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EXHIBIT 10.31
FIRST AMENDMENT TO
AGREEMENT CONCERNING TERMINATION OF EMPLOYMENT
OF XXXXXX XXXXXXX
This First Amendment, effective December 14, 1999, is between
Genetronics Biomedical Ltd., a company incorporated in British Columbia, and
Genetronics, Inc., a California corporation having its principal place of
business at 00000 Xxxxxxxx Xxxxxx Xxxx, Xxx Xxxxx, XX 00000 (collectively,
"Genetronics") and Xxxxxx Xxxxxxx, having an address at 0000 Xxxxxxx Xxxxx, #0,
Xxx Xxxxx, XX 00000 ("Xx. Xxxxxxx").
I. BACKGROUND
1.1 Genetronics and Xx. Xxxxxxx entered into an Agreement Concerning Termination
of Employment of Xx. Xxxxxxx, effective December 14, 1999, that set forth terms
and conditions of Xx. Xxxxxxx'x separation from Genetronics ("Termination
Agreement").
1.2 Section 3 of the Termination Agreement sets forth, in part (b), the
agreement of the Company to grant Xx. Xxxxxxx a option to purchase 97,000 shares
of the common stock of the Company ("New Option").
1.3 The Compensation Committee of the Company granted the New Option pursuant to
a resolution passed at its meeting of November 12, 1999, however, the New Option
agreement has not been entered into by the parties as of May 22, 2000.
1.4 On the Effective Date, the Company and Xx. Xxxxxxx believed that, as an
individual deemed to hold more than 10% of the issued and outstanding shares of
the Company, any stock option grant made by the Company to Xx. Xxxxxxx was
subject to 26 USC Sec. 422(d) of the IRS Code. That Section of the IRS Code
specifies that any Incentive Stock Option ("ISO") to purchase stock in a company
that is granted to a holder of more than 10% of the issued and outstanding
shares in the company must (i) have an Exercise Price that is at least 110% of
the fair market value at the time of grant and (ii) have a term that is no
longer than five years from the date of grant. Accordingly, the Exercise Price
of the New Option was stated to be US$3.23 per share ("Exercise Price"), which
is 110% of the fair market value of GEB common shares on the AMEX at market
close on November 11, 1999. The term of the New Option was stated to be five
years ("Term").
1.5 However, Section 26 USC Sec. 422(d) of the IRS Code applies only to ISO
grants, which cannot be granted to non-employees. Because Xx. Xxxxxxx was not an
employee of Genetronics on the date the New Option was granted, the New Option
is a non-qualified, or non-ISO, option. Accordingly, Section 26 USC Sec. 422(d)
of the IRS Code does not apply.
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1.6 Therefore, one purpose of this First Amendment is to amend Section 3 of the
Termination Agreement to state an Exercise Price equal to the fair market value
of common shares of the Company at the time of grant and a Term of ten years.
These changes are beneficial to Xx. Xxxxxxx, as they result in a lower Exercise
Price and a longer Term.
1.7 A second purpose of this First Amendment is to amend Section 10 of the
Separation Agreement to reflect the parties' agreement, set forth in Exhibit I,
attached hereto, that Genetronics will make the quarterly match (less applicable
withholding) that it would have made to Xx. Xxxxxxx 's 401(k) account had he
remained an employee through January 7, 2001 in cash rather than in Company
stock.
1.8 Accordingly, the parties agree to this First Amendment as follows:
II. AMENDMENT
2.1 Section 3 of the Termination Agreement is deleted in its entirety and
replaced with:
3. SEVERANCE PAY. The Company agrees to make severance payments to Xx.
Xxxxxxx 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 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 ten 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 exercisable 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.
2.2 Section 10 of the Termination Agreement is deleted in its entirety and
replaced with:
10. 401(k). The Company agrees that, as part of this Agreement and in
consideration thereof, the Company will purchase for Xx. Xxxxxxx 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 ("401(k) Shares"). Such stock shall be purchased for him
quarterly as it is for
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First Amendment to Termination Page 3 of 3
employees who participate in the Company's 401(K) plan. Pursuant to a letter
agreement between the parties, dated January 8, 2000, and attached hereto as
Exhibit I, in lieu of purchasing 401(k) Shares for Xx. Xxxxxxx each quarter,
the Company will make a quarterly cash payment to Xx. Xxxxxxx that is
equivalent to the number of 401(k) Shares, less applicable withholding
amounts, that otherwise would have been due Xx. Xxxxxxx that quarter.
2.3 Other than expressly stated herein, no other term or provision of the
Termination Agreement is amended by this First Amendment.
Agreement to the foregoing is acknowledged by the signatures below:
XXXXXX X. XXXXXXX
/s/ Xxxxxx X. Xxxxxxx
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Date: May 22, 2000
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GENETRONICS, INC. GENETRONICS BIOMEDICAL LTD.
/s/ Xxxxxx Xxxx /s/ Xxxxxx Xxxx
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Date: May 24, 2000 Date: May 24, 2000
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