<PAGE>
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 March 31, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 24572
GENEMEDICINE, INC.
(Exact name of registrant as specified in its charter)
Delaware 76-0355802
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
8301 New Trails Drive, The Woodlands, Texas 77381-4248
(Address of principal executive office) (zip code)
(281) 364-1150
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No ___
---
As of May 11, 1998, there were outstanding 14,515,466 and 3,750,000 shares of
Common Stock and Series B Preferred Stock, par value $.001, respectively, of
the registrant.
<PAGE>
GENEMEDICINE, INC.
(A Delaware Corporation in the Development Stage)
FORM 10-Q
TABLE OF CONTENTS
PAGE NO.
---------
COVER PAGE 1
TABLE OF CONTENTS 2
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Balance Sheets as of March 31, 1998 and December 31, 1997 3
Statements of Operations for the three months ended March 31, 1998
and March 31, 1997, and for the period from inception (January 2,
1992) through March 31, 1998 4
Statements of Cash Flows for the three months ended March 31, 1998
and March 31, 1997, and for the period from inception (January 2,
1992) through March 31, 1998 5
Notes to Financial Statements 6
ITEM 2.
Management's Discussion and Analysis of Financial Condition and Results
of Operations 7
PART II. OTHER INFORMATION 9
SIGNATURES 10
Page 2 of 10
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GENEMEDICINE, INC.
(A DELAWARE CORPORATION IN THE DEVELOPMENT STAGE)
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
------------ ------------
ASSETS (UNAUDITED)
------
<S> <C> <C>
Current Assets:
Cash and cash equivalents............................................... $ 124,237 $ 873,180
Short-term investments.................................................. 24,698,996 23,708,845
Prepaid expenses and other.............................................. 164,489 175,128
------------ ------------
Total current assets.................................................. 24,987,722 24,757,153
------------ ------------
Equipment, furniture and leasehold improvements, net....................... 3,166,076 3,220,987
Deposits and other assets.................................................. 9,195 9,195
------------ ------------
Total Assets............................................................... $ 28,162,993 $ 27,987,335
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable and accrued liabilities................................ $ 734,548 $ 1,454,986
Deferred grant revenue.................................................. - 89,737
Current portion of capital lease obligations............................ 275,956 270,166
------------ ------------
Total current liabilities......................................... 1,010,504 1,814,889
------------ ------------
Long-term Liabilities:
Deferred contract revenue............................................... 3,169,970 2,919,970
Capital lease obligations, net of current portion....................... - 54,814
------------ ------------
Total long-term liabilities....................................... 3,169,970 2,974,784
------------ ------------
Commitments
Stockholders' Equity:
Convertible preferred stock, $.001 par value; 20,000,000 shares
authorized; 3,750,000 issued and outstanding.......................... 3,750 3,750
Common stock, $.001 par value; 40,000,000 shares authorized;
14,514,077 and 13,911,422 shares issued and outstanding............... 14,514 13,911
Additional paid-in capital.............................................. 74,124,059 70,097,651
Deferred compensation................................................... (28,173) (56,348)
Deficit accumulated during the development stage........................ (50,131,631) (46,861,302)
------------ ------------
Total stockholders' equity............................................ 23,982,519 23,197,662
------------ ------------
Total Liabilities and Stockholders' Equity................................. $ 28,162,993 $ 27,987,335
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 3 of 10
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GENEMEDICINE, INC.
(A DELAWARE CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENTS OF OPERATIONS
(UNAUDITED)
Inception
Three Months Ended (January 2, 1992)
March 31, through
------------------- March 31,
1998 1997 1998
---- ---- ----
Revenues and other income:
Contract revenue................. $ 1,022,500 $ 1,500,000 $ 13,202,500
Research and development
grant revenue.................. 89,738 240,000 1,616,135
Interest income.................. 351,916 430,946 6,049
------------ ------------ ------------
1,464,154 2,170,946 20,868
Expenses:
Research and development......... 3,730,450 3,279,329 53,218
General and administrative....... 995,220 1,004,516 17,277
Interest expense................. 8,807 19,839 504
------------ ------------ ------------
Total expenses..................... 4,734,477 4,303,684 71,000
------------ ------------ ------------
Net loss........................... $ (3,270,323) $ (2,132,738) $(50,131,625)
============ ============ ============
Basic and diluted loss per share... $ (0.23) $ (0.16)
Shares used in computing basic
and diluted loss per share....... 14,306,044 13,462,240
The accompanying notes are an integral part of these financial statements.
Page 4 of 10
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GENEMEDICINE, INC.
(A DELAWARE CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED INCEPTION
MARCH 31, (JANUARY 2, 1992)
--------------------- THROUGH
1998 1997 MARCH 31, 1998
---- ---- --------------
<S> <C> <C> <C>
Cash flows used in operating activities:
Net loss............................................................ $ (3,270,323) $ (2,132,738) $ (50,131,625)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization...................................... 267,219 221,026 3,045,196
Issuance of convertible debt for noncash consideration............. - - 905,000
Issuance of stock for noncash consideration........................ - - 107,644
Compensation expense related to stock plans........................ 28,175 96,840 1,749,535
Loss on equipment retirements...................................... - - 7,565
Changes in assets and liabilities:
Decrease (increase) in prepaid expenses and other assets......... 10,634 (529,541) (170,561)
Increase (decrease) in accounts payable and accrued liabilities.. (720,438) (194,540) 734,548
Increase in deferred revenue and deferred contract revenue....... 160,262 110,000 3,169,970
--------------- -------------- ---------------
Net cash used in operating activities.......................... (3,524,471) (2,428,953) (40,582,728)
--------------- -------------- ---------------
Cash flows used in investing activities:
Purchase of equipment, furniture and leasehold improvements........ (212,308) (686,799) (6,221,966)
Net sales (purchases) of short-term investments.................... (990,151) (896,048) (24,698,996)
--------------- -------------- ---------------
Net cash (used in) provided by investing activities............ (1,202,459) (1,582,847) (30,920,962)
--------------- -------------- ---------------
Cash flows from financing activities:
Proceeds from notes payable and capital lease obligations.......... - - 2,030,823
Repayment of notes payable and capital lease obligations........... (49,024) (83,374) (1,623,867)
Advance on line of credit.......................................... - - 750,000
Proceeds from issuance of preferred stock, net..................... - - 22,264,465
Proceeds from issuance of common stock, net........................ 4,027,011 4,144,203 48,206,506
--------------- -------------- ---------------
Net cash provided by financing activities...................... 3,977,987 4,060,829 71,627,927
--------------- -------------- ---------------
(748,943) 49,029 124,237
Cash and cash equivalents, beginning of period........................ 873,180 2,145,404 -
--------------- -------------- ---------------
Cash and cash equivalents, end of period.............................. $ 124,237 $ 2,194,433 $ 124,237
=============== ============== ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest........................... $ 8,807 $ 19,839 $ 500,992
Supplemental schedule of noncash financing activity:
Conversion of debt to preferred and common stock................... $ - $ - $ 1,786,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 5 of 10
<PAGE>
GENEMEDICINE, INC.
(A Delaware Corporation in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
(unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION:
GeneMedicine, Inc. ("GeneMedicine" or the "Company") is a Delaware
corporation in the development stage. The Company is developing non-viral
gene therapies that may provide unique clinical benefits in the treatment of a
number of human diseases. The Company intends to develop its products through
alliances with major pharmaceutical and biotechnology companies.
The Company has devoted substantially all of its efforts to research and
product development and has not yet generated any revenues from the sale of
products, nor is there any assurance of future product revenues. In addition,
the Company expects to continue to incur losses for the foreseeable future,
and there can be no assurance that the Company will successfully complete the
transition from a development stage company to successful operations. The
research and development activities engaged in by the Company involve a high
degree of risk and uncertainty. The ability of the Company to successfully
develop, manufacture and market its proprietary products is dependent upon
many factors. These factors include, but are not limited to, the need for
additional financing, the ability to establish and maintain collaborative
arrangements for research, development and commercialization of products with
corporate partners, and the ability to develop or access manufacturing, sales
and marketing experience. Additional factors include uncertainties as to
patents and proprietary technologies, technological change and risk of
obsolescence, development of products, competition, government regulations and
regulatory approval, and product liability exposure. As a result of the
aforementioned factors and the related uncertainties, there can be no
assurance of the Company's future success.
The accompanying interim financial statements are unaudited and reflect all
adjustments which, in the opinion of management, are necessary for a fair
presentation of the results for the interim periods presented. Results for
interim periods are not necessarily indicative of the results to be expected
for the entire year ending December 31, 1998. These financial statements
should be read in conjunction with the Company's audited financial statements
included with the Company's Annual Report on Form 10-K for the year ended
December 31, 1997.
Effective January 1, 1998, the Company adopted Financial Accounting
Standards No. 130, "Reporting Comprehensive Income." Statement No. 130
establishes standards for reporting and displaying comprehensive income and
its components. Comprehensive income is the total of net income and all other
non-owner changes in equity. For the period from inception (January 2, 1992)
through March 31, 1998, the only component of comprehensive income for the
Company is net income. Adopting Statement No. 130 had no effect on the
Company's financial position or results of operation.
Page 6 of 10
<PAGE>
GENEMEDICINE, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Except for the historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. Actual results could differ materially from those discussed
here. Factors that could cause or contribute to such differences include, but
are not limited to, the early stage of GeneMedicine, Inc.'s development and
technological uncertainty, dependence on collaborative partners and licenses,
the failure of existing or future partnerships to be successful, future capital
needs and uncertainty of additional funding, uncertainty of patent protection,
uncertainty of government regulatory requirements, level of competition and
rapid technological change, as well as those set forth in this section and in
the section entitled "Risk Factors" and elsewhere in the Company's Form 10-K for
the year ended December 31, 1997.
Since its inception in January 1992, GeneMedicine has devoted its resources
primarily to fund its research and development programs. The Company has been
unprofitable since inception and to date has not received any revenues from the
sale of products. No assurance can be given that the Company will be able to
generate sufficient product revenues to attain profitability on a sustained
basis or at all. The Company expects to incur substantial losses for the next
several years as it continues to invest in product research and development,
preclinical studies, clinical trials and regulatory compliance. At March 31,
1998, the Company's accumulated deficit was approximately $50.1 million.
RESULTS OF OPERATIONS
Revenues and other income of $1.5 million were recorded for the quarter ended
March 31, 1998. Such revenues consisted of contract revenue of $1.0 million,
research and development grant revenue of $0.1 million and interest income of
$0.4 million. This compares with revenues of $2.2 million for the quarter ended
March 31, 1997, which consisted of contract revenue of $1.5 million, research
and development grant revenue of $0.3 million and interest income of $0.4
million. Contract revenues in each respective quarter primarily resulted from a
corporate partnership with certain Boehringer Mannheim subsidiaries ("Boehringer
Mannheim") of Corange International Ltd. ("Corange"), which was acquired by
Roche Holding Ltd. in March 1998, to develop certain non-viral gene medicines to
treat selected cancer indications. The decrease in contract revenue for the
first quarter of 1998 compared to the same period in 1997 was due to the
recognition in 1997 of a $0.5 million milestone payment from Boehringer Mannheim
for achieving clearance from the U.S. Food and Drug Administration to commence a
Phase I clinical trial using the Company's IL-2 Gene Medicine, which
GeneMedicine is developing for the treatment of head and neck cancer.
The Company's research and development expenses for the quarter ended March
31, 1998 were $3.7 million, compared to $3.3 million for the first quarter of
1997. The increase in research and development expenses was generally due to the
expansion of the Company's research and development activities, staffing
increases and the related salary and benefit costs as well as additional
laboratory supplies and other support costs. The expansion of research and
development activities resulted primarily from the Company's continued expansion
of research in the field of cancer. The Company anticipates that expenditures
will increase over the next several years as it expands its research and product
development efforts.
General and administrative expenses remained relatively unchanged at $1.0
million for the quarter ended March 31, 1998 compared to the same period in
1997.
Page 7 of 10
<PAGE>
Net loss per share for the three months ended March 31, 1998 was $0.23
compared to a net loss per share of $0.16 for the same period in 1997. The
increase in the Company's net loss per share was primarily the result of
decreased contract revenue and increased research and development expenses as
described above.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations primarily through
private and public sales of its equity securities, interest income on invested
funds and revenues from corporate alliances. Through March 31, 1998, the Company
had received approximately $70.5 million in net proceeds from sales of its
equity securities. At March 31, 1998, the Company had working capital of $24.0
million and cash, cash equivalents and short-term investments of $24.8 million.
In addition, in April 1998 the Company received a $1.25 million, quarterly
scheduled, contract research payment from Boehringer Mannheim.
The Company expects its cash requirements to increase significantly in future
periods. The Company will require substantial funds to conduct research and
development programs, preclinical studies and clinical trials of its potential
products and to market with its partners any products that are developed. In
addition, the Company currently plans to manufacture clinical scale quantities
of its products, which will require the Company to expend substantial additional
capital. The Company's future capital requirements will depend on many factors,
including the ability to maintain existing and establish additional corporate
partnerships, continued scientific progress in its research and development
programs, the scope and results of preclinical testing and clinical trials, the
time and costs involved in obtaining regulatory approvals, the costs involved in
filing, prosecuting and enforcing patent claims, competing technological
developments, the cost of manufacturing, and scale-up and effective
commercialization activities and arrangements. Based on its current plans, the
Company believes that its available cash, including proceeds from projected
interest income and anticipated funding from its corporate alliance with
Boehringer Mannheim, will enable the Company to maintain its current and planned
operations into the first quarter of 2000. There can be no assurance, however,
that changes in the Company's research and development plans or other changes
affecting the Company's operating expenses will not result in the expenditure of
such resources before such time. The Company intends to seek additional funding
through public or private financing, research and development arrangements with
potential corporate partners, or from other sources. There can be no assurance
that additional financing will be available on favorable terms, if at all. In
the event that adequate funding is not available, the Company may be required to
delay, reduce or eliminate one or more of its research or development programs
or obtain funds through arrangements with corporate collaborators or others that
may require the Company to relinquish greater or all rights to product
candidates at an earlier stage of development or on less favorable terms than
the Company would otherwise seek. Insufficient financing may also require the
Company to relinquish rights to certain of its technologies that the Company
would otherwise develop or commercialize itself.
The Company's business is subject to significant risks, including, without
limitation, uncertainties associated with the length and expense of the
regulatory approval process, uncertainty associated with obtaining and enforcing
patents and risks associated with dependence on corporate partners. Although
the Company's products may appear promising at an early stage of development,
they may not be successfully commercialized for a number of reasons, such as the
possibility that the potential products will be determined to be ineffective
during clinical trials, fail to receive necessary approvals, be uneconomical to
manufacture or market, or be precluded from commercialization by proprietary
rights of third parties. In addition, the failure by the Company to obtain
patent protection for its products may make certain of its products commercially
unattractive. There can be no assurance that any collaboration will be continued
or result in successful commercialized products.
Page 8 of 10
<PAGE>
GENEMEDICINE, INC.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
In February 1998, the Company issued 533,333 shares of Common Stock, at
a price per share of $7.50, to Corange, the parent company of
Boehringer Mannheim pursuant to the Company's corporate partnership
with Boehringer Mannheim. The Company issued such shares in reliance on
the exemption provided by section 4(2) of the Securities Act of 1933,
as amended.
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Number Description
-------------- -----------
10.4 1994 Non-Employee Directors' Stock Option Plan, as
amended
10.12 Employment Agreement between Registrant and Eric
Tomlinson dated January 1, 1998
10.22 First Amendment to the Change of Control Severance
Plan dated February 1, 1998
10.23 Amendment Agreement to Preferred Share Rights Plan
dated January 31, 1998
27 Financial Data Schedule
(b) No reports on Form 8-K have been filed during the quarter for
which this report is filed.
Page 9 of 10
<PAGE>
GENEMEDICINE, INC.
SIGNATURES
Pursuant to the requirements 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.
GENEMEDICINE, INC.
Date: 5/11/1998 By: John M. Dodson
----------- ---------------------------
John M. Dodson
Director, Finance & Accounting
(on behalf of the Registrant and as the
Registrant's Chief Accounting Officer)
Page 10 of 10
<PAGE>
GENEMEDICINE, INC. EXHIBIT 10.4
1994 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
ADOPTED ON MARCH 21, 1994
APPROVED BY STOCKHOLDERS ON JUNE 20, 1994;
AMENDED BY THE BOARD ON JANUARY 12, 1995 AND
APPROVED BY STOCKHOLDERS ON APRIL 26, 1995
AMENDED SEPTEMBER 4, 1996
AMENDED JANUARY 13, 1997
1. PURPOSE.
(a) The purpose of the 1994 Non-Employee Directors' Stock Option Plan (the
"Plan") is to provide a means by which each director of GENEMEDICINE, INC. (the
"Company") who is not otherwise an employee of or consultant to the Company or
of any Affiliate of the Company (each such person being hereafter referred to as
a "Non-Employee Director") will be given an opportunity to purchase stock of the
Company.
(b) The word "Affiliate" as used in the Plan means any parent corporation or
subsidiary corporation of the Company as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
from time to time (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of
persons now serving as Non-Employee Directors of the Company, to secure and
retain the services of persons capable of serving in such capacity, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors of the Company
(the "Board") unless and until the Board delegates administration to a
committee, as provided in subparagraph 2(b).
(b) The Board may delegate administration of the Plan to a committee
composed of one (1) or more members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board.
1.
<PAGE>
The Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 10 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to options granted under
the Plan shall not exceed in the aggregate Three Hundred Ninety Thousand
(390,000) shares of the Company's common stock. If any option granted under the
Plan shall for any reason expire or otherwise terminate without having been
exercised in full, the stock not purchased under such option shall again become
available for the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. ELIGIBILITY.
Options shall be granted only to Non-Employee Directors of the Company.
5. NON-DISCRETIONARY GRANTS.
(a) Upon the date of the approval of the Plan by the stockholders of the
Company (the "Adoption Date"), each person who is then a Non-Employee Director
automatically shall be granted an option to purchase Ten Thousand (10,000)
shares of common stock of the Company on the terms and conditions set forth
herein.
(b) Each person who, after the Adoption Date, is elected for the first time
to be a Non-Employee Director automatically shall, upon the date of his initial
election to be a Non-Employee Director by the Board or stockholders of the
Company, be granted an option to purchase Thirty Thousand (30,000) shares of
common stock of the Company on the terms and conditions set forth herein;
provided that such option shall not be exercisable and shall automatically
terminate with respect to Ten Thousand (10,000) shares of common stock effective
January 12, 1996 if the amendment of this Section 5(b) is not approved by the
stockholders of the Company by such date.
(c) Upon the date of approval of this Section 5(c) by the stockholders of
the Company (the "Amendment Approval Date"), and thereafter upon each
anniversary of the Amendment Approval Date, each person who, as of the
applicable date, is then a Non-Employee Director and has been a Non-Employee
Director for at least six (6) months shall automatically be entitled to
2.
<PAGE>
receive an option to purchase Five Thousand (5,000) shares of common stock of
the Company on the terms and conditions set forth herein.
6. OPTION PROVISIONS.
Each option shall be subject to the following terms and conditions:
(a) The term of each option commences on the date it is granted and, unless
sooner terminated as set forth herein, expires on the date ("Expiration Date")
ten (10) years from the date of grant. If the optionee's service as a Non-
Employee Director or as an employee of or consultant to the Company or any
Affiliate terminates for any reason or for no reason, the option shall terminate
on the earlier of the Expiration Date or the date three (3) months following the
date of termination of service; provided, however, that if such termination of
service is due to the optionee's death or disability, the option shall terminate
on the earlier of the Expiration Date or twelve (12) months following the date
of such optionee's death or disability. In any and all circumstances, an option
may be exercised following termination of the optionee's service as a Non-
Employee Director or as an employee of or consultant to the Company or any
Affiliate only as to that number of shares as to which it was exercisable on the
date of termination of such service under the provisions of subparagraph 6(e).
(b) The exercise price of each option shall be equal to the fair market
value of the stock subject to such option on the date such option is granted.
(c) Payment of the exercise price of each option is due in full in cash
upon any exercise when the number of shares being purchased upon such exercise
is less than One Thousand (1,000) shares; but when the number of shares being
purchased upon an exercise is One Thousand (1,000) or more shares, the optionee
may elect to make payment of the exercise price under one of the following
alternatives:
(i) Payment of the exercise price per share in cash at the
time of exercise; or
(ii) Provided that at the time of the exercise the Company's
common stock is publicly traded and quoted regularly in the Wall Street Journal,
payment by delivery of shares of common stock of the Company already owned by
the optionee, held for the period required to avoid a charge to the Company's
reported earnings, and owned free and clear of any liens, claims, encumbrances
or security interest, which common stock shall be valued at its fair
3.
<PAGE>
market value on the date preceding the date of exercise; or
(iii) Payment by a combination of the methods of payment
specified in subparagraph 6(c)(i) and 6(c)(ii) above.
Notwithstanding the foregoing, this option may be exercised pursuant to a
program developed under Regulation T as promulgated by the Federal Reserve Board
which results in the receipt of cash (or check) by the Company prior to the
issuance of shares of the Company's common stock.
(d) An option shall not be transferable except by will or by the laws of
descent and distribution, and shall be exercisable during the lifetime of the
person to whom the option is granted only by such person or by his guardian or
legal representative. The person to whom the option is granted may, by
delivering written notice to the Company, in a form satisfactory to the Company,
designate a third party who, in the event of death of the optionee, shall
thereafter be entitled to exercise the option.
(e) The option shall become exercisable over a period of four (4) years
from the date of grant in four (4) equal annual installments commencing on the
first anniversary of the date of grant of the option, provided that the optionee
has, during the entire period prior to such vesting date, continuously served as
a Non-Employee Director or as an employee of or consultant to the Company or any
Affiliate, whereupon such option shall become fully exercisable in accordance
with its terms with respect to that portion of the shares represented by that
installment.
(f) The Company may require any optionee, or any person to whom an option
is transferred under subparagraph 6(d), as a condition of exercising any such
option: (i) to give written assurances satisfactory to the Company as to the
optionee's knowledge and experience in financial and business matters; and (ii)
to give written assurances satisfactory to the Company stating that such person
is acquiring the stock subject to the option for such person's own account and
not with any present intention of selling or otherwise distributing the stock.
These requirements, and any assurances given pursuant to such requirements,
shall be inoperative if (i) the issuance of the shares upon the exercise of the
option has been registered under a then-currently-effective registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
or (ii), as to any particular requirement, a determination is made by counsel
for the Company that such requirement need not be met in the circumstances under
the then-
4.
<PAGE>
applicable securities laws.
(g) Notwithstanding anything to the contrary contained herein, an option
may not be exercised unless the shares issuable upon exercise of such option are
then registered under the Securities Act or, if such shares are not then so
registered, the Company has determined that such exercise and issuance would be
exempt from the registration requirements of the Securities Act.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the options granted under the
Plan; provided, however, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any option granted under the
Plan, or any stock issued or issuable pursuant to any such option. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems necessary
for the lawful issuance and sale of stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell stock upon exercise of
such options.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to options granted under the Plan
shall constitute general funds of the Company.
9. MISCELLANEOUS.
(a) Neither an optionee nor any person to whom an option is transferred
under subparagraph 6(d) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such option unless
and until such person has satisfied all requirements for exercise of the option
pursuant to its terms.
(b) Nothing in the Plan or in any instrument executed pursuant thereto
shall confer upon any Non-Employee Director any right to continue in the service
of the Company or any Affiliate or shall affect any right of the Company, its
Board or stockholders or any Affiliate to terminate the service of any Non-
Employee Director with or without cause.
(c) No Non-Employee Director, individually or as a member of a group, and
no
5.
<PAGE>
beneficiary or other person claiming under or through him, shall have any right,
title or interest in or to any option reserved for the purposes of the Plan
except as to such shares of common stock, if any, as shall have been reserved
for him pursuant to an option granted to him.
(d) In connection with each option made pursuant to the Plan, it shall be a
condition precedent to the Company's obligation to issue or transfer shares to a
Non-Employee Director, or to evidence the removal of any restrictions on
transfer, that such Non-Employee Director make arrangements satisfactory to the
Company to insure that the amount of any federal or other withholding tax
required to be withheld with respect to such sale or transfer, or such removal
or lapse, is made available to the Company for timely payment of such tax.
(e) As used in this Plan, fair market value means, as of any date, the
value of the common stock of the Company determined as follows:
(i) If the common stock is listed on any established stock exchange or
a national market system, including without limitation the Nasdaq National
Market, the fair market value of a share of common stock shall be the closing
sales price for such stock (or the closing bid, if no sales were reported) as
quoted on such system or exchange (or the exchange with the greatest volume of
trading in common stock) on the last market trading day prior to the day of
determination, as reporting in the Wall Street Journal or such other source as
the Board deems reliable;
(ii) If the common stock is quoted on the Nasdaq Stock Market (but not
on the Nasdaq National Market thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the fair market value of
a share of common stock shall be the mean between the bid and asked prices for
the common stock on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source as
the Board deems reliable;
(iii) In the absence of an established market for the common stock,
the fair market value shall be determined in good faith by the Board.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any option
6.
<PAGE>
granted under the Plan (through merger, consolidation, reorganization,
recapitalization, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or otherwise), the Plan and outstanding options will be
appropriately adjusted in the class(es) and maximum number of shares subject to
the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding options.
(b) In the event of: (1) a disolution, liqidation or sale of substantially
all of the assets of the Company; (2) a merger or consolidation in which the
Company is not the surviving corporation; (3) a reverse merger in which the
Company is the surviving corporation but the shares of the Company's common
stock outstanding immediately preceding the merger are converted by virtue of
the merger into other property, whether in the form of securities, cash or
otherwise; or (4) any other capital reorganization (including a sale of stock of
the Company to a single purchaser or single group of affiliated purchasers)
after which less than fifty percent (50%) of the outstanding voting shares of
the new or continuing corporation are owned by stockholders of the Company
immediately before such transaction, the time during which options outstanding
under the Plan may be exercised shall be accelerated to permit the optionee to
exercise all such options in full prior to such event, and the options shall
terminate if not exercised prior to such event.
11. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan,
provided, however, that the Board shall not amend the plan more than once every
six (6) months, with respect to the provisions of the Plan which relate to the
amount, price and timing of grants, other than to comport with changes in the
Code, the Employee Retirement Income Security Act, or the rules thereunder.
Except as provided in paragraph 10 relating to adjustments upon changes in
stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will increase the number of shares which may be
issued under the Plan.
(b) Rights and obligations under any option granted before any amendment
of the
7.
<PAGE>
Plan shall not be altered or impaired by such amendment unless (i) the Company
requests the consent of the person to whom the option was granted and (ii) such
person consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on March 20, 2004. No options may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any option granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom the option was granted.
(c) The Plan shall terminate upon the occurrence of any of the events
described in Section 10(b) above.
13. EFFECTIVE DATE OF PLAN; CONDITIONS OF EXERCISE.
(a) The Plan shall become effective upon adoption by the Board of
Directors, subject to the condition subsequent that the Plan is approved by the
stockholders of the Company.
(b) No option granted under the Plan shall be exercised or exercisable
unless and until the condition of subparagraph 13(a) above has been met.
8.
<PAGE>
EMPLOYMENT AGREEMENT EXHIBIT 10.12
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
effective as of January 1, 1998 (the "Effective Date") by and between
GENEMEDICINE, INC., A Delaware corporation (the "Company") and Eric Tomlinson,
D.Sc. (the "Executive"). The Company and Executive are hereinafter collectively
referred to as the "Parties," and individually referred to as a "Party."
RECITALS
A. The Company hereby agrees to continue to employ Executive, and
Executive hereby accepts continued employment by the Company, upon the terms and
conditions set forth in this Agreement.
B. The Company and the Executive have previously entered into an
Employment and Stock Purchase Agreement, dated as of July 31, 1992 (the "Prior
Agreement") memorializing the terms of Executive's engagement by the Company.
C. The Company and the Executive desire to terminate the Prior Agreement
and to enter into this Agreement, the terms of which shall supersede in their
entirety the terms of the Prior Agreement.
AGREEMENT
In consideration of the foregoing recitals and the mutual promises and
covenants herein contained, and for other good and valuable consideration, the
Parties, intending to be legally bound, agree as follows:
1. EMPLOYMENT AND TERM
1.1 Executive shall remain the President and Chief Executive Officer of the
Company, and shall report to, and be subject to the general direction and
control of the Board of Directors of the Company (the "Board").
1.2 Except as otherwise provided for in this Agreement, the term of this
Agreement shall commence on the Effective Date and terminate six (6) months
after the Effective Date unless such term is extended by mutual written consent
(the "Term"); provided, however, that either party may terminate this Agreement
at any time, with or without cause subject to the terms and conditions of
Sections 4 and 5 herein.
1.3 Executive shall agree to resign from the Board upon his termination
from the Company, as set forth in Section 4 herein.
1.
<PAGE>
2. LOYAL AND CONSCIENTIOUS PERFORMANCE
2.1 During the Term, Executive shall devote his full business energies,
interest, abilities and productive time to the proper and efficient performance
of his duties under this Agreement.
2.2 During the Term and for a period of eighteen (18) months thereafter,
Executive agrees to not, solicit, for himself or others, any person or entity
that is or was a customer of the Company during his employment with the Company,
or a potential customer with whom the Company had significant contacts during
his employment with the Company for any purpose or activity that is directly or
indirectly competitive with the business of the Company, or solicit the
employment or services of, or attempt to cause to leave the employment or
service of the Company, or any affiliate of the Company, or otherwise interfere
with the relationship of the Company or any affiliate of the Company, with any
person who is or was employed by, or otherwise engaged to perform services for,
the Company or any affiliate of the Company, whether such affiliation is in the
capacity of employee, consultant, independent contractor or otherwise.
2.3 Executive hereby acknowledges and agrees that the scope of the
covenants set forth in this Section 2 are reasonable and necessary to protect
the interests of the Company.
2.4 Although the restrictions set forth in this Section 2 are considered by
the Parties to be reasonable in all circumstances, it is recognized that
restrictions of the nature in question may fail for unforeseen reasons, and
accordingly it is hereby agreed and declared that if any of the restrictions set
forth in this Section 2 shall be adjudged to be void as going beyond what is
reasonable in all of the circumstances for the protection of the Company and of
the Executive or for any other reason, but would be valid if part of the wording
thereof were deleted or the periods (if any) thereof reduced or the range of
activities or area dealt with thereby reduced in scope, such restrictions shall
apply with such modifications as may be necessary to make them valid and
effective and such provisions shall be modified accordingly.
2.5 The provisions of this Section 2 shall survive any termination of this
Agreement.
3. COMPENSATION OF EXECUTIVE
3.1 During the Term, the Company shall pay Executive a salary (the "Base
Salary") of three hundred ten thousand one hundred twenty eight dollars
($310,128) per year, payable in regular periodic payments in accordance with
Company policy. Such salary shall be prorated for any partial year of
employment on the basis of a 365-day fiscal year.
3.2 During the Term, the Company agrees to pay Executive seven hundred
sixty five dollars and seven cents ($765.07) per month or such other reasonable
amount that the Executive is actually billed for reasonable health and medical
benefits chosen by the Executive.
3.3 The Company agrees to maintain Executive's membership at The Woodlands
Country Club (the "Club") during the Term.
3.4 If Executive sells the home in which he resides on the Effective Date
before the later of (i) December 31, 1999 or, (ii) the period of eighteen (18)
months from the Term, the
2.
<PAGE>
Company agrees to reimburse Executive for reasonable closing costs up to a
maximum of thirty thousand dollars ($30,000), provided that Executive personally
incurs such closing costs in the sale of his home. Executive shall also be
entitled to receive from the Company an additional payment (the "gross-up
payment") in an amount that is equal to the taxes imposed upon the
reimbursement, if any. Executive shall not be entitled to any additional payment
on the gross-up payment. Executive must submit appropriate documentation in
accordance with the Company's expense reimbursement policy in order to receive
reimbursement for such costs.
3.5 During the Term, the Company agrees to reimburse the Executive for all
reasonable and necessary business expenses in accordance with the Company's
expense reimbursement policies.
3.6 All of Executive's compensation shall be subject to customary
withholding taxes and any other employment taxes as are commonly required to be
collected or withheld by the Company.
4. TERMINATION
Executive's employment with the Company may be terminated under the following
conditions:
4.1 Death or Disability. Executive's termination shall be effective upon
the date of Executive's death or, disability as defined under Section 4.1.1.
4.1.1 The term "disability" shall mean total mental or physical incapacity
of the Executive, which continues for not less than one (1) month and is based
upon a certification of such incapacity by Executive's physician or a duly
licensed physician selected by the Board.
4.2 Termination by the Company/Expiration of the Term. Executive shall be
deemed terminated upon the expiration of the Term of this Agreement; provided,
however, that the Company may terminate Executive's employment under this
Agreement at any time and for any reason by delivery of written notice to the
Executive prior to the expiration of the Term. Any notice of termination given
pursuant to this Section 4.2 shall effect termination as of the date specified
in such notice or, in the event no such date is specified, on the last day of
the month in which such notice is delivered or deemed delivered as provided in
Section 9 below.
4.3 Termination by Executive. Executive may terminate his employment under
this Agreement at any time and for any reason prior to the expiration of the
Term by delivery of a written notice to the Company. Any notice of termination
given pursuant to this Section 4.3 shall effect termination as of the date
specified in such notice or, in the event no date is specified, on the last day
of the month in which such notice is delivered or deemed delivered as provided
in Section 9 below.
5. COMPENSATION UPON TERMINATION
5.1 Termination by the Company/Expiration of Term. Upon the termination of
Executive's employment as described in Section 4.2, and upon Executive's
furnishing to the Company and an executed waiver and release of claims (a form
of which is attached hereto as Exhibit A), Executive shall be entitled to the
following:
3.
<PAGE>
5.1.1 Executive's Base Salary and accrued benefits through the date of
termination;
5.1.2 Continuation of Executive's annual Base Salary in effect at the
time of termination through the later of (i) December 31, 1999, or (ii) a period
of eighteen (18) months from the Term;
5.1.3 Each of the stock option grants set forth on Exhibit B are
hereby amended to reflect that: (i) the vesting of each outstanding stock option
(the "Options") shall be accelerated such that the Options shall be fully vested
upon termination, and (ii) each Option shall be exercisable up to and including
two (2) years from the termination date of Executive's employment. Pursuant to
applicable tax laws, the Options will lose potentially favorable tax treatment
afforded incentive stock options if not exercised within ninety (90) days of
Executive's termination date.
5.1.4 Seven hundred sixty five dollars and seven cents ($765.07) per
month from the Company for reasonable health benefits chosen by the Executive,
plus continued payment for Club membership, through (i) December 31, 1999, or
(ii) a period of eighteen (18) months from the Term. Executive shall be solely
responsible for all expenses arising from his use of the Club other than the
Club membership fee.
5.2 Death and Disability. If Executive's employment shall be terminated by
death or disability as provided in Section 4.1, the provisions of Section 5.1
shall apply.
5.3 Termination by Executive. If Executive shall terminate Executive's
employment with the Company prior to the end of the Term of the Agreement, then
upon Executive's furnishing to the Company an executed waiver and release of
claims (a form of which is attached hereto as Exhibit A), Executive shall be
entitled to the following:
5.3.1 Executive's Base Salary and accrued benefits through the date of
termination;
5.3.2 Continuation of Executive's Base Salary in effect at the time of
termination for a period of eighteen (18) months;
5.3.3 Each of the stock option grants set forth on Exhibit B are
hereby amended to reflect that: (i) the Options shall be accelerated such that
the number of vested shares under the Options shall equal the number of shares
that would have vested under the Options had Executive remained an employee for
an additional eighteen (18) months, and (ii) each Option shall be exercisable up
to and including two (2) years from the termination date of Executive's
employment;
5.3.4 Seven hundred sixty five dollars and seven cents ($765.07) per
month from the Company for reasonable health benefits chosen by the Executive,
plus continued payment for Club membership, for eighteen (18) months. Executive
shall be solely responsible for all expenses arising from his use of the Club
other than the Club membership fee.
4.
<PAGE>
5.4 Change of Control. If, during the Term, a Change of Control occurs as
defined in Section 7.1.1, and the Executive's employment with the new company is
terminated by the new company for any reason whatsoever, the provisions of
Section 5.1 shall apply upon such termination.
6. Confidential Information; Executive's Duties Upon Termination
6.1 No Confidential Information shall be disclosed by the Executive to any
third party or used by the Executive for the benefit of the Executive or any
third party without the prior written consent of the Company.
6.2 Confidential information shall not include information that:
6.2.1 at the time of its disclosure, is publicly available through no
fault of the Parties;
6.2.2 at the time of its disclosure, is, without fault of the
receiving party, part of the public domain;
6.2.3 subsequent to its disclosure hereunder, is obtained by the
Executive from a third party not subject to a contractual or fiduciary
obligation for confidentiality to the disclosing party;
6.2.4 is required to be disclosed under court or governmental order,
rule or regulation; or
6.2.5 is disclosed pursuant to any research grant related to
technology outside of gene therapy.
6.3 Upon termination of the employment of Executive for any reason,
Executive will deliver to the Company all documents, notebooks, designs,
specifications, customer lists, drawings, manuals, reports, plans and other data
of any nature containing or relating to the Confidential Information, Technology
or Inventions, and Executive will not deliver to anyone else any of such
documents or data or any reproduction of such documents or data containing or
relating to the Confidential Information, Technology or Inventions of the
Company.
6.4 Executive agrees to make prompt and complete disclosure to the Company
of every Invention. Executive agrees that the Company shall have sole ownership
rights to all Inventions and agrees to cooperate fully, at no expense to the
Executive, with the Company to secure and defend the Company's said ownership
rights. Executive hereby assigns to the Company any rights the Executive may
acquire in any such Inventions.
6.4.1 Exhibit C hereto contains a true, complete and accurate list of
all inventions, copyrights, patents or improvements of the Executive relevant to
the subject matter of the employment of the Executive by the Company that had
been made or conceived or first reduced to practice by the Executive alone or
jointly with others prior to the employment of the Executive and prior to
Executive's execution of this Agreement and which Executive desires to remove
from the operation of this Agreement.
5.
<PAGE>
6.5 Executive represents that the performance of all the terms of this
Agreement by Executive and as an officer of the Company does not and, to the
best knowledge of the Executive, will not breach any agreement or duty to keep
in confidence proprietary information acquired by Executive in confidence or in
trust prior to the employment of the Executive by the Company. Executive
represents that the Executive has not entered into, and the Executive hereby
covenants that the Executive will not enter into, any agreement either written
or oral, in conflict herewith. Executive represents that at the present time
Executive is not restricted from entering into this Agreement.
6.6 Executive represents that Executive has not brought to the Company and
covenants that Executive will not bring to the Company or use in the performance
of the Executive's responsibilities at the Company any proprietary information,
materials or documents of a former or present employer that are not generally
available to the public, unless the Executive has obtained prior written
authorization from the former or present employer. Executive hereby covenants
that the Executive shall not breach any obligation of confidentiality or duty
that the Executive may have to former or present employers.
6.7 The provisions of this Section 6 shall survive any termination of this
Agreement.
7. Definitions
7.1 As used herein, the following terms shall have the following meanings:
7.1.1 Change of Control means the occurrence of one or more of the
following events: (i) a dissolution or liquidation of the Company; (ii) a merger
or consolidation in which the Company is not the surviving corporation in which
the Company's shareholders immediately prior to the transaction do not hold
beneficial ownership of a least fifty percent (50%) of the outstanding voting
shares of the new or continuing corporation; (iii) a reverse merger in which the
Company is the surviving corporation but the shares of the Company's common
stock outstanding immediately preceding the merger are converted by virtue of
the merger into other property, whether in the form of securities, cash or
otherwise; (iv) at least a majority of the outstanding corporate shares of the
Company are sold, exchanged or otherwise disposed of, in one transaction or
series of related transactions and the Company's shareholders immediately prior
to such transaction or transactions do not hold beneficial ownership of at least
fifty percent (50%) of the outstanding voting shares of the Company or of the
ownership interests of the entity for which shares of the Company were exchanged
(taking into account only such shareholders' ownership of the Company prior to
the time such transaction or transactions commenced); or (v) the Company sells
all or substantially all of its assets to a single purchaser or to a group of
associated purchasers.
7.1.2 Confidential Information shall mean, subject to Section 6.2, the
Technology in the field of gene therapy known by, or disclosed to, or learned
by, or developed by, the Executive in the course and scope of the performance of
this Agreement, which information is not generally known in the trade, science
or industry in which the Company and/or its affiliates are engaged.
6.
<PAGE>
7.1.3 Inventions shall mean all improvements, discoveries, inventions,
whether patentable or not, copyrightable works, copyrights, trade secrets,
formulae, processes techniques, and other developments and advances with respect
to the Technology in the field of gene therapy that are developed, conceived or
reduced to practice by the Executive in the course and scope of the performance
of this Agreement during the Term and for a period of one year thereafter that
result from the Executive's duties hereunder or result from the use of premises
or equipment owned, leased or contracted for by the Company.
7.1.4 Technology shall mean all know-how, information, ideas,
concepts, designs, specifications, suggestions, improvements, discoveries,
inventions, copyrightable works, uncopyrightable works, copyrights, patent
rights, unpatentable works, patents, trade secrets, formulae, processes,
techniques, methods, machines, devices, products, services, marketing plans,
strategies, forecasts and customer lists and other data, in each case that are
included within the field of gene therapy, and includes, without limiting the
generality of the foregoing, notebooks, drawings, computer software, manuals,
reports, specifications and other writings or compilations of information,
engineering and other scientific and practical information, models and records.
8. Assignment and Binding Effect
8.1 This Agreement, including Exhibits A, B and C shall be binding upon and
inure to the benefit of Executive and Executive's heirs, executors, personal
representatives, assigns, administrators and legal representatives. Because of
the unique and personal nature of Executive's duties under this Agreement,
neither this Agreement nor any rights or obligations under this Agreement shall
be assignable by Executive. This Agreement shall be binding upon and inure to
the benefit of the Company and its successors, assigns and legal
representatives.
9. Notices
9.1 All notices or demands of any kind required or permitted to be given by
the Company or Executive under this Agreement shall be given in writing and
shall be personally delivered (and receipted for) or mailed by certified mail,
return receipt requested, postage prepaid, addressed as follows:
9.1.1 If to the Company:
Vice President, Human Resources
GeneMedicine, inc.
8301 New Trails Drive
The Woodlands, Texas 77381-4248
If to Executive:
Eric Tomlinson, D.Sc.
7 Morning Arbor Place
The Woodlands, Texas 77381-6628
7.
<PAGE>
Any such written notice shall be deemed received when personally delivered or
three (3) days after its deposit in the United States mail as specified above.
Either Party may change its address for notices by giving notice to the other
Party in the manner specified in this section.
10. Choice of Law
10.1 This Agreement shall be construed and enforced in accordance with the
laws of the State of Texas without regard to the place of execution or the place
for performance thereof. This Agreement is to be at least partially performed in
Harris County, Texas, and, as such, the Company and the Executive agree that
personal jurisdiction and venue shall be proper with the state or federal courts
situated in Harris County, Texas, to hear such disputes arising under this
Agreement .
11. Integration
11.1 This Agreement contains the complete, final and exclusive agreement of
the Parties relating to the subject matter of this Agreement, and supersedes all
prior oral and written employment agreements or arrangements between the
Parties, including without limitation the Prior Agreement, and except for the
benefits Executive may be entitled to under the terms and conditions of the
GeneMedicine, inc. Cash Incentive Retention and Severance Plan.
12. Public Announcements
12.1 The Parties agree that no public announcements regarding the terms and
conditions of this Agreement, including Executive's termination of employment,
will be made by either party, except as is required in order to comply with all
applicable laws and regulations; provided that, the Company shall use reasonable
efforts to give Executive an opportunity to review and comment regarding any
such required public announcements.
13. Amendment
13.1 This Agreement cannot be amended or modified except by a written
agreement signed by Executive and the Company.
14. Waiver
14.1 No term, covenant or condition of this Agreement or any breach thereof
shall be deemed waived, except with the written consent of the Party against
whom the wavier in claimed, and any waiver or any such term, covenant, condition
or breach shall not be deemed to be a waiver of any preceding or succeeding
breach of the same or any other term, covenant, condition or breach.
15. Severability
15.1 The finding by a court of competent jurisdiction of the
unenforceability, invalidity or illegality of any provision of this Agreement
shall not render any other provision of this Agreement unenforceable, invalid or
illegal. Such court shall have the authority to modify or replace the invalid or
unenforceable term or provision with a valid and enforceable term or
8.
<PAGE>
provision which most accurately represents the Parties' intention with respect
to the invalid or unenforceable term or provision.
16. Interpretation; Construction
16.1 The headings set forth in this Agreement are for convenience of
reference only and shall not be used in interpreting this Agreement. This
Agreement has been drafted by legal counsel representing the Company, but
Executive has been encouraged, and has consulted with, his own independent
counsel and tax advisors with respect to the terms of this Agreement. The
Parties acknowledge that each Party and its counsel has reviewed and revised, or
had an opportunity to review and revise, this Agreement, and the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement.
17. Representations and Warranties
17.1 Executive represents and warrants that he is not restricted or
prohibited, contractually or otherwise, from entering into and performing each
of the terms and covenants contained in this Agreement, and that his execution
and performance of this Agreement will not violate or breach any other
agreements between Executive and any other person or entity.
18. Counterparts
18.1 This Agreement may be executed in two counterparts, each of which shall
be deemed an original, all of which together shall contribute one and the same
instrument.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
The Company:
GENEMEDICINE, INC.
a Delaware Corporation
By:Kathryn Stankis
---------------
Date:______________________________
EXECUTIVE:
Eric Tomlinson
-----------------------------------
Date:______________________________
9.
<PAGE>
Waiver and Release Agreement - Exhibit A
Stock Options Exhibit B
Inventions Exhibit C
10.
<PAGE>
EXHIBIT A
RELEASE AND WAIVER OF CLAIMS
In consideration of the payments and other benefits set forth in Sections 5.1
and 5.3 of the Employment Agreement dated January 1, 1998, to which this form is
attached, I hereby furnish GeneMedicine, inc. (the "Company") with the following
release and waiver.
I hereby release, and forever discharge the Company, its officers, directors,
agents, employees, stockholders, successors, assigns and affiliates, 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 at any time prior to and including my
employment termination date with respect to any claims relating to my employment
and the termination of my employment, including but not limited to, claims
pursuant to any federal, state or local law relating to employment, including,
but not limited to, discrimination claims, claims under the California Fair
Employment and Housing Act, and the Federal Age Discrimination in Employment Act
of 1967, as amended ("ADEA"), or claims for wrongful termination, breach of the
covenant of good faith, contract claims, tort claims, and wage or benefit
claims, including but not limited to, claims for salary, bonuses, commissions,
stock, stock options, vacation pay, fringe benefits, severance pay or any form
of compensation.
I acknowledge that, among other rights, I am waiving and releasing any rights
I may have under ADEA, that this waiver and release is knowing and voluntary,
and that the consideration given for this waiver and release is in addition to
anything of value to which I was already entitled as an employee of the Company.
I further acknowledge that I have been advised, as required by the Older Workers
Benefit Protection Act, that: (a) the waiver and release granted herein does
not relate to claims which may arise after this agreement is executed; (b) I
have the right to consult with an attorney prior to executing this agreement
(although I may choose voluntarily not to do so); (c) I have twenty-one (21)
days from the date I receive this agreement, in which to consider this agreement
(although I may choose voluntarily to execute this agreement earlier); (d) I
have seven (7) days following the execution of this agreement to revoke my
consent to the agreement; and (e) this agreement shall not be effective until
the seven (7) day revocation period has expired.
Date: __________________ By: Eric Tomlinson
--------------
<PAGE>
EXHIBIT B
STOCK OPTIONS
<TABLE>
<CAPTION>
Grant Date Type Shares Price Shares Exercised Outstanding Outstanding
Granted Un-Vested Exercisable
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
30-Aug-94 ISO 50,000 8.375 0 7,217 42,713
- -------------------------------------------------------------------------------------------------------------------
11-Jul-95 ISO 20,000 9.750 0 7,418 12,512
- -------------------------------------------------------------------------------------------------------------------
1-Jul-96 ISO 40,000 3.813 0 24,990 15,050
- -------------------------------------------------------------------------------------------------------------------
8-Jul-97 ISO 30,000 6.875 0 26,250 3,750
- -------------------------------------------------------------------------------------------------------------------
8-Jul-97 ISO 20,000 6.875 0 17,472 2,521
- -------------------------------------------------------------------------------------------------------------------
6-Jan-98 ISO 50,000 5.375 0 50,000 0
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT C
INVENTIONS
<PAGE>
FIRST AMENDMENT TO THE EXHIBIT 10.22
GENEMEDICINE, INC.
CHANGE OF CONTROL SEVERANCE PLAN
The GeneMedicine, inc. Change of Control Severance Plan (the "Plan") is
hereby amended, effective January 30, 1998, as set forth below:
1. Section 2(b)(i) is amended in its entirety to read as follows:
(i) The Eligible Employee has executed an individually negotiated
employment contract or agreement with the Company relating to severance
benefits that is in effect on his or her Termination Date and such
individually negotiated employment contract or agreement provides, in the
aggregate, for severance benefits that are more favorable, determined in
the sole discretion of the Company, than the severance benefits provided
under this Plan. Such Eligible Employee's severance benefit shall be
governed by the terms of such individually negotiated employment contract
or agreement. If, however such individually negotiated employment contract
or agreement provides, in the aggregate, for severance benefits that are
less favorable, determined in the sole discretion of the Company, than the
severance benefits provided under this Plan, then such Eligible Employee's
severance benefits shall be governed by the terms of this Plan. Under no
circumstances shall an Eligible Employee be entitled to receive benefits
both under this Plan and under an individually negotiated employment
contract.
2. Section 3 of the Plan is amended by the addition of a new paragraph (d)
at the end thereof, to read as follows:
(d) CERTAIN TAX PROVISIONS AFFECTING AMOUNT OF PAYMENTS. Anything in
the Plan to the contrary notwithstanding, in the event it shall be
determined that any payment or distribution by the Company to or for the
benefit of an Eligible Employee (whether paid or payable or distributed or
distributable pursuant to the terms of the Plan or otherwise) (a "Payment")
would be nondeductible by the Company for federal income tax purposes
because of Section 280G of the Internal Revenue Code (the "Code") and would
cause the Eligible Employee to be liable for an excise tax pursuant to
Section 4999 of the Code, then the aggregate present value of amounts
payable or distributable as Benefits under this Plan may be reduced to the
Reduced Amount. The "Reduced Amount" shall be an amount expressed in
present value which maximizes the aggregate present value of Benefits
without causing any Payment to be nondeductible by the Company because of
Section 280G of the Code or to create an excise tax liability under Section
4999 of the Code. For purposes of this Paragraph (d), present value shall
be determined in accordance with Section 280G(d)(4) of the Code. The
decisions as to whether or not to reduce the Severance Benefits to the
Reduced Amount, and as to the manner of any such reduction, shall be made
by the Eligible Employee and such decisions shall be binding upon the
Company and the Eligible Employee. However, in the event that the Eligible
Employee fails to make any decision within thirty (30) days of the date of
determination referred to above, the Company shall be entitled to make
these decisions.
<PAGE>
3. The Benefits Schedules for the Plan shall be amended by deleting in its
entirety the "Benefits Schedule for the Executive Officers and Vice Presidents"
and substituting in its place a "Benefits Schedule for the Executive Officers"
and a "Benefits Schedule for Vice Presidents", in the form attached hereto and
incorporated herein by this reference.
In Witness Whereof, this First Amendment is executed this 1st day of
February, 1998.
GENEMEDICINE, INC.
Kathryn Stankis
-------------------------------
Vice President, Human Resources
-------------------------------
<PAGE>
BENEFITS SCHEDULE
FOR THE
GENEMEDICINE INC.
CHANGE OF CONTROL SEVERANCE PLAN
EXECUTIVE OFFICERS
THE COMPANY SHALL DETERMINE IN ITS SOLE AND ABSOLUTE DISCRETION IN WHICH
CATEGORY AN ELIGIBLE EMPLOYEE SHALL BE PLACED FOR PURPOSES OF RECEIVING
SEVERANCE BENEFITS UNDER THIS PLAN. THE COMPANY'S DETERMINATION SHALL BE FINAL
AND SHALL BE BINDING AND CONCLUSIVE ON ALL PERSONS. THE COMPANY RETAINS THE
RIGHT TO RECLASSIFY AN ELIGIBLE EMPLOYEE PRIOR TO THE TIME OF THE OCCURRENCE OF
A CHANGE OF CONTROL, AND THEREAFTER TO THE EXTENT PERMITTED BY THE PLAN.
1. The cash severance benefit payable under this Plan for Executive Officers
shall be a lump sum payment equal to twelve (12) months of Pay.
2. An Eligible Employee who becomes eligible to receive benefits under this
Plan shall (i) become fully vested in the Eligible Employee's nonvested stock
options, if any, that were previously granted to the Eligible Employee under the
Company's discretionary stock compensation plans, including, without limitation,
the GeneMedicine, Inc. 1993 Stock Option Plan, upon termination of employment
and (ii) with respect to stock options having an exercise price in excess of
$3.063 per share (as adjusted for stock splits and the like subsequent to
January 30, 1998), be entitled to exercise such options until the earlier to
occur of (A) the date that is twelve (12) months after the date of termination
of employment or (B) the respective expiration date(s) of such stock options.
DEFINITIONS:
For purposes of this Benefits Schedules, the following definitions shall
apply:
EXECUTIVE OFFICERS shall mean those Eligible Employees who are designated
from time to time as Executive Officers by the Board of Directors of the Company
and who are serving as Executive Officers of the Company as of the effective
date of a Change in Control.
<PAGE>
BENEFITS SCHEDULE
FOR THE
GENEMEDICINE INC.
CHANGE OF CONTROL SEVERANCE PLAN
VICE PRESIDENTS
The Company shall determine in its sole and absolute discretion in which
category an Eligible Employee shall be placed for purposes of receiving
severance benefits under this Plan. The Company's determination shall be final
and shall be binding and conclusive on all persons. The Company retains the
right to reclassify an Eligible Employee prior to the time of the occurrence of
a Change of Control, and thereafter to the extent permitted by the Plan.
1. The cash severance benefit payable under this Plan for Vice Presidents
shall be a lump sum payment equal to twelve (12) months of Pay.
2. An Eligible Employee who becomes eligible to receive benefits under this
Plan shall become vested in the Eligible Employee's nonvested stock options, if
any, that were previously granted to the Eligible Employee under the Company's
discretionary stock compensation plans, including, without limitation, the
GeneMedicine, Inc. 1993 Stock Option Plan, in accordance with the following
schedule based upon the number of years the Eligible Employee has been employed
by the Company:
YEARS EMPLOYED PERCENTAGE TO BE VESTED IN NONVESTED OPTIONS
0 to less than 2 50%
2 to less than 4 75%
4 plus 100%
3. For purposes of calculating years of employment with the Company for stock
option vesting, periods during which the Eligible Employee was not working but
was paid under the Company's paid time off policy ("Paid Time Off") will be
counted in calculating years of employment. Periods during which the Eligible
Employee was not working and was not paid under Paid Time Off, such as leave
without pay, leaves of absence or sabbaticals, will not be counted in
calculating years of employment.
DEFINITIONS:
For purposes of this Benefits Schedules, the following definitions shall
apply:
VICE PRESIDENTS shall mean those Eligible Employees whose employment title
is Vice President as reflected on the personnel records of the Company as of the
effective date of a Change in Control and who are not designated by the Board of
Directors of the Company as Executive Officers.
<PAGE>
GENEMEDICINE, INC. EXHIBIT 10.23
AMENDMENT AGREEMENT
THIS AMENDMENT AGREEMENT (the "AMENDMENT AGREEMENT") is made as of January 31,
1998 between GeneMedicine, inc., a Delaware corporation (the "COMPANY"), and
American Stock Transfer & Trust Company ("RIGHTS AGENT").
WHEREAS, the Company and the Rights Agent entered into that certain Rights
Agreement dated as of January 16, 1996 (the "RIGHTS AGREEMENT") (capitalized
terms used but not defined herein shall have the meaning assigned to them in the
Agreement); and
WHEREAS, the Company and the Rights Agent desire to amend the Rights Agreement
as provided below.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and conditions set forth below, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties to this
Amendment Agreement hereby agree as follows:
AMENDMENT
1. The third and fourth paragraphs of Section 1(a) of the Rights Agreement are
amended in their entirety to read as follows:
"In addition, Corange International Limited, a Bermudan corporation
("Corange"), shall not be deemed to be an "Acquiring Person" for purposes
of this Agreement so long as Corange and any of its Affiliates or
Associates have acquired the Company's Common Shares solely in accordance
with the terms of (i) that certain Share Purchase Agreement between Corange
and the Company dated July 17, 1995 or any documents executed in connection
with or pursuant thereto (the "Share Purchase Agreement"), including
without limitation Section 6.1 thereof or (ii) the Stock and Warrant
Purchase Agreement (defined below); provided, however, that this paragraph
shall not apply in the event that Corange or any of its Affiliates or
Associates commences a tender or exchange offer to acquire 15% or more of
the Common Shares of the Company then outstanding.
Furthermore, Syntex (U.S.A.), Inc., a Delaware corporation ("Syntex"),
shall not be deemed to be an "Acquiring Person" for purposes of this
Agreement so long as Syntex and any of its Affiliates or Associates have
acquired the Company's Common Shares solely (A) (i) upon conversion of the
Series B Preferred Shares (as hereinafter defined) or (ii) upon exercise of
the Warrants issued to Syntex, in each case acquired solely in accordance
with the terms of that certain Stock and Warrant Purchase Agreement by and
between Syntex and the Company dated April 8, 1994 or any documents
executed in connection with or pursuant thereto
1.
<PAGE>
(the "Stock and Warrant Purchase Agreement"), or (B) in accordance with the
terms of the Share Purchase Agreement (defined above); provided, however,
that this paragraph shall not apply to in the event that Syntex or any of
its Affiliates or Associates commences a tender or exchange offer to
acquire 15% or more of the Common Shares of the Company then outstanding.
Solely for the purposes of the foregoing, "Corange" and "Syntex" shall
include any entity which acquires all or substantially all of the business
or assets of each respective entity."
2. Except as modified by this Amendment Agreement, the Rights Agreement shall
remain in full force and effect. This Amendment Agreement shall be deemed an
amendment to the Rights Agreement and shall become effective when executed and
delivered by the Company and the Rights Agent as provided under Section 27 of
the Rights Agreement.
2.
<PAGE>
The foregoing Amendment Agreement is hereby executed as of the date first
above written.
THE COMPANY:
GENEMEDICINE, INC.
By: Richard A. Waldron
---------------------------------------------
Title: Vice President and Chief Financial Officer
------------------------------------------
RIGHTS AGENT:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By: Herbert J. Lemmer
---------------------------------------------
Title: Vice President
------------------------------------------
3.
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