Exhibit 10.5

 

INTERCEPT PHARMACEUTICALS, INC.

 

Performance Stock Unit Award Grant Notice ("Notice")

Performance Stock Unit Award Grant under the Company's
2012 Equity Incentive Plan

 

1. Name and Address of Participant:                             2.

Date of Grant of

Performance Stock Unit Award:

            3.

Target Number of Shares underlying

Performance Stock Unit Award:

  [#] (the "Target Award Amount")         4. Vesting Threshold of Award:  Except
as set forth in the Performance Stock Unit Agreement accompanying this Notice,
no portion of this Performance Stock Unit Award shall vest unless the
Participant is a director, Employee or Consultant of the Company or an Affiliate
on December 31, 2020 and the Company has attained a TSR during the Performance
Period which places the Company in the 25th percentile or higher of the Peer
Group (as such terms are defined below).   5. Payment of Award: The Participant
shall receive the number of shares of Common Stock  equal to the Payout
Percentage (as calculated below), which shall be paid to the Participant on or
prior to the date which is 60 days following the end of the Performance Period.

 

The following definitions shall apply for purposes of this Notice and the
accompanying Performance Stock Unit Agreement:

 

The "Beginning Stock Price" for the Company and each member of the Peer Group
shall equal the average closing price for such company's common equity on the
principal exchange on which such equity is traded for each of the trading days
in December 2017, after adjusting for the Dividend Value, as applicable.

 

The "Ending Stock Price" for the Company and each member of the Peer Group shall
equal the average closing price for such company's common equity on the
principal exchange on which such equity is traded for each of the trading days
in December 2020, after adjusting for the Dividend Value, as applicable.

 

The "Dividend Value" shall mean the value of any dividends paid on a share in
December 2017 or during the Performance Period , with the payment date deemed to
have occurred on the ex-dividend date for such dividend and the amount of such
dividend deemed reinvested in shares of the applicable issuer as of the
ex-dividend date (based on the closing price of such shares on such date).

 

The "Performance Period" shall mean the three-year period commencing on January
1, 2018 and ending on December 31, 2020.

 

The "Peer Group" shall consist of the companies which comprised the S&P
Biotechnology Select Industry Index as of January 1, 2018; provided, however,
that any company included in the Peer Group which (i) ceases to be publicly
traded during the Performance Period shall be removed from the Peer Group or
(ii) subsequently reorganizes under the United States Bankruptcy Code (or any
successor or comparable law) shall remain in the Peer Group and all such
companies (if any) shall be deemed to be ranked below all other companies in the
Peer Group.

 

 

 

 

"TSR" shall mean the percent return of an applicable share of common equity of
the Company or a member of the Peer Group, determined using the following
calculation:

 

[image_001.jpg]

 

 

Except as set forth in the accompanying Performance Stock Unit Agreement,
following the completion of the Performance Period, the vesting of the
Performance Stock Unit Award shall be determined by (1) calculating the TSR of
the Company and each member of the Peer Group for the Performance Period and (2)
determining the Company’s ranking within the Peer Group based on its TSR for the
Performance Period.

 

The Company’s percentile rank within the Peer Group will be calculated using the
formula below, where N is the total companies in the Peer Group including the
Company and R is the Company’s ranking within the Peer Group:

 

Percentile rank = [image_002.jpg]

 

Payment of the Performance Stock Unit Award shall be made as specified in the
following chart:

 

Percentile Rank Payout Percentage (number of Shares as a Percent of Target Award
Amount) 75th Percentile and above 150% 50th Percentile 100% 25th Percentile 50%
below 25th Percentile 0%

 

There shall be straight line interpolation to determine the payout percentage
earned for results falling in between the quartiles specified in the above
chart. Notwithstanding the above, in the event that the Company's TSR for the
Performance Period is negative, the maximum payout for the Performance Stock
Unit Award shall be the Target Award Amount.

 

The Participant hereby acknowledges receipt of this Performance Stock Unit Award
Grant Notice and agrees to the terms of the Performance Stock Unit Agreement
attached hereto and incorporated by reference herein, the Company's 2012 Equity
Incentive Plan and the terms of this Performance Stock Unit Award as set forth
above.

 

  INTERCEPT PHARMACEUTICALS, INC.         By:     Name:     Title:              
Participant

  

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INTERCEPT PHARMACEUTICALS, INC.

 

PERFORMANCE STOCK UNIT AGREEMENT -
INCORPORATED TERMS AND CONDITIONS

 

AGREEMENT made as of the date of grant set forth in the Performance Stock Unit
Award Grant Notice (sometimes referred to herein as the "Notice") between
Intercept Pharmaceuticals, Inc. (the "Company"), a Delaware corporation, and the
individual whose name appears on the Performance Stock Unit Award Grant Notice
(the "Participant").

 

WHEREAS, the Company has adopted the Intercept Pharmaceuticals, Inc. 2012 Equity
Incentive Plan (the "Plan"), to promote the interests of the Company by
providing an incentive for Employees and Consultants of the Company and its
Affiliates;

 

WHEREAS, pursuant to the provisions of the Plan, the Company desires to grant to
the Participant performance stock units ("PSUs") related to the Company's common
stock, par value $0.001 per share ("Common Stock"), in accordance with the
provisions of the Plan, all on the terms and conditions hereinafter set forth;
and

 

WHEREAS, the Company and the Participant understand and agree that any terms
used and not defined herein have the meanings ascribed to such terms in the Plan
or the Performance Stock Unit Award Grant Notice (as applicable).

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

 

1.                   Grant of Award. The Company hereby grants to the
Participant the number of PSUs (the "Award") set forth in the Performance Stock
Unit Award Grant Notice, which represents a contingent entitlement of the
Participant to receive shares of Common Stock, on the terms and conditions and
subject to all the limitations set forth herein and in the Notice and the Plan,
which are incorporated herein by reference. The Participant acknowledges receipt
of a copy of the Plan and the Notice.

 

2.                   Vesting of Award.

 

(a)                 Subject to the terms and conditions set forth in this
Agreement, the Notice and the Plan, the Award granted hereby shall vest as set
forth in the Performance Stock Unit Award Grant Notice and is subject to the
other terms and conditions of this Agreement and the Plan. Following the
Performance Period set forth in the Performance Stock Unit Award Grant Notice,
the Participant shall be entitled to receive the number of shares of Common
Stock calculated as set forth in the Notice, provided that, on such vesting
date, the Participant is a director, Employee or Consultant of the Company or an
Affiliate. Such shares of Common Stock shall thereafter be delivered by the
Company to the Participant within sixty days following the end of the
Performance Period and in accordance with this Agreement and the Plan. The
purchase price is $0.001 per share payable if and when shares of Common Stock
are issued by the Company, which payment will be made by the Company on behalf
of the Participant as compensation for the Participant's prior service to the
Company and which amount will be reported as income on the Participant's W-2 (or
other applicable form) in the year of payment.

 

(b)                Except as otherwise set forth in this Agreement, if the
Participant ceases to be, for any reason, a director, Employee or Consultant of
the Company or an Affiliate (the "Termination") prior to the end of the
Performance Period, then as of the Termination, all PSUs shall immediately be
forfeited to the Company and this Agreement shall terminate and be of no further
force or effect.

 

(c)                 Effect of Certain Termination Events. Notwithstanding
anything to the contrary contained in this Agreement or the Notice, in the event
the Company or an Affiliate terminates the Participant's employment or service,
as the case may be, due to the Participant's death or Disability, the
Participant shall become vested in a number of PSUs equal to the Target Award
Amount, pro-rated for the portion of the Performance Period which has elapsed as
of the Termination (which award shall be paid within 60 days of such
termination).

 

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(d)                Change of Control. Notwithstanding the foregoing, except to
the extent specifically provided to the contrary in any employment agreement
between the Participant and the Company or an Affiliate, in the event of a
Change of Control (as defined below), the Performance Period shall end and
amounts payable pursuant to this Award shall be determined based on an Ending
Stock Price for the Company and each member of the Peer Group equal to the
average closing price for such company's common equity on the principal exchange
on which such equity is traded for each of the trading days in last full
calendar month prior to the month in which the Change in Control occurs (without
any subsequent pro-ration) and payment shall be made with respect to the award
within 5 business days following the occurrence of the Change in Control.

 

Change of Control means the occurrence of any of the following events:

 

(i)Ownership. Any "Person" (as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended) becomes the "Beneficial Owner"
(as defined in Rule 13d-3 under said Act), directly or indirectly, of securities
of the Company representing 50% or more of the total voting power represented by
the Company's then outstanding voting securities (excluding for this purpose any
such voting securities held by the Company or its Affiliates or any employee
benefit plan of the Company) pursuant to a transaction or a series of related
transactions which the Board of Directors does not approve; or

 

(ii)Merger/Sale of Assets. (A) A merger or consolidation of the Company whether
or not approved by the Board of Directors, other than a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving entity
or the parent of such corporation) more than 50% of the total voting power
represented by the voting securities of the Company or such surviving entity or
parent of such corporation, as the case may be, outstanding immediately after
such merger or consolidation; or (B) the sale or disposition by the Company of
all or substantially all of the Company's assets in a transaction requiring
stockholder approval; or

 

(iii)Change in Board Composition. A change in the composition of the Board of
Directors, as a result of which fewer than a majority of the directors are
Incumbent Directors. "Incumbent Directors" shall mean directors who either (A)
are directors of the Company as of the date of grant of this award, or (B) are
elected, or nominated for election, to the Board of Directors with the
affirmative votes of at least a majority of the Incumbent Directors at the time
of such election or nomination (but shall not include an individual whose
election or nomination is in connection with an actual or threatened proxy
contest relating to the election of directors to the Company).

 

(iv)"Change of Control" shall be interpreted, if applicable, in a manner, and
limited to the extent necessary, so that it will not cause adverse tax
consequences under Section 409A.

 

3.                   Prohibitions on Transfer and Sale. This Award (including
any additional PSUs received by the Participant as a result of stock dividends,
stock splits or any other similar transaction affecting the Company's securities
without receipt of consideration) shall not be transferable by the Participant
otherwise than (i) by will or by the laws of descent and distribution, or (ii)
pursuant to a qualified domestic relations order as defined by the Internal
Revenue Code or Title I of the Employee Retirement Income Security Act or the
rules thereunder. Except as provided in the previous sentence, the shares of
Common Stock to be issued pursuant to this Agreement shall be issued, during the
Participant's lifetime, only to the Participant (or, in the event of legal
incapacity or incompetence, to the Participant's guardian or representative).
This Award shall not be assigned, pledged or hypothecated in any way (whether by
operation of law or otherwise) and shall not be subject to execution, attachment
or similar process. Any attempted transfer, assignment, pledge, hypothecation or
other disposition of this Award or of any rights granted hereunder contrary to
the provisions of this Section 3, or the levy of any attachment or similar
process upon this Award shall be null and void.

 

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4.                   Adjustments. The Plan contains provisions covering the
treatment of PSUs and shares of Common Stock in a number of contingencies such
as stock splits. Provisions in the Plan for adjustment with respect to this
Award and the related provisions with respect to successors to the business of
the Company are hereby made applicable hereunder and are incorporated herein by
reference. Without limiting the foregoing, the Administrator shall have the sole
discretion and authority to make such equitable adjustments to the Award as may
be necessary or appropriate.

 

5.                   Securities Law Compliance. The Participant specifically
acknowledges and agrees that any sales of shares of Common Stock shall be made
in accordance with the requirements of the Securities Act of 1933, as amended.
The Company currently has an effective registration statement on file with the
Securities and Exchange Commission with respect to the Common Stock to be
granted hereunder. The Company intends to maintain this registration statement
but has no obligation to do so. If the registration statement ceases to be
effective for any reason or there is a restriction under foreign law, a
Participant will not be able to transfer or sell any of the shares of Common
Stock issued to the Participant pursuant to this Agreement unless exemptions
from registration or filings under applicable securities laws are available.
Furthermore, despite registration, applicable securities laws may restrict the
ability of the Participant to resell his or her Common Stock, including due to
the Participant's affiliation with the Company. The Company shall not be
obligated to either issue the Common Stock or permit the resale of any shares of
Common Stock if such issuance or resale would violate any applicable securities
law, rule or regulation.

 

6.                   Rights as a Stockholder. The Participant shall have no
right as a stockholder, including voting and dividend rights, with respect to
the PSUs subject to this Agreement.

 

7.                   Tax Liability of the Participant and Payment of Taxes. The
Participant acknowledges and agrees that any income or other taxes due from the
Participant with respect to this Award or the shares of Common Stock to be
issued pursuant to this Agreement or otherwise sold shall be the Participant's
responsibility. Without limiting the foregoing, the Participant agrees that if
under applicable law the Participant will owe taxes at the payment date on the
portion of the Award then payable the Company shall be entitled to immediate
payment from the Participant of the amount of any tax required to be withheld by
the Company. Any taxes due shall be paid, at the option of the Company as
follows:

 

(a)                 through reducing the number of shares of Common Stock
entitled to be issued to the Participant on the payment date in an amount equal
to the amount of minimum withholding tax due and payable by the Company.
Fractional shares will not be retained to satisfy any portion of the withholding
tax. Accordingly, the Participant agrees that in the event that the amount of
withholding tax owed would result in a fraction of a share being owed, that
amount will be satisfied by withholding the fractional amount from the
Participant's paycheck;

 

(b)                requiring the Participant to deposit with the Company an
amount of cash equal to the amount determined by the Company to be required with
respect to the statutory minimum of the Participant's estimated total federal,
state and local tax obligations or otherwise withholding from the Participant's
paycheck an amount equal to the withholding tax due and payable; or

 

(c)                 if the Company believes that the sale of shares can be made
in compliance with applicable securities laws, authorizing, at a time when the
Participant is not in possession of material nonpublic information, the sale by
the Participant on the payment date of such number of shares of Common Stock as
the Company instructs a registered broker to sell to satisfy the Company's
withholding obligation, after deduction of the broker's commission, and the
broker shall be required to remit to the Company the cash necessary in order for
the Company to satisfy its withholding obligation. To the extent the proceeds of
such sale exceed the Company's tax withholding obligation the Company agrees to
pay such excess cash to the Participant as soon as practicable. In addition, if
such sale is not sufficient to pay the Company's tax withholding obligation the
Participant agrees to pay to the Company as soon as practicable, including
through additional payroll withholding, the amount of any tax withholding
obligation that is not satisfied by the sale of shares of Common Stock. The
Participant agrees to hold the Company and the broker harmless from all costs,
damages or expenses relating to any such sale. The Participant acknowledges that
the Company and the broker are under no obligation to arrange for such sale at
any particular price. In connection with such sale of shares of Common Stock,
the Participant shall execute any such documents requested by the broker in
order to effectuate the sale of shares of Common Stock and payment of the
withholding obligation to the Company. The Participant acknowledges that this
paragraph is intended to comply with Section 10b5-1(c)(1)(i)(B) under the
Exchange Act.

 

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The Company shall not deliver any shares of Common Stock to the Participant
until it is satisfied that all required withholdings have been made.

 

8.                   Participant Acknowledgements and Authorizations.

 

The Participant acknowledges the following:

 

(a)                 The Company is not by the Plan or this Award obligated to
continue the Participant as a director, Employee or Consultant of the Company or
of an Affiliate.

 

(b)                The Plan is discretionary in nature and may be suspended or
terminated by the Company at any time.

 

(c)                 The grant of this Award is considered a one-time benefit and
does not create a contractual or other right to receive any other award under
the Plan, benefits in lieu of awards or any other benefits in the future.

 

(d)                The Plan is a voluntary program of the Company and future
awards, if any, will be at the sole discretion of the Company, including, but
not limited to, the timing of any grant, the amount of any award, vesting
provisions and the purchase price, if any.

 

(e)                 The value of this Award is an extraordinary item of
compensation outside of the scope of any employment or service. As such, the
Award is not part of normal or expected compensation for purposes of calculating
any severance, resignation, redundancy, end of service payments, bonuses,
long-service awards, pension or retirement benefits or similar payments. The
future value of the shares of Common Stock is unknown and cannot be predicted
with certainty.

 

(f)                  The Participant (i) authorizes the Company and its
Affiliates or, if the Participant is not employed by the Company or an
Affiliate, his or her employer, to furnish the Company and its Affiliates (and
any agent administering the Plan or providing recordkeeping services) with such
information and data as it shall request in order to facilitate the grant of the
Award and the administration of the Plan, (ii) waives any data privacy rights he
or she may have with respect to such information or the sharing of such
information, and (iii) authorizes the Company and its Affiliates to store and
transmit such information in electronic form.

 

9.                   Notices. Any notices required or permitted by the terms of
this Agreement or the Plan shall be given by recognized courier service,
facsimile, registered or certified mail, return receipt requested, addressed as
follows:

 

If to the Company:

 

Intercept Pharmaceuticals, Inc.
10 Hudson Yards, 37th Floor
New York, NY 10001
Attention: Chief Financial Officer

 

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If to the Participant at the address set forth on the Performance Stock Unit
Award Grant Notice

or to such other address or addresses of which notice in the same manner has
previously been given. Any such notice shall be deemed to have been given on the
earliest of receipt, one business day following delivery by the sender to a
recognized courier service, or three business days following mailing by
registered or certified mail.

 

10.                Assignment and Successors.

 

(a)                 This Agreement is personal to the Participant and without
the prior written consent of the Company shall not be assignable by the
Participant otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Participant's
legal representatives.

 

(b)                This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.

 

11.                Governing Law. This Agreement shall be construed and enforced
in accordance with the laws of the Delaware, without giving effect to the
conflict of law principles thereof. For the purpose of litigating any dispute
that arises under this Agreement, whether at law or in equity, the parties
hereby consent to exclusive jurisdiction in the state of New York and agree that
such litigation shall be conducted in the state courts of New York or the
federal courts of the United States for the Southern District of New York.

 

12.                Severability. If any provision of this Agreement is held to
be invalid or unenforceable by a court of competent jurisdiction, then such
provision or provisions shall be modified to the extent necessary to make such
provision valid and enforceable, and to the extent that this is impossible, then
such provision shall be deemed to be excised from this Agreement, and the
validity, legality and enforceability of the rest of this Agreement shall not be
affected thereby.

 

13.                Entire Agreement. This Agreement, together with the Plan,
constitutes the entire agreement and understanding between the parties hereto
with respect to the subject matter hereof and supersedes all prior oral or
written agreements and understandings relating to the subject matter hereof. No
statement, representation, warranty, covenant or agreement not expressly set
forth in this Agreement shall affect or be used to interpret, change or restrict
the express terms and provisions of this Agreement provided, however, in any
event, this Agreement shall be subject to and governed by the Plan.

 

14.                Modifications and Amendments; Waivers and Consents. The terms
and provisions of this Agreement may be modified or amended as provided in the
Plan. Except as provided in the Plan, the terms and provisions of this Agreement
may be waived, or consent for the departure therefrom granted, only by written
document executed by the party entitled to the benefits of such terms or
provisions. No such waiver or consent shall be deemed to be or shall constitute
a waiver or consent with respect to any other terms or provisions of this
Agreement, whether or not similar. Each such waiver or consent shall be
effective only in the specific instance and for the purpose for which it was
given, and shall not constitute a continuing waiver or consent.

 

15.                Section 409A. The Award of PSUs evidenced by this Agreement
is intended to be exempt from the nonqualified deferred compensation rules of
Section 409A of the Code as a "short term deferral" (as that term is used in the
final regulations and other guidance issued under Section 409A of the Code,
including Treasury Regulation Section 1.409A-1(b)(4)(i)), and shall be construed
accordingly.

 

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