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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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Leadership Transition Announced; Jerome
Durso Appointed President and Chief Executive Officer
On December 10, 2020,
Intercept Pharmaceuticals, Inc. (the “Company”) announced that Jerome (Jerry) Durso, currently Chief Operating Officer,
will succeed Mark Pruzanski as President and Chief Executive Officer, effective January 1, 2021. Mr. Durso will also be appointed
to the Board of Directors (the “Board”) following the transition. Dr. Pruzanski will remain with the Company as a director
on the Board and retained adviser to the Company.
Mr. Durso, age 53,
has served as the Company’s Chief Operating Officer since February 2017 and has played a critical leadership role in managing
all aspects of the Company’s business globally, including the continued growth of the PBC business in over 35 countries with
more than $310 million in revenues anticipated this year. Mr. Durso has over 25 years of experience in building and leading commercial
and business operations at life sciences organizations both in the United States and abroad. Prior to joining the Company, Mr. Durso
served as a consultant to the biopharmaceutical industry from September 2015 to February 2017. Mr. Durso spent the majority
of his career at Sanofi, a global pharmaceutical company, where he served as Senior Vice President, Chief Commercial Officer of
the Global Diabetes Division. Prior to that, Mr Durso was Senior Vice President, Chief Commercial Officer of Sanofi’s U.S.
pharmaceuticals business and also served in a number of commercial leadership roles of increasing responsibility in business unit
and brand management, marketing and sales since he first joined Sanofi in 1993.
In connection with
his promotion to the position of President and Chief Executive Officer, Mr. Durso and the Company entered into an amended and restated
employment agreement (the “Employment Agreement”), dated December 9, 2020, which sets forth amended terms and conditions
of Mr. Durso’s employment with the Company. The Employment Agreement, which has an initial 2-year term with automatic renewal
each year thereafter, provides that Mr. Durso shall (i) receive an annual base salary of $690,750 (“Base Salary”) and
(ii) be eligible for an annual target bonus in an amount equal to 70% of his base salary (commencing with the Company’s 2021
fiscal year).
The Employment Agreement
provides that in the event that the Company does not renew Mr. Durso’s employment at the end of his employment term, Mr.
Durso is terminated by the Company without cause, as defined in the Employment Agreement, or he resigns with good reason, as defined
in the Employment Agreement, Mr. Durso will be entitled to receive (i) 12 months of his base salary in effect at the time of termination
(paid in accordance with the Company’s payroll), (ii) a lump sum payment equal to his target annual bonus and (iii) continued
participation in the Company’s group health and dental plans and the payment of his premiums for 12 months (or the cost of
COBRA coverage for such period) for him and his dependents covered under the Company’s group health and dental plans prior
to termination. In the event that Mr. Durso does not renew his employment at the end of the employment term, is terminated for
cause, is terminated due to death or disability, or terminates his employment without good reason, Mr. Durso will not be entitled
to any compensation or benefits other than any accrued but unpaid compensation and benefits or as otherwise required by law.
The Employment Agreement
further provides that if either the Company does not renew the employment of Mr. Durso at the end of his respective employment
term, Mr. Durso is terminated by the Company without cause or he resigns with good reason (as such terms are defined in the Employment
Agreement), all of Mr. Durso’s equity awards and stock options that would have vested within 2 years of the termination date
will vest upon effectiveness of a release of claims and all vested stock options will be exercisable for up to one year from the
effective date of termination unless the stock plan pursuant to which the option is granted requires earlier termination.
In the event that Mr.
Durso is terminated by the Company for cause, by Mr. Durso by reason of non-renewal of the Employment Agreement, or by Mr. Durso
without good reason, all unvested equity awards and stock options granted will immediately be forfeited and all vested options
will be exercisable for up to one year following termination unless the stock plan pursuant to which the option is granted requires
earlier termination.
In the event of a termination
of Mr. Durso’s employment within 3 months prior to or within 12 months following a change in control of the Company (as defined
in the Employment Agreement) (i) by the Company by reason of non-renewal of the Employment Agreement, (ii) by Mr. Durso for good
reason or (iii) by the Company without cause, Mr. Durso will be entitled to receive (a) an amount equal to 24 months of his then-current
monthly base salary payable as a single lump sum, (b) an amount equal to 2 times his target annual bonus payable as a single lump
sum and (c) benefit continuation for up to 24 months. In such instances of termination, all of Mr. Durso’s unvested equity
awards and stock options will, upon effectiveness of a release of claims, become fully vested and all of his vested stock options
will be exercisable for a period of one year following the effective date of termination unless the stock plan pursuant to which
the option is granted requires earlier termination.
Retirement of Mark Pruzanski, M.D.,
as President and Chief Executive Officer
Effective January 1,
2021, Mark Pruzanski, M.D., will retire from his position as President and Chief Executive Officer. During the period commencing
on January 1, 2021 (the “Transition Date”) and ending on such date following the first anniversary of the Transition
Date as either party may determine (the “Consulting Period”), Dr. Pruzanski will continue to provide consulting services
to the Company as a non-employee consultant, including assisting the Company with the transition of Dr. Pruzanski’s duties
to the Company’s new leadership team, assisting the Company’s executive team, its Board and other senior Company personnel
with respect to specific projects and providing assistance with respect to any investigative, administrative or regulatory proceeding
as requested from time to time, as set forth in the retirement and consulting agreement, dated December 9, 2020 (the “Consulting
Agreement”), by and between Dr. Pruzanski and the Company. Dr. Pruzanski’s resignation was not the result of any disagreement
regarding any matter related to the Company’s operations, policies or practices. Dr. Pruzanski is not retiring from the Board.
Pursuant to the Consulting
Agreement, Dr. Pruzanski will receive: (i) a consulting fee of $118,200 per month, payable monthly in arrears, (ii) a reimbursement
for all pre-approved reasonable business expenses incurred in connection with providing the services under the Consulting Agreement
during the Consulting Period and (iii) continued participation in the Company’s health and dental plans. Dr. Pruzanski will
also be entitled to reimbursement for attorney’s fees incurred in connection with entering into the Consulting Agreement.
In addition, all outstanding Company equity awards held by Dr. Pruzanski as of December 9, 2020 will continue to vest in equal
monthly installments over a period of 12 months following the Transition Date, with any performance-based restricted stock units
vesting at the maximum level of performance, subject Dr. Pruzanski’s continued service on the Board or as a consultant and
all of his options will be exercisable for a period of up to 3 years following the date of termination unless the stock plan pursuant
to which the option is granted requires earlier termination.