Exhibit 10.63
AVI
BIOPHARMA, INC.
EMPLOYMENT
AGREEMENT
This Employment
Agreement (the “Agreement”), made on this 8th day of
February, 2008 (the “Effective Date”) by and between
AVI BioPharma, Inc., an Oregon corporation, with its principal
office at 1 SW Columbia Street, Suite 1105,
Portland, OR 97258 (the “Company”), and Leslie
Hudson, Ph.D. (the “Executive”).
RECITALS:
The Company
desires to hire the Executive as Chief Executive Officer, and the
Executive desires to accept such position under the terms and
conditions stated herein.
NOW, THEREFORE, in
consideration of the mutual benefits contained herein, the
sufficiency of which the parties acknowledge, the parties hereby
agree as follows:
AGREEMENT:
1.
Employment Term.
The term of
employment (the “Term”) shall commence on the Effective
Date and shall continue until terminated in accordance with
Section 12 . This Agreement establishes an
“at will” employment relationship between the Company
and the Executive as such term is defined and used under Oregon
law.
2.
Duties.
(a)
The Executive shall have all of the authority, duties and
responsibilities commensurate with being the Chief Executive
Officer of a public company of the size and nature of the Company
and such other duties commensurate with his position as may be
assigned to him from time to time by the Board of Directors of the
Company (the “Board”).
(b)
The Executive shall devote substantially all of his business time
to the service of the Company throughout the Term.
Notwithstanding anything to the contrary herein, the Executive and
the Company acknowledge and agree that (i) the Executive may
hold certain offices and directorships within certain for-profit
entities as set forth on Exhibit A to this Agreement,
(ii) the Executive’s devotion of reasonable amounts of
time in such capacities, so
long as it does not
materially interfere with his performance of services hereunder,
shall not conflict with the terms of this Agreement, and
(iii) Exhibit A may be amended from time to time
by agreement of the parties. The Executive may also be
involved in charitable and professional activities and manage his
personal investments so long as such activities, as determined by
the Board in good faith, do not materially interfere with the
Executive’s duties hereunder. If the Board determines
any activities described in this paragraph materially interfere
with the Executive’s duties, the Board shall provide written
notice to the Executive and a reasonable time period for the
Executive to reduce such activities to the extent necessary to
reduce such interference to a level reasonably acceptable to the
Board with due regard for Executive’s fiduciary duties to
such other organizations.
3.
Compensation.
(a)
Base Compensation . During the Term the Company shall
compensate the Executive at an initial annual salary of four
hundred eighty thousand dollars ($480,000.00), payable in
accordance with the Company’s payroll practices in effect
from time to time, and less amounts required to be withheld under
applicable law and requested to be withheld by the Executive (as
increased from time to time, “Base Compensation”). The
Executive’s Base Compensation shall be subject to review for
potential increase (but not decrease) on an annual basis. Except as
otherwise provided in this Agreement, the Base Compensation shall
be prorated for any period of service less than a full month.
(b)
Bonuses . The Executive shall be eligible for an
annual bonus. The Board shall set performance objectives to
achieve the bonus compensation. The payment amount will be
determined in good faith by the Board based on the
Executive’s and the Company’s performance. The
bonus target shall be sixty percent (60 %) of the Base
Compensation. The bonus, if any, shall be paid within two and
one-half (2-1/2) months after the end of the period to which it
relates.
(c)
Equity Compensation . On the Effective Date, the
Executive will be granted options to purchase six hundred
sixty-seven thousand (667,000) shares of the Company’s common
stock (the “Options”) under the Company’s 2002
Equity Incentive Plan (the “Plan”), with an exercise
price at the fair market value of the Company common stock on the
Effective Date. Subject to accelerated vesting or termination
as set forth herein, the Options shall vest in equal annual
installments over four (4) years. In addition, on the
Effective Date, the Executive shall be issued three hundred
thirty-three thousand (333,000) shares of the Company’s
common stock (the “Restricted Stock”) under the
Plan. Subject to the following vesting schedule, and
acceleration as provided herein, the Restricted Stock shall be
subject to forfeiture upon termination of this Agreement: 100,000
shares of Restricted Stock shall become 100% vested on the
Effective Date and the remaining 233,000 shares of Restricted Stock
shall vest in equal annual installments over four years commencing
on the Effective Date. The exercise price of the Options, the
issuance price of the Restricted Stock and all other terms and
conditions associated with the Options and Restricted Stock shall
be determined in accordance with the Plan and grants (the forms of
which are annexed hereto as Exhibits B and C). To the maximum
extent possible, the Options shall be Incentive Stock Options.
4.
Expenses.
The Company will
reimburse the Executive for all expenses reasonably incurred by him
in discharging his duties for the Company, conditioned upon the
Executive’s submission of written documentation in support of
claimed reimbursement of such expenses, and consistent with the
Company’s expense reimbursement policies in effect from time
to time.
5.
Benefits.
In addition to the
compensation set forth above, the Executive shall be entitled to
the following benefits:
(a)
During the Term of this Agreement, the Company shall, at the
Executive’s direction, either reimburse the Executive monthly
or pay on the Executive’s behalf monthly the monthly premiums
required to be paid by the Executive from time to time to the
Pfizer healthcare provider for Pfizer retiree healthcare coverage
for the Executive and the Executive’s spouse.
(b)
Upon execution of this Agreement, the Company shall promptly pay to
the Executive’s counsel up to twenty-five thousand dollars
($25,000.00) for legal fees reasonably incurred by the Executive in
connection with the negotiation of this Agreement.
(c)
The Company shall pay to the Executive monthly a living allowance
in the amount of four thousand five hundred dollars ($4,500.00) per
month. To the extent that these costs associated with the
living allowance are not tax deductible under Section 217 of
the Internal Revenue Code (“Code”), the Company agrees
to provide the Executive with a Gross-Up Payment, as defined and in
accordance with Section 14 of this Agreement.
Only four thousand dollars ($4,000.00) per month of this amount
will be subject to the Gross-Up Payment provisions of
Section 14 . This living allowance shall be
provided for a period of twelve (12) months beginning one month
after the Effective Date. If, following a review period of
approximately six (6) months after the Effective Date ,
the Company’s Board decides to relocate the Company’s
headquarters to a state other than Oregon, the amount set forth in
this paragraph (c) will be extended for an additional six
(6) months. In addition, the Executive shall be
reimbursed for one month of temporary living expenses during his
transition to Portland, Oregon.
(d)
The Company will provide the Executive monthly with a car allowance
of one thousand dollars ($1,000.00) per month. The Executive
shall also receive a Gross-Up Payment in accordance with
Section 14 of this Agreement with regard to such
allowance.
(e)
Within twenty-four (24) months of the Effective Date, the Company
will reimburse the Executive for the reasonable and customary costs
of selling a residence in Princeton, New Jersey (but not vacant
home carrying costs), shipment of personal effects to Portland,
Oregon or other headquarters location, and the customary closing
costs associated with the purchase of a residence in Portland,
Oregon or the new headquarters location. In addition,
Executive and his spouse will each be entitled during 2008 to
receive two round-trip economy
fare airplane tickets
for house-hunting purposes. To the extent that these costs
associated with relocation are not tax deductible under
Section 217 of the Code, the Company agrees to provide the
Executive with a Gross-Up Payment in accordance with
Section 14 of this Agreement.
(f)
During the first year of employment, beginning one month after the
Effective Date, the Executive shall be reimbursed for up to four
(4) round trip economy plane tickets per month for travel
actually incurred between Portland, Oregon and Bend, Oregon.
If the Company’s headquarters are relocated outside the state
of Oregon during this period, this benefit shall be extended to
apply to travel actually incurred between the new headquarters
location and Bend, Oregon. If the headquarters are relocated
outside the state of Oregon during the first year of employment,
this benefit shall be extended up to eighteen (18) months beginning
one month after the Effective Date.
(g)
Subject to eligibility requirements, the Executive shall be
entitled to participate in such benefit plans and programs as are
generally available to all employees or executives as adopted by
the Company from time to time, including participation in the
Company’s pre-tax spending account (if any), stock purchase
plan (if any), disability and life insurance programs, and
retirement plans (qualified and non-qualified). Without
limiting the foregoing, the Company shall cover the Executive as an
insured under the Company’s standard directors and officers
insurance policy insuring the Executive against liability arising
out of the performance of his duties, and shall indemnify and hold
the Executive harmless from liability arising out of his services
hereunder to the fullest extent allowed under Oregon law, including
but not limited to advancement of legal fees. The provisions
of the prior sentence shall survive any termination of
employment.
(h)
The Executive shall be entitled to four (4) weeks of paid
vacation each calendar year. The Executive shall also be
entitled to the same standard paid holidays given by the Company to
senior executives generally, all as determined from time to time by
the Board. Vacation time shall accrue according to Company
policy.
(i)
The Executive shall be entitled to nine thousand five hundred
dollars ($9,500.00) per year for reasonable expenses incurred in
connection with preparation of Executive’s federal and state
income tax returns and investment advice. Such amount shall
be paid in March of each year during the Term, and shall be
adjusted after good faith review by the Board each year to reflect
reasonable increases in the preparation of the returns and
investment advice.
(j)
Upon the Effective Date, the Executive will be appointed to the
Board and shall be renominated to the Board each time his term
would otherwise expire. For the purposes of “Good
Reason” being on the Board shall be part of the
Executive’s “position”.
6.
Confidentiality.
(a)
In the course of his employment with the Company, it is anticipated
that the Executive may acquire knowledge (both orally and in
writing) regarding confidential affairs of the Company and
confidential or proprietary information including: (i) matters
of a technical nature, such as know-how, Inventions, processes,
products, designs, chemicals, compounds,
materials, drawings,
concepts, formulas, trade secrets, secret processes or machines,
Inventions or research projects; (ii) matters of a business
nature, such as information about costs, profits and pricing
policies; (iii) markets, sales, suppliers, customers, plans
for future development, plans for future products, marketing plans
or strategies; and (iv) other information of a similar nature
which is not generally disclosed by the Company to the public,
referred to collectively hereafter as “Confidential
Information.” “Confidential Information” shall
not include information generally available to the public. The
Executive agrees that during the Term of this Agreement and
thereafter, other than in the good faith performance of his duties,
he (1) will keep secret and retain in the strictest confidence
all Confidential Information, (2) not disclose Confidential
Information to anyone except employees of the Company authorized to
receive it and third parties to whom such disclosure is
specifically authorized, and (3) not use any Confidential
Information for any purpose other than performance of services
under this Agreement without prior written permission from the
Company.
(b)
If the Executive is served with any subpoena or other compulsory
judicial or administrative process calling for production or
disclosure of Confidential Information or if the Executive is
otherwise required by law or regulation to disclose Confidential
Information, he may comply with it, but the Executive will
immediately, and to the extent feasible, prior to production or
disclosure, notify the Company and provide it with such information
as may be in his possession as may be reasonably requested by the
Company in order that the Company may take such action as it deems
necessary to protect its interest.
(c)
The provisions of this Section 6 shall survive
termination of this Agreement.
7.
Non-competition; Non-solicitation.
(a)
The Executive agrees that for a two (2) year period from the
effective date of the termination of the Executive’s
employment with the Company, the Executive shall not directly or
indirectly engage in or have any ownership interest in, or
participate in the financing, operation, management or control of,
persons, firms, corporations or businesses to the extent such
entity (collectively, the “Specified Entities”) engages
in any activity that competes with any of the Company’s
business activities (“Competitors”) at the time of such
termination; provided however , that there shall be no more
than five (5) Specified Entities at any one time. The
Company shall promptly notify the Executive of the Specified
Entities after the Effective Date in writing, and at any time up to
sixty (60) days prior to the effective date of any termination of
the Executive’s employment the Company may amend such list of
Specified Entities by written notice to the Executive so long so as
at no time shall it include more than five
(5) Competitors. This provision shall not prohibit the
Executive from owning up to five percent (5%) of any class of
outstanding bonds, preferred stock or shares of common stock of any
such entity (whether or not such entity is a Competitor).
(b)
For a period of two (2) years following termination of
employment with the Company for any reason, except with the express
written consent of the Company, the Executive agrees to refrain
from directly or indirectly recruiting, hiring or assisting anyone
else to hire, or otherwise counseling to discontinue employment
with the Company, any person then employed
by the Company or its
subsidiaries or affiliates, provided that the foregoing shall not
be violated by general advertising not targeted at Company
employees or by serving as a reference.
(c)
In the event that the provisions of this Section 7
should ever be deemed to exceed the duration or geographic
limitations or scope permitted by applicable law, then such
provisions shall be reformed to the maximum time or geographic
limitations or scope, as the case may be, permitted by applicable
laws.
(d)
The provisions of this Section 7 shall survive
termination of this Agreement and the term of employment.
8.
Covered Work.
(a)
All rights, title and interest to any Covered Work that the
Executive makes or conceives (whether alone or with others) while
employed by the Company, belong to the Company. This Agreement
operates as an actual assignment of all rights in Covered Work to
the Company. “Covered Work” means products and
Inventions that relate to the actual or anticipated business of the
Company or any of its subsidiaries or affiliates, or that result
from or are suggested by a task assigned to the Executive or work
performed by the Executive on behalf of the Company or any of its
subsidiaries or affiliates, or that were developed in whole or in
part on the Company time or using the Company’s equipment,
supplies or facilities. “Inventions” mean ideas,
improvements, designs, computer software, technologies, techniques,
processes, products, chemicals, compounds, materials, concepts,
drawings, authored works or discoveries, whether or not patentable
or copyrightable, as well as other newly discovered or newly
applied information or concepts. The foregoing does not cover any
product or Invention in which the Executive had or has any right,
title or interest prior to the Effective Date.
(b)
The Executive shall promptly reveal all information relating to
Covered Work and Confidential Information to an appropriate officer
of the Company and shall cooperate with the Company, and execute
such documents (prepared at Company expense) as may be necessary,
in the event that the Company desires to seek copyright, patent or
trademark protection thereafter relating to same.
(c)
In the event that the Company requests that the Executive assist in
efforts to defend any legal claims to Covered Works or Inventions,
the Company agrees to reimburse the Executive for any reasonable
expenses the Executive may incur in connection with such
assistance. This obligation to reimburse shall survive termination
of this Agreement and the term of employment.
(d)
The provisions of this Section 8 shall survive
termination of this Agreement and the term of employment.
9.
Return of Inventions, Products and Documents.
The Executive
acknowledges and agrees that all Inventions, all products of the
Company and all originals and copies of records, reports,
documents, lists, drawings, memoranda, notes, proposals, contracts
and other documentation related to the business of the Company
or
containing any
information described in this Section 9 shall be the
sole and exclusive property of the Company and shall be returned to
the Company immediately upon termination of the Executive’s
employment with the Company or upon the written request of the
Company. The foregoing shall not include Executive’s
rolodex and other address books (whether hard copy or
electronic). The Executive shall also be entitled to retain
his cell phone number and the Company shall cooperate, as
necessary, to transfer it to Executive upon termination.
10.
Injunction.
The Executive
agrees that it would be difficult to measure damages to the Company
from any breach by the Executive of Sections 6 , 7 ,
8 , and/or 9 of this Agreement, and that monetary
damages would be an inadequate remedy for any such breach.
Accordingly, the Executive agrees that if the Executive shall
breach Sections 6 , 7 , 8 , and/or 9 of
this Agreement, the Company shall be entitled, in addition to all
other remedies it may have at law or in equity, to an injunction or
other appropriate orders to restrain any such breach without
showing or proving any actual damage sustained by the
Company.
11.
Obligations to Others.
Except for items
disclosed to the Company, the Executive represents and warrants to
the Company that (i) the Executive’s employment by the
Company does not violate any agreement with any prior employer or
other person or entity, and (ii) the Executive is not subject
to any existing confidentiality or non-competition agreement or
obligation, or any agreement relating to the assignment of
Inventions except as has been fully disclosed in writing to the
Company. The Company acknowledges that the Executive has
informed it of limitations with regard to prior employers and where
he is or has served as a director.
12.
Termination.
(a)
During the first year of employment the Executive may voluntarily
terminate his employment with the Company with or without Good
Reason upon giving the Company not less than ninety (90) days
written notice. Thereafter, such written notice will be
reduced to not less than thirty (30) days.
(b)
The Company may terminate the Executive’s employment without
Cause and other than in connection with a Change of Control (in
both cases as defined below) upon giving the Executive thirty (30)
days’ written notice of termination.
(c)
The Executive’s employment with the Company shall terminate
upon the occurrence of any one of the following:
(i)
The Executive’s death;
(ii)
The Executive’s Disability, which is defined as the
Board’s determination made in good faith and after
consultation with a qualified physician selected by the Board, that
the Executive is incapable of performing his
duties under this
Agreement, with or without reasonable accommodation because of a
physical or mental incapacity that has prevented the Executive from
performing his full-time duties for a period of ninety (90)
consecutive calendar days and the determination that such
incapacity is likely to continue for at least another ninety (90)
days. Termination under this paragraph (c)(ii) shall be
effective on the date specified in the notice of termination;
or
(iii)
The effective date of a notice sent to the Executive terminating
the Executive’s employment for Cause.
(d)
“Cause” means the occurrence of one or more of the
following events:
(i)
The Executive’s willful and repeated failure or refusal to
attempt in good faith to (x) comply in any material respect
with the reasonable lawful direction of the Board,
or (y) to perform his duties in accordance with this
Agreement after notice to the Executive of such failure or
refusal;
(ii)
The Executive being indicted for, convicted of, or pleading guilty
or nolo contendere to, a felony;
(iii)
The Executive engages in willful misconduct that is materially
detrimental to the reputation, character or standing of the
Company; or
(iv)
The Executive’s willful and material breach of Sections
6 , 7 and 8 in this Agreement.
No act shall be deemed
detrimental if taken in good faith that such act is not adverse to
the best interests of the Company.
(e)
“Good Reason” means the termination by the Executive
upon the occurrence of any of the below described events. The
Executive must provide notice to the Company of the existence of
such event within ninety (90) days of the first occurrence of such
event, and the Company will have thirty (30) days to remedy the
condition, in which case no Good Reason shall exist. If the
Company fails to remedy the condition within such thirty (30) day
period, the Executive must terminate employment within two
(2) years of the first occurrence of such event. The
events which constitute a Good Reason termination are:
(i)
A material reduction in the Executive’s Base
Compensation;
(ii)
A material reduction in the Executive’s duties or
responsibilities or budget authority, including without limitation
requiring the Executive to report to a corporate officer rather
than directly to the Board;
(iii)
Relocation of the Company’s headquarter offices at which the
Executive performs the substantial portion of his services to more
than fifty (50) miles from its then location, other than
(x) to a location, even if in excess of 50 miles from its then
location, recommended in writing, or consented to, by the Executive
, or (y) a relocation which results in the Company’s
headquarter offices being closer to the Executive’s primary
residence than prior to such relocation; provided however ,
that this clause (iii) shall not
apply to the first relocation, if any, of the
Company’s headquarters following the Effective Date;
or;
(iv)
A material breach of this Agreement.
13.
Termination Compensation.
(a)
Upon the Executive’s voluntary termination of employment
(other than with Good Reason) or termination of the
Executive’s employment for Cause, the Company shall pay the
Executive all Base Compensation, unpaid reimbursements, Gross-Up
Payments and other unpaid expenses due through the effective date
of termination and any unused vacation accrued according to the
Company’s policies at such times as such amounts would
otherwise be due hereunder. The Executive shall not be
entitled to any other compensation, including without limitation
the right to receive benefits under Section 5 or any
bonus relating to the year in which such termination is
effective.
(b)
Upon the Executive’s death, the Company shall pay to the
Executive’s estate or such other party who shall be legally
entitled thereto, all Base Compensation, earned but unpaid bonuses,
unpaid reimbursements, Gross-Up Payments and other unpaid expenses
due at the date of death at such times as such amounts would
otherwise be due hereunder, plus a continuation of Base
Compensation and benefits under Section 5 (a) and
(h) at the rate set forth in this Agreement following the
date of death for six (6) months following the end of the
month in which the death occurs. The Executive’s estate
or such other party who shall be legally entitled thereto shall
have six (6) months to exercise all vested stock Options.
(c)
Upon the Executive’s Disability (as defined above), the
Company shall pay to the Executive all Base Compensation, earned
but unpaid bonuses, and unpaid reimbursements, Gross-Up Payments
and other unpaid expenses due at the effective date of termination
because of Disability, accrued but unused vacation in accordance
with Company policy at such times as such amounts would otherwise
be due hereunder, plus a continuation of Base Compensation and
benefits under Section 5 (a) and (h) at the
rate set forth in this Agreement from such effective date of
termination for six (6) months following the end of the month
in which the Executive’s termination for Disability
occurs. Any such party who shall be legally entitled thereto
shall have six (6) months to exercise vested stock
Options.
(d)
Upon termination of the Executive’s employment by the Company
without Cause or by the Executive for Good Reason where no
Change of Control under Section 13(e) has
occurred, the Company shall pay to t
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