Mixing up the holidays…

It’s Labor Day, not Christmas! So why did David Brinkley, Senior Vice-President of Theravance (THRX), receive a $1.1 million payout last week? The bonus was likely four times’ Brinkley’s annual salary, judging by the salaries of the five top executives in the compensation table in the 10-K (Brinkley wasn’t included). The 8-K Theravance filed to disclose the payout gave little information about the bonus, but the 10-K hints at a possible reason for the payout:

In his offer letter, we also agreed to loan Mr. Brinkley up to $1 .1 million to assist him to exercise a non-qualified stock option to purchase 129,032 shares of the Company’s Common Stock granted to him at an exercise price of $ 8.525 per share (the ‘Option’_) and also agreed that this loan would be forgiven upon the 5th anniversary of Mr. Brinkley’s employment. Mr. Brinkley has not yet exercised the Option and therefore not yet taken this additional loan. Due to the prohibition on loans to officers in the Sarbanes-Oxley Act, which was enacted subsequent to our hiring of Mr. Brinkley, we determined that we can no longer make such a loan to Mr. Brinkley and instead are discussing an alternative arrangement with Mr. Brinkley. We expect that the terms of such alternative arrangement will be finalized following the expiration of the 180-day post-IPO lock-up period.

Ah, I get it now. Since the Company couldn’t disguise the payout as a loan because of Sarbanes-Oxley rules, they had to just give the money to Brinkley — and try to hide it in a holiday weekend filing.