Exhibit 10.2
EMPLOYMENT AGREEMENT
This Employment Agreement (this
“Agreement”), is executed and entered into on the 10th
day of June, 2008, by and between MDRNA, INC., a Delaware
corporation (the “Company”), with offices at 3830 Monte
Villa Parkway, Bothell, Washington 98021 and J. Michael French, an
individual resident in the State of Arizona (the
“Executive”), effective June 23, 2008 (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 Executive
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 Executive 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 Board of Directors of the Company (the “Board”)
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 (provided, however,
that for purposes of Sections 18(b) through (e) hereof,
“Business of the Company” shall mean the
Company’s business as of the date of termination of
Executive’s employment, as the same may have changed since
the Effective Date), 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 June 9,
2011 unless it is (a) extended by written agreement between the
parties or by continuing employment of the Executive by the Company
as provided in the following sentence or (b) earlier
terminated pursuant to Section 11 hereof. If the Executive
shall remain in full-time employment by the Company beyond what
would otherwise be the end of the Employment Period without any
written agreement between the parties, this Agreement and the
Employment Period shall be
deemed
to continue on a quarter-to-quarter basis and either party shall
have the right to terminate the Executive’s employment
hereunder at the end of any ensuing fiscal quarter on written
notice of at least ninety (90) days.
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 and forty thousand dollars
($340,000) per annum commencing on the Effective Date and which
shall thereafter be set by the Board from time to time as
determined by the Board or the Compensation Committee of the Board
(the “Compensation Committee”), with the target for
each year being the 50 th percentile of
the Radford survey. This target is precatory and not binding on the
Company, and the Executive’s base salary may be more or less
than said targeted percentile (but in no event shall it be less
than the initial base salary).
5.
Incentive Cash Compensation .
(a) For
the Company’s fiscal year that began on January 1, 2008,
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 performance
targets which the Board or Compensation Committee shall determine
and communicate to the Executive as described below (the
“Annual Bonus Plan”). The targeted amount of such
Annual Bonus Plan shall be forty percent (40%) 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 nil, or may be more or
less than said targeted amount.
(b) 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 second 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
used in determining the Executive’s incentive cash
compensation, and the performance areas and performance targets
referred to herein, shall be based on the input and recommendations
of the Company’s Chair 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, as the case may be, shall act reasonably
and in consultation and cooperation with the Chair and consistently
with past practice.
(c) As
soon as practical, and absent unforeseen circumstances no later
than ninety (90) days following the end of each fiscal year of
the Company, 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. If unforeseen developments occur that in the
opinion of the Board make the performance areas and/or targets
previously determined unachievable, infeasible, or inadvisable
— and therefore inappropriate as a measure of the performance
of the Executive — the Board shall consider in good faith the
extent to which the
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actual
performance of the Executive nevertheless warrants payment of the
amounts that would have been payable if the performance criteria
had been achieved; and, to such extent, payment shall be made to
the Executive.
6.
Stock Options . The Company and the Executive hereby
acknowledge that the Board of Directors shall grant, as and to the
extent provided below in this paragraph, to the Executive options
to purchase shares of common stock of the Company (the
“Outstanding Options”). The terms of the grant
agreements granting such Outstanding Options 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. Upon the Effective Date of
this Agreement, the Executive shall receive a grant of options to
purchase 1,260,000 shares of common stock of the Company. With
respect to these options: (A) 420,000 options shall vest and
be exercisable on June 10, 2009 at the fair market value
calculated as of the Effective Date (the “Effective Date
Strike Price”); (B) 105,000 options shall vest and be
exercisable on each of September 10, 2009, December 10,
2009, March 10, 2010 and June 10, 2010 (for an aggregate
420,000 options during such period) at the Effective Date Strike
Price plus $1.00; and (C) 105,000 options shall vest and be
exercisable on each of September 10, 2010, December 10,
2010, March 10, 2011 and June 9, 2011 (for an aggregate
420,000 options during such period) with a strike price equal to
the Effective Date Strike Price plus $2.00. It is intended that
160,037 of these Outstanding Options qualify as incentive stock
options under Section 422 of the Internal Revenue Code of
1986, and the remaining Outstanding Options shall be treated as
non-qualified options. It is further intended that the incentive
stock options shall vest such that, as nearly as possible, the
aggregate fair market value prices of those incentive stock options
which first become exercisable in each of calendar years 2009, 2010
and 2011 shall be $100,000 in each such year.
7.
Board . During the Employment Period, the Company shall:
(i) take such actions as may be necessary initially to submit
Executive’s name to the Nominating and Governance Committee
of the Board for consideration as a director, and thereafter, if
said Committee deems Executive qualified, to appoint Executive as a
director (it being contemplated that such actions shall be
completed no later than the next Board of Directors meeting which
follows the date of this Agreement), and (ii) thereafter to cause
the nomination and recommendation of the Executive for election at
the following shareholders’ meeting as a director, and to use
all best efforts to cause Executive to be elected as a
non-independent director. Upon termination of Executive’s
employment, Executive shall immediately resign from the Board and
shall be deemed to have immediately for all purposes to have
resigned from the Board.
8.
Temporary Housing and Related Travel . The Company
acknowledges that Executive’s home residence is in Arizona.
The Company shall reimburse Executive for his reasonable travel
expenses from his home residence to Bothell, Washington, and
temporary housing expenses in Bothell, Washington, until such time
as Executive relocates to Bothell.
9.
Benefits . During the Employment Period, the Company shall
provide or cause to be provided 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.
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11.
Termination .
(a) Executive’s
employment by the Company shall be “at will.” 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 material diminution in the
Executive’s authority or role as Chief Executive Officer,
including his no longer serving as the highest ranking executive
officer in the Company; (ii) failure of the Company to pay to
the Executive any amounts of base salary and/or incentive cash
compensation 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 the Company’s material violation of
any of the terms, covenants, representations or warranties
contained in this Agreement; (iii) a material demotion in the
Executive’s title or status; or (iv) failure of the
Executive to have been appointed and/or re-elected to the Board of
Directors; provided that , the Executive must notify
the Company of the existence of a Good Reason within 90 days
of the initial event giving rise to such Good Reason, and the
Company shall have 30 days from the date of such notice to
cure and remediate such condition and thereby eliminate the Good
Reason.
(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 Board, which failure
continues for a period of thirty (30) days following receipt
by the Executive of written notice from the Company containing a
specific description of any such alleged failure(s) and a demand
for immediate cure thereof; (ii) conviction of the Executive
of a criminal offense involving moral turpitude; (iii) the
Executive’s commission of an act of fraud or theft against
the Company; or (iv) the Executive’s material violation
of any of the terms, covenants, representations or warranties
contained in this Agreement provided that , in the
case of this clause “iv,” if such violation is subject
to cure and effective remediation by the Executive, such violation
is not so cured and remediated by the Executive within thirty
(30) days following receipt by the Executive of written notice
from the Company containing a reference to the violation and a
demand for immediate cure thereof.
(c)
“Disability” shall mean that the Executive is unable to
engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment that can be
expected to result in death or can be expected to last for a
continuous
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period
of not less than twelve (12) months, as determined by an
independent physician chosen jointly by the Executive and the
Company.
(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, the effective
date of the termination as provided in Section 11(a) hereof; or
(iv) if this Agreement expires by its terms, June 9, 2011
or, if later, the expiration of the Employment Period.
12. Severance .
(a) Subject
to Section 21 hereof, if (i) the Company terminates the
employment of the Executive during any Employment Period and
without Cause, or (ii) the Executive terminates his employment
during any Employment Period for Good Reason, then
(A) Executive shall be entitled to receive base salary,
incentive cash compensation (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, and an amount
equal to twelve (12) months of the Executive’s specified
base salary hereunder at the rate in effect on the Termination Date
payable over the following twelve (12) months in semi-monthly
installments, and (B) notwithstanding the vesting and
exercisability provisions otherwise applicable to Outstanding
Options, all of such options shall be fully vested and exercisable
upon such termination and shall remain 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
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, 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 it shall have been
determined in writing by a court of competent jurisdiction or by
any arbitrator appointed pursuant to Section 26 that the
Executive has materially violated the provisions of
Section 18, 19, or 20 of this Agreement and such violation has
not been cured within thirty (30) days following receipt of
written notice from the Company containing a description of the
violation and a demand for immediate cure. The Company also may
withhold any severance pay while it pursues such
determination.
(b) Subject
to Section 21 hereof, if (A) the Executive voluntarily
terminates his employment during any Employment Period other than
for Good Reason or (B) the Executive’s employment is
terminated by the Company during any Employment Period for Cause,
then the Executive shall be entitled to receive salary, a pro-rated
amount of incentive cash compensation for the fiscal year in which
the Termination Date occurs, pay for accrued but unused paid time
off, and reimbursement of expenses pursuant to Section 13
hereof through the Termination Date
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only;
vesting of Outstanding Options 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 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, 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 21 hereof, if the Executive’s employment is
terminated during any Employment Period 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 throu
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