Document:

exv10w1

 

Exhibit 10.1

CAPELLA EDUCATION COMPANY

ANNUAL INCENTIVE PLAN

MANAGEMENT EMPLOYEES — 2007

PLAN OBJECTIVE

To
recognize and reward eligible management employees for the achievement of Company financial goals.

PLAN SUMMARY

	 	•	 	The plan is based upon Company performance against, revenue and
operating income metrics as compared to plan, for eligible participants as follows:

	 	–	 	90% of the incentive opportunity is based on 2007 total Company
performance, measured by achievement of revenue and operating income compared to
plan.
	 
	 	–	 	10% of the incentive opportunity is based on achievement of a Learner
Satisfaction Measure.

	 	•	 	You have the opportunity to earn from 0% — 190 % of your target incentive
amount. The financial performance and payout matrices will be
reviewed periodically as to progress during the Plan Year.
	 
	 	•	 	The Company must achieve at least 95% of its plan target for operating income,
in order to pay out any portion of the incentive based on revenue achievement.
	 
	 	•	 	Your incentive earnings will be paid within two and one-half months after the end of
the Plan Year based on year-end Company financial achievement.

Note:
The remaining pages and exhibits provide further explanation regarding
plan design, payout criteria, and administration.

See
Exhibit 1 for specific information, including definitions, terms and
conditions, and payout criteria.

 

 

ELIGIBILITY CRITERIA

Select management-level employees who meet the Eligibility Criteria are eligible for plan
participation. Criteria the plan administrator will consider when selecting eligible employees for
participation include scope and level of responsibility, organizational impact, internal equity and
external competitiveness. Incentive awards for employees who work less than full-time will be
prorated accordingly.

PLAN ADMINISTRATOR

The Compensation Committee of the Board of Directors of the Company will administer the plan. The
Committee may delegate to the Chief Executive Officer and the Vice President of Human Resources the
authority to determine incentive awards under the plan for eligible employees who are not executive
officers of the Company. Awards granted pursuant to such delegated authority shall be made
consistent with the criteria established by the Committee and shall be subject to any other
restrictions placed on the delegation by the Committee. Any incentive award under the plan to the
Company’s Chief Executive Officer will be approved and administered by the Executive Committee of
the Board of Directors.

To the full extent permitted by law, (i) no member of the Committee or other plan administrator
shall be liable for any action or determination taken or made in good faith with respect to the
plan or any award made under the plan, and (ii) the members of the Committee and the other plan
administrators shall be entitled to indemnification by the Company with regard to such actions.

SIZE OF AWARD OPPORTUNITY

Incentive potential for plan participants is
expressed as a percentage of Base Compensation as of December 31st of the Plan Year. At target level performance, the size of the
incentive award opportunity is based upon your position as determined by the plan administrator.

PAYOUT CRITERIA — COMPANY FINANCIAL RESULTS

Total Year Revenue and Operating income

	 	•	 	90% of your targeted incentive potential is based on total year, year-end company
financial results for revenue and operating income.
	 
	 	•	 	At the beginning of the year, an annual financial target will be established at
the Company level, approved by the Compensation Committee. The Chief Executive Officer or
designate will communicate this financial target to you. Incentive potential will be based
on the level of Company financial performance within a specified range.
	 
	 	•	 	All participants, unless otherwise communicated, will have a financial
target that reflects overall Company financial results.

 

 

	 	•	 	If the Company exceeds the target financial level on the full year performance, per the
incentive plan schedule (matrix), you will be eligible to receive a greater than target
level incentive award for this portion of the plan.
	 
	 	•	 	This portion of the plan pays out for a range of financial performance with an
upward potential of 190% of your target incentive award opportunity.
(Please see the financial matrix for the specific payout schedule).

Learner Satisfaction Measure

	 	•	 	10% of your targeted incentive potential is based on a Learner Satisfaction Measure.
The maximum target level for this component of the plan is 10%.

QUALIFICATION OF AWARD PAYMENT

The plan administrator reserves the right to withhold incentive payment in the event an individual
fails to perform his or her day-to-day job in a satisfactory manner after the Company has provided
reasonable notice of such failure.

 

 

Exhibit 1

CAPELLA EDUCATION COMPANY

MANAGEMENT INCENTIVE PLAN

I. Definitions of Terms

The following terms as used in the plan have meaning as described below:

Company — Capella Education Company.

Base Compensation — total base salary wages for the plan year. (Note: excludes
any incentive compensation payment(s), lump sump merit increases and taxable
fringes). Base salary wages will be reduced for any leave of absence, paid or
unpaid, beyond 90 days.

Eligibility Criteria — Individuals need to be regular status, work a minimum of
half time to be eligible for plan participation (average of 40 hours per pay period),
and be considered a management level employee (functional leader or above).
Incentive awards for employees who work less than full-time will be prorated
according to his/her total annual base salary wages.

Financial Objective — the
level of company performance against any financial measure approved by the Committee to define operating performance. The Committee may amend
the goals to reflect material adjustment in or changes to the Company’s policies; to
reflect material company changes such as mergers or acquisitions; and to reflect such other
events having a material impact on goals.

Learner Satisfaction Measure — refers to the specific measurement of learner satisfaction
as measured by a learner satisfaction survey conducted by the Company.

Performance Measures — means any of the following measures with respect to the performance
of the Company or a group, a unit, an Affiliate, or an individual; specified levels of the
Company’s stock price, market share, sales, earnings per share, return on equity, costs,
operating income, net income before interest, taxes, depreciation and/or amortization, net
income before or after extraordinary items, return on operating assets or levels of cost
savings, earnings before taxes, net earnings, asset turnover, total shareholder return,
pre-tax, pre-interest expense return on invested capital, return on incremental invested
capital, free cash flow or cash flow from operations, or customer satisfaction or learner
success metrics. In addition, with respect to an Award that is not intended to qualify for
the exemption from the limitation on deductibility imposed by Section 162(m) of the Code
on compensation paid to “covered employees” as defined therein, “Performance Measures” may
include any other measure determined by the Committee. Such performance measures may be set as an absolute measure or relative to a
designated peer group or index of comparable companies.

 

 

Plan Year — the fiscal year of the Company.

Payout
— the actual amount to be paid to a participant based upon achievement of Company financial objectives.

II. Plan Administration

New Hires — new hires must start by October 1st to qualify. For individuals hired by
October 1st of the Plan Year, eligibility begins on the first date of employment.
Individual incentive awards will be prorated from the date of hire based on an individual’s
total annual base wages earned during the Plan Year.

Promotions — individuals must be promoted into an eligible management level position by
October 1st to be eligible for participation in that Plan Year. Note: if an individual is
promoted October 1st or after of the Plan Year it will be at the Committee’s discretion to
determine the percentage of incentive Payout that an employee will receive at year-end.

Termination of Employment — in the event any eligible participant ceases to be an employee
during any year in which he/she is participating in the plan, he/she will not be eligible
to receive any incentive compensation for such year unless otherwise provided for in the
Senior Executive Severance Plan or the Executive Severance Plan. Individuals need to be
employed at the time of award payment to be eligible for any incentive payments unless
otherwise provided for in the Senior Executive Severance Plan, or Executive Severance Plan.
Incentive awards to individuals who are subject to the Senior Executive Severance Plan, or
the Executive Severance Plan will be determined in accordance with the plan, as adjusted in
accordance with the Senior Executive Severance Plan or the Executive Severance Plan, and
all Payouts will be made in accordance with the Senior Executive Severance Plan, or the
Executive Severance Plan. Employees who become disabled or retire during the year will be
eligible to receive a prorated portion of the incentive payment, if earned.

Right to Continue Employment — nothing contained in the plan shall be construed to confer
upon any employee the right to continue in the employment of, or the Company’s right to
terminate his/her employment at any time.

Tax Withholding — The Company shall have the right to withhold from cash payments under the
plan to a participant or other person an amount sufficient to cover any required
withholding taxes.

 

 

Unfunded Plan - The plan shall be unfunded and the Company shall not be required to
segregate any assets that may at any time be represented by awards under the plan.

Plan Amendment, Modification, or Termination — from time to time the Compensation Committee
may amend the plan as it believes appropriate and/or may terminate the plan, provided that
no such amendment or termination will affect the right of any participant to receive
incentive compensation in accordance with the terms of the plan for the portion of any year
up to the date of the amendment or termination. Typically, any such modification would be
made on an annual basis.

Governing Law - To the extent that federal laws do not otherwise control, the plan and all
determinations made and actions taken pursuant to the plan shall be governed by the laws of
Minnesota and construed accordingly.exv10w1

 

Exhibit 10.1

February 13, 2007

James L. Fares

3260 Whipple Road

Union City, California 94587

RE: Amendment to Change-in-Control Agreement

Dear Mr. Fares:

     This letter (this “Amendment”) amends that certain Change-in-Control Agreement (the “Original
Agreement”) entered into by and between you and Questcor Pharmaceuticals, Inc., a California
corporation (“Questcor”) in connection with your commencement of employment at Questcor. Unless
otherwise modified by this Amendment, the Original Agreement remains in full force and effect.

     This Amendment, once fully executed and delivered by Questcor and you, entitles you to receive
the benefits set forth in this Amendment in the event of certain Changes in Control (as defined in
The Questcor Pharmaceuticals Incorporated 1992 Stock Option Plan (the “1992 Plan) or the 2006
Equity Incentive Award Plan (the “2006 Plan”). You shall receive no benefits under this Amendment
unless there has been a Change in Control.

     1. Accelerated Vesting. Section 1 of the Original Agreement is amended and restated
its entirety to read as follows:

     “Notwithstanding anything to the contrary in Section 11 of the Plan (other than Sections 11(a)
and 11(h) of the 1992 Plan and Section 12.2(a) and 12.2(e) of the 2006 Plan), in the event that a
Change in Control occurs, and your employment with the Company is terminated as a result of an
Involuntary Termination (as defined below) at any time within the twelve (12) month period
commencing on 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 your outstanding stock options and one-hundred
percent (100%) of your restricted shares subject to vesting will become immediately vested and
exercisable on the date of your Involuntary Termination. The Company shall cause each option
agreement evidencing the grant of stock options to you (each, an “Option Agreement”) under the 1992
Plan or the 2006 Plan to reflect the accelerated vesting provisions set forth in this Amendment.”

     2. Cash Severance. In the event that a Change in Control occurs, and your employment
with the Company is terminated as a result of an Involuntary Termination (as defined below) at any
time within the twelve (12) month period commencing on the date of such Change in Control, you will
receive severance compensation equal to the sum of (i) an amount equal to the product of your
minimum annual base salary in effect as of the date of termination multiplied by the number two
(2), plus (ii) an amount equal to the product of your target bonus as established by the Board of
Directors or its Compensation Committee for the year during which the termination takes place
multiplied by the number two (2) (the “Severance Payment”). If payment is due to you as a result
of you terminating your employment for Good Reason, then the Severance Payment shall be paid as
follows: (1) if, on the date you terminate your employment for Good Reason, the Company is a

 

 

reporting company under the Securities Exchange Act of 1934 (the “Exchange Act”), then you
will be entitled to receive such payment in a single lump sum on the first business day that occurs
at the end of the period commencing on the date of termination and ending six months after the last
day of the calendar month in which the date of termination occurs (e.g., if you terminate your
employment on March 15, 2007, the Company will pay the amount specified herein on the first
business day immediately following September 30, 2007); (2) however, if the Company is not a
reporting company under the Exchange Act at the time you terminate your employment for Good Reason,
you shall be entitled to receive such payment in a single lump sum on the fifth business day
following your termination of employment. If paid upon a Change in Control, the Severance Payment
shall be in lieu of, and not in addition to, the payment of any cash severance payments that you
may otherwise be entitled to under your Offer Letter.

     3. At-Will Employment. Nothing contained in this Amendment shall (i) confer upon you
any right to continue in the employ of the Company, (ii) constitute any contract or agreement of
employment, or (iii) interfere in any way with the at-will nature of your employment with the
Company.

     4. Entire Agreement. This Amendment, the Original Agreement, the Offer Letter, the
Plan and any Option Agreements or Restricted Stock Award Agreement set forth the entire agreement
of the parties hereto in respect of the accelerated vesting of stock options or restricted stock
held by you and supersede all prior agreements, promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, by any officer, employee or representative
of any party hereto, and any prior agreement of the parties hereto in respect of the accelerated
vesting of stock options held by you, is hereby terminated and cancelled.

     5. Miscellaneous. No provision of this Amendment may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing and signed by you
and such officer as may be specifically designated by the Board. No waiver by either party hereto
at any time of any breach by the other party hereto of or compliance with, any condition or
provision of this Amendment to be performed by such other party shall be deemed a waiver of similar
or dissimilar provisions or conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, express or implied, with respect to the subject
matter hereof have been made by either party which are not expressly set forth in this Amendment.
The validity, interpretation, construction and performance of this Amendment shall be governed by
the laws of the State of California without regard to its conflicts of law principles. The section
headings contained in this Amendment are for convenience only, and shall not affect the
interpretation of this Amendment.

 

 

Please indicate your acceptance of this Amendment by returning a signed copy of this Amendment.

	 	 	 
	 

	 	Sincerely,
	 
	 	 
	 

	 	/s/ Albert Hansen

	 

	 	 
	 

	 	Albert Hansen
	 

	 	Chairman of the Board of Directors
	 

	 	Questcor Pharmaceuticals, Inc.
	Accepted by,
	 	 
	 
	 	 
	/s/ James L. Fares
	 	 
	 

James L. Fares

	 	 
	 
	 	 
	Date: February 14, 2007

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