2002, we had one investment of approximately $61,000 in WorldCom, Inc. corporate bonds that matures on May 15,2003. The fair market value of these corporate bonds at September 30, 2002 was approximately $7,000, based on a market quotation. In July2002, WorldCom, Inc. and its subsidiaries filed a voluntary jointly administered petition under the U.S. Bankruptcy Code in the United StatesBankruptcy Court for the Southern District of New York. We believe that it is probable that we will be unable to collect all amounts due to usaccording to the contractual terms of the corporate bonds, therefore, we consider the impairment as other than temporary and have recorded a lossfor approximately $51,000 in other expense during the three-month period ended June 30, 2002.

Our primary market risk exposures relate to (1) interest rate risk on borrowings, (2) our ability to pay or refinance our borrowings at maturityat market rates, (3) interest rate risk on our investment portfolio, and (4) credit risk of the companies’ bonds in which we invest. We manageinterest rate risk on our investment portfolio by matching scheduled investment maturities with our cash requirements. We manage interest raterisk on our outstanding borrowings by using fixed rate debt. While we cannot predict or manage our ability to refinance existing borrowings and ourinterest rate risk on our investment portfolio, we evaluate our financial position on an ongoing basis.

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Our borrowings bear interest at fixed rates. Changes in interest rates affect the fair value of our borrowings, but do not have an impact oninterest expense. Because of the relatively short-term nature of our borrowings, fluctuations in fair value are not deemed to be material.

Business Outlook

Our future operating results are highly uncertain, and the following factors should be carefully reviewed in addition to the other informationand references contained in this quarterly report on Form 10-Q:

The results of a completed pivotal clinical trial of Neotrofin in patients with mild to moderate Alzheimer’s disease indicated that there was nostatistical difference in the performance of patients taking Neotrofin when compared to patients taking placebo. Preliminary results from ourstudies of Neotrofin in patients with Parkinson’s disease and spinal cord injury indicated that there was no meaningful improvement in theperformance of patients taking Neotrofin. No further resources will be used for the development of Neotrofin.

On August 20, 2002, we announced a shift in our strategic focus from discovery and development of neurology drugs to the in-licensing ofoncology drug candidates and the further development of and strategic alliances for these drug candidates and the discovery of neurology drugsand out-licensing these drug candidates to strategic partners. As a result of these changes and the completion of a large Alzheimer’s diseaseclinical trial, our burn rate fell from approximately $7 million per quarter to approximately $5 million during the three-month period ended June 30,2002 to approximately $3 million (excluding the restructuring charge and the GPC Biotech AG license fee revenue) during the three-month periodended September 30, 2002 and we expect it to continue to fall to approximately $1.5 million, or lower, per quarter beginning in the fourth quarter of2002. The recent and the prospective reduction in the burn rate is principally due to reductions in clinical, research and administrative personnelrepresenting an approximate 77% reduction in personnel since December 2001, the termination of a facility lease for office space used toadminister the Alzheimer’s disease clinical trial, the reduction of expenses for the manufacturing of Neotrofin supplies, a reduction in our researchand fellowship grant commitments, and the elimination of the research operations of our functional genomics business.

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ONCOLOGY

Our oncology program’s drug candidates, target indications and phase of development based on our shift in strategic focus is summarized inthe following table:

ANTI-CANCER PLATFORM

Drug Candidate Target Indication Phase of Development/Status

Satraplatin Prostate cancer Phase 3: Study expected to begin in 2003Neoquin Bladder cancer Phase 2: Study in progress Radiation sensitization Phase 1/2: Study expected to begin in 2003*Elsamitrucin Non-Hodgkin’s lymphoma Phase 2: Study expected to begin in 2003*

* - Assumes availability of financial resources.

On September 30, 2002, we entered into a co-development and license agreement with GPC Biotech AG for the development andcommercialization of our lead drug candidate, satraplatin. Under the co-development and licensing agreement, NeoTherapeutics may receive up to$22 million in license fees and milestone payments. The license fee consists of a total of $4 million; $2 million upon signing (which was received inOctober of 2002) and $1 million in cash and a $1 million equity investment within 30 days after the first dosing of a patient in a registrational study.GPC Biotech has agreed to make additional payments totaling up to $18 million upon achieving agreed upon milestones. However, there can be noassurance that any milestone will be achieved. Furthermore, GPC Biotech has agreed to fully fund development and commercialization expensesfor satraplatin. Upon commercial sale of satraplatin, if any, NeoTherapeutics will be entitled to receive royalty payments based upon net sales.

We do not intend to initiate new clinical trials on our other oncology drug candidates unless financial resources become available. All ofthese drugs are in the late stage of development.

We are working towards developing additional strategic alliances with other pharmaceutical companies to further develop our other anti-cancer compounds and are currently in negotiations with several potential strategic alliance partners. We believe that if we are successful in ournegotiations and are able to establish a strategic alliance for one or more of our other anti-cancer compounds, we may receive initial and milestonepayments related to further product candidate development and rights to royalty payments on product sales if the compounds are ever approvedfor marketing and are sold. However, we cannot be certain that we will be able to establish any additional strategic alliances, or if so, on whatterms.

Our nervous system drug platforms’ drug candidates, target indications and phase of development based on our shift in strategic focus aresummarized in the following tables:

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NERVOUS SYSTEM

ATTENTION/COGNITION PLATFORM


AIT-034 Dementia Pre-clinicalNEO-339

Attention deficit Hyperactivity disorder and mildcognitive impairment

Pre-clinical

Additional compounds Cognitive and Attentional disorders Pre-clinical

ANTIPSYCHOTIC PLATFORM


NEO-376 and NEO-392 Psychosis and schizophrenia Pre-clinicalAdditional compounds

Psychosis, schizophrenia, depression,anxiety, pain

Pre-clinical

NEUROREGENERATION PLATFORM


Neotrofin

Peripheral neuropathy

Phase 2: Study inprogress for thetreatment ofchemotherapy inducedperipheral neuropathy

Additional compounds Neurodegenerative diseases Pre-clinical

We are completing the ongoing clinical trial for Neotrofin in the treatment of chemotherapy-induced neuropathy. Depending upon the resultsof these clinical trials, we will determine whether to support any more clinical studies or await strategic alliances with other pharmaceuticalcompanies. We do not intend to conduct any other clinical trials for Neotrofin or our other neurology drug candidates.

We are working towards developing strategic alliances with other pharmaceutical companies to further develop our neurology compoundsand are currently in negotiations with several potential partners. We believe that if we are successful in our negotiations and are able to establish astrategic alliance for one or more of our neurology compounds, we may receive payments related to further product candidate development and onproduct sales if the compounds are ever approved for marketing and are sold. However, no such strategic alliances have been established and wecannot be certain that we will be able to establish any, or if so, on what terms.

FUNCTIONAL GENOMICS

We have two agreements with Pfizer, Inc. for out-licensing two of our G-protein-coupled receptor, or GPCR, system discoveries.

We are working towards developing strategic alliances with other pharmaceutical companies to further out-license the technology discoveredin connection with the terminated joint venture with the University of California, Irvine and are currently in negotiations with several potentialpartners. We believe that if we are successful in our negotiations and are able to establish a strategic alliance for one or more of our GPCRsystem discoveries, we may receive payments related to further product candidate development and on product sales if the compounds derivedfrom the technology are ever approved for marketing and are sold. However, we cannot be certain that we will be able to establish any additionalstrategic alliances, or if so, on what terms.

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On May 10, 2002 we received the first milestone payment of $250,000 from Pfizer Inc. under our technology out-license agreement datedMarch 15, 2001 with Pfizer Inc. (the “Agreement”). This milestone payment became due at the time Pfizer formally approved the funding andimplementation of a research program with respect to a pharmaceutical lead based on the technology that we licensed to Pfizer, and as describedin the Agreement.

On July 19, 2002, we adopted a formal plan to discontinue the operations of our functional genomics business. However, as part of a changein management and reassessment of the Company’s strategy in August 2002, we altered our plans to discontinue the operations and changed thefocus of the business to out-licensing the genomics technology and the administration of two Pfizer collaboration agreements. We have eliminatedall further functional genomics research operations and the associated commitments to the University of California, Irvine. The two Pfizeragreements will remain in effect, if we are successful in our negotiations with UCI to extend the rights to the receptors underlying the two Pfizeragreements, following the reduction of operations at our NeoGene subsidiary.

Risk Factors

The risk factors described below are not intended to be complete. A more comprehensive list of factors that could affect our future operatingresults can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2001, in “Item 1. Description of Business” underthe subheading “Risk Factors” and in our Quarterly Reports on Form 10-Q for the quarter ended March 31, 2002 and June 30, 2002 in “Item 2.Management’s Discussion and Analysis of Results of Operations and Financial Condition”, under the subheading “Risk Factors.” Failure tosatisfactorily achieve any of our objectives or avoid any of the below or other risks would likely have a material adverse effect on our business andresults of operations.

As shown in the accompanying condensed consolidated financial statements, we continue to incur significant losses and negative cash flowfrom operations. During the nine-month period ended September 30, 2002, we incurred a loss of approximately $13.8 million. Our burn rate duringthe three-month period ended September 30, 2002 was approximately $3.0 million, excluding the charges related to the restructuring and therevenue related to the GPC Biotech AG licensing agreement. We anticipate that our burn rate will be reduced to approximately $1.5 million, orlower, per quarter starting with the fourth quarter. At September 30, 2002 we had cash, cash equivalents, marketable securities and short-terminvestments of approximately $296,000. Subsequent to September 30, 2002 we received net cash proceeds from a licensing agreement with GPCBiotech AG of $2 million. Therefore, we will need to raise additional funds by December 2002, or sooner, through public or private financings,including equity financings or through other arrangements, to continue operating our businesses, including out-licensing our technology, to meetour short-term and long-term cash needs. We continue to seek additional sources of financing at the most favorable terms available to us,however, we do not know whether we will be able to secure sufficient new funds to continue our businesses. If we are not able to obtain sufficientfunding within the time frame estimated by us, we will have to take other actions that we otherwise would not take, such as selling some or all ofour intellectual property rights or further restructuring our operations, or a combination of these activities, including the possibility of a restructuringor liquidation provided for by one of the sections of the United States Bankruptcy Code.

Our need for additional funding is substantial and will be determined by the progress and cost of the development and commercialization ofour products and other activities. We will require substantial additional funds in order to continue the research and development activities currentlycontemplated and to commercialize our proposed products. The source, availability, and terms of such funds have not been determined and thereis no assurance that we will be able to obtain any funding on acceptable terms or at all.

We have incurred losses in every year of our existence and expect to continue to incur significant operating losses for the next severalyears. We have never generated revenues from product sales and there is no assurance that revenue from product sales will ever be achieved.There is no assurance that any of our proposed products will ever be successfully developed, receive and maintain required governmentalregulatory approvals, become commercially viable or achieve market acceptance.

Our business strategy requires that we establish and maintain good strategic alliances. Currently we are seeking strategic alliances but havelimited experience in obtaining such alliances. We cannot give any assurance that we will be successful in establishing additional alliances or thatwe will be able to maintain existing and new alliances in a manner that is beneficial to us.

We have no experience in manufacturing, procuring products in commercial quantities or marketing, and only limited experience innegotiating, setting up or maintaining strategic relationships and conducting clinical trials or other late stage phases of the regulatory approvalprocess, and there is no assurance that we will successfully engage in any of these activities.

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We shifted our strategic focus from discovery and development of neurology drugs to the in-licensing of oncology drug candidates and thefurther development of and strategic alliances for these drug candidates and the discovery of neurology drugs and out-licensing these drugcandidates to strategic partners. As a result of these changes we made reductions in clinical, administrative and research personnel. We believethat we retained the correct, and a level of, personnel that are key to our success in executing our strategic focus. We may be wrong and laterrequire additional personnel or personnel with skills different than those that we retained.

On September 30, 2002, we entered into a co-development and license agreement with GPC Biotech AG for the development andcommercialization of our lead drug candidate, satraplatin. GPC Biotech has agreed to fully fund development and commercialization expenses forsatraplatin. We will not have complete control over the drug development process and therefore, the success of our lead drug candidate will bedepend upon the efforts of a third party. There is no assurance that GPC Biotech will be successful in the clinical development of the drug, theachievement of any milestones such as the acceptance of the NDA (New Drug Application) filing by the U.S. Food and Drug Administration or theeventual commercialization of satraplatin.

Our common stock was transferred from the Nasdaq National Market to the Nasdaq SmallCap Market where it began trading on October 16,2002 under the ticker symbol NEOT. To remain listed on this market, we must meet Nasdaq’s continued listing requirements. Among otherrequirements, Nasdaq rules require that a SmallCap Market company maintain a minimum stockholders equity of $2.5 million or a minimum marketvalue of listed securities of $35 million or a net income from continuing operations (in latest fiscal year or 2 of the last 3 fiscal years) of at least$500,000. We are currently not in compliance with this standard. There is no assurance that we will be able to regain compliance with this standardor maintain compliance with any of the other continued listing requirements. If we fail to do so, our common stock could be delisted from theNasdaq SmallCap Market.

If our stock is delisted from the Nasdaq SmallCap Market, we would likely seek quotation on the American Stock Exchange or a regionalstock exchange, if available. However, quotation on such a market or exchange could reduce the market liquidity for our common stock. If ourcommon stock is not quoted on another market or exchange, trading of our common stock could be conducted in the over-the-counter market onan electronic bulletin board established for unlisted securities such as the Pink Sheets or the OTC Bulletin Board. As a result, an investor wouldfind it more difficult to dispose of, or obtain accurate quotations for the price of, our common stock.

If our common stock is delisted from the Nasdaq SmallCap Market, we fail to obtain quotation on another market or exchange, and thetrading price remains below $5.00 per share, trading in our common stock might also become subject to the requirements of certain rulespromulgated under the Securities Exchange Act of 1934, which require additional disclosure by broker-dealers in connection with any tradesinvolving a stock defined as a “penny stock” (generally, any equity security not listed on a national securities exchange or quoted on Nasdaq thathas a market price of less than $5.00 per share, subject to certain exceptions). Many

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brokerage firms are reluctant to recommend low-priced stocks to their clients. Moreover, various regulations and policies restrict the ability ofstockholders to borrow against or “margin” low-priced stocks and declines in the stock price below certain levels may trigger unexpected margincalls. Additionally, because brokers’ commissions on low-priced stocks generally represent a higher percentage of the stock price thancommissions on higher priced stocks, the current share price of the common stock can result in an individual stockholder paying transaction coststhat represent a higher percentage of total share value than would be the case if our share price were higher. This factor may also limit thewillingness of institutions to purchase our common stock. Finally, the additional burdens imposed upon broker-dealers by these requirements coulddiscourage broker-dealers from facilitating trades in our common stock, which could severely limit the market liquidity of the stock and the abilityof investors to trade our common stock.

Nasdaq corporate governance rules prohibit an issuer of listed securities from issuing 20% or more of its outstanding voting stock in onetransaction or a series of related transactions other than a public offering at less than the greater of book value or the then current market value,without obtaining prior stockholder consent (the “20% Share Limitation”). We obtained stockholder approval on September 5, 2002 for the raising,as necessary, of up to $10,000,000 in private financings, pursuant to a registration statement filed with the Securities and Exchange Commissionor otherwise, through the issuance of our common stock and/or warrants exercisable for the purchase of common stock, up to an aggregatemaximum of 10,000,000 shares of common stock, potentially at discounts of up to (but not more than) 25% below the then current market price asdetermined in the discretion of our Board of Directors. However, the approval of stockholders applies only to financings to be completed, if at all,prior to December 5, 2002.

We do not generate sufficient revenues to fund its operations, and we do not currently have sufficient cash on hand to fund our operationsbeyond December 2002. While we are exploring all financing and strategic alternatives, we will need to raise additional funds through the sale ofsecurities by December 2002, or sooner, to continue operating our business. Based on our recent experience and our current financial position, webelieve that we might need to offer our securities at a discount to market price in order to attract investors to provide these funds. Therefore this20% Share Limitation rule may hinder or prevent financing transactions from occurring.

Nasdaq corporate governance standards also requires us to notify Nasdaq no later than fifteen (15) days prior to entering into a transactionthat may result in the potential issuance of common stock greater than ten percent (10%) of the total shares of common stock outstanding.Therefore this 15 day notification rule may hinder or prevent financing transactions from occurring.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

See “ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations”, subheading “Financial MarketRisks,” above.

ITEM 4. Controls and Procedures

(a) We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under theSecurities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’srules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and ourVice President, Strategic Planning and Finance (our senior financial officer), as appropriate, to allow timely decisions regarding required disclosure.In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how welldesigned and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily wasrequired to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Within 90 days prior to the date of this report, we carried out an evaluation, under the supervision and with the participation of ourmanagement, including our Chief Executive Officer and our Vice President, Strategic Planning and Finance, of the effectiveness of the design andoperation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and our Vice President, StrategicPlanning and Finance concluded that our disclosure controls and procedures were effective.

(b) There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect the internal controlssubsequent to the date the Company completed its evaluation.

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PART II — OTHER INFORMATION

ITEM 1. Legal Proceedings

None

ITEM 2. Changes in Securities and Use of Proceeds

The following is a summary of transactions involving sales of our securities that were not registered under the Securities Act of 1933, asamended (the “Securities Act”), and have not been previously included in a quarterly report on Form 10-Q.

On October 21, 2002, we issued 25,000 shares of our common stock to Threshold Pharmaceuticals, Inc. (“Threshold”) as consideration forThreshold’s assistance in development of a clinical development plan for one of the Company’s oncology drug candidates. Exemption fromregistration was relied upon under Section 4(2) of the Securities Act. We made no solicitation in connection with the agreement, other thancommunications with Threshold; we obtained representations from Threshold regarding Threshold’s investment intent, experience andsophistication; and the shares were not issued as part of a plan of financing.

ITEM 3. Defaults Upon Senior Securities

See the information under the subheading Debt and Capital Leases provided in Note 8 to the Financial Statements in Item 1. Part 1 of thisForm 10-Q, which is hereby incorporated by reference.

ITEM 4. Submission of Matters to a Vote of Security Holders

The following matters were voted upon at our Special Meeting of Stockholders held on September 5, 2002:

1. A proposal to approve the amendment of the Company’s Certificate of Incorporation, as amended, to effect a twenty-five-for-onereverse stock split of the Company’s outstanding Common Stock, was approved by the following vote:

Votes Cast Broker Non- For Against Abstain Votes Number of Shares 34,920,559 1,905,097 86,471 0

2. A proposal to approve new financings of up to $10 million involving the potential issuance of the Company’s Common Stock and/orwarrants to purchase Common Stock equal to 20% or more of the Company’s Common Stock outstanding prior to the financings, upto an aggregate maximum of 10 million shares of Common Stock, potentially at discounts of up to (but not more than) 25% belowmarket price as determined in the discretion of the Board of Directors, was approved by the following vote:

Votes Cast Broker Non- For Against Abstain Votes Number of Shares 8,292,942 1,161,594 92,427 27,365,164

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PART II — OTHER INFORMATION (continued)

ITEM 5. Other Information (not previously reported in a Form 8-K)

None

ITEM 6. Exhibits and Reports on Form 8-K

(a) Exhibits

Exhibit No. Description4.1+ Certificate of Amendment of Certificate of Incorporation filed on September 5, 20024.2+ Form of Amended and Restated Bylaws10.1

Form of Stock Purchase Agreement dated as of July 8, 2002. (Filed as Exhibit 10.1 to Form 8-K, as filed withthe Securities and Exchange Commission on July 8, 2002, and incorporated herein by this reference.)

10.2+

Mutual Rescission Agreement dated as of July 25, 2002 by and between the Company and Stonestreet LimitedPartnership

10.3+

Warrant Repurchase Agreement dated as of July 31, 2002 by and between the Company and BNC BachInternational, Ltd.

10.4

Retirement Agreement and General Release, dated as of August 16, 2002, by and between the Company andDr. Alvin J. Glasky (Filed as Exhibit 10.4 to Form 10-Q, as filed with the Securities and Exchange Commissionon August 19, 2002, and incorporated herein by this reference.)

10.5

Retirement Agreement and General Release, dated as of August 20, 2002, by and between the Company andSamuel Gulko (Filed as Exhibit 10.1 to Form 8-K, as filed with the Securities and Exchange Commission onAugust 23, 2002, and incorporated herein by this reference.)

10.6+

Additional Collateral Rider between NeoTherapeutics, Inc. and General Electric Capital Corporation datedSeptember 22, 2002

10.7+ Settlement Agreement between NeoTherapeutics, Inc. and Merck Eprova AG dated September 30, 200210.8+ †

First Amendment to License Agreement Dated August 28, 2001 between Johnson Matthey PLC andNeoTherapeutics, Inc. dated September 30, 2002

10.9+ †

Co-Development and License Agreement between NeoTherapeutics, Inc. and GPC Biotech AG datedSeptember 30, 2002

10.10+

Retirement Agreement and General Release, dated as of November 6, 2002, by and between the Company andMichelle S. Glasky, Ph.D.

+ Filed herewith† Confidential portions omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 promulgated

under the Securities and Exchange Act of 1934, as amended.

(b) Reports on Form 8-K

1. The Company filed a Report on Form 8-K on July 12, 2002 to report a press release issued on July 12, 2002, which announced thecompletion of an offering of 258,824 shares of its common stock at a negotiated purchase price per share of $4.25 to four institutionalinvestors for aggregate consideration of approximately $1,100,000.00. The shares were issued pursuant to an effective RegistrationStatement on Form S-3.

2. The Company furnished a Report on Form 8-K on August 19, 2002 providing to the Securities and Exchange Commission the

certifications of its Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2002 as required by 18 U.S.C. ss. 1350, ascreated by Section 906 of the Sarbanes-Oxley Act of 2002.

3. The Company filed a Report on Form 8-K on August 23, 2002 to report a press release issued on August 21, 2002, which announced

the retirement of Samuel Gulko as Director, Senior Vice President Finance, Chief Financial Officer, Secretary and Treasurer of theCompany. The Report on Form 8-K also reported a press release issued on August 22, 2002 which announced an additionalrestructuring intended to reduce the Company’s expected monthly expenses to less than $500,000, including the elimination of 23 ofthe Company’s approximately 44 full-time equivalent positions.

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4. The Company furnished a Report on Form 8-K on August 27, 2002 to report on a conference call on August 22, 2002, to discuss andanswer questions regarding its recently announced strategic and organizational changes. The Report on Form 8-K includes anunofficial transcript of the conference call.

5. The Company filed a Report on Form 8-K on September 6, 2002 to report a press release issued on September 5, 2002 which

announced that its stockholders have approved an amendment to the Company’s certificate of incorporation to effect a 25-for-1reverse split of the Company’s common stock. The stockholders of the Company also approved the raising, as necessary, of up to$10,000,000, through the issuance of the Company’s common stock and/or warrants exercisable for the purchase of common stock,up to a maximum of 10,000,000 shares of common stock, potentially at discounts to the then current market price.

6. The Company filed a Report on Form 8-K on October 1, 2002 to report a press release issued on October 1, 2002 which announced

that it has signed an agreement with GPC Biotech AG to co-develop one of its anti-cancer drugs, satraplatin.

ITEM 7. SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalfby the undersigned thereunto duly authorized.

NEOTHERAPEUTICS, INC. Date: November 12, 2002 By: /s/ John L. McManus

John L. McManus, Vice President StrategicPlanning & Finance(Principal Accounting and Financial Officer)

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PART II — OTHER INFORMATION

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Rajesh C. Shrotriya, certify that:

1. I have reviewed this quarterly report on Form 10-Q of NeoTherapeutics, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect tothe period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as definedin Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of thisquarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation asof the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the auditcommittee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process,summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls;and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internalcontrols or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including anycorrective actions with regard to significant deficiencies and material weaknesses.

Date: November 12, 2002 /s/ Rajesh C. Shrotriya

Rajesh C. Shrotriya, M.D.

Chairman, Chief Executive Officer and President

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CERTIFICATION OF VICE PRESIDENT, STRATEGIC PLANNING AND FINANCE

I, John McManus, certify that:

1. I have reviewed this quarterly report on Form 10-Q of NeoTherapeutics, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect tothe period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as definedin Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of thisquarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation asof the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the auditcommittee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process,summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls;and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internalcontrols or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including anycorrective actions with regard to significant deficiencies and material weaknesses.

Date: November 12, 2002 /s/ John L. McManus

John L. McManus

Vice President, Strategic Planning and Finance

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Exhibits

Exhibit No. Description4.1+ Certificate of Amendment of Certificate of Incorporation filed on September 5, 20024.2+ Form of Amended and Restated Bylaws10.1

Form of Stock Purchase Agreement dated as of July 8, 2002. (Filed as Exhibit 10.1 to Form 8-K, as filed with the Securities andExchange Commission on July 8, 2002, and incorporated herein by this reference.)

10.2+ Mutual Rescission Agreement dated as of July 25, 2002 by and between the Company and Stonestreet Limited Partnership10.3+ Warrant Repurchase Agreement dated as of July 31, 2002 by and between the Company and BNC Bach International, Ltd.10.4

Retirement Agreement and General Release, dated as of August 16, 2002, by and between the Company and Dr. Alvin J. Glasky(Filed as Exhibit 10.4 to Form 10-Q, as filed with the Securities and Exchange Commission on August 19, 2002, and incorporatedherein by this reference.)

10.5

Retirement Agreement and General Release, dated as of August 20, 2002, by and between the Company and Samuel Gulko (Filedas Exhibit 10.1 to Form 8-K, as filed with the Securities and Exchange Commission on August 23, 2002, and incorporated herein bythis reference.)

10.6+ Additional Collateral Rider between NeoTherapeutics, Inc. and General Electric Capital Corporation dated September 22, 200210.7+ Settlement Agreement between NeoTherapeutics, Inc. and Merck Eprova AG dated September 30, 200210.8+ †

First Amendment to License Agreement Dated August 28, 2001 between Johnson Matthey PLC and NeoTherapeutics, Inc. datedSeptember 30, 2002

10.9+ † Co-Development and License Agreement between NeoTherapeutics, Inc. and GPC Biotech AG dated September 30, 200210.10+

Retirement Agreement and General Release, dated as of November 6, 2002, by and between the Company and Michelle S. Glasky,Ph.D.

+ Filed herewith† Confidential portions omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 promulgated

under the Securities and Exchange Act of 1934, as amended.

38

EXHIBIT 4.1

CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF NEOTHERAPEUTICS, INC.

NeoTherapeutics, Inc., a corporation organized and existing under and byvirtue of the General Corporation Law of the State of Delaware (the"Corporation"), does hereby certify that: 1. Article 4 of the Corporation's Certificate of Incorporation ishereby amended by adding the following three paragraphs at the end of saidArticle 4:

"Effective as of 11:59 p.m. Eastern Time on the date of the filing of the Certificate of Amendment that adds this paragraph to this Article 4 (the time of such filing, the "Effective Time"), all issued and outstanding shares of Common Stock ("Existing Common Stock") shall be and hereby are automatically combined and reclassified as follows: each twenty-five (25) shares of Existing Common Stock shall be combined and reclassified as one (1) share of issued and outstanding Common Stock ("New Common Stock"), provided, that there shall be no fractional shares of New Common Stock. In the case of any holder of any number of shares of Existing Common Stock which, when divided by twenty-five (25), does not result in a whole number, the holder shall receive cash in lieu of any fractional share of New Common Stock at a price per share equal to the product of (a) the number of shares of Existing Common Stock held by such holder immediately prior to the Effective Time which have not been classified into a whole share of New Common Stock, multiplied by (b) the closing price of the Existing Common stock as reported on the Nasdaq National Market on the date of the filing of the Certificate of Amendment.

The Corporation shall, through its transfer agent, provide certificates representing shares of New Common Stock to holders of Existing Common Stock in exchange for certificates representing shares of Existing Common stock. From and after the Effective Time, certificates representing shares of Existing Common Stock are hereby cancelled and shall represent only the right of the holders thereof to receive shares of New Common Stock.

From and after the Effective Time, the term "New Common Stock" as used in this Article 4 shall mean Common Stock as provided in this Certificate of Incorporation. The par value of the Common Stock shall remain $0.001 per share."

2. The amendment of the certificate of incorporation hereincertified has been duly adopted in accordance with the provisions of Section 242of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, the undersigned has executed this Certificate ofAmendment of Certificate of Incorporation on September 5, 2002.

NEOTHERAPEUTICS, INC. a Delaware corporation

By: \s\ Rajesh C. Shrotriya, M.D. ------------------------------------ Rajesh C. Shrotriya, M.D. Chairman of the Board, Chief Executive Officer and President

EXHIBIT 4.2

BYLAWS OF NEOTHERAPEUTICS, INC. A DELAWARE CORPORATION

ARTICLE I OFFICES

SECTION 1. REGISTERED OFFICE. The registered office of the Corporationin the State of Delaware shall be in the City of Wilmington, County of NewCastle.

SECTION 2. OTHER OFFICES. The Corporation may also have offices at suchother places both within and without the State of Delaware as the Board ofDirectors may from time to time determine or the business of the Corporation mayrequire.

SECTION 3. BOOKS. The books of the Corporation may be kept within orwithout the State of Delaware as the Board of Directors may from time to timedetermine or the business of the Corporation may require.

ARTICLE II MEETINGS OF STOCKHOLDERS

SECTION 1. PLACE OF MEETINGS. All meetings of stockholders shall be heldat such place either within or without the State of Delaware as may bedesignated from time to time by the Board of Directors.

SECTION 2. ANNUAL MEETINGS. Annual meetings of stockholders shall beheld at a time and date designated by the Board of Directors for the purpose ofelecting directors and transacting such other business as may properly bebrought before the meeting.

SECTION 3. SPECIAL MEETINGS. Special meetings of stockholders, for anypurpose or purposes, unless otherwise prescribed by statute or by theCertificate of Incorporation, may be called by the Board of Directors, theChairman of the Board, or by the Chief Executive Officer.

SECTION 4. NOTIFICATION OF BUSINESS TO BE TRANSACTED AT MEETING. At anymeeting of the stockholders, only such business shall be conducted as shall havebeen properly brought before such meeting. To be brought properly before anannual meeting of stockholders, business must be (a) specified in the notice ofmeeting (or any supplement thereto) given by or at the direction of the Board ofDirectors, (b) otherwise properly brought before the meeting by or at thedirection of the Board of Directors or the chairman of the meeting, or (c)otherwise properly brought before the meeting by a stockholder. For business tobe properly brought before an annual meeting by a stockholder, the stockholdermust have given timely notice thereof in writing to the Secretary of theCorporation. To be timely, a stockholder's notice must be received no less thansixty days nor more than ninety days prior to the first anniversary of thepreceding year's annual meeting of stockholders; provided, however, that in theevent that the

1

date of the annual meeting is advanced by more than thirty days or delayed bymore than sixty days from such anniversary, notice by the stockholder, to betimely, must be received not earlier than the ninetieth day prior to such annualmeeting of stockholders and not later than the close of business on the later of(a) the sixtieth day prior to such annual meeting or (b) the tenth day followingthe date on which notice of the date of the annual meeting was mailed or publicdisclosure thereof was made, whichever first occurs. Each such notice shall setforth as to each matter the stockholder proposes to bring before the annualmeeting of stockholders: (a) a brief description of the business desired to bebrought before the annual meeting of stockholders and the reasons for conductingsuch business at such meeting, (b) the name and address, as they appear on the

Corporation's books, of the stockholder proposing such business, (c) the class,series, and number of shares of the Corporation that are beneficially owned bythe stockholder, and (d) any material interest of the stockholder or anyAffiliate of the stockholder in such business. The stockholder also shall complywith all applicable requirements of the Exchange Act and the rules andregulations thereunder with respect to the matters set forth in this Section 4.

To be properly brought before a special meeting, business must be (a)specified in the notice of meeting (or any supplement thereto) given by or atthe direction of the Board of Directors or (b) otherwise properly brought beforethe meeting by or at the direction of the Board of Directors or the chairman ofthe meeting. No other business may be brought before a special meeting bystockholders.

No business shall be conducted at any meeting of the stockholders exceptin accordance with the procedures set forth in this Section 4. The chairman ofthe meeting shall, if the facts warrant, determine and declare to the meetingthat business was not properly brought before the meeting and in accordance withthe provisions of this Section 4, and if he or she should so determine, any suchbusiness not properly brought before the meeting shall not be transacted.Nothing herein shall be deemed to affect any rights of stockholders to requestinclusion of proposals in the Corporation's proxy statement pursuant to Rule14a-8 under the Exchange Act or any successor provision.

SECTION 5. NOTICE; WAIVER OF NOTICE. Whenever stockholders are requiredor permitted to take any action at a meeting, a written notice of the meetingshall be given which shall state the place, date and hour of the meeting, and,in the case of a special meeting, the purpose or purposes for which the meetingis called. Unless otherwise required by law, such notice shall be given not lessthan ten (10) nor more than sixty (60) days before the date of the meeting toeach stockholder of record entitled to vote at such meeting. If mailed, suchnotice shall be deemed to be given when deposited in the United States mail,postage prepaid, directed to the stockholder at his address as it appears on therecords of the Corporation. A written waiver of any such notice signed by theperson entitled thereto, whether before or after the time stated therein, shallbe deemed equivalent to notice. Attendance of a person at a meeting shallconstitute a waiver of notice of such meeting, except when the person attendsthe meeting for the express purpose of objecting, at the beginning of themeeting, to the transaction of any business because the meeting is not lawfullycalled or convened.

SECTION 6. QUORUM; ADJOURNMENT. Except as otherwise required by law, orprovided by the Certificate of Incorporation or these Bylaws, the holders of amajority of the capital stock

2

issued and outstanding and entitled to vote thereat, present in person orrepresented by proxy, shall constitute a quorum for the transaction of businessat all meetings of the stockholders. A meeting at which a quorum is initiallypresent may continue to transact business, notwithstanding the withdrawal ofenough votes to leave less than a quorum, if any action taken is approved by atleast a majority of the required quorum to conduct that meeting. If, however,such quorum shall not be present or represented at any meeting of thestockholders, the majority of the stockholders entitled to vote thereat, presentin person or represented by proxy, shall have power to adjourn the meeting fromtime to time, without notice other than announcement at the meeting of the timeand place of the adjourned meeting, until a quorum shall be present orrepresented. At such adjourned meeting at which a quorum shall be present orrepresented, any business may be transacted which might have been transacted atthe meeting as originally noticed. If the adjournment is for more than thirty(30) days, or if after the adjournment a new record date is fixed for theadjourned meeting, a notice of the adjourned meeting shall be given to eachstockholder entitled to vote at the meeting.

SECTION 7. VOTING; PROXIES. At all meetings of stockholders at which aquorum is present for the election of directors a plurality of the votes castshall be sufficient to elect. All other questions brought before a meeting ofstockholders at which a quorum is present shall, unless otherwise provided bylaw, the Certificate of Incorporation or these Bylaws, be decided by the vote ofthe holders of the majority of stock represented and entitled to vote thereat.Unless otherwise provided in the Certificate of Incorporation, each stockholderrepresented at a meeting of stockholders shall be entitled to cast one vote for

each share of the capital stock entitled to vote thereat held by suchstockholder. Each stockholder entitled to vote at a meeting of stockholders orto express consent or dissent to corporate action in writing without a meetingmay authorize another person or persons to act for him by proxy, but no suchproxy shall be voted or acted upon after three years from its date, unless theproxy provides for a longer period. A proxy shall be irrevocable if it statesthat it is irrevocable and if, and only as long as, it is coupled with aninterest sufficient in law to support an irrevocable power. A stockholder mayrevoke any proxy which is not irrevocable by attending the meeting and voting inperson or by filing an instrument in writing revoking the proxy or by deliveringa proxy in accordance with applicable law bearing a later date to the Secretaryof the Corporation. Elections of directors need not be by ballot unless theChairman of the meeting so directs or unless a stockholder demands election byballot at the meeting and before the voting begins.

SECTION 8. STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.Except as otherwise provided in the Certificate of Incorporation, any actionwhich may be taken at any annual or special meeting of stockholders, may betaken without a meeting and without prior notice, if a consent in writing,setting forth the action so taken, is signed by the holders of all of theoutstanding shares entitled to vote thereon. All such consents shall be filedwith the Secretary of the Corporation and shall be maintained in the corporaterecords.

SECTION 9. RECORD DATE. In order that the Corporation may determine thestockholders entitled to notice of or to vote at any meeting of stockholders orany adjournment thereof, or entitled to receive payment of any dividend or otherdistribution or allotment of any rights, or entitled to exercise any rights inrespect of any change, conversion or exchange of stock, or for the purpose ofany other lawful action, the Board of Directors may fix, in advance, a recorddate, which shall not be more than sixty (60) days nor less than ten (10) daysbefore the date of such

3

meeting, nor more than sixty (60) days prior to any other action. Adetermination of stockholders of record entitled to notice of or to vote at ameeting of stockholders shall apply to any adjournment of the meeting; provided,however, that the Board of Directors may fix a new record date for the adjournedmeeting. Stockholders on the record date are entitled to notice and to vote orto receive the dividend, distribution or allotment of rights or to exercise therights, as the case may be, notwithstanding any transfer of any shares on thebooks of the Corporation after the record date, except as otherwise provided byagreement or by applicable law.

SECTION 10. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The officer who hascharge of the stock ledger of the Corporation shall prepare and make, at leastten (10) days before every meeting of stockholders, a complete list of thestockholders entitled to vote at the meeting, arranged in alphabetical order,and showing the address of each stockholder and the number of shares registeredin the name of each stockholder. Such list shall be open to the examination ofany stockholder, for any purpose germane to the meeting, during ordinarybusiness hours, for a period of at least ten (10) days prior to the meeting,either at a place within the city where the meeting is to be held, which placeshall be specified in the notice of the meeting, or, if not so specified, at theplace where the meeting is to be held. The list shall also be produced and keptat the time and place of the meeting during the whole time thereof, and may beinspected by any stockholder of the Corporation who is present.

SECTION 11. STOCK LEDGER. The stock ledger of the Corporation shall bethe only evidence as to who are the stockholders entitled to examine the stockledger, the list required by Section 10 of this Article II or the books of theCorporation, or to vote in person or by proxy at any meeting of stockholders.

SECTION 12. INSPECTORS OF ELECTION. In advance of any meeting ofstockholders, the Board of Directors may appoint one or more persons (who shallnot be candidates for office) as inspectors of election to act at the meeting orany adjournment thereof. If an inspector or inspectors are not so appointed, orif an appointed inspector fails to appear or fails or refuses to act at ameeting, the Chairman of any meeting of stockholders may, and on the request ofany stockholder or his proxy shall, appoint an inspector or inspectors ofelection at the meeting. The duties of such inspector(s) shall include:determining the number of shares outstanding and the voting power of each; theshares represented at the meeting; the existence of a quorum; the authenticity,

validity and effect of proxies; receiving votes, ballots or consents; hearingand determining all challenges and questions in any way arising in connectionwith the right to vote; counting and tabulating all votes or consents;determining the result; and such acts as may be proper to conduct the electionor vote with fairness to all stockholders. In the event of any dispute betweenor among the inspectors, the determination of the majority of the inspectorsshall be binding.

SECTION 13. ORGANIZATION. At each meeting of stockholders the Chairmanof the Board of Directors, if one shall have been elected, (or in his absence orif one shall not have been elected, the Chief Executive Officer) shall act asChairman of the meeting. The Secretary (or in his or her absence or inability toact, the person whom the Chairman of the meeting shall appoint Secretary of themeeting) shall act as Secretary of the meeting and keep the minutes thereof.

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SECTION 14. ORDER OF BUSINESS. The order and manner of transactingbusiness at all meetings of stockholders shall be determined by the Chairman ofthe meeting.

SECTION 15. NOMINATION AND ELECTION OF DIRECTORS. Subject to the rightsof holders of any class or series of stock having a preference over the CommonStock as to dividends or upon liquidation, dissolution or winding up of theCorporation, nominations for the election of directors shall be made by anominating committee of the Board of Directors if then constituted pursuant tothese Bylaws, or if no nominating committee has been constituted, by the Boardof Directors. In addition, any stockholder entitled to vote in the election ofdirectors generally may nominate one or more persons for election as directorsat an annual meeting of stockholders, but only if written notice of suchstockholder's intent to make such nomination or nominations has been received bythe Secretary of the Corporation not less than sixty nor more than ninety daysprior to the first anniversary of the preceding year's annual meeting ofstockholders. In the event that the date of the annual meeting of stockholdersis advanced by more than thirty days or delayed by more than sixty days fromsuch anniversary, notice by the stockholder to be timely must be received by theSecretary of the Corporation not earlier than the ninetieth day prior to suchannual meeting and not later than the close of business on the later of (a) thesixtieth day prior to such annual meeting or (b) the tenth day following the dayon which notice of the date of the annual meeting was mailed or publicdisclosure thereof was made by the Corporation, whichever first occurs. Eachsuch notice by a stockholder shall set forth: (a) the name and address of thestockholder who intends to make the nomination and of the person or persons tobe nominated; (b) a representation that the stockholder is a holder of record ofstock of the Corporation entitled to vote at such meeting and intends to appearin person or by proxy at a meeting to nominate the person or persons specifiedin the notice; (c) a description of all arrangements or understandings betweenthe stockholder or any person that directly or indirectly through one or moreintermediaries controls, or is controlled by, or is under common control with,such stockholder (an "Affiliate" of such stockholder) and each nominee and anyother person or persons (naming such person or persons) relating to thenomination or nominations; (d) the class and number of shares of the Corporationthat are beneficially owned by such stockholder and the person to be nominatedas of the date of such stockholder's notice and by any other stockholders knownby such stockholder to be supporting such nominees as of the date of suchstockholder's notice; (e) such other information regarding each nominee proposedby such stockholder as would be required to be included in a proxy statementfiled pursuant to the proxy rules of the Securities and Exchange Commission; and(f) the written consent of each nominee to serve as a director of theCorporation if so elected. The stockholder also shall comply with all applicablerequirements of the Securities Exchange Act of 1934, as amended (the "ExchangeAct"), and the rules and regulations thereunder, with respect to the matters setforth in this Section 15.

In addition, in the event the Corporation calls a special meeting ofstockholders for the purpose of electing one or more directors, any stockholderentitled to vote in the election of directors generally may nominate one or morepersons for election as directors at a special meeting only if written notice ofsuch stockholder's intent to make such nomination or nominations, setting forththe information and complying with the form described in the immediatelypreceding paragraph, has been received by the Secretary of the Corporation notearlier than the ninetieth day prior to such special meeting and not later thanthe close of business on the later of (i) the sixtieth day prior to such special

meeting or (ii) the tenth day following the

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day on which notice of the date of the special meeting was mailed or publicdisclosure thereof was made by the Corporation, whichever comes first. Thestockholder also shall comply with all applicable requirements of the ExchangeAct and the rules and regulations thereunder with respect to the matters setforth in this Section 15.

No person shall be eligible for election as a director of theCorporation unless nominated in accordance with the procedures set forth in thisSection 15. The chairman of the meeting shall, if the facts warrant, determineand declare to the meeting that a nomination was not made in accordance with theprocedures prescribed by this Section 15, and if he or she should so determine,the defective nomination shall be disregarded.

ARTICLE III DIRECTORS

SECTION 1. POWERS. Except as otherwise required by law or provided bythe Certificate of Incorporation, the business and affairs of the Corporationshall be managed by or under the direction of the Board of Directors.

SECTION 2. NUMBER AND ELECTION OF DIRECTORS. Subject to any limitationsin the Certificate of Incorporation, the authorized number of directors of theCorporation shall be fixed from time to time by the Board of Directors pursuantto a resolution duly adopted by a majority of the entire Board of Directors, butno decrease in the number of directors constituting the Board of Directors shallshorten the term of any incumbent director. Until changed in the foregoingmanner, the number of directors shall be nine (9). Directors shall be elected ateach annual meeting of the stockholders to replace directors whose terms thenexpire, and, subject to the provisions of Section 3 of this Article III, eachdirector elected shall hold office for a term of three (3) years or until his orher successor is duly elected and qualified, or until his or her earlier death,resignation or removal. Any director may resign at any time effective upongiving written notice to the Board of Directors, unless the notice specifies alater time for such resignation to become effective. If the resignation of adirector is effective at a future time, the Board of Directors may elect asuccessor prior to such effective time to take office when such resignationbecomes effective. Directors need not be stockholders.

SECTION 3. CLASSIFIED BOARD OF DIRECTORS. The Board of Directors shallbe divided into three (3) classes, as nearly equal in number as possible,designated Class I, Class II and Class III. The number of directors constitutingeach Class shall be fixed from time to time by a resolution duly adopted by amajority of the entire Board of Directors. Class I directors shall hold officefor a full term expiring at the 2003 annual meeting of stockholders. Class IIdirectors shall hold office for a continuing term expiring at the 2001 annualmeeting of stockholders. Class III directors shall hold office for an initialterm expiring at the 2002 annual meeting of stockholders. At each annual meetingof stockholders held thereafter, directors shall be elected for a full term ofoffice to succeed the directors of the Class whose terms then expire.

SECTION 4. VACANCIES. Subject to the limitations in the Certificate ofIncorporation, vacancies in the Board of Directors resulting from death,resignation, removal or otherwise and newly created directorships resulting fromany increase in the authorized number of directors

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may be filled by a majority of the directors then in office, although less thana quorum, or by a sole remaining director. Each director so selected shall holdoffice for the remainder of the full term of office of the former director whichsuch director replaces and until his successor is duly elected and qualified, oruntil his earlier death, resignation or removal. No decrease in the authorizednumber of directors constituting the Board of Directors shall shorten the termof any incumbent directors.

SECTION 5. TIME AND PLACE OF MEETINGS. The Board of Directors shall holdits meetings at such place, either within or without the State of Delaware, andat such time as may be determined from time to time by the Board of Directors.

SECTION 6. ANNUAL MEETING. The Board of Directors shall meet for thepurpose of organization, the election of officers and the transaction of otherbusiness, as soon as practicable after each annual meeting of stockholders, onthe same day and at the same place where such annual meeting shall be held.Notice of such meeting need not be given. In the event such annual meeting isnot so held, the annual meeting of the Board of Directors may be held at suchplace, either within or without the State of Delaware, on such date and at suchtime as shall be specified in a notice thereof given as hereinafter provided inSection 8 of this Article III or in a waiver of notice thereof.

SECTION 7. REGULAR MEETINGS. Regular meetings of the Board of Directorsmay be held at such places within or without the State of Delaware at such dateand time as the Board of Directors may from time to time determine and, if sodetermined by the Board of Directors, notices thereof need not be given.

SECTION 8. SPECIAL MEETINGS. Special meetings of the Board of Directorsmay be called by the Chairman of the Board, the Chief Executive Officer, or byany two (2) directors. Notice of the date, time and place of special meetingsshall be delivered personally or by telephone to each director or sent byfirst-class mail or telegram, charges prepaid, addressed to each director at thedirector's address as it is shown on the records of the Corporation. In case thenotice is mailed, it shall be deposited in the United States mail at least four(4) days before the time of the holding of the meeting. In case the notice isdelivered personally or by telephone or telegram, it shall be deliveredpersonally or by telephone or to the telegraph company at least forty-eight (48)hours before the time of the holding of the meeting. The notice need not specifythe purpose of the meeting. A written waiver of any such notice signed by theperson entitled thereto, whether before or after the time stated therein, shallbe deemed equivalent to notice. Attendance of a person at a meeting shallconstitute a waiver of notice of such meeting, except when the person attendsthe meeting for the express purpose of objecting, at the beginning of themeeting, to the transaction of any business because the meeting is not lawfullycalled or convened.

SECTION 9. QUORUM; VOTE REQUIRED FOR ACTION; ADJOURNMENT. Except asotherwise required by law, or provided in the Certificate of Incorporation orthese Bylaws, a majority of the directors shall constitute a quorum for thetransaction of business at all meetings of the Board of Directors and theaffirmative vote of not less than a majority of the directors present at anymeeting at which there is a quorum shall be the act of the Board of Directors.If a quorum shall not be present at any meeting of the Board of Directors, thedirectors present thereat may adjourn the meeting, from time to time, withoutnotice other than announcement at the meeting, until a

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quorum shall be present. A meeting at which a quorum is initially present maycontinue to transact business, notwithstanding the withdrawal of directors, ifany action taken is approved by at least a majority of the required quorum toconduct that meeting. When a meeting is adjourned to another time or place(whether or not a quorum is present), notice need not be given of the adjournedmeeting if the time and place thereof are announced at the meeting at which theadjournment is taken. At the adjourned meeting, the Board of Directors maytransact any business which might have been transacted at the original meeting.

SECTION 10. ACTION BY ELECTRONIC MAIL AND/OR WRITTEN CONSENT. Unlessotherwise restricted by the certificate of incorporation or bylaws, any actionrequired or permitted to be taken at any meeting of the Board of Directors or ofany committee thereof may be taken without a meeting if all members of the boardor committee, as the case may be, consent thereto in writing or by electronictransmission, and the writing or writings or electronic transmission ortransmissions are filed with the minutes of proceedings of the board, orcommittee. Such filing shall be in paper form if the minutes are maintained inpaper form and shall be in electronic form if the minutes are maintained inelectronic form.

SECTION 11. TELEPHONE MEETINGS. Unless otherwise restricted by theCertificate of Incorporation, members of the Board of Directors of theCorporation, or any committee designated by the Board of Directors, mayparticipate in a meeting of the Board of Directors or such committee, as thecase may be, by conference telephone or similar communications equipment bymeans of which all persons participating in the meeting can hear each other.Participation in a meeting pursuant to this Section 11 shall constitute presence

in person at such meeting.

SECTION 12. COMMITTEES. The Board of Directors may, by resolution passedby a majority of the entire Board, designate one or more committees, eachcommittee to consist of one or more of the directors of the Corporation. TheBoard of Directors may designate one or more directors as alternate members ofany such committee, who may replace any absent or disqualified member at anymeeting of the committee. In the event of absence or disqualification of amember of a committee, and in the absence of a designation by the Board ofDirectors of an alternate member to replace the absent or disqualified member,the committee member or members present at any meeting and not disqualified fromvoting, whether or not he or they constitute a quorum, may unanimously appointanother member of the Board of Directors to act at the meeting in the place ofthe absent or disqualified member. Any committee, to the extent allowed by lawand as provided in the resolution of the Board of Directors, shall have and mayexercise all the powers and authority of the Board of Directors in themanagement of the business and affairs of the Corporation, and may authorize theseal of the Corporation to be affixed to all papers which may require it, but nosuch committee shall have the power or authority in reference to the followingmatter: (i) approving or adopting, or recommending to the stockholders, anyaction or matter expressly required by the Delaware General Corporation Law tobe submitted to stockholders for approval or (ii) adopting, amending orrepealing any Bylaw of the Corporation. Each committee shall keep regularminutes of its meetings and report to the Board of Directors when required."

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SECTION 13. COMPENSATION. The directors may be paid such compensationfor their services as the Board of Directors shall from time to time determine.

SECTION 14. INTERESTED DIRECTORS. No contract or transaction between theCorporation and one or more of its directors or officers, or between theCorporation and any other corporation, partnership, association, or otherorganization in which one or more of its directors or officers are directors orofficers, or have a financial interest, shall be void or voidable solely forthis reason, or solely because the director or officer is present at orparticipates in the meeting of the Board of Directors or the committee thereofwhich authorizes the contract or transaction, or solely because his or theirvotes are counted for such purpose if: (i) the material facts as to his or theirrelationship or interest and as to the contract or transaction are disclosed orare known to the Board of Directors or the committee, and the Board of Directorsor committee in good faith authorizes the contract or transaction by theaffirmative votes of a majority of the disinterested directors, even though thedisinterested directors be less than a quorum; or (ii) the material facts as tohis or their relationship or interest and as to the contract or transaction aredisclosed or are known to the stockholders entitled to vote thereon, and thecontract or transaction is specifically approved in good faith by vote of thestockholders; or (iii) the contract or transaction is fair as to the Corporationas of the time it is authorized, approved or ratified, by the Board ofDirectors, a committee thereof, or the stockholders. Interested directors may becounted in determining the presence of a quorum at a meeting of the Board ofDirectors or of a committee which authorizes the contract or transaction.

ARTICLE IV OFFICERS

SECTION 1. OFFICERS. The officers of the Corporation shall be aPresident, a Secretary and a Chief Financial Officer. The Corporation may alsohave, at the discretion of the Board of Directors, a Chairman of the Board, aVice Chairman of the Board, a Chief Executive Officer, one or more VicePresidents, one or more Assistant Financial Officers and Treasurers, one or moreAssistant Secretaries and such other officers as may be appointed in accordancewith the provisions of Section 3 of this Article IV.

SECTION 2. APPOINTMENT OF OFFICERS. The officers of the Corporation,except such officers as may be appointed in accordance with the provisions ofSection 3 or Section 5 of this Article IV, shall be appointed by the Board ofDirectors, and each shall serve at the pleasure of the Board, subject to therights, if any, of an officer under any contract of employment.

SECTION 3. SUBORDINATE OFFICERS. The Board of Directors may appoint, andmay empower the Chief Executive Officer or President to appoint, such other

officers as the business of the Corporation may require, each of whom shall holdoffice for such period, have such authority and perform such duties as areprovided in the Bylaws or as the Board of Directors may from time to timedetermine.

SECTION 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights ofan officer under any contract, any officer may be removed at any time, with orwithout cause, by the Board of Directors or, except in case of an officer chosenby the Board of Directors, by any officer

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upon whom such power of removal may be conferred by the Board of Directors. Anyofficer may resign at any time by giving written notice to the Corporation. Anyresignation shall take effect at the date of the receipt of that notice or atany later time specified in that notice; and, unless otherwise specified in thatnotice, the acceptance of the resignation shall not be necessary to make iteffective. Any resignation shall be without prejudice to the rights of theCorporation under any contract to which the officer is a party.

SECTION 5. VACANCIES IN OFFICES. A vacancy in any office because ofdeath, resignation, removal, disqualification or any other cause shall be filledin the manner prescribed in these Bylaws for regular appointments to thatoffice.

SECTION 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if such anofficer is elected, shall, if present, preside at meetings of the stockholdersand of the Board of Directors. He shall, in addition, perform such otherfunctions (if any) as may be prescribed by the Bylaws or the Board of Directors.

SECTION 7. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of theCorporation shall, subject to the control of the Board of Directors, havegeneral supervision, direction and control of the business and the officers ofthe Corporation. He shall exercise the duties usually vested in the chiefexecutive officer of a corporation and perform such other powers and duties asmay be assigned to him from time to time by the Board of Directors or prescribedby the Bylaws. In the absence of the Chairman of the Board and any Vice Chairmanof the Board, the Chief Executive Officer shall preside at all meetings of thestockholders and of the Board of Directors.

SECTION 8. PRESIDENT. The President of the Corporation shall, subject tothe control of the Board of Directors and the Chief Executive Officer of theCorporation, if there be such an officer, have general powers and duties ofmanagement usually vested in the office of president of a corporation and shallhave such other powers and duties as may be prescribed by the Board of Directorsor the Bylaws or the Chief Executive Officer of the Corporation. In the absenceof the Chairman of the Board, Vice Chairman of the Board and Chief ExecutiveOfficer, the President shall preside at all meetings of the Board of Directorsand stockholders.

SECTION 9. VICE PRESIDENT. In the absence or disability of thePresident, the Vice Presidents, if any, in order of their rank as fixed by theBoard of Directors or, if not ranked, a Vice President designated by the Boardof Directors, shall perform all the duties of the President, and when so actingshall have all the powers of, and subject to all the restrictions upon, thePresident. The Vice Presidents shall have such other powers and perform suchother duties as from time to time may be prescribed for them respectively by theBoard of Directors or the Bylaws, and the President, or the Chairman of theBoard.

SECTION 10. SECRETARY. The Secretary shall keep or cause to be kept, atthe principal executive office or such other place as the Board of Directors maydirect, a book of minutes of all meetings and actions of Directors, committeesof Directors, and stockholders, with the time and place of holding, whetherregular or special, and, if special, how authorized, the notice given, the namesof those present at Directors' meetings or committee meetings, the number ofshares present or represented at stockholders' meetings, and a summary of theproceedings.

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The Secretary shall keep, or cause to be kept, at the principal

executive office or at the office of the Corporation's transfer agent orregistrar, as determined by resolution of the Board of Directors, a shareregister, or a duplicate share register, showing the names of all stockholdersand their addresses, the number and classes of shares held by each, the numberand date of certificates issued for the same, and the number and date ofcancellation of every certificate surrendered for cancellation.

The Secretary shall give, or cause to be given, notice of all meetingsof the stockholders and of the Board of Directors required by the Bylaws or bylaw to be given, and he shall keep or cause to be kept the seal of theCorporation if one be adopted, in safe custody, and shall have such powers andperform such other duties as may be prescribed by the Board of Directors or bythe Bylaws.

SECTION 11. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shallkeep and maintain, or cause to be kept and maintained, adequate and correctbooks and records of accounts of the properties and business transactions of theCorporation. The Chief Financial Officer shall deposit all moneys and othervaluables in the name and to the credit of the Corporation with suchdepositories as may be designated by the Board of Directors. He shall make suchdisbursements of the funds of the Corporation as are authorized and shall renderfrom time to time an account of all of his transactions as Chief FinancialOfficer and of the financial condition of the Corporation. The Chief FinancialOfficer shall also have such other powers and perform such other duties as maybe prescribed by the Board of Directors or the Bylaws.

ARTICLE V STOCK

SECTION 1. FORM OF CERTIFICATES. Every holder of stock in theCorporation shall be entitled to have a certificate signed in the name of theCorporation by the Chairman or Vice Chairman of the Board of Directors, or thePresident or a Vice President and by the Treasurer or an Assistant Treasurer, orby the Secretary or an Assistant Secretary of the Corporation, certifying thenumber of shares owned by such stockholder in the Corporation.

SECTION 2. SIGNATURES. Any or all of the signatures on the certificatemay be a facsimile. In case any officer, transfer agent or registrar who hassigned or whose facsimile signature has been placed upon a certificate shallhave ceased to be such officer, transfer agent or registrar before suchcertificate is issued, it may be issued by the Corporation with the same effectas if he were such officer, transfer agent or registrar at the date of issue.

SECTION 3. LOST CERTIFICATES. The Corporation may issue a newcertificate to be issued in place of any certificate theretofore issued by theCorporation, alleged to have been lost, stolen or destroyed, upon the making ofan affidavit of that fact by the person claiming the certificate to be lost,stolen or destroyed. The Board of Directors may in its discretion require a bondin such form and amount and with such surety as it may determine, before issuinga new certificate.

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SECTION 4. TRANSFERS. Stock of the Corporation shall be transferable inthe manner prescribed by law and in these Bylaws or in any agreement with thestockholder making the transfer. Transfers of stock shall be made on the booksof the Corporation only by the person named in the certificate or by hisattorney lawfully constituted in writing and upon the surrender of thecertificate therefor, which shall be canceled before a new certificate shall beissued.

SECTION 5. RECORD HOLDERS. The Corporation shall be entitled torecognize the exclusive right of a person registered on its books as the recordholder of shares to receive dividends, and to vote as such record holder, and tohold liable for calls and assessments a person registered on its books as therecord holder of shares, and shall not be bound to recognize any equitable orother claim to or interest in such share or shares on the part of any otherperson, whether or not it shall have express or other notice thereof, except asotherwise required by law.

SECTION 6. TRANSFER AGENT. The Board of Directors may at its discretionappoint one or more transfer agents, registrars and agents for making payment

upon any class of stock, bond, debenture or other security of the Corporation.Such agents shall be located either within or outside of Delaware. They shall beentitled to such compensation as may be agreed.

ARTICLE VI INDEMNIFICATION

SECTION 1. RIGHT TO INDEMNIFICATION. Each person who was or is made aparty or is threatened to be made a party to or is otherwise involved in anyaction, suit or proceeding, whether civil, criminal, administrative orinvestigative (hereinafter a "proceeding"), by reason of the fact that he or sheis or was a director or officer of the Corporation or is or was serving at therequest of the Corporation as a director or officer of another corporation or ofa partnership, joint venture, trust or other enterprise, including service withrespect to employee benefit plans (hereinafter an "indemnitee"), whether thebasis of such proceeding is alleged action in an official capacity as a directoror officer or in any other capacity while serving as a director or officer,shall be indemnified and held harmless by the Corporation to the fullest extentauthorized by the Delaware General Corporation Law, as the same exists or mayhereafter be amended (but, in the case of any such amendment, only to the extentthat such amendment permits the Corporation to provide broader indemnificationrights than such law permitted the Corporation to provide prior to suchamendment), against all expense, liability and loss (including attorneys' fees,judgments, fines, ERISA excise taxes or penalties and amounts paid insettlement) reasonably incurred or suffered by such indemnitee in connectiontherewith and such indemnification shall continue as to an indemnitee who hasceased to be a director or officer and shall inure to the benefit of theindemnitee's heirs, executors and administrators; provided, however, that,except as provided in Section 2 of this Article VI with respect to proceedingsto enforce rights to indemnification, the Corporation shall indemnify any suchindemnitee in connection with a proceeding (or part thereof) initiated by suchindemnitee only if such proceeding (or part thereof) was authorized by the Boardof Directors of the Corporation. The right to indemnification conferred in thisSection shall be a contract right and shall include the right to be paid by theCorporation the expenses incurred in defending any such proceeding in advance ofits final disposition (hereinafter an "advancement of expenses"); provided,however,

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that, if the Delaware General Corporation Law requires, an advancement ofexpenses incurred by an indemnitee in his capacity as a director or officer (andnot in any other capacity in which service was or is rendered by suchindemnitee, including without limitation, service to an employee benefit plan)shall be made only upon delivery to the Corporation of an undertaking, by or onbehalf of such indemnitee, to repay all amounts so advanced if it shallultimately be determined by final judicial decision from which there is nofurther right to appeal that such indemnitee is not entitled to be indemnifiedfor such expenses under this Article VI or otherwise (hereinafter an"undertaking").

SECTION 2. RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under Section 1of this Article VI is not paid in full by the Corporation within forty-five (45)days after a written claim has been received by the Corporation, the indemniteemay at any time thereafter bring suit against the Corporation to recover theunpaid amount of the claim. If successful in whole or part in any such suit orin a suit brought by the Corporation to recover an advancement of expensespursuant to the terms of an undertaking, the indemnitee shall be entitled to bepaid also the expense of prosecuting or defending such suit. In (i) any suitbrought by the indemnitee to enforce a right to indemnification hereunder (butnot in a suit brought by the indemnitee to enforce a right to an advancement ofexpenses) it shall be a defense that, and (ii) any suit by the Corporation torecover an advancement of expenses pursuant to the terms of an undertaking theCorporation shall be entitled to recover such expenses upon a final adjudicationthat, the indemnitee has not met the applicable standard of conduct set forth inthe Delaware General Corporation Law. Neither the failure of the Corporation(including its Board of Directors, independent legal counsel, or itsstockholders) to have made a determination prior to the commencement of suchsuit that indemnification of the indemnitee is proper in the circumstancesbecause the indemnitee has met the applicable standard of conduct set forth inthe Delaware General Corporation Law, nor an actual determination by theCorporation (including its Board of Directors, independent legal counsel, or itsstockholders) that the indemnitee has not met such applicable standard of

conduct, shall create a presumption that the indemnitee has not met theapplicable standard of conduct or, in the case of such a suit brought byindemnitee, be a defense to such suit. In any suit brought by the indemnitee toenforce a right hereunder, or by the Corporation to recover an advancement ofexpenses pursuant to the terms of an undertaking, the burden of proving that theindemnitee is not entitled to be indemnified or to such advancement of expensesunder this Article VI or otherwise shall be on the Corporation.

SECTION 3. NON-EXCLUSIVITY OF RIGHTS. The rights of indemnification andto the advancement of expenses conferred in this Article VI shall not beexclusive of any other right which any person may have or hereafter acquireunder any statute, provision of the Certificate of Incorporation, Bylaws,agreement, vote of stockholders or disinterested directors or otherwise.

SECTION 4. INSURANCE. The Corporation may maintain insurance, at itsexpense, to protect itself and any director, officer, employee or agent of theCorporation or another corporation, partnership, joint venture, trust or otherenterprise against any expense, liability or loss, whether or not theCorporation would have the power to indemnify such person against such expense,liability or loss under the Delaware General Corporation Law.

SECTION 5. INDEMNIFICATION OF EMPLOYEES OR AGENTS OF THE CORPORATION.The Corporation may, to the extent authorized from time to time by the Board ofDirectors, grant

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rights to indemnification and to the advancement of expenses, to any employee oragent of the Corporation to the fullest extent of the provisions of this ArticleVI with respect to the indemnification and advancement of expenses of directorsor officers of the Corporation.

SECTION 6. INDEMNIFICATION CONTRACTS. The Board of Directors isauthorized to enter into a contract with any director, officer, employee oragent of the Corporation, or any person serving at the request of theCorporation as a director, officer, employee or agent of another corporation,partnership, joint venture, trust or other enterprise, including employeebenefit plans, providing for indemnification rights equivalent to or, if theBoard of Directors so determines, greater than, those provided for in thisArticle VI.

SECTION 7. EFFECT OF TERMINATION OF ACTION. The termination of anyaction, suit or proceeding by judgment, order, settlement, or conviction or upona plea of nolo contendere or its equivalent shall not of itself create apresumption that the person seeking indemnification did not act in good faithand in the best interests of the Corporation and, with respect to any criminalaction or proceeding, had a reasonable cause to believe that his conduct wasunlawful. Entry of a judgment by a consent as part of a settlement shall not bedeemed a final adjudication of liability for negligence or misconduct in theperformance of duty, nor of any other issue or matter.

SECTION 8. EFFECT OF AMENDMENT. Any amendment, repeal or modification ofany provision of this Article VI by the stockholders or the directors of theCorporation shall not adversely affect any right or protection of a director orofficer of the Corporation existing at the time of such amendment, repeal ormodification.

ARTICLE VII GENERAL PROVISIONS

SECTION 1. DIVIDENDS. Subject to limitations contained in the GeneralCorporation Law of the State of Delaware and the Certificate of Incorporation,the Board of Directors may declare and pay dividends upon the shares of capitalstock of the Corporation, which dividends may be paid either in cash, securitiesof the Corporation or other property.

SECTION 2. DISBURSEMENTS. All checks or demands for money and notes ofthe Corporation shall be signed by such officer or officers or such other personor persons as the Board of Directors may from time to time designate.

SECTION 3. FISCAL YEAR. The fiscal year of the Corporation shall befixed by resolution of the Board of Directors.

SECTION 4. CORPORATE SEAL. The Corporation shall have a corporate sealin such form as shall be prescribed by the Board of Directors.

SECTION 5. VOTING OF STOCK OWNED BY THE CORPORATION. The Chairman of theBoard, the Chief Executive Officer, the President and any other officer of theCorporation authorized by the Board of Directors shall have power, on behalf ofthe Corporation, to attend, vote and grant

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proxies to be used at any meeting of stockholders of any corporation (exceptthis Corporation) in which the Corporation may hold stock.

SECTION 6. CONSTRUCTION AND DEFINITIONS. Unless the context requiresotherwise, the general provisions, rules of construction and definitions in theGeneral Corporation Law of the State of Delaware shall govern the constructionof these Bylaws.

SECTION 7. AMENDMENTS. Subject to the General Corporation Law of theState of Delaware, the Certificate of Incorporation and these Bylaws, the Boardof Directors may by the affirmative vote of a majority of the entire Board ofDirectors amend or repeal these Bylaws, or adopt other Bylaws as in theirjudgment may be advisable for the regulation of the conduct of the affairs ofthe Corporation. Unless otherwise restricted by the Certificate ofIncorporation, these Bylaws may be altered, amended or repealed, and new Bylawsmay be adopted, at any annual meeting of the stockholders (or at any specialmeeting thereof duly called for that purpose) by a majority of the combinedvoting power of the then outstanding shares of capital stock of all classes andseries of the Corporation entitled to vote generally in the election ofdirectors, voting as a single class, provided that, in the notice of any suchspecial meeting, notice of such purpose shall be given.

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EXHIBIT 10.2

MUTUAL RESCISSION AGREEMENT

NeoTherapeutics, Inc., 157 Technology Drive, Irvine, California,92618, hereinafter referred to as the "Company," and Stonestreet LimitedPartnership, c/o Canaccord Capital Corporation, 320 Bay Street, Suite 1300,Toronto, Ontario M5H 4A6, Canada, hereinafter referred to as "Investor"(collectively, the "Parties") agree as follows:

CONSENT TO PARTIAL RESCISSION

1. The Parties hereby consent and agree to rescind the purchaseof 400,000 shares (the "Shares") of the Company's common stock, par value $.001per share (the "Common Stock"), pursuant to that certain Securities PurchaseAgreement between them, dated as of June 7, 2002 (the "Securities PurchaseAgreement"), which Securities Purchase Agreement provided for the purchase of(i) 1,935,483 shares of Common Stock and (ii) a warrant to purchase up to193,548 shares of Common Stock (the "Warrant") at an exercise price of $0.275per share, for a total purchase price of $450,000. A copy of the SecuritiesPurchase Agreement is attached hereto and incorporated herein by reference.

RETURN OF CONSIDERATION

2. On the date hereof, Investor shall return to the Shares to theCompany by electronic transfer to the account set forth below through theDeposit Withdrawal Agent Commission System:

DTC No.: ------------------------------------ Account No.: n/a -------------------------------- Reference: U.S. Stock Transfer Corporation --------------------------------

3. On the date hereof, the Company shall return Investor'spayment of $0.2325 per Share for a total of $93,000 by wire transfer to pursuantto the following wire transfer instructions:

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-------------------------

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4. As additional consideration for the payment by the Company setforth in Section 3 above, effective upon the execution hereof, the Warrant ishereby amended so that the Warrant may not be exercised before December 8, 2002.Promptly after the date hereof, the Investor shall return the Warrant to theCompany and the Company shall issue to the Investor a new warrant reflectingthis amendment.

MISCELLANEOUS

5. Except as set forth above, the rights and obligations of theParties under the Securities Purchase Agreement and the Warrant shall remain infull force and effect. Delivery of an executed copy of a signature page to thisMutual Rescission Agreement by facsimile transmission shall be effective asdelivery of a manually executed copy of this Mutual Rescission Agreement andshall be effective and enforceable as the original. This Mutual RescissionAgreement may be executed in one or more counterparts, each of which shall bedeemed an original, but all of which together shall constitute one and the sameinstrument. This Mutual Rescission Agreement shall be governed and construed inaccordance with the internal laws of the State of California without givingeffect to the conflicts of law principles thereunder.

Executed on July 25, 2002.


By: /s/Samuel Gulko -------------------------------------- Name: Samuel Gulko ------------------------------------ Title: Senior V.P. Finance and CFO -----------------------------------

STONESTREET LIMITED PARTNERSHIP

By: /s/M. Finkelstein -------------------------------------- Name: Michael Finkelstein ----------------------------------- Title: President -----------------------------------

EXHIBIT 10.3

WARRANT REPURCHASE AGREEMENT

NeoTherapeutics, Inc., 157 Technology Drive, Irvine, California,92618 (the "Company"), and BNC Bach International, Ltd., c/o Rhino Advisors, 130West 29th Street, 5th Floor, New York, NY 10001 (the "Investor"), (collectively,the "Parties") agree as follows:

1. The Investor hereby agrees to return to the Company forcancellation Warrant number NEOT063, dated June 7, 2002 (the "Warrant"), for thepurchase of up to 400,000 shares of the Company's common stock, par value $.001per share, at an exercise price of $0.275 per share, issued to the Investorpursuant to that certain Securities Purchase Agreement between the Parties,dated as of June 7, 2002 (the "Securities Purchase Agreement"), in return for acash payment from the Company to the Investor of $50,000.

2. On the date hereof, Investor shall return the Warrant to theCompany at the address set forth above (attention Samuel Gulko) by overnightcourier service for delivery on the next business day.

3. Upon receipt of the Warrant from the Investor, asconsideration for the cancellation of the Warrant, the Company shall pay theInvestor $50,000 by wire transfer pursuant to the following wire transferinstructions:

-----------------------------

-----------------------------

-----------------------------

-----------------------------

4. Delivery of an executed copy of a signature page to thisWarrant Repurchase Agreement by facsimile transmission shall be effective asdelivery of a manually executed copy of this Warrant Repurchase Agreement andshall be effective and enforceable as the original. This Warrant RepurchaseAgreement may be executed in one or more counterparts, each of which shall bedeemed an original, but all of which together shall constitute one and the sameinstrument. This Warrant Repurchase Agreement shall be governed and construed inaccordance with the internal laws of the State of California without givingeffect to the conflicts of law principles thereunder.

Executed on July 31, 2002.


By: /s/Samuel Gulko ------------------------------------- Name: Samuel Gulko ----------------------------------- Title: Senior V.P. Finance, CFO ----------------------------------

BNC BACH INTERNATIONAL, LTD.

By: /s/ H. U. Bachofen ------------------------------------ Name: H. U. Bachofen ----------------------------------- Title: Director ----------------------------------

EXHIBIT 10.6

ADDITIONAL COLLATERAL RIDER

This Additional Collateral Rider (this "Rider") is part of that certain MasterLease Agreement dated as of September 22, 2000, as amended by Amendment No. 1dated as of September 28, 2000, and all Equipment Schedules and SummarySchedules thereto (collectively, the "Contract") by and between Comdisco, Inc.and NEOTHERAPEUTICS, INC. (the "Lessee") which Contract was assigned to GENERALELECTRIC CAPITAL CORPORATION (the "Lessor") on or about May 31, 2002. Unlessotherwise defined herein, all capitalized terms used in this Rider have themeanings set forth in the Contract.

Under the Contract, the Lessee must maintain cash or equivalents of not lessthan $5,000,000.00. The Lessee is in default of this covenant as of June 30,2002. Therefore, after negotiations between the Lessor and Lessee, it is agreedthat Lessor shall waive its right to any remedies or actions that Lessor is ormay be entitled to under the Contract due to this default, and no Event ofDefault shall be deemed to have occurred as a result of such default, inconsideration of Lessee's granting of a lien on corporate assets as provided forherein.

1. As security for the full and faithful performance by Lessee of all of theobligations of Lessee to Lessor now or hereafter in existence, Lessee doeshereby grant to Lessor a security interest in all of Lessee's right, title andinterest in and to the following (all hereinafter collectively called, the"Additional Collateral"):

- All Equipment (as defined in the Uniform Commercial Code) now or hereafter owned and wherever located, including but not limited to all laboratory, scientific, computer, test and production equipment, all molds and tooling, all office furniture and office equipment and all proceeds thereof, including insurance proceeds.

- All Accounts (as defined in the Uniform Commercial Code) now or hereafter owned and wherever located, including but not limited to all accounts receivable, and all proceeds thereof and therefrom.

Additional Collateral does not include any Intellectual Property ownedor licensed by Lessee, including but not limited to all patents, trademarks,service marks, tradenames, copyrights, trade secrets, licenses, information andproprietary rights and processes.

2. In the event of a default by Lessee under the Contract or under any otherobligation to Lessor, Lessor shall have all of the rights and remedies of aLessor under the Uniform Commercial Code with respect to the AdditionalCollateral in addition to any other rights which it may have under the Contract.Lessee shall have the same obligations with respect to the portion of theAdditional Collateral constituting Equipment as it has under the Contract withrespect to the Equipment, as defined in the Contract, financed under theContract, including but not limited to the restrictions on moving, transferring,encumbering or giving up possession of, and the obligation to insure, suchAdditional Collateral constituting Equipment.

3. Lessor agrees to release its security interest in the Additional Collateralupon Lessee maintaining an Unrestricted Cash position equal to the greater of 1)$5,000,000.00 or 2) the sum of the last three months net income (loss) plusnon-cash charges multiplied by three, for three consecutive quarters, or uponfull payment of Lessee's obligations under the Contract. Unrestricted Cash shallbe defined for purposes of this Rider as cash on hand, including marketablesecurities with maturities of less than fourteen (14) months, less cash pledgedto other parties. It shall be an additional Event of Default under the Contractif Lessee fails to maintain the above minimum Unrestricted Cash position.

4. Lessor is not withholding the Lessee's right to sell Equipment that is partof the Additional Collateral.

5. The Lessee may make early payment, partial or in full, of its obligationunder the Contract. All payments will be calculated and paid pursuant to theterms and conditions of the Contract.

6. This Rider shall run to the benefit of Lessor's successors and assigns.Except as expressly modified hereby, all of the terms and provisions of theContract shall remain in full force and effect.

7. This Rider may be executed in one or more counterparts, each of which shallbe deemed an original, but all of which shall constitute the same instrument.

IN WITNESS WHEREOF, the parties have executed this Rider this 13th day ofSeptember, 2002.

GENERAL ELECTRIC CAPITALCORPORATION NEOTHERAPEUTICS, INC.

BY: /s/Diane Hernandez BY: /s/Rajesh C. Shrotriya ----------------------------------- -----------------------------------

TITLE: Vice President TITLE: Chairman and Chief Executive ------------------------------- Officer -------------------------------

EXHIBIT 10.7

Settlement Agreement

between

NeoTherapeutics, Inc. 157 Technology Drive Irvine; California 92618

- in the following called "NEOT"

and

Merck Eprova AG

Im Laternenacker 5 8200 Schaffhausen Switzerland

- in the following called "EPRO" -

Whereas NEOT develops new drugs for e.g. neurological diseases;

Whereas EPRO changed recently its company name from Eprova AG into Merck EprovaAG out of corporate identity reasons and manufactures intermediates of drugsubstances or the drug substances itself (e.g. Neotrofin and AIT-034);

Whereas NEOT has asked EPRO to manufacture certain substances (SUBSTANCES) aslisted in attachment 1;

Whereas EPRO has fulfilled its obligations, NEOT has indicated that it haspresently no use for these SUBSTANCES and asks for a settlement of the payablesin a reasonable manner;

Whereas EPRO is willing to help NEOT to restore financial stability and to findother possible uses for the SUBSTANCES;

Therefore the parties agree as follows:

1) EPRO will remain the owner of all SUBSTANCES as mentioned in the fourinvoices as listed in attachment 2.

2) NEOT grants to EPRO the right of first refusal for the production of anyfurther needs of the SUBSTANCES as well as the related drug substances Neotrofinand AIT-034 for a duration of five (5) years after execution of this agreement.EPRO agrees to negotiate the terms of the production of the SUBSTANCES in goodfaith.

3) EPRO will examine carefully all recommendations of NEOT to sell theSUBSTANCES to third parties. EPRO will also try to find third parties interestedin the SUBSTANCES.

4) NEOT will pay CHF 485'470 within ten (10) days after the execution of thisagreement to the account of EPRO as stated in attachment 3 for full and finalpayment of the invoices listed in attachment 2. The above-mentioned sum has beencombined from the following amounts:

INVOICE COMPOUND AMOUNT 1) D22094 Aminopropylpyrrolidinone CHF 102'700--------------------------------------------------------------------------------2) D22095 ACA CHF 175'500--------------------------------------------------------------------------------3) D22049 ACA CHF 66'625

--------------------------------------------------------------------------------4) D22162 Ala-benzonate CHF 140'645--------------------------------------------------------------------------------

5) EPRO will not charge costs for the storage and possible disposal of theSUBSTANCES, V.A.T. as well as for not-realized interests.

6) a) After the last signature under this agreement, the patent application PCTWO 02/00659 and all corresponding patent applications or patent rights based onUS Appl No. 09/602,048 (PATENTS), owned by NEOT will become the property of EPROaccording to the ten (10) provisions of attachment 4.

b) For the case, NEOT would be interested to get back the rights on thesePATENTS, EPRO herewith grants to NEOT an exclusive option to buy these PATENTSwithin twelve (12) months after execution of this agreement for a purchase priceof CHF 527'676 plus all costs which has been incurred to maintain the PATENTSduring this time. During the term of the exclusive option, EPRO agrees to notenter into any agreement related to the PATENTS in regard to Neotrofin andAIT-034 without the prior consent of NEOT. EPRO also agrees it will usecommercially reasonable efforts to maintain the PATENTS.

c) In case, NEOT repurchases the PATENTS, EPRO will be granted a non-exclusive,royalty-free, world-wide license to these PATENTS excluding the manufacturing ofNeotrofin and AIT-034. Any assignment of the PATENTS by NEOT to a third partywill be subject to the non-exclusive license to EPRO.

d) In case, NEOT desires to contract for the production of Neotrofin or AIT-034after the time-frame of item 2 above and does not exercise its option torepurchase the PATENTS under item 2, EPRO will grant NEOT a non-exclusive,world-wide license with a license fee that will not exceed CHF 527'676 over thelife of the license. Moreover, in addition to the aforementioned license fee,NEOT agrees to EPRO all

costs which will have been incurred by EPRO to maintain the PATENTS to date andduring the time of the licensing agreement.

7) In case NEOT is in default with the agreed payment, EPRO may claim interestsof 20% above LIBOR per year for the unpaid sum. In case NEOT indicates not topay any amount of the agreed sums, EPRO may claim to be paid according toattachment 2 for the unpaid rest as well as an interest rate of 5% above LIBORper year since the date of the invoices and all costs and damages caused by thenon-payment and the storage and/or the disposal of the SUBSTANCES.

8) This agreement states the entire understanding of the parties. No change,modification, alteration, or addition to any provision hereof shall be bindingunless in writing and signed by authorized representatives of both parties.

9) This agreement shall be governed by, and construed and enforced in accordancewith Swiss law.

10) Except for the right of either party to apply to a court of competentjurisdiction for a temporary restraining order, a preliminary injunction, orother equitable relief to preserve the status quo or prevent irreparable harm,any and all claims, disputes or controversies arising under, out of, of inconnection with this agreement, which the parties shall be unable to resolvewithin sixty (60) days shall be mediated in good faith. The party raising suchdispute shall promptly advise the other party of such claim, dispute orcontroversy in a writing which describes in reasonable detail the nature of suchdispute. By not later than five (5) business days after the recipient hasreceived such notice of dispute, each party shall have selected for itself arepresentative who shall have the authority to bind such party, and shalladditionally have advised the other party in writing of the name and title ofsuch representative. By not later than ten (10) business days after the date ofsuch notice of dispute, the party against whom the dispute shall be raised shallselect a mediation specialist in the area of the defendant and suchrepresentatives shall schedule a date with such mediation hearing. The partiesshall enter into good faith mediation and shall share the costs equally. If therepresentatives of the parties have not been able to resolve the dispute withinfifteen (15) business days after such mediation hearing, the parties shall havethe right to pursue this case by arbitration.

11) All disputes arising in connection with the present contract shall be thenfinally settled under the rules of Conciliation and Arbitration of the

International Chamber of Commerce by three arbitrators appointed in accordancewith said rules. The language of correspondence and the language used by thecourt in the settlement of disputes shall be English. The place of settlement ofdisputes shall be in Schaffhausen. The costs of court of arbitration shall beborn equally by both parties, and each party shall be for its own part of allother costs arising. Both parties agree to accept the decision of the Court ofArbitration as final binding of them both to the exclusion of all remedies.

12) In the event that any one or more of the provisions contained in thisAgreement shall for any reason be held to be invalid, illegal or unenforceablein any respect, such invalidity, illegality or unenforceability shall not affectany other provision hereof, and this Agreement shall be construed as if suchinvalid, illegal or unenforceable provision or provisions had never beencontained herein.

IN WITNESS WHEREOF, each party has caused this Agreement to be signed by itsduly authorized representatives.

Irvine, Schaffhausen, 26 September 2002

NeoTherapeutics, Inc. Merck Eprova AG

/s/Rajesh C. Shrotriya, M.D. /s/M. Ulmann------------------------------- ----------------------------------------- M. Ulmann General Manager

/s/T. Suter ----------------------------------------- T. Suter Head Business Support

Attachment 1

Compound------------------------------Aminopropylpyrrolidinone------------------------------ACA------------------------------ACA------------------------------Ala-benzonate------------------------------

Attachment 2

Invoice Compound Amount-------------------------------------------------------------------------------- 1) D22094 Aminopropylpyrrolidinone CHF 102'700--------------------------------------------------------------------------------2) D22095 ACA CHF 351'000--------------------------------------------------------------------------------3) D22049 ACA CHF 133'250--------------------------------------------------------------------------------4) D22162 Ala-benzonate CHF 426`196--------------------------------------------------------------------------------

Attachment 3

Account of EPRO

No. 230-M0141740.0 at UBS AG, Zurich, Swift-Code UBSWCCHZZ

Attachment 4

(1) NEOT herewith transmits all rights to EPRO on the PCT WO 02/00659 (US ApplNo. 09/602,048) with all rights connected thereto.

(2) Therefore, after the last signature under this agreement, the PATENTS becomethe property of EPRO. NEOT will agree to the recording of the assignment of thePATENTS in the register of the US -- as well as the PCT Patent Office and NEOTpromises to provide the required documents and to make all necessary signatures.

(3) NEOT promises to submit to EPRO all written research documents, tabulations,experimental reports, correspondences, which relate to the subject matterinvention. The transfer will be made at the latest thirty (30) days after theexecution of this agreement.

(4) NEOT will advise EPRO about the status of the PATENTS and their plans for aoptimal protection of the invention in the different countries.

(5) If required by EPRO, NEOT promises to provide its full assistance to EPROafter the transfer of the documents and materials for an introduction of theemployees of EPRO.

(6) EPRO is aware of the technical features of the invention. NEOT is not liablefor the technical utility and completeness of the technical documents under thisagreement.

(7) NEOT declares that legal defects in the PATENTS and technical defects in theinvention are not known to him. A liability for freedom of defects, particularlydependency of the invention is not undertaken. All rights of warranty orrescission by EPRO are excluded.

(8) NEOT promises to keep knowledge relating to the patented inventionconfidential after the complete signature of the agreement until it has boughtback the rights on the PATENTS as agreed in this agreement.

(9) NEOT promises not to attack the PATENTS and/or all derived patents and notto assist third parties in attacks on the PATENTS and/or all derived patents.

(10) The costs and fees for the assignment and recording will be borne by EPRO.EPRO will also pay all the fees and costs for maintenance of the PATENTS afterthe execution of this agreement.

Confidential treatment has been requested for portions of this exhibit. The copyfiled herewith omits the information subject to the confidentiality request.Omissions are designated as [Intentionally Redacted]. A complete version of theexhibit has been filed separately with the Securities and Exchange Commission.

EXHIBIT 10.8

FIRST AMENDMENT TO LICENCE AGREEMENT DATED AUGUST 28, 2001 BETWEEN JOHNSON MATTHEY PLC AND NEOTHERAPEUTICS, INC.

This First Amendment to License Agreement ("FIRST AMENDMENT") is enteredinto and effective this 30th day of September 2002 by and between JohnsonMatthey PLC, a company organised under the laws of England and Wales whoseregistered office is at 2-4 Cockspur Street, Trafalgar Square, London, SW1Y 5BQ,England, acting for itself and for its AFFILIATES including particularly JohnsonMatthey, Inc (collectively, "LICENSOR"), and NeoTherapeutics, Inc., acorporation organized under the laws of the State of California, United Statesof America whose principal place of business is at 157 Technology Drive, Irvine,California 92618, United States of America with reference to the following factsand on the following terms and conditions.

RECITALS

(A) Effective August 28, 2001, LICENSOR and LICENSEE entered into theLicense Agreement (the "LICENSE") pursuant to which LICENSOR granted a licensefor the use of technical information relating to the use of platinum complexJM216 in the treatment of tumor cells as well as for the use of the PATENTRIGHTS (as defined in the LICENSE). All defined terms in this FIRST AMENDMENT(as set forth in capital letters) shall have the same meaning as set forth inthe LICENSE.

(B) The parties now wish to amend and modify the LICENSE on the termsand conditions as set forth in this FIRST AMENDMENT.

Now therefore, for good and valuable consideration, the parties agree asfollows:

1

(1) ARTICLE I

Paragraph 16 of Article I of the LICENSE shall be amended to readas follows:

TERM: the term commencing on the EFFECTIVE DATE and terminating on a country-by-country basis upon the expiry of the last to expire of the patents granted in each such country which have expiration dates specified on Schedule A. The date of expiration of a patent described in this Section shall include any extension granted to LICENSOR by virtue of any continuation, continuations-in-part and divisional applications, including reissues and reexamination applications and patents and reexamination certificates issuing to LICENSOR.

(2) ARTICLE II

Paragraph 1 of Article II of the LICENSE shall be amended to readas follows:

1. Subject to Article II.3 below, the LICENSOR agrees to grant and hereby grants to the LICENSEE an exclusive worldwide royalty-bearing revocable right and licence, with rights to sublicence, under the PATENT RIGHTS to use PLATINUM COMPLEXES, the LICENSOR'S INFORMATION and the LICENSOR'S ONGOING INFORMATION to make, have made, use, offer to sell, and have sold PRODUCTS for use within the FIELD.

Paragraph 2 of Article II of the LICENSE shall be amended to readas follows:

2. The LICENSEE shall be entitled to sub-license any THIRD PARTY under rights granted under Article II.1 hereof provided that the LICENSEE shall remain responsible for all acts and omissions of such sub-licensee as though they were by the LICENSEE. In particular, the LICENSEE shall be responsible to the LICENSOR for payments due in respect of sales by sub-licensees as though they were sales by LICENSEE. The terms of any sub-license agreement shall provide that upon termination of this Agreement, any

2

sub-licensee shall attorn to and accept the LICENSOR in place of the LICENSEE such that any sub-license shall be deemed an agreement between the LICENSOR and sub-licensee.

(3) ARTICLE III

Paragraph 1 of Article III of the LICENSE shall be amended toread as follows:

1. The LICENSEE, its AFFILIATES and sub-licensees shall diligently perform research and development on the use of JM 216 and other PLATINUM COMPLEXES within the FIELD and on the formulation of PRODUCTS. The LICENSEE, its AFFILIATE and sub-licensees shall exercise in the performance of such research technical skill and competence of a high calibre.

(4) ARTICLE IV

Article IV of the LICENSE shall be amended to read as follows:

1. The LICENSEE, its AFFILIATES and sub-licensees shall use its best efforts to test, evaluate and develop PRODUCTS so as to meet the objectives detailed hereunder:

Objective

1 Submission of NDA to US FDA (hereinafter called the 'First MILESTONE')

2 Acceptance of NDA by US FDA (hereinafter called the 'Second MILESTONE')

3 Receipt of US FDA approval of NDA (hereinafter called the 'Third MILESTONE')

4 Approval in the first European Union state of a new drug application (hereinafter called the 'Fourth MILESTONE')

3

5 Approval by US FDA of JM216 for the first indication other than the indication approved in Objective 2. (hereinafter called the 'Fifth MILESTONE')

6 Approval in the first European Union state of JM216 for the first indication other than the indication approved in Objective 3. (hereinafter called the `Sixth MILESTONE')

(5) ARTICLE V

Paragraphs 1 through 5, inclusive of Article V of the LICENSEshall be amended to read as follows:

1. The LICENSOR acknowledges receipt of US$100,000 which was paid by LICENSOR on the EFFECTIVE DATE;

2. The LICENSOR acknowledges receipt of US$150,000 as required by Article V.2 of the LICENSE.

3. Within 30 (thirty) days of the date of the attainment of each MILESTONE by the LICENSEE, an AFFILIATE or sub-licensee, the LICENSEE shall pay to the LICENSOR the following sums:

(i) the First MILESTONE: [Intentionally Redacted]

(ii) the Second MILESTONE:[Intentionally Redacted]

(iii) the Third MILESTONE: [Intentionally Redacted]

(iv) the Fourth MILESTONE:[Intentionally Redacted]

(v) the Fifth MILESTONE: [Intentionally Redacted]

(vi) the Sixth MILESTONE: [Intentionally Redacted]

In no event will LICENSEE be liable for more than one payment upon the occurrence of each MILESTONE.

4

[Intentionally Redacted] Certain information on this page has been omitted andfiled separately with the Securities and Exchange Commission. Confidentialtreatment has been requested with respect to the omitted portions.

4. The LICENSEE shall during the TERM of this Agreement pay to the LICENSOR a royalty calculated at the rate set forth below of the NET SALES VALUE of all PRODUCTS sold or otherwise supplied for use whether within the FIELD or outside the FIELD for money or money's worth by LICENSEE or any AFFILIATE or sublicensee thereof; provided, however, that in any country in the TERRITORY where a GENERIC PRODUCT is sold in competition with the PRODUCT, the royalty payable to LICENSOR with respect to NET SALES of such PRODUCTS in such country shall be reduced to 0%, commencing with the calendar quarter during which any such GENERIC PRODUCT first becomes available in competition with the PRODUCT in such country.

Royalty Rate NET SALES during calendar year ------------ ------------------------------

[Intentionally Redacted]

5. Payments due under Article V.4 shall be made within 45 days of the end of each calendar quarter in respect of royalties accruing on PRODUCTS invoiced in that calendar quarter. Paragraphs 7 and 8 of Article V of the LICENSE shall be amended to read as follows:

7. The LICENSEE agrees during for a period of three (3) years following the accrual of any royalty it will keep and maintain accurate records and books of account containing all data necessary for determination of royalties payable under this Agreement, including records and books of account relating to sales of PRODUCTS by sub-licensees, which records and books of account of LICENSEE shall upon reasonable notice by LICENSOR be open at all reasonable times during reasonable business hours for inspection by an independent accountant appointed by LICENSOR for the purpose of verifying the accuracy of the LICENSEE's reports hereunder. Such accountant shall be entitled to take copies solely of LICENSEE's records pertaining to such reports as LICENSOR's

5


expense. The LICENSEE shall ensure that its sub-licensees (if any) also keep true and accurate records and books of account containing all data necessary for the determination of royalties payable in respect of their activities and shall ensure that such records and books of account shall upon reasonable notice by the LICENSOR be open for inspection at all reasonable times during business hours for inspection by such independent accountant no less than once per year for purposes of verifying the accuracy of the LICENSEE'S reports hereunder.

8. The LICENSEE shall submit to the LICENSOR within 45 days of the end of each calendar quarter a statement setting forth with respect to the operations of the LICENSEE hereunder, as well as with regard to each sub-licensee during that period, the quantity of PRODUCTS made and sold and the NET SALES VALUE of all PRODUCTS sold together with payments due.

(6) ARTICLE VII

Paragraph 6 of Article VII of the LICENSE shall be amended byinserting the following after the first sentence:

LICENSOR further represents and warrants that it is not aware of any patents, whether granted to LICENSOR, an AFFILIATE, or any THIRD PARTY, which would be infringed by: (i) the making, using and selling of any PRODUCT; (ii) or utilization of any PLATINUM COMPLEX by LICENSEE in accordance with the license granted by this AGREEMENT; or (iii) the metabolites of JM216. To the best of LICENSOR's knowledge and belief, the practice of the PATENT RIGHTS and the exercise of the rights granted LICENSEE under Article II.1 do not infringe upon or conflict with any patent, copyright or other proprietary right of any THIRD PARTY.

6

(7) ARTICLE IX

The first sentence of Paragraph 1 of Article IX of the LICENSEshall be amended by to read as follows:

1. During the continuance of this Agreement the LICENSEE, its AFFILIATES, and its sub-licensees shall:

(8) ARTICLE XI.

Paragraph 3 of Article XI shall be amended to read as follows

3. Intentionally deleted.

Subparagraph 8.3 of Article XI shall be amended to read asfollows:

8.3 Upon any termination of this Agreement, sublicenses granted by the LICENSEE shall be automatically assigned to the LICENSOR which shall thereafter receive all benefits and have all obligations under the sublicenses as in place and stead of the LICENSEE.

(9) [Intentionally Redacted]

(10) GENERAL PROVISIONS

(a) This FIRST AMENDMENT may be executed in two or morecounterparts, including facsimile signatures, each of which will be deemed anoriginal, but all of which together will constitute one and the same instrument.

(b) This FIRST AMENDMENT and the AGREEMENT constitute thecomplete and integrated agreement of the parties with respect to the subjectmatter hereof and

7


thereof. Except as provided in this FIRST AMENDMENT, the AGREEMENT will remainin full force and effect and unchanged in all other respects.

(c) LICENSOR represents that it is not aware of any default byLICENSEE under the Agreement, or aware of any event or omission which with thepassage of time might be reasonable foreseen to lead to a default under theAgreement.

The parties have caused this FIRST AMENDMENT to be executed bytheir respective authorized representatives effective as of the date first setforth above.

LICENSOR LICENSEE Johnson Matthey PLC NeoTherapeutics, Inc.

By: /s/ Ian Wishart By: /s/ Rajesh Shrotriya ------------------------------ ------------------------------ Its: Group Patents and Its: Chairman, CEO and Licensing Controller President ------------------------------ ------------------------------

8

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as {redacted}. A complete version of the exhibit has been filed separately with the Securities and Exchange Commission.

EXHIBIT 10.9

FINAL

CO-DEVELOPMENT AND

LICENSE AGREEMENT

between


and

GPC BIOTECH AG

Dated as of September 30, 2002

CO-DEVELOPMENT AND LICENSE AGREEMENT

This CO-DEVELOPMENT AND LICENSE AGREEMENT (this "Agreement"), dated asof September 30, 2002, is between Neotherapeutics, Inc., a company dulyorganized and existing under the laws of Delaware and having offices at 157Technology Drive, Irvine, California, USA for and on behalf of itself and itsAffiliates ("NEOTHERAPEUTICS"), and GPC Biotech AG, a company duly organized andexisting under the laws of the Federal Republic of Germany and having offices atFraunhoferstrasse 20, D-82152 Martinsried/Munich Germany, for and on behalf ofitself and its Affiliates (together with its Affiliates, "GPC").

PRELIMINARY STATEMENTS

A. NEOTHERAPEUTICS has entered into that certain License Agreementwith Johnson Matthey PLC ("J-M") dated August 28, 2001, pursuant to whichNEOTHERAPEUTICS has been granted a license, with the right to sublicense, tocertain patent rights and other know-how and technology owned by J-M.

B. NEOTHERAPEUTICS wishes to grant a sublicense to GPC, and GPC wishesto take a sublicense from NEOTHERAPEUTICS, under certain rights granted toNEOTHERAPEUTICS under the J-M License Agreement and under other relevant patentrights and know-how controlled by NEOTHERAPEUTICS, upon the terms and conditionsset forth in this Agreement.

NOW, THEREFORE, in consideration of the foregoing preliminarystatements and the mutual covenants and agreements of the Parties contained inthis Agreement, the Parties hereby agree as follows:

1. DEFINITIONS

As used in this Agreement, the following terms shall have those

meanings set forth in this Section 1 unless the context dictates otherwise.

1.1. "Affiliate" with respect to either Party, shall mean any Personcontrolling, controlled by, or under common control with, such Party. For thepurpose of this Section 1.1, "control" shall refer to (i) the possession,directly or indirectly, of the power to direct the management or policies ofsuch Party, whether through the ownership of voting securities, by contract orotherwise, or (ii) the beneficial ownership (as such term is defined in the 1934Act) of at least fifty percent (50%) of the voting securities or other ownershipinterest of such Party.

1.2. "Confidential Information" shall have the meaning assigned to suchterm in Section 12.1.

1.3. "Covered Product" shall mean any Platinum Complexes formulated foradministration to humans, the research, development, manufacture, sale or use ofwhich

in any country in the Territory is covered by a Valid Claim of any Patentincluded in the J-M Licensed Technology or the NEOTHERAPEUTICS LicensedTechnology.

1.4. "Effective Date" shall mean the date first set forth above.

1.5. "EMEA" shall mean the European Agency for the Evaluation ofMedicinal Products and any successor thereto.

1.6. "FDA" shall mean the United States Food and Drug Administration,or any successor thereto.

1.7. "Field" shall mean the FIELD, as such term is defined in the J-MLicense Agreement, as amended from time to time.

1.8. "First Commercial Sale" shall mean, with respect to any CoveredProduct, the first sale for use or consumption by the general public of suchCovered Product in a country in the Territory after all required marketing andpricing approvals have been granted, or otherwise permitted, by the governinghealth authority of such country. "First Commercial Sale" shall not include thesale of any Covered Product for use in clinical trials or for compassionate useprior to the approval of an NDA.

1.9. "GPC Development Technology" shall mean all Inventions andKnow-How first developed, reduced to practice or shown to have utility by one ormore employees of GPC without the involvement of one or more employees ofNEOTHERAPEUTICS in connection with the development of Covered Products, as wellas any and all Patents covering the same.

1.10. "Invention" shall mean any new or useful method, process,manufacture, compound or composition of matter, whether or not patentable orcopyrightable, or any improvement thereof.

1.11. "J-M License Agreement" shall mean that certain License Agreementdated August 28, 2001, by and between NEOTHERAPEUTICS and J-M, as amended fromtime to time. A copy of such Agreement, including all amendments executed priorto the execution of this Agreement, is attached hereto as Exhibit A.

1.12. "J-M Licensed Technology" shall mean the J-M Patent Rights, theLICENSOR'S INFORMATION and the LICENSOR'S ONGOING INFORMATION to whichNEOTHERAPEUTICS has been granted a license under the J-M License Agreement, assuch capitalized terms are defined in the J-M License Agreement, as amended fromtime to time.

1.13. "J-M Patent Rights" shall mean the PATENT RIGHTS, as such term isdefined in the J-M Licensed Agreement. A list of all such J-M Patent Rights inexistence on the Effective Date is included in Exhibit B attached hereto.

1.14. "J-M Royalty Term" shall mean the period beginning on theEffective Date and ending on the earlier of (i) the expiration of the TERM, assuch term is defined

in the J-M License Agreement, as amended from time to time, or (ii) the date onwhich NEOTHERAPEUTICS is no longer required to make royalty payments to J-Mpursuant to the J-M License Agreement.

1.15. "Joint Development Committee" shall mean the entity organized andacting pursuant to Section 4.

1.16. "Joint Development Technology" shall mean all Inventions andKnow-How first developed, reduced to practice or shown to have utility by one ormore employees of GPC and one or more employees of NEOTHERAPEUTICS in connectionwith the development of Covered Products, as well as any and all Patentscovering the same.

1.17. "Know-How" shall mean unpatented technical and other informationwhich is not in the public domain including information comprising or relatingto discoveries, inventions, data, designs, formulae, methods, models, assays,research plans, procedures, designs for experiments and tests and results ofexperimentation and testing (including results of research or development),processes (including manufacturing processes, specifications and techniques),laboratory records, chemical, pharmacological, toxicological, clinical,analytical and quality control data, trial data, case report forms, dataanalyses, reports or summaries and information contained in submissions to andinformation from ethical committees and regulatory authorities. Know-Howincludes rights protecting Know-How. The fact that an item is known to thepublic shall not be taken to exclude the possibility that a compilationincluding the item, and/or a development relating to the item, is (and remains)not known to the public.

1.18. "MAA" shall mean a Marketing Authorization Application or similarapplication filed with the EMEA after completion of human clinical trials toobtain marketing approval for a Covered Product in the European Union.

1.19. "MHW" shall mean the Ministry of Health and Welfare in Japan andany successor agency.

1.20. "NDA" shall mean a New Drug Application to be filed with the FDA,or the equivalent thereof in other countries or regulatory jurisdictions.

1.21. "NEOTHERAPEUTICS Development Technology" shall mean allInventions and Know-How first developed, reduced to practice or shown to haveutility by one or more employees of NEOTHERAPEUTICS without the involvement ofone or more employees of GPC in connection with the development of CoveredProducts, as well as any and all Patents covering the same.

1.22. "NEOTHERAPEUTICS Licensed Technology" shall mean the LICENSEE'SONGOING INFORMATION, as such term is defined in the J-M License Agreement, asamended from time to time, as well as all Patents owned or controlled by, orlicensed to, NEOTHERAPEUTICS, and all Know-How and Inventions developed, ownedor controlled by, or licensed to, NEOTHERAPEUTICS, on or after the EffectiveDate, other than the J-M Licensed Technology, which, by objective standards, is

necessary for or may be useful in the development, manufacture, use or sale ofLicensed Products in the Field in the Territory, all to the extent thatNEOTHERAPEUTICS has the right to license or otherwise make available suchPatents, Know-How and Inventions to GPC hereunder. A list of all such Patents inexistence on the Effective Date is included in Exhibit B attached hereto.

1.23. "Net Sales" shall have the meaning ascribed to the term "NetSales Value" in the J-M License Agreement, as amended from time to time.

Notwithstanding the foregoing, in the event a Covered Product is sold inconjunction with another proprietary component so as to be a combination product(whether packaged together or in the same therapeutic formulation), Net Salesshall be calculated by multiplying the Net Sales of such combination product bya fraction, the numerator of which shall be the fair market value of the CoveredProduct as if sold separately (determined in accordance with generally acceptedaccounting principles), and the denominator of which shall be the aggregate fairmarket value of all the proprietary active components of such combinationproduct, including the Covered Product, as if sold separately. In the event nosuch separate sales are made by GPC or its Affiliates, Net Sales of thecombination product shall be calculated in a manner to be negotiated and agreedupon by the Parties, reasonably and in good faith, prior to any sale of suchcombination product, which shall be based upon the respective estimatedcommercial values of the proprietary active components of such combinationproduct.

GPC's or any of its Affiliate's transfer of Covered Product to another

Affiliate or a Sublicensee shall not result in any Net Sales, unless suchCovered Product is consumed by such Affiliate or Sublicensee in the course ofits commercial activities.

1.24. "1934 Act" shall mean the U.S. Securities Exchange Act of 1934,as amended, and all regulations promulgated pursuant thereto from time to time.

1.25. "Party" shall mean NEOTHERAPEUTICS or GPC and, when used in theplural, shall mean NEOTHERAPEUTICS and GPC.

1.26. "Patents" shall mean all letters patent and patent applicationsthroughout the Territory, as well as any and all substitutions, extensions,renewals, continuations, continuations-in-part, divisions, patents-of-additionand/or reissues thereof.

1.27. "Person" shall mean any natural person, corporation, firm,business trust, joint venture, association, organization, company, partnershipor other business entity, or any government or any agency or politicalsubdivision thereof.

1.28. "Platinum Complexes" shall mean the platinum co-ordinationcompounds that are the subject of the J-M Patent Rights.

1.29. "Royalty Term" shall mean the period beginning on the EffectiveDate and ending on the date of the expiration of the last to expire Valid Claim,if any, included in the Joint Development Technology or NEOTHERAPEUTICSDevelopment Technology

that covers the manufacture or sale of Covered Products. If, at the time ofexpiration of the J-M Royalty Term, there are no Valid Claims included in theJoint Development Technology or NEOTHERAPEUTICS Development Technology coveringthe manufacture or sale of a Covered Product, then the Royalty Term with respectto such Covered Product shall expire on the expiration of the J-M Royalty Term.

1.30. "Satraplatin" shall mean the platinum complexbis(acetato)amminedichloro(cyclohexylamine)platinum(IV).

1.31. "Sublicensee" shall mean a Third Party to which GPC hassublicensed rights under the NEOTHERAPEUTICS Licensed Technology or J-M LicensedTechnology for the commercialization of Covered Products.

1.32. "Sublicense Fees" shall mean all payments made to GPC from aSublicensee that relate specifically to the sublicense of rights granted to GPChereunder, excluding (i) payments made in consideration of research anddevelopment efforts undertaken by GPC, (ii) payments made to reimburse GPC forexpenses previously incurred by GPC in connection with the development ofCovered Products, (iii) payments made in consideration of the purchase of equityof GPC by a Sublicensee to the extent that such payments do not exceed the fairmarket value of such equity, (iv) payments made in consideration of themanufacture or supply of Covered Products by GPC to the extent that suchpayments do not exceed GPC's costs of such manufacture and supply, (v) loansmade to GPC or (vi) Sublicense Royalties.

1.33. "Sublicense Royalties" shall mean royalty payments made to GPCbased on sales of Covered Products by a Sublicensee.

1.34. "Territory" shall mean the entire world.

1.35. "Third Party" shall mean any Person who or which is neither aParty nor an Affiliate of a Party.

1.36. "Valid Claim" shall mean (i) a pending claim in any patentapplication that has not been pending for more than five (5) years, which shallbe treated as if such pending claim were issued in then-current form, or (ii) aclaim of any issued letters patent that, in each case, has not been held invalidor unenforceable by final decision of a court or other governmental agency ofcompetent jurisdiction, unappealable or unappealed within the time allowed forappeal, and that is not admitted to be invalid or unenforceable through reissue,disclaimer or otherwise.

2. REPRESENTATIONS AND WARRANTIES

2.1. REPRESENTATIONS AND WARRANTIES OF BOTH PARTIES. Each Partyrepresents and warrants to the other Party that, as of the Effective Date:

(a) Such Party is duly organized and validly existing under the laws ofthe jurisdiction of its incorporation and has full corporate power and authorityto enter into this Agreement and to carry out the provisions hereof;

(b) Such Party has taken all corporate action necessary to authorize theexecution and delivery of this Agreement and the performance of its obligationsunder this Agreement; and

(c) This Agreement is a legal and valid obligation of such Party,binding upon such Party and enforceable against such Party in accordance withthe terms of this Agreement, except as such enforceability may be affected bylaws affecting creditors' rights generally and general equitable principles. Theexecution, delivery and performance of this Agreement by such Party do notconflict with any agreement, instrument or understanding, oral or written, towhich such Party is a party or by which such Party may be bound, or violate anylaw or regulation of any court, governmental body or administrative or otheragency having authority over such Party. All consents, approvals andauthorizations from all governmental authorities or other Third Parties requiredto be obtained by such Party in connection with the execution, delivery andperformance of this Agreement have been obtained.

2.2. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF NEOTHERAPEUTICS.NEOTHERAPEUTICS represents and warrants to GPC that, as of the Effective Date:

(a) NEOTHERAPEUTICS and/or its Affiliates are the owner of, or haveexclusive rights to, all of the Patents included in the J-M Licensed Technology(except as expressly provided in the copy of the J-M License Agreement attachedas Exhibit A) and the NEOTHERAPEUTICS Licensed Technology in existence on theEffective Date, and have the exclusive right to grant the licenses orsublicenses, as the case may be, therefor granted under this Agreement;

(b) All such Patents consist of either patent applications that havebeen filed and are pending and actively being prosecuted as of the EffectiveDate, or issued letters patent that are in full force and effect and have beenmaintained through the Effective Date;

(c) NEOTHERAPEUTICS is not aware of any asserted or unasserted claim ordemand which it believes can be enforced by a Third Party against any suchPatents;

(d) To the best of NEOTHERAPEUTICS's knowledge and belief, the practiceof such Patents and the exercise of the rights granted to GPC in Section 7 donot infringe upon or conflict with any patent, copyright or other proprietaryright of any Third Party;

(e) NEOTHERAPEUTICS and/or its Affiliates have the right to grant thelicenses or sublicenses, as the case may be, granted under this Agreement forall of the Know-How and Inventions included in the J-M Licensed Technology andNEOTHERAPEUTICS Licensed Technology in existence on the Effective Date;

(f) Such Know-How and Inventions were not obtained by NEOTHERAPEUTICS,and to the best of NEOTHERAPEUTICS's knowledge and belief were not obtained byJ-M, in violation of any contractual or fiduciary obligation to which

NEOTHERAPEUTICS, J-M or any of their respective employees or staff members areor were bound, or by the misappropriation of the trade secrets of any ThirdParty;

(g) NEOTHERAPEUTICS has not entered into any agreement with any ThirdParty which is in conflict with the rights granted to GPC under to thisAgreement, and the execution and performance of this Agreement byNEOTHERAPEUTICS do not and shall not violate any agreement or undertaking towhich NEOTHERAPEUTICS is a party; and

(h) To the best of NEOTHERAPEUTICS's knowledge and belief, all of thedata and information that NEOTHERAPEUTICS has provided to GPC prior to theEffective Date relating to such Patents, Know-How and Inventions, and to CoveredProducts in general, are reasonably accurate, and NEOTHERAPEUTICS has notomitted therefrom any material data or information in NEOTHERAPEUTICS'spossession or control reasonably in advance of the Effective Date concerning thesame.

2.3. REPRESENTATIONS AND WARRANTIES OF GPC. GPC represents and warrantsto NEOTHERAPEUTICS that, as of the Effective Date:

(a) Experience. GPC acknowledges that it can bear the economic riskof its investment in the NEOTHERAPEUTICS Shares. GPC has by reason of itsbusiness or financial experience or the business or financial experience of itsprofessional advisors who are unaffiliated with and who are not compensated byNEOTHERAPEUTICS or any affiliate or selling agent of NEOTHERAPEUTICS , directlyor indirectly, has the capacity to protect its own interests in connection withits purchase of the NEOTHERAPEUTICS Shares. GPC has the financial capacity tobear the risk of this investment.

(c) Purchase Entirely for Own Account. The NEOTHERAPEUTICS Shareswill be acquired by GPC for investment for GPC's own account not as a nominee oragent, and not with a view to the resale or distribution of any part thereof,and GPC has no present intention of selling, granting any participation in, orotherwise distributing the same. GPC does not presently have any contract,undertaking, agreement or arrangement with any Person to sell, transfer or grantparticipations to such Person or to any third Person, with respect to any of theNEOTHERAPEUTICS Shares. GPC has not been formed for the specific purpose ofacquiring solely the NEOTHERAPEUTICS Shares.

(e) Disclosure of Information. GPC has received and reviewedinformation about NEOTHERAPEUTICS, and in particular about the Patents,Know-How, Inventions and Covered Products, and has had an opportunity to discussNEOTHERAPEUTICS's business, management and financial affairs with its managementand to review NEOTHERAPEUTICS's facilities. GPC understands and acknowledgesthat such discussions, as well as any written information issued byNEOTHERAPEUTICS (i) were intended to describe the aspects of NEOTHERAPEUTICS'sbusiness and prospects which NEOTHERAPEUTICS believes to be material, but werenot necessarily an exhaustive description (except to the extent described inSection 2.2(h)), and (ii) may have contained forward-looking statementsinvolving known and unknown risks and uncertainties which may causeNEOTHERAPEUTICS's actual results in future periods

or plans for future periods to differ materially from what was anticipated andthat no representations or warranties were or are being made with respect to anysuch forward-looking statements or the probability of achieving any of theresults projected in any of such forward-looking statements. Nothing containedin this Section 2.3 shall limit in any respect NEOTHERAPEUTICS's representationsand warranties contained in this Agreement.

(g) Restricted Securities. GPC understands that the NEOTHERAPEUTICSShares have not been, and will not, prior to issuance under Section 9.1(c), be,registered under the Securities Act of 1933, as amended (the "Securities Act"),by reason of a specific exemption from the registration provisions of theSecurities Act which depends upon, among other things, the bona fide nature ofthe investment intent and the accuracy of GPC's representations as expressedherein. GPC understands that the NEOTHERAPEUTICS Shares are "restrictedsecurities" under applicable U.S. federal and state securities laws and that,pursuant to these laws, GPC must hold the NEOTHERAPEUTICS Shares indefinitelyunless they are registered with the SEC and qualified by state authorities, oran exemption from such registration and qualification requirements is available.GPC acknowledges that NEOTHERAPEUTICS has no obligation to register or qualifythe NEOTHERAPEUTICS Shares for resale except as set forth in the RegistrationRights Agreement to be entered into as provided in Section 9.1(c). GPC furtheracknowledges that if an exemption from registration or qualification isavailable, it may be conditioned on various requirements including, but notlimited to, the time and manner of sale, the holding period for theNEOTHERAPEUTICS Shares, and on requirements relating to NEOTHERAPEUTICS whichare outside of GPC's control, and which NEOTHERAPEUTICS is under no obligationand may not be able to satisfy. GPC acknowledges that NEOTHERAPEUTICS will makea notation on its stock books regarding the restrictions on transfers set forthin this Section 2.3 and will transfer securities on the books of NEOTHERAPEUTICSonly to the extent not inconsistent therewith.

(i) Residence. The office or offices of GPC in which its investmentdecision was made is located at the address or addresses of GPC set forth in thepreamble.

(k) Further Restrictions on Disposition. GPC agrees not to make anydisposition of all or any portion of the NEOTHERAPEUTICS Shares unless anduntil: (a) there is then in effect a registration statement under the Securities

Act covering such proposed disposition and the disposition is made in accordancewith such registration statement; or (b) (i) GPC shall have notifiedNEOTHERAPEUTICS of the proposed disposition and shall have furnishedNEOTHERAPEUTICS with a statement of the circumstances surrounding the proposeddisposition and (ii) if reasonably requested by NEOTHERAPEUTICS , GPC shall havefurnished NEOTHERAPEUTICS with an opinion of counsel, reasonably acceptable toNEOTHERAPEUTICS , that such disposition will not require registration under theSecurities Act.

(m) Legends. GPC understands that the NEOTHERAPEUTICS Shares, andany securities issued in respect of or exchange for the NEOTHERAPEUTICS Shares,

may bear one or all of the following legends until they are no longer requiredby law or the provisions of this Agreement:

"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDERTHE SECURITIES ACT OF 1933, AS AMENDED, (THE "SECURITIES ACT") PURSUANT TO ANEXEMPTION FROM REGISTRATION CONTAINED IN REGULATION S PROMULGATED UNDER THESECURITIES ACT, AND MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH THEPROVISIONS OF REGULATION S, PURSUANT TO A REGISTRATION UNDER THE SECURITIES ACTOR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION. NO HEDGING TRANSACTIONSINVOLVING THESE SECURITIES MAY BE CONDUCTED EXCEPT IN COMPLIANCE WITH THESECURITIES ACT."

Any legend required by the Blue Sky laws of any state to the extent such lawsare applicable to the shares represented by the certificate so legended.

The legend set forth above shall be removed by NEOTHERAPEUTICS from anycertificate evidencing NEOTHERAPEUTICS Shares upon transfer of suchNEOTHERAPEUTICS Shares in compliance with Rule 144(k) under the Securities Actor upon delivery to NEOTHERAPEUTICS of an opinion, in form and substance and bycounsel reasonably satisfactory to NEOTHERAPEUTICS , that a registrationstatement under the Securities Act is at that time in effect with respect to thelegended security or that such security can be freely transferred without such aregistration statement being in effect and that such transfer will notjeopardize the exemption or exemptions from registration pursuant to which thesecurities were issued.

(o) Foreign Investors. GPC hereby represents that it has satisfieditself as to the full observance of the laws of its jurisdiction in connectionwith any invitation to subscribe for the NEOTHERAPEUTICS Shares or any use ofthis Agreement, including (i) the legal requirements within its jurisdiction forthe purchase of the NEOTHERAPEUTICS Shares, (ii) any foreign exchangerestrictions applicable to such purchase, (iii) any governmental or otherconsents that may need to be obtained, and (iv) the income tax and other taxconsequences, if any, that may be relevant to the purchase, holding, redemption,sale, or transfer of the NEOTHERAPEUTICS Shares. GPC's subscription and paymentfor and continued beneficial ownership of the NEOTHERAPEUTICS Shares, will notviolate any applicable securities or other laws of GPC's jurisdiction and willnot require NEOTHERAPEUTICS to obtain any permit, make any filing or take anyother action in such jurisdiction.

(q) Offshore Transaction.

(i) GPC is not organized under the laws of or is not a citizen or resident of the United States and was not formed for the purpose of investing in Regulation S securities, does not have any of its securities registered under the Exchange Act, and is not owned by U.S. Persons as defined in Regulation S and herein.

(ii) At the time the buy order to purchase the NEOTHERAPEUTICS Shares was originated, GPC was outside the United States.

(iii) All subsequent offers and sales of the NEOTHERAPEUTICS Shares shall be made in compliance with Regulation S, pursuant to registration of the securities under the Securities Act or pursuant to an exemption from such registration.

(iv) GPC agrees that from the date hereof until after one year after the issuance of the NEOTHERAPEUTICS Shares hereunder (the "Restrictive Period"), GPC agrees, upon any offer, sale, or transfer of the NEOTHERAPEUTICS Shares (including any interests therein), GPC, or any successor, or any Professional under its direction (as defined

below) (except for sales of any NEOTHERAPEUTICS Shares registered under the Securities Act or otherwise exempt from such registration) (i) will not sell to a U.S. Person or to an account of or for the benefit of a U.S. Person or to anyone believed to be a U.S. Person; (ii) will not engage in any efforts to sell the NEOTHERAPEUTICS Shares in the United States; (iii) will, at the time the buy order or transfer is originated, believe the buyer or transferee is outside the United States; (iv) will send to any transferee who is a Professional, whether acting as agent or principal, a confirmation or other notice stating that the Professional is subject to the same restrictions on transfer to U.S. Persons or for the account of or benefit of U.S. Persons during the Restrictive Period as provided herein; and (v) will not in connection with the common stock of NEOTHERAPEUTICS engage in the United States in any short selling, option writing, equity swaps, or other types of hedging transactions or derivative transactions. NEOTHERAPEUTICS will not honor or register and will not be obligated to honor or register any transfer in violation of these provisions.

(v) For purpose hereof, in general, a "U.S. Person;" means any natural person, resident of the United States; any partnership or corporation organized or incorporated under the laws of the United States or any state or territory thereof; any estate of which any executor or administrator is a U.S. Person; any trust of which any trustee is a U.S. Person; any agency or branch of a foreign entity located in the United States; any nondiscretionary account or similar account, other than estate or trust, held by a dealer or other fiduciary organized, incorporated, or (if an individual) resident of the United States; and any partnership or corporation if organized or incorporated under the laws of any foreign jurisdiction and formed by a U.S. Person principally for the purpose of investing in securities and not registered under the Securities Act unless it is organized and incorporated and owned by "accredited investors," as defined under Rule 501(a) under the Securities Act, who are not natural persons, estates or trusts. "U.S. Person" is further defined in Rule 902(o) under the Securities Act.

(vi) A "Professional" is a "distributor" as defined in Rule 902(c) under the Securities Act (generally any underwriter, or other person, who participates, pursuant to a contractual arrangement, in the distribution of the Shares); a dealer

as defined in Section 2(12) of the Exchange Act (encompassing those who engage in the business of trading or dealing in securities as agent, broker, or principal); or a person receiving a selling concession, fee, or other remuneration in respect of the sale of the Shares sold.

2.4. DEFINITION OF "KNOWLEDGE." As used in this Section 2, the phrases"to the best of" a Party's "knowledge and belief," "known to" or similar phrasesare intended to indicate that no information has come to the attention of seniormanagement of the Party making the particular representation which would givesuch person actual knowledge of the existence or absence of such facts.

3. J-M LICENSE AGREEMENT

3.1. REPRESENTATIONS AND WARRANTIES OF NEOTHERAPEUTICS. NEOTHERAPEUTICSrepresents and warrants to GPC that, as of the Effective Date:

(a) The J-M License Agreement is in full force and effect and has notbeen modified or amended, except that no representation or warranty is made withrespect to J-M or matters solely within the control or direction of J-M that arenot known to NEOTHERAPEUTICS;

(b) To the best of NEOTHERAPEUTICS's knowledge and belief, neither J-Mnor NEOTHERAPEUTICS is in default with respect to a material obligation under,and neither such party has claimed or has grounds upon which to claim that theother party is in default with respect to a material obligation under, the J-MLicense Agreement;

(c) To the best of NEOTHERAPEUTICS's knowledge and belief, the rightsthat J-M has licensed to NEOTHERAPEUTICS pursuant to the J-M License Agreementwere not and are not subject to any restrictions or limitations except as setforth in the copy of the J-M License Agreement attached as Exhibit A; and

(d) NEOTHERAPEUTICS has not waived or allowed to lapse any of its rights

under the J-M License Agreement, and no such rights have lapsed or otherwiseexpired or been terminated.

3.2. NEOTHERAPEUTICS OBLIGATIONS. NEOTHERAPEUTICS agrees that duringthe term of this Agreement:

(a) NEOTHERAPEUTICS will use commercially reasonable efforts to fulfillits obligations under the J-M License Agreement to the extent such obligationshave not been delegated to GPC and to the extent that failure to do so wouldadversely affect GPC or its rights hereunder;

(b) NEOTHERAPEUTICS shall not enter into any subsequent agreement withJ-M that modifies or amends the J-M License Agreement in any way that couldpotentially adversely affect GPC's rights or economic interest under thisAgreement without GPC's prior written consent, and shall provide GPC with a copyof all modifications to or amendments of the J-M License Agreement, regardlessof whether

GPC's consent was required with respect thereto; provided that, NEOTHERAPEUTICSmay redact confidential portions of any such modifications and amendments, butonly to the extent that any such redactions do not impair GPC's ability to takefull advantage of its rights and benefits under this Agreement;

(c) NEOTHERAPEUTICS shall not terminate the J-M License Agreement inwhole or in part, directly or indirectly, without GPC's prior written consent;

(d) NEOTHERAPEUTICS shall promptly furnish GPC with copies of allreports and other communications NEOTHERAPEUTICS receives from J-M that relateto the subject matter of this Agreement;

(e) NEOTHERAPEUTICS shall promptly furnish GPC with copies of allreports and other communications that NEOTHERAPEUTICS furnishes to J-M thatrelate to the subject of this Agreement, and to the extent any such reports orcommunications relate to the efforts of GPC under this Agreement,NEOTHERAPEUTICS shall give GPC a reasonable opportunity to review and commentupon such reports or communications before they are transmitted to J-M;

(f) NEOTHERAPEUTICS shall furnish GPC with copies of all noticesreceived by NEOTHERAPEUTICS relating to any alleged breach or default byNEOTHERAPEUTICS under the J-M License Agreement within three (3) business daysafter NEOTHERAPEUTICS's receipt thereof and, if NEOTHERAPEUTICS cannot orchooses not to cure or otherwise resolve any such alleged breach or default,NEOTHERAPEUTICS shall so notify GPC within five (5) days thereafter and allowGPC, in GPC's sole discretion, to cure or otherwise resolve any such allegedbreach or default; and

(g) NEOTHERAPEUTICS, acting as an intermediary between J-M and GPC,shall allow GPC to enjoy the direct benefit of all of NEOTHERAPEUTICS'saffirmative rights, to the extent they relate to the J-M Licensed Technology.

4. JOINT DEVELOPMENT COMMITTEE

4.1. MEMBERS. The Parties shall establish a Joint Development Committee(the "Joint Development Committee"), which shall comprise three (3)representatives designated by each Party (or such other number as the Partiesmay agree in writing). The initial members of the Joint Development Committeeare set forth on Exhibit C. Any Member of the Joint Development Committee may berepresented at any meeting by a designee who is appointed by such member forsuch meeting and who has authority to act on behalf of such member, as evidencedby written notice from such Member to the chairperson of the Joint DevelopmentCommittee. The chairperson of the Joint Development Committee shall be one ofthe representatives designated by GPC. The initial chairperson is designated onExhibit C. Each Party shall be free to replace its representative members withnew appointees who have authority to act on behalf of such Party on the JointDevelopment Committee, on written notice to the other Party.

4.2. RESPONSIBILITIES. The Joint Development Committee shall beresponsible for planning, overseeing and directing the development andcommercialization of, and regulatory filings relating to, Covered Products.

4.3. MEETINGS. The Joint Development Committee shall meet quarterlyuntil the achievement of the first milestone described in Section 9.2 and,

thereafter, as frequently as the Parties deem appropriate, on such dates and atsuch times as the Parties shall agree, on ten (10) days' written notice to theother Party unless such notice is waived by the other Party. The JointDevelopment Committee may convene or be polled or consulted from time to time bymeans of telecommunications, video conferences or correspondence, as deemednecessary or appropriate by the Parties. To the extent that meetings are held inperson, they shall alternate between the offices of the Parties unless theParties otherwise agree. The chairperson shall be responsible for sendingnotices of meetings to all members.

4.4. DECISIONS.

(a) A quorum for a meeting of the Joint Development Committee shallrequire the presence of at least one NEOTHERAPEUTICS member (or designee) and atleast one GPC member (or designee) in person or by telephone. All decisions madeor actions taken by the Joint Development Committee shall be made unanimously byits members, with the NEOTHERAPEUTICS members cumulatively having one vote andthe GPC members cumulatively having one vote.

(b) In the event that unanimity cannot be reached by the JointDevelopment Committee with respect to a matter that is a subject of itsdecision-making authority within thirty (30) days after the matter is firstbrought before the Joint Development Committee, then the matter shall be decidedby the chairperson of the Joint Development Committee in good faith.

4.5. MINUTES. Within fifteen (15) days after each Joint DevelopmentCommittee meeting, GPC shall prepare and distribute minutes of the meeting,which shall provide a description in reasonable detail of the discussions had atthe meeting and a list of any actions, decisions or determinations approved bythe Joint Development Committee at such meeting. GPC shall be responsible forcirculation of all draft and final minutes. Draft minutes shall be circulated toall members of the Joint Development Committee sufficiently in advance of thenext meeting to allow review and comment prior to the meeting. Minutes shall beapproved or disapproved, and revised as necessary, at the next meeting. Finalminutes shall be distributed to the members of the Joint Development Committee.

4.6. TERM. The Joint Development Committee shall exist until theexpiration of the Royalty Term for all Covered Products.

4.7. EXPENSES. Each Party shall be responsible for all travel andrelated costs for its representatives to attend meetings of, and otherwiseparticipate on, the Joint Development Committee.

4.8. ADDITIONAL STUDIES. NEOTHERAPEUTICS reserves the right, subject tothe approval and oversight of the Joint Development Committee, which approvalwill not be unreasonably withheld, to propose additional studies of Satraplatinat its own expense.

5. CO-PROMOTION. In the event GPC determines to directly market Covered Productsin the United States itself rather than licensing such Covered Products to aThird Party for commercialization, GPC shall notify NEOTHERAPEUTICS in writingreasonably in advance of the commencement of commercialization of any suchCovered Product. If, within ten (10) days after receipt of such notice from GPC,NEOTHERAPEUTICS indicates in writing to GPC that it desires to co-promote suchCovered Product with GPC, the Parties shall negotiate in good faith the terms ofsuch co-promotion of such Covered Product. If GPC proposes to enter into anagreement with a Third Party that includes a grant of rights to such Third Partyto market a Covered Product in the United States, GPC shall use commerciallyreasonable efforts to obtain co-promotion rights in the United States with suchThird Party that include NEOTHERAPEUTICS.

6. OWNERSHIP; PATENT PROTECTION

6.1. OWNERSHIP OF GPC DEVELOPMENT TECHNOLOGY. Except as otherwiseprovided in this Agreement, the entire right, title and interest in and to allGPC Development Technology shall be owned solely by GPC, and all decisionsregarding the protection of GPC Development Technology shall remain with GPC.

6.2. OWNERSHIP OF J-M LICENSED TECHNOLOGY, NEOTHERAPEUTICS LICENSEDTECHNOLOGY, NEOTHERAPEUTICS DEVELOPMENT TECHNOLOGY. Except as otherwise providedin this Agreement, the entire right, title and interest in and to allNEOTHERAPEUTICS Licensed Technology and NEOTHERAPEUTICS Development Technologyand, as between the Parties, J-M Licensed Technology shall be owned solely by

NEOTHERAPEUTICS, and, except as otherwise set forth in this Agreement or the J-MLicense Agreement, all decisions regarding the protection of J-M LicensedTechnology, NEOTHERAPEUTICS Licensed Technology and NEOTHERAPEUTICS DevelopmentTechnology shall remain with NEOTHERAPEUTICS.

6.3. OWNERSHIP OF JOINT DEVELOPMENT TECHNOLOGY. GPC and NEOTHERAPEUTICSshall jointly own all rights, title and interests in Joint DevelopmentTechnology.

6.4. PATENT FILING, PROSECUTION AND MAINTENANCE.

(a) Reasonably promptly after the Effective Date the Joint DevelopmentCommittee, in consultation with the Parties' respective patent counsel, shallagree upon a patent filing policy with respect to the NEOTHERAPEUTICS LicensedTechnology, the Joint Development Technology and the NEOTHERAPEUTICS DevelopmentTechnology. In addition, from time to time, the Joint Development Committeeshall determine, in accordance with such policy, whether and in whatjurisdictions patent applications should be filed with respect to any Know-Howor Inventions included in the

NEOTHERAPEUTICS Licensed Technology, the Joint Development Technology and theNEOTHERAPEUTICS Development Technology.

(b) Following a determination by the Joint Development Committee that apatent application should be filed with respect to any Know-How or Inventionsincluded in the NEOTHERAPEUTICS Licensed Technology, NEOTHERAPEUTICS, throughoutside patent counsel (including, without limitation, foreign patent counseland agents) reasonably acceptable to GPC, shall promptly file a patentapplication with respect thereto in the jurisdiction(s) selected by the JointDevelopment Committee, and thereafter NEOTHERAPEUTICS shall prosecute suchapplication and maintain any letters patent issuing therefrom. NEOTHERAPEUTICSshall take all such actions in consultation with GPC and its patent counsel andshall keep GPC apprised as to the status of all pending patent applications. Theout-of-pocket costs of filing, prosecuting and maintaining any Patents actuallyincurred by NEOTHERAPEUTICS under this Section 6.3(b) shall be reimbursed byGPC. NEOTHERAPEUTICS shall invoice GPC for such costs on a quarterly basis. Suchinvoices shall be payable forty-five (45) days after receipt thereof. If theJoint Development Committee determines to not have a patent application filedwith respect to any Know-How or Inventions included in the NEOTHERAPEUTICSLicensed Technology, NEOTHERAPEUTICS may, notwithstanding anything elsecontained herein, file, prosecute and maintain a patent application and anyletters patent issuing therefrom at its own expense.

(c) The preparation, filing, prosecuting and maintenance of Patentsincluded in the J-M Licensed Technology shall be accomplished as provided in theJ-M License Agreement, subject to the provisions of this Agreement. Furthermore,the Parties' respective rights and obligations under this Section shall besubject, in all events, to any superior rights of J-M under the J-M LicenseAgreement regarding the J-M Licensed Technology.

(d) If J-M elects to abandon the prosecution or maintenance of any J-MPatent Right in any country pursuant to Section 1 of Article VII of the J-MLicense Agreement and NEOTHERAPEUTICS elects not to assume the prosecution ormaintenance of such J-M Patent Right, NEOTHERAPEUTICS shall so notify GPC. IfGPC notifies NEOTHERAPEUTICS that GPC wishes to assume the prosecution ormaintenance of such J-M Patent Right, NEOTHERAPEUTICS shall exercise its rightto assume such prosecution or maintenance on behalf of GPC, and NEOTHERAPEUTICSshall assign its rights to such J-M Patent Right in such country to GPC.

6.5. TERMINATION OF SUPPORT BY GPC. GPC shall have the right toterminate its obligations, if any, under this Agreement in any country withrespect to any Patent included in the NEOTHERAPEUTICS Licensed Technology, fromtime to time, upon notice to NEOTHERAPEUTICS; provided, however, that no suchnotice shall be effective with respect to any such Patent if it is given fewerthan sixty (60) days prior to a deadline for taking any action that must betaken in order to preserve the owner's rights in such Patent. Upon the deliveryof any such effective notice, GPC's rights, licenses and obligations under thisAgreement with respect to such Patent shall terminate in any such

country, except those obligations that shall have accrued prior to the deliveryof such notice.

7. GRANT OF LICENSES

7.1. EXCLUSIVE SUBLICENSE GRANT. NEOTHERAPEUTICS hereby grants GPC anexclusive royalty-bearing right and sublicense in the Field throughout theTerritory, with the right to grant further sublicenses in accordance with theterms of this Agreement, under the J-M Licensed Technology to research, develop,make, have made, use, sell, offer for sale, have sold, import and export CoveredProducts.

7.2. EXCLUSIVE LICENSE GRANT. NEOTHERAPEUTICS hereby grants to GPC anexclusive royalty-bearing right and license in the Field throughout theTerritory, with the right to grant sublicenses in accordance with the terms ofthis Agreement, under the NEOTHERAPEUTICS Licensed Technology, theNEOTHERAPEUTICS Development Technology and NEOTHERAPEUTICS's interest in theJoint Development Technology to research, develop, make, have made, use, sell,offer for sale, have sold, import and export Covered Products.

7.3. SCOPE OF EXCLUSIVITY. The licenses granted to GPC pursuant toSections 7.1 and 7.2 shall be exclusive even as to NEOTHERAPEUTICS, except tothe extent necessary for NEOTHERAPEUTICS to perform its obligations under thisAgreement.

7.4. PROVISIONS REGARDING SUBLICENSES. Any sublicense by GPC of therights granted to GPC hereunder shall be consistent with the terms of thisAgreement and shall include an obligation for the Sublicensee to comply with theapplicable obligations of GPC set forth in this Agreement. GPC shall provide toNEOTHERAPEUTICS a copy of any sublicense agreement of the rights granted hereinwith any Third Party promptly after entering into such sublicense; providedthat, GPC may redact confidential portions of any such sublicense agreement, butonly to the extent that any such redactions do not impair NEOTHERAPEUTICS'ability to ensure compliance with the provisions of this Agreement.

7.5. TRANSFER OF INFORMATION. Promptly following the Effective Date,NEOTHERAPEUTICS shall coordinate with the Joint Development Committee andprovide copies of and access to all of LICENSOR'S INFORMATION, LICENSOR'SONGOING INFORMATION and all other information relating to the J-M Patent Rightsin its possession. Thereafter, NEOTHERAPEUTICS will continue to provide suchinformation, as well as NEOTHERAPEUTICS Development Technology, to GPC as itbecomes available to or is conceived by NEOTHERAPEUTICS as soon as practicableafter it becomes available to or is conceived by NEOTHERAPEUTICS.

8. DEVELOPMENT AND COMMERCIALIZATION

8.1. DEVELOPMENT EFFORTS BY GPC. GPC shall, either itself or through itsAffiliates or Sublicensees:

(a) at its own expense, or at the expense of its Affiliates orSublicensees, diligently conduct the development of Covered Products within theField using Platinum Complexes. GPC shall exercise in the performance of suchdevelopment commercially reasonable technical skill and competence;

(b) use its commercially reasonable endeavors to obtain appropriateregulatory approvals for Covered Products in the United States or any of thecountries currently comprising the European Union and Japan and to promote thedistribution and sale of Covered Products in the Field in such countries wheresuch regulatory approval is obtained;

(c) ensure that all literature prepared by GPC and relating to CoveredProducts bears an acknowledgement to the effect that they are subject to alicense from J-M and NEOTHERAPEUTICS, and all protocols prepared by GPC andrelating to Covered Products bears an acknowledgement to the effect that theyare subject to a license from NEOTHERAPEUTICS and attach to all Covered Productsa label quoting relevant patent numbers and stating that such Covered Productsare made under license under J-M and NEOTHERAPEUTICS; and

(d) advise NEOTHERAPEUTICS promptly of all approvals granted withrespect to Covered Product.

8.2. DELEGATION OF IND AUTHORITY; RIGHT TO REFERENCE. NEOTHERAPEUTICSacknowledges that a Phase II clinical trial of Satraplatin has been conductedpursuant to an Investigational New Drug Application Number 44,615 filed with theFDA (the "Filed IND"). Promptly after the Effective Date, NEOTHERAPEUTICS shallprepare for filing with the FDA all documents necessary to designate anddelegate to GPC all exclusive (even as to NEOTHERAPEUTICS) authority to takeactions and receive all communications from the FDA with respect to the Filed

IND and shall file such documents with the FDA following GPC's review andapproval of such documents. NEOTHERAPEUTICS shall not take any action to revokeor limit the delegation described in the preceding sentence. In addition, in theevent that the FDA, for any reason, fails to recognize and give full effect tothe delegation described in this Section, NEOTHERAPEUTICS shall not take anyaction with respect to the Filed IND or the clinical trials conducted pursuantto the Filed IND without the prior approval of the Joint Development Committee.In addition to the foregoing, NEOTHERAPEUTICS hereby grants to GPC anirrevocable right to reference the Filed IND and all other regulatorysubmissions, approvals, clearances, data and other documents and informationrelated to the Filed IND that NEOTHERAPEUTICS has filed or referenced with theFDA. Promptly after the Effective Date, the Parties shall begin planning andcoordinating the transfer to the Joint Development Committee of allresponsibilities regarding clinical trials conducted pursuant to the Filed IND.GPC shall promptly provide to NEOTHERAPEUTICS copies of all correspondencerelated to Covered Products delivered to or received from the FDA.

8.3. OWNERSHIP OF REGULATORY FILINGS. Except for the Filed IND, allINDs, NDAs and other regulatory filings made or filed by GPC with respect to anyCovered Products shall be in the name of, and be owned solely by, GPC.

8.4. REPORTING. (a) GPC shall promptly notify NEOTHERAPEUTICS concerningany happening or circumstance that GPC understands will result inNEOTHERAPEUTICS's loss of any of its rights under the J-M License Agreement, andGPC shall reasonably cooperate with NEOTHERAPEUTICS to prevent any such loss.

(b) Following any acquisition of or by NEOTHERAPEUTICS (whether throughmerger, consolidation, acquisition (directly or indirectly) of stockrepresenting thirty percent (30%) or more of the outstanding voting stock orother of its equity securities, sale of all or substantially all of its assets,or otherwise) by or of any Third Party that is a substantial competitor of GPC,as determined by objective standards (which shall include, but not be limitedto, a determination as to whether such Third Party is developing or marketing adrug of the same chemical class as the Covered Product or whether such ThirdParty is developing or marketing a drug targeted to the same tumor type as a anyproduct under development or being marketing by GPC) , GPC shall not be requiredto include in any report furnished by GPC pursuant to this Agreement, or provideto any representative of NEOTHERAPEUTICS (or any successor thereto), anyinformation that GPC, acting in good faith, determines to be competitivelysensitive or enabling information, unless such information is required forcompliance with the obligations to J-M under the J-M License Agreement, in whichevent NEOTHERAPEUTICS or its successor, as the case may be, and J-M (if it shallreceive such information) shall execute a nondisclosure agreement, satisfactoryto GPC in form and substance, concerning all such information.

8.5. TRADEMARKS. GPC shall market the Covered Products throughout theTerritory under trademarks (collectively, the "Trademarks") selected by GPC. GPCshall own all right, title and interest in and to such Trademarks and shall bearall costs and expenses of registering, and maintaining the registration of,same.

9. MONETARY OBLIGATIONS

9.1. LICENSE FEE. In partial consideration of the rights and licensesgranted to GPC under this Agreement, GPC shall pay to NEOTHERAPEUTICS thefollowing license fees at the times indicated below:

(a) Within ten (10) days after the execution of this Agreement, or suchlater date as the First Amendment to the J-M License Agreement shall have beenamended to (x) delete all references in the J-M License Agreement to the formsub-license agreement attached as Exhibit 1 to the J-M License Agreement and (y)change the references in Section (7) of the First Amendment to Paragraph 1 ofArticle IX in lieu of the references to Paragraph 6 of Article VII, GPC shallpay NEOTHERAPEUTICS a non-refundable, non-creditable, one-time license fee inthe amount of US$2,000,000 in cash.

(b) Within thirty (30) days of the first dosing of the first patient inthe first Phase III or registrational clinical trial of Satraplatin after theEffective Date (such date of dosing, the "Dosing Date"), GPC shall payNEOTHERAPEUTICS a non-refundable, non-creditable, one time license fee in theamount of $2,000,000, $1,000,000 of which fee shall be payable in cash and$1,000,000 of which fee shall be payable through the purchase by GPC, for anaggregate payment of $1,000,000, of a number of shares of common stock, par

value $.001 per share, of NEOTHERAPEUTICS equal to the lesser of (i) thequotient obtained by dividing (x) $1,000,000 by (y) one hundred and fiftypercent (150%) of the average closing sale price of the NEOTHERAPEUTICS commonstock, as reported by the Nasdaq quotation system for the twenty (20)consecutive trading days ending on the third trading day before the Dosing Date,or (ii) 19.9% of the number of shares of NEOTHERAPEUTICS common stockoutstanding as of the Dosing Date, or such other number of shares as Nasdaq mayspecify as the highest number of shares of common stock that NEOTHERAPEUTICS mayissue hereunder without first obtaining stockholder approval (the"NEOTHERAPEUTICS Shares"); provided that, if the number of NEOTHERAPEUTIC Sharesto be issued pursuant to this Section is determined pursuant to clause (ii)above, then, until GPC has purchased the number of shares of NEOTHERAPEUTICScommon stock determined pursuant to clause (i) above and subject toNEOTHERAPEUTICS ability to issue additional shares without first obtainingstockholder approval pursuant to Nasdaq regulations, all milestone payments owedby GPC to NEOTHERAPEUTICS pursuant to Section 9.2 below shall be used topurchase additional shares of NEOTHERAPEUTICS common stock at the pricedetermined as of the date of the achievement of the applicable milestone inaccordance with the formula set in clause (i)(y) above, and such additionalshares shall be considered to be NEOTHERAPEUTICS Shares hereunder. Concurrentlywith the first issuance of the NEOTHERAPEUTICS Shares, the Parties shall executea Registration Rights Agreement in the form attached hereto as Exhibit D. GPCagrees that it shall be a condition of the issuance of the NEOTHERAPEUTICSShares that GPC make the representations set forth in Section 2.3 as of the dateof issuance of the NEOTHERAPEUTICS Shares. GPC represents that it has notengaged in any short selling, option writing, equity swaps, or other types ofhedging transactions or derivative transactions with respect to the common stockof NEOTHERAPEUTICS, and GPC further agrees that it will not engage in any suchtransaction with respect to the common stock of NEOTHERAPEUTICS at any timeduring the period commencing on the Effective Date and ending one year after theissuance of the NEOTHERAPEUTICS Shares.

9.2. DEVELOPMENT MILESTONE PAYMENTS BY GPC. (a) In partialconsideration of the rights and licenses granted to GPC by NEOTHERAPEUTICS underthis Agreement, GPC shall pay NEOTHERAPEUTICS the following milestone paymentsupon the first occurrence of each event set forth below achieved by GPC or itsAffiliates:

(i) {redacted} upon acceptance by the FDA of an NDA covering Satraplatin

(ii) {redacted}

(iii) {redacted}

{redacted} Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

(iv) {redacted}

(v) {redacted}

(vi) {redacted}

(vii) {redacted}

Each of the foregoing payments shall be made within thirty (30) days afterachievement of such milestone. For the avoidance of doubt, after GPC has madeany of the foregoing payments with respect to any one Covered Product, GPC shallhave no further obligation to make such payment with respect to any otherCovered Product. As used in this Section 9.2, "approval" shall mean approval bythe FDA, the EMEA or the MHW of a NDA, MAA or other application for regulatoryapproval to market and sell a Covered Product in the United States, the EuropeanUnion or Japan, and with respect to the European Union shall also include anygovernment pricing or reimbursement approval necessary to market or sell suchCovered Product in the European Union.

9.3. ROYALTIES. (a) Subject to Section 9.3(b), in partial considerationof the rights and licenses granted to GPC under this Agreement, GPC shall payNEOTHERAPEUTICS a royalty on Net Sales of each Covered Product, commencing onthe First Commercial Sale of each Covered Product by GPC or its Affiliates ineach country in the Territory, in an amount equal to the applicable percentage

of the world-wide Net Sales of such Covered Product by GPC and its Affiliatesthroughout the Territory during each calendar year (or portion thereof) duringthe term of this Agreement:

(i) {redacted}

(ii) {redacted}

(iii) {redacted}

{redacted}

(b) Notwithstanding the foregoing, GPC's obligation to make paymentswith respect to each Covered Product in each country in the Territory underSections 9.3 and 9.4 shall expire upon the expiration of the Royalty Term withrespect to such Covered Product in such country.

(c) The obligation to pay royalties to NEOTHERAPEUTICS under thisSection 9.3 is imposed only once with respect to the same unit of a CoveredProduct, regardless of the number of Patents pertaining thereto.

9.4. SUBLICENSE INCOME.

(a) {redacted}

(b) {redacted}


9.5. THIRD PARTY PAYMENTS. (a) GPC, at its sole expense, shall pay allamounts owing to any Third Party to obtain rights to any Valid Claims of anyissued patent or patent application issued to Third Parties determined by theJoint Development Committee to be necessary for GPC's exercise of its rightshereunder to research, develop, make, have made, use, sell, offer for sale, havesold, import or export any Covered Product (collectively, "Third PartyPayments"). Except as provided in Section 9.5(b), GPC shall not be entitled toany credit under this Agreement on account of any Third Party Payments paid byGPC.

(b) {redacted}

9.6. PAYMENTS UNDER J-M LICENSE. Notwithstanding anything elsecontained herein, NEOTHERAPEUTICS shall remain solely responsible to J-M for allpayments due to J-M under the J-M License.

9.7. REIMBURSEMENT OF NEOTHERAPEUTICS DEVELOPMENT EXPENSES. Withinthirty (30) days of receipt of invoices from NEOTHERAPEUTICS, which invoicesshall be delivered by NEOTHERAPEUTICS no more frequently than quarterly, GPCshall reimburse NEOTHERAPEUTICS for all costs and expenses (including fullreimbursement for NEOTHERAPEUTICS personnel) incurred by NEOTHERAPEUTICS in thedevelopment of Covered Products as approved in advance by the Joint DevelopmentCommittee.

10. PAYMENTS AND REPORTS

10.1. PAYMENT. Except as otherwise provided in this Agreement, allroyalty and other payments due hereunder shall be paid quarterly within thirty(30) days after the end of each calendar quarter. Each such payment shall beaccompanied by a statement, Covered Product-by-Covered Product andcountry-by-country, of the amount of Net Sales during such quarter, the amountof royalties due on such Net Sales, the amount of Sublicense Fees and SublicenseRoyalties during such quarter and the amount owed to NEOTHERAPEUTICS on accountof such Sublicense Fees and Sublicense Royalties.

10.2. MODE OF PAYMENT. GPC shall make all payments required under thisAgreement as directed by NEOTHERAPEUTICS from time to time, in U.S. Dollars(except as provided in Section 10.6). All royalties due hereunder shall first bedetermined in the currency of the country in which the Covered Products in

question were sold and then converted into equivalent U.S. funds. The exchangerate for such conversion shall be that rate quoted in The Wall Street Journal onthe last business day of the applicable reporting period.

10.3. RECORDS RETENTION. GPC and its Affiliates shall keep complete andaccurate records pertaining to the sale of Covered Products in the Territory inaccordance with the obligations therefor set forth in the J-M License Agreement.

10.4. AUDIT REQUEST. At the request and expense (except as providedbelow) of NEOTHERAPEUTICS, GPC and its Affiliates shall permit an independent,certified


public accountant appointed by NEOTHERAPEUTICS and reasonably acceptable to GPC,at reasonable times and upon reasonable notice, to examine no more than once peryear those records and all other material documents relating to or relevant toNet Sales in the possession or control of GPC and its Affiliates, for a periodof three years after such royalties have accrued. The results of any suchexamination shall be made available to both Parties. If, as a result of anyinspection of the books and records of GPC or its Affiliates, it is shown thatGPC's royalty payments under this Agreement were less than the amount whichshould have been paid, then GPC shall make all payments required to eliminateany discrepancy revealed by said inspection within forty-five (45) days afterNEOTHERAPEUTICS's demand therefor. Furthermore, if the aggregate royaltypayments GPC made were less than ninety five (95%) of the amount which shouldhave been paid made during the period in question, GPC shall also reimburseNEOTHERAPEUTICS for the reasonable out-of-pocket cost of such inspection andshall pay interest on the deficiency pursuant to Section 10.7.

10.5. TAXES. In the event that GPC is required to withhold any tax tothe tax or revenue authorities in any country in the Territory in connectionwith any payment to NEOTHERAPEUTICS due to the laws of such country whichpayment is credited to NEOTHERAPEUTICS's tax liability, such amount shall bededucted from the royalty or other payment to be made by GPC, and GPC shallnotify NEOTHERAPEUTICS and promptly furnish NEOTHERAPEUTICS with copies of anytax certificate or other documentation evidencing such withholding. Each Partyagrees to cooperate with the other Party in claiming exemptions from suchdeductions or withholdings under any agreement or treaty from time to time ineffect.

10.6. BLOCKED CURRENCY. If at any time legal restrictions prevent GPC'sprompt remittance of part or all of the royalties due with respect to anycountry where a Covered Product is sold, GPC shall convert the amount owed toNEOTHERAPEUTICS into U.S. funds and shall pay NEOTHERAPEUTICS directly fromGPC's U.S. source of funds for the amount impounded. GPC shall then pay allfuture royalties due to NEOTHERAPEUTICS from GPC's U.S. source of funds so longas the legal restrictions of this Section 10.6 still apply.

10.7. LATE PAYMENTS. In the event that any payment GPC is required tomake hereunder is not made within thirty (30) days after such payment wasoriginally due, GPC shall pay interest on the past due amount as follows:

(a) If GPC's late payment pertains to a payment NEOTHERAPEUTICS isrequired to make under the J-M License Agreement and causes NEOTHERAPEUTICS tobecome liable to pay interest with respect to such payment under the J-M LicenseAgreement, then GPC shall pay interest on the past due amount as provided underthe applicable provision(s) of the J-M License Agreement.

(b) In all other events, GPC shall pay interest on the past due amountat the rate of twelve percent (12%) per annum, until payment in full is made.

11. MANUFACTURING. Promptly following the Effective Date, GPC andNEOTHERAPEUTICS shall negotiate in good faith the terms of a Supply Agreementregarding the supply of PLATINUM COMPLEXES (as defined in the J-M LicenseAgreement) to GPC. {redacted}

12. CONFIDENTIALITY

12.1. CONFIDENTIALITY; EXCEPTIONS. Except to the extent expressly

authorized by this Agreement or otherwise agreed in writing, the Parties agreethat, during the term of this Agreement and for five years thereafter, eachParty, its Affiliates and its Sublicensees, if any (collectively, a "receivingParty"), shall use their best efforts to keep completely confidential, shall notpublish or otherwise disclose to any Third Party and shall not use for anypurpose other than the performance of this Agreement both the financial terms ofthis Agreement and any information furnished to it by the other Party, itsAffiliates or its Sublicensees, if any (collectively, a "disclosing Party") (andshall ensure that its and its Affiliates' and its Sublicensees' respectivedirectors, officers, employees or agents do likewise), except to the extent thatit can be established by the receiving Party by competent proof that suchinformation: (i) is, or hereafter becomes, generally available to the publicother than by reason of any default by the receiving Party with respect to itsconfidentiality obligations hereunder; (ii) was already known to the receivingParty at the time of disclosure by the disclosing Party; (iii) was lawfullydisclosed to the receiving Party by a Third Party who was not in default of anyconfidentiality obligation to the disclosing Party; or (iv) is independentlydeveloped by or for the receiving Party without reference to or reliance uponthe information furnished by the disclosing Party (all such information to whichnone of the foregoing exceptions applies, "Confidential Information"). TheNEOTHERAPEUTICS Licensed Technology and NEOTHERAPEUTICS Development Technologyshall be the Confidential Information of NEOTHERAPEUTICS and the GPC DevelopmentTechnology shall be the Confidential Information of GPC. The Joint DevelopmentTechnology shall be the Confidential Information of both Parties.

12.2. EXCLUSIONS TO CONFIDENTIALITY. The restrictions contained inSection 12.1 shall not apply to any Confidential Information in the hands of areceiving Party that (i) is submitted by the receiving Party to governmentalauthorities to facilitate the issuance of marketing approvals for a CoveredProduct, provided that reasonable measures shall be taken to assure confidentialtreatment of such information, if practicable; (ii) is provided by GPC to anyThird Party under appropriate terms and conditions, including confidentialityprovisions equivalent to those in this Agreement, for consulting, manufacturingdevelopment, manufacturing, external testing, marketing trials and sublicensingor potential sublicensing; or (iii) is otherwise required to be disclosed incompliance with applicable laws or regulations (including, without limitation,to comply with any governmental or stock exchange disclosure requirements) or anorder by a court or other regulatory body having competent jurisdiction;provided, however, that if a receiving Party is required to make any suchdisclosure of the disclosing Party's Confidential Information such receivingParty shall, except where impracticable for necessary disclosures (for exampleto physicians conducting studies or to health authorities), give reasonableadvance notice to the other Party of such disclosure


requirement and, except to the extent inappropriate in the case of patentapplications or otherwise, will use its best efforts to secure confidentialtreatment of such Confidential Information required to be disclosed. Inaddition, any press release or other public announcement permitted by the termsof Section 17.7 hereof shall be excluded from the provisions of Section 12.1.

12.3. INJUNCTIVE RELIEF. The Parties acknowledge that monetary damagesalone would not adequately compensate the disclosing Party in the event of amaterial breach by the receiving Party of this Section 12, and that, in additionto all other remedies available to the disclosing Party under this Agreement, atlaw or in equity, it shall be entitled to injunctive relief for the enforcementof its rights under this Section 12, without the posting of a bond or othersecurity.

13. INTELLECTUAL PROPERTY

13.1. PATENT ENFORCEMENT. (a) Each Party shall notify the other promptlyafter such Party becomes aware of any alleged infringement of any Patentlicensed to GPC under this Agreement in any country in the Territory. Except asprovided in Section 13.3, GPC shall have the first right, but not the duty, toinstitute patent infringement actions against Third Parties with respect to anysuch alleged infringement. GPC shall take all such actions under this Section13.1(a) (other than with respect to a Patent included solely in the GPCDevelopment Technology) in reasonable consultation with NEOTHERAPEUTICS andshall keep NEOTHERAPEUTICS apprised as to the status of any such infringement

action GPC institutes. NEOTHERAPEUTICS shall execute all reasonable, necessaryand proper documents and take such actions as shall be appropriate to allow GPCto institute and prosecute infringement actions under this Section 13.1(a).

(b) The costs and expenses of bringing and maintaining any infringementaction under Section 13.1(a) shall be borne solely by GPC.

(c) Any award or compensation (including the fair market value ofnon-monetary compensation) paid by Third Parties as a result of any infringementaction brought by GPC under Section 13.1(a) (whether by way of settlement orotherwise) shall be allocated first to reimbursement of GPC for all expensesincurred by it in connection with such action. Any remaining award orcompensation shall be used to pay NEOTHERAPEUTICS the royalty it would have beenentitled to receive had the balance of such recovery or damages, to the extentattributable to sales of such infringing products, been attributable to sales ofCovered Products by GPC hereunder.

(d) Except as provided in Section 13.3, in the event GPC elects not to,or fails to, exercise its rights under Section 13.1(a) with respect to anyalleged infringement of a Patent licensed to GPC under this Agreement (excludingany Patent included solely in the GPC Development Technology) within one hundredtwenty (120) days after receiving notice thereof, NEOTHERAPEUTICS shall have theright, but not the duty, to institute patent infringement actions against ThirdParties with respect to any such alleged infringement. NEOTHERAPEUTICS shalltake all such actions under this Section 13.1(d) in reasonable consultation withGPC and shall keep GPC apprised as to

the status of any such infringement action NEOTHERAPEUTICS institutes. GPC shallexecute all reasonable, necessary and proper documents and take such actions asshall be appropriate to allow NEOTHERAPEUTICS to institute and prosecuteinfringement actions under this Section 13.1(d). Any award or compensation(including the fair market value of non-monetary compensation) paid by ThirdParties as a result of any infringement action brought by NEOTHERAPEUTICS underthis Section 13.1(d) (whether by way of settlement or otherwise) shall beallocated first to reimbursement of NEOTHERAPEUTICS for all expenses incurred byit in connection with such action. Any remaining award or compensation shall beallocated equally between the Parties.

13.2. INFRINGEMENT ACTIONS BY THIRD PARTIES. (a) Each Party shall notifythe other Party promptly in writing of any claim of, or action for, infringementof any Patents owned or licensed by Third Parties which is threatened, made orbrought against either Party by reason of either Party's performance of itsobligations under this Agreement or manufacture, use or sale of any CoveredProducts in the Territory in the Field.

(b) Except as provided in Section 13.3, in the event that such an actionfor infringement is commenced solely against a Party or both Parties jointlyand/or any of their respective Affiliates or Sublicensees, as the case may be,with respect to any Covered Product developed and commercialized by GPC, itsAffiliates and/or Sublicensees, GPC shall defend such action at its own expense,and NEOTHERAPEUTICS hereby agrees to assist and cooperate with GPC to the extentnecessary in the defense of such suit, in accordance with Section 13.2(c). GPCshall have the right to settle any such action or consent to an adverse judgmentthereto, and NEOTHERAPEUTICS's consent shall not be required unless suchsettlement or consent: (i) imposes any material obligation on NEOTHERAPEUTICS(including under Section 13.2(d)), or (ii) materially impairs NEOTHERAPEUTICS'srights in or to any J-M Licensed Technology, NEOTHERAPEUTICS LicensedTechnology, NEOTHERAPEUTICS Development Technology and/or Joint DevelopmentTechnology, in which event NEOTHERAPEUTICS's consent shall not be unreasonablywithheld or delayed.

(c) The costs of defending any infringement action with respect to aCovered Product developed and commercialized by GPC, its Affiliates and/orSublicensees shall be borne solely by GPC.

(d) During the pendency of any such action, GPC shall continue to payall royalties due hereunder. Subject to Section 9.5(b), GPC shall be fullyliable for the payment of any award for damages, or any amount due pursuant toany settlement entered into by GPC, to the extent that any such action pertainsto a Covered Product developed and commercialized by GPC and/or its Affiliatesor Sublicensees.

(e) Except to the extent that the provisions of Section 13.1 shall applyto any portion thereof, GPC shall retain any award or compensation (including

the fair market value of non-monetary compensation) received by GPC as a resultof any such action (i.e., as a result of a counterclaim).

13.3. SUPERIOR RIGHTS OF J-M. Notwithstanding any other provision ofthis Agreement, the Parties' respective rights and obligations under thisSection 13 shall be subject, in all events, to any superior rights of J-M underthe J-M License Agreement regarding the J-M Licensed Technology.

14. INDEMNIFICATION

14.1. BY GPC. GPC shall indemnify and hold NEOTHERAPEUTICS and itsAffiliates and their respective directors, officers, employees and agents,harmless from and against any and all liabilities, damages, losses, costs andexpenses (including the reasonable fees of attorneys and other professionals andother reasonable litigation expenses) arising out of or resulting from:

(i) the negligence, recklessness or intentional misconduct of GPC, its Affiliates or its Sublicensees and their respective directors, officers, employees and agents, in connection with the work performed by GPC in connection with the development of Covered Products or pursuant to Section 8 or in connection with GPC's exercise of any of its rights hereunder;

(ii) any and all product liability claims resulting from the development and/or commercialization of any Covered Product by GPC, its Affiliates or its Sublicensees;

(iii) any warranty claims, Covered Product recalls or any tort claims of personal injury (including death) or property damage relating to or arising out of the manufacture, use, distribution or sale of any Covered Product by GPC, its Affiliates or its Sublicensees due to any negligence, recklessness or intentional misconduct by, or strict liability of, GPC, its Affiliates or its Sublicensees, and their respective directors, officers, employees and agents, except, in each case, to the comparative extent such claim arose out of or resulted from the negligence, recklessness or intentional misconduct of NEOTHERAPEUTICS or its Affiliates and their respective directors, officers, employees and agents; or

(iv) any breach of any representation or warranty made by GPC in Section 2.1.

14.2. BY NEOTHERAPEUTICS. NEOTHERAPEUTICS shall indemnify and hold GPC,its Affiliates and its Sublicensees and their respective directors, officers,employees and agents, harmless from and against any and all liabilities,damages, losses, costs and expenses (including the reasonable fees of attorneysand other professionals and other reasonable litigation expenses) arising out ofor resulting from:

(i) the negligence, recklessness or intentional misconduct of NEOTHERAPEUTICS or its Affiliates and their respective directors, officers, employees and agents, in connection with the work performed by NEOTHERAPEUTICS under the development of Covered Products or pursuant to Section 5 or in connection with NEOTHERAPEUTICS's exercise of any of its rights hereunder; or

(ii) any breach of any representation or warranty made by NEOTHERAPEUTICS pursuant to Section 2 or 3.1.

14.3. NOTICE. In the event that any Person entitled thereto (an"Indemnitee") is seeking indemnification under Section 14.1 or 14.2, suchIndemnitee shall inform the indemnifying Party of a claim as soon as reasonablypracticable after the indemnitee receives notice of the claim, shall permit theindemnifying Party to assume direction and control of the defense of the claim(including the sole right to settle it at the sole discretion of theindemnifying Party, provided that such settlement does not impose any materialobligation on the indemnitee or the other Party) and shall cooperate asrequested (at the expense of the indemnifying Party) in the defense of the claim(including, without limitation, granting the indemnifying Party limited accessto pertinent records and making persons under such Indemnitee's controlavailable for interview and testimony).

14.4. COMPLETE INDEMNIFICATION. As the Parties intend completeindemnification, all costs and expenses incurred by any Indemnitee to enforcethis Section 14 shall be reimbursed by the indemnifying Party.

15. TERM; TERMINATION

15.1. TERM. This Agreement shall commence as of the Effective Date and,unless sooner terminated as provided hereunder, shall expire as follows:

(a) As to each Covered Product in each country in the Territory, thisAgreement shall expire upon the expiration of the Royalty Term with respect tosuch Covered Product in such country.

(b) This Agreement shall expire in its entirety upon the termination ofthe respective Royalty Terms with respect to all Covered Products in allcountries in the Territory.

15.2. EFFECT OF EXPIRATION. Following the expiration of this Agreementwith respect to a Covered Product in a country in the Territory pursuant toSection 15.1(a), GPC shall have the royalty-free, perpetual right to continue tomake, have made, use, sell, offer for sale, have sold and export such CoveredProduct in such country. Following the expiration of the term of this Agreementin its entirety pursuant to Section 15.1(b), GPC shall have the royalty-free,perpetual right to continue to make, have made, use, sell, offer for sale, havesold and export all Covered Products in all countries in the Territory.

15.3. TERMINATION BY EITHER PARTY. Each Party shall have the right toterminate this Agreement, upon notice to the other Party, in the event that:

(i) Such other Party materially defaults with respect to any of its material obligations under this Agreement and does not cure such default within sixty (60) days after the receipt of a notice from the non-breaching Party specifying the nature of, and requiring the remedy of, such default (or, if such default cannot be cured within such sixty (60)-day period, if the breaching Party does not commence and diligently continue actions to cure same during such sixty

(60)-day period); provided that, (x) if NEOTHERAPEUTICS is the Party claiming a default by GPC, GPC shall promptly following receipt of such notice of default notify NEOTHERAPEUTICS if it intends to seek to cure such default, (y) if the default relates to the payment of any amounts owed under this Agreement, the cure period described above shall be fifteen (15) days from receipt of notice of such default, and (z) if any such default is limited to the breaching Party's obligations with respect to a particular Covered Product and/or a particular country in the Territory, then any termination of this Agreement under this clause (i) due to such default shall be limited to the breaching Party's rights under this Agreement with respect to such Covered Product and/or country. Any termination pursuant to this clause (i) shall be without prejudice to any of the non-breaching Party's other rights under this Agreement, and in addition to any other remedies available to it by law or in equity;

(ii) The other Party shall have: (i) voluntarily commenced any proceeding or filed any petition seeking relief under the bankruptcy, insolvency or other similar laws of any jurisdiction, (ii) applied for, or consented to, the appointment of a receiver, trustee, custodian, sequestrator, conciliator, administrator or similar official for it or for all or substantially all of its property, (iii) filed an answer admitting the material allegations of a petition filed against or in respect of it in any such proceeding, (iv) made a general assignment for the benefit of creditors of all or substantially all of its assets, (v) admitted in writing its inability to pay all or substantially all of its debts as they become due, or (vi) taken corporate action for the purpose of effecting any of the foregoing; or

(iii) An involuntary proceeding shall have been commenced, or any involuntary petition shall have been filed, in a court of competent jurisdiction seeking: (i) relief in respect of the other Party, or of its property, under the bankruptcy, insolvency or similar laws of any jurisdiction, (ii) the appointment of a receiver, trustee, custodian, sequestrator, conciliator, administrator or similar official for such other Party or for all or substantially all of its property, or (iii) the winding-up or liquidation of such other Party; and, in each case, such proceeding or petition shall have continued undismissed for sixty (60) days, or an order or decree approving or ordering any of the foregoing shall have continued unstayed, unappealed and in effect for

thirty (30) days.

15.4. TERMINATION BY GPC. Notwithstanding any other provision of thisAgreement, GPC shall have the right to terminate this Agreement, in its entiretyor with respect to any particular Covered Product and/or country in theTerritory, at any time upon six (6) months' notice (or less, at NEOTHERAPEUTICSdiscretion) to NEOTHERAPEUTICS.

15.5. EFFECT OF EXPIRATION OR TERMINATION. (a) Subject to Section15.5(b), upon any termination of this Agreement by NEOTHERAPEUTICS pursuant toSection 15.3 or by GPC pursuant to Section 15.4, GPC shall (i) transfer andassign to NEOTHERAPEUTICS all of GPC's right, title and interest in and to anyGPC Development Technology and all data, reports, records, materials and otherintellectual

property owned or controlled by GPC that relates exclusively to the CoveredProducts; (ii) grant NEOTHERAPEUTICS a non-exclusive license, solely for thepurpose of NEOTHERAPEUTICS's developing, making, having made, using, marketingand selling Covered Products, under GPC's interest in any Joint DevelopmentTechnology that does not exclusively relate to the Covered Products; and (iii)transfer and assign to NEOTHERAPEUTICS ownership of all INDs, NDAs and otherregulatory filings made or filed with respect to any Covered Product (or, ifsuch transfer and assignment is not permitted under the laws of any applicablejurisdiction, GPC shall take such other permitted actions with respect to suchfilings as may be reasonably requested by NEOTHERAPEUTICS), all uponcommercially reasonable, arms length financial terms and conditions that theParties shall negotiate in good faith and agree upon as soon as practicableafter such termination of this Agreement; provided that, if this Agreement isterminated by GPC pursuant to Section 15.4, then NEOTHERAPEUTICS shall not beobligated to pay any amount for the licenses and transfers described in thissentence. In the event the Parties, despite the mutual use of good faithefforts, are unable to agree upon such terms and conditions, the Parties shallappoint an independent valuation expert who shall determine such terms andconditions, which determination shall be binding upon the Parties. If theParties are unable to agree upon the appointment of such an expert, then eachParty shall nominate an expert (the cost of whom shall be borne by such Party),and both experts appointed by the Parties shall jointly appoint the expert whoshall make such determination. Any expert appointed pursuant to this Section15.5(a) shall have at least fifteen (15) years' experience in the business ofpharmaceutical development and commercialization. Except as provided above, thecosts and expenses of any expert acting under this Section 15.5(a) shall beborne equally by the Parties.

(b) Notwithstanding the foregoing:

(i) In the event of any termination of this Agreement by NEOTHERAPEUTICSpursuant to Section 15.3 or by GPC pursuant to Section 15.4 with respect tofewer than all of the Covered Products and/or fewer than all of the countries inthe Territory, the rights, licenses and other benefits to be transferred,granted and otherwise assigned to NEOTHERAPEUTICS under Section 15.5(a) shall beexpressly limited to those pertaining to the Covered Products and/or thecountries in the Territory to which such termination applies; and

(ii) At any time prior to any transfer, granting and assignment ofrights, licenses and benefits to NEOTHERAPEUTICS pursuant to Section 15.5(a),NEOTHERAPEUTICS may elect, upon notice to GPC, to waive the application ofSection 15.5(a) with respect to such rights, licenses and benefits. Followingany such waiver neither Party shall have any obligation or liability to theother with respect to such rights, licenses and benefits.

15.6. RIGHT TO SELL STOCK ON HAND. Provided that GPC is not in materialbreach of any obligation under this Agreement at the time of any termination ofthis Agreement, in whole or in part, GPC shall have the right for one yearthereafter to dispose of all Covered Product then in its inventory and tocomplete manufacture of and dispose of any work-in-progress then beingmanufactured, as though this Agreement had

not terminated. GPC shall pay royalties thereon, in accordance with theprovisions of this Agreement, as though this Agreement had not terminated.

15.7. SURVIVAL OF SUBLICENSES. Upon any termination of this Agreement,all sublicenses granted by GPC under this Agreement shall be automaticallyassigned to NEOTHERAPEUTICS, which shall thereafter receive all benefits and

have all obligations under the sublicenses as in the place and stead of GPC.

15.8. EFFECT OF TERMINATION OF J-M LICENSE AGREEMENT. Upon anytermination of the J-M License Agreement, GPC shall attorn to and accept J-M inplace of NEOTHERAPEUTICS such that this Agreement shall be deemed to be anagreement between J-M and GPC.

15.9. ACCRUED RIGHTS, SURVIVING OBLIGATIONS. (a) Termination,relinquishment or expiration of this Agreement for any reason shall be withoutprejudice to any rights which shall have accrued to the benefit of either Partyprior to such termination, relinquishment or expiration. Such termination,relinquishment or expiration shall not relieve either Party from obligationswhich are expressly indicated to survive termination or expiration of thisAgreement. The rights of the Parties upon termination described in thisAgreement shall not be exclusive of any other rights or claims at law or inequity that either Party may have against the other arising out of thisAgreement.

(b) Termination, relinquishment or expiration of this Agreement shallnot terminate each Party's obligation to pay all royalties, milestone paymentsand other monetary obligations that may have accrued hereunder prior to suchtermination. All of the Parties' rights and obligations under Sections 6.1, 6.2,8.5, 10, 12, 13 (solely with respect to actions pending at such time), 14, 15.2,15.5, 15.6, 15.7, 15.8, 15.9, 17.1 (if in effect at such time), 17.3, 17.5,17.12, 17.13 and 17.14 shall survive termination, relinquishment or expirationhereof.

16. FORCE MAJEURE

Neither Party shall be held liable or responsible to the other Party norbe deemed to be in default under or in breach of any provision of this Agreementfor failure or delay in fulfilling or performing any obligation under thisAgreement when such failure or delay is due to force majeure, and without thefault or negligence of the Party so failing or delaying. For purposes of thisAgreement, force majeure shall be defined as causes beyond the control of theParty, including, without limitation, acts of God; acts, regulations, or laws ofany government; war; civil commotion; destruction of production facilities ormaterials by fire, flood, earthquake, explosion or storm; labor disturbances;epidemic; and failure of public utilities or common carriers. In such eventNEOTHERAPEUTICS or GPC, as the case may be, shall immediately notify the otherParty of such inability and of the period for which such inability is expectedto continue. The Party giving such notice shall thereupon be excused from suchof its obligations under this Agreement as it is thereby disabled fromperforming for so long as it is so disabled and for thirty (30) days thereafter.To the extent possible, each Party shall use reasonable efforts to minimize theduration of any force majeure.

17. MISCELLANEOUS

17.1. RELATIONSHIP OF PARTIES. Nothing in this Agreement is intended orshall be deemed to constitute a partnership, agency, employment or joint venturerelationship between the Parties. Neither Party shall be entitled to, or shall,incur any debts or make any commitments for the other, except to the extent, ifat all, specifically provided herein.

17.2. ASSIGNMENT. (a) Each Party shall be entitled to assign thisAgreement to any of its Affiliates upon sixty (60) days' prior written notice tothe other Party; provided, however, that in the event of any such assignment,the assigning Party shall remain jointly and severally liable with respect toall of its obligations hereunder, and in the event of any default relating toany such obligations, the other Party shall be entitled to proceed againsteither such Affiliate or directly against the assigning Party, as such otherParty may determine in its sole discretion, to enforce this Agreement.

(b) Except as provided in Section 17.5(a), neither Party shall beentitled to assign its rights hereunder without the express written consent ofthe other Party, except that each Party may assign this Agreement to anyassignee of all or substantially all of such Party's business (or that portionthereof to which this Agreement relates) or in the event of such Party's merger,consolidation or similar transaction.

(c) No assignment contemplated by this Section 17.3 shall be valid oreffective unless and until the assignee/transferee shall agree in writing to be

bound by the provisions of this Agreement.

17.3. DISCLAIMER OF WARRANTIES. EXCEPT AS EXPRESSLY PROVIDED IN SECTIONS2 AND 3.1, THE PARTIES EXPRESSLY DISCLAIM ALL OTHER WARRANTIES, EXPRESS ORIMPLIED, INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY, FITNESS FORA PARTICULAR PURPOSE, OR NON-INFRINGEMENT OF THIRD PARTY RIGHTS, OR ARISING FROMA COURSE OF DEALING OR USAGE OF TRADE PRACTICE.

17.4. FURTHER ACTIONS. Each Party shall execute, acknowledge and deliversuch further instruments, and take all such other acts, as may be necessary orappropriate in order to carry out the purposes and intent of this Agreement.

17.5. NOTICE. Any notice or request required or permitted to be givenunder or in connection with this Agreement shall be deemed to have beensufficiently given if in writing and personally delivered or sent by certifiedmail (return receipt requested), facsimile transmission (receipt verified), orovernight express courier service (signature required), prepaid, to the Partyfor which such notice is intended, at the address set forth for such Partybelow:

(i) In the case of GPC, to:

GPC BIOTECH AG

Fraunhoferstrasse 20 D-82152 Martinsried/Munich Germany

Attention: Chief Executive Officer Facsimile No.: 011-49-89-8565-2610

With a copy to:

Ropes & Gray One International Place Boston, Massachusetts USA Attention: Marc A. Rubenstein, Esq. Facsimile No.: 617-951-7050

(ii) In the case of NEOTHERAPEUTICS, to:

157 Technology Drive Irvine, California 92618 USA Attention: Facsimile No.: 949-788-6706

or to such other address for such Party as it shall have specified by likenotice to the other Party, provided that notices of a change of address shall beeffective only upon actual receipt thereof. If delivered personally or byfacsimile transmission, the date of delivery shall be deemed to be the date onwhich such notice or request was given. If sent by overnight express courierservice, the date of delivery shall be deemed to be the next business day aftersuch notice or request was deposited with such service. If sent by certifiedmail, the date of delivery shall be deemed to be the fifth (5th) business dayafter such notice or request was deposited with the postal service in thecountry of mailing.

17.6. USE OF NAME. Except as otherwise provided herein, neither Partyshall have any right, express or implied, to use in any manner the name or otherdesignation of the other Party or any other trade name or trademark of the otherParty (including, without limitation, any Trademark) for any purpose inconnection with the performance of this Agreement.

17.7. PUBLIC ANNOUNCEMENTS. (a) Except as required by law (including,without limitation, the applicable disclosure requirements of any relevantregulatory authority or stock exchange) and as permitted by Section 12.2,neither Party shall make any public announcement concerning this Agreement, anyCovered Product or any other subject matter hereof without the prior writtenconsent of the other Party, which shall not be unreasonably withheld or delayed.It shall not be unreasonable for a Party to withhold consent with respect to anypublic announcement containing any of such Party's

Confidential Information. In the event of any required or proposed publicannouncement, (i) the Parties shall consult with each other in good faith as tothe timing thereof, and (ii) the Party making such announcement shall providethe other Party with a copy of the proposed text prior to such announcementsufficiently in advance of the scheduled release of such announcement to affordsuch other Party a reasonable opportunity to review and comment upon theproposed text. Notwithstanding the foregoing, the Parties agree to prepare amutually agreeable press release that may be used by either Party in connectionwith this Agreement, and any further announcement containing substantially thesame information may be used without the need to seek the consent of the otherParty.

(b) Each Party acknowledges and agrees that the other Party needs tocommunicate with its investors regularly and keep them apprised of thedevelopment status of the products in which such Party has an interest. In orderto facilitate this communication, promptly after the Effective Date each Partyshall designate, from time to time, one employee who shall have primaryresponsibility for reviewing and approving all proposed investor communicationsof the other Party, to the extent that they pertain to this Agreement, anyCovered Product or any other subject matter hereof. Each Party shall instructsuch employee to review the content of such draft communications asexpeditiously as possible and otherwise to cooperate with and assist the otherParty in connection therewith, so long as the number of such communications andthe timing thereof are reasonable.

(c) Following a Party's consent to or approval of the publicannouncement of any information pursuant to this Section 17.7, both Partiesshall be entitled to make subsequent public announcements of such informationwithout renewed compliance with this Section 17.7, unless the scope and/orduration of such consent or approval is expressly limited.

17.8. WAIVER. A waiver by either Party of any of the terms andconditions of this Agreement in any instance shall not be deemed or construed tobe a waiver of such term or condition for the future, or of any subsequentbreach hereof. All rights, remedies, undertakings, obligations and agreementscontained in this Agreement shall be cumulative, and none of them shall be inlimitation of any other remedy, right, undertaking, obligation or agreement ofeither Party.

17.9. COMPLIANCE WITH LAW. Nothing in this Agreement shall be deemed topermit a Party to export, re-export or otherwise transfer any Covered Productsold under this Agreement without compliance with applicable laws.

17.10. SEVERABILITY. When possible, each provision of this Agreementwill be interpreted in such manner as to be effective and valid under applicablelaw, but if any provision of this Agreement is held to be prohibited by orinvalid under applicable law, such provision shall be ineffective only to theextent of such prohibition or invalidity, without invalidating the remainder ofthis Agreement.

17.11. AMENDMENT. No amendment, modification or supplement of anyprovisions of this Agreement shall be valid or effective unless made in writingand signed by a duly authorized officer of each Party.

17.12. GOVERNING LAW; ENGLISH ORIGINAL; JURISDICTION. (a) This Agreementshall be governed by and interpreted in accordance with the laws of theCommonwealth of Massachusetts without regard to its choice of law principles.The English original of this Agreement shall prevail over any translationhereof.

(b) Without prejudice to the rights and obligations of the Parties underSection 17.13, each Party hereby consents to the in personam jurisdiction of anystate or federal court sitting in the Commonwealth of Massachusetts with respectto any matter arising in connection with this Agreement and further consents tothe service of any process, notice of motion or other application to any suchcourt or a judge thereof outside the Commonwealth of Massachusetts by registeredor certified mail or personal service, provided that reasonable time is allowedfor appearance. Each Party hereby waives, to the greatest extent it may do so,any defense it may have on the grounds of inconvenient forum with respect to anyaction or proceeding maintained in any state or federal court in Massachusetts.

17.13. ARBITRATION. (a) Any dispute arising out of or relating to anyprovisions of this Agreement shall be finally settled by arbitration to be heldin Boston, Massachusetts, under the auspices and then current commercial

arbitration rules of the American Arbitration Association (the "AAA"). Sucharbitration shall be conducted by three (3) arbitrators. Within thirty (30) daysafter the commencement of any arbitration, each Party shall appoint onearbitrator, and these two arbitrators shall jointly appoint the thirdarbitrator, who shall have significant experience in pharmaceutical drugdevelopment and commercialization; provided, however, that if the twoarbitrators appointed by the Parties are unable to agree upon the thirdarbitrator within thirty (30) days after their appointment, then the thirdarbitrator shall be appointed by the AAA. The Parties shall instruct sucharbitrators to render a determination of any such dispute within four (4) monthsafter their appointment. All arbitration proceedings shall be conducted inEnglish. Judgment upon any award rendered may be entered in any court havingjurisdiction, or application may be made to such court for a judicial acceptanceof the award and an order of enforcement, as the case may be.

(b) Section 17.14(a) shall not prohibit a Party from seeking injunctiverelief from a court of competent jurisdiction in the event of a breach orprospective breach of this Agreement by the other Party which would causeirreparable harm to the first Party.

17.14. NO CONSEQUENTIAL DAMAGES. IN NO EVENT SHALL EITHER PARTY OR ANYOF ITS RESPECTIVE AFFILIATES OR SUBLICENSEES BE LIABLE TO THE OTHER PARTY OR ANYOF ITS AFFILIATES OR SUBLICENSEES FOR SPECIAL, INDIRECT, INCIDENTAL ORCONSEQUENTIAL DAMAGES, WHETHER IN CONTRACT, WARRANTY, TORT, NEGLIGENCE, STRICTLIABILITY OR OTHERWISE, INCLUDING, BUT NOT LIMITED TO, LOSS OF

PROFITS OR REVENUE, OR CLAIMS OF CUSTOMERS OF ANY OF THEM OR OTHER THIRD PARTIESFOR SUCH OR OTHER DAMAGES.

17.15. ENTIRE AGREEMENT. This Agreement (together with the Exhibitshereto) sets forth the entire agreement and understanding between the Parties asto the subject matter hereof and merges all prior discussions and negotiationsbetween them, and neither of the Parties shall be bound by any conditions,definitions, warranties, understandings or representations with respect to suchsubject matter other than as expressly provided herein or as duly set forth onor subsequent to the Effective Date in writing and signed by a proper and dulyauthorized officer or representative of the Party to be bound thereby. Withoutlimiting the generality of the foregoing, the terms and conditions of thisAgreement shall supersede the terms and conditions of any confidentiality,non-disclosure or similar such agreement that the Parties may have executedprior to the Effective Date.

17.16. PARTIES IN INTEREST. All the terms and provisions of thisAgreement shall be binding upon, inure to the benefit of and be enforceable bythe Parties hereto and their respective permitted successors and assigns.

17.17. DESCRIPTIVE HEADINGS. The descriptive headings of this Agreementare for convenience only, and shall be of no force or effect in construing orinterpreting any of the provisions of this Agreement.

17.18. COUNTERPARTS. This Agreement may be executed simultaneously intwo counterparts, any one of which need not contain the signature of more thanone Party, but both such counterparts taken together shall constitute one andthe same agreement.

IN WITNESS WHEREOF, each of the Parties has caused this Agreement to beexecuted by its duly authorized officer as of the day and year first abovewritten.


By: /s/ Rajesh Shrotriya -------------------------------------- Name: Rajesh C. Shrotriya, M.D. Title: Chairman, CEO & President

GPC BIOTECH AG

By: /s/ Bernd R. Seizinger -------------------------------------- Name: Bernd R. Seizinger Title: Chief Executive Officer

By: /s/ S. Meier-Ewert -------------------------------------- Name: S. Meier-Ewert Title: Chief Scientific Officer

EXHIBIT A

J-M License Agreement

The Johnson Matthey PLC License Agreement was filed as Exhibit 10.5 to Form 10-Q, as filed with the Securities and Exchange Commission on November 14, 2001, and incorporated herein by this reference.

The First Amendment to the License Agreement dated August 28, 2001 between Johnson Matthey PLC and NeoTherapeutics, Inc. dated September 30, 2002, is filed as Exhibit 10.8 to this Form 10-Q and incorporated herein by this reference.

EXHIBIT B

Patent Rights

Filed as Schedule A of Exhibit 10.5 to Form 10-Q, as filed with the Securities and Exchange Commission on November 14, 2001, and incorporated herein by this reference.

EXHIBIT C

Initial Members of Joint Development Committee

GPC Designees: Marcel Rozencweig, Chairman Michael Petrone Ed McNiff

NEOTHERAPEUTICS Designees: Gino Lenaz Ashok Gore Shanta Chawla

EXHIBIT D

Registration Rights Agreement


REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (this "Agreement") is made as of_______ __, 2002, between NeoTherapeutics, Inc., a Delaware corporation (the"Company"), and GPC Biotech AG, a company organized under the laws of theFederal Republic of Germany (the "GPC").

RECITALS

The Company and GPC are parties to a Co-Development and License Agreement(the "License Agreement") dated as of September __, 2002, pursuant to which theCompany has agreed to sell to GPC and GPC has agreed to purchase from theCompany shares of the Company's Common Stock, upon the attainment of certainmilestones under the License Agreement. As a condition to GPC's obligation topurchase shares of Common Stock under the License Agreement, the Company and GPCare required to enter into this Agreement in order to provide GPC with certainrights to register for resale the shares of the Company's Common Stock purchasedunder the License Agreement.

AGREEMENT

The parties agree as follows:

1. DEFINITIONS; REGISTRATION RIGHTS.

1.1 DEFINITIONS. For purposes of this Agreement:

(a) "Common Stock" means the common stock, par value $0.001 pershare, of the Company.

(b) "Exempt Registration" means a registration statement relating tothe sale of securities by the Company pursuant to a stock option, stock purchaseor similar benefit plan or an SEC Rule 145 transaction or any other registrationstatement that would not customarily provide for the secondary sale of equityshares for cash.

(c) "Holder" means (i) GPC and (ii) any person owning RegistrableSecurities to whom the rights under this Section 1 have been transferred inaccordance with Section 1.9 of this Agreement.

(d) "person" means any individual, corporation, partnership, limitedliability company, trust, business, association or government or politicalsubdivision thereof, governmental agency or other entity.

(e) "register," "registered," and "registration" refer to aregistration effected by preparing and filing a registration statement orsimilar document in compliance with the Securities Act and the declaration orordering of effectiveness of such registration statement or document.

(f) The term "Registrable Securities" means (i) the shares of CommonStock issued under the License Agreement, and (ii) any other shares of CommonStock of the Company issued as (or issuable upon the conversion or exercise ofany warrant, right or other security which is issued as) a dividend or otherdistribution with respect to, or in exchange for or in replacement of, theshares listed in clause (i) and this clause (ii); provided, however, that theforegoing definition shall exclude in all cases any Registrable Securities soldor transferred by a Holder in a transaction in which such Holder's rights underthis Agreement are not assigned. Notwithstanding the foregoing, securities shallonly be treated as Registrable Securities if and so long as they have not been(A) sold to or through a broker or dealer or underwriter in a publicdistribution or a public securities transaction, or (B) sold in a transactionexempt from the registration and prospectus delivery requirements of theSecurities Act under Section 4(1) thereof so that all transfer restrictions, andrestrictive legends with respect thereto, if any, are removed upon theconsummation of such sale.

(g) "SEC" means the Securities and Exchange Commission or any otherfederal agency at the time administering the Securities Act.

(h) "Securities Act" means the Securities Act of 1933, as amended.

1.2 COMPANY REGISTRATION.

(a) Initiation. If (but without any obligation to do so) the Companyproposes to register (including for this purpose a registration effected by theCompany for stockholders other than the Holders) any of its stock in connectionwith the public offering of such securities solely for cash (other than anExempt Registration), the Company shall, at such time, promptly give each Holdernotice of such proposed registration. Upon the written request of each Holdergiven within 20 days after receipt by such Holder of the Company's notice, theCompany shall, subject to the provisions of Section 1.2(b), cause to beregistered all of the Registrable Securities that each such Holder has requestedto be registered.

(b) Underwritten Offering. In connection with any offering involvingan underwriting of shares of the Company's capital stock, the Company shall notbe required under Section 1.2(a) to include any of the Holders' securities insuch underwriting unless they accept the terms of the underwriting as agreedupon between the Company and the underwriters selected by it (or by otherpersons entitled to select the underwriters), and then only in such quantity asthe underwriters determine in their sole discretion will not jeopardize thesuccess of the offering by the Company. If the total amount of securities,including Registrable Securities, requested by stockholders to be included insuch offering exceeds the amount of securities sold other than by the Companythat the underwriters determine in their sole discretion is compatible with thesuccess of the offering, then the Company shall be required to include in theoffering only that number of such securities, including Registrable Securities,which the underwriters determine in their sole discretion will not jeopardizethe success of the offering (the securities so included to be apportioned prorata (to the nearest 100 shares) among the selling stockholders according to thetotal amount of securities entitled to be included therein owned by each sellingstockholder or in such other proportions as shall mutually be agreed to by suchselling stockholders). For purposes of the preceding apportionment, for anyparticipating Holder that is a partnership, limited liability company orcorporation, the partners, retired partners, members,

2

retired members and stockholders of such Holder, or the estates and familymembers of any such partners, members, retired partners or members and anytrusts for the benefit of any of the foregoing persons shall be deemed to be asingle "selling stockholder," and any pro-rata reduction with respect to such"selling stockholder" shall be based upon the aggregate amount of sharescarrying registration rights owned by all Persons included in such "sellingstockholder," as defined in this sentence.

(c) Right to Terminate Registration. The Company shall have theright to terminate or withdraw any registration initiated by it under thisSection 1.2 prior to the effectiveness of such registration whether or not anyHolder has elected to include Registrable Securities in such registration.

1.3 OBLIGATIONS OF THE COMPANY. Whenever required under this Section 1 toeffect the registration of any Registrable Securities, the Company shall, asexpeditiously as reasonably possible:

(a) Prepare and file with the SEC a registration statement withrespect to such Registrable Securities and use its best efforts to cause suchregistration statement to become effective.

(b) Prepare and file with the SEC such amendments and supplements tosuch registration statement and the prospectus used in connection with suchregistration statement as may be necessary to comply with the provisions of theSecurities Act.

(c) Furnish to the Holders such numbers of copies of a prospectus,including a preliminary prospectus, in conformity with the requirements of theSecurities Act, and such other documents as they may reasonably request in orderto facilitate the disposition of such Registrable Securities.

(d) Use its reasonable best efforts to register and qualify thesecurities covered by such registration statement under such other securities orBlue Sky laws of such jurisdictions as shall be reasonably requested by theHolders, provided that the Company shall not be required in connection therewithor as a condition thereto to qualify to do business or to file a general consentto service of process in any such states or jurisdictions.

(e) In the event of any underwritten public offering, enter into andperform its obligations under an underwriting agreement with the managingunderwriter of such offering in usual and customary form and consistent with theother provisions of this Agreement. Each Holder participating in suchunderwriting shall also enter into and perform its obligations under such anagreement.

(f) Promptly notify each Holder covered by the registrationstatement at any time when the Company becomes aware of the happening of anyevent as a result of which the registration statement or the prospectus includedin such registration statement or any supplement to the prospectus (as then in

effect) contains any untrue statement of a material fact or omits to state amaterial fact necessary to make the statements there in (in the case of theprospectus, in light of the circumstances under which they were made) notmisleading or, if for any other reason it shall be necessary during such timeperiod to amend or supplement the

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registration statement or the prospectus in order to comply with the SecuritiesAct, whereupon, in either case, each Holder shall immediately cease to use suchregistration statement or prospectus for any purpose and, as promptly aspracticable thereafter, the Company shall prepare and file with the SEC, andfurnish without charge to the appropriate Holders and managing underwriters, ifany, a supplement or amendment to such registration statement or prospectuswhich will correct such statement or omission or effect such compliance and suchcopies thereof as the Holders and any underwriters may reasonably request.

(g) Cause all such Registrable Securities registered pursuanthereunder to be listed on each securities exchange or market on which similarsecurities issued by the Company are then listed or traded, if applicable.

(h) Use its reasonable best efforts to furnish, at the request ofany Holder requesting registration of Registrable Securities pursuant to thisSection 1, on the date that such Registrable Securities are delivered to theunderwriters for sale in connection with a registration pursuant to this Section1, if such securities are being sold through underwriters, or, if suchsecurities are not being sold through underwriters, on the date that theregistration statement with respect to such securities becomes effective, (i) anopinion, dated such date, of the counsel representing the Company for thepurposes of such registration, in form and substance as is customarily given tounderwriters in an underwritten public offering, addressed to the underwriters,if any, and to the Holders requesting registration of Registrable Securities and(ii) a letter dated such date, from the independent certified public accountantsof the Company, in form and substance as is customarily given by independentcertified public accountants to underwriters in an underwritten public offering,addressed to the underwriters, if any, and to the Holders requestingregistration of Registrable Securities (to the extent the then applicablestandards of professional conduct permit said letter to be addressed to theHolders).

1.4 FURNISH INFORMATION. It shall be a condition precedent to theobligations of the Company to take any action pursuant to this Section 1 withrespect to the Registrable Securities of any selling Holder that such Holdershall furnish to the Company such information regarding itself, the RegistrableSecurities held by it, and the intended method of disposition of such securitiesas shall be required to effect the registration of such Holder's RegistrableSecurities.

1.5 EXPENSES OF REGISTRATION. All expenses other than underwritingdiscounts and commissions incurred in connection with registrations initiatedpursuant to Section 1.2, including without limitation all registration, filingand qualification fees, printers' and accounting fees, fees and disbursements ofcounsel for the Company and the reasonable fees and disbursements of one counselfor the Holders, shall be borne by the Company.

1.6 DELAY OF REGISTRATION. No Holder shall have any right to obtain orseek an injunction restraining or otherwise delaying any such registration asthe result of any controversy that might arise with respect to theinterpretation or implementation of this Section 1.

1.7 INDEMNIFICATION. In the event any Registrable Securities are includedin a registration statement under this Section 1:

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(a) Indemnification by the Company. To the extent permitted by law,the Company will indemnify and hold harmless each Holder, any underwriter (asdefined in the Securities Act) for such Holder and each person, if any, whocontrols such Holder or underwriter within the meaning of the Securities Act orthe Securities Exchange Act of 1934, as amended (the "Exchange Act"), againstany losses, claims, damages, or liabilities (joint or several) to which they maybecome subject under the Securities Act, the Exchange Act or other federal orstate law, insofar as such losses, claims, damages, or liabilities (or actions

in respect thereof) arise out of or are based upon any of the followingstatements, omissions or violations (collectively a "Violation"): (i) any untruestatement or alleged untrue statement of a material fact contained in suchregistration statement, including any preliminary prospectus or final prospectuscontained therein or any amendments or supplements thereto, (ii) the omission oralleged omission to state therein a material fact required to be stated therein,or necessary to make the statements therein not misleading, or (iii) anyviolation or alleged violation by the Company of the Securities Act, theExchange Act, any state securities law or any rule or regulation promulgatedunder the Securities Act, the Exchange Act or any state securities law; and theCompany will pay to each such Holder, underwriter or controlling person, asincurred, any legal or other expenses reasonably incurred by them in connectionwith investigating or defending any such loss, claim, damage, liability, oraction; provided, however, that the indemnity agreement contained in thisSection 1.7(a) shall not apply to amounts paid in settlement of any such loss,claim, damage, liability, or action if such settlement is effected without theconsent of the Company (which consent shall not be unreasonably withheld), norshall the Company be liable to any Holder, underwriter or controlling person forany such loss, claim, damage, liability, or action to the extent that it arisesout of or is based upon a Violation (x) which occurs in reliance upon and inconformity with written information furnished expressly for use in connectionwith such registration by any such Holder, underwriter or controlling person or(y) which occurs in any preliminary prospectus if a final, amended orsupplemental prospectus which corrects such Violation is delivered by theCompany to such person at or prior to the written confirmation of the salegiving rise to such loss, claim, damage, liability, or action.

(b) Indemnification by the Holders. To the extent permitted by law,each selling Holder will indemnify and hold harmless the Company, each of itsdirectors, each of its officers who has signed the registration statement, eachperson, if any, who controls the Company within the meaning of the SecuritiesAct, any underwriter, any other Holder selling securities in such registrationstatement and any controlling person of any such underwriter or other Holder,against any losses, claims, damages, or liabilities (joint or several) to whichany of the foregoing persons may become subject, under the Securities Act, theExchange Act or other federal or state law, insofar as such losses, claims,damages, or liabilities (or actions in respect thereto) arise out of or arebased upon any Violation, in each case to the extent (and only to the extent)that such Violation occurs in reliance upon and in conformity with writteninformation furnished by such Holder expressly for use in connection with suchregistration statement; and each such Holder will pay, as incurred, any legal orother expenses reasonably incurred by any person intended to be indemnifiedpursuant to this Section 1.7(b), in connection with investigating or defendingany such loss, claim, damage, liability, or action; provided, however, that theindemnity agreement contained in this Section 1.7(b) shall not apply to amountspaid in settlement of any such loss, claim, damage, liability or action if suchsettlement is effected without the consent of the Holder, which consent shallnot be unreasonably withheld; provided, that in no event shall anyindemnification by a Holder under this Section 1.7(b) exceed the net

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proceeds from the offering received by such Holder, except in the case ofwillful fraud by such Holder.

(c) Procedures. Promptly after receipt by an indemnified party underthis Section 1.7 of notice of the commencement of any action (including anygovernmental action), such indemnified party will, if a claim in respect thereofis to be made against any indemnifying party under this Section 1.7, deliver tothe indemnifying party a written notice of the commencement thereof and theindemnifying party shall have the right to participate in, and, to the extentthe indemnifying party so desires, jointly with any other indemnifying partysimilarly noticed, to assume the defense thereof with counsel mutuallysatisfactory to the parties; provided, however, that an indemnified party(together with all other indemnified parties which may be represented withoutconflict by one counsel) shall have the right to retain one separate counsel,with the reasonable fees and expenses to be paid by the indemnifying party, ifrepresentation of such indemnified party by the counsel retained by theindemnifying party would be inappropriate due to actual or potential differinginterests between such indemnified party and any other party represented by suchcounsel in such proceeding. The failure to deliver written notice to theindemnifying party within a reasonable time of the commencement of any suchaction, if materially prejudicial to its ability to defend such action, shallrelieve such indemnifying party of any liability to the indemnified party under

this Section 1.7, but the omission so to deliver written notice to theindemnifying party will not relieve it of any liability that it may have to anyindemnified party otherwise than under this Section 1.7. No indemnifying party,in the defense of any such claim or litigation, shall, except with the consentof each indemnified party, consent to entry of any judgment or enter into anysettlement which does not include as an unconditional term thereof the giving bythe claimant or plaintiff to such indemnified party of a release from allliability in respect to such claim or litigation. The indemnity agreementscontained in this Section 1.7 shall not apply to amounts paid in settlement ofany loss, claim, damage, liability or action if such settlement is effectedwithout the consent of the indemnifying party, such consent not to beunreasonably withheld.

(d) Contribution. If the indemnification provided for in thisSection 1.7 is held by a court of competent jurisdiction to be unavailable to anindemnified party with respect to any loss, liability, claim, damage or expensereferred to therein, then the indemnifying party, in lieu of indemnifying suchindemnified party hereunder, shall contribute to the amount paid or payable bysuch indemnified party as a result of such loss, liability, claim, damage, orexpense in such proportion as is appropriate to reflect the relative fault ofthe indemnifying party on the one hand and of the indemnified party on the otherin connection with the statements or omissions that resulted in such loss,liability, claim, damage or expense as well as any other relevant equitableconsiderations; provided, that in no event shall any contribution by a Holderunder this Section 1.7(d) exceed the net proceeds from the offering received bysuch Holder, except in the case of willful fraud by such Holder. The relativefault of the indemnifying party and of the indemnified party shall be determinedby reference to, among other things, whether the untrue or alleged untruestatement of a material fact or the omission to state a material fact relates toinformation supplied by the indemnifying party or by the indemnified party andthe parties' relative intent, knowledge, access to information, and opportunityto correct or prevent such statement or omission.

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(e) Underwriting Agreement. Notwithstanding the foregoing, to theextent that the provisions on indemnification and contribution contained in theunderwriting agreement entered into in connection with the underwritten publicoffering are in conflict with the foregoing provisions, the provisions in theunderwriting agreement shall control.

(f) Survival. The obligations of the Company and Holders under thisSection 1.7 shall survive the completion of any offering of RegistrableSecurities in a registration statement under this Section 1, and otherwise.

1.8 REPORTS UNDER EXCHANGE ACT. With a view to making available to theHolders the benefits of Rule 144 promulgated under the Securities Act and anyother rule or regulation of the SEC that may at any time permit a Holder to sellsecurities of the Company to the public without registration, the Company agreesto:

(a) make and keep public information available, in accordance withSEC Rule 144, at all times after the effective date of the first registrationstatement filed by the Company for the offering of its securities to the generalpublic so long as the Company remains subject to the periodic reportingrequirements under Sections 13 or 15(d) of the Exchange Act;

(b) file with the SEC in a timely manner all reports and otherdocuments as may be required of the Company under the Securities Act and theExchange Act; and

(c) furnish to any Holder, so long as the Holder owns anyRegistrable Securities, forthwith upon request (i) a written statement by theCompany that it has complied with the reporting requirements of SEC Rule 144,the Securities Act and the Exchange Act (at any time after it has become subjectto such reporting requirements), (ii) a copy of the most recent annual orquarterly report of the Company and such other reports and documents so filed bythe Company, and (iii) such other information as may be reasonably requested inavailing any Holder of any rule or regulation of the SEC which permits theselling of any such securities without registration or pursuant to such form.

1.9 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company toregister securities granted Holders under Section 1.2 may not be assigned to atransferee or assignee of Registrable Shares without the prior written consent

of the Company, except that such rights may be freely transferred to any partycontrolling, controlled by or under common control with a Holder without suchconsent; provided, that the Company is provided with prompt notice of the nameand address of such transferee and such transferee agrees in writing to be boundby the provisions of this Agreement.

1.10 TERMINATION OF REGISTRATION RIGHTS. No Holder shall be entitled toexercise any registration right provided for in this Section 1 after such timeas Rule 144(k) or another similar exemption under the Securities Act isavailable for the sale of all of such Holder's shares without limitation as tovolume or manner of sale.

2. MISCELLANEOUS.

2.1 ENTIRE AGREEMENT. This Agreement constitutes the entire agreementamong the parties hereto pertaining to the subject matter hereof, and any andall other written or oral

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agreements relating to the subject matter hereof existing among any of theparties hereto are expressly canceled.

2.2 RECAPITALIZATIONS, ETC. The provisions of this Agreement (includingany calculation of share ownership) shall apply, to the full extent set forthherein with respect to the Registrable Securities and to the Common Stock, toany and all shares of capital stock of the Company or any capital stock,partnership or member units or any other security evidencing ownership interestsin any successor or assign of the Company (whether by merger, consolidation,sale of assets or otherwise) that may be issued in respect of, in exchange for,or in substitution of the Registrable Securities by reason of any stockdividend, split, combination, recapitalization, liquidation, reclassification,merger, consolidation or otherwise.

2.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided in thisAgreement, the terms and conditions of this Agreement shall inure to the benefitof and be binding upon the respective permitted successors and assigns of theparties. Nothing in this Agreement, express or implied, is intended to conferupon any party other than the parties hereto or their respective successors andassigns any rights, remedies, obligations, or liabilities under or by reason ofthis Agreement, except as expressly provided in this Agreement.

2.4 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended orwaived only with the written consent of the Company and the holders of at leasta majority of the Registrable Securities then outstanding. GPC and itssuccessors and assigns acknowledge that by operation of this Section 2.4, theholders of at least a majority of the then outstanding Registrable Securities,when acting together with the Company, will have the right and power to diminishor eliminate any rights or increase any or all obligations under this Agreement.

2.5 NOTICES. Any notice required or permitted by this Agreement shall bein writing and shall be deemed sufficient upon delivery, when deliveredpersonally or by overnight courier or sent by electronic mail or fax, orforty-eight (48) hours after being deposited in the U.S. mail, as certified orregistered mail, with postage prepaid, addressed (a) if to the Company orNeoTherapeutics, to 157 Technology Drive, Irvine, California 92618, Attention:Chief Executive Officer or via facsimile to (949) 788-6706, with a copy toLatham & Watkins, 650 Town Center Drive, Suite 2000, Costa Mesa, California92626-1925, Attention: Alan W. Pettis, or via facsimile to (714) 755-8290, or(b) if to GPC, to Fraunhoferstrasse 20, D-82152 Martinsried/Munich, Germany,Attention: Chief Executive Officer or via facsimile to 49-89-8565-2610, with acopy to Ropes & Gray, One International Place, Boston, Massachusetts 02110,Attention: Marc A. Rubenstein, or via facsimile to (617) 951-7050.

2.6 SEVERABILITY. If one or more provisions of this Agreement are held tobe unenforceable under applicable law, the parties agree to renegotiate suchprovision in good faith. Until the parties have agreed upon an enforceablereplacement for such provision, (a) such provision shall be excluded from thisAgreement, (b) the balance of the Agreement shall be interpreted as if suchprovision were so excluded and (c) the balance of the Agreement shall beenforceable in accordance with its terms.

2.7 DELAYS OR OMISSIONS; REMEDIES CUMULATIVE. No delay or omission toexercise any right, power or remedy accruing to any party under this Agreement,

upon any breach or

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default of any other party under this Agreement, shall impair any such right,power or remedy of such non-breaching or non-defaulting party nor shall it beconstrued to be a waiver of any such breach or default, or an acquiescencetherein, or of or in any similar breach or default thereafter occurring; norshall any waiver of any single breach or default be deemed a waiver of any otherbreach or default theretofore or thereafter occurring. Any waiver, permit,consent or approval of any kind or character on the part of any party of anybreach or default under this Agreement, or any waiver on the part of any partyof any provisions or conditions of this Agreement, must be in writing and shallbe effective only to the extent specifically set forth in such writing. Allremedies, either under this Agreement or by law or otherwise afforded to anyparty, shall be cumulative and not alternative.

2.8 ATTORNEY'S FEES. If any action at law or in equity (includingarbitration) is necessary to enforce or interpret the terms of any thisAgreement, the prevailing party shall be entitled to reasonable attorney's fees,costs and necessary disbursements in addition to any other relief to which suchparty may be entitled.

2.9 GOVERNING LAW. All questions concerning the construction, validity,enforcement and interpretation of this Agreement shall be governed by andconstrued and enforced in accordance with the internal laws of the State ofCalifornia, without regard to the principles of conflicts of law thereof. TheCompany and GPC hereby irrevocably submit to the exclusive jurisdiction of thestate and federal courts sitting in Orange County, California, for theadjudication of any dispute hereunder or in connection herewith or with anytransaction contemplated hereby or discussed herein, and hereby irrevocablywaives, and agrees not to assert in any suit, action or proceeding, any claimthat it is not personally subject to the jurisdiction of any such court, or thatsuch suit, action or proceeding is improper. Each of the Company and GPC herebyirrevocably waives personal service of process and consents to process beingserved in any such suit, action or proceeding by receiving a copy thereof sentto the Company at the address in effect for notices to it under this instrumentand agrees that such service shall constitute good and sufficient service ofprocess and notice thereof. Nothing contained herein shall be deemed to limit inany way any right to serve process in any manner permitted by law.

2.10 COUNTERPARTS. This Agreement may be executed in counterparts, each ofwhich shall be deemed an original, but all of which together shall constituteone and the same instrument.

2.11 TITLES AND SUBTITLES. The titles and subtitles used in this Agreementare used for convenience only and are not to be considered in construing orinterpreting this Agreement.

2.12 AGGREGATION OF STOCK. All shares of Company stock held or acquired byaffiliated Persons (including former and current partners, former and currentmembers and former and current stockholders) shall be aggregated together forthe purpose of determining the availability of any rights under this Agreement.

2.13 CONFIDENTIALITY. Each Holder agrees that, except with the priorwritten permission of the applicable party, it shall at all times keepconfidential and not divulge, furnish or make accessible to anyone anyconfidential information, knowledge or data concerning or relating to thebusiness or financial affairs of the Company or any other party to which such

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Holder has been or shall become privy by reason of this Agreement. Theprovisions of this Section 2.13 shall be in addition to, and not in substitutionfor, the provisions of any separate nondisclosure agreement executed by theparties hereto with respect to the transactions contemplated hereby.

[Signature Page Follows]

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The parties have executed this Registration Rights Agreement as of the

date first above written.

NEOTHERAPEUTICS, INC. GPC BIOTECH AG

By: By: --------------------------------- -----------------------------------Name: Name: ------------------------------- ---------------------------------Title: Title: ------------------------------ --------------------------------

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EXHIBIT 10.10

CONFIDENTIAL SEPARATION AGREEMENT AND GENERAL RELEASE

THIS CONFIDENTIAL SEPARATION AGREEMENT AND GENERAL RELEASE (this"Agreement") is entered into as of November 6, 2002 (the "Effective Date"), byand between NeoTherapeutics, Inc., a Delaware corporation (the "Company") andMichelle S. Glasky, Ph.D., an individual ("Executive").

RECITALS

WHEREAS, Executive is employed by the Company pursuant to thatcertain executive employment agreement dated as of December 1, 2002 (the"Employment Agreement");

WHEREAS, Executive and the Company (collectively, the "Parties")have agreed that Executive's employment as an officer and employee of theCompany shall terminate as of the Effective Date;

WHEREAS, the Parties wish to specify the terms of the terminationand resolve any outstanding issues between them.

AGREEMENT

NOW THEREFORE, in consideration of the representations andagreements contained herein, and of other good and valuable consideration, thereceipt and sufficiency of which are hereby acknowledged, and intending to bebound hereby, the Company and Executive hereby agree to terminate theiremployment relationship on the following basis:

1. Termination of the Employment Agreement. The Employment Agreement andeach Party's rights thereunder are hereby terminated, including, withoutlimitation, Executive's right to receive any "Base Salary" (as defined in theEmployment Agreement), bonus or other compensation, or any entitlement toseverance or other payments upon termination of employment under the EmploymentAgreement.

2. Separation. Executive and Company hereby agree that Executive'semployment as Vice President, Scientific Affairs and an employee of the Companyshall terminate as of the Effective Date. Executive understands and agrees thatshe is giving up any right or claim to future employment with the Company andany compensation or benefit of such employment, including any compensationand/or benefits owed to the Executive pursuant to the Employment Agreement,except for compensation and/or benefits provided for in this Agreement.Executive acknowledges that she has received all compensation and benefits dueto her through the Effective Date.

3. Compensation. In consideration of the termination of Executive'semployment pursuant to the terms of this Agreement:

(a) As of the Effective Date, Executive shall be paid thefollowing: (i) $ 43,269.30 in lieu of severance, (ii) $ 13,411.30 in fullpayment of Executive's accrued and unpaid vacation pay, and (iii) $ 2812.50 asfull payment of all deferred salary owed to Executive.

(b) All stock options previously granted to Executive shallbecome fully vested as of the Effective Date, and Executive shall be entitled toexercise such options in whole or in part from time to time during the one yearperiod commencing on the Effective Date. Executive agrees that, notwithstandingany other provision in the Company's stock option plan or the stock optionagreements between the Company and Executive, nothing in this Agreement or theterms of the consulting agreement set forth in Section 5 hereof shall entitleExecutive to exercise any stock options beyond the one year period following theEffective Date.

(c) As of the Effective Date, the Company hereby transfers toExecutive ownership of (i) the laptop computer and accessories (docking station,monitor, keyboard, mouse, stand, speakers and printer) provided to her by theCompany in consideration of the payment by Executive to the Company of $150 and(ii) the cellular telephone provided to her by the Company. After the Effective

Date, Executive agrees to assume and pay all costs of the laptop computer andcellular telephone or their use.

4. Options. Executive and the Company are parties to certain writtenagreements pursuant to which Executive has been granted options to purchasestock in the Company. Executive acknowledges that although such options might beidentified as incentive stock options, such options may not be qualified fortreatment as incentive stock options, either now or in the future. Executive isadvised to consult with her personal tax advisor to determine whether theoptions are qualified for treatment as incentive stock options. Except as setforth in Section 3(b) and this Section 4, Executive's rights under her existingoption agreements are not intended to be modified by this Agreement in any way.

5. Future Consulting. Executive shall provide consulting services to theCompany as may be reasonably requested by the Company from time to time up toand through December 31, 2003, such requests to be made on reasonable notice toExecutive and such services to be performed solely during ordinary businesshours. It is the express intent of the parties that Executive shall provideconsulting services to the Company as an independent contractor pursuant to thisAgreement. Executive will not be an employee of the Company after the EffectiveDate, and Executive shall not hold herself out to be an employee of the Company,and shall not have the authority to enter into or bind the Company to anycontract, promise, or obligation under any circumstances. The Company isinterested only in the results to be achieved by Executive under this Agreement,and the manner and method of performing all services of Executive under thisAgreement, and achieving the desired results, shall be under the exclusivecontrol of Executive. The Company shall have no right or authority to direct orcontrol Executive with respect to the performance of Executive's services underthis Agreement, except as otherwise provided by this Agreement.

The Company shall compensate Executive for consulting servicesactually rendered hereunder at the rate of $150 per hour and reimburse her forother amounts actually expended by Executive in the course of performing herduties as a consultant to the Company, if such amounts are approved in writingby the Company beforehand and Executive tenders

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receipts or other documentation reasonably substantiating the amounts asrequired by the Company.

6. Return of Company Property. Except as expressly provided for herein,at the Company's request, the Executive will return to the Company all files,records, credit cards, keys, equipment, and any other property of the Company ordocuments maintained by her for the Company's use or benefit, on or before theEffective Date.

7. Confidentiality. The Parties acknowledge that this Agreement and allmatters relating to or leading up to the negotiation and effectuation of thisAgreement are confidential and shall not be disclosed to any third party exceptas follows: the Company may disclose the terms of this Agreement to the publicas required by law, including without limitation, the Securities Act of 1933, asamended, and the Securities Exchange Act of 1934, as amended; the Company maydisclose the terms of this Agreement to Company employees with a businesspurpose for receiving such information; the Parties may disclose the terms ofthe Agreement to their respective legal, accounting and tax advisors to theextent necessary for them to perform services; and the Parties may disclose theterms of this Agreement to the Internal Revenue Service and the CaliforniaFranchise Tax Board as required by law, rule or regulation, or as otherwiserequired by law or necessary to enforce the terms of this Agreement. If anydisclosure is made as permitted by this paragraph other than to governmentalauthorities as required by law, then such persons or entities shall be cautionedabout the confidentiality obligations imposed by this Agreement.

8. Non-Disclosure, Non-Competition and Non-Solicitation.

(a) Executive agrees that she will not disclose at any time,other than to an authorized employee, officer, director or agent of the Company,any information relating to the Company's business, trade, practices, tradesecrets or know-how or proprietary information without the Company's priorexpress written consent. Following the Effective Date, Executive shall bepermitted to continue in her usual occupation and shall not be prohibited fromcompeting with the Company. Executive agrees that until December 31, 2003,

Executive shall not directly or indirectly solicit, induce, recruit or encourageany of the Company's employees to leave their employment or take away suchemployees to leave their employment or take away such employees or attempts tosolicit, induce, recruit, encourage or take away employees of the Company.

(b) Executive understands and agrees that future payments underthis Agreement may be terminated by the Company if she violates this provisionin addition to any other remedies available under applicable law. In the eventthe Company terminates payments pursuant to this Section, Executive maychallenge such termination in accordance with Section 15 below. In the event ofany other breach or violation of this Agreement, the party asserting a breach orviolation of the Agreement may seek remedies otherwise available underapplicable law or another provision of this Agreement in accordance with Section15 below.

9. General Release by Executive.

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(a) Release of Claims. Executive does hereby for herself and herrespective heirs, successors and assigns, release, acquit and forever dischargethe Company, its parents, subsidiaries and affiliates and any of their officers,directors, managers, employees, representatives, related entities, successorsand assigns, and all persons acting by, through or in concert with them (the"Company Releasees") of and from any and all claims, actions, charges,complaints, causes of action, rights, demands, debts, damages, or accountings ofwhatever nature, known or unknown which Executive may have against the CompanyReleasees, or any of them, based on any actions or events which occurred priorto the effective date of this Agreement, including, but not limited to, thoserelated to, or arising from, Executive's employment with the Company or thetermination thereof, including, without limitation, any claims under Title VIIof the Civil Rights Act of 1964, the Americans with Disabilities Act and theCalifornia Fair Employment and Housing Act (collectively, the "Claims" orindividually, "Claim"); provided, however, that the release set forth in thisSection 10(a) shall not be effective with respect to any Company Releasee, otherthan the Company, who commences any claim, action or proceeding againstExecutive based on any actions or events which occurred prior to the effectivedate of this Agreement.

(b) Release of Unknown Claims. In addition, Executive expresslywaives all rights under Section 1542 of the Civil Code of the State ofCalifornia, which reads as follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH A CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HER MUST HAVE MATERIALLY AFFECTED HER SETTLEMENT WITH THE DEBTOR.

(c) No Assignment of Claims. Executive represents and warrants tothe Company Releasees that there has been no assignment or other transfer of anyinterest in any Claim which Executive may have against the Company Releasees, orany of them, and Executive agrees to indemnify and hold the Company Releaseesharmless from any liability, claims, demands, damages, costs, expenses andattorneys' fees incurred as a result of any person asserting any such assignmentor transfer of any rights or Claims if Executive has made such assignment ortransfer from such party.

(d) No Suits or Actions. Executive represents and warrants to theCompany that there have been no claims, suits, actions, complaints, or chargesfiled by her against the Company Releasees, or any of them. Executive agreesthat if she hereafter commences, joins in, or in any manner seeks relief throughany suit arising out of, based upon, or relating to any of the Claims releasedhereunder, or in any manner asserts against the Company Releasees, or any ofthem, any of the Claims released hereunder, then she will pay to the CompanyReleasees against whom such claim(s) is asserted, in addition to any otherdamages caused thereby, all attorneys' fees incurred by such Company Releaseesin defending or otherwise responding to said suit or Claim.

(e) No Admission. Executive further understands and agrees thatneither the payment of money nor the execution of this Release shall constituteor be construed as an admission of any liability whatsoever by the CompanyReleasees.

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10. General Release by the Company.

(a) Release of Claims. The Company does hereby for itself and itsrespective successors and assigns, release, acquit and forever dischargeExecutive and her heirs, estates, successors and assigns, and all persons actingby, through or in concert with them (the "Executive Releasees") of and from anyand all claims, actions, charges, complaints, causes of action, rights, demands,debts, damages, or accountings of whatever nature, known or unknown which theCompany may have against the Executive Releasees, or any of them, based on anyactions or events which occurred prior to the effective date of this Agreement,including, but not limited to, those related to, or arising from, Executive'semployment with the Company or the termination thereof (collectively, the"Claims" or individually, "Claim").

(b) Release of Unknown Claims. In addition, the Company expresslywaives all rights under Section 1542 of the Civil Code of the State ofCalifornia, which reads as follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH A CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HER MUST HAVE MATERIALLY AFFECTED HER SETTLEMENT WITH THE DEBTOR.

(c) No Assignment of Claims. The Company represents and warrantsto the Executive Releasees that there has been no assignment or other transferof any interest in any Claim which the Company may have against the ExecutiveReleasees, or any of them, and the Company agrees to indemnify and hold theExecutive Releasees harmless from any liability, claims, demands, damages,costs, expenses and attorneys' fees incurred as a result of any person assertingany such assignment or transfer of any rights or Claims if the Company has madesuch assignment or transfer from such party.

(d) No Suits or Actions. The Company agrees that if it hereaftercommences, joins in, or in any manner seeks relief through any suit arising outof, based upon, or relating to any of the Claims released hereunder, or in anymanner asserts against the Executive Releasees, or any of them, any of theClaims released hereunder, then it will pay to the Executive Releasees againstwhom such claim(s) is asserted, in addition to any other damages caused thereby,all attorneys' fees incurred by such Executive Releasees in defending orotherwise responding to said suit or Claim.

(e) No Admission. The Company further understands and agrees thatneither the payment of money nor the execution of this Release shall constituteor be construed as an admission of any liability whatsoever by the ExecutiveReleasees.

11. Nondisparagement. The Parties shall not make any disparaging orderogatory comments, public or otherwise, concerning each other, and Executiveshall refrain from making any disparaging comments, public or otherwise,concerning any employees, officers or directors of the Company.

12. Successors and Assigns. This Agreement shall be binding upon andinure to the benefit of and be enforceable by the parties hereto and theirrespective successors and assigns.

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Notwithstanding the foregoing, neither this Agreement nor any rights hereundermay be assigned to any party by the Company or Executive without the priorwritten consent of the other party hereto.

13. Entire Agreement/No Oral Modification. This Agreement contains allof the terms, promises, representations, and understandings, oral or written,made between the Company and Executive with respect to the subject matter hereofand supersedes all prior representations, understandings, or agreements, oral orwritten, between the Company and Executive, with respect to such matters, whichthe Parties acknowledge have been merged into this Agreement. This Agreement may

not be modified other than with a writing executed by both parties and statingan intent to modify this agreement.

14. Governing Law. This Agreement shall be governed by the laws of theState of California, without regard for conflict of law principles.

15. Arbitration; Waiver of Jury Trial. Except for claims for equitableor injunctive relief which cannot be timely addressed through arbitration (whichclaims may be brought in any state or federal court in Orange County,California), the parties hereby agree to submit any claim or dispute arising outof the terms of this Agreement, including, without limitation, claims regardingconfidentiality under Section 8 of this Agreement and/or any dispute arising outof or relating to Executive's employment or consulting relationship with theCompany in any way, to private and confidential arbitration by a single neutralarbitrator through JAMS. All arbitration proceedings shall be governed by thethen current JAMS rules governing employment disputes, and shall take place inOrange County, California. The decision of the arbitrator shall be rendered inwriting and shall be final and binding on all parties to this Agreement.Judgment thereon may be entered in any court having jurisdiction. The Companyshall advance the arbitrator's fee and all costs of services provided by thearbitrator and arbitration organization; however, all costs of the arbitrationproceeding or litigation to enforce this Agreement, including attorneys' feesand witness expenses, may be awarded to the prevailing party in addition to suchother relief as the arbitrator may determine. Except for claims for equitable orinjunctive relief which cannot be timely addressed through arbitration (whichclaims may be brought in any state or federal court in Orange County,California), this arbitration procedure is intended to be the exclusive methodof resolving any claim relating to the obligations set forth in this Agreement.Executive hereby waives any right to a jury trial on any dispute or claimcovered by this paragraph.

16. Counterparts. This Agreement may be executed in one or morecounterparts, each of which shall be deemed an original, but all of which shallconstitute the same instrument.

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IN WITNESS WHEREOF, this Agreement is executed by the parties setforth below as of the date first indicated above.

THE COMPANY EXECUTIVE

NEOTHERAPEUTICS, INC. MICHELLE S. GLASKY, PH.D.,a Delaware corporation an individual

By: /s/ John L. McManus /s/ Michelle S. Glasky --------------------------------- ----------------------------------

Title: V.P. Strategic Planning & Finance ------------------------------

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NEOTHERAPEUTICS, INC. - Investor Relations

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