Re: Transition Agreement VIA HAND DELIVERY
Exhibit 10.1
April 27, 2009
Xx. Xxxxxx X Xxxxxxxx
Questcor Pharmaceuticals, Inc.
0000 Xxxxxxx Xxxx
Xxxxx Xxxx, XX 00000
Questcor Pharmaceuticals, Inc.
0000 Xxxxxxx Xxxx
Xxxxx Xxxx, XX 00000
| Re: | Transition Agreement | VIA HAND DELIVERY |
Dear Xx. Xxxxxxxx:
This letter agreement (“Agreement”) sets forth the terms of your change in status from your
current role as a full-time employee of Questcor Pharmaceuticals, Inc. (the “Company”) to a new
role as a part-time employee of the Company for a six month transition period:
1. Transition Date. May 1, 2009 will be designated as your transition date (the “Transition
Date”). Until the Transition Date, you shall continue to use your best efforts to perform your
currently assigned duties and responsibilities. During your continued full-time employment through
the Transition Date, you will receive your regular base salary and continue in the benefits
programs which you are currently enrolled. The Company will also reimburse you, in accordance with
its standard practices, for any expenses incurred in the performance of your currently assigned
duties and responsibilities that are currently in place at Questcor. Of course, you must continue
to comply with all of the Company’s policies and procedures during your continued employment.
2. Post-Transition Date. On the Transition Date, you will continue to be an employee and an
officer of the Company under the terms set forth in this Agreement. Your title will remain the
same, but nothing in this Agreement or any other agreement between you and the Company shall limit
the Company’s ability to hire one or more persons to perform the same or similar functions that you
currently perform or the functions set forth on Schedule 1. You agree to work part-time (less than
30 hours per week) and your compensation will be a gross amount of $20,256.66 per month ($10,128.33
gross semi-monthly) less all applicable payroll deductions and withholdings. This compensation
shall be paid to you semi-monthly on the Company’s regular payroll dates. The Company will also
reimburse you, in accordance with its standard practices, for any expenses incurred in the
performance of your post-Transition Date duties and responsibilities. The term of your
post-Transition Date employment will be for a period (the “Transition Period”) commencing on the
Transition Date and ending on the “Transition Ending Date” which shall be the date that is: (a) six
months after the Transition Date; (b) if you become employed for 32 hours or more per week by any
other employer, whether or not a competitor of the Company, before the six month anniversary of the
Transition Date, the day before your employment with that other employer starts, or (c) the date
the Company ends the Transition Period in accordance with Paragraph 9(b) of this Agreement. A
description of your duties and responsibilities during the Transition Period is set forth on
Schedule 1. All duties and responsibilities assigned during the Transition Period may be
conducted from either of your homes or from our offices in Union City.
3. Continued Vesting. All of your grants under the Company’s 2006 Equity Incentive Award Plan
(the “2006 Plan”) are set forth on Schedule 2. As a result of your continuous service as
an employee, all your stock options to purchase the Company’s Common Stock shall continue to vest
until the Transition Ending Date. After the Transition Ending Date, in accordance with your stock
SCHEDULE 1
option agreements (the “Option Agreements”) and the 2006 Plan, you will have ninety (90) days
to exercise your vested stock options, subject to certain exceptions as set forth in the Option
Agreements and the 2006 Plan. Unless a Change of Control occurs during the Transition Period as
provided in the Change of Control agreement dated on October 16, 2006, upon the Transition Ending
Date, all of your unvested stock options will terminate immediately. For purposes of
clarification, since your title will not change during the Transition Period, you will continue to
be an “executive officer” of the Company under Section 16 of the Securities Exchange Act of 1934.
Additionally, you will continue to be subject to the Company’s Xxxxxxx Xxxxxxx Compliance Program.
4. Other Benefits. Until the Transition Ending Date, you will be eligible to participate in
all the Company’s benefits plans to which you are currently entitled, including, but not limited
to, medical, dental and vision insurance, as well as life, accidental death and disability
insurance and Exec-U-Care program. You will continue to accrue paid vacation at your current rate
during the Transition Period and will receive regular paid holidays. Until the Transition Ending
Date, you will also continue to be eligible to participate in the Company’s 401(k) Plan, Section
529 College Savings Program and Employee Stock Purchase Plan. As required, you will be covered
under the provisions of COBRA during the Transition Period and the Company will cover your COBRA
insurance payments if any during the period of time in which you are an active, part-time employee.
5. Accrued Salary and Vacation. You will continue to receive regular pay on the Company’s
regular paydays during the Transition Period as provided in Paragraph 2. On the Transition Ending
Date, the Company will pay you for all accrued but unpaid salary and all accrued and unused
vacation earned through the Transition Ending Date, subject to standard payroll deductions and
withholdings. The Company will also pay you for any approved expenses incurred but not yet paid as
of the Transition Ending Date. You are entitled to these payments by law.
6. Transition Ending Date Benefits. If you: (a) timely sign and date this Agreement; (b)
allow it to become effective and fully perform under its terms, (c) sign and date the Transition
Ending Date Release attached hereto as Exhibit A on or within 21 days after the Transition
Ending Date, and (d) allow the Transition Ending Date Release to become effective and do not revoke
it; then after your Transition Ending Date, the Company will pay you the sum of $30,385. However,
in the event that the Transition Ending Date is less than six months from the Transition Date
because you became Re-employed with another company as provided in Paragraphs 2 and 9(a), then the
Company will pay you a pro rata portion of the $30,385 based on the total number of days you worked
during the Transition Period. The Transition Ending Date payment shall be made on the
8th day following your execution Exhibit A, provided you have not revoked the Transition
Ending Date release within the revocation period provided by law.
7. Approval Bonus. If (a) you remain employed with Questcor through October 31, 2009 (the six
month anniversary of the Transition Date), (b) you are involuntarily terminated by operation of
your submitting a binding request to Questcor to extend the term of this Agreement pursuant to
Section 14 and Questcor not accepting such request to extend the term, and (c) Questcor receives a
letter from the FDA indicating that by December 31, 2010 (1) Acthar NDA 22-432 Supplement for
Infantile Spasm (IS) is approved as of the date of the letter from the FDA, and (2) Questcor can
initiate marketing of Acthar for IS subject only to submission of final printed labeling (FPL),
then you will receive an additional bonus of $75,000 subject to applicable withholding (the
“Approval Bonus”). Payment of the Approval Bonus shall be made within 30 days of the date that
conditions (1) and (2) immediately above are both met; provided however that the payment of any
amount pursuant to this Paragraph 7 shall be delayed as necessary until such time as you have also
undergone a “Separation from Service” as defined in Treas. Reg. 1.409A-1(h), but in no event
shall any payment pursuant to this Paragraph 7 be made later than 14 months after the date of such
Separation from Service.
8. Proprietary Information and Inventions. You agree that the Proprietary Information and
Inventions Agreement between you and the Company (the “Proprietary Information Agreement” shall
remain in full force and effect following the date of this Agreement and the Transition Ending Date
in accordance with its terms.
9. Other Work Activities.
(a) You have no duty to mitigate any compensation you receive from this Agreement. Throughout
the Transition Period, you may engage in employment, consulting, or other work relationships in
addition to your work for the Company, provided that such other employment, consulting, or work
relationships do not interfere with your continuing obligations to the Company or otherwise create
a conflict of interest with the Company. The Company will make reasonable arrangements to enable
you to perform your work for the Company at such times and in such a manner so that it will not
interfere with other activities in which you may engage. Notwithstanding the foregoing, in the
event you are employed by a third party as a consultant or as an employee for 32 or more hours per
week (“Re-employment”), you agree to notify the Company in writing. If this Re-employment occurs,
then your Transition Ending Date shall be the day before that Re-employment starts.
(b) In order to protect the trade secrets and confidential and proprietary information of the
Company, you agree that, during the Transition Period, you will notify the Company, in writing,
before you obtain competitive employment, perform competitive work for any business entity, or
engage in any other work activity which you reasonably believe is or may be competitive with the
Company. You also agree to, and you will obtain the Company’s written consent before engaging in
any such activity which you reasonably believe may constitute competitive activity. If you
engage in such competitive activity during the Transition Period without the Company’s prior
written consent, or otherwise breach a material term of this Agreement (which, for purposes of
clarity, shall include your obligation to provide notice of Re-employment under Paragraph 9(a)) or
a material term of the Proprietary Information Agreement, then, in addition to any other remedies,
the Company may end the Transition Period, and shall pay you all accrued but unpaid salary and
vacation as of the end of the Transition Period. You shall not be entitled to any further payments
under Paragraph 6 of this Agreement. However, the Change of Control Agreements dated October 16,
2006 and amended December 17, 2008 (“Change in Control Agreement”) previously executed by you shall
remain in effect solely as they may relate to any Change in Control occurring prior to the
Transition Ending Date.
10. Other Compensation or Benefits.
(a) General Compensation or Benefits. You acknowledge that, except as expressly
provided in this Agreement, you are not entitled to receive and will not receive from the Company
any additional compensation or benefits, including but not limited to salary, bonuses, severance,
or employee benefits either during your continued employment or after the Transition Ending Date.
By way of example, but not limitation, you acknowledge and agree that you are not eligible for any
bonus compensation for 2009, and upon the termination of your employment on the Transition Ending
Date, you will not be entitled to receive any severance pay notwithstanding the
terms of that certain Severance Agreement between you and the Company dated October 16, 2006
and later amended in an agreement dated December 17, 2008, both of these agreements are hereby
terminated and of no further force or effect, and you hereby waive any right to any compensation or
benefits under these agreements.
(b) Change in Control Compensation or Benefits. From the date of this Agreement up
until and including your Transition Ending Date, you shall be entitled to receive any Change in
Control benefits to which you become entitled during such period pursuant to the terms of your
Change in Control Agreement dated October 16, 2006 and amended December 17, 2008 (“Change in
Control Agreement”).
11. Return of Company Property. You agree to return to the Company, on the Transition Ending
Date or earlier if requested by the Company, all Company documents (and all copies thereof) and
other property of the Company in your possession or control. You agree that you will make a
diligent and timely search to locate any such documents, property and information. In addition, if
you have used any personally owned computer, server, or e-mail system to receive, store, review,
prepare or transmit any Company confidential or proprietary data, materials or information, then
you agree to provide the Company, no later than the Transition Ending Date, with a computer-useable
copy of all such information and then permanently delete and expunge such Company confidential or
proprietary information from those systems without retaining any reproductions (in whole or in
part); and you agree to provide the Company access to your system as requested to verify that the
necessary copying and/or deletion is done. Your timely compliance with this Section 10 is a
precondition to your eligibility for the Transition Ending Date Benefits.
12. Nonsolicitation. In order to protect the trade secrets and confidential and proprietary
information of the Company, you agree that during your continued employment, and for one year
following the Transition Ending Date, you will not, either directly or through others, solicit or
attempt to solicit any employee of the Company to terminate his or her relationship with the
Company in order to become an employee, consultant or independent contractor to or for any other
person or entity.
13. Nondisparagement. You agree not to disparage the Company or the Company’s officers,
directors, employees, shareholders, parents, subsidiaries, affiliates, and agents, in any manner
likely to be harmful to them or their business, business reputation or personal reputation and the
Company agrees not to disparage you in any manner likely to be harmful to your business, business
reputation or personal reputation; provided that the parties may respond accurately and fully to
any question, inquiry or request for information when required by legal process.
14. Extension and Termination. This agreement shall continue until the Transition Ending
Date. In the event the parties elect to extend the Transition Period beyond November 1, 2009,
they may do so by entering into a separate written agreement.
15. Release.
(a) General Release. In exchange for the consideration provided by this Agreement
that both you and the Company are not otherwise entitled to receive, and for the mutual promises
contained herein, you and the Company hereby generally and completely release, acquit and forever
discharge each other, along with each other’s predecessors and successors and their respective
directors, officers, employees, shareholders, partners, agents, attorneys, insurers, affiliates
and assigns (collectively, the “Released Parties”), of and from any and all claims,
liabilities and obligations, both known and unknown, that arise from or are in any way related to
events, acts, conduct, or omissions occurring at any time prior to and including the date that you
sign this Agreement (collectively, the “Released Claims”).
(b) Scope of Release. The Released Claims include, but are not limited to: (a) all
claims arising out of or in any way related to your employment with the Company, or the termination
of that employment; (b) all claims related to your compensation or benefits from the Company,
including salary, bonuses, commissions, other incentive compensation, severance payments, fringe
benefits, or any other ownership or equity interests in the Company (excluding those provided in
Paragraph 15(c) below); (c) all claims for breach of contract, wrongful termination, and breach of
the implied covenant of good faith and fair dealing; (d) all tort claims, including but not limited
to claims for fraud, defamation, emotional distress, and discharge in violation of public policy;
and (e) all federal, state, and local statutory claims, including but not limited to claims for
discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal
Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990 (as
amended), the federal Age Discrimination in Employment Act of 1967 (as amended) (the “ADEA”), and
the California Fair Employment and Housing Act (as amended).
(c) Exceptions. Notwithstanding the foregoing, the following are not included in the
Released Claims (the “Excluded Claims”):
(i) any rights or claims for indemnification you may have pursuant to any written
indemnification agreement with the Company to which you are a party, the charter, bylaws, or
operating agreements of the Company, by virtue of any insurance policy or under applicable law;
(ii) any rights which are not waivable as a matter of law;
(iii) the Change of Control agreement dated October 16, 2006 and the Amendment to Change of
Control Agreement dated February 13, 2007;
(iv) any rights you have under (i) the 2006 Stock Option Plan; (ii) the Non-Statutory Stock
Option Agreement and (iii) the Incentive Stock Option Agreements you signed;
(v) any rights you have to employment or disability benefits, or to COBRA; or
(vi) any claims arising from the breach of this Agreement.
(vii) In addition, nothing in this Agreement prevents you from filing, cooperating with, or
participating in any investigation or proceeding before the Equal Employment Opportunity
Commission, the Department of Labor, the California Department of Fair Employment and Housing, or
any other government agency, except that you hereby waive your right to any monetary benefits in
connection with any such claim, charge, investigation or proceeding. You hereby represent and
warrant that, other than the Excluded Claims, you are not aware of any claims you have or might
have against any of the Released Parties that are not included in the Released Claims.
16. ADEA Waiver. You hereby acknowledge that you are knowingly and voluntarily waiving and
releasing any rights you may have under the ADEA, and that the consideration given for the waiver
and release you have given in this Agreement is in addition to anything of value to which you were
already entitled. You further acknowledge that: (a) your waiver and release do not apply to any
rights or claims that may arise after the date you sign this Agreement; (b) you should consult with
an attorney prior to signing this Agreement (although you may voluntarily decide not to do so); (c)
you have twenty-one (21) days to consider this Agreement (although you may choose voluntarily to
sign this Agreement sooner); (d) you have seven (7) days following the date you sign this Agreement
to revoke this Agreement (in a written revocation sent to and received by the Company’s Chief
Executive Officer); and (e) this Agreement will not be effective until the date upon which the
revocation period has expired, which will be the eighth day after you sign this Agreement, provided
that you do not revoke it (the “Effective Date”).
17. Section 1542 Waiver. In giving the release herein, which includes claims which may be
unknown to you at present, you acknowledge that you have read and understand Section 1542 of the
California Civil Code, which reads as follows:
A general release does not extend to claims which the creditor does
not know or suspect to exist in his or her favor at the time of
executing the release, which if known by him or her must have
materially affected his or her settlement with the debtor.
For the purpose of implementing a full and complete release and discharge of the Released Parties,
you hereby expressly waive and relinquish all rights and benefits under that section and any law or
legal principle of similar effect in any jurisdiction with respect to your release of claims in
this Agreement, including your release of unknown and unsuspected claims.
18. Entire Agreement. Nothing in this Agreement shall affect the terms of the Indemnification
Agreement you entered into with the Company on October 16, 2006, which shall continue in full force
and effect. All of your initial offer letter, your Severance Agreement dated October 16, 2006 and
the subsequent Severance Agreement that was amended on December 17, 2008 are completely superseded
by this Agreement and are no longer of any force or effect. Except as expressly stated above, this
Agreement, including all exhibits, and the documents anticipated by this Agreement, constitute the
complete, final and exclusive embodiment of the entire agreement between you and the Company with
regard to the subject matter hereof. This Agreement supersedes any and all other agreements,
whether oral, implied or written, between you and the Company on its subject matter. It is entered
into without reliance on any promise or representation, written or oral, other than those expressly
contained herein. It may not be modified except in a written agreement approved by the Board and
signed by you and a duly authorized officer of the Company. Each party has carefully read this
Agreement, has been afforded the opportunity to be advised of its meaning and consequences by his
or its respective attorneys, and signed the same of his or its own free will. Any ambiguity in
this Agreement shall not be construed against either party as the drafter.
19. Successors and Assigns. This Agreement will bind the heirs, personal representatives,
successors, assigns, executors and administrators of each party, and will inure to the benefit of
each party, its heirs, successors and assigns.
20. Applicable Law. This Agreement will be deemed to have been entered into and will be
construed and enforced in accordance with the laws of the State of California without regard to
conflict of laws principles. The parties agree that venue for any legal action relating to
this Agreement will be Alameda County, California.
21. Severability; Waiver of Breach. If any provision of this Agreement is determined to be
invalid or unenforceable, in whole or in part, this determination will not affect any other
provision of this Agreement and the provision in question shall be deemed modified so as to be
rendered enforceable in a manner consistent with the intent of the parties, insofar as possible
under applicable law. Any waiver of a breach of this Agreement, or rights hereunder, shall be in
writing and shall not be deemed to be a waiver of any successive breach or rights hereunder.
22. Counterparts. This Agreement may be executed in two counterparts, each of which will be
deemed an original, all of which together constitutes one and the same instrument. Facsimile
signatures are as effective as original signatures.
23. Section 409A Provisions. Notwithstanding any provision herein to the contrary, all
payments required to be made by Questcor to you pursuant to this Agreement (other than payments of
the Approval Bonus under Section 7) shall be made by March 15, 2010. The foregoing provisions are
intended to comply with the requirements of Section 409A so that none of the severance payments and
benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A,
and any ambiguities herein will be interpreted to so comply. The Company and you agree to work
together in good faith to consider amendments to this Agreement and to take such reasonable actions
which are necessary, appropriate or desirable to avoid imposition of any additional tax or income
recognition prior to actual payment to you under Section 409A.
24. Attorney’s Fees. If any action is brought to enforce the terms of this Agreement, the
prevailing party will be entitled to recover its reasonable attorneys’ fees, costs and expenses
from the other party, in addition to any other relief to which the prevailing party may be
entitled.
If this Agreement is acceptable to you, please sign below within twenty-one (21) days of your
receipt of this Agreement, and return the fully signed original to me. If you do not sign this
Agreement within the aforementioned timeframe and promptly return it to me, or if you sign this
Agreement but then timely revoke this Agreement under Paragraph 14 above, then this Agreement will
be of no force or effect.
We wish you the best and look forward to continuing to work with you prior to and during the
Transition Period.
| Sincerely, QUESTCOR PHARMACEUTICALS, INC. |
||||
| By: | /S/ Xxx X. Xxxxxx | |||
| Xxx Xxxxxx | ||||
| President & Chief Executive Officer | ||||
| UNDERSTOOD AND AGREED: |
||||
| /S/ Xxxxxx X. Xxxxxxxx | ||||
| Xxxxxx X Xxxxxxxx | ||||
Date: April 27, 2009
