Exhibit 10.1
EMPLOYMENT
AGREEMENT
This Employment Agreement (this
“Agreement”), is executed and entered into by and
between MDRNA, Inc., a Delaware corporation (the
“Company”), with offices at 3830 Monte Villa Parkway,
Bothell, Washington and Peter Garcia (the “Executive”),
effective July 13, 2009 (the “Effective
Date”).
W I T N E S S E T H
:
WHEREAS, the Company and the
Executive wish to enter into this Agreement which shall set forth
the Executive’s terms of employment as Chief Financial
Officer of the Company.
NOW THEREFORE, in consideration of
the mutual promises and agreements herein and for other good and
valuable consideration the receipt and sufficiency of which are
hereby mutually acknowledged, the Company and the Executive agree
as follows:
1. Application and
Effectiveness of Agreements . Effective as of the Effective
Date, this Agreement shall govern (i) the employment
relationship between the Company and the Executive and
(ii) other matters as set forth herein.
2. Employment;
Responsibilities and Authority; Definitions .
(a) Subject to the terms and
conditions of this Agreement, the Company shall employ the
Executive as its Chief Financial Officer during the Employment
Period (as defined in Section 3, below) and the Executive
shall perform such acts and duties and furnish such services to the
Company and its Subsidiaries (as defined below) as the Chief
Executive Officer shall from time to time direct.
(b) Subject to the terms and
conditions of this Agreement, the Executive hereby accepts such
employment and agrees to devote his full time and continuous best
efforts to the duties provided for herein.
(c) For purposes of this
Agreement: (1) the “Business of the Company” means
the description of the Company’s business as is described in
Part I, Item 1 of the Company’s most recent Annual
Report on Form 10-K filed with the U.S. Securities and Exchange
Commission, and as may be amended from time to time during the term
of this Agreement, and (2) the term “Subsidiary”
means a corporation or other entity that is at least majority
owned, directly or indirectly, by the Company.
3. Term; Employment
Period . The “Employment Period” under this
Agreement shall commence on the Effective Date and shall terminate
at the close of business on July 13, 2012 unless it is
(a) extended by written agreement between the parties or
(b) earlier terminated pursuant to Section 11 hereof.
4. Salary . For services
rendered to the Company during the Employment Period, the Company
shall compensate the Executive with a base salary, payable in
semi-monthly installments, which initially shall be three hundred
thousand dollars ($300,000) per annum commencing on the Effective
Date and which shall thereafter be set by the Board of Directors of
the Company (the “Board”) and/or the Chief Executive
Officer from time to time as determined by the Board and/or the
Chief Executive Officer.
5. Incentive Cash
Compensation .
(a) For the Company’s
fiscal year that began on January 1, 2009, and for each
subsequent fiscal year or portion thereof during the Employment
Period, the Executive shall also be eligible to receive incentive
cash compensation based on the Executive’s performance in
relation to the performance areas and provided that the Executive
meets certain performance targets which the Chief Executive Officer
and/or the Board shall determine and communicate to the Executive
as described below (the “Annual Bonus Plan”). The
targeted amount of such Annual Bonus Plan shall be thirty percent
(30%) of the Executive’s base salary for such year; provided,
however, that the Executive and the Company acknowledge that the
amount actually paid to the Executive pursuant to this Section 5
for any fiscal year or portion thereof may be more or less than
said targeted amount, depending on performance. The timing and
amount of any Annual Bonus Plan payout shall be at the sole
discretion of the Company.
(b) The Chief Executive
Officer, upon consultation with the Board, shall establish
performance criteria for determination of the incentive cash
compensation that will be payable to the Executive with respect to
each fiscal year of the Company. To the extent possible, such
criteria shall be established, as to each fiscal year, prior to the
end of the first month of such fiscal year. As an example, such
performance criteria may be comprised of several designated
performance areas and one or more performance targets in each area.
The Company acknowledges that the business objectives heretofore
used in determining the Executive’s incentive cash
compensation have been, and that the performance areas and
performance targets referred to herein shall continue to be, based
largely on the input and recommendations of the Company’s
Chief Executive Officer and that, in exercising its review and
supervisory role with respect to the determination and adoption of
those performance areas and performance targets, the Board or the
Compensation Committee of the Board (the “Compensation
Committee”), as the case may be, shall act reasonably and in
consultation and cooperation with the Chief Executive Officer and
consistently with past practice.
(c) As soon as practical
following the end of each fiscal year of the Company, the Chief
Executive Officer and/or the Board, shall determine, reasonably and
in good faith, the extent to which the applicable performance
criteria for such fiscal year shall have been achieved and,
accordingly, shall cause the appropriate amount of incentive cash
compensation to be paid to the Executive.
6. Stock Options . The
Company and the Executive hereby acknowledge that the Board of
Directors has previously approved the grant to the Executive of
options to purchase shares of common stock of the Company (which
options shall constitute “incentive stock options”
under the Company’s 2008 Stock Incentive Plan (the
“Plan”)) (the “Outstanding Options”). The
terms of the Plan and the grant agreement granting such Outstanding
Options, a copy of which is being delivered to Executive
substantially contemporaneously with the execution of this
Agreement, shall govern the rights and obligations of the Executive
with respect thereto (which grant agreement incorporates the
provisions of this Section 6 and Sections 12 and 21 of
this Agreement). Upon the Effective Date of this Agreement, the
Executive shall receive a grant of options to purchase 360,000
shares of common stock of the Company. With respect to these
options: (A) 120,000 options shall vest and be exercisable on
July 13, 2010 at the Fair Market Value (as defined in the
Plan) calculated as of the Effective Date (the “Effective
Date Strike Price”); (B) 30,000 options shall vest and
be exercisable on each of October 13, 2010, January 13,
2011, April 13, 2011 and July 13, 2011 (for an aggregate
120,000 options during such period) at the Effective Date Strike
Price plus $1.00; and (C) 30,000 options shall vest and be
exercisable on each of October 13, 2011, January 13,
2012, April 13, 2012 and July 12, 2012 (for an aggregate
120,000 options during such period) with a strike price equal to
the Effective Date Strike Price plus $2.00. In addition, during the
Employment Period the Board of Directors may grant additional
options to purchase shares of common stock of the Company to the
Executive.
7. Restricted Shares .
The Company and the Executive hereby acknowledge that the Board or
the Compensation Committee has issued, and may, in the discretion
of the Board or the Compensation Committee, in the future issue, to
the Executive restricted shares of common stock of the Company
(collectively, whether issued prior to or after the Effective Date,
the “Outstanding Restricted Shares”). The terms of the
grant agreements issuing such Outstanding Restricted Shares shall
govern the rights and obligations of the Executive with respect
thereto, subject, however, to the provisions of Sections 12
and 21 of this Agreement, if and as applicable.
8. Relocation and Temporary
Travel Expenses The Company hereby agrees to pay Executive for
costs typically associated with the Executive’s relocating to
Washington State. Specifically, the Company agrees to pay the
Executive ninety thousand dollars ($90,000) in two separate
payments of forty-five thousand dollars ($45,000) through its
regular payroll process, on September 15, 2009 and
January 15, 2010. The Company shall reimburse Executive for
his reasonable travel expenses from his home residence to Bothell,
Washington until September 2, 2009. Reimbursements shall be
made pursuant to Company’s reimbursement policy and
consistent with Section 13 hereof.
9. Benefits . During the
Employment Period, the Company shall provide to the Executive at
least such employee benefits as are provided to other executive
officers of the Company.
10. Paid Time Off . The
Executive shall be entitled to paid time off in accordance with the
Company’s policies in effect from time to time for executive
officers of the Company.
11. Termination .
(a) Executive’s
employment by the Company shall be “at will.” In other
words, either the Company or the Executive may terminate
Executive’s employment by the Company at the end of any
calendar month, with or without Cause or Good Reason
(as such terms are defined below), in its or his sole discretion,
upon thirty (30) days’ prior written notice of
termination. In addition, the Executive’s employment by the
Company shall be terminated by his death or Disability (as defined
below). Termination of the Executive’s employment as provided
for herein shall terminate the Employment Period.
(b) For purposes of this
Agreement, in the case of a termination of the Executive’s
employment hereunder by the Executive, the term “Good
Reason” shall have the meaning set forth for it below; in the
case of a termination of the Executive’s employment hereunder
by the Company, the term “Cause” shall have the meaning
set forth for it below; and the other terms set out below in this
Section 11 shall have the meanings provided for them
respectively:
(i) “Good Reason”
shall mean (i) any substantial diminution in the
Executive’s authority or role as Chief Financial Officer;
(ii) failure of the Company to pay to the Executive any
amounts of base salary as provided for in Sections 4 or 5
above, or to honor promptly any of its obligations or commitments
regarding stock options or other benefits referred to in
Sections 7, 8, 9, and/or 10 above, or to honor promptly any of
its other material obligations hereunder; or (iii) a material
demotion in the Executive’s title or status.
(ii) “Cause” shall
mean (i) the Executive’s willful and repeated failure to
perform his duties hereunder or to comply with any reasonable and
proper direction given by the Chief Executive Officer;
(ii) the Executive being found guilty in a criminal court of
an offense involving moral turpitude; (iii) the
Executive’s commission of any material act of fraud or theft
against the Company; or (iv) the Executive’s material
violation of any of the material terms, covenants, representations
or warranties contained in this Agreement.
(c) “Disability”
shall mean total and permanent disability as defined in
Section 22(e)(3) of the Internal Revenue Code of 1986, as
amended.
(d) “Termination
Date” shall mean (i) if this Agreement is terminated on
account of death, the date of death; (ii) if this Agreement is
terminated for Disability, the date that such Disability is
established; (iii) if this Agreement is terminated by the
Company or by the Executive prior to July 13, 2012, the
effective date of the termination as provided in Section 11(a)
hereof; or (iv) if this Agreement expires by its terms,
July 13, 2012.
(a) Subject to Section 20
hereof, if (i) the Company terminates the employment of the
Executive prior to July 13, 2012 against his will and without
Cause, or (ii) the Executive terminates his employment prior
to July 13, 2012 for Good Reason, then (A) Executive
shall be entitled to receive base salary, incentive cash
compensation if performance targets established pursuant to
Paragraph 5 have been met (determined on a pro-rated basis as
to the year in which the Termination Date occurs), pay for accrued
but unused paid time off, and reimbursement for expenses pursuant
to Section 13 hereof through the Termination Date plus a lump
sum equal to twelve (12) months of the Executive’s specified
base salary hereunder at the rate in effect on the Termination
Date, and (B) notwithstanding the vesting and exercisability
provisions otherwise applicable to Outstanding Options and the
restrictions applicable to Outstanding Restricted Shares, all of
such options shall be fully vested and exercisable upon such
termination and shall remain exercisable as specified in the option
grant agreements, and all of such restricted shares shall thereon
become immediately and fully vested. Except to the extent that more
time is required to determine any of the incentive compensation
amounts, the Company shall pay the cash amounts provided for in
this Section 12 within thirty (30) days after the six
(6) month anniversary of the date of such termination (but no
later than the end of the calendar year in which such six
(6) month anniversary occurs); provided, however, that pay for
accrued but unused paid time off shall be paid as soon as
practicable following such termination, and that to the extent that
Section 409A of the Internal Revenue Code of 1986 and any
guidance or regulations issued thereunder, as amended, do not
require the effectuation of the six (6) month delay described
above with respect to any other cash amounts provided for in this
Section 12, the Company shall pay such cash amounts within
thirty (30) days after the date of such termination (but no
later than the end of the calendar year in which such termination
occurs). Notwithstanding the foregoing, the Company shall not be
required to pay any severance pay for any period following the
Termination Date if the Executive shall have materially violated
the provisions of Section 17, 18, or 19 of this Agreement.
(b) Subject to Section 20
hereof, if (A) the Executive voluntarily terminates his
employment prior to July 13, 2012 other than for Good Reason
or (B) the Executive’s employment is terminated by the
Company prior to July 13, 2012 for Cause, then the Executive
shall be entitled to receive salary, pay for accrued but unused
paid time off, and reimbursement of expenses pursuant to Section 13
hereof through the Termination Date only; vesting of Outstanding
Options and Outstanding Restricted Shares shall cease on such
Termination Date; any then un-vested Outstanding Options shall
terminate (with the then-vested Outstanding Options vested and
exercisable as specified in the option grant agreements). The
Company shall pay the cash amounts provided for in this Section 12
within thirty (30) days after the six (6) month
anniversary of the date of such termination (but no later than the
end of the calendar year in which such six (6) month
anniversary occurs); provided, however, that pay for accrued but
unused paid time off shall be paid as soon as practicable following
such termination, and that to the extent that Section 409A of
the Internal Revenue Code of 1986 and any guidance or regulations
issued thereunder, as amended, do not require the effectuation of
the six (6) month delay described above with respect to any
other cash amounts provided for in this Section 12, the
Company shall pay such cash amounts within thirty (30) days
after the date of such termination (but no later than the end of
the calendar year in which such termination occurs).
(c) Subject to Section 20
hereof, if the Executive’s employment is terminated prior to
July 13, 2012 due to death or Disability, the Executive (or his
estate or legal representative as the case may be) shall be
entitled to receive (i) salary, reimbursement of expenses
pursuant to Section 13 hereof, and pay for any unused paid time off
accrued through the Termination Date; (ii) a pro-rated amount
of incentive cash compensation for the fiscal year in which the
Termination Date occurs; and (iii) a lump sum equal to base
salary at the rate in effect on the date of such termination for
the lesser of (a) twelve (12) months and (b) the
remaining term of this Agreement at the time of such termination.
In such case, vesting of the Outstanding Options and Outstanding
Restricted Shares shall cease on such Termination Date, and any
then un-vested Outstanding Options shall terminate (with the
then-vested Outstanding Options vested and exercisable as specified
in the option grant agreements). Except to the extent that more
time is required to determine any of the incentive compensation
amounts, the Company shall pay the cash amounts provided for in
this Section 12 on the thirtieth (30 th ) day
following the Executive’s death, or if termination is due to
Disability, within thirty (30) days after the six
(6) month anniversary of the date of such termination (but no
later than the end of the calendar year in which such six (6) month
anniversary occurs); provided, however, that to the extent that
Section 409A of the Internal Revenue Code of 1986 and any
guidance or regulations issued thereunder, as
