<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM
_____________________________ TO ____________________________________
COMMISSION FILE NO. 0-29608
GENETRONICS BIOMEDICAL LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
BRITISH COLUMBIA, CANADA 33-002-4450
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.
for Genetronics, Inc.)
11199 SORRENTO VALLEY ROAD 92121-1334
SAN DIEGO, CALIFORNIA (Zip Code)
(Address of principal executive offices)
Company's telephone number, including area code: (858) 597-6006
Indicate by check mark whether the Company (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the Company
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
The number of shares outstanding of the Company's Common Stock, no par
value, was 22,354,474 as of January 31, 2000.
<PAGE> 2
GENETRONICS BIOMEDICAL LTD.
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 1999
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Page
----
<S> <C>
Item 1. Financial Statements
a) Consolidated Balance Sheets
as of December 31, 1999 (Unaudited) and March 31, 1999.............1
b) Consolidated Statements of Loss and Deficit
for the Three Months and Nine Months Ended December 31, 1999
and 1998 (Unaudited)...............................................2
c) Consolidated Statements of Cash Flows
for the Nine Months Ended December 31, 1999
and 1998 (Unaudited)...............................................3
d) Notes to Consolidated Financial Statements.........................4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................................9
Item 3. Quantitative and Qualitative Disclosures About Market Risk...............18
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.........................................19
SIGNATURES................................................................................20
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GENETRONICS BIOMEDICAL LTD.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(In U.S. dollars)
December 31 March 31
1999 1999
$ $
(Unaudited) (Note)
- --------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT
Cash and cash equivalents 4,535,014 6,189,284
Short-term investments 6,354,840 --
Accounts receivable, net of allowance for
uncollectible accounts of $ 61,493
[March 31, 1999 - $19,685] 975,063 776,648
Inventories [note 2] 879,903 655,906
Prepaid expenses and other 192,435 6,095
- --------------------------------------------------------------------------
TOTAL CURRENT ASSETS 12,937,255 7,627,933
- --------------------------------------------------------------------------
Fixed assets, net 949,081 1,177,393
Other assets, net 1,347,963 1,002,318
- --------------------------------------------------------------------------
15,234,299 9,807,644
==========================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Accounts payable and accrued expenses 1,759,955 1,377,443
Current portion of obligations under
capital leases 51,192 45,892
Deferred revenue 266,666 --
- --------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 2,077,813 1,423,335
- --------------------------------------------------------------------------
Obligations under capital leases 79,299 118,384
Deferred rent 2,493 9,564
- --------------------------------------------------------------------------
TOTAL LIABILITIES 2,159,605 1,551,283
- --------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Share capital 29,284,263 28,357,863
Special Warrants [note 4] 11,065,963 --
Deficit (27,172,850) (19,998,501)
Cumulative translation adjustment (102,682) (103,001)
- --------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 13,074,694 8,256,361
- --------------------------------------------------------------------------
15,234,299 9,807,644
==========================================================================
</TABLE>
Note: The Financial statements at March 31, 1999 are derived from Audited
financial statements but do not include all of the footnotes and other
disclosures required by generally accepted accounting principles.
See accompanying notes.
1
<PAGE> 4
GENETRONICS BIOMEDICAL LTD.
CONSOLIDATED STATEMENTS OF
LOSS AND DEFICIT
(Unaudited)
<TABLE>
<CAPTION>
(In U.S. dollars)
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31 DECEMBER 31
1999 1998 1999 1998
$ $ $ $
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE
Net sales 1,025,822 709,580 2,806,200 2,480,500
License fee and milestone payments 83,333 4,000,000 416,667 4,000,000
Grant funding 71,156 184,987 313,061 320,139
Revenues under collaborative research
and development arrangements 33,334 25,400 48,334 31,400
Interest income 164,898 121,032 409,591 228,457
- ---------------------------------------------------------------------------------------------------------
1,378,543 5,040,999 3,993,853 7,060,496
- ---------------------------------------------------------------------------------------------------------
EXPENSES
Cost of sales 523,868 331,323 1,289,461 1,143,928
Research and development 1,360,739 2,262,142 5,003,359 6,113,730
Selling, general and administrative 1,242,656 1,459,036 4,257,062 3,810,200
Interest expense 6,001 4,805 19,260 13,698
Restructuring charges [note 5] 231,481 -- 599,060 --
- ---------------------------------------------------------------------------------------------------------
3,364,745 4,057,306 11,168,202 11,081,556
- ---------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) FOR THE PERIOD (1,986,202) 983,693 (7,174,349) (4,021,060)
Deficit, beginning of period (25,186,648) (18,399,417) (19,998,501) (13,394,664)
- ---------------------------------------------------------------------------------------------------------
DEFICIT, END OF PERIOD (27,172,850) (17,415,724) (27,172,850) (17,415,724)
=========================================================================================================
NET INCOME (LOSS) PER SHARE [note 3]:
BASIC INCOME (LOSS) PER SHARE (0.09) 0.05 (0.32) (0.20)
DILUTED INCOME (LOSS PER SHARE) (0.09) 0.04 (0.32) (0.20)
- ---------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES USED IN COMPUTING BASIC INCOME
(LOSS) PER SHARE 22,212,606 21,094,573 22,583,825 19,812,479
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES USED IN COMPUTING DILUTED
INCOME (LOSS) PER SHARE 22,212,606 25,307,859 22,583,825 19,812,479
=========================================================================================================
</TABLE>
See accompanying notes
2
<PAGE> 5
GENETRONICS BIOMEDICAL LTD.
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(In U.S. dollars)
NINE NINE
MONTHS ENDED MONTHS ENDED
DECEMBER 31 DECEMBER 31
1999 1998
$ $
- ----------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss for the period (7,174,349) (4,021,060)
Items not involving cash:
Depreciation and amortization 388,402 286,108
Changes in working capital items:
Accounts receivable (198,415) (36,723)
Inventories (223,997) (141,709)
Prepaid expenses and other (186,340) 4,666
Accounts payable and accrued expenses 382,512 140,457
Deferred revenue 266,666 --
Deferred rent (7,071) (10,759)
- ----------------------------------------------------------------------------------
CASH USED IN OPERATING ACTIVITIES (6,752,592) (3,779,020)
- ----------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of short-term investments (6,354,840) --
Purchase of capital assets (82,191) (400,266)
Increase in other assets (423,544) (232,013)
- ----------------------------------------------------------------------------------
CASH USED IN INVESTING ACTIVITIES (6,860,575) (632,279)
- ----------------------------------------------------------------------------------
FINANCING ACTIVITIES
Payments on obligations under capital leases (33,785) 13,713
Proceeds from issuance of Special Warrants - net 11,157,853 --
Proceeds from issuance of common shares - net 834,510 6,760,269
- ----------------------------------------------------------------------------------
CASH PROVIDED BY FINANCING ACTIVITIES 11,958,578 6,773,982
- ----------------------------------------------------------------------------------
Effect of exchange rate changes on cash 319 (49,480)
- ----------------------------------------------------------------------------------
DECREASE IN CASH AND CASH EQUIVALENTS (1,654,270) 2,313,203
Cash and cash equivalents, beginning of period 6,189,284 6,521,990
- ----------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD 4,535,014 8,835,193
Short-term investments, end of period 6,354,840 --
- ----------------------------------------------------------------------------------
CASH, CASH EQUIVALENTS AND SHORT-TERM
INVESTMENTS, END OF PERIOD 10,889,854 8,835,193
==================================================================================
</TABLE>
See accompanying notes
3
<PAGE> 6
GENETRONICS BIOMEDICAL LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In U.S. dollars)
1. BASIS OF PRESENTATION
The Consolidated Statements of Loss and Deficit for the three-month and
nine-month periods ended December 31, 1999 and 1998, the Consolidated Balance
Sheets as of December 31, 1999, and the Consolidated Statements of Cash Flows
for the nine-month periods ended December 31, 1999 and 1998 have been prepared
by the Company. In the opinion of management, all adjustments (which include
reclassifications and normal recurring adjustments) necessary to present fairly
the financial position, results of operations and cash flows at December 31,
1999 and for all periods presented, have been made.
Certain information and note disclosures normally included in the
financial statements prepared in accordance with accounting principles generally
accepted in Canada have been omitted. It is suggested that the present
consolidated financial statements and notes thereto should be read in
conjunction with the audited consolidated financial statements for the year
ended March 31, 1999 included in the Genetronics Biomedical Ltd. Annual Report
on Form 10-K filed with the Securities and Exchange Commission. The results of
operations for the three-month and nine-month periods ended December 31, 1999
are not necessarily indicative of the results for the full year.
In these financial statements, the Company has adopted the new cash flow
statement recommendations of the Canadian Institute of Chartered Accountants.
Accordingly, the comparative periods presented have been restated to exclude
non-cash investing and financing transactions.
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, 1999 March 31, 1999
----------------- --------------
<S> <C> <C>
Raw Materials 539,472 401,634
Work in process 65,299 81,863
Finished Goods 275,132 172,409
------- -------
879,903 655,906
------- -------
</TABLE>
3. PER SHARE DATA
Basic loss per common share is computed by dividing the net income or
loss by the weighted average number of common shares outstanding during the
period. Diluted earnings per
4
<PAGE> 7
share is computed on the basis of the weighted average number of common shares
outstanding plus the dilutive effect of outstanding stock options, assuming
their exercise occurred at the beginning of the period. For the three months
ended December 31, 1999, the nine months ended December 31, 1999, and the nine
months ended December 31, 1998 all potentially dilutive securities were excluded
from the calculation of diluted loss per share as their inclusion would have
been anti-dilutive
4. SHARE CAPITAL
Authorized Share Capital
On July 26, 1999 the shareholders approved deletion of the special
rights and restrictions attached to the 100,000,000 Class A preferred shares and
replacement with new Class A preferred shares which allow the Directors to
create special rights and restrictions.
Stock Option Plan
On July 26, 1999 the shareholders approved an amendment to the Company's
1997 Stock Option Plan to increase the number of authorized shares of Common
Stock available for issuance under the Plan from 4,700,000 shares to 6,400,000
shares.
Private Placement
On June 17, 1999 the Company closed a private placement of 4,187,500
special warrants at a price of US$ 3.00 per special warrant for gross proceeds
of US$ 12,562,500 less expenses of US$ 1,496,537. The special warrants are
convertible into common shares for no further consideration upon the earlier of
1) five days after receipt for the final prospectus is issued by the last of the
securities regulatory authorities in British Columbia and Ontario, or 2) request
for conversion made by special warrant holder after June 17, 1999, or 3) the
date of June 16, 2000.
5. RESTRUCTURING CHARGES
During the three months ended September 30, 1999 the Company undertook a
review of its operating structure to identify opportunities to improve operating
effectiveness. As a result of this review certain staffing changes occurred and
program review continued into the next period. The Company also announced that
its employment of two senior executives ended in September 1999. In December
1999 the Company entered into an Agreement for Termination of Employment with
each of the two senior executives. In accordance with the staffing changes and
the terms of the Termination of Employment Agreements, the Company has accrued
and recorded restructuring charges of $231,481 for the three months ended
December 31, 1999 and $599,060 for the nine months ended December 31, 1999.
6. SEGMENT INFORMATION
The Company's reportable business segments include the BTX Division and
the Drug and DNA Delivery Division. The Company evaluates performance based on
many factors including net results from operations before certain unallocated
costs. The Company does not
5
<PAGE> 8
allocate interest income and expenses and general and administrative costs to
its reportable segments. In addition, total assets are not allocated to each
segment.
Substantially all of the Company's assets and operations are located in
the United States and predominantly all revenues are generated in the United
States.
<TABLE>
<CAPTION>
BTX DRUG AND DNA DELIVERY
DIVISION DIVISION TOTAL
$ $ $
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
THREE MONTHS ENDED DECEMBER 31, 1999
Reportable segment revenue 1,015,211 198,434 1,213,645
- ------------------------------------------------------------------------------------
Add reconciling items
Interest income 164,898
- ------------------------------------------------------------------------------------
Total revenue 1,378,543
- ------------------------------------------------------------------------------------
Net results of reportable segment 172,963 (1,311,799) (1,138,836)
- ------------------------------------------------------------------------------------
Add (deduct) reconciling items
Interest income 164,898
General and administrative (1,006,263)
Interest expense (6,001)
- ------------------------------------------------------------------------------------
Net loss (1,986,202)
====================================================================================
</TABLE>
<TABLE>
<CAPTION>
BTX DRUG AND DNA DELIVERY
DIVISION DIVISION TOTAL
$ $ $
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
THREE MONTHS ENDED DECEMBER 31, 1998
Reportable segment revenue 709,580 4,210,387 4,919,967
- ------------------------------------------------------------------------------------
Add reconciling items
Interest income 121,032
- ------------------------------------------------------------------------------------
Total revenue 5,040,999
- ------------------------------------------------------------------------------------
Net results of reportable segment (22,273) 2,053,734 2,031,461
- ------------------------------------------------------------------------------------
Add (deduct) reconciling items
Interest income 121,032
General and administrative (1,163,995)
Interest expense (4,805)
- ------------------------------------------------------------------------------------
Net profit 983,693
====================================================================================
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
BTX DRUG AND DNA DELIVERY
DIVISION DIVISION TOTAL
$ $ $
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
NINE MONTHS ENDED DECEMBER 31, 1999
Reportable segment revenue 2,791,720 792,542 3,584,262
- ------------------------------------------------------------------------------------
Add reconciling items
Interest income 409,591
- ------------------------------------------------------------------------------------
Total revenue 3,993,853
- ------------------------------------------------------------------------------------
Net results of reportable segment 210,595 (4,456,183) (4,245,588)
- ------------------------------------------------------------------------------------
Add (deduct) reconciling items
Interest income 409,591
General and administrative (3,319,092)
Interest expense (19,260)
- ------------------------------------------------------------------------------------
Net loss (7,174,349)
====================================================================================
</TABLE>
<TABLE>
<CAPTION>
BTX DRUG AND DNA DELIVERY
DIVISION DIVISION TOTAL
$ $ $
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
NINE MONTHS ENDED DECEMBER 31, 1998
Reportable segment revenue 2,480,900 4,351,139 6,832,039
- ------------------------------------------------------------------------------------
Add reconciling items
Interest income 228,457
- ------------------------------------------------------------------------------------
Total revenue 7,060,496
- ------------------------------------------------------------------------------------
Net results of reportable segment 284,886 (1,520,362) (1,235,476)
- ------------------------------------------------------------------------------------
Add (deduct) reconciling items
Interest income 228,457
General and administrative (3,000,343)
Interest expense (13,698)
- ------------------------------------------------------------------------------------
Net loss (4,021,060)
====================================================================================
</TABLE>
7. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED STATES
These consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in Canada (Canadian GAAP), which,
in the case of the Company, conform in all material respects with those in the
United States (U.S. GAAP) and with the requirements of the Securities and
Exchange Commission (SEC), except as described below.
7
<PAGE> 10
The impact of significant variations to U.S. GAAP on the consolidated
statements of loss and deficit are as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31 DECEMBER 31 DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
$ $ $ $
<S> <C> <C> <C> <C>
Income (loss) for the period, Canadian GAAP (1,986,202) 983,693 (7,174,349) (4,021,060)
Adjustment for stock based compensation
- - non-employees (64,341) (94,083) (389,016) (379,842)
Income (loss) for the period, U.S. GAAP (2,050,543) 889,610 (7,563,365) (4,400,902)
- ----------------------------------------------------------------------------------------------------------------
Unrealized gains (losses) from
short term investments(1) 9,671 -- 3,892 --
Unrealized gains (losses) on
foreign currency translation (45) (20,452) 319 (49,480)
Comprehensive income (loss) for
the period, U.S. GAAP (2,040,917) 869,158 (7,559,154) (4,450,382)
- ----------------------------------------------------------------------------------------------------------------
Basic income (loss) per share,
U.S. GAAP (0.09) 0.04 (0.33) (0.22)
Diluted income (loss) per share,
U.S. GAAP (0.09) 0.04 (0.33) (0.22)
- ----------------------------------------------------------------------------------------------------------------
Weighted average number of shares,
used in computing basic income
(loss) per share, U.S. GAAP 22,212,606 21,094,573 22,583,825 19,812,479
Weighted average number of shares,
used in computing diluted income
(loss) per share, U.S. GAAP 22,212,606 22,190,755 22,583,825 19,812,479
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
The impact of significant variations to U.S. GAAP on the Consolidated
Balance Sheet items is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1999 MARCH 31, 1999
$ $
- -------------------------------------------------------------------------------
<S> <C> <C>
Share capital 31,106,523 29,791,107
Deficit (28,995,110) (21,431,745)
- -------------------------------------------------------------------------------
</TABLE>
- --------
(1) Under U.S. GAAP short term investments are classified as available-for-sale
and carried at market value with unrealized gains or losses reflected as a
component of comprehensive income or loss.
8
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto. This Quarterly Report on
Form 10-Q may be deemed to include forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 that involve risk and uncertainty, including financial,
clinical, business environment and trend projections. Although the Company
believes that its expectations are based on reasonable assumptions, it can give
no assurance that its goals will be achieved. The important factors that could
cause actual results to differ materially from those in the forward-looking
statements herein include, without limitation, the current stage of development
of both Genetronics and its products, the timing and uncertainty of results of
both research and regulatory processes, the extensive government regulation
applicable to its business, the unproven safety and efficacy of its device
products, its significant additional financing requirements, the volatility of
its stock price, the uncertainty of future capital funding, its potential
exposure to product liability or recall, uncertainties relating to patents and
other intellectual property, including whether the Company will obtain
sufficient protection or competitive advantage therefrom, uncertainties relating
to the Company's ability to successfully complete its Year 2000 initiatives and
its dependence upon a limited number of key personnel and consultants and its
significant reliance upon its collaborative partners for achieving its goals,
and other factors detailed in its Annual Report on Form 10-K for the year ended
March 31, 1999.
GENERAL
Through its Drug and DNA Delivery Division, Genetronics is engaged in
developing drug and DNA delivery systems based on electroporation to be used in
the site-specific treatment of disease. Through its BTX Division, the Company
develops, manufactures, and sells electroporation equipment to the research
laboratory market.
In the past the Company's revenues primarily reflected, through the BTX
Division, product sales to the research market and research grants. In October
1998 the Company entered into a comprehensive License and Development Agreement
and a Supply Agreement with Ethicon, Inc., a Johnson & Johnson company,
involving Genetronics' proprietary drug and DNA delivery system for the
electroporation therapy treatment of solid tumor cancer. As part of the License
and Development Agreement, the Company received an up-front licensing fee. The
Company has received milestone payments and will be receiving future milestone
payments if and when milestones are met. In August 1999 the Company announced
that Ethicon Inc. transferred its responsibilities and obligations under the
License and Development and Supply Agreements to Ethicon Endo-Surgery, Inc.
("Ethicon"), which is also a Johnson & Johnson company. Ethicon and Genetronics
have begun a project to assemble and review all existing clinical and regulatory
information. This project will delay for several months commercialization of the
system in Europe and initiation of a pivotal clinical trial in the United
States. Until the commercialization of clinical products pursuant to the License
and Development and Supply Agreements, the Company expects revenues to continue
to be attributable to product sales to the research market, milestone payments,
grants, collaborative research arrangements, and interest income.
9
<PAGE> 12
Due to the expenses incurred in the development of the drug and DNA
delivery systems, the Company has been unprofitable in the last five years. As
of December 31, 1999 the Company has incurred a cumulative deficit of
$27,172,850. The Company expects to continue to incur substantial operating
losses in the future due to continued spending on research and development
programs, the funding of preclinical studies, clinical trials and regulatory
activities and the costs of manufacturing and administrative activities.
RESULTS OF OPERATIONS
Revenues
The Company produced net sales of $1,025,822 for the third quarter ended
December 31, 1999 which was an increase of $316,242, or 45%, compared to total
revenues of $709,580 for the third quarter ended December 31, 1998. The increase
in the third quarter of 1999 over the same quarter of the previous year was
partially a result of ECM 630 sales. The ECM 630, an Exponential Decay Wave
Electroporation system which utilizes a Precision Pulse Technology, the new BTX
Platform technology, and all-new digital user interface, was introduced at the
end of the second quarter of 1999. Also, sales to the Company's domestic
distributors increased by 47% from the third quarter of 1998 to the third
quarter of 1999. The increase in sales was also attributed to the increased
focus on application-based sales in the in-vivo gene therapy area.
Revenues from grant funding decreased from $184,987 for the three months
ended December 31, 1998 to $71,156 for the three months ended September 30,
1999. For the nine months ended December 31, 1999 the Company recorded grant
revenues in the amount of $313,061, compared to $320,139 for the nine months
ended December 31, 1998. The lower grant revenues in the third quarter of 1999
compared to the third quarter of 1998 were primarily a result of decreased
activities within the Oncology field for which a Phase II SBIR grant was awarded
to the Company by the NIH in September 1997. Revenues from grant funding may
fluctuate from period to period based on the level of grant funding awarded and
the level of research activity under the grants awarded.
In December 1999 the Drug and DNA Delivery Division recorded milestone
revenues in the amount of $83,333. The milestone achieved was part of the
Licensing Agreement with Ethicon involving the use of the Medpulser system for
Electroporation Therapy in the treatment of solid tumor cancer. Milestone
revenues may fluctuate from period to period due to the timing of milestone
achievements, the amount of milestone payments, and whether milestones were
achieved.
In the third quarter of 1999 the Company recorded contract research
revenues in the amount of $ 33,334 as a result of a collaborative research
agreement to develop Genetronics' electroporation technology for use in a
particular gene therapy application.
Interest income for the three months and nine months ended December 31,
1999 in the amount of $164,898 and $409,591 increased significantly compared to
the interest income in the three months and nine months ended December 31, 1998
in the amount of $121,032 and $228,457 as a result of the proceeds from the
private placement in June 1999 which were invested in interest bearing
instruments.
10
<PAGE> 13
The Company reported total revenues for the third quarter of 1999 in the
amount of $1,378,543, compared to $5,040,999 for the third quarter of 1998. The
significantly higher revenues in the third quarter of 1998 were a result of a
$4,000,000 up-front license fee from Ethicon.
Cost Of Sales
Cost of sales increased by $192,545, or 58%, from $331,323 for the three
months ended December 31, 1998 to $523,868 for the three months ended December
31, 1999 as a result of higher net product sales. Also, as a result of a 13%
increase in sales, cost of sales was $1,289,461 for the nine months ended
December 31, 1999, an increase of $145,533, or 13%, from $1,143,928 for the same
period of the previous year.
Gross Profit and Gross Margin
Primarily due to higher sales, the gross profit for the three months
ended December 31, 1999, in the amount of $501,954, increased by $123,697, or
33%, compared with $378,257 for the three months ended December 31, 1998. The
gross profit margin of 49% for the three months ended December 31, 1999 was 4%
lower than the gross profit margin of 53% for the three months ended December
31, 1998, primarily as a result of the lower profit margin of the newly
introduced ECM 630 which is sold in a highly competitive market. Also, the
introduction of the ECM 630 resulted in higher labor costs due to the learning
curve for building the new instrument.
Gross profit for the nine months ended December 31, 1999 in the amount
of $1,516,739 increased by $180,167, or 13%, compared with the gross profit in
the amount of $1,336,572 for the nine months ended December 31, 1998. The gross
profit margin of 54% for the nine months ended December 31, 1999 remained at the
same level compared to the same period of the previous year.
Selling, General and Administrative Expenses
Selling, general and administrative expenses, which include advertising,
promotion and selling expenses, decreased by $216,380, or 15%, from $1,459,036
for the three months ended December 31, 1998 to $1,242,656 for the three months
ended December 31, 1999. The decrease over the three months ended December 31,
1998 was primarily a result of the Administrative and Sales & Marketing
restructuring activities in the second quarter of 1999, which improved operating
efficiency.
11
<PAGE> 14
For the nine months ended December 31, 1999, selling, general and
administrative expenses totaled $4,257,062, an increase of $446,862, or 12%,
compared to $3,810,200 for the nine months ended December 31, 1998. The increase
was partially a result of higher personnel expenses due to an increase in
salaries and an increase in headcount during fall of 1998 and higher
amortization and depreciation expenses attributable to patent costs and fixed
asset additions of previous periods. Sales and marketing expenses in the BTX
Division in the second quarter of 1999 increased as a result of marketing
efforts in order to promote the newly introduced ECM630.
Research and Development/Clinical Trials
Research & Development expenses for the third quarter of 1999 were
$1,360,739, a decrease of $901,403, or 40%, compared to $2,262,142 for the same
quarter of the previous year.
The overall lower R&D expenses were primarily a result from lower
clinical/regulatory expenses due to the winding down of the Head & Neck Phase II
clinical trials in the U.S. and Canada and decreased activities in the
Engineering department. Reduced expenses in the transdermal and vascular therapy
areas, as the result of a shift in the Company's primary focus to oncology and
gene therapy, also contributed to the lower research and development expenses.
As a result of the above, research and development expenses in the nine
months ended December 31, 1999 were $5,003,359, a decrease of $1,110,371, or
18%, compared to $6,113,730 for the nine months ended December 31, 1998.
Restructuring Charges
During the three months ended September 30, 1999 the Company undertook a
review of its operating structure to identify opportunities to improve operating
effectiveness. As a result of this review, certain staffing changes occurred.
The Company also announced that its employment of two senior executives ended in
September 1999. In December 1999, the Company entered into an Agreement for
Termination of Employment with each of the two senior executives. In accordance
with the staffing changes and the terms of the Termination of Employment
Agreements, the Company has accrued and recorded restructuring charges of
$231,481 for the three months ended December 31, 1999 and $599,060 for the nine
months ended December 31, 1999.
Net results of reportable segments (Net results of reportable segments
do not include unallocated costs such as interest income and expense and general
and administrative costs)
The BTX Division reported a net surplus in the amount of $172,963 for
the three months ended December 31, 1999 compared to net expenditures in the
amount of $22,273 for the three months ended December 31, 1998. The improved
results for the quarter ended December 31, 1999 were primarily attributable to
an increase in revenues from $709,580 for the three months ended December 31,
1998 to $1,015,211 for the three months ended December 31, 1999.
For the nine months ended December 31, 1999 the BTX Division reported a
net surplus in the amount of $210,595, a decrease of $74,291, or 26%, over the
same period of the previous year. The decrease was primarily a result of
increased engineering expenses incurred in order to
12
<PAGE> 15
upgrade the BTX instrument product line and sales and marketing expenses
incurred for marketing efforts in order to introduce new products. The increase
in operating expenses for the nine months ended December 31, 1999 more than
offset the 13% increase in revenues.
The Drug and DNA Delivery Division reported net expenditures in the
amount of $1,311,799 for the three months ended December 31, 1999 compared to a
net surplus in the amount of $2,053,734 for the three months ended December 31,
1998, an increase of $3,365,533. The increase in net expenditures was a result
of the $4,000,000 up-front licensing fee received in 1998 from Ethicon as part
of the Licensing Agreement, which did not repeat in 1999. Not including the
one-time licensing fee, net expenditures decreased by about $600,000 primarily
as a result of the lower research and development expenses and selling, general,
and administrative expenses.
For the nine months ended December 31, 1999 the Drug and DNA Delivery
Division reported net expenditures of $4,456,183, which meant an increase of
$2,935,821, or 193%, compared to net expenditures of $1,520,362 for the nine
months ended December 31, 1998. This change was also a result of the licensing
fee which was received in the third quarter of 1998.
Net Loss
For the three months ended December 31, the Company recorded a net loss
of $1,986,202, compared with a net profit of $983,693 for the three months ended
December 31, 1998, a result of the licensing fee in 1998. The net loss in the
amount of $7,174,349 for the nine months ended December 31, 1999 was $3,153,289,
or 78%, higher than the net loss in the amount of $4,021,060 for the same period
of the previous year, also a result of the higher revenues for the nine months
ended December 31, 1998.
The Company does not believe that inflation has had a material impact on
its result of operations.
13
<PAGE> 16
LIQUIDITY AND CAPITAL RESOURCES
During the last five fiscal years, the Company's primary uses of cash
have been to finance research and development activities, including preclinical
and clinical trials in the Drug and DNA Delivery Division. The Company has
satisfied its cash requirements principally from proceeds from the sale of
equities. In June 1999 the Company closed a private placement of 4,187,500
special warrants at a price of $3.00 per special warrant for net proceeds to the
Company of $11,065,963. Each warrant entitles the holder to acquire one common
share in the capital of the Company at no additional cost upon exercise.
As of December 31, 1999, the Company had working capital of $10,859,442,
compared to $6,204,598, as of March 31, 1999. The increase was a result of the
private placement in June 1999.
On December 31, 1999, the Company's cash, cash equivalents and short
term investments amounted to $10,889,854. Cash flows used in operating
activities were $6,752,592 for the nine months ended December 31, 1999 compared
to $3,779,020 for the nine months ended December 31, 1998, which meant an
increase of $ 2,973,572, or 79%. The increase in cash used in operating
activities compared to the nine months ended December 31, 1998 was primarily
attributable to the license fee received from Ethicon in October 1998. Excluding
the $4,000,000 license fee, the cash used in operating activities for the nine
months ended December 31, 1999 decreased by $1,026,428, or 13%, from the nine
months ended December 31, 1998, primarily a result of the higher net sales and
milestone revenues.
Investing activities increased for other assets due to increased
expenses related to the strengthening of the Company's patent portfolio, whereas
expenses incurred for the purchase of capital assets decreased.
In August 1999 the Company entered into a revolving credit agreement
with a bank which provides the Company with the ability to borrow up to
$2,000,000. Borrowings under this facility bear interest at the Bank's floating
reference rate less a discount, or the London Inter Bank Offer Rate (LIBOR) plus
a premium. Under the agreement outstanding balances are collaterized by
assignment of cash accounts and short term investment accounts. The credit
facility will expire on June 30, 2000. At December 31, 1999, there was no
outstanding balance on the revolving line of credit.
Receivables in the amount of $975,083 at December 31, 1999 were $198,415
higher than at March 31, 1999 primarily due to outstanding invoices for
milestone payments and reimbursement of tooling expenses.
Inventories increased from $655,906 at March 31, 1999 to $879,903 at
December 31, 1999, primarily due to a further build-up of inventory of drug and
DNA delivery products in anticipation of activities pursuant to the Supply
Agreement with Ethicon.
Current liabilities increased from $1,423,335 at March 31, 1999 to
$2,077,813 at December 31, 1999, primarily due to the accrual of restructuring
charges and the recording of
14
<PAGE> 17
$266,666 deferred revenues as a result of the receipt of an up-front payment as
part of a Collaborative Gene Therapy Research Agreement.
The Company believes that its existing cash, cash equivalents, and short
term investments will be sufficient to fund its operations at least through the
next twelve months.
The Company's long term capital requirements will depend on numerous
factors including:
o The progress and magnitude of the research and development programs,
including preclinical and clinical trials;
o The time involved in obtaining regulatory approvals;
o The cost involved in filing and maintaining patent claims;
o Competitor and market conditions;
o The Company's ability to establish and maintain collaborative
arrangements;
o The Company's ability to obtain grants to finance research and
development projects; and
o The cost of manufacturing scale-up and the cost of commercialization
activities and arrangements
The Company's ability to generate substantial funding to continue
research and development activities, preclinical and clinical studies and
clinical trials and manufacturing, scale-up, and administrative activities is
subject to a number of risks and uncertainties and will depend on numerous
factors including:
o The Company's ability to raise funds in the future through public or
private financings, collaborative arrangements, grant awards or from
other sources;
o The potential for equity investments, collaborative arrangements,
license agreements or development or other funding programs with the
Company in exchange for manufacturing, marketing, distribution or other
rights to products developed by the Company; and
o The Company's ability to maintain its existing collaborative
arrangements
The Company cannot guarantee that additional funding will be available
when needed. If it is not, the Company will be required to scale back its
research and development programs, preclinical studies and clinical trials,
administrative activities, and financial results and condition would be
materially adversely affected.
YEAR 2000 ISSUES
The Year 2000 Problem stems from the fact that many computer systems,
software programs and equipment and instruments with embedded microprocessors
were designed to only
15
<PAGE> 18
recognize the last two digits of a calendar year. With the arrival of the Year
2000, these systems and microprocessors may encounter operating problems due to
their inability to distinguish years after 1999 from years preceding 1999. The
Company is aware of the issues associated with the Year 2000 Problem in many
existing hardware and software applications. In 1998 the Company established a
Year 2000 compliance plan which was approved by the Company's senior management
and Board of Directors. To execute the plan, the Company formed a Year 2000
committee that is composed of both management and non-management personnel. In
addition, the Company has contracted with an outside Year 2000 service provider
to assist with the implementation of the Year 2000 compliance plan. The plan is
a multi-phased approach to the Year 2000 Problem, and includes assessment,
inventory, testing and remediation phases.
The Company has completed the assessment and inventory phases of the
Year 2000 compliance plan, and the preliminary testing of the Company's internal
management information and other systems to verify their Year 2000 compliance
status. The Company is conducting ongoing tests of mission-critical systems to
ensure that they remain operational through the Year 2000. Based on the results
of the work performed to date, the Company believes that the mission critical
computer systems and applications used by the Company either are currently Year
2000 compliant, or will be brought into compliance as third-party Year
2000-related software upgrades or patches become available and are installed.
These mission critical systems include: Accounting and Distribution Software,
Telephone System, Security System, Customer Relations Management Software, and
Clinical Report Database.
The Company, in collaboration with its outside Year 2000 consultants,
has examined the products manufactured in the BTX Division and has determined
that the BTX products will not experience any Year 2000-related failures. In
addition, the Company, in collaboration with its outside Year 2000 consultants,
has examined the products produced by the Drug and DNA Delivery Division, and
has determined that these products will not experience any Year 2000-related
failures.
In addition to examining the Company's internal Year 2000 compliance
issues, the Company has contacted the critical companies in the Company's supply
and distribution chain in order to ensure that they are Year 2000 compliant, and
that there will be no interruption of the Company's business operations due to
Year 2000 failures. The Company has evaluated the responses received from these
companies and is taking steps to ensure that there will not be Year 2000-related
issues with these companies. The Company is also evaluating the Year 2000
compliance status of other critical business dependencies, including business
partners, collaborators, and clinical test sites. As part of this effort, the
Company is implementing a process to monitor the Year 2000 Compliance status of
its key outside business dependencies up to and through the Year 2000. However,
the Company cannot guarantee the compliance status of third parties, and the
failure of key suppliers, distributors, business partners, or customers to
become Year 2000 compliant on a timely basis, or at all, could have a material
adverse effect on the Company.
The Company has developed and is in the process of implementing and
documenting a contingency plan which will be used by the Company in the event
that Year 2000 failures occur which affect critical operations. Towards this
end, the Company has formed a contingency planning team, which includes
management and information technology staff, to address Year 2000 issues as they
arise, notwithstanding the efforts described above to identify and eliminate
16
<PAGE> 19
such problems. The most serious Year 2000 risks for the Company are related to
its ability to continue production of products, as well as distribute those
products to its customers. To reduce the risk of Year 2000-related disruption,
the Company has increased the inventory levels for its key product components to
ensure that a sufficient amount will be available to meet the expected demand in
the first and second quarters of the Year 2000. In addition, the Company has
identified and contacted secondary sources of supply, distribution, and
manufacture of its key products, which will enhance the Company's ability to
provide continued product flow in the event that a primary source is unable to
provide service due to Year 2000 disruptions. For several of the products where
assembly has been outsourced to third parties, in addition to utilizing
secondary sources, the Company has the capability to perform the assembly
in-house if necessary. Also, the Company is working with its primary bank to
ensure that fund transfers from the Company's overseas distributors will not be
disrupted by Year 2000 problems. Where there is doubt about the ability of an
overseas distributor to make timely payment, the Company is evaluating
alternative payment arrangements such as full or partial prepayment. Finally,
the Company has developed a contingency plan to maintain critical business
operations functions in the event there is a sustained lack of availability of
key infrastructure services such as telecommunications and electric power. The
plan includes obtaining access to off-site resources in various locations in the
event that the infrastructure failures are localized. While the Company's
contingency plans will mitigate the impact of Year 2000 problems on the
Company's operations, it is unlikely that any contingency plan can fully
mitigate the impact of significant business disruptions among key suppliers or
customers. In any event, even where the Company has developed contingency plans,
there can be no assurance that such plans will address all the problems that may
arise, or that such plans, even if implemented, will be successful.
The Company has established a Year 2000 budget to address Year 2000
issues. The total cost of these year 2000 compliance activities to date have not
been material to the Company's financial condition or its operating results. In
addition to utilizing outside resources for the Company's Year 2000 program, the
Company is devoting necessary internal resources to the Year 2000 compliance
program. The Company is including the internal costs incurred as part of the
Company's Year 2000 expenditures in this disclosure. The Company will continue
to review and update data for costs incurred related to the Year 2000 and will
revise forecasted costs each quarter. To date, the costs incurred for Year 2000
compliance activities have been approximately $20,000 internally and $ 27,000
for external resources. Based on the Company's Year 2000 review to date, the
Company does not believe that the incremental costs of addressing Year 2000
issues will have a material adverse effect on the Company's consolidated results
of operations, liquidity and capital resources. Given the fact that the
Company's Year 2000 Plan is essentially completed, the Company does not expect
to make significant Year 2000-related expenditures in the future.
However, there can be no assurance that the Company will timely identify
and remediate all year 2000 problems, that remedial efforts will not involve
significant time and expense, or that such problems will not have a material
adverse effect on the Company's business, operating results and financial
condition.
To date, there has been no incidence of Year 2000 errors or shutdowns.
In addition, the Company is not aware of any adverse impact of the year 2000 on
any of its customers or suppliers. However, until comfortably past January 1,
2000, the Company will not be able to
17
<PAGE> 20
confidently assess whether there has been any adverse affects on any of its
customers or suppliers.
The statements set forth herein concerning the Year 2000 Problem which
are not historical facts are forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially from those in
the forward-looking statements. There can be no guarantee that any estimates or
other forward-looking statements will be achieved and actual results could
differ significantly from those planned or contemplated. The Company plans to
update the status of its Year 2000 program as necessary in its periodic filings
and in accordance with applicable securities laws.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk related to changes in interest
rates. The risks related to foreign currency exchange rates are immaterial and
the Company does not use derivative financial instruments.
The Company has invested its excess cash, cash equivalents, and
short-term investments in U.S. government, municipal, and corporate debt
securities with high quality credit ratings and an average maturity of no more
than six months. These investments are not held for trading or other speculative
purposes. Given the short-term nature of these investments, and that the Company
has no borrowings outstanding, the Company is not subject to significant
interest rate risk.
18
<PAGE> 21
PART II. OTHER INFORMATION
ITEMS 1, 2, 3, 4, AND 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<S> <C>
10.1 Research and Option Agreement dated November 2, 1999 by and
between the Registrant and Boehringer Ingelheim International
GMBH+
10.2 Termination of Employment Agreement dated December 6, 1999 by and
between the Registrant and Lois J. Crandell
10.3 Consulting Services Agreement dated December 6, 1999 by and
between the Registrant and Lois J. Crandell
10.4 Termination of Employment Agreement dated December 6, 1999 by and
between the Registrant and Gunter A. Hofmann
10.5 Consulting Services Agreement dated December 6, 1999 by and
between the Registrant and Gunter A. Hofmann
27 Financial Data Schedule (filed only electronically with the SEC)
</TABLE>
(a) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended December 31,
1999
- ------------
+ Confidential treatment has been requested with respect to certain portions
of this exhibit. Omitted portions have been filed separately with the
Securities and Exchange Commission.
19
<PAGE> 22
GENETRONICS BIOMEDICAL LTD.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Genetronics Biomedical Ltd.
Date: 02/10/00 By: /s/ Martin Nash
-------------------- ------------------------------------
Martin Nash, Chief Executive Officer
and Chief Financial Officer
20
<PAGE> 1
EXHIBIT 10.1
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. Sections 200.80(b)(4),
200.83 and 240.24b-2
RESEARCH AND OPTION AGREEMENT
between
BOEHRINGER INGELHEIM INTERNATIONAL GmbH
55218 Ingelheim
GERMANY
(hereinafter referred to as "BII")
and
GENETRONICS, INC.
11199 Sorrento Valley Road
San Diego
California 92121-1334
USA
(hereinafter referred to as "GENETRONICS")
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. DEFINITIONS...............................................................4
2. CONDUCT OF RESEARCH.......................................................8
3. CONSIDERATION............................................................10
4. RESEARCH OPTION..........................................................11
5. DEVELOPMENT AND LICENSE OPTION...........................................13
6. OPTION FEE...............................................................14
7. WARRANTIES AND LIABILITIES...............................................14
8. CONFIDENTIALITY..........................................................16
9. INVENTIONS...............................................................18
10. PATENTS..................................................................18
11. PUBLICATIONS.............................................................20
12. TERM AND TERMINATION.....................................................21
13. CONCLUDING PROVISIONS....................................................22
APPENDIX 1 RESEARCH PLAN......................................................25
APPENDIX 2 LICENSE TERMS......................................................31
</TABLE>
-2-
<PAGE> 3
WITNESSETH:
WHEREAS, BII has expressed an interest in the application of in vivo
electroporation for the delivery of DNA in solution, or in particles, into human
skin or other tissue; and
WHEREAS, BII has extensive expertise in the field of gene transfer and tumor
vaccines and has developed a variety of approaches to tumor vaccination; and
WHEREAS, Genetronics has broad technology and expertise in the field of in vivo
electroporation for intradermal and transdermal delivery of genes and drugs and
has, over a period of years, expended considerable effort and resources in the
development of technology in the area of electroporation and related
technologies for drug and gene delivery, and has accumulated extensive
experience in such areas; and
WHEREAS, BII and Genetronics have entered into discussions and have agreed upon
the content of a research project which will include the use of technologies and
methodologies proprietary to either Genetronics or BII; and
WHEREAS, Genetronics is willing to perform the Research Program in collaboration
with BII; and
WHEREAS, BII is willing to provide the funding for the Research Program; and
WHEREAS, BII wishes to obtain an option right with respect to a license to
develop and commercialize electrically assisted DNA vaccine delivery and
Genetronics is willing to grant such option;
NOW, THEREFORE, and in consideration of the foregoing premises and other good
and valuable consideration, the receipt of which is hereby acknowledged, the
parties agree as follows:
-3-
<PAGE> 4
1. DEFINITIONS
1.1 "Affiliates" shall mean any company or business entity which controls,
is controlled by, or is under common control with either Genetronics or
BII. For this purpose "control" shall mean direct or indirect beneficial
ownership of at least fifty per cent (50%) of the voting share capital
in such company or other business entity.
1.2 "BII Invention" shall mean any patentable and/or non-patentable
invention made solely by one or more BII employees, without inventive
contribution of Genetronics employees, pursuant to the Research Program
or in relation to the development, manufacture, marketing or sale of a
Product-Kit.
1.3 "BII Technology" shall mean (i) all Patent Rights and Know How owned by
or licensed to BII as of the Effective Date that are directly related to
tumor antigens, DNA encoding tumor antigens, tumor vaccines, vaccine
formulations, gene transfer technology and/or tumor vaccination, (ii)
all BII Inventions and BII Research Program Know How that are not within
Genetronics Core Technology, and (iii) all Genetronics Inventions,
Genetronics Research Program Know How, Joint Inventions, and Joint
Research Program Know How that are not within Genetronics Core
Technology and are directly related to tumor antigens, DNA encoding
tumor antigens, tumor vaccines, vaccine formulations, gene transfer
technology, and/or tumor vaccination.
1.4 "BII Patent Rights" shall mean any and all Patent Rights in BII
Technology owned by or licensed to BII.
1.5 "BII Product" shall mean one or more nucleic acids encoding [...***...]
and all other material for inclusion in a Product-Kit with the exception
of any components purchased from Genetronics or a Genetronics Affiliate.
1.6 "Biological Material" shall mean all composition of matter provided to
Genetronics by or on behalf of BII for performance of the Research
Program.
1.7 "Confidential Information of BII" shall mean confidential information
disclosed by BII or an Affiliate of BII to Genetronics or an Affiliate
of Genetronics, including but not limited to BII Technology.
* Confidential Treatment Requested
-4-
<PAGE> 5
1.8 "Confidential Information of Genetronics" shall mean confidential
information disclosed by Genetronics or its Affiliates to BII or its
Affiliates, including but not limited to Genetronics CoreTechnology and
Genetronics New Technology.
1.9 "Confidential Information" shall mean Confidential Information of
Genetronics and/or Confidential Information of BII.
1.10 "Effective Date" shall mean the date of execution by the last party to
sign this Agreement.
1.11 "Electrically Assisted Delivery" shall mean the delivery of matter
across biological barriers such as cell membranes or layer(s) of the
skin, facilitated by the effect of electrical fields or currents on such
biological barriers and/or on the matter to be delivered.
1.12 "Equipment" shall mean the equipment defined in Appendix 1.
1.13 "Extended Research Program" shall have the meaning set forth in Clause
4.1.
1.14 "Extended Research Program Plan" shall have the meaning set forth in
Clause 4.4.
1.15 "Field" shall mean the field of cancer DNA vaccines, specifically
defined to be [...***...] nucleic acids that code for tumor antigens,
which may be combined with [...***...] or formulation thereof that
elicits a [...***...] immune response against [...***...] or [...***...]
cancer cells or cancerous tissue when administered to [...***...] or
[...***...], respectively. For the sake of clarity, the Field does not
include HIV DNA vaccines.
1.16 "Genetronics Core Technology" shall mean (i) all Patent Rights and Know
How owned by or licensed to Genetronics as of the Effective Date that
are directly related to the Electrically Assisted Delivery of any
substance into or through organismal cells or tissues, and (ii) all
Genetronics Inventions, BII Inventions, Joint Inventions, and Research
Program Know How that are directly related to the Electrically Assisted
Delivery of any substance into or through organismal cells or tissues.
* Confidential Treatment Requested
-5-
<PAGE> 6
1.17 "Genetronics Invention" shall mean any patentable and/or non-patentable
invention made solely by one or more Genetronics employees, without
inventive contribution of BII employees, pursuant to the Research
Program or in relation to the development, manufacture, marketing or
sale of a Product-Kit.
1.18 "Genetronics Patent Rights" shall mean any and all Patent Rights owned
by or licensed to Genetronics in Genetronics Core Technology and
Genetronics New Technology.
1.19 "Genetronics NewTechnology" shall mean all Genetronics Inventions and
Genetronics Research Program Know How that are not within Genetronics
Core Technology or BII Technology.
1.20 "Joint Invention" shall mean any patentable and/or non-patentable
invention made jointly by one or more BII employees together with one or
more Genetronics employees pursuant to the Research Program or in
relation to the development, manufacture, marketing or sale of
Product-Kit .
1.21 "Joint Patent Rights" shall mean Genetronics' and BII's joint Patent
Rights in Joint Technology
1.22 "Joint Technology" shall mean all Joint Inventions and all Joint
Research Program Know How that is not within BII Technology or
Genetronics Core Technology.
1.23 "Know How" shall mean information which is not known to the public
including information comprising or relating to inventions, including
patent applications in preparation, concepts, discoveries, data,
designs, formulae, ideas, experience; information comprising or relating
to material, methods, models, assays, research plans, procedures,
designs for experiments and tests and results of experimentation and
testing including results of research or development together with
processes including manufacturing processes, specifications, techniques,
chemical, pharmacological, toxicological, clinical, analytical and
quality control data, trial data, case report forms, data analyses,
reports or summaries and correspondence no matter whether contained in
written documents, tapes, discs, diskettes, CDROM and any other media on
which Know How can be permanently stored. The fact that an item is known
to the public shall not be taken to exclude the possibility that a
compilation including the item, and/or a development related to the
items, is (or
-6-
<PAGE> 7
remains) not known to the public.
1.24 "License Terms" shall mean the licensing terms referred to in Clause 5
below and attached hereto as Appendix 2.
1.25 "Non-Exclusive License to Genetronics Core Technology" shall mean a
non-exclusive, royalty-bearing license to Genetronics Core Technology in
the Territory necessary to develop, make, use, sell, offer to sell, and
import Product-Kits for use in the Field and as referred to in Appendix
2 hereto attached.
1.26 "Net Sales" shall mean [...***...].
1.27 "Patent Rights " shall mean rights in all Know-How, patent applications
and patents, design patents, improvement patents and models and
certificates of addition and all foreign counterparts of them, including
any provisional applications, divisional applications and patents,
refilings, renewals, continuations, continuations-in-part, patents of
addition, extensions, reissues, substitutions, confirmations,
registrations, revalidation and additions of or to any of them, as well
as any supplementary protection certificates, and equivalent protection
rights in respect of any of them.
1.28 "Product-Kit" shall mean the finished product containing a BII Product
combined with components purchased from Genetronics or Genetronics
Affiliates for the Electrically Assisted Delivery of a BII Product. Each
Specified Product-Kit is a subset of Product-Kit and shall be considered
a Product-Kit for all purposes and definitions of this Agreement, except
as expressly stated otherwise.
1.29 "Research Program Know How" shall mean Know How that is created,
generated or developed by or on behalf of BII ("BII Research Program
Know How"), by or on behalf of Genetronics ("Genetronics Research
Program Know How"), or jointly ("Joint Research Program Know How")
pursuant to the Research Program or in relation to development,
manufacture, marketing or sale of the Product-Kit.
1.30 "Research Program" shall mean the research project entitled: "Delivery
of certain cancer DNA vaccines by in vivo electroporation or related
technologies" as set forth in detail in the Research Plan, which will be
conducted by Genetronics and BII in collaboration in the Field pursuant
to Clauses 2 and 7 of this Agreement. The Extended Research Program is a
subset of Research Program and shall be
* Confidential Treatment Requested
-7-
<PAGE> 8
considered a Research Program for all purposes and definitions of this
Agreement, except as expressly stated otherwise.
1.31 "Research Plan" shall mean the project as described in the protocol and
the respective timelines attached hereto as Appendix 1, as amended from
time to time in writing with the mutual written consent of both parties.
1.32 "Territory" shall mean the world.
2. CONDUCT OF RESEARCH
2.1 The Research Program is a program for collaborative research under which
Genetronics shall, among other things, develop electrodes for the in
vivo electroporation of DNA encoding one or more tumor antigens to
elicit an antitumor immune response. Genetronics and BII will carry out
the research activities allocated to them in accordance with the
Research Plan set forth in Appendix 1 of this Agreement. The Research
Program shall begin on the Effective Date and shall terminate 18 months
thereafter, except as it may be extended pursuant to Clause 4 of this
Agreement.
2.2 Genetronics shall be responsible to perform all activities necessary to
conduct its part of the Research Program as described in the Research
Plan in Appendix 1 and within the timelines set forth therein at its own
cost and expense.
2.3 BII will use its experience and the BII Technology to discover, develop,
and/or acquire potential BII Products for use in the Research Program at
its own cost and expense.
2.4 The parties shall meet at least every six (6) months to discuss the
progress of the Research Program. The meetings shall be held at
locations that are agreed upon by the parties, and all expenses
associated with attending the meetings shall be borne by BII.
Each party shall provide the other party with all Know How in its
possession as of the Effective Date and during the term of the Research
Program, which it has the right to disclose, to the extent necessary for
the successful conduct of the Research Program.
-8-
<PAGE> 9
2.5 Genetronics shall furnish BII with interim reports of observations and
results of the different phases of the Research Program every 3rd month
(quarterly) after commencement of the Research Program.
2.5 Genetronics hereby nominates [...***...] as the project manager at
Genetronics, and BII hereby nominates [...***...] as the project manager
at BII, who shall be jointly responsible for coordinating all work to be
conducted under the Research Program.
Genetronics shall use its best reasonable efforts to ensure that there
are no changes in the person of the project manager. If a change,
nevertheless, occurs, Genetronics will promptly submit the name and
qualification of any planned replacement for the project manager,
whereupon BII shall, at its sole discretion, approve or reject any such
replacement within a reasonable time.
The parties shall each nominate a deputy for each of these individuals,
who shall be entitled to represent such individuals in the event of
absence of the same.
2.6 Genetronics shall further provide BII with a complete and detailed draft
final report of observations and results of the Research Program to date
no later than 30 (thirty) days before completion of the Research Program
for BII's review and approval. Upon written request of BII provided no
later than 10 (ten) days after receipt of the draft final report,
Genetronics shall make any reasonable modifications in such draft final
report after receipt of BII's written request, such that a final report
shall be complete and provided to BII no later than 18 months after
beginning the Research Program. If BII does not timely request that
modifications be made to the draft final report, as set forth herein,
then the draft final report provided by Genetronics shall become the
final report.
2.7 Genetronics agrees to provide Equipment to BII promptly after initiation
of the Research Program. BII agrees it shall use the Equipment only
within the Field and only pursuant to the Research Program, and shall
abide by the following terms and conditions:
a. BII shall not analyze, have analyzed, structurally modify, or
have modified the Equipment in any way.
* Confidential Treatment Requested
-9-
<PAGE> 10
b. Genetronics shall retain all right, title, and interest in the
Equipment provided to BII under this Agreement.
c. Under no circumstances is the Equipment to be used on humans.
d. BII shall not transfer the Equipment to a third party
non-Affiliate without the prior written permission of
Genetronics. BII shall have the right to transfer the Equipment
to an Affiliate pursuant to the Research Program, provided
however, BII shall inform Genetronics regularly on such
transfers.
The provisions of this Clause 2.7 shall apply accordingly for use
of the Biological Material to be supplied by BII to Genetronics.
2.8 Genetronics hereby grants BII a limited license to use Genetronics Core
Technology and Genetronics New Technology to the extent necessary for
BII to perform the Research Program as set forth in the Research Plan
for the term of this Agreement. BII hereby grants Genetronics a limited
license to use BII Technology to the extent necessary for Genetronics to
perform the Research Program as set forth in the Research Plan for the
term of this Agreement. Each party shall have the right to sublicense
such right to its Affiliate(s) solely for fulfilment of its obligations
under this Agreement. No other license is granted by one party to the
other pursuant to this Agreement.
2.9 Genetronics hereby assigns to BII its rights in any Genetronics
Invention, Research Program Know How, and Joint Invention that is not
within Genetronics Core Technology and that relates to tumor antigens,
DNA encoding tumor antigens, tumor vaccines, vaccine formulations, gene
transfer technology, and/or tumor vaccination. BII hereby assigns to
Genetronics its rights in any BII Invention, Research Program Know How,
and Joint Invention that is directly related to the Electrically
Assisted Delivery of any substance into or through organismal cells or
tissues.
3. CONSIDERATION
3.1 In consideration of the work to be conducted by Genetronics under the
Research Program, BII shall place at the disposal of Genetronics the
total sum of [...***...] which shall be payable according to the
provisions of this Clause 3. Said
* Confidential Treatment Requested
-10-
<PAGE> 11
total sum shall be exclusive of value added tax which shall be added
thereon by BII, if applicable.
3.2 The sum referred to in Clause 3.1 above shall become duly payable in
accordance with the following schedule:
(i) [...***...] upon execution of this Agreement;
(ii) [...***...]
(iii) [...***...]
(iv) [...***...]
(v) [...***...]
(vi) [...***...] upon receipt of the final report of the Research
Program.
3.3 BII undertakes to make all payments due hereunder within 30 (thirty)
days of receipt of an invoice by Genetronics, detailing value added tax
separately as needed, to a bank account designated by Genetronics.
3.4 The sum referred to in Clause 3.1 above is inclusive of all costs and
expenses of Genetronics (internal and pass-through costs) incurred in
connection with the Research Program, except as explicitly provided
otherwise in this Agreement. Genetronics shall assign [...***...] to the
Research Program, [...***...] shall be a Ph.D. level scientist and
[...***...] shall be at the level of at least a research technician, and
[...***...] shall be qualified to perform the Research Program as set
forth in Appendix 1.
4. RESEARCH OPTION
4.1 BII has the right to request one 18 (eighteen) month extension of the
Research Program if BII, in its sole discretion, decides that further
basic research should be conducted. Such right shall be exercisable by
notice in writing to Genetronics within 3 (three) months after BII
receives the final report of the Research Program. If BII exercises its
option during such period, this Agreement shall be automatically
* Confidential Treatment Requested
-11-
<PAGE> 12
extended for one 18 (eighteen) month period, beginning on the date of
such written notice, under the same terms and conditions set forth
herein, but for the right to any additional extensions ("Extended
Research Program"). For the Extended Research Program, a consideration
of [...***...] of the total amount set forth in Clause 3.1 is foreseen.
In the event the Extended Research Program requires increased or
decreased staffing and costs compared to the original Research Program,
the parties shall jointly agree upon amounts greater or lower than
[...***...] to fund the Program as the case may be. The consideration
shall be paid in [...***...] equal installments. The first such payment
shall be due by the beginning of the Extended Research Program, the next
[...***...] installments at the beginning of the then following
[...***...] calendar quarters and the last installment upon receipt of
the final report of the Extended Research Program.
4.2 BII shall reimburse Genetronics for staff allocated to future questions
resulting out of the Research Program in an amount of [...***...] per
month for the period between the end of the original Research Program
and (i) notification of BII's decision to enter the Extended Research
Program or (ii) notification that BII has decided not to enter the
Extended Research Program or (iii) expiry of the option period pursuant
to Clause 4.1 without any notice, whichever of (i) - (iii) occurs first.
Each payment shall be made by BII on a monthly basis until the first to
occur of (i) - (iii).
4.3 The parties may mutually decide to extend the Research Program for a
period shorter than 18 (eighteen) months, and under terms and conditions
they may agree upon, but neither party has an obligation to do so.
4.4 Within a reasonable period of time following notification of BII's
exercise of its option to enter the Extended Research Program, the
parties shall prepare and mutually agree upon a detailed "Extended
Research Program Plan". Such Extended Research Program Plan shall
describe in detail the work to be carried out by Genetronics and BII
during the Extended Research Program.
4.5 In the event the Agreement is not extended pursuant to Clause 4.1 or
4.3, it shall be deemed terminated as of the end of 3 (three) months
after receipt of the final report by BII. Other than rights and
obligations under the option set forth in Clause 5 below, and
obligations that extend after termination, as set forth in Clause 12.1,
the parties shall have no further obligations to each other.
* Confidential Treatment Requested
-12-
<PAGE> 13
5. DEVELOPMENT AND LICENSE OPTION
5.1 During the performance of the Research Program or, if extended, the
Extended Research Program or a program extension under Clause 4.3, and
for a three month period after such has been conducted, BII may, in its
sole discretion, decide to enter into a development and license
agreement with Genetronics, the major terms of which are set forth in
the License Terms attached hereto as Appendix 2. Such option right shall
be exercisable by notifying Genetronics at the latest 3 (three) months
after receipt of the final report of the Research Program, receipt of
the final report of the Extended Research Program, or completion of the
Clause 4.3 research extension, as the case may be. In the event BII
exercises the option granted under this Clause 5.1 during the term of
the Research Program, the Extended Research Program, or a program
extension under Clause 4.3, BII shall either (i) terminate the Agreement
pursuant to the terms of Clause 12.3, or (ii) continue to make all
payments to Genetronics as agreed to, and on the schedule, pursuant to
Clauses 3.2, 4.1 or 4.3, as the case may be, as consideration for
development activities to be assigned to Genetronics under the license
and development agreement. The choice between (i) and (ii) shall be made
solely by BII.
5.2 Genetronics and BII shall negotiate all terms of a development and
license agreement that are not already agreed upon in the License Terms
during the initial Research Program, such that a finally negotiated and
drafted development and license agreement shall be in a form for
execution at completion of the Research Program. Upon exercise of the
option pursuant to Clause 5.1, and in the event the development and
license agreement is not yet in finally negotiated and drafted form, the
parties shall enter into good faith, timely, negotiations on all
remaining terms of such development and license agreement not already
agreed upon in the License Terms, including but not limited to
provisions concerning diligent development, warranties, liabilities,
termination, and effect of termination appropriate for such kind of
agreement.
5.3 If the parties fail to agree upon the remaining terms, and (i) such
failure is a result of reasonable differences in opinion between the
parties with respect to a substantive term of the agreement, and (ii)
such failure is not a result of Genetronics desiring to enter into a
license and development agreement with a third party instead of BII, and
(iii) a final development and license agreement has not been concluded
within four (4) months after the option pursuant to Clause 5.1 has been
exercised, then BII's option
-13-
<PAGE> 14
right shall be deemed to have expired. Neither Party shall have any
further right to negotiate with the other party. In the event of such
failed negotiations, and upon request of BII at the end of the four (4)
month negotiation period, Genetronics shall warrant and represent to BII
in writing that its failure to agree with BII as to all terms of the
development and license agreement is a result of a sincere difference of
opinion and is not a result of Genetronics desiring to enter into a
license and development agreement with a third party instead of BII.
6. OPTION FEE
6.1 If BII enters into an extension under Clause 4.1 or 4.3, or exercises
its option to enter into a development and license agreement granted
under Clause 5.1, a one time option fee of [...***...] will be paid to
Genetronics by BII within 30 (thirty) days notifying Genetronics of the
first to occur of an extension or exercise of the development and
license right, and receipt of a respective invoice.
7. WARRANTIES AND LIABILITIES
7.1 Genetronics represents and warrants that:
(i) it will use its best endeavours to carry out the Research Program
as set forth in the Research Plan and within the times agreed
upon in Appendix 1, with all reasonable care and skill in
accordance with all applicable laws, professional standards and
in accordance with all provisions of this Agreement, with both
parties acknowledging that it may not be possible to complete all
research outlined in Appendix 1 within the eighteen month term
due to reasons beyond the parties' control;
(ii) it shall devote the efforts of suitably qualified and trained
employees capable of carrying out the Research Program to a
professional standard and shall provide all necessary facilities
therefor;
(iii) all reports, documentation and information to be provided to BII
hereunder shall be compiled in accordance with best scientific
practice and delivered in a form agreed upon in advance with BII;
* Confidential Treatment Requested
-14-
<PAGE> 15
(iv) the Genetronics Core Technology and Genetronics New Technology is
owned by Genetronics or an Affiliate and it will use its best
reasonable endeavours to see that such will continue to be the
case during the term of this Agreement;
(v) the Genetronics Core Technology and Genetronics New Technology is
free of any mortgage, charge or other encumbrance and it will use
its best reasonable endeavours to see that such will continue to
be the case during the term of this Agreement.
7.2 Each party represents and warrants that:
(i) it has legal power, authority and right to enter into this
Agreement and to properly perform its respective obligations in this
Agreement; and
(ii) it is not as of the Effective Date a party to any agreement,
arrangement or understanding with any third party which in any way
prevents it from fulfilling any of its obligations under the terms of
this Agreement.
7.3 BII hereby indemnifies and holds harmless Genetronics from and against
all third party claims, including without limitation, any claims with
respect to death or injury to a person or damage to property, and all
damages, losses, costs and expenses, including reasonable attorney's
fees, which Genetronics may incur arising out of or resulting from (i)
the conduct of the Research Plan solely performed by BII, its
Affiliates or sublicensees, and/or (ii) the negligence, recklessness or
willful misconduct of BII, its Affiliates or sublicensees or each of
their officers, employees or agents.
7.4 Genetronics hereby indemnifies and holds harmless BII and its
Affiliates from and against all third party claims, including without
limitation, any claims with respect to death or injury a person or
damage to property, and all damages, losses, costs and expenses,
including reasonable attorney's fees, which BII or its Affiliates may
incur arising out of or resulting from (i) conduct of the Research Plan
solely performed by Genetronics and/or (ii) the negligence,
recklessness or willful misconduct of Genetronics or its officers,
employees or agents.
7.5 The party seeking indemnification under Clause 7.3 or 7.4 (the
"Indemnified Party") shall (i) give the other party (the "Indemnifying
Party") notice of the relevant claim,
-15-
<PAGE> 16
(ii) cooperate with the Indemnifying Party, at the Indemnifying Party's
expense, in the defence of such claim and (iii) give the Indemnifying
Party the right to control the defence and settlement of such claim,
except that the Indemnifying Party shall not enter into any settlement
that affects the Indemnified Party's rights or interest without the
Indemnified Party's prior written approval. The Indemnified Party shall
have no authority to settle any claim on behalf of the Indemnifying
Party. A party's obligation to indemnify the other pursuant to Clause
7.3 or 7.4 shall be waived with respect to a certain claim in the event
a party seeking to be indemnified does not provide notice of the
relevant claim in sufficient time for the other party to respond or
defend against the claim.
8. CONFIDENTIALITY
8.1 In relation to Confidential Information disclosed by one party to the
other and subject to Clauses 8.2 and 8.3 below, each party agrees:
(i) not to publish or provide or make available any of the other
party's Confidential Information in any form to any third party;
and
(ii) not to use or reproduce any of the other party's Confidential
Information except for use reasonably necessary for its
performance of this Agreement.
8.2 Each party may provide or make available the Confidential Information
disclosed by the other:
(i) to those of its employees who have a need to know consistent with
the receiving party's authorized use of that Confidential
Information; and
(ii) in the case of BII, to official organizations responsible for
granting marketing authorizations; and
(iii) in the case of Genetronics, to [...***...]., (i) only as far as
Genetronics Core Technology is concerned; no information on BII
Technology and no confidential information on BII's or BII's
Affiliates' trade secrets, business affairs or finances are to be
disclosed to [...***...] and (ii) only to the extent necessary
for Genetronics to fulfill its obligation to provide [...***...]
with
* Confidential Treatment Requested
-16-
<PAGE> 17
[...***...] with respect to any development and license agreement
pertaining to [...***...].
(iv) to Affiliates of the parties in order to reasonably perform this
Agreement, in which event recipients of the Confidential
Information shall be bound by written obligations of
confidentiality no less onerous than those contained in this
Clause 8; and
(v) to comply with the disclosure obligations of the patent laws of
any jurisdiction in connection with any patent application
relating to BII Technology, Genetronics Core Technology,
Genetronics New Technology, or Joint Technology or any component
thereof.
8.3 The obligations of confidentiality and non-use in Clause 8.1 above shall
not apply to any part of the Confidential Information which:
(i) is in or comes into the public domain in any way without breach
of this Agreement by the receiving party; or
(ii) the receiving party can show was in its possession or known to it
by being in its use or being recorded in its files or computers
or other recording media prior to receipt from the disclosing
party and was not previously acquired by the receiving party from
the disclosing party; or
(iii) the receiving party obtains or has available from a source other
than the disclosing party without breach by the receiving party
or such source of any obligation of confidentiality or non-use
towards the disclosing party; or
(iv) is disclosed by the receiving party (a) with the prior written
approval of the disclosing party or (b) without such approval,
after a period that is the longer of 20 (twenty) years from the
date of this Agreement, 10 (ten) years from the date of
termination of this Agreement, or if executed, 10 (ten) years
from the date of termination of a subsequent business agreement
between the parties that is relevant to this Agreement .
8.4 Notwithstanding the foregoing, the receiving party shall be entitled to
make any disclosure required by any law or by any governmental authority
of the other party's
* Confidential Treatment Requested
-17-
<PAGE> 18
Confidential Information provided that it gives the other party not less
than 5 (five) working days notice of such disclosure.
8.5 Each party reserves all rights in its Confidential Information and no
rights or obligations other than those expressly recited herein are
granted or to be implied from this Agreement. In particular, other than
as expressly provided in this Agreement, no license is granted by this
Agreement directly or indirectly under any patent, invention, discovery,
copyright or other intellectual property right now or in the future
held, made, obtained or licensable by either party. Nothing in this
Agreement or its operation shall preclude or in any way impair or
restrict either party from continuing to engage in its business
otherwise than in breach of the terms of this Agreement.
8.6 The parties agree not to disclose the terms of this Agreement to third
parties, other than Affiliates, and neither shall make any announcement
in relation to or otherwise publicize its contents without the prior
written approval of the other, except as necessary under government
rules, regulations and laws. BII agrees that Genetronics shall have the
right to disclose this Agreement in a press release approved by BII in
advance, which approval shall not be unreasonably withheld.
9. INVENTIONS
9.1 By virtue of the Agreement, Genetronics shall not acquire any right to
BII Technology or future BII gene transfer systems, other than as set
forth in Clause 2.8.
9.2 By virtue of the Agreement, BII shall not acquire any right to
Genetronics Core Technology or Genetronics New Technology other than as
set forth in Clause 2.8.
10. PATENTS
10.1 BII shall have full responsibility for, and shall bear all expenses for,
the filing, prosecution, maintenance or other protection of BII Patent
Rights.
10.2 Genetronics shall have full responsibility for, and shall bear all
expenses for, the filing, prosecution, maintenance or other protection
of Genetronics Patent Rights.
-18-
<PAGE> 19
10.3 Joint Technology shall be jointly owned by both partners. The parties
will discuss and agree which party shall have responsibility for the
filing, prosecution and maintenance of the Joint Patent Rights on Joint
Inventions worldwide and on the cost sharing related thereto.
10.4 Each party agrees to assist the other party in every proper way,
including the execution of all proper documents requested by the filing
party. If a party decides not to file, prosecute or maintain a Patent
Right on its own Invention, or on a Joint Invention, in any country, it
shall give the other party reasonable notice to that effect; upon
receipt of such notice, the other party may, at its expense, file,
prosecute or maintain such Patent Right unless the first party has
determined to protect such invention as an intellectual property right
other than a patent.
10.5 Each party shall promptly inform the other party of any BII,
Genetronics, or Joint Invention of which it becomes aware during the
term of this Agreement.
10.6 At least fourteen (14) days prior to filing of any patent application
for an Invention within the scope of this Agreement, the party
responsible for the filing will provide the other party with an English
language summary of the patent application for the non-filing party's
review and comment. The filing party will also provide the non-filing
party with a full copy of each such patent application actually filed in
the language in which it was originally filed.
10.7 If either party becomes aware that a Genetronics Patent Right or a Joint
Patent Right is infringed by a third party in any country, that party
shall promptly notify the other party in writing. Genetronics shall have
the primary right, but not the obligation, to bring and prosecute at its
own expense an action concerning such infringement. If Genetronics does
not commence such an action within [...***...] of learning of such
infringement, BII shall have the right but not the obligation to bring
and prosecute at its own expense an action concerning such infringement.
The parties shall cooperate with each other in connection with any
action brought under this Clause 10.7. Any monetary award granted to the
prosecuting party hereunder shall be applied first to the costs and
expenses of the party prosecuting the action, then to the costs and
expenses of the other party. The party bringing the suit shall be
entitled to any monetary awards in excess.
-19-
<PAGE> 20
10.8 The parties shall assist each other to secure the proper documentation
to assign rights consistent with the grants set forth in Clause 2.9.
10.9 The inventorship of a BII Invention, Genetronics Invention and Joint
Invention will be determined pursuant to relevant appropriate laws of
the jurisdiction in which a patent application directed to the Invention
is to be filed. To the extent it is necessary to determine inventorship
or ownership of intellectual property that is not the subject of a
patent application, Genetronics and BII will make a determination based
on the facts, fairness, and, if applicable, relevant laws.
11. PUBLICATIONS
During the term of this Agreement, Genetronics and BII each acknowledges
the other party's interest in publishing certain of its results to
obtain recognition within the scientific community and to advance the
state of scientific knowledge. Each party also recognizes the mutual
interest in obtaining valid intellectual property protection and
maintaining as confidential any information related to non-patentable
technology which would have commercial value when undisclosed.
Consequently, either party, its employees or consultants wanting to make
a publication (including any oral disclosure) relating to work performed
by such party as part of the Research Program (the "Publishing Party")
shall transmit to the other party (the "Reviewing Party") a copy of the
proposed written publication at least ninety (90) days prior to
submission for publication, or an outline of such oral disclosure at
least sixty (60) days prior to presentation. The Reviewing party shall
have the right (a) to propose modification to the publication for patent
or other reasons and (b) to request a delay in publication in order to
protect patentable information.
If the Reviewing Party requests such a delay, the Publishing Party shall
delay submission or presentation of the publication for a period not
longer than ninety (90) days to enable patent applications protecting
each party's rights in such information to be filed in accordance with
Article 10. If the Reviewing Party reasonably claims that such
information, whether or not patentable, may have significant commercial
value and can be maintained as a trade secret, the Publishing Party
shall publish or disclose only such information which would not
adversely affect such commercial value. Upon the expiration of ninety
(90) days or sixty (60) days from transmission to the Reviewing Party,
as applicable, the Publishing Party shall be free to proceed with
-20-
<PAGE> 21
the written publication or the presentation, respectively, unless the
Reviewing Party has requested the trade secret protection described
above.
12. TERM AND TERMINATION
12.1 This Agreement shall commence on the Effective Date and shall terminate
upon the first to occur of (i) completion of the Research Program with a
duration of 18 (eighteen months and expiration or termination of the
option in Clause 4.1 or 4.3 without exercise, (ii) completion of the
Extended Research Program with a duration of 18 (eighteen) months and
expiration, termination, or exercise of the option in Clause 5.1, if BII
has exercised its option pursuant to Clause 4.1, or (iii) completion of
an extended research program the parties may agree upon pursuant to
Clause 4.3 and expiration, termination, or exercise of the option in
Clause 5.1. The following Clauses shall survive termination of this
Agreement: 2.6 (final report); 5.3 (in event of no agreement on
license); 6.1 (option fee); 7.3, 7.4 and 7.5 (indemnification); 8
(confidentiality); 9 (invention); 10 (patents); 11 (publications); 12.1
(survival); 12.3 (early termination), 12.4 (effects of termination);
12.5 (return of equipment); 13.1 (Affiliates); 13.6 (choice of law);
Appendix 2 (partial license terms).
12.2 This Agreement may be terminated with immediate effect by written notice
by either party, if the other party breaches this Agreement in any
material manner and shall have failed to remedy such default within 30
(thirty) days after written notice thereof by the terminating party.
12.3 BII shall be entitled to terminate this Agreement forthwith at any time
upon written notice to Genetronics thereof. In such an event, BII shall
be obligated to pay Genetronics the difference between (i) the amount
set forth in Clause 3.1 or agreed upon pursuant to Clause 4.1 or 4.3, as
the case may be and (ii) the amount that will have been paid to
Genetronics as of the date of early termination.
However, if BII has terminated this Agreement in accordance with the
provisions of Clause 12.2 above, BII shall only be obliged to pay to
Genetronics the amounts due on the date of termination pursuant to
Clause 3 or 4, as the case may be.
12.4 Upon termination of this Agreement for any reason, any license or option
right granted from one party to the other, either expressly or
impliedly, pursuant to this Agreement, including but not limited to the
license grants under Clause 2.8, shall revert to the
-21-
<PAGE> 22
granting party, with the exception of any such right granted in a
subsequent license or other agreement between the parties. BII shall
retain all ownership rights in BII Technology, regardless of
inventorship. Genetronics shall retain all ownership rights in
Genetronics Core Technology and Genetronics New Technology, regardless
of inventorship. Absent an express license subsequently granted by one
party to the other, neither party shall have the right to practice
within the other's Technology.
12.5 Upon termination of the Agreement, each party shall promptly return the
Equipment or the Biological Material, as the case may be, or dispose of
any unused portions as the other party may direct in writing.
13. CONCLUDING PROVISIONS
13.1 Neither party shall be entitled to assign or otherwise transfer its
rights and obligations under this Agreement in whole or in part to any
third party without the prior written consent of the other party except
to its Affiliates. BII shall have the right to exercise any of its
rights or perform any of its obligations hereunder through any of its
Affiliates and to the extent it does so it hereby guarantees such
performance. BII shall be responsible for all payments due to
Genetronics under this Agreement and BII shall ensure that any Affiliate
performs all its obligations under the sub-license granted to it by BII.
BII indemnifies Genetronics against all loss, damage, cost or expense
which Genetronics may incur as a result of failure by such Affiliate or
BII to perform obligations under any such sub-license equivalent to any
obligation of BII hereunder. If also Genetronics wishes to exercise its
rights or perform its obligations through an Affiliate the provisions of
this Clause 13.1 shall apply accordingly to Genetronics.
With respect to any reference to BII or Genetronics in the definition of
a party's sole or Joint Invention, Technology, Patent Rights, Product,
Confidential Information, Core Technology, Know How, and Research
Program Know How, it is the parties' intent that "BII" shall mean "BII
or its Affiliates" and "Genetronics" shall mean "Genetronics or its
Affiliates".
13.2 This Agreement sets forth the entire agreement between the parties and
supersedes all previous agreements, written or oral regarding the
subject matter hereof. This Agreement may be amended only by an
instrument in writing duly executed on behalf of the parties.
-22-
<PAGE> 23
13.3 Neither party shall be liable for delay or failure to perform hereunder
due to any contingency beyond its control, including, but not limited to
acts of God, fires, floods, wars, civil wars, sabotage, strikes,
governmental laws, ordinances, rules or regulations or failure of third
party delivery, provided, such party promptly gives to the other party
hereto written notice claiming force majeure and uses its best efforts
to eliminate the effect of such force majeure, insofar as is possible
and with all reasonable dispatch. If the period of delay of failure
should extend for more than 3 (three) months then either party shall
have the right to terminate this Agreement forthwith upon written notice
at any time after expiration of said 3 (three) months period.
13.4 Any waiver shall be made in writing for it to be effective and unless
expressly stated shall not be a continuing waiver not shall it prevent
the waiving party from acting upon that or any subsequent breach or from
enforcing any term or condition of this Agreement.
13.5 The invalidity of any provision of this Agreement shall not affect the
validity of any other provision hereof. The parties undertake to replace
any invalid provision in the Agreement with another provision which
reflects legally the originally intended commercial objectives of the
parties as closely as possible.
13.6 This Agreement shall be governed exclusively by [...***...] law. In the
event of any controversy or claim arising out of or relating to any
provision of this Agreement, the parties shall first try to settle those
conflicts amicably between themselves. All disputes arising in
connection with this Agreement, which cannot be settled amicably, shall
be litigated in the [...***...], provided any lawsuit shall be filed in
the Federal Courts and the parties hereby consent to waive any
Constitutional, Statutory or Common Law of trial by Jury.
13.7 In the performance of this Agreement each party shall be an independent
contractor, and therefore, no party shall be entitled to any benefits
applicable to any employee of the other party. No party is authorized to
act as an agent for the other party for any purpose, and no party shall
enter into any contract, warranty or representation as to any matter on
behalf of the other party.
* Confidential Treatment Requested
-23-
<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in duplicate by their duly authorized representatives.
Ingelheim, Germany San Diego, California
BOEHRINGER INGELHEIM GENETRONICS, INC.
INTERNATIONAL GMBH
ppa.
/s/ Prof. Dr. Bernd Wetzel Dr. Christian Hauke /s/ Martin Nash 10/27/99
- ------------------------------------------------ -------------------------
11/02/99
-24-
<PAGE> 25
APPENDIX 1
RESEARCH PLAN
BI AUSTRIA- GENETRONICS DNA VACCINE DELIVERY PROJECT
GOAL:
The goal of this project is to determine parameters of DNA delivery by
electroporation which will yield an optimal immune response against tumor cells.
BACKGROUND/ASSUMPTIONS:
Three important factors of DNA vaccination include the design of the DNA
construct, the choice of the target tissue and the mode of DNA delivery. The
immune response will greatly depend on each one of these factors.
This project outline will focus on the [...***...] as the target tissue and
electrical pulses as the means of DNA delivery. In addition, [...***...] will be
investigated.
By designing appropriate conditions, we expect that DNA delivery into the
[...***...] by electroporation will allow, at least to some extent, us to
control DNA delivery into a certain [...***...]. This will determine the types
of cells which will receive the DNA vaccine. We also expect to be able to
control, within limits, the percentage of cells which will be transfected. These
parameters will indirectly influence the level and time course of antigen
expression, secretion and interstitial or systemic distribution. It is also
conceivable that a second series of electroporation pulses to antigen-producing
cells will substantially influence the immune response by facilitating antigen
dissemination from these cells.
Presently, the two main methods for DNA delivery are (1) direct needle injection
of a DNA solution into skin or muscle and (2) shooting DNA-coated particles into
the skin with a "gene gun." Direct needle injection into the skin or muscle is
effective to some extent in eliciting immune responses in various mammals,
including humans. However, large quantities of DNA are required and it remains
to be seen whether this approach will meet safety and economic requirements for
routine use.
Administering DNA precipitated on the surface of microscopic gold particles via
"gene gun" technology results in direct delivery of DNA into skin cells. The
amount of DNA required in
* Confidential Treatment Requested
-25-
<PAGE> 26
this method is relatively small but mass production of the coated particles and
a safe, consistently effective delivery gun are still formidable obstacles to
overcome.
Genetronics has demonstrated that electrical pulses can be used to deliver DNA
in solution into cells of living tissue, including [...***...]. Genetronics'
technology can also deliver particles which could be coated or loaded with DNA
into [...***...]. The proposed research aims at determining the feasibility of
inducing a therapeutically or prophylactically effective immune response by
electroporation-mediated DNA delivery into [...***...].
During this project the following questions will be addressed:
1. What are the optimal electrode designs and pulse conditions for
introducing DNA vaccines into tissue?
2. How does the Genetronics delivery technology compare to other methods in
the resulting immune response? What are the advantages for vaccine
delivery by Genetronics' technology? (e.g., [...***...])
3. What adjuvants and/or co-factors are suitable and appropriate for
modulation of resulting immune responses and can they be delivered
together with DNA?
4. Does the Genetronics delivery of vaccines elicit immune responses in
large animals?
* Confidential Treatment Requested
-26-
<PAGE> 27
EXPERIMENTAL OUTLINE
Research phase (18 months)
The proposed program is open to modifications upon mutual written agreement.
Genetronics will provide the following equipment to BII ("Equipment"):
(i) one (1) 830 Electroporation System;
(ii) one (1) auto switcher and one (1) manual switcher;
(iii) various 2 needle arrays and various 6 needle arrays;
(iv) various flat (surface) electrodes (meander, micropatch); and
(v) any composition of matter provided to BII by or on behalf of
Genetronics for performance of the Research Program
1. GENE EXPRESSION PROFILE IN MOUSE [...***...]
Determine DNA delivery parameters to achieve optimal antigen expression in mouse
[...***...]
Test [...***...] DNA and two different BI formulations in mice Administration:
[...***...]
Determine gene expression profile: [...***...]
Electrode design: Meander or other non-invasive electrode
Needle array
Novel needle array
Other
Pulse design: Pulse (wave) form
Polarity
Current
Field strength and field homogeneity
Pulse length
Number and frequency of pulses
Homogeneous or heterogeneous pulses
* Confidential Treatment Requested
-27-
<PAGE> 28
If delivery through [...***...] is ineffective, [...***...]
* Confidential Treatment Requested
-28-
<PAGE> 29
2. CHARACTERIZE IMMUNE RESPONSES AFTER IN VIVO ELECTROPORATION
Genes/Models:
Genetronics will work on: [...***...]
BI Austria will work on: [...***...]
2.1. Humoral immune responses in mice
Dose response
Effect of booster immunisation
Isotype profile of specific antibodies after electroporation
Longevity of response
2.2. Cellular immune responses
[...***...]
2.3. Efficacy in mouse models
[...***...]
3. STUDIES TO MODIFY THE TYPE OF IMMUNE RESPONSE
[...***...]
4. GENE EXPRESSION PROFILE IN PIG SKIN
Short term parameter study in pigs, similar to 1., using best devices and
protocols
* Confidential Treatment Requested
-29-
<PAGE> 30
WORK PACKAGES (OVERVIEW)
0 6 9 18 months
[...***...]
[...***...]
[...***...]
[...***...]
[...***...]
* Confidential Treatment Requested
-30-
<PAGE> 31
APPENDIX 2
LICENSE TERMS
1. DEFINITIONS
The definitions set forth in Clause 1 of the Research and Option
Agreement and Clause 13.1 are incorporated herein by reference and shall
control, unless the text in this Appendix clearly indicates to the
contrary.
2. CERTAIN RIGHTS GRANTED TO BII UPON BII'S EXERCISE OF OPTION TO NEGOTIATE
AND ENTER INTO A DEVELOPMENT AND LICENSE AGREEMENT AND THE EXECUTION OF
SUCH AN AGREEMENT
(i) Non-Exclusive License to Genetronics Core Technology.
Genetronics shall grant BII a non-exclusive, royalty-bearing
license in the Territory to Genetronics Core Technology necessary
to develop, make, use, sell, offer to sell, and import
Product-Kits for use in the Field.
(ii) Exclusive License to Genetronics New Technology.
Genetronics shall grant BII an exclusive, royalty-bearing license
in the Territory to Genetronics New Technology necessary to
develop, make, use, sell, offer to sell, and import Product-Kits
for use in the Field.
(iii) In case of early termination of the license agreement because of
Genetronics bankruptcy or material breach of contract by
Genetronics, BII shall have a fully paid up right to manufacture,
or have manufactured, the disposable delivery devices (e.g.,
electrodes) for use in the Field and Genetronics will supply to
BII all Know How and technical assistance necessary to exercise
such manufacturing right.
(iv) All rights granted to BII under a development and license
agreement shall include the right to sublicense such rights to an
Affiliate. BII shall remain responsible to Genetronics for any
acts, sales, and obligations of a
-31-
<PAGE> 32
sublicensee as if they were made by BII.
(v) This Agreement shall expire and the licenses granted by
Genetronics to BII shall become fully paid on a
country-by-country basis upon the last to occur of (i) expiration
of all valid claims on Genetronics Technology in each such
country or (ii) ten (10) years from the first commercial sale of
a Product-Kit in each such country.
3. CONSIDERATION
(i) Milestone payments:
[...***...]
(ii) Royalties for Product-Kits governed by non-exclusive licenses to
Genetronics Core Technology:
[...***...] on Net Sales; the price paid by BII for any components purchased
from Genetronics that are incorporated into the Product-Kit shall be subtracted
from the amount of Net Sales before calculating any royalties.
The [...***...] royalty rate for each Product-Kit shall be diminished by
[...***...] for each additional delivery-related license BII obtains for that
Product-Kit and by [...***...] for the first license BII obtains for a BII
Product within that Product-Kit and by [...***...] for the second and each
additional license BII obtains for a BII Product that constitutes part of that
Product-Kit. Each such decrease in royalty rate shall be made only if BII is
obligated to pay a royalty to the respective third party licensor that is
[...***...] the rate of the decrease contemplated by this Clause 3 (ii). By way
of example, in the event BII is obligated to pay a royalty for a
delivery-related license for a BII Product that is at least [...***...] of Net
Sales, then the present [...***...] royalty shall be decreased by [...***...].
Alternatively, in the event BII is obligated to pay a royalty for a
delivery-related license for a BII Product that is less than [...***...] of Net
Sales, then the present [...***...] royalty shall not be decreased by
[...***...] in recognition of that third party license. In no case shall the
royalty rate paid to Genetronics under a non-exclusive license be
* Confidential Treatment Requested
-32-
<PAGE> 33
less than [...***...].
(iii) Transfer price of disposable delivery device (e.g., electrodes)
for a Product-Kit:
The purchase price BII shall pay Genetronics for the single use
disposable delivery device which is presently envisioned to be a
component of a Product-Kit shall be the higher of (i)[...***...]
for each single use disposable delivery device suitable for one
vaccination (one "shot") per person, or (ii) a price [...***...]
in excess of Genetronics manufacturing costs for such device,
(allowing a [...***...] gross profit) but, in the event
[...***...] of the weighted average retail price of the
respective Product-Kit is greater than the higher of (i) or (ii),
the purchase price for the single use disposable delivery device
shall not exceed [...***...] of the weighted average retail price
of the respective Product-Kit. The [...***...] upper cap may be
revised by mutual written agreement of the parties depending on
the progress in Product-Kit development and projected market
conditions. BII will use, and will require its sublicensees to
use, Genetronics disposables exclusively. In all cases
Genetronics will use best efforts to provide BII with the
economically best transfer price.
(iv) Marketing of pulse generators:
Pulse generators shall be developed and tested in consultation
with BII and manufactured, distributed and serviced by
Genetronics or its Affiliates. BII shall require the exclusive
use of Genetronics pulse generators with Genetronics'
disposables. Pricing of pulse generators shall be the sole
responsibility of Genetronics; however, input from BII market
research will be welcomed in reaching a pricing decision.
(v) By virtue of the Agreement, Genetronics shall not acquire any
ownership in future inventions or intellectual property rights to
any of BII's existing or future intellectual property regarding
gene transfer systems, except for such future inventions and/or
intellectual property rights that fall under Genetronics Core
Technology as defined in Clause 1.16 of the Research and Option
Agreement.
* Confidential Treatment Requested
-33-
<PAGE> 1
EXHIBIT 10.2
AGREEMENT CONCERNING TERMINATION
OF EMPLOYMENT OF LOIS CRANDELL
The following sets forth the terms and conditions of the agreement (the
"Agreement") regarding the end of Lois Crandell's ("Ms. Crandell") employment in
the positions of Chief Executive Officer and President of Genetronics Biomedical
Ltd. and Genetronics, Inc. (collectively, the "Company") effective as of
September 7, 1999. Pursuant to Section 18 herein, the Agreement shall become
effective on the eighth day after this Agreement is executed by Ms. Crandell
(the "Effective Date"). Lois Crandell and the Company hereby agree as follows:
1. TERMINATION OF EMPLOYMENT AGREEMENT. Except for Section 5 of the
employment agreement between Ms. Crandell and the Company dated January
9, 1995, as amended from time to time (the "Employment Agreement"), a
copy of which is attached hereto as Exhibit A, the Employment Agreement
is hereby superseded by this Agreement and is null and void and of no
further force or effect. For the sake of clarity, Ms. Crandell expressly
acknowledges that Section 5 of the Employment Agreement contains
confidentiality and non-disclosure provisions therein to which she
remains, and shall remain, bound as set forth therein.
2. EMPLOYMENT. Ms. Crandell's employment as Chief Executive Officer and
President and all other employment positions Ms. Crandell may have held
with the Company were terminated effective as of September 7, 1999 (the
"Separation Date").
3. SEVERANCE PAY. The Company agrees to make severance payments to Ms.
Crandell in the form of: (a) continuation of her base salary in effect
on the Separation Date for a period of twelve (12) months from the
Separation Date (the "Severance Period") and (b) "(b) a grant of an
option to purchase 26,700 shares of the common stock of the Company
("New Option") at a price per share equal to ten percent (10%) more than
the fair market value of the Company's common stock on the date that is
the last trading day before the date of grant. The term of the New
Options shall be five years from the date of grant. The New Options will
vest on September 6,2000, which is the last day of the Severance Period,
and will be exerciseable for the duration of the term of the New
Options. However, in the event the Company is acquired by, or merged
with, another entity prior to the vesting of the New Options, the New
Options will vest upon the completion of the merger or acquisition. The
New Options shall be governed pursuant to the terms and conditions of
the Genetronics Biomedical, Ltd. 1997 Stock Option Plan, as amended.The
twelve months of severance payments will be paid on the Company's
ordinary payroll dates and will be subject to standard payroll
deductions and withholdings.
<PAGE> 2
4. STOCK OPTIONS. The stock options listed in Exhibit B to this Agreement
("Existing Options") shall be fully vested as of the Effective Date of
this Agreement, and changed from ISO to non-qualifying options. Other
than as provided in this Section 4, you acknowledge that your Existing
Options will continue to be governed by the terms and conditions of the
Genetronics Biomedical, Ltd. Stock Option Plan under which each Existing
Option was granted.
5. ACCRUED SALARY AND VACATION. Ms. Crandell agrees and acknowledges that
the Company has paid her all accrued salary, and all accrued and unused
vacation benefits earned through the Separation Date, if any, subject to
standard payroll deductions, withholding taxes and other obligations.
6. INSURANCE BENEFITS. To the extent provided by the federal COBRA law or,
if applicable, state insurance laws, and by the Company's current group
health insurance policies, Ms. Crandell will be eligible to continue her
health insurance benefits. Later, Ms. Crandell may be able to convert to
an individual policy through the provider of the Company's health
insurance, if she wishes. Ms. Crandell will be provided with a separate
notice of her COBRA rights. In the event that Ms. Crandell elects
continued coverage under COBRA, the Company will pay her COBRA health
insurance premiums (Company and employee contributions) for 12 (twelve)
months from the Separation Date. Thereafter, Ms. Crandell shall be
solely responsible for the payment of the premium for such benefits to
the Company's health insurance provider, if Ms. Crandell desires to
continue such benefits.
7. LIFE INSURANCE. The Company agrees that it will maintain a life
insurance policy on Ms. Crandell's life for her and her estate's
benefit, the terms of which shall be substantially similar to terms of
the personal policy maintained by the Company for her benefit prior to
the Separation Date, for a period of twelve (12) months after the
Separation Date.
8. COMPANY EQUIPMENT. The Company agrees that, as part of this Agreement
and in consideration thereof, Ms. Crandell may keep for her own personal
use any Company computer, cellular telephone and facsimile machine
currently in her possession.
9. AUTOMOBILE. The Company agrees that, as part of this Agreement and in
consideration thereof, it will continue to pay for the lease payments
(approximate value of Fifteen Thousand Dollars ($15,000)) on the
automobile that was obtained for Ms. Crandell as an officer of the
Company for the duration of the existing lease period.
10. 401(k). The Company agrees that, as part of this Agreement and in
consideration thereof, the Company will purchase for Ms. Crandell the
same number of shares of common stock of the Company that she would have
received through the Company's 401(k) plan had she remained an employee
through September 7, 2000. Such stock shall be purchased for her
quarterly as it is for employees who participate in the Company's 401(K)
plan.
2
<PAGE> 3
11. OTHER COMPENSATION AND BENEFITS. Except as expressly provided herein,
Ms. Crandell acknowledges and agrees that she is not entitled to and
will not receive any additional employment-related compensation,
severance, stock options, stock or benefits from the Company after the
Separation Date. 12. NON-DISCLOSURE OF THE TERMS OF THIS AGREEMENT. The
provisions of this Agreement shall be held in strictest confidence by
Ms. Crandell and the Company and shall not be publicized or disclosed in
any manner whatsoever; provided, however, that: (a) Ms. Crandell may
disclose this Agreement, in confidence, to her immediate family; (b) the
parties may disclose this Agreement in confidence to their respective
attorneys, accountants, auditors, tax preparers, and financial advisors;
(c) the Company may disclose this Agreement as necessary to fulfill
standard or legally required corporate reporting or disclosure
requirements; and (d) the parties may disclose this Agreement insofar as
such disclosure may be necessary to enforce its terms or as otherwise
required by law.
13. NON-DISPARAGEMENT. The parties agree that neither they, nor their
officers, directors or employees will make any disparaging statements
about each other. However, in the interest of implementing open
discussion and disclosure among Board members, the parties agree that
this provision does not apply to statements made by the above
individuals in their capacity as directors to other directors of the
Company.
14. NON-SOLICITATION. Ms. Crandell agrees that for a period of one (1) year
from the Separation Date she will not hire or take away or cause to be
hired or taken away any employee of the Company for the purpose of
employment in any business or endeavor. She further agrees, without
prejudice to any and all other rights of the Company, that in the event
of her violation or attempted violation of the covenants contained in
this agreement, an injunction or other like remedy shall be the only
effective method to protect the Company's and its affiliates' rights and
property, and that an interim injunction may be granted immediately on
the commencement of any suit.
15. RETURN OF PROPERTY. Except as otherwise provided herein, upon the
Effective Date, Ms. Crandell agrees to return to the Company all Company
documents (and all copies thereof) and other Company property in her
possession or her control as an employee, including, but not limited to,
Company files, business plans, notes, samples, sales notebooks,
drawings, specifications, calculations, sequences, data,
computer-recorded information, tangible property, including, but not
limited to, software, credit cards, business cards, entry cards, keys
and any other materials of any nature pertaining to her work with the
Company as an employee, and any documents or data of any description (or
any reproduction of any documents or data) containing or pertaining to
any proprietary or confidential material of the Company, which is in her
possession by nature of her employment relationship with the Company. In
the event no property is returned, Ms. Crandell will be deemed to have
agreed and acknowledged that she has no Company documents of substantive
value in her possession, other than those documents in her possession
for reasonable use as a consultant or documents she received as a former
director.
3
<PAGE> 4
16. TAX CONSEQUENCES. The Company makes no representations or warranties
with respect to the tax consequences of any payments to Ms. Crandell
under the terms of this Agreement. Ms. Crandell agrees and understands
that she is responsible for payment, if any, of local, state and/or
federal taxes on the sums paid hereunder by the Company and any
penalties or assessments thereon. Ms. Crandell further agrees to
indemnify and hold the Company harmless from any claims, demands,
deficiencies, penalties, assessments, executions, judgments, or
recoveries by any government agency against the Company for any amounts
claimed due on account of her failure to pay federal or state taxes or
damages sustained by the Company by reason of any such claims, including
reasonable attorneys' fees.
17. RELEASE OF CLAIMS AGAINST THE COMPANY. In consideration of the
foregoing, Ms. Crandell hereby releases, acquits, and forever discharges
the Company, its parents and subsidiaries, and their officers,
directors, agents, servants, employees, attorneys, shareholders,
partners, successors, assigns, affiliates, customers, and clients of and
from any and all claims, liabilities, demands, causes of action, costs,
expenses, attorneys' fees, damages, indemnities and obligations of every
kind and nature, in law, equity, or otherwise, known and unknown,
suspected and unsuspected, disclosed and undisclosed, arising out of or
in any way related to agreements, acts or conduct at any time prior to
the Separation Date, including, but not limited to: all such claims and
demands directly or indirectly arising out of or in any way connected
with the Company's employment of Ms. Crandell, the termination of that
employment, the Company's performance of its obligations as her former
employer, and any claims arising from the Employment Agreement or her
offer letter; claims or demands related to salary, bonuses, commissions,
stock, or any other ownership interests in the Company, vacation pay,
fringe benefits, expense reimbursements, severance pay, or any form of
compensation; claims pursuant to any federal, state or local law or
cause of action including, but not limited to, the California Fair
Employment and Housing Act, the federal Civil Rights Act of 1964, as
amended; the federal Age Discrimination in Employment Act of 1967, as
amended; the federal Americans With Disabilities Act; tort law; contract
law; wrongful discharge; discrimination; harassment; fraud; defamation;
emotional distress; and breach of the implied covenant of good faith and
fair dealing. Notwithstanding the above, Ms. Crandell is not hereby
releasing any claims Ms. Crandell may have (i) under this Agreement;
(ii) for indemnification pursuant to and in accordance with the
applicable statutes, the applicable terms of the charters, articles of
incorporation or bylaws of the Company, any insurance policies
maintained by the Company which afford coverage to Ms. Crandell; (iii)
for rights or claims Ms. Crandell may have pursuant to any applicable
stock option plans or stock option agreements Ms. Crandell may have with
the Company; and (iv) for any criminal, grossly negligent or fraudulent
conduct on the part of the Company, other than by her own conduct, which
creates liability on the part of Ms. Crandell. For the sake of clarity,
Ms. Crandell expressly agrees that the provisions of this Section 17,
including part (iv) herein, shall not be interpreted to permit Ms.
Crandell to make a claim against the Company that is related to
termination of her employment with the Company or the Company's
performance of its obligations as her former employer,
4
<PAGE> 5
any claims arising from the Employment Agreement, or any form of
compensation she received as an employee.
18. ADEA WAIVER. Ms. Crandell further acknowledges that she is knowingly and
voluntarily waiving and releasing any rights she may have under the Age
Discrimination in Employment Act of 1967 ("ADEA"). She also acknowledges
that the consideration given for the waiver and release in the preceding
paragraphs hereof is in addition to anything of value to which she was
already entitled. Since Ms. Crandell is more than forty (40) years of
age when this release is signed, she hereby provides the further
acknowledgment that she is advised by this writing, as required by the
Older Workers Benefit Protection Act, that: (a) her waiver and release
do not apply to any rights or claims that may arise after the Effective
Date of this release; (b) she has the right to consult with an attorney
prior to executing this release (although she may voluntarily choose not
to do so); (c) she may have at least twenty-one (21) days to consider
this Agreement (although she may by her own choice execute this release
earlier); (d) she has seven (7) days following the execution of this
release to revoke this release; and (e) this Agreement shall not be
effective until the date upon which the revocation period has expired,
therefore making the effective date the eighth day after this release is
signed by Ms. Crandell (the "Effective Date").
19. RELEASE OF CLAIMS AGAINST MS. CRANDELL. In consideration of the
foregoing, the Company, for and on behalf of itself, its directors,
officers, shareholders, successors and assigns hereby releases, acquits
and forever discharges Ms. Crandell and her assigns, transferees,
successors, heirs, agents and attorneys from any and all claims,
liabilities, demands, causes of action, costs, expenses, attorneys'
fees, damages, indemnities and obligations of every kind and nature, in
law, equity, or otherwise, known and unknown, suspected and unsuspected,
disclosed and undisclosed, arising out of or in any way related to
agreements, acts or conduct of Ms. Crandell within the course and scope
of her obligations and duties as an employee or officer of the Company
at any time prior to the Separation Date, including, but not limited to:
all such claims and demands directly or indirectly arising out of or in
any way connected with the Company's employment of Ms. Crandell, the
termination of that employment, her performance of her obligations and
duties as an employee, officer, and director of the Company, or arising
out of any agreement between Ms. Crandell and the Company, with the
exception of any claim arising out of (i) her obligations under this
Agreement; (ii) her obligations arising out of Section 5 of the
Employment Agreement or any other obligations relating to the
proprietary information of the Company; and (iii) any criminal, grossly
negligent, or fraudulent conduct by her which creates liability on the
part of the Company.
5
<PAGE> 6
20. SECTION 1542 WAIVER. In providing the releases set forth in Paragraphs
16 and 18 above, the parties agree that the releases include claims
which may be unknown to the parties at present. The parties hereby
acknowledge that they have read and understand Section 1542 of the Civil
Code of the State of California which reads as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE
TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
21. LEGAL ADVICE. The parties acknowledge that they have been given the
opportunity to seek the advice of independent legal counsel with respect
to this Agreement and they have been provided with sufficient time to
obtain such legal advice.
22. CONSULTING AGREEMENT. Ms. Crandell agrees to provide consulting services
to the Company as set forth in a separate consulting agreement.
23. NO OTHER AGREEMENTS. The parties acknowledge and represent to each other
that this Agreement is signed without reliance upon any promises,
representations or warranties whatsoever, whether expressed or implied,
which are not contained herein in writing concerning the matters herein
set forth.
24. ENTIRE AGREEMENT. This Agreement constitutes the complete, final and
exclusive embodiment of the entire Agreement between the parties with
regard to the subject matter hereof. It is entered into without reliance
on any promise or representation, written or oral, other than those
expressly contained herein. It may not be modified except in a writing
signed by Ms. Crandell and a duly authorized officer of the Company.
Each party has carefully read this Agreement, has been afforded the
opportunity to be advised of its meaning and consequences by her or its
respective attorneys, and signed the same of her or its free will.
25. APPLICABLE LAW. This Agreement shall be deemed to have been entered into
and shall be construed and enforced in accordance with the laws of the
State of California as applied to contracts made and to be performed
entirely within California.
26. SECTION HEADINGS. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
27. COUNTERPARTS. This Agreement may be executed in two counterparts, each
of which shall be deemed an original, all of which together shall
constitute one and the same instrument.
6
<PAGE> 7
28. ACKNOWLEDGMENT. By executing this Agreement, each signatory acknowledges
that it or she has read and understands this Agreement and release and
further acknowledges that it or she has had the opportunity to review it
with an attorney. Each signatory further acknowledges that it or she is
executing this Agreement and release voluntarily and with full knowledge
of its terms and provisions and of legal rights and regard thereto.
IN WITNESS WHEREOF, the parties have duly authorized and caused this
Agreement to be executed as follows:
Dated this 6th day of December, 1999. Dated this 6th day of December,1999.
GENETRONICS BIOMEDICAL, LTD.
/s/ Lois J. Crandell BY: /s/ Martin Nash
- ------------------------------------- --------------------------------
LOIS J. CRANDELL ITS: PRESIDENT AND CEO
Dated this 6th day of December, 1999.
GENETRONICS, INC.
BY: MARTIN NASH
--------------------------------
ITS: PRESIDENT AND CEO
Attachments:
Exhibit A: Employment Agreement
Exhibit B: Schedule of Outstanding Stock Options
7
<PAGE> 8
EXHIBIT A
EMPLOYMENT AGREEMENT
Filed as an exhibit to Registrant's Form 20-F for the period ended February 28,
1998
EXHIBIT B
SCHEDULE OF OUTSTANDING STOCK OPTIONS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
DATE OF PLAN NUMBER PRICE PER VESTING EXPIRATION
GRANT OF SHARE
OPTIONS (US$)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
01-14-97 1995 40,000 2.81 100% 01-13-02
- --------------------------------------------------------------------------------------------
01-27-97 1995 60,000 3.06 100% 01-26-02
- --------------------------------------------------------------------------------------------
07-25-97 1997 40,000 3.21 100% 07-24-02
- --------------------------------------------------------------------------------------------
07-08-98 1997 43,125 2.48 100% 07-07-03
- --------------------------------------------------------------------------------------------
10-20-98 1997 100,000 2.95 25% * 10-19-03
- --------------------------------------------------------------------------------------------
</TABLE>
* 100% TO BE VESTED AS OF EFFECTIVE DATE OF THIS AGREEMENT.
8
<PAGE> 1
EXHIBIT 10.3
CONSULTING SERVICES AGREEMENT
This Agreement is entered into effective November 5, 1999 ("Effective
Date"), between Genetronics, Inc. ("Genetronics"), a California corporation
located at 11199 Sorrento Valley Road, San Diego, CA 92129 and Lois J. Crandell,
having an address at 3750 Riviera Drive, #6, San Diego, California 92109
("Consultant").
I. BACKGROUND
1.1 Genetronics desires that Consultant provide consulting services to
Genetronics for the purpose of advising Genetronics management on various
general business related matters ("Field").
1.2 Consultant has agreed to provide services in the Field, pursuant to the
terms and conditions that follow.
II. CONSULTING SERVICES
2.1 Consultant agrees to perform consulting services, as set forth in this
Section II, beginning as of the Effective Date and terminating upon the later of
(i) September 6, 2000, (ii) the date of expiration or termination of the stock
option agreement entered into by Genetronics and Consultant as of November 12,
1999 ("New Options"), or (iii) the date of expiration or termination of the last
stock option agreement between Genetronics and Consultant in effect as of the
Effective Date of this Consulting Services Agreement ("Existing Options") (the
"Term"). The parties acknowledge that the New Options will naturally expire on
November 11, 2004,
1
<PAGE> 2
and the latest natural expiration date of the Existing Options is October 19,
2003. For the sake of clarity, the parties acknowledge that the New Options
agreement and each Existing Options agreement shall be terminated on the date
all options granted pursuant to such agreement have been exercised.
2.2 Consultant agrees to advise Genetronics management and/or other Genetronics
consultants in the Field as requested by Genetronics ("Services"). Services
shall include, but not be limited to, telephone time; on-site advising at
Genetronics, or elsewhere; review of written documents; and/or preparation of
written documents.
2.3 Services shall be provided on an as needed basis, as requested by
Genetronics and pursuant to availability of Consultant. Consultant agrees to
make reasonable accommodations in his schedule if necessary to provide requested
Services.
2.4 Consultant shall report to James Lierman, Chief Operating Officer of
Genetronics, or his delegate, when performing Services pursuant to this
Agreement.
III. COMPENSATION
3.1 In consideration of Services, Genetronics shall compensate Consultant
directly as follows during the terms of this Agreement:
a. Genetronics shall pay Consultant One Thousand Dollars ($1,000) per
full day of Services provided pursuant to Genetronics request ("Rate"), which
Rate shall be prorated in the event less than a full day of Services is
provided.
b. Payment shall be made upon receipt of an invoice for Services
rendered. Consultant agrees to submit an invoice no more frequently than one
time per month.
3.2 The compensation set forth in Section 3.1 does not include expenses incurred
pursuant to
2
<PAGE> 3
rendering Services. Genetronics shall reimburse Consultant for all reasonable
living and transportation expenses incurred by Consultant pursuant to rendering
requested Services or Excess Services, provided such expenses are approved in
writing by Genetronics prior to being incurred. Reimbursement shall be made
directly to Consultant upon submission to Genetronics of an invoice that
includes original receipts.
3.3 Consultant shall maintain true and correct records for time spent fulfilling
obligations under this Agreement and all transactions related thereto, for at
least twenty-four (24) months after termination of this Agreement.
3
<PAGE> 4
IV. NO CONFLICT OF INTEREST AND NO COMPETITION
4.1 Consultant acknowledges that no prior or existing relationships exist which
would prevent Consultant from entering into and fulfilling all obligations under
this Agreement.
4.2 Consultant shall not disclose to Genetronics any information, suggestion,
product, product development, or process with respect to which Consultant is
under any actual or implied duty to any third party to keep secret or to advise,
suggest, or develop such information, and nothing in this Agreement shall impose
an obligation on Consultant to act contrary to any such actual or implied duty
to others. Genetronics shall be free to use all information that is disclosed by
Consultant to Genetronics without any further obligation to Consultant.
4.3 Genetronics wishes to avoid any possibility of conflict arising in the
future. Therefore, if any specific issue or project brought to the attention of
Consultant by Genetronics poses a potential conflict of interest, Consultant
will immediately advise Genetronics and Genetronics shall not request Services
on that specific issue or project.
4.4 No Competition
a. Consultant acknowledges that development of, and maintaining
proprietary rights in, instruments, hardware, applicators and other equipment
related to electroporation-mediated delivery of compositions, such as drugs and
genes ("Genetronics Equipment") is a primary focus of Genetronics' current
business and future goals. Consultant also acknowledges that research and
development of electrically-assisted delivery of compositions to experimental
animals and human subjects, for a variety of biological and pathological fields
("Genetronics Research"), is another current and future objective of
Genetronics.
b. It would be detrimental to Genetronics' business if Consultant were
to assist Genetronics' competitors in the areas of Genetronics Research or with
instrumentation competitive with Genetronics Equipment.
4
<PAGE> 5
c. Consultant shall not use, promote, develop, or assist in the
development of, instrumentation that is competitive with Genetronics Equipment.
Further, Consultant shall not contract or collaborate, or otherwise assist, a
third party in the area of Genetronics Research. Consultant acknowledges and
agrees with these restrictions.
4.5 Consultant warrants and represents that he is not aware that any
relationship presently exists which is in conflict with the provisions of this
Section IV, and that he has disclosed to Genetronics any other consulting or
business relationships that may possibly be related to this Agreement.
V. CONFIDENTIAL INFORMATION
5.1 Genetronics shall disclose confidential information to Consultant directly
or indirectly, with or without notice of its confidential nature. Accordingly,
Consultant agrees to hold all information disclosed to Consultant by Genetronics
in confidence and neither disclose the same to others nor use the same for any
purpose other than as provided herein without the written permission of
Genetronics. Upon request, Consultant will return to Genetronics all written
information supplied to Consultant by Genetronics, or generated by Consultant on
behalf of Genetronics, including all copies thereof..
5.2 Consultant agrees that all technical information, including any reports,
relating to Genetronics developed by Consultant in connection with Services
under this Agreement, shall be the property of Genetronics and subject to the
confidentiality and nonuse provisions set forth herein.
5.3 The duty of confidentiality and nonuse shall not apply to any information
disclosed to Consultant by Genetronics which, through no act or failure to act
on the part of Consultant:
5
<PAGE> 6
a. is or becomes public information,
b. Consultant has in his possession at the time of disclosure by
Genetronics, other than by previous disclosure by Genetronics or through his
previous employment relationship with Genetronics,
c. is furnished to Consultant by a third party without restriction on
disclosure, provided the third party is not related to this Agreement or to
Services rendered,
d. is developed by or for Consultant outside the scope of this
Agreement, or
e. Consultant has an obligation to disclose under law, including but not
limited to those promulgated by the FDA, SEC and/or USPTO, provided Genetronics
is given a reasonable opportunity to review the planned disclosure and discuss
the need for such.
VI. INVENTIONS
6.1 Any inventions, discoveries and improvements, patentable or unpatentable,
that arise out of Services provided by Consultant under this Agreement and for
which Consultant is an inventor or coinventor, as determined under U.S. patent
law, ("Inventions") shall belong to Genetronics.
6.2 Consultant shall promptly and fully disclose all Inventions that arise out
of Services provided by Consultant under this Agreement to Genetronics and
cooperate with Genetronics or with its attorneys as may be reasonably required
in order to obtain patent and copyright protection therefor, including the
signing of any proper assignments, affidavits, applications and the like.
Furthermore, Consultant agrees to assign or otherwise transfer any and all
property rights, including all patent rights and all copyrights in materials
related to Services, domestic and foreign, resulting therefrom to Genetronics.
6
<PAGE> 7
6.3 Consultant represents and warrants that he has the right to agree to the
terms of Sections 6.1 and 6.2 and is not bound by an obligation of assignment to
a third party with respect to Inventions, as defined herein.
VII. OTHER PROVISIONS
7.1 In performing Services for Genetronics pursuant to this Agreement,
Consultant shall be acting in the capacity of an independent contractor to
Genetronics and not as an employee of Genetronics or any of its subsidiaries or
affiliated companies. Accordingly, although Genetronics shall specify the
general nature of the work to be performed and the goals to be met, the details
of performing such work and meeting such goals shall be determined by
Consultant. Pursuant to this Agreement, Consultant shall not be entitled to any
benefits Genetronics offers its employees.
7.2 Consultant is not an agent of Genetronics pursuant to this Agreement and is
not authorized to make any representation, contract or commitment on behalf of
Genetronics as a Consultant.
7.3 Consultant will be solely responsible for all tax returns and payments
required to be filed with or made to any federal, state or local tax authority
with respect to Consultant's performance of Services and receipt of fees under
this Agreement. Consultant will regularly report amounts paid to Consultant by
filing form 1099-MISC with the Internal Revenue Service as required by law.
Because Consultant is an independent contractor, Genetronics will not withhold
or make any payments for social security, unemployment insurance or disability
insurance contributions, or obtain Workers' Compensation Insurance on
Consultant's behalf. Consultant agrees to accept exclusive liability for
complying with all applicable state and federal laws governing self-employed
individuals, including obligations such as payment of taxes, social security,
disability and other contributions based on fees paid to Consultant under this
Agreement. Consultant hereby agrees to indemnify and defend Genetronics against
any and all such taxes or
7
<PAGE> 8
contributions, including penalties and interest.
7.4 This Agreement may be terminated earlier than the Term set forth in Section
2.1 , only upon mutual agreement of the parties. Provisions of compensation,
confidentiality, nonuse, and invention shall survive termination or expiration
of this Agreement by any mechanism.
7.5 This Agreement cannot be assigned by Consultant.
7.6 Any amendment or modification to this Agreement shall be valid only if in
writing and signed by both parties.
7.7 This Agreement will be governed by the laws of the State of California and,
to the extent applicable, the laws of the United States of America, without
regard to the place this Agreement is to be performed or where this Agreement
was made. Any dispute arising under this Agreement that the parties cannot
resolve by good faith negotiation and discussion shall be decided by binding
arbitration, conducted according to rules and guidelines to which the parties
shall jointly agree after good faith negotiation. In the event the parties
cannot agree on such rules and guidelines within 30 days of beginning such
negotiation, the parties hereby agree that the rules and guidelines of the
American Arbitration Association shall apply to resolve the dispute.
8
<PAGE> 9
Agreement to the foregoing is indicated by the signatures below:
GENETRONICS, INC. LOIS J. CRANDELL
By: /s/ Martin Nash By: /s/ Lois J .. Crandell
------------------------------------- -----------------------------
Martin Nash Lois J. Crandell
President and Chief Executive Officer
Date: 12/06/99 Date: 12/06/99
--------------------- ---------------------
9
<PAGE> 1
EXHIBIT 10.4
AGREEMENT CONCERNING TERMINATION OF
EMPLOYMENT OF GUNTER HOFMANN
The following sets forth the terms and conditions of the agreement (the
"Agreement") regarding the end of Gunter Hofmann's ("Dr. Hofmann") employment in
the position of Chief Scientific Officer of Genetronics Biomedical Ltd. and
Genetronics, Inc. (collectively, the "Company") effective as of September 7,
1999. Pursuant to Section 18 herein, the Agreement shall become effective on the
eighth day after this Agreement is executed by Dr. Hofmann (the "Effective
Date"). Gunter Hofmann and the Company hereby agree as follows:
1. TERMINATION OF EMPLOYMENT AGREEMENT. Except for Section 5 of the
employment agreement between Dr. Hofmann and the Company dated January
9, 1995, as amended from time to time (the "Employment Agreement"), a
copy of which is attached hereto as Exhibit A, the Employment Agreement
is hereby superseded by this Agreement and is null and void and of no
further force or effect. For the sake of clarity, Dr. Hofmann expressly
acknowledges that Section 5 of the Employment Agreement contains
confidentiality and non-disclosure provisions therein to which he
remains, and shall remain, bound as set forth therein.
2. EMPLOYMENT. Dr. Hofmann's employment as Chief Scientific Officer and all
other employment positions Dr. Hofmann may have held with the Company
were terminated effective as of September 7, 1999 (the "Separation
Date").
3. SEVERANCE PAY. The Company agrees to make severance payments to Dr.
Hofmann in the form of: (a) continuation of his base salary in effect on
the Separation Date for a period of sixteen (16) months from the
Separation Date (the "Severance Period") and (b) a grant of an option to
purchase 97,000 shares of the common stock of the Company ("New Option")
at a price per share equal to ten percent (10%) more than the fair
market value of the Company's common stock on the date that is the last
trading day before the date of grant. The term of the New Options shall
be five years from the date of grant. The New Options will vest on
January 6, 2001, which is the last day of the Severance Period, and will
be exerciseable for the duration of the term of the New Options.
However, in the event the Company is acquired by, or merged with,
another entity prior to the vesting of the New Options, the New Options
will vest upon the completion of the merger or acquisition. The New
Options shall be governed pursuant to the terms and conditions of the
Genetronics Biomedical, Ltd. 1997 Stock Option Plan, as amended."The
sixteen months of severance payments will be paid on the Company's
ordinary payroll dates and will be subject to standard payroll
deductions and withholdings.
4. STOCK OPTIONS. The stock options listed in Exhibit B to this Agreement
("Existing Options") shall be fully vested as of the Effective Date of
this Agreement, and changed from ISO to non-qualifying options. Other
than as provided in this Section 4, you
1
<PAGE> 2
acknowledge that your Existing Options will continue to be governed by
the terms and conditions of the Genetronics Biomedical, Ltd. Stock
Option Plan under which each Existing Option was granted.
5. ACCRUED SALARY AND VACATION. Dr. Hofmann agrees and acknowledges that
the Company has paid him all accrued salary, and all accrued and unused
vacation benefits earned through the Separation Date, if any, subject to
standard payroll deductions, withholding taxes and other obligations.
6. INSURANCE BENEFITS. To the extent provided by the federal COBRA law or,
if applicable, state insurance laws, and by the Company's current group
health insurance policies, Dr. Hofmann will be eligible to continue his
health insurance benefits. Later, Dr. Hofmann may be able to convert to
an individual policy through the provider of the Company's health
insurance, if he wishes. Dr. Hofmann will be provided with a separate
notice of his COBRA rights. In the event that Dr. Hofmann elects
continued coverage under COBRA, the Company will pay his COBRA health
insurance premiums (Company and employee contributions) for sixteen (16)
months from the Separation Date. Thereafter, Dr. Hofmann shall be solely
responsible for the payment of the premium for such benefits to the
Company's health insurance provider, if Dr. Hofmann desires to continue
such benefits.
7. LIFE INSURANCE. The Company agrees that it will maintain a life
insurance policy on Dr. Hofmann's life for his and his estate's benefit,
the terms of which shall be substantially similar to terms of the
personal policy maintained by the Company for his benefit prior to the
Separation Date, for a period of sixteen (16) months after the
Separation Date.
8. COMPANY EQUIPMENT. The Company agrees that, as part of this Agreement
and in consideration thereof, Dr. Hofmann may keep for his own personal
use any Company computer, cellular telephone and facsimile machine
currently in his possession.
9. AUTOMOBILE. The Company agrees that, as part of this Agreement and in
consideration thereof, it will continue to pay for the lease payments
(approximate value of Fifteen Thousand Dollars ($15,000)) on the
automobile that was obtained for Dr. Hofmann as an officer of the
Company for the duration of the existing lease period.
10. 401(k). The Company agrees that, as part of this Agreement and in
consideration thereof, the Company will purchase for Dr. Hofmann the
same number of shares of common stock of the Company that he would have
received through the Company's 401(k) plan had he remained an employee
through January 7, 2001. Such stock shall be purchased for him quarterly
as it is for employees who participate in the Company's 401(K) plan.
11. OTHER COMPENSATION AND BENEFITS. Except as expressly provided herein,
Dr. Hofmann acknowledges and agrees that he is not entitled to and will
not receive any additional
2
<PAGE> 3
employment-related compensation, severance, stock options, stock or
benefits from the Company after the Separation Date.
12. NON-DISCLOSURE OF THE TERMS OF THIS AGREEMENT. The provisions of this
Agreement shall be held in strictest confidence by Dr. Hofmann and the
Company and shall not be publicized or disclosed in any manner
whatsoever; provided, however, that: (a) Dr. Hofmann may disclose this
Agreement, in confidence, to his immediate family; (b) the parties may
disclose this Agreement in confidence to their respective attorneys,
accountants, auditors, tax preparers, and financial advisors; (c) the
Company may disclose this Agreement as necessary to fulfill standard or
legally required corporate reporting or disclosure requirements; and (d)
the parties may disclose this Agreement insofar as such disclosure may
be necessary to enforce its terms or as otherwise required by law.
13. NON-DISPARAGEMENT. The parties agree that neither they, nor their
officers, directors or employees will make any disparaging statements
about each other. However, in the interest of implementing open
discussion and disclosure among Board members, the parties agree that
this provision does not apply to statements made by the above
individuals in their capacity as directors to other directors of the
Company.
14. NON-SOLICITATION. Dr. Hofmann agrees that for a period of one (1) year
from the Separation Date he will not hire or take away or cause to be
hired or taken away any employee of the Company for the purpose of
employment in any business or endeavor. He further agrees, without
prejudice to any and all other rights of the Company, that in the event
of his violation or attempted violation of the covenants contained in
this agreement, an injunction or other like remedy shall be the only
effective method to protect the Company's and its affiliates' rights and
property, and that an interim injunction may be granted immediately on
the commencement of any suit.
15. RETURN OF PROPERTY. Except as otherwise provided herein, upon the
Effective Date, Dr. Hofmann agrees to return to the Company all Company
documents (and all copies thereof) and other Company property in his
possession or his control as an employee, including, but not limited to,
Company files, business plans, notes, samples, sales notebooks,
drawings, specifications, calculations, sequences, data,
computer-recorded information, tangible property, including, but not
limited to, software, credit cards, business cards, entry cards, keys
and any other materials of any nature pertaining to his work with the
Company as an employee, and any documents or data of any description (or
any reproduction of any documents or data) containing or pertaining to
any proprietary or confidential material of the Company, which is in his
possession by nature of his employment relationship with the Company. In
the event no property is returned, Dr. Hofmann will be deemed to have
agreed and acknowledged that he has no Company documents of substantive
value in his possession, other than those documents in his possession
for reasonable use as a director or consultant.
16. TAX CONSEQUENCES. The Company makes no representations or warranties
with respect to the tax consequences of any payments to Dr. Hofmann
under the terms of this
3
<PAGE> 4
Agreement. Dr. Hofmann agrees and understands that he is responsible for
payment, if any, of local, state and/or federal taxes on the sums paid
hereunder by the Company and any penalties or assessments thereon. Dr.
Hofmann further agrees to indemnify and hold the Company harmless from
any claims, demands, deficiencies, penalties, assessments, executions,
judgments, or recoveries by any government agency against the Company
for any amounts claimed due on account of his failure to pay federal or
state taxes or damages sustained by the Company by reason of any such
claims, including reasonable attorneys' fees.
17. RELEASE OF CLAIMS AGAINST THE COMPANY. In consideration of the
foregoing, Dr. Hofmann hereby releases, acquits, and forever discharges
the Company, its parents and subsidiaries, and their officers,
directors, agents, servants, employees, attorneys, shareholders,
partners, successors, assigns, affiliates, customers, and clients of and
from any and all claims, liabilities, demands, causes of action, costs,
expenses, attorneys' fees, damages, indemnities and obligations of every
kind and nature, in law, equity, or otherwise, known and unknown,
suspected and unsuspected, disclosed and undisclosed, arising out of or
in any way related to agreements, acts or conduct at any time prior to
the Separation Date, including, but not limited to: all such claims and
demands directly or indirectly arising out of or in any way connected
with the Company's employment of Dr. Hofmann, the termination of that
employment, the Company's performance of its obligations as his former
employer, and any claims arising from the Employment Agreement or his
offer letter; claims or demands related to salary, bonuses, commissions,
stock, or any other ownership interests in the Company, vacation pay,
fringe benefits, expense reimbursements, severance pay, or any form of
compensation; claims pursuant to any federal, state or local law or
cause of action including, but not limited to, the California Fair
Employment and Housing Act, the federal Civil Rights Act of 1964, as
amended; the federal Age Discrimination in Employment Act of 1967, as
amended; the federal Americans With Disabilities Act; tort law; contract
law; wrongful discharge; discrimination; harassment; fraud; defamation;
emotional distress; and breach of the implied covenant of good faith and
fair dealing. Notwithstanding the above, Dr. Hofmann is not hereby
releasing any claims Dr. Hofmann may have (i) under this Agreement; (ii)
for indemnification pursuant to and in accordance with the applicable
statutes, the applicable terms of the charters, articles of
incorporation or bylaws of the Company, any insurance policies
maintained by the Company which afford coverage to Dr. Hofmann; (iii)
for rights or claims Dr. Hofmann may have pursuant to any applicable
stock option plans or stock option agreements Dr. Hofmann may have with
the Company; and (iv) any criminal, grossly negligent or fraudulent
conduct on the part of the Company, other than his own conduct, which
creates liability on the part of Dr. Hofmann. For the sake of clarity,
Dr. Hofmann expressly agrees that the provisions of this Section 17,
including part (iv) herein, shall not be interpreted to permit Dr.
Hofmann to make a claim against the Company that is related to
termination of his employment with the Company or the Company's
performance of its obligations as his former employer, any claims
arising from the Employment Agreement, or any form of compensation he
received as an employee.
4
<PAGE> 5
18. ADEA WAIVER. Dr. Hofmann further acknowledges that he is knowingly and
voluntarily waiving and releasing any rights he may have under the Age
Discrimination in Employment Act of 1967 ("ADEA"). He also acknowledges
that the consideration given for the waiver and release in the preceding
paragraphs hereof is in addition to anything of value to which he was
already entitled. Since Dr. Hofmann is more than forty (40) years of age
when this release is signed, he hereby provides the further
acknowledgment that he is advised by this writing, as required by the
Older Workers Benefit Protection Act, that: (a) his waiver and release
do not apply to any rights or claims that may arise after the Effective
Date of this release; (b) he has the right to consult with an attorney
prior to executing this release (although he may voluntarily choose not
to do so); (c) he may have at least twenty-one (21) days to consider
this Agreement (although he may by his own choice execute this release
earlier); (d) he has seven (7) days following the execution of this
release to revoke this release; and (e) this Agreement shall not be
effective until the date upon which the revocation period has expired,
therefore making the effective date the eighth day after this release is
signed by Dr. Hofmann (the "Effective Date").
19. RELEASE OF CLAIMS AGAINST DR. HOFMANN. In consideration of the
foregoing, the Company, for and on behalf of itself, its directors,
officers, shareholders, successors and assigns hereby releases, acquits
and forever discharges Dr. Hofmann and his assigns, transferees,
successors, heirs, agents and attorneys from any and all claims,
liabilities, demands, causes of action, costs, expenses, attorneys'
fees, damages, indemnities and obligations of every kind and nature, in
law, equity, or otherwise, known and unknown, suspected and unsuspected,
disclosed and undisclosed, arising out of or in any way related to
agreements, acts or conduct of Dr. Hofmann within the course and scope
of his obligations and duties as an employee or officer of the Company
at any time prior to the Separation Date, including, but not limited to:
all such claims and demands directly or indirectly arising out of or in
any way connected with the Company's employment of Dr. Hofmann, the
termination of that employment, his performance of his obligations and
duties as an employee, officer, and director of the Company, or arising
out of any agreement between Dr. Hofmann and the Company, with the
exception of any claim arising out of (i) his obligations under this
Agreement; (ii) his obligations arising out of Section 5 of the
Employment Agreement or any other obligations relating to the
proprietary information of the Company; and (iii) any criminal, grossly
negligent, or fraudulent conduct by him which creates liability on the
part of the Company.
5
<PAGE> 6
20. SECTION 1542 WAIVER. In providing the releases set forth in Paragraphs
16 and 18 above, the parties agree that the releases include claims
which may be unknown to the parties at present. The parties hereby
acknowledge that they have read and understand Section 1542 of the Civil
Code of the State of California which reads as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE
TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
21. LEGAL ADVICE. The parties acknowledge that they have been given the
opportunity to seek the advice of independent legal counsel with respect
to this Agreement and they have been provided with sufficient time to
obtain such legal advice.
22. CONSULTING AGREEMENT. Dr. Hofmann agrees to provide consulting services
to the Company as set forth in a separate consulting agreement.
23. NO OTHER AGREEMENTS. The parties acknowledge and represent to each other
that this Agreement is signed without reliance upon any promises,
representations or warranties whatsoever, whether expressed or implied,
which are not contained herein in writing concerning the matters herein
set forth.
24. ENTIRE AGREEMENT. This Agreement constitutes the complete, final and
exclusive embodiment of the entire Agreement between the parties with
regard to the subject matter hereof. It is entered into without reliance
on any promise or representation, written or oral, other than those
expressly contained herein. It may not be modified except in a writing
signed by Dr. Hofmann and a duly authorized officer of the Company. Each
party has carefully read this Agreement, has been afforded the
opportunity to be advised of its meaning and consequences by his or its
respective attorneys, and signed the same of his or its free will.
25. APPLICABLE LAW. This Agreement shall be deemed to have been entered into
and shall be construed and enforced in accordance with the laws of the
State of California as applied to contracts made and to be performed
entirely within California.
26. SECTION HEADINGS. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
27. COUNTERPARTS. This Agreement may be executed in two counterparts, each
of which shall be deemed an original, all of which together shall
constitute one and the same instrument.
6
<PAGE> 7
28. ACKNOWLEDGMENT. By executing this Agreement, each signatory acknowledges
that he or it has read and understands this Agreement and release and
further acknowledges that he or it has had the opportunity to review it
with an attorney. Each signatory further acknowledges that he or it is
executing this Agreement and release voluntarily and with full knowledge
of its terms and provisions and of legal rights and regard thereto.
IN WITNESS WHEREOF, the parties have duly authorized and caused this
Agreement to be executed as follows:
Dated this 6th day of December, 1999. Dated this 6th day of December, 1999.
GENETRONICS BIOMEDICAL, LTD.
/s/ Gunter Hofmann BY: /s/ Martin Nash
- ------------------------------------- ---------------------------------
GUNTER A. HOFMANN ITS: PRESIDENT AND CEO
Dated this 6th day of December, 1999.
GENETRONICS, INC.
BY: /S/ MARTIN NASH
--------------------------------
ITS: PRESIDENT AND CEO
Attachments:
Exhibit A: Employment Agreement
Exhibit B: Schedule of Outstanding Stock Options
7
<PAGE> 8
EXHIBIT A
EMPLOYMENT AGREEMENT
Filed as an exhibit to Registrant's Form 20-F for the period ended February 28,
1998
EXHIBIT B
SCHEDULE OF OUTSTANDING STOCK OPTIONS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
DATE OF PLAN NUMBER PRICE PER VESTING EXPIRATION
GRANT OF SHARE
OPTIONS (US$)
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
09-04-96 1995 35,000 2.27 100% 09-03-01
- --------------------------------------------------------------------------------------------
01-14-97 1995 25,000 2.81 100% 01-13-02
- --------------------------------------------------------------------------------------------
01-27-97 1995 45,000 3.06 100% 01-26-02
- --------------------------------------------------------------------------------------------
07-08-98 1997 35,200 2.48 100% 07-07-03
- --------------------------------------------------------------------------------------------
10-20-98 1997 100,000 2.95 25% * 10-19-03
- --------------------------------------------------------------------------------------------
</TABLE>
* 100% TO BE VESTED AS OF THE EFFECTIVE DATE OF THIS AGREEMENT.
8
<PAGE> 1
EXHIBIT 10.5
CONSULTING SERVICES AGREEMENT
This Agreement is entered into effective November 5, 1999 ("Effective
Date"), between Genetronics, Inc. ("Genetronics"), a California corporation
located at 11199 Sorrento Valley Road, San Diego, CA 92129 and Gunter A.
Hofmann, Ph.D., having an address at 3750 Riviera Drive, #6, San Diego,
California 92109 ("Consultant").
I. BACKGROUND
1.1 Genetronics desires that Consultant provide consulting services to
Genetronics for the purpose of advising Genetronics management and scientific
staff on matters concerning the business of Genetronics, including but not
limited to research, development, and intellectual property matters ("Field").
1.2 Consultant has agreed to provide services in the Field, pursuant to the
terms and conditions that follow.
II. CONSULTING SERVICES
2.1 Consultant agrees to perform consulting services, as set forth in this
Section II, beginning as of the Effective Date and terminating upon the later of
(i) January 6, 2001, (ii) the date of expiration or termination of the stock
option agreement entered into by Genetronics and Consultant as of November 12,
1999 ("New Options"), or (iii) the date of expiration or termination of the last
stock option agreement between Genetronics and Consultant in effect as of the
Effective Date of this Consulting Services Agreement ("Existing Options") (the
"Term"). The parties acknowledge that the New Options will naturally expire on
November 11, 2004, and the latest natural expiration date of the Existing
Options is October 19, 2003. For the sake of
1
<PAGE> 2
clarity, the parties acknowledge that the New Options agreement and each
Existing Options agreement shall be terminated on the date all options granted
pursuant to such agreement have been exercised.
2.2 Consultant agrees to advise Genetronics management, scientists and/or other
Genetronics consultants in the Field as requested by Genetronics ("Services").
Services shall include, but not be limited to, telephone time; on-site advising
at Genetronics, or elsewhere; review of written documents; and/or preparation of
written documents.
2.3 Services shall be provided on an as needed basis, as requested by
Genetronics and pursuant to availability of Consultant. Consultant agrees to
make reasonable accommodations in his schedule if necessary to provide requested
Services.
2.4 Consultant shall report to James Lierman, Chief Operating Officer of
Genetronics, or his delegate, when performing Services pursuant to this
Agreement.
III. COMPENSATION
3.1 In consideration of Services, Genetronics shall compensate Consultant
directly as follows during the terms of this Agreement:
a. Genetronics shall pay Consultant One Thousand Dollars ($1,000) per
full day of Services provided pursuant to Genetronics request ("Rate"), which
Rate shall be prorated in the event less than a full day of Services is
provided.
b. Payment shall be made upon receipt of an invoice for Services
rendered. Consultant agrees to submit an invoice no more frequently than one
time per month.
3.2 The compensation set forth in Section 3.1 does not include expenses incurred
pursuant to
2
<PAGE> 3
rendering Services. Genetronics shall reimburse Consultant for all reasonable
living and transportation expenses incurred by Consultant pursuant to rendering
requested Services or Excess Services, provided such expenses are approved in
writing by Genetronics prior to being incurred. Reimbursement shall be made
directly to Consultant upon submission to Genetronics of an invoice that
includes original receipts.
3.3 Consultant shall maintain true and correct records for time spent fulfilling
obligations under this Agreement and all transactions related thereto, for at
least twenty-four (24) months after termination of this Agreement.
3
<PAGE> 4
IV. NO CONFLICT OF INTEREST AND NO COMPETITION
4.1 Consultant acknowledges that no prior or existing relationships exist which
would prevent Consultant from entering into and fulfilling all obligations under
this Agreement.
4.2 Consultant shall not disclose to Genetronics any information, suggestion,
product, product development, or process with respect to which Consultant is
under any actual or implied duty to any third party to keep secret or to advise,
suggest, or develop such information, and nothing in this Agreement shall impose
an obligation on Consultant to act contrary to any such actual or implied duty
to others. Genetronics shall be free to use all information that is disclosed by
Consultant to Genetronics without any further obligation to Consultant.
4.3 Genetronics wishes to avoid any possibility of conflict arising in the
future. Therefore, if any specific issue or project brought to the attention of
Consultant by Genetronics poses a potential conflict of interest, Consultant
will immediately advise Genetronics and Genetronics shall not request Services
on that specific issue or project.
4.4 No Competition
a. Consultant acknowledges that development of, and maintaining
proprietary rights in, instruments, hardware, applicators and other equipment
related to electroporation-mediated delivery of compositions, such as drugs and
genes ("Genetronics Equipment") is a primary focus of Genetronics' current
business and future goals. Consultant also acknowledges that research and
development of electrically-assisted delivery of compositions to experimental
animals and human subjects, for a variety of biological and pathological fields
("Genetronics Research"), is another current and future objective of
Genetronics.
b. It would be detrimental to Genetronics' business if Consultant were
to assist Genetronics' competitors in the areas of Genetronics Research or with
instrumentation competitive with Genetronics Equipment.
4
<PAGE> 5
c. Consultant shall not use, promote, develop, or assist in the
development of, instrumentation that is competitive with Genetronics Equipment.
Further, Consultant shall not contract or collaborate, or otherwise assist, a
third party in the area of Genetronics Research. Consultant acknowledges and
agrees with these restrictions.
4.5 Consultant warrants and represents that he is not aware that any
relationship presently exists which is in conflict with the provisions of this
Section IV, and that he has disclosed to Genetronics any other consulting or
business relationships that may possibly be related to this Agreement.
V. CONFIDENTIAL INFORMATION
5.1 Genetronics shall disclose confidential information to Consultant directly
or indirectly, with or without notice of its confidential nature. Accordingly,
Consultant agrees to hold all information disclosed to Consultant by Genetronics
in confidence and neither disclose the same to others nor use the same for any
purpose other than as provided herein without the written permission of
Genetronics. Upon request, Consultant will return to Genetronics all written
information supplied to Consultant by Genetronics, or generated by Consultant on
behalf of Genetronics, including all copies thereof..
5.2 Consultant agrees that all technical information, including any reports,
relating to Genetronics developed by Consultant in connection with Services
under this Agreement, shall be the property of Genetronics and subject to the
confidentiality and nonuse provisions set forth herein.
5.3 The duty of confidentiality and nonuse shall not apply to any information
disclosed to Consultant by Genetronics which, through no act or failure to act
on the part of Consultant:
5
<PAGE> 6
a. is or becomes public information,
b. Consultant has in his possession at the time of disclosure by
Genetronics, other than by previous disclosure by Genetronics or through his
previous employment relationship with Genetronics,
c. is furnished to Consultant by a third party without restriction on
disclosure, provided the third party is not related to this Agreement or to
Services rendered,
d. is developed by or for Consultant outside the scope of this
Agreement, or
e. Consultant has an obligation to disclose under law, including but not
limited to those promulgated by the FDA, SEC and/or USPTO, provided Genetronics
is given a reasonable opportunity to review the planned disclosure and discuss
the need for such.
VI. INVENTIONS
6.1 Any inventions, discoveries and improvements, patentable or unpatentable,
that arise out of Services provided by Consultant under this Agreement and for
which Consultant is an inventor or coinventor, as determined under U.S. patent
law, ("Inventions") shall belong to Genetronics.
6.2 Consultant shall promptly and fully disclose all Inventions that arise out
of Services provided by Consultant under this Agreement to Genetronics and
cooperate with Genetronics or with its attorneys as may be reasonably required
in order to obtain patent and copyright protection therefor, including the
signing of any proper assignments, affidavits, applications and the like.
Furthermore, Consultant agrees to assign or otherwise transfer any and all
property rights, including all patent rights and all copyrights in materials
related to Services, domestic and foreign, resulting therefrom to Genetronics.
6
<PAGE> 7
6.3 Consultant represents and warrants that he has the right to agree to the
terms of Sections 6.1 and 6.2 and is not bound by an obligation of assignment to
a third party with respect to Inventions, as defined herein.
VII. OTHER PROVISIONS
7.1 In performing Services for Genetronics pursuant to this Agreement,
Consultant shall be acting in the capacity of an independent contractor to
Genetronics and not as an employee of Genetronics or any of its subsidiaries or
affiliated companies. Accordingly, although Genetronics shall specify the
general nature of the work to be performed and the goals to be met, the details
of performing such work and meeting such goals shall be determined by
Consultant. Pursuant to this Agreement, Consultant shall not be entitled to any
benefits Genetronics offers its employees.
7.2 Consultant is not an agent of Genetronics pursuant to this Agreement and is
not authorized to make any representation, contract or commitment on behalf of
Genetronics as a Consultant.
7.3 Consultant will be solely responsible for all tax returns and payments
required to be filed with or made to any federal, state or local tax authority
with respect to Consultant's performance of Services and receipt of fees under
this Agreement. Consultant will regularly report amounts paid to Consultant by
filing form 1099-MISC with the Internal Revenue Service as required by law.
Because Consultant is an independent contractor, Genetronics will not withhold
or make any payments for social security, unemployment insurance or disability
insurance contributions, or obtain Workers' Compensation Insurance on
Consultant's behalf. Consultant agrees to accept exclusive liability for
complying with all applicable state and federal laws governing self-employed
individuals, including obligations such as payment of taxes, social security,
disability and other contributions based on fees paid to Consultant under this
Agreement. Consultant hereby agrees to indemnify and defend Genetronics against
any and all such taxes or
7
<PAGE> 8
contributions, including penalties and interest.
7.4 This Agreement may be terminated earlier than the Term set forth in Section
2.1 , only upon mutual agreement of the parties. Provisions of compensation,
confidentiality, nonuse, and invention shall survive termination or expiration
of this Agreement by any mechanism.
7.5 This Agreement cannot be assigned by Consultant.
7.6 Any amendment or modification to this Agreement shall be valid only if in
writing and signed by both parties.
7.7 This Agreement will be governed by the laws of the State of California and,
to the extent applicable, the laws of the United States of America, without
regard to the place this Agreement is to be performed or where this Agreement
was made. Any dispute arising under this Agreement that the parties cannot
resolve by good faith negotiation and discussion shall be decided by binding
arbitration, conducted according to rules and guidelines to which the parties
shall jointly agree after good faith negotiation. In the event the parties
cannot agree on such rules and guidelines within 30 days of beginning such
negotiation, the parties hereby agree that the rules and guidelines of the
American Arbitration Association shall apply to resolve the dispute.
8
<PAGE> 9
Agreement to the foregoing is indicated by the signatures below:
GENETRONICS, INC. GUNTER A. HOFMANN, PH.D.
By: /s/ Martin Nash By: /s/ Gunter A. Hofmann
------------------------------------- ------------------------------
Martin Nash Gunter A. Hofmann, Ph.D.
President and Chief Executive Officer
Date: 12/06/99 Date: 12/06/99
----------------------------------- ----------------------------
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 4,535,015
<SECURITIES> 6,354,840
<RECEIVABLES> 975,063
<ALLOWANCES> 61,493
<INVENTORY> 879,903
<CURRENT-ASSETS> 12,937,255
<PP&E> 1,995,454
<DEPRECIATION> 1,046,373
<TOTAL-ASSETS> 15,234,299
<CURRENT-LIABILITIES> 2,077,813
<BONDS> 0
0
0
<COMMON> 29,284,263
<OTHER-SE> (16,209,569)
<TOTAL-LIABILITY-AND-EQUITY> 15,234,299
<SALES> 2,806,200
<TOTAL-REVENUES> 3,993,853
<CGS> 1,289,461
<TOTAL-COSTS> 1,289,461
<OTHER-EXPENSES> 9,859,481
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,260
<INCOME-PRETAX> (7,174,349)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,174,349)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,174,349)
<EPS-BASIC> (0.32)
<EPS-DILUTED> (0.32)
</TABLE>
