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Item 5.02.
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Departure of Directors or Certain Officers; Election
of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
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On October 7, 2016, Intercept Pharma Europe
Ltd. (“IPEL”), a subsidiary of Intercept Pharmaceuticals, Inc. (the "Company"), entered into an employment
agreement (the “Agreement”) with Lisa Bright, President, International.
Pursuant to the Agreement,
Ms. Bright shall (i) receive a base salary of £300,000; (ii) be eligible for an annual cash bonus of up to 50% of her base
salary; (iii) receive a car allowance of £14,160 per year; (iv) receive a maximum of £1,080 per month in reasonable
travel costs; and (v) be eligible to participate in the Company’s benefits plans. Ms. Bright also received an award of 11,725
shares of restricted stock awards under the Company’s 2012 Equity Incentive Plan (the “Plan”). The vesting of
the restricted stock awards is conditions on the satisfaction of certain performance criteria.
Ms.
Bright’s employment will continue until it is either terminated by Ms. Bright or IPEL by giving six months’ written
notice. In the event Ms. Bright’s employment is terminated by IPEL without equity cause or by Ms. Bright for equity good
reason, IPEL shall provide Ms. Bright with cash severance (“Cash Severance”) equal to (i) a payment equal to 12 months
of her base salary and either continue to provide her benefits (comprising car allowance, pension contributions, private medical
insurance and life assurance but not bonus or other benefits) or the value thereof to which Ms. Bright was entitled for a 12 month
period, less (ii) any payment made by way of payment in lieu of notice, less (iii) any salary paid or benefits provided in relation
to any period during which she is placed on garden leave
.
If Ms. Bright
terminates her employment for equity good reason or if she is terminated by IPEL without equity cause, all time-based unvested
stock options and other equity awards that would have otherwise vested within one year of Ms. Bright’s termination shall
vest, and Ms. Bright shall have until the earlier of the expiration date of the option or one year from her date of termination
to exercise all vested options unless the stock plan pursuant to which the option is granted requires earlier termination. In the
event that Ms. Bright is terminated for equity cause or she terminates her employment without equity good reason, or if she is
terminated by reason of disability, all unvested equity awards and stock options will immediately be forfeited
and all vested
options will be exercisable for up to 90 days following termination unless the stock plan pursuant to which the option is granted
requires earlier termination.
In the event of the termination
of Ms. Bright’s employment is in anticipation of, and/or within 12 months following, a change in control, all of Ms. Bright’s
time-based unvested equity awards and stock options will immediately become fully vested and all of her vested stock options will
be exercisable for a period of one year following the effective date of termination, unless the provisions contained in the Plan
require earlier termination in connection with a liquidation or sale of the Company.
The Agreement also provides for a trial
period that will run through December 31, 2016 (the “Trial Period End Date”). In the event that Ms. Bright gives notice
to terminate her employment on or prior to the Trial Period End Date, she is entitled to receive (i) the relevant amount of base
salary (which salary is based on the Cash Severance provision, less any base salary payment made by way of payment in lieu of notice
or any base salary payment made to Ms. Bright while she was on garden leave); (ii) certain benefits as specified in the Agreement;
and (iii) a discretionary bonus payment for the 2016 bonus year which is subject to a pro rata reduction in proportion to the period
of the bonus year that Ms. Bright remained employed by IPEL and during which she was not on garden leave.
In the event that IPEL gives notice
to terminate the Agreement without equity cause on or prior to the Trial Period End Date, Ms. Bright shall be entitled to receive
(i) the relevant amount of base salary (which salary is based on the Cash Severance provision, less any base salary payment made
by way of payment in lieu of notice or any base salary payment made to Ms. Bright while she was on garden leave); (ii) certain
benefits as specified in the Agreement; and (iii) a discretionary bonus payment for the full 2016 bonus year and a prorated bonus
for 2017. The performance criteria under Ms. Bright’s performance-vesting restricted stock awards will be permitted to be
satisfied through the Trial Period End Date. In this situation, IPEL may not terminate Ms. Bright with payment in lieu of notice
through the Trial Period End Date.
Receipt of the severance benefits described
above is conditioned upon Ms. Bright entering into a release of claims with us and the release becoming effective and irrevocable
within 60 days after termination.
Under the Agreement, “equity cause”
for termination shall be deemed to exist upon a good faith finding that (i) Ms. Bright has engaged in material dishonesty,
willful misconduct or gross negligence, (ii) Ms. Bright has breached or threatened to breach an agreement between herself and IPEL
related to intellectual property, non-disclosure or non-solicitation of IPEL’s employees or customers, (iii) Ms. Bright has
materially breached the Agreement and failed to cure such breach within thirty (30) days after receipt of written notice of such
breach of written notice from IPEL, or (iv) Ms. Bright’s conviction or entry of nolo contendere to any crime involving fraud,
bribery, embezzlement or any other criminal offense. Under the Agreement, “equity good reason” is defined as a material
diminution in duties, position, responsibilities or reporting requirements other than as specified in the Agreement, a relocation
of Ms. Bright’s place of employment by more than 50 miles, or any material breach by IPEL of the Agreement.