Exhibit 10.5
THERAVANCE, INC.
AMENDED AND RESTATED CHANGE IN CONTROL SEVERANCE PLAN
AND SUMMARY PLAN DESCRIPTION
(As amended July 27, 2007)
The Theravance, Inc. Amended and Restated
Change in Control Severance Plan (the “Plan”) is
primarily designed to provide separation pay and other benefits to
Theravance, Inc. (the “Corporation”) executives
who meet the eligibility requirements as set forth below (an
“Eligible Executive”) and whose employment is
involuntarily terminated in connection with a change in control
occurring after an initial public offering
(“IPO”).
This Plan is designed to be an “employee
welfare benefit plan,” as defined in
Section 3(1) of the Employee Retirement Income Security
Act of 1974, as amended (“ERISA”). This Plan is
governed by ERISA and, to the extent applicable, the laws of the
State of California. This document constitutes both the
official plan document and the required summary plan description
under ERISA.
I.
ELIGIBILITY
You will be an Eligible Executive for severance
benefits under the Plan if:
·
you are an officer of the
Corporation;
·
your active employment is
Involuntarily Terminated other than for Misconduct within the
designated period following a Change in Control;
·
you execute a waiver and general
release of all claims in a form provided by and acceptable to the
Corporation as provided for in the section entitled “Release
and Waiver of Claims,” within the prescribed number of days
following your date of termination, as set forth in such release;
and
·
you are not in one of the excluded
categories listed below.
You will not be an Eligible Executive for
severance benefits under this Plan if:
·
you are an independent contractor, a
temporary employee, part-time employee working fewer than 32 hours
per week, probationary employee or student employee;
·
you are employed with a successor
employer following a Change in Control. However, you would be
eligible for severance benefits pursuant to the terms of the Plan
upon a subsequent Involuntary Termination other than for Misconduct
within the designated period following a Change in Control;
or
·
you are dismissed for
Misconduct.
II.
HOW THE PLAN WORKS
1.
Severance
Guidelines
If you are an Eligible Executive and your
employment is Involuntarily Terminated within three (3) months
before or twenty-four (24) months after a Change in Control, you
will be paid a Severance Payment calculated as
follows:
If you were an officer of the Corporation
immediately before the Change in Control:
·
100% of your combined Annual Base
Pay and Target Bonus, plus
·
A pro-rata portion of your current
target bonus based on the number of full months of employment
completed in the applicable period on the date of termination in
such year of termination.
If you were senior vice president of the
Corporation immediately before the Change in Control:
·
150% of your combined Annual Base
Pay and Target Bonus, plus
·
A pro-rata portion of your current
target bonus based on the number of full months of employment
completed in the applicable period on the date of termination in
such year of termination.
If you were the chief executive officer or an
executive vice president of the Corporation immediately before the
Change in Control:
·
200% of your combined Annual Base
Pay and Target Bonus, plus
·
A pro-rata portion of your current
target bonus based on the number of full months of employment
completed in the applicable period on the date of termination in
such year of termination.
Payments made under this Plan shall not be
treated as “compensation” for purposes of the
Theravance, Inc. 401(k) Profit Sharing Plan. An
Eligible Executive will also receive his unpaid salary through his
termination date and a lump sum payment for all accrued and unused
vacation (through the termination date) in a final paycheck
provided on his last day of work.
The full amount of any balance and accrued
interest remaining on any outstanding loans owed by the Eligible
Executive to the Corporation as of the date of termination shall be
forgiven in full immediately upon the Eligible Executive’s
Involuntary Termination.
The Severance Payment under this subsection 1
shall be paid in one lump sum from the general assets of the
Corporation on the first scheduled payroll date of the Corporation
following the latest of the following dates: the Eligible
Executive’s last day of employment, the date the Corporation
receives the Eligible Executive’s signed release, or the date
the revocation period (if any) specified in the release
expires. If the release has not been signed by the Eligible
Executive and become effective by the date that is two and one-half
months after the end of the year in
2
which employment ceases, then the Eligible
Executive will cease to be eligible for benefits under this
Plan.
2.
Group Insurance
Coverage
If an Eligible Executive becomes entitled to a
Severance Payment under this Plan, then the Corporation shall
continue to provide all welfare benefits provided on the date of
termination to the Eligible Executive and, if applicable, to the
Eligible Executive’s dependents for the following
periods:
·
12 months if you were an officer of
the Corporation immediately before the Change in Control
·
18 months if you were a senior vice
president of the Corporation immediately before the Change in
Control
·
24 months if you were the chief
executive officer or an executive vice president of the Corporation
immediately before the Change in Control
The Corporation’s obligation to pay
premiums or make contributions shall cease when the Eligible
Executive obtains new employment offering comparable welfare
benefits. All welfare benefits, other than pursuant to COBRA,
shall cease on the last day of the second calendar year following
the year in which the separation from service occurs. The
Corporation will pay the monthly premium under COBRA for the
Eligible Executive and, if applicable, his or her dependents until
the earliest of (a) the end of the period of 12, 18 or 24
months (as applicable based on the formula set forth above)
following the month in which the Eligible Executive’s
employment terminates or (b) the expiration of the Eligible
Executive’s continuation coverage under COBRA.
3.
Equity
If an Eligible Executive
becomes entitled to a Severance Payment under this Plan, then the
Corporation shall fully vest the officer in all of his unvested
shares and options, and such options shall become fully
exercisable, as of the date of termination. To the extent
that the foregoing results in acceleration of exercisability on or
before September 1, 2007 as to options which otherwise would
not have been exercisable on that date, then such accelerated
options shall be treated as vested and exercisable as of
September 1, 2007. To the extent necessary to effectuate
the intent of the foregoing, each such option shall have an
extended period of time to exercise following a cessation of
service which shall not expire earlier than October 1,
2007.
4.
Definitions
Annual Base Pay shall mean the Eligible Executive’s base
salary at the highest rate in effect at any regularly scheduled
payroll period preceding the occurrence of the Change in Control
and does not include, for example, bonuses, overtime
compensation, incentive pay, sales commissions or expense
allowances.
3
Target Bonus shall mean the normal bonus amount that would be
paid for achieving 100% of goals or MBOs as used in the applicable
annual bonus plan.
Involuntary Termination
shall mean the termination of the
service of the Eligible Executive which occurs by reason
of:
A.
such individual’s involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
B.
such individual’s voluntary resignation following (i) a
material diminution in the Eligible Executive’s authority,
duties or responsibilities, (ii) a material reduction in his
or her base compensation, (iii) a material change in the
geographic location at which he or she must perform services for
the Corporation or (iv) any other action or inaction that
constitutes a material breach by the Corporation of the agreement
under which the Eligible Executive provides services. For the
Eligible Executive to receive the benefits under this Plan as a
result of a voluntary resignation under this clause B, all of the
following requirements must be satisfied: (1) the
Eligible Executive must provide notice to the Corporation of his or
her intent to assert this clause B within 90 days of the initial
existence of one or more of the conditions set forth in subclauses
(i) through (iv); (2) the Corporation will have 30 days
from the date of such notice to remedy the condition and, if it
does so, the Eligible Executive may withdraw his or her resignation
or may resign with no Plan benefits; and (3) any termination
of employment under this clause B must occur within two years of
the initial existence of one or more of the conditions set forth in
subclauses (i) through (iv). Should the Corporation
remedy the condition as set forth above and then one or more of the
conditions arises again within two years following the occurrence
of a Change in Control, the Eligible Executive may assert this
clause B again subject to all of the conditions set forth
herein.
Misconduct shall mean the commission of any material act of
fraud, embezzlement or dishonesty by an individual, any material
unauthorized use or disclosure by such person of confidential
information or trade secrets of the Corporation (or any Parent or
Subsidiary), or any other intentional material misconduct by such
person adversely affecting the business or affairs of the
Corporation (or any Parent or Subsidiary).
Change in Control
shall mean:
A.
The consummation of a merger or consolidation of the Corporation
with or into another entity or any other corporate reorganization,
if persons who were not stockholders of the Corporation immediately
prior to such merger, consolidation or other reorganization own
immediately after such merger, consolidation or other
reorganization 50% or more of the voting power of the outstanding
securities of each of (i) the continuing or surviving entity
and (ii) any direct or indirect parent corporation of such
continuing or surviving entity;
B.
The sale, transfer or other disposition of all or substantially all
of the Corporation’s assets;
C.
A change in the composition of the Board, as a result of which
fewer than 50% of the incumbent directors are directors who
either:
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(i)
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had been directors of the Corporation on the
date 24 months prior to the date of such change in the composition
of the Board (the “Original Directors”) or
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(ii)
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were appointed to the Board, or nominated for
election to the Board, with the affirmative votes of at least a
majority of the aggregate of (A) the Original Directors who
were in office at the time of their appointment or nomination and
(B) the directors whose appointment or no
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