Exhibit 10.1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this “ Agreement ”), dated
as of June 2, 2008 (the “ Effective Date
”), between Questcor Pharmaceuticals, Inc., a California
corporation (the “ Company ”), and Don Bailey
(“ Executive ”).
W I T N E S S
E T H :
WHEREAS,
Executive has been employed by the Company pursuant to an Offer
Letter dated May 20, 2007 (the “ Offer Letter
”), and the Company and Executive desire to enter into a more
detailed agreement relating to the employment of Executive by the
Company.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the Company and Executive hereby agree as follows:
1. Employment .
(a) Agreement to Employ
. Upon the terms and subject to the conditions of this Agreement,
the Company hereby agrees to employ Executive and Executive hereby
agrees to be employed by the Company under the terms of this
Agreement, effective as of the Effective Date.
(b) Term of Employment .
Executive’s employment with the Company pursuant to this
Agreement shall commence on the Effective Date and shall continue
for an indefinite period of time until terminated as provided in
Section 5 hereof (the “ Employment Period
”).
2. Duties and
Responsibilities . During the Employment Period, Executive
shall serve as President and Chief Executive Officer of the Company
and shall have duties and responsibilities as may be assigned to
him from time to time by the Board of Directors of the Company (the
“ Board ”); provided, however, that the Board
shall delegate to Executive duties and responsibilities consistent
with the duties and responsibilities of a chief executive officer.
Executive shall report directly to the Board and shall comply with
directives of the Board and all policies of the Company. Executive
shall devote all of his skill and knowledge and all of his working
time (other than periods of vacation, illness or disability) to the
business of the Company. During the Employment Period, Executive
shall not serve as an employee, officer, director, or consultant
of, or otherwise perform services for compensation for, any other
entity without the prior written consent of the Board;
provided that Executive may serve as an officer or
director of or otherwise participate in purely not-for-profit
educational, welfare, social, religious and civic organizations so
long as such activities do not interfere with Executive’s
employment hereunder. The Company acknowledges that Executive
currently serves on the board of directors of the entities set
forth on Schedule 2, and the Board hereby consents to
Executive’s continued service on these boards.
3. Board Membership;
Post-Employment Option Vesting . Upon the termination of
Executive’s employment (including, without limitation, a
termination by the Company with or
Without
Cause (as hereinafter defined) or termination by Executive for Good
Reason (as hereinafter defined), if Executive is a member of the
Company’s Board at the time of such termination, he shall
immediately tender to the Board his written and signed resignation
from the Board, which resignation shall be effective immediately.
If Executive desires to remain on the Board following the
termination of his employment, he shall condition his resignation
solely on the Board’s acceptance thereof and the Board shall
in its sole discretion decide whether or not to accept the
resignation. If the Board does not accept the resignation, then
Executive shall continue to serve as a member of the Board and any
stock options or restricted shares held by Executive shall continue
to vest in accordance with their terms for so long as Executive
remains on the Board. If Executive fails to tender his resignation
from the Board in accordance with this Section 3 or if the
Board accepts his resignation, then Executive’s stock options
will stop vesting as of the date Executive’s employment was
terminated.
4. Compensation and
Benefits .
(a) Base Salary . During
the Employment Period, the Company shall pay Executive a base
salary at the annual rate of $525,000, subject to review and change
by the Board at its discretion, which will be paid in a manner
consistent with the Company’s customary payroll practices.
Executive’s annual base salary payable hereunder is referred
to herein as “ Base Salary ”.
(b) Annual Bonus . In
addition to Base Salary, Executive shall be eligible to receive a
discretionary annual cash bonus (the “ Cash Bonus
”) in accordance with the Company’s “Incentive
Compensation Policy and Process” (as such may be amended or
replaced from time to time), in an amount up to a target percentage
of Base Salary, which target percentage shall be set annually by
the Board. For the year ending December 31, 2008, the target
percentage is sixty-five percent (65%). The actual amount of any
year end Cash Bonus will be determined by and within the discretion
of the Board, and the Cash Bonus shall be paid on or before the
fifteenth (15th) day after the completion of the external audit of
the Company’s financial statements for the period for which
the Cash Bonus relates.
(c) Equity Incentive
Compensation . In addition to Base Salary and the discretionary
Cash Bonus, Executive shall be eligible to receive stock option
awards and grants of restricted stock under the Company’s
equity incentive plans, as determined from time to time by the
Board.
(d) Employee Benefit/Plan
Participation . During the Employment Period, Executive shall
be eligible, but shall not be required, to participate in various
employee benefit plans sponsored or maintained by the Company in
accordance with the terms and conditions of such plans, including
those related to medical, dental, disability, and life insurance.
Executive recognizes that the Company has the right, in its sole
discretion, to amend, modify or terminate any employee benefit
plans in accordance with their terms.
(e) Business Expenses .
Subject to the Company’s reimbursement policies and
procedures, the Company shall reimburse Executive for all
reasonable and necessary expenses incurred in the performance of
Executive’s duties hereunder, upon presentation of
expense
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statements or vouchers, receipts, and such other information and
documentation as the Company may require.
5. Termination of
Employment .
(a) Termination of the
Employment Period . The Employment Period shall end if
Executive’s employment with the Company terminates with or
without Cause at the election of either Executive or the Company,
or as a result of Executive’s death or Disability (
“Disability” shall mean a physical or mental
impairment that renders Executive unable to perform the essential
functions of his position, with or without reasonable
accommodation). In any such event, the Employment Period shall end
and, except as otherwise provided herein, including with respect to
the ongoing post-employment restrictions and covenants contained in
Section 11, this Agreement shall terminate upon the effective
date of such termination.
(b) Termination by the
Company With or Without Cause . The Company may terminate
Executive’s employment at any time during the Employment
Period with or without Cause effective immediately upon delivery of
a Notice of Termination to Executive. Subject to the immediately
following sentence “ Cause ” shall mean with
respect to Executive, any of the following:
(i) Executive’s material neglect of assigned duties with
the Company or Executive’s failure or refusal to perform
assigned duties with the Company, which continues uncured for
thirty (30) days following receipt of written notice of such
deficiency from the Board, specifying the scope and nature of the
deficiency; (ii) Executive’s commission of a felony or
fraud; or Executive’s misappropriation of property belonging
to the Company or its affiliates; (iii) Executive’s
commission of a misdemeanor or act of dishonesty, which causes
material harm to the Company; (iv) Executive’s engaging
in any act of moral turpitude which causes material harm to the
Company; (v) Executive’s breach of the terms of this
Agreement or any trading compliance program or any confidentiality,
proprietary information or nondisclosure agreement with the
Company; or (vi) Executive’s working for another
company, partnership or other entity, whether as an employee,
consultant or director, while an employee of the Company without
the prior written consent of the Board (unless permitted by
Section 2). Following a Change in Control,
“Cause” shall not include Executive’s acts
or omissions contemplated by clause (i) in the immediately
preceding sentence and shall only include those acts and omissions
set forth in (ii) through (vi) above. Any determination
of Cause as used herein will be made in good faith by the Board. A
termination by the Company for reasons other than set forth in
clauses (i) through (vi) (but excluding clause (i) following a
Change in Control) above, or for no reason at all but not including
a termination of the Employment Period as a result of death or
Disability, shall be deemed a “ Termination Without
Cause .”
(c) Voluntary Termination by
Executive . Executive may voluntarily terminate his employment
with the Company upon 30 days written notice to the
Company.
(d) Termination by Executive
for Good Reason. Executive may terminate his employment with
the Company for Good Reason. “ Good Reason
” shall mean the occurrence, without Executive’s
written consent, of one or more of the following events:
(i) the Company decreases Executive’s Base Salary below
$400,000, (ii) the Company decreases Executive’s Annual
Bonus target percentage to below 50% of Base Salary, (iii) the
Company materially decreases Executive’s responsibilities, or
(iv) the Company breaches the terms of this
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Agreement; provided that no such event shall constitute Good Reason
hereunder unless (a) Executive shall have given written notice
to the Company of Executive’s intent to resign for Good
Reason within 30 days after Executive becomes aware of the
occurrence of any such event (specifying in detail the nature and
scope of the event) and (b) such event or occurrence shall not
have been resolved to Executive’s reasonable satisfaction
within 30 days of the Company’s receipt of such notice.
For purposes of clause (iii) above, a material decrease in
Executive’s responsibilities shall include, without
limitation, a situation where Executive was no longer serving as
the sole Chief Executive Officer of the Company’s parent
corporation.
(e) Notice of
Termination . Any termination of Executive’s employment
by the Company or by Executive shall be communicated by a written
Notice of Termination addressed to Executive or the Company, as
applicable. The Company may also communicate its Notice of
Termination verbally, in accordance with Section 13(g).
Termination may be effective immediately upon communication of such
Notice of Termination. A “ Notice of Termination
” shall mean a notice stating that Executive’s
employment with the Company has been or will be terminated and the
specific provisions of this Section 5 under which such
termination is being effected.
(f) Payments Upon
Termination . Upon termination of Executive’s employment
for any reason, the Company shall pay Executive (i) his Base
Salary earned but not yet paid for services rendered to the Company
on or prior to the date on which the Employment Period ends,
(ii) any accrued but unused vacation days, (iii) any
incurred but unpaid business expenses contemplated by
Section 4(e) and other insurance related reimbursable
expenses, and (iv) any amounts required under the
Company’s Employee Stock Purchase Plan (or successor
plans).
6. Payments Upon Certain
Terminations Not Involving a Change in Control .
(a) Termination by the
Company Without Cause or Termination by Executive for Good
Reason . In addition to the payments described in Section 5(f)
and subject to Section 9, provided that Executive has resigned
from the Board as contemplated by Section 3 and is in
compliance with his obligations under Section 11, in the event
the Employment Period ends by reason of termination of
Executive’s employment by the Company Without Cause or by
Executive for Good Reason, the Company shall (i) pay Executive
any annual bonus payable for services rendered in any annual bonus
period for the year which had been completed in its entirety prior
to the date on which the Employment Period ends and that had not
previously been paid, (ii) continue to make Base Salary
payments for a period 12 months following such termination of
employment (the period of time such payments are provided, the
“ Severance Period ”), payable in accordance
with the Company’s payroll practices as in effect on such
termination date, except that such continued Base Salary payments
shall not commence until the first payroll date following the
effective date of the Release Agreement referenced in
Section 9, and the first continued Base Salary payment shall
cover the period between the termination date and such payment.
Each installment payment made pursuant to this Section 6(a)
(ii) shall be considered a separate payment for purposes of
Section 409A of the Internal Revenue Code of 1986 (the
“Code”). In the event the Employment Period ends on or
prior to December 31, 2009 by reason of termination of
Executive’s employment by the Company Without Cause or by
Executive for Good Reason, subject to Section 9, Executive
shall receive a pro rata portion (based upon the number of complete
months within the fiscal year that shall have elapsed
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through
the date of Executive’s termination of employment) of any
Annual Bonus that the Board determines Executive would otherwise
have received pursuant to Section 4(b) hereof for that calendar
year had Executive been employed through the end of the year, which
will be payable when and if such Annual Bonus would otherwise have
been payable had Executive’s employment not terminated,
provided again that Executive resigned from the Board immediately
as contemplated by Section 3 and has been in compliance with
his obligations under Section 11 from the date of termination
through such payment dates. Notwithstanding the foregoing,
Executive shall not be entitled to any pro-rated bonus unless the
date of termination is after the first six months of the fiscal
year in which it occurs. During the Severance Period, the Company
shall continue to pay health insurance premiums for continued
health insurance coverage for Executive and his currently insured
dependents, provided that Executive makes a timely election to
continue such coverage under COBRA and is not otherwise eligible
for health insurance through any subsequent employer. If the
termination is a result of Executive’s death or Disability,
then Executive’s currently insured dependents shall upon
their timely election be eligible to receive continued benefits
pursuant to COBRA.
(b) Duty to Mitigate .
If Executive is reemployed for at least twenty (20) hours per
week on average at any time after the termination date and before
the end of the Severance Period, Executive shall promptly provide
written notice to the Company of such reemployment, and all further
severance compensation payments under this Section 6 shall be
decreased by the amount of the annual compensation received by
Executive from the new employer.
7. Payments Upon Certain
Terminations Involving a Change in Control .
(a) Statement of Intent.
The Board recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control of the Company
may exist and that the uncertainty and questions that it may raise
among management could result in the departure or distraction of
management personnel to the detriment of the Company and its
shareholders. Accordingly, the Board has decided to reinforce and
encourage Executive’s attention and dedication to
Executive’s assigned duties without the distraction arising
from the possibility of a change in control of the Company.
(b) Accelerated Vesting
. Notwithstanding anything to the contrary in Section 12 of
the Company’s 2006 Equity Incentive Award Plan (the
“2006 Plan”), other than Sections 12.2(a) and
12.2(e) of the 2006 Plan, in the event that a Change in Control (as
defined in the 2006 Plan) occurs, and Executive’s employment
with the Company is terminated by the Company Without Cause or by
Executive for Good Reason at any time within the three
(3) month period before the date of such Change in Control or
during the twelve (12) month period following the date of such
Change in Control, one-hundred percent (100%) of the then-unvested
shares of Questcor’s common stock subject to each of
Executive’s outstanding stock options and one-hundred percent
(100%) of Executive’s restricted shares subject to vesting
will become immediately vested and exercisable on the date of such
termination. The Company shall cause each option agreement
evidencing the grant of stock options to Executive under the 2006
Plan (and successors to such plan) to reflect the accelerated
vesting provisions set forth in this Agreement.
(c) Cash Severance Upon
Termination Without Cause or for Good Reason . In the event
that a Change in Control occurs, and Executive’s employment
with the Company is
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terminated by the Company Without Cause or by Executive for Good
Reason at any time within the three (3) month period before
the date of such Change in Control or during the twelve
(12) month period following the date of such Change in
Control, Executive will receive severance compensation equal to the
sum of (i) an amount equal to the product of his highest Base
Salary in the calendar year in which the Change in Control occurs
(but in no event less than $400,000) multiplied by the number two
(2), plus (ii) an amount equal to the product of his target
bonus as established by the Board or its Compensati
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