Exhibit 10.48


 


THERAVANCE, INC.

2009 CHANGE IN CONTROL SEVERANCE PLAN

AND SUMMARY PLAN DESCRIPTION


 


(As adopted by the Board
of Directors on December 16, 2009)


 


The Theravance, Inc. 2009 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.


 


Eligible Executives will not be eligible for severance benefits
under the Company’s Amended and Restated Change in Control Severance Plan.


 


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 who
was either (i) hired after December 16, 2009 or (ii) promoted to
an officer level position after December 16, 2009;


 


·                  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 or an executive 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 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 


 


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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 or an executive vice president of the Corporation immediately before
the Change in Control


 


·                  24 months if you were the chief executive
officer 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.


 


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.


 


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:


 


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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:


 


(i)                                     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


 


(ii)                                  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 


 


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Original Directors who
were in office at the time of their appointment or nomination and (B) the
directors whose appointment or nomination was previously approved in a manner
consistent with this clause (ii); or


 


D.            Any transaction as a
result of which any person is the “beneficial owner” (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Corporation representing at least 50% of the total voting power represented by
the Corporation’s then outstanding voting securities.  For purposes of this Paragraph (d), the
term “person” shall have the same meaning as when used in sections 13(d) and
14(d) of the Exchange Act but shall exclude (i) a trustee or other
fiduciary holding securities under an employee benefit plan of the Corporation
or of a Parent or Subsidiary and (ii) a corporation owned directly or indirectly
by the stockholders of the Corporation in substantially the same proportions as
their ownership of the common stock of the Corporation.


 


Except with respect to a GSK Change In Control (defined below), (i) any
stock purchase by SmithKline Beecham Corporation, a Pennsylvania corporation (“GSK”),
pursuant to the Class A Common Stock Purchase Agreement dated as of March 30,
2004 or (ii) the exercise by GSK of any of its rights under the Amended
and Restated Governance Agreement dated as of June 4, 2004
among the Corporation, GSK, GlaxoSmithKline plc and Glaxo Group Limited, as
amended (the “Governance Agreement”) to representation on the Board (and its
committees) or (iii) any acquisition by GSK of securities of the Company
(whether by merger, tender offer, private or market purchases or otherwise) not
prohibited by the Governance Agreement shall not constitute a Change in
Control.  A transaction shall not
constitute a Change in Control if its sole purpose is to change the state of
the Corporation’s incorporation or to create a holding company that will be
owned in substantially the same proportions by the persons who held the
Corporation’s securities immediately before such transaction.  A “GSK Change In Control” shall mean the
acquisition by GSK of the Company’s Voting Stock (as defined in the Governance
Agreement) that would bring GSK’s Percentage Interest (as defined in the
Governance Agreement) to 100% in compliance with the provisions of the
Governance Agreement.


 


5.             Golden Parachute Tax Limitation


 


The Internal Revenue Code imposes a 20% excise tax on certain payments
and other benefits received by certain officers and shareholders in connection
with a change of control involving the Corporation.  Such payments can include severance pay, loan
forgiveness and acceleration of option vesting.


 


Basic Rule


 


In the event that it is determined that any
payment or distribution of any type to or for the benefit of the Eligible
Executive made by the Corporation, by any of its affiliates, by any person who
acquires ownership or effective control of the Corporation or ownership of a
substantial portion of the Corporation’s assets (within the meaning of section
280G of the Code and the regulations thereunder) or by any affiliate of such
person, whether paid or payable or distributed or distributable pursuant to the
terms of this Plan or under any other agreement including an Eligible Executive’s
stock option agreement and including loan forgiveness (the “Total Payments”),
would be subject to the excise tax imposed by section 4999 of the Code or
any interest or penalties with respect to such excise tax (such excise tax,
together with any such 


 


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interest or penalties, are collectively
referred to as the “Excise Tax”), then the Total Payments shall be made to the Eligible
Executive either (i) in full or (ii) as to such lesser amount as
would result in no portion of the Total Payments being subject to Excise Tax (a
“Reduced Payment”), whichever of the foregoing results in the receipt by the Eligible
Executive on an after-tax basis, of benefits of the greatest value,
notwithstanding that all or some portion of the Total Payments may be subject
to the Excise Tax.


 


Reduction of Payments


 


For purposes of determining whether to make a
Reduced Payment, the Corporation shall cause to be taken into account all
federal, state and local income and employment taxes and excise taxes
applicable to the Eligible Executive (including the Excise Tax).  If a Reduced Payment is made, the Corporation
shall reduce or eliminate the Total Payments in the following order: (1) cancellation
of accelerated vesting of stock options with no intrinsic value, (2) reduction
of cash payments, (3) cancellation of accelerated vesting of equity awards
other than stock options, (4) cancellation of accelerated vesting of stock
options with intrinsic value and (5) reduction of other benefits paid to
the Eligible Executive.  In the event
that acceleration of vesting is reduced, such acceleration of vesting shall be
cancelled in the reverse order of the date of grant of the Eligible Executive’s
equity awards.  In the event that cash
payments or other benefits are reduced, such reduction shall occur in reverse
order beginning with payments or benefits which are to be paid the farthest in
time from the date of the Determination (as defined below).  For avoidance of doubt, an option will be
considered to have no intrinsic value if the exercise price of the shares
subject to the option exceeds the fair market value of such shares.


 


All mathematical determinations and all
determinations of whether any of the Total Payments are “parachute payments”
(within the meaning of Section 280G of the Code) shall be made by an
independent accounting firm selected by the Corporation (the “Accounting Firm”),
which shall provide its determination (the “Determination”), together with
detailed supporting calculations, both to the Corporation and to the Eligible
Executive within seven business days of the Eligible Executive’s termination
date, if applicable, or such earlier time as is requested by the Corporation or
by the Eligible Executive (if the Eligible Executive reasonably believes that
any of the Total Payments may be subject to Excise Tax).  In any event, as promptly as practicable following
the Accounting Firm’s Determination, the Corporation shall pay or transfer to
or for the benefit of the Eligible Executive such amounts as are then due to
him or her and shall promptly pay or transfer to or for the benefit of the
Eligible Executive in the future such amounts as become due to him or her.  Any determination by the Accounting Firm
shall be binding upon the Corporation and the Eligible Executive, absent
manifest error.


 


Underpayments and Overpayments.


 


As a result of uncertainty in the application
of Sections 4999 and 280G of the Code at the time of an initial
Determination by the Accounting Firm hereunder, it is possible that payments
will have been made by the Corporation which should not have been made (an “Overpayment”)
or that additional payments which will not have been made by the Corporation
could have been made (an “Underpayment”), consistent in each case with the
calculation of whether and to what extent a Reduced Payment shall be made
hereunder.  In either event, the
Accounting Firm shall determine the amount of the Overpayment or Underpayment
that has occurred.  In the event that the
Accounting Firm determines that an Overpayment has occurred, such Overpayment
shall be 


 


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treated for all purposes as a loan to the
Eligible Executive that he or she shall repay to the Corporation, together with
interest at the applicable federal rate provided in Section 7872(f)(2) of
the Code; provided, however, that no amount shall be payable by the Eligible
Executive to the Corporation if and to the extent that such payment would not
reduce the amount that is subject to taxation under Section 4999 of the
Code.  In the event that the Accounting
Firm determines that an Underpayment has occurred, such Underpayment shall
promptly be paid or transferred by the Corporation to or for the benefit of the
Eligible Executive, together with interest at the applicable federal rate
provided in section 7872(f)(2) of the Code.


 


If this Section 5 is applicable, it shall
supersede any contrary provision of any plan, arrangement or agreement
governing the Eligible Executive’s rights to the Total Payments.


 


6.             Mandatory Deferral of Payments.


 


This Section 6 shall only apply if the Corporation determines that
the Eligible Executive is a “specified employee” under Section 409A(a)(2)(B)(i) of
the Code and the regulations thereunder when his or her employment
terminates.  If this Section 6
applies, it shall supersede any contrary provision of this Agreement.  To the extent that no exemption from Section 409A
of the Code is available for the benefits under Section 1 or 2, such
payments shall commence on the earliest practicable date that occurs more than
six months after the Eligible Executive’s employment terminates.  The severance payments or benefits that
otherwise would have been made during the first six months following the
termination date shall be paid in a lump sum on the first day of the seventh
month after the termination date.


 


III.                                 OTHER IMPORTANT INFORMATION


 


1.                                      Release and Waiver of
Claims.  Any other provision of this Plan
notwithstanding, an Eligible Executive shall not be entitled to receive
any Severance Payment, other payment, or benefit under this Plan unless such
Eligible Executive has executed a waiver of claims and a general release of all
claims in favor of the Corporation and its affiliates.  Such release shall be executed on a form
provided by and acceptable to the Corporation. 
The Corporation shall complete the form of release and deliver it to the
Eligible Executive within 30 days after his or her employment terminates.  The form of the release will specify how much
time such Eligible Executive has to sign it and whether there is a revocation
period.


 


2.                                      Plan Administration. 
As the Plan Administrator, the Corporation has full discretionary
authority to administer and interpret the Plan, including discretionary
authority to determine eligibility for benefits under the Plan and the amount
of benefits (if any) payable per participant. Any determination by the Plan
Administrator will be final and conclusive upon all persons.  The Plan Administrator hereby delegates to
the Chief Financial Officer all of its administrative duties.  Accordingly, the Chief Financial Officer, on
behalf of the Plan Administrator, has full discretionary authority to carry out
its delegated duties.  Any determination
by the Chief Financial Officer will be final and conclusive upon all
persons.  The Corporation, as the Plan
Administrator, will indemnify and hold harmless the Chief Financial Officer for
carrying out the responsibilities of the Plan Administrator; provided, however, such person does not act with gross
negligence or willful misconduct.


 


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3.                                      Benefits.  The Corporation is not required to establish a
trust to fund the Plan.  The benefits
provided under this Plan are not assignable and may be conditioned upon your
compliance with any confidentiality agreement you have entered into with the
Corporation.


 


4.                                      Claims Procedure.  If
you believe you are incorrectly denied a benefit or are entitled to a greater
benefit than the benefit you receive under the Plan, you may submit a signed,
written application to the Plan Administrator within ninety (90) days of your
Termination Date or, in the case of a dispute involving a Reduced Payment, the
date on which a Determination is made regarding a Reduced Payment.  You will be notified of the approval or
denial of this claim within ninety (90) days of the date that the Plan
Administrator receives the claim, unless special circumstances require an
extension of time for processing the claim. 
If your claim is denied, the notification will state specific reasons
for the denial and you will have sixty (60) days from receipt of the written
notification of the denial of your claim to file a signed, written request for
a review of the denial with the Plan Administrator.  This request should include the reasons you
are requesting a review, facts supporting your request and any other relevant
comments.  Pursuant to its discretionary
authority to administer and interpret the Plan and to determine eligibility for
benefits under the Plan, the Plan Administrator will generally make a final,
written determination of your eligibility for benefits within sixty (60) days
of receipt of your request for review.


 


5.                                      Plan Terms. 
This Plan supersedes any and all prior separation, severance and salary
continuation arrangements, programs and plans which were previously offered by
the Corporation relating to a Change in Control event, for which you are
eligible (including, without limitation, the Company’s Amended and Restated
Change in Control Severance Plan), but excluding terms of the Corporation’s
stock option plans and individual letter agreements which address the vesting
of stock options or restricted stock.  In
no event shall an Eligible Executive receive cash severance benefits under this
Plan following a Change in Control event and under any other plan (including,
without limitation, the Company’s Amended and Restated Change in Control
Severance Plan), program or arrangement.


 


6.                                      Plan Amendment or
Termination.  The Corporation, acting through its Board of
Directors or its Compensation Committee, reserves the right to terminate or
amend the Plan at any time and in any manner. 
Any termination or amendment of the Plan may be made effective
immediately with respect to any benefits not yet paid, whether or not prior
notice of such amendment or termination has been given to affected
employees.  However, no amendment or
termination may be approved following the execution of a definitive agreement
to effect any Change in Control involving the Corporation without the consent
of 75% of the then participating Eligible Executives.


 


7.                                      Taxes. 
Except as set forth herein, the Corporation will withhold taxes and
other payroll deductions from any severance payment.


 


8.                                      No Right to Employment. 
This Plan does not provide you with any right to continue employment
with the Corporation or affect the Corporation’s right, which right is hereby
expressly reserved, to terminate the employment of any individual at any time
for any reason with or without cause.


 


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IV.                                STATEMENT OF ERISA RIGHTS


 


As a participant in the Plan, you are entitled to certain rights and
protections under ERISA.  ERISA provides
that all Plan participants shall be entitled to:


 


1.                                       Examine, without charge, at the Plan
Administrator’s office, all Plan documents, including all documents filed by
the Plan with the U.S. Department of Labor.


 


2.                                       Obtain copies of all Plan documents and
other Plan information upon written request to the Plan Administrator.  The Plan Administrator may make a reasonable
charge for the copies.


 


3.                                       File suit in a federal court, if you, as
a participant, request materials and do not receive them within thirty (30)
days of your request.  In such a case,
the court may require the Plan Administrator to provide the materials and to
pay you a fine of up to $100 for each day’s delay until the materials are
received, unless the materials were not sent because of reasons beyond the
control of the Plan Administrator.


 


In addition to creating rights for certain employees of the Corporation
under the Plan, ERISA imposes obligations upon the people who are responsible
for the operation of the Plan.  The
people who operate the Plan (called “fiduciaries”) have a duty to do so
prudently and in the interest of the Corporation’s employees who are covered by
the Plan.


 


No one, including your employer or any other person, may fire you or
otherwise discriminate against you in any way to prevent you from obtaining a
benefit to which you are entitled under the Plan or from exercising your rights
under ERISA.


 


If your claim for a severance benefit is denied or ignored, in whole or
in part, you have a right to file suit in a federal or a state court.  If Plan fiduciaries are misusing the Plan’s
assets (if any) or if you are discriminated against for asserting your rights,
you may seek assistance from the U.S. Department of Labor or file suit in a
federal court.  The court will decide who
will pay court costs and legal fees.  If
you are successful in your lawsuit, the court may, if it so decides, order the
party you have sued to pay your legal costs, including attorney fees.  However, if you lose, the court may order you
to pay these costs and fees, for example, if it finds that your claim or suit
is frivolous.


 


If you have any questions about the Plan, this statement or your rights
under ERISA, you should contact the Plan Administrator or the nearest Area
Office of the U.S. Labor-Management Services Administration, Department of
Labor.


 


ADDITIONAL PLAN
INFORMATION


 


	
  Name of Plan:

  	
   

  	
  Theravance, Inc. 2009 Change in Control
  Severance Plan

  
	
   

  	
   

  	
   

  
	
  Corporation Sponsoring Plan:

  	
   

  	
  Theravance, Inc.

  901 Gateway Boulevard

  South San Francisco, CA 94080

  650-808-6000

  



 


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  Employer Identification Number:

  	
   

  	
  94-3265960

  
	
   

  	
   

  	
   

  
	
  Plan Number:

  	
   

  	
  507

  
	
   

  	
   

  	
   

  
	
  Plan Year:

  	
   

  	
  The calendar year; the
  first plan year shall end December 31, 2009

  
	
   

  	
   

  	
   

  
	
  Plan Administrator:

  	
   

  	
  Theravance, Inc.

  901 Gateway Boulevard

  South San Francisco, CA 94080

  650-808-6000

  
	
   

  	
   

  	
   

  
	
  Agent for Service of Legal Process:

  	
   

  	
  Plan Administrator

  
	
   

  	
   

  	
   

  
	
  Type of Plan:

  	
   

  	
  Severance Plan/Employee Welfare Benefit Plan

  
	
   

  	
   

  	
   

  
	
  Plan Costs:

  	
   

  	
  The cost of the Plan is paid by
  Theravance, Inc.

  



 


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