Exhibit 10.24

 

THERAVANCE, INC.

2008 NEW EMPLOYEE EQUITY INCENTIVE PLAN

(AS ADOPTED EFFECTIVE JANUARY 29, 2008)

(AS AMENDED JULY 21, 2009)

(AS AMENDED DECEMBER 16, 2009)

 

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TABLE OF CONTENTS

 

 

 

 

Page

 

 

 

 

ARTICLE 1.

INTRODUCTION

 

1

 

 

 

 

ARTICLE 2.

ADMINISTRATION

 

1

2.1

Committee Composition

 

1

2.2

Committee Responsibilities

 

1

2.3

Committee for Non-Officer Grants

 

1

 

 

 

 

ARTICLE 3.

SHARES AVAILABLE FOR GRANTS

 

2

3.1

Basic Limitation

 

2

3.2

Shares Returned to Reserve

 

2

3.3

Dividend Equivalents

 

2

 

 

 

 

ARTICLE 4.

ELIGIBILITY

 

2

 

 

 

 

ARTICLE 5.

OPTIONS

 

2

5.1

Stock Option Agreement

 

2

5.2

Number of Shares

 

3

5.3

Exercise Price

 

3

5.4

Exercisability and Term

 

3

5.5

Modification or Assumption of Options

 

3

5.6

Buyout Provisions

 

3

 

 

 

 

ARTICLE 6.

PAYMENT FOR OPTION SHARES

 

3

6.1

General Rule

 

3

6.2

Surrender of Stock

 

3

6.3

Net Exercise

 

4

6.4

Exercise/Sale

 

4

6.5

Other Forms of Payment

 

4

 

 

 

 

ARTICLE 7.

RESTRICTED SHARES

 

4

7.1

Restricted Stock Agreement

 

4

7.2

Payment for Awards

 

4

7.3

Vesting Conditions

 

4

7.4

Voting and Dividend Rights

 

4

 

 

 

 

ARTICLE 8.

STOCK UNITS

 

4

8.1

Stock Unit Agreement

 

4

8.2

Payment for Awards

 

5

8.3

Vesting Conditions

 

5

8.4

Voting and Dividend Rights

 

5

8.5

Form and Time of Settlement of Stock Units

 

5

8.6

Death of Recipient

 

5

8.7

Creditors’ Rights

 

5

 

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ARTICLE 9.

CHANGE IN CONTROL

 

6

9.1

Effect of Change in Control

 

6

9.2

Acceleration

 

6

 

 

 

 

ARTICLE 10.

PROTECTION AGAINST DILUTION

 

6

10.1

Adjustments

 

6

10.2

Dissolution or Liquidation

 

7

10.3

Reorganizations

 

7

 

 

 

 

ARTICLE 11.

AWARDS UNDER OTHER PLANS

 

8

 

 

 

 

ARTICLE 12.

LIMITATION ON RIGHTS

 

8

12.1

Retention Rights

 

8

12.2

Stockholders’ Rights

 

8

12.3

Regulatory Requirements

 

8

 

 

 

 

ARTICLE 13.

WITHHOLDING TAXES

 

8

13.1

General

 

8

13.2

Share Withholding

 

8

 

 

 

 

ARTICLE 14.

FUTURE OF THE PLAN

 

9

14.1

Term of the Plan

 

9

14.2

Amendment or Termination

 

9

14.3

Stockholder Approval

 

9

 

 

 

 

ARTICLE 15.

DEFINITIONS

 

9

 

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THERAVANCE, INC.
2008 NEW EMPLOYEE EQUITY INCENTIVE PLAN

 

ARTICLE 1.        INTRODUCTION.

 

The Plan was adopted by the Board effective January 29, 2008.  The purpose of
the Plan is to promote the long-term success of the Corporation and the creation
of stockholder value by (a) encouraging Employees to focus on critical
long-range objectives, (b) encouraging the attraction and retention of Employees
with exceptional qualifications and (c) linking Employees directly to
stockholder interests through increased stock ownership.  The Plan seeks to
achieve this purpose by providing for Awards in the form of Restricted Shares,
Stock Units, or Options (which shall be NSOs).

 

The Plan is designed to attract new employees and is intended to satisfy the
requirements of Nasdaq Marketplace Rule 5635.

 

The Plan shall be governed by, and construed in accordance with, the laws of the
State of Delaware (except their choice-of-law provisions).

 

ARTICLE 2.        ADMINISTRATION.

 

2.1          Committee Composition.  The Committee shall administer the Plan. 
The Committee shall consist exclusively of two or more directors of the
Corporation, who shall be appointed by the Board.  In addition, each member of
the Committee shall meet the following requirements:

 

(A)           ANY LISTING STANDARDS PRESCRIBED BY THE PRINCIPAL SECURITIES
MARKET ON WHICH THE CORPORATION’S EQUITY SECURITIES ARE TRADED;

 

(B)           SUCH REQUIREMENTS AS THE SECURITIES AND EXCHANGE COMMISSION MAY
ESTABLISH FOR ADMINISTRATORS ACTING UNDER PLANS INTENDED TO QUALIFY FOR
EXEMPTION UNDER RULE 16B-3 (OR ITS SUCCESSOR) UNDER THE EXCHANGE ACT; AND

 

(C)           ANY OTHER REQUIREMENTS IMPOSED BY APPLICABLE LAW, REGULATIONS OR
RULES.

 

2.2          Committee Responsibilities.  The Committee shall (a) select the
Employees who are to receive Awards under the Plan, (b) determine the type,
number, vesting requirements and other features and conditions of such Awards,
(c) interpret the Plan, (d) make all other decisions relating to the operation
of the Plan and (e) carry out any other duties delegated to it by the Board. 
The Committee may adopt such rules or guidelines as it deems appropriate to
implement the Plan.  The Committee’s determinations under the Plan shall be
final and binding on all persons.

 

2.3          Committee for Non-Officer Grants.  The Board may also appoint a
secondary committee of the Board, which shall be composed of one or more
directors of the

 

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Corporation who need not satisfy the requirements of Section 2.1.  Such
secondary committee may administer the Plan with respect to Employees who are
not considered executive officers of the Corporation under section 16 of the
Exchange Act, may grant Awards under the Plan to such Employees and may
determine all features and conditions of such Awards.  Within the limitations of
this Section 2.3, any reference in the Plan to the Committee shall include such
secondary committee.

 

ARTICLE 3.        SHARES AVAILABLE FOR GRANTS.

 

3.1          Basic Limitation.  Common Shares issued pursuant to the Plan may be
authorized but unissued shares or treasury shares.  The aggregate number of
Common Shares issued under the Plan shall not exceed (a) 700,000(1) plus (b) the
additional Common Shares described in Section 3.2.  The number of Common Shares
that are subject to Awards outstanding at any time under the Plan shall not
exceed the number of Common Shares that then remain available for issuance under
the Plan.  The limitations of this Section 3.1 shall be subject to adjustment
pursuant to Article 10.

 

3.2          Shares Returned to Reserve.  If Options or Stock Units are
forfeited or terminate for any other reason before being exercised or settled,
then the Common Shares subject to such Options or Stock Units shall again become
available for issuance under the Plan.  If Stock Units are settled, then only
the number of Common Shares (if any) actually issued in settlement of such Stock
Units shall reduce the number available under Section 3.1 and the balance shall
again become available for issuance under the Plan.  If Restricted Shares or
Common Shares issued upon the exercise of Options are reacquired by the
Corporation pursuant to a forfeiture provision or for any other reason, then
such Common Shares shall again become available for issuance under the Plan. 
Shares not issued or delivered as a result of the net exercise of an Option
shall again become available for issuance under the Plan.

 

3.3          Dividend Equivalents.  Any dividend equivalents paid or credited
under the Plan shall not be applied against the number of Common Shares that may
be issued under the Plan, whether or not such dividend equivalents are converted
into Stock Units.

 

ARTICLE 4.        ELIGIBILITY.

 

Only Employees shall be eligible for the grant of Restricted Shares, Stock
Units, or NSOs.

 

ARTICLE 5.        OPTIONS.

 

5.1          Stock Option Agreement.  Each grant of an Option under the Plan
shall be evidenced by a Stock Option Agreement between the Optionee and the
Corporation.  Such Option shall be subject to all applicable terms of the Plan
and may be subject to any other terms that are not inconsistent with the Plan. 
The provisions of the various Stock Option Agreements entered into under the
Plan need not be identical.  Options may be granted in consideration of a
reduction in the Optionee’s other compensation.  A Stock Option Agreement may
provide that a

 

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(1) Exhibit A includes a schedule of the initial share reserve and any
subsequent increases in the reserve.

 

2

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new Option will be granted automatically to the Optionee when he or she
exercises a prior Option and pays the Exercise Price in the form described in
Section 6.2.

 

5.2          Number of Shares.  Each Stock Option Agreement shall specify the
number of Common Shares subject to the Option and shall provide for the
adjustment of such number in accordance with Article 10.

 

5.3          Exercise Price.  Each Stock Option Agreement shall specify the
Exercise Price; provided that the Exercise Price shall in no event be less than
100% of the Fair Market Value of a Common Share on the date of grant.

 

5.4          Exercisability and Term.  Each Stock Option Agreement shall specify
the date or event when all or any installment of the Option is to become
exercisable.  The Stock Option Agreement shall also specify the term of the
Option.  A Stock Option Agreement may provide for accelerated exercisability in
the event of the Optionee’s death, disability or retirement or other events and
may provide for expiration prior to the end of its term in the event of the
termination of the Optionee’s Service.

 

5.5          Modification or Assumption of Options.  Within the limitations of
the Plan, the Committee may modify, extend, or assume outstanding options.  The
foregoing notwithstanding, no modification of an Option shall, without the
consent of the Optionee, alter or impair his or her rights or obligations under
such Option. Notwithstanding anything in this Plan to the contrary, and except
for the adjustments provided in Articles 9 and 10, neither the Committee nor any
other person may decrease the exercise price for any outstanding Option after
the date of grant nor cancel or allow an optionee to surrender an outstanding
Option to the Corporation as consideration for the grant of a new Option with a
lower exercise price or the grant of another type of Award the effect of which
is to reduce the exercise price of any outstanding Option.

 

5.6          Buyout Provisions.  The Committee may at any time (a) offer to buy
out for a payment in cash or cash equivalents an Option previously granted or
(b) authorize an Optionee to elect to cash out an Option previously granted, in
either case at such time and based upon such terms and conditions as the
Committee shall establish.

 

ARTICLE 6.        PAYMENT FOR OPTION SHARES.

 

6.1          General Rule.  The entire Exercise Price of Common Shares issued
upon exercise of Options shall be payable in cash or cash equivalents at the
time when such Common Shares are purchased, except that the Committee at its
sole discretion may accept payment of the Exercise Price in any other
form(s) described in this Article 6.  However, if the Optionee is an executive
officer of the Corporation, he or she may pay the Exercise Price in a form other
than cash or cash equivalents only to the extent permitted by section 13(k) of
the Exchange Act.

 

6.2          Surrender of Stock.  With the Committee’s consent, all or any part
of the Exercise Price may be paid by surrendering, or attesting to the ownership
of, Common Shares that are already owned by the Optionee.  Such Common Shares
shall be valued at their Fair Market Value on the date when the new Common
Shares are purchased under the Plan.

 

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6.3          Net Exercise.  With the Committee’s consent, all or any part of the
Exercise Price may be paid by requesting that the Corporation withhold Common
Shares that otherwise would be issued in connection with the Option exercise. 
Such Common Shares shall be valued at their Fair Market Value on the date when
the Option is exercised.

 

6.4          Exercise/Sale.  With the Committee’s consent, all or any part of
the Exercise Price and any withholding taxes may be paid by delivering (on a
form prescribed by the Corporation) an irrevocable direction to a securities
broker approved by the Corporation to sell all or part of the Common Shares
being purchased under the Plan and to deliver all or part of the sales proceeds
to the Corporation.

 

6.5          Other Forms of Payment.  With the Committee’s consent, all or any
part of the Exercise Price and any withholding taxes may be paid in any other
form that is consistent with applicable laws, regulations and rules.

 

ARTICLE 7.        RESTRICTED SHARES.

 

7.1          Restricted Stock Agreement.  Each grant of Restricted Shares under
the Plan shall be evidenced by a Restricted Stock Agreement between the
recipient and the Corporation.  Such Restricted Shares shall be subject to all
applicable terms of the Plan and may be subject to any other terms that are not
inconsistent with the Plan.  The provisions of the various Restricted Stock
Agreements entered into under the Plan need not be identical.

 

7.2          Payment for Awards.  Restricted Shares may be sold or awarded under
the Plan for such consideration as the Committee may determine, including
(without limitation) cash, cash equivalents, property, full-recourse promissory
notes, past services and future services.  If the Participant is an executive
officer of the Corporation, he or she may pay for Restricted Shares with a
promissory note only to the extent permitted by section 13(k) of the Exchange
Act.  Within the limitations of the Plan, the Committee may accept the
cancellation of outstanding options in return for the grant of Restricted
Shares.

 

7.3          Vesting Conditions.  Each Award of Restricted Shares may or may not
be subject to vesting.  Vesting shall occur, in full or in installments, upon
satisfaction of the conditions specified in the Restricted Stock Agreement.  A
Restricted Stock Agreement may provide for accelerated vesting in the event of
the Participant’s death, disability or retirement or other events.

 

7.4          Voting and Dividend Rights.  The holders of Restricted Shares
awarded under the Plan shall have the same voting, dividend and other rights as
the Corporation’s other stockholders.  A Restricted Stock Agreement, however,
may require that the holders of Restricted Shares invest any cash dividends
received in additional Restricted Shares.  Such additional Restricted Shares
shall be subject to the same conditions and restrictions as the Award with
respect to which the dividends were paid.

 

ARTICLE 8.        STOCK UNITS.

 

8.1          Stock Unit Agreement.  Each grant of Stock Units under the Plan
shall be evidenced by a Stock Unit Agreement between the recipient and the
Corporation.  Such Stock

 

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Units shall be subject to all applicable terms of the Plan and may be subject to
any other terms that are not inconsistent with the Plan.  The provisions of the
various Stock Unit Agreements entered into under the Plan need not be
identical.  Stock Units may be granted in consideration of a reduction in the
recipient’s other compensation.

 

8.2          Payment for Awards.  To the extent that an Award is granted in the
form of Stock Units, no cash consideration shall be required of the Award
recipients.

 

8.3          Vesting Conditions.  Each Award of Stock Units may or may not be
subject to vesting.  Vesting shall occur, in full or in installments, upon
satisfaction of the conditions specified in the Stock Unit Agreement.  A Stock
Unit Agreement may provide for accelerated vesting in the event of the
Participant’s death, disability or retirement or other events.

 

8.4          Voting and Dividend Rights.  The holders of Stock Units shall have
no voting rights.  Prior to settlement or forfeiture, any Stock Unit awarded
under the Plan may, at the Committee’s discretion, carry with it a right to
dividend equivalents.  Such right entitles the holder to be credited with an
amount equal to all cash dividends paid on one Common Share while the Stock Unit
is outstanding.  Dividend equivalents may be converted into additional Stock
Units.  Settlement of dividend equivalents may be made in the form of cash, in
the form of Common Shares, or in a combination of both.  Prior to distribution,
any dividend equivalents that are not paid shall be subject to the same
conditions and restrictions as the Stock Units to which they attach.

 

8.5          Form and Time of Settlement of Stock Units.  Settlement of vested
Stock Units may be made in the form of (a) cash, (b) Common Shares or (c) any
combination of both, as determined by the Committee.  The actual number of Stock
Units eligible for settlement may be larger or smaller than the number included
in the original Award, based on predetermined performance factors.  Methods of
converting Stock Units into cash may include (without limitation) a method based
on the average Fair Market Value of Common Shares over a series of trading
days.  Vested Stock Units may be settled in a lump sum or in installments.  The
distribution may occur or commence when all vesting conditions applicable to the
Stock Units have been satisfied or have lapsed, or it may be deferred to any
later date.  The amount of a deferred distribution may be increased by an
interest factor or by dividend equivalents.  Until an Award of Stock Units is
settled, the number of such Stock Units shall be subject to adjustment pursuant
to Article 10.

 

8.6          Death of Recipient.  Any Stock Units Award that becomes payable
after the recipient’s death shall be distributed to the recipient’s beneficiary
or beneficiaries.  Each recipient of a Stock Units Award under the Plan shall
designate one or more beneficiaries for this purpose by filing the prescribed
form with the Corporation.  A beneficiary designation may be changed by filing
the prescribed form with the Corporation at any time before the Award
recipient’s death.  If no beneficiary was designated or if no designated
beneficiary survives the Award recipient, then any Stock Units Award that
becomes payable after the recipient’s death shall be distributed to the
recipient’s estate.

 

8.7          Creditors’ Rights.  A holder of Stock Units shall have no rights
other than those of a general creditor of the Corporation.  Stock Units
represent an unfunded and

 

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unsecured obligation of the Corporation, subject to the terms and conditions of
the applicable Stock Unit Agreement.

 

ARTICLE 9.        CHANGE IN CONTROL

 

9.1          Effect of Change in Control.  In the event of any Change in
Control, each outstanding Award shall automatically accelerate so that each such
Award shall, immediately prior to the effective date of the Change in Control,
become fully exercisable for all of the Common Shares at the time subject to
such Award and may be exercised for any or all of those shares as fully-vested
Common Shares.  However, an outstanding Award shall not so accelerate if and to
the extent such Award is, in connection with the Change in Control, either to be
assumed by the successor corporation (or parent thereof) or to be replaced with
a comparable Award for shares of the capital stock of the successor corporation
(or parent thereof).  The determination of Award comparability shall be made by
the Committee, and its determination shall be final, binding and conclusive.

 

9.2          Acceleration.  The Committee shall have the discretion, exercisable
either at the time the Award is granted or at any time while the Award remains
outstanding, to provide for the automatic acceleration of vesting upon the
occurrence of a Change in Control, whether or not the Award is to be assumed or
replaced in the Change in Control.

 

ARTICLE 10.      PROTECTION AGAINST DILUTION.

 

10.1        Adjustments.  In the event of a subdivision of the outstanding
Common Shares, a declaration of a dividend payable in Common Shares or a
combination or consolidation of the outstanding Common Shares (by
reclassification or otherwise) into a lesser number of Common Shares,
corresponding adjustments shall automatically be made in each of the following:

 

(A)           THE NUMBER OF OPTIONS, RESTRICTED SHARES AND STOCK UNITS AVAILABLE
FOR FUTURE AWARDS UNDER ARTICLE 3;

 

(B)           THE NUMBER OF COMMON SHARES COVERED BY EACH OUTSTANDING OPTION;

 

(C)           THE EXERCISE PRICE UNDER EACH OUTSTANDING OPTION; OR

 

(D)           THE NUMBER OF STOCK UNITS INCLUDED IN ANY PRIOR AWARD THAT HAS NOT
YET BEEN SETTLED.

 

In the event of a declaration of an extraordinary dividend payable in a form
other than Common Shares in an amount that has a material effect on the price of
Common Shares, a recapitalization, a spin-off or a similar occurrence, the
Committee shall make such adjustments as it, in its sole discretion, deems
appropriate in one or more of the foregoing.  Except as provided in this
Article 10, a Participant shall have no rights by reason of any issuance by the
Corporation of stock of any class or securities convertible into stock of any
class, any subdivision or consolidation of shares of stock of any class, the
payment of any stock dividend or any other increase or decrease in the number of
shares of stock of any class.

 

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10.2        Dissolution or Liquidation.  To the extent not previously exercised
or settled, Options, and Stock Units shall terminate immediately prior to the
dissolution or liquidation of the Corporation.

 

10.3        Reorganizations.  In the event that the Corporation is a party to a
merger or consolidation, all outstanding Awards shall be subject to the
agreement of merger or consolidation.  Such agreement shall provide for one or
more of the following:

 

(A)           THE CONTINUATION OF SUCH OUTSTANDING AWARDS BY THE CORPORATION (IF
THE CORPORATION IS THE SURVIVING CORPORATION).

 

(B)           THE ASSUMPTION OF SUCH OUTSTANDING AWARDS BY THE SURVIVING
CORPORATION OR ITS PARENT (IN A MANNER THAT COMPLIES WITH SECTION 424(A) OF THE
CODE WITH RESPECT TO OPTIONS).

 

(C)           THE SUBSTITUTION BY THE SURVIVING CORPORATION OR ITS PARENT OF NEW
AWARDS FOR SUCH OUTSTANDING AWARDS (IN A MANNER THAT COMPLIES WITH
SECTION 424(A) OF THE CODE WITH RESPECT TO OPTIONS).

 

(D)           FULL EXERCISABILITY OF SUCH OUTSTANDING AWARDS AND FULL VESTING OF
THE COMMON SHARES SUBJECT TO SUCH AWARDS, FOLLOWED BY THE CANCELLATION OF SUCH
AWARDS.  THE FULL EXERCISABILITY OF SUCH AWARDS AND FULL VESTING OF THE COMMON
SHARES SUBJECT TO SUCH AWARDS MAY BE CONTINGENT ON THE CLOSING OF SUCH MERGER OR
CONSOLIDATION.  THE PARTICIPANTS SHALL BE ABLE TO EXERCISE SUCH AWARDS DURING A
PERIOD OF NOT LESS THAN FIVE FULL BUSINESS DAYS PRECEDING THE CLOSING DATE OF
SUCH MERGER OR CONSOLIDATION, UNLESS (I) A SHORTER PERIOD IS REQUIRED TO PERMIT
A TIMELY CLOSING OF SUCH MERGER OR CONSOLIDATION AND (II) SUCH SHORTER PERIOD
STILL OFFERS THE PARTICIPANTS A REASONABLE OPPORTUNITY TO EXERCISE SUCH AWARDS. 
ANY EXERCISE OF SUCH AWARDS DURING SUCH PERIOD MAY BE CONTINGENT ON THE CLOSING
OF SUCH MERGER OR CONSOLIDATION.

 

(E)           THE CANCELLATION OF SUCH OUTSTANDING AWARDS AND A PAYMENT TO THE
PARTICIPANTS EQUAL TO THE EXCESS OF (I) THE FAIR MARKET VALUE OF THE COMMON
SHARES SUBJECT TO SUCH AWARDS (WHETHER OR NOT SUCH AWARDS ARE THEN EXERCISABLE
OR SUCH COMMON SHARES ARE THEN VESTED) AS OF THE CLOSING DATE OF SUCH MERGER OR
CONSOLIDATION OVER (II) THEIR EXERCISE PRICE.  SUCH PAYMENT SHALL BE MADE IN THE
FORM OF CASH, CASH EQUIVALENTS, OR SECURITIES OF THE SURVIVING CORPORATION OR
ITS PARENT WITH A FAIR MARKET VALUE EQUAL TO THE REQUIRED AMOUNT.  SUCH PAYMENT
MAY BE MADE IN INSTALLMENTS AND MAY BE DEFERRED UNTIL THE DATE OR DATES WHEN
SUCH AWARDS WOULD HAVE BECOME EXERCISABLE OR SUCH COMMON SHARES WOULD HAVE
VESTED.  SUCH PAYMENT MAY BE SUBJECT TO VESTING BASED ON THE PARTICIPANT’S
CONTINUING SERVICE, PROVIDED THAT THE VESTING SCHEDULE SHALL NOT BE LESS
FAVORABLE TO THE PARTICIPANT THAN THE SCHEDULE UNDER WHICH SUCH AWARD WOULD HAVE
BECOME EXERCISABLE OR SUCH COMMON SHARES WOULD HAVE VESTED.  IF THE EXERCISE
PRICE OF THE COMMON SHARES SUBJECT TO SUCH AWARDS EXCEEDS THE FAIR MARKET VALUE
OF SUCH COMMON SHARES, THEN SUCH AWARDS MAY BE CANCELLED WITHOUT MAKING A
PAYMENT TO THE PARTICIPANTS.  FOR PURPOSES OF THIS SUBSECTION (E), THE FAIR
MARKET VALUE OF ANY SECURITY SHALL BE DETERMINED WITHOUT REGARD TO ANY VESTING
CONDITIONS THAT MAY APPLY TO SUCH SECURITY.

 

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ARTICLE 11.      AWARDS UNDER OTHER PLANS.

 

The Corporation may grant awards under other plans or programs.  Such awards may
be settled in the form of Common Shares issued under this Plan.  Such Common
Shares shall be treated for all purposes under the Plan like Common Shares
issued in settlement of Stock Units and shall, when issued, reduce the number of
Common Shares available under Article 3.

 

ARTICLE 12.      LIMITATION ON RIGHTS.

 

12.1        Retention Rights.  Neither the Plan nor any Award granted under the
Plan shall be deemed to give any individual a right to remain an Employee.  The
Corporation and its Parents, Subsidiaries and Affiliates reserve the right to
terminate the Service of any Employee at any time, with or without cause,
subject to applicable laws and a written employment agreement (if any).

 

12.2        Stockholders’ Rights.  A Participant shall have no dividend rights,
voting rights or other rights as a stockholder with respect to any Common Shares
covered by his or her Award prior to the time when a stock certificate for such
Common Shares is issued or, if applicable, the time when he or she becomes
entitled to receive such Common Shares by filing any required notice of exercise
and paying any required Exercise Price.  No adjustment shall be made for cash
dividends or other rights for which the record date is prior to such time,
except as expressly provided in the Plan.

 

12.3        Regulatory Requirements.  Any other provision of the Plan
notwithstanding, the obligation of the Corporation to issue Common Shares under
the Plan shall be subject to all applicable laws, rules and regulations and such
approval by any regulatory body as may be required.  The Corporation reserves
the right to restrict, in whole or in part, the delivery of Common Shares
pursuant to any Award prior to the satisfaction of all legal requirements
relating to the issuance of such Common Shares, to their registration,
qualification or listing or to an exemption from registration, qualification or
listing.

 

ARTICLE 13.      WITHHOLDING TAXES.

 

13.1        General.  To the extent required by applicable federal, state, local
or foreign law, a Participant or his or her successor shall make arrangements
satisfactory to the Corporation for the satisfaction of any withholding tax
obligations that arise in connection with the Plan.  The Corporation shall not
be required to issue any Common Shares or make any cash payment under the Plan
until such obligations are satisfied.

 

13.2        Share Withholding.  To the extent that applicable law subjects a
Participant to tax withholding obligations, the Committee may permit such
Participant to satisfy all or part of such obligations by having the Corporation
withhold all or a portion of any Common Shares that otherwise would be issued to
him or her or by surrendering all or a portion of any Common Shares that he or
she previously acquired.  Such Common Shares shall be valued at their Fair
Market Value on the date when they are withheld or surrendered.

 

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ARTICLE 14.      FUTURE OF THE PLAN.

 

14.1        Term of the Plan.  The Plan, as set forth herein, shall become
effective on the date of adoption.  The Plan shall remain in effect until the
earlier of (a) the date the Plan is terminated under Section 14.2 or (b) the
10th anniversary of the date the Board adopted the Plan.

 

14.2        Amendment or Termination.  The Board may, at any time and for any
reason, amend or terminate the Plan.  No Awards shall be granted under the Plan
after the termination thereof.  The termination of the Plan, or any amendment
thereof, shall not affect any Award previously granted under the Plan.

 

14.3        Stockholder Approval.  Approval of the Corporation’s stockholders
shall be required only to the extent required by applicable laws, regulations or
rules.

 

ARTICLE 15.      DEFINITIONS.

 

15.1        “AFFILIATE” MEANS ANY ENTITY OTHER THAN A SUBSIDIARY, IF THE
CORPORATION AND/OR ONE OR MORE SUBSIDIARIES OWN NOT LESS THAN 50% OF SUCH
ENTITY.

 

15.2        “AWARD” MEANS ANY AWARD OF AN OPTION, A RESTRICTED SHARE OR A STOCK
UNIT UNDER THE PLAN.

 

15.3        “BOARD” MEANS THE CORPORATION’S BOARD OF DIRECTORS, AS CONSTITUTED
FROM TIME TO TIME.

 

15.4        “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 ORIGINAL DIRECTORS WHO WERE IN OFFICE AT THE TIME OF THEIR APPOINTMENT
OR NOMINATION AND (B) THE DIRECTORS

 

9

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whose appointment or nomination was previously approved in a manner consistent
with this Paragraph (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 (THE “GOVERNANCE AGREEMENT”) TO
REPRESENTATION ON THE BOARD (AND ITS COMMITTEES) OR (III) ANY ACQUISITION BY GSK
OF SECURITIES OF THE CORPORATION (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 CORPORATION’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.

 

15.5        “CODE” MEANS THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.

 

15.6        “COMMITTEE” MEANS A COMMITTEE OF THE BOARD, AS DESCRIBED IN
ARTICLE 2.

 

15.7        “COMMON SHARE” MEANS ONE SHARE OF THE COMMON STOCK OF THE
CORPORATION.

 

15.8        “CORPORATION” MEANS THERAVANCE, INC., A DELAWARE CORPORATION.

 

15.9        “CONSULTANT” MEANS A CONSULTANT OR ADVISER WHO PROVIDES BONA FIDE
SERVICES TO THE CORPORATION, A PARENT, A SUBSIDIARY OR AN AFFILIATE AS AN
INDEPENDENT CONTRACTOR.

 

15.10      “EMPLOYEE” MEANS A COMMON-LAW EMPLOYEE OF THE CORPORATION, A PARENT,
A SUBSIDIARY OR AN AFFILIATE WHO IS NEWLY HIRED AS A EMPLOYEE BY THE
CORPORATION, OR WHO IS REHIRED FOLLOWING A BONA FIDE PERIOD OF INTERRUPTION OF
EMPLOYMENT, INCLUDING PERSONS WHO BECOME NEW EMPLOYEES OF THE CORPORATION, A
PARENT, A SUBSIDIARY OR AN AFFILIATE IN CONNECTION WITH A MERGER OR ACQUISITION.

 

15.11      “EXCHANGE ACT” MEANS THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

10

--------------------------------------------------------------------------------

 

15.12      “EXERCISE PRICE,” IN THE CASE OF AN OPTION, MEANS THE AMOUNT FOR
WHICH ONE COMMON SHARE MAY BE PURCHASED UPON EXERCISE OF SUCH OPTION, AS
SPECIFIED IN THE APPLICABLE STOCK OPTION AGREEMENT.

 

15.13      “FAIR MARKET VALUE” MEANS THE CLOSING SELLING PRICE OF ONE COMMON
SHARE AS REPORTED ON NASDAQ, AND IF NOT AVAILABLE, THEN IT SHALL BE DETERMINED
BY THE COMMITTEE IN GOOD FAITH ON SUCH BASIS AS IT DEEMS APPROPRIATE.  WHENEVER
POSSIBLE, THE DETERMINATION OF FAIR MARKET VALUE BY THE COMMITTEE SHALL BE BASED
ON THE PRICES REPORTED IN THE WALL STREET JOURNAL.  SUCH DETERMINATION SHALL BE
CONCLUSIVE AND BINDING ON ALL PERSONS.

 

15.14      “NSO” MEANS A STOCK OPTION NOT DESCRIBED IN SECTIONS 422 OR 423 OF
THE CODE.

 

15.15      “OPTION” MEANS AN NSO GRANTED UNDER THE PLAN AND ENTITLING THE HOLDER
TO PURCHASE COMMON SHARES.

 

15.16      “OPTIONEE” MEANS AN INDIVIDUAL OR ESTATE WHO HOLDS AN OPTION.

 

15.17      “PARENT” MEANS ANY CORPORATION (OTHER THAN THE CORPORATION) IN AN
UNBROKEN CHAIN OF CORPORATIONS ENDING WITH THE CORPORATION, IF EACH OF THE
CORPORATIONS OTHER THAN THE CORPORATION OWNS STOCK POSSESSING 50% OR MORE OF THE
TOTAL COMBINED VOTING POWER OF ALL CLASSES OF STOCK IN ONE OF THE OTHER
CORPORATIONS IN SUCH CHAIN.  A CORPORATION THAT ATTAINS THE STATUS OF A PARENT
ON A DATE AFTER THE ADOPTION OF THE PLAN SHALL BE CONSIDERED A PARENT COMMENCING
AS OF SUCH DATE.

 

15.18      “PARTICIPANT” MEANS AN INDIVIDUAL OR ESTATE WHO HOLDS AN AWARD.

 

15.19      “PLAN” MEANS THIS THERAVANCE, INC. 2008 NEW EMPLOYEE EQUITY INCENTIVE
PLAN, AS AMENDED FROM TIME TO TIME.

 

15.20      “RESTRICTED SHARE” MEANS A COMMON SHARE AWARDED UNDER THE PLAN.

 

15.21      “RESTRICTED STOCK AGREEMENT” MEANS THE AGREEMENT BETWEEN THE
CORPORATION AND THE RECIPIENT OF A RESTRICTED SHARE THAT CONTAINS THE TERMS,
CONDITIONS AND RESTRICTIONS PERTAINING TO SUCH RESTRICTED SHARE.

 

15.22      “SERVICE” MEANS SERVICE AS AN EMPLOYEE OR CONSULTANT.

 

15.23      “STOCK OPTION AGREEMENT” MEANS THE AGREEMENT BETWEEN THE CORPORATION
AND AN OPTIONEE THAT CONTAINS THE TERMS, CONDITIONS AND RESTRICTIONS PERTAINING
TO HIS OR HER OPTION.

 

15.24      “STOCK UNIT” MEANS A BOOKKEEPING ENTRY REPRESENTING THE EQUIVALENT OF
ONE COMMON SHARE, AS AWARDED UNDER THE PLAN.

 

15.25      “STOCK UNIT AGREEMENT” MEANS THE AGREEMENT BETWEEN THE CORPORATION
AND THE RECIPIENT OF A STOCK UNIT THAT CONTAINS THE TERMS, CONDITIONS AND
RESTRICTIONS PERTAINING TO SUCH STOCK UNIT.

 

11

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15.26      “SUBSIDIARY” MEANS ANY CORPORATION (OTHER THAN THE CORPORATION) IN AN
UNBROKEN CHAIN OF CORPORATIONS BEGINNING WITH THE CORPORATION, IF EACH OF THE
CORPORATIONS OTHER THAN THE LAST CORPORATION IN THE UNBROKEN CHAIN OWNS STOCK
POSSESSING 50% OR MORE OF THE TOTAL COMBINED VOTING POWER OF ALL CLASSES OF
STOCK IN ONE OF THE OTHER CORPORATIONS IN SUCH CHAIN.  A CORPORATION THAT
ATTAINS THE STATUS OF A SUBSIDIARY ON A DATE AFTER THE ADOPTION OF THE PLAN
SHALL BE CONSIDERED A SUBSIDIARY COMMENCING AS OF SUCH DATE.

 

12

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EXHIBIT A

 

SCHEDULE OF SHARES RESERVED FOR ISSUANCE UNDER THE PLAN

 

Date of Board/Committee
Approval

 

Number of Shares Added

 

Cumulative Number of
Shares

January 29, 2008

 

Not Applicable

 

500,000

July 21, 2009

 

200,000

 

700,000

 

--------------------------------------------------------------------------------

 

Form of Notice of Grant and Stock Option Agreement under 2008 New Employee
Equity Incentive Plan

 

THERAVANCE, INC.

 

2008 NEW EMPLOYEE EQUITY INCENTIVE PLAN

 

NOTICE OF STOCK OPTION GRANT

 

You have been granted the following option to purchase shares of the Common
Stock of Theravance, Inc. (the “Company”):

 

Name of Optionee:

 

«Name»

 

 

 

ID Number:

 

«ID»

 

 

 

Total Number of Shares Granted:

 

«Shares»

 

 

 

Type of Option:

 

Nonstatutory Stock Option

 

 

 

Grant Number:

 

«Number»

 

 

 

Exercise Price Per Share:

 

$«Price»

 

 

 

Date of Grant:

 

«DateGrant»

 

 

 

Vesting Commencement Date:

 

«VestDay»

 

 

 

Vesting Schedule:

 

This option becomes exercisable with respect to the first 25% of the Shares
subject to this option when you complete 12 months of continuous Service from
the Vesting Commencement Date and with respect to an additional 2.0833% of the
Shares subject to this option when you complete each month of continuous Service
thereafter.

 

 

 

Expiration Date:

 

«ExpDate». This option expires earlier if your Service terminates earlier, as
described in the Stock Option Agreement.

 

You and the Company agree that this option is granted under and governed by the
terms and conditions of the Stock Option Agreement, which is attached to and
made a part of this document, and the Company’s 2008 New Employee Equity
Incentive Plan (the “Plan”).

 

You further agree that the Company may deliver by email all documents relating
to the Plan or this option (including, without limitation, prospectuses required
by the Securities and Exchange Commission) and all other documents that the
Company is required to deliver to its security holders (including, without
limitation, annual reports and proxy statements). You also agree that the
Company may deliver these documents by posting them on a web site maintained by
the Company or by a third party under contract with the Company. If the Company
posts these documents on a web site, it will notify you by email.

 

--------------------------------------------------------------------------------

 

THERAVANCE, INC.

2008 NEW EMPLOYEE EQUITY INCENTIVE PLAN

 

STOCK OPTION AGREEMENT

 

Grant of Option

 

You have been granted an option as of the Grant Date to purchase up to the
number of Shares of Company Common Stock specified in the Notice of Stock Option
Grant.

 

 

 

Tax Treatment

 

This option is a nonstatutory stock option.

 

 

 

Vesting

 

This option becomes exercisable in installments, as shown in the Notice of Stock
Option Grant.

 

 

 

 

 

This option shall become exercisable in full if not assumed or a new option
substituted pursuant to Section 11.3 of the Plan. In addition, this option
becomes exercisable in full if the Company is subject to a “Change in Control”
(as defined in the Plan) before your Service (as defined in the Plan)
terminates, and you are subject to an Involuntary Termination (as defined below)
within three months prior or 24 months after the Change in Control.

 

 

 

 

 

For purposes of this Agreement, “Cause” shall mean (i) the unauthorized use or
disclosure of the confidential information or trade secrets of the Company,
which use causes material harm to the Company, (ii) conviction of a felony under
the laws of the United States or any state thereof, (iii) gross negligence or
(iv) repeated failure to perform lawful assigned duties for thirty days after
receiving written notification from the Board of Directors.

 

 

 

 

 

For purposes of this Agreement, “Involuntary Termination” means the termination
of your Service by reason of:

 

 

 

 

 

(a)

an involuntary dismissal or discharge by the Company for reasons other than for
Cause; or

 

 

 

 

 

 

(b)

your voluntary resignation following (i) a change in your position with the
Company (or Parent or Subsidiary employing you) which materially reduces your
level of responsibility, (ii) a reduction in your level of compensation
(including base salary, fringe benefits and participation in
corporate-performance based bonus or incentive programs) or (iii) a relocation
of your workplace more than fifty miles away from the workplace designated by
the Company on your initial date of service, provided and only if such change,
reduction or relocation is effected by the Company without your consent.

 

 

 

 

 

 

No additional shares will vest after your Service has terminated for any reason,
except to the extent set forth above if you are subject to an Involuntary
Termination within three months prior to a Change in Control.

 

--------------------------------------------------------------------------------

 

Term

 

This option expires in any event at the close of business at Company
headquarters on the day before the 10th anniversary of the Date of Grant, as
shown in the Notice of Stock Option Grant. (It will expire earlier if your
Service terminates, as described below.) You may exercise this option at any
time before its expiration under the preceding sentence, but only to the extent
that this option had become exercisable before your Service terminated.

 

 

 

Regular Termination

 

If your Service terminates for any reason except death or total and permanent
disability, then this option will expire at the close of business at Company
headquarters on the date three months after your termination date. The Company
determines when your Service terminates for this purpose.

 

 

 

Death

 

If you die before your Service terminates, then this option will expire at the
close of business at Company headquarters on the date that is 12 months after
the date of death.

 

 

 

Disability

 

If your Service terminates because of your total and permanent disability, then
this option will expire at the close of business at Company headquarters on the
date 12 months after your termination date.

 

 

 

 

 

For all purposes under this Agreement, “total and permanent disability” means
that you are unable to engage in any substantial gainful activity by reason of
any medically determinable physical or mental impairment which can be expected
to result in death or which has lasted, or can be expected to last, for a
continuous period of not less than one year.

 

 

 

Leaves of Absence and Part-Time Work

 

For purposes of this option, your Service does not terminate when you go on a
military leave, a sick leave or another bona fide leave of absence, if the leave
was approved by the Company in writing. But your Service terminates when the
approved leave ends, unless you immediately return to active work.

 

 

 

 

 

If you go on a leave of absence, then the vesting schedule specified in the
Notice of Stock Option Grant may be adjusted in accordance with the Company’s
leave of absence policy or the terms of your leave. If you commence working on a
part-time basis, then the vesting schedule specified in the Notice of Stock
Option Grant may be adjusted in accordance with the Company’s part-time work
policy or the terms of an agreement between you and the Company pertaining to
your part-time schedule.

 

 

 

Restrictions on Exercise

 

The Company will not permit you to exercise this option if the issuance of
shares at that time would violate any law or regulation.

 

2

--------------------------------------------------------------------------------

 

Notice of Exercise

 

When you wish to exercise this option, you must notify the Company by filing the
proper “Notice of Exercise” form at the address given on the form. Your notice
must specify how many shares you wish to purchase. Your notice must also specify
how your shares should be registered. The notice will be effective when the
Company receives it.

 

 

 

 

 

If someone else wants to exercise this option after your death, that person must
prove to the Company’s satisfaction that he or she is entitled to do so.

 

 

 

Form of Payment

 

When you submit your notice of exercise, you must include payment of the option
exercise price for the shares that you are purchasing. To the extent permitted
by applicable law, payment may be made in one (or a combination of two or more)
of the following forms:

 

 

 

 

 

·

Your personal check, a cashier’s check or a money order.

 

 

 

 

 

·

Certificates for shares of Company stock that you own, along with any forms
needed to effect a transfer of those shares to the Company. The value of the
shares, determined as of the effective date of the option exercise, will be
applied to the option exercise price. Instead of surrendering shares of Company
stock, you may attest to the ownership of those shares on a form provided by the
Company and have the same number of shares subtracted from the option shares
issued to you. However, you may not surrender, or attest to the ownership of,
shares of Company stock in payment of the exercise price if your action would
cause the Company to recognize additional compensation expense with respect to
this option for financial reporting purposes.

 

 

 

 

 

·

Irrevocable directions to a securities broker approved by the Company to sell
all or part of your option shares and to deliver to the Company from the sale
proceeds an amount sufficient to pay the option exercise price and any
withholding taxes. (The balance of the sale proceeds, if any, will be delivered
to you.) The directions must be given by signing a special “Notice of Exercise”
form provided by the Company.

 

 

 

 

 

·

Irrevocable directions to a securities broker or lender approved by the Company
to pledge option shares as security for a loan and to deliver to the Company
from the loan proceeds an amount sufficient to pay the option exercise price and
any withholding taxes. The directions must be given by signing a special “Notice
of Exercise” form provided by the Company.

 

3

--------------------------------------------------------------------------------

 

Withholding Taxes and Stock Withholding

 

You will not be allowed to exercise this option unless you make arrangements
acceptable to the Company to pay any withholding taxes that may be due as a
result of the option exercise. With the Company’s consent, these arrangements
may include withholding shares of Company stock that otherwise would be issued
to you when you exercise this option. The value of these shares, determined as
of the effective date of the option exercise, will be applied to the withholding
taxes.

 

 

 

Restrictions on Resale

 

You agree not to sell any option shares at a time when applicable laws, Company
policies or an agreement between the Company and its underwriters prohibit a
sale. This restriction will apply as long as your Service continues and for such
period of time after the termination of your Service as the Company may specify.

 

 

 

Transfer of Option

 

Prior to your death, only you may exercise this option. You cannot transfer or
assign this option. For instance, you may not sell this option or use it as
security for a loan. If you attempt to do any of these things, this option will
immediately become invalid. You may, however, dispose of this option in your
will or a beneficiary designation.

 

 

 

 

 

Regardless of any marital property settlement agreement, the Company is not
obligated to honor a notice of exercise from your former spouse, nor is the
Company obligated to recognize your former spouse’s interest in your option in
any other way.

 

 

 

Retention Rights

 

Your option or this Agreement does not give you the right to be retained by the
Company or a subsidiary of the Company in any capacity. The Company and its
subsidiaries reserve the right to terminate your Service at any time, with or
without cause.

 

 

 

Stockholder Rights

 

You, or your estate or heirs, have no rights as a stockholder of the Company
until you have exercised this option by giving the required notice to the
Company and paying the exercise price. No adjustments are made for dividends or
other rights if the applicable record date occurs before you exercise this
option, except as described in the Plan.

 

 

 

Adjustments

 

In the event of a stock split, a stock dividend or a similar change in Common
Stock, the number of shares covered by this option and the exercise price per
share shall be adjusted as provided in the Plan.

 

 

 

Applicable Law

 

This Agreement will be interpreted and enforced under the laws of the State of
Delaware (without regard to their choice-of-law provisions).

 

4

--------------------------------------------------------------------------------

 

The Plan and Other Agreements

 

The text of the Plan is incorporated in this Agreement by reference. A copy of
the Plan is available on the Company’s intranet or by request to the Company’s
Finance Department.

 

 

 

 

 

This Agreement and the Plan constitute the entire understanding between you and
the Company regarding this option. Any prior agreements, commitments or
negotiations concerning this option are superseded. This Agreement may be
amended only by another written agreement between the parties.

 

BY ACCEPTING THIS STOCK OPTION GRANT, YOU AGREE TO ALL OF THE TERMS AND

CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.

 

5

--------------------------------------------------------------------------------

 

Form of Notice of Restricted Stock Unit Award and Restricted Stock Unit
Agreement under 2008 New Employee Equity Incentive Plan

 

THERAVANCE, INC. 2008 NEW EMPLOYEE EQUITY INCENTIVE PLAN

 

NOTICE OF RESTRICTED STOCK UNIT AWARD

 

You have been granted the number of restricted stock units indicated below by
Theravance, Inc. (the “Company”) on the following terms:

 

Name:                    «Name»

 

Restricted Stock Unit Award Details:

 

Date of Grant:

«DateGrant»

Restricted Stock Units:

«TotalShares»

Vesting Commencement Date:

«VestComDate»

 

Each restricted stock unit (the “Restricted Stock Unit”) represents the right to
receive one share of the Company’s Common Stock subject to the terms and
conditions contained in the Restricted Stock Unit Agreement.

 

Vesting Schedule:

 

Vesting is dependent upon continuous service as an employee or consultant of the
Company, a Parent, a Subsidiary or an Affiliate (“Service”) throughout the
vesting period.  The units will vest as follows:  25% on «InitialVestDate»;
6.25% on  «SecondVestDate»; and an additional 6.25% on the final day of each
3-month period thereafter until the final vest date, which is three years after
«InitialVestDate», provided that you remain in continuous service through such
date.

 

You and the Company agree that your right to receive the units is granted under
and governed by the terms and conditions of the Plan and of the Restricted Stock
Unit Agreement that is attached to and made a part of this document. 
Capitalized terms not defined herein have the meaning ascribed to such terms in
the Plan.

 

You agree that the Company may deliver by email all documents relating to the
Plan or this award (including, without limitation, prospectuses required by the
Securities and Exchange Commission) and all other documents that the Company is
required to deliver to its security holders (including, without limitation,
annual reports and proxy statements).  You also agree that the Company may
deliver these documents by posting them on a web site maintained by the Company
or by a third party under contract with the Company.  If the Company posts these
documents on a web site, it will notify you by email.

 

You further agree to cover the applicable withholding taxes as set forth more
fully herein.

 

--------------------------------------------------------------------------------

 

THERAVANCE, INC. 2008 NEW EMPLOYEE EQUITY INCENTIVE PLAN:

RESTRICTED STOCK UNIT AGREEMENT

 

Payment for Shares

 

No payment is required for the restricted stock units you are receiving.

 

 

 

Nature of Units

 

Your units are bookkeeping entries. They represent only the Company’s unfunded
and unsecured promise to issue shares of Common Stock on a future date. As a
holder of units, you have no rights other than the rights of a general creditor
of the Company.

 

 

 

Settlement of Units

 

Each of your units will be settled when it vests (unless you and the Company
have agreed to a later settlement date pursuant to procedures that the Company
may prescribe at its discretion).

 

 

 

 

 

At the time of settlement, you will receive one share of the Company’s Common
Stock for each vested unit.

 

 

 

Vesting

 

The restricted stock units that you are receiving will vest as shown in the
Notice of Restricted Stock Unit Award.

 

 

 

 

 

No additional units vest after your Service has terminated for any reason,
except as set forth on the Notice of Restricted Stock Unit Award. It is intended
that vesting in the restricted stock units is commensurate with a full-time work
schedule. For possible adjustments that may be made by the Company, see the
Section below entitled “Leaves of Absence and Part-Time Work.”

 

 

 

 

 

The restricted stock units will vest in full if not assumed or substituted with
a new award as set forth in Section 11.3 of the Plan.

 

 

 

Forfeiture

 

If your Service terminates for any reason then your restricted stock units that
have not vested before the termination date and do not vest as a result of the
termination pursuant to this Agreement or as set forth on the Notice of
Restricted Stock Unit Award, will be forfeited immediately. This means that the
restricted stock units will immediately revert to the Company. You receive no
payment for restricted stock units that are forfeited. The Company determines
when your Service terminates for this purpose.

 

 

 

Leaves of Absence and Part-Time Work

 

For purposes of this award, your Service does not terminate when you go on a
military leave, a sick leave or another bona fide leave of absence, if the leave
was approved by the Company in writing. If your leave of absence lasts for more
than 6 months, then vesting will be suspended on the day that is 6 months and 1
day after the leave of absence began. Vesting will resume effective as of the
second vesting date after you

 

--------------------------------------------------------------------------------

 

 

 

return from leave of absence provided you have worked at least one day during
that vesting period.

 

 

 

 

 

In the case of all leaves, your Service terminates when the approved leave ends,
unless you immediately return to active work.

 

 

 

 

 

If you and the Company agree to a reduction in your scheduled work hours, then
the Company reserves the right to modify the rate at which the restricted stock
units vest, so that the rate of vesting is commensurate with your reduced work
schedule. Any such adjustment shall be consistent with the Company’s policies
for part-time or reduced work schedules or shall be pursuant to the terms of an
agreement between you and the Company pertaining to your reduced work schedule.

 

 

 

 

 

The Company shall not be required to adjust any vesting schedule pursuant to
this subsection.

 

 

 

Stock Certificates

 

No shares of Common Stock shall be issued to you prior to the date on which the
restricted stock units vest. After any restricted stock units vest pursuant to
this Agreement, the Company shall promptly cause to be issued in book-entry
form, registered in your name or in the name of your legal representatives,
beneficiaries or heirs, as the case may be, the number of shares of Common Stock
representing your vested restricted stock units. No fractional shares shall be
issued.

 

 

 

Stockholder Rights

 

The restricted stock units do not entitle you to any of the rights of a
stockholder of Common Stock. Upon settlement of the restricted stock units into
shares of Common Stock, you will obtain full voting and other rights as a
stockholder of the Company.

 

 

 

Units Restricted

 

You may not sell, transfer, pledge or otherwise dispose of any restricted stock
units or rights under this Agreement other than by will or by the laws of
descent and distribution. Notwithstanding the foregoing, you may designate a
beneficiary or beneficiaries to receive any property distributable with respect
to the restricted stock units upon your death.

 

 

 

Withholding Taxes

 

No shares will be distributed to you unless you have made arrangements
acceptable to the Company to pay any withholding taxes that may be due as a
result of the settlement of this award. Prior to the relevant taxable event, you
shall pay or make adequate arrangements satisfactory to the Company to satisfy
all withholding obligations for applicable taxes. You authorize the Company to
instruct the broker whom it has selected for this purpose to sell a number of
shares of Common Stock to be issued upon the vesting of your restricted stock
units to meet the withholding obligations. Such sales shall be effected at the
prevailing market price following the date that the restricted stock units vest.

 

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You acknowledge that the proceeds of any such sale may not be sufficient to
satisfy your withholding obligations. To the extent the proceeds from such sale
are insufficient to cover the taxes due, the Company may in its discretion
(a) withhold the balance of all applicable taxes legally payable by you from
your wages or other cash compensation paid to you by the Company and/or
(b) withhold in shares of Common Stock, provided that the Company only withholds
an amount of shares not in excess of the amount necessary to satisfy the minimum
withholding amount. The fair market value of withheld shares, determined as of
the date taxes otherwise would have been withheld in cash, will be applied
against the withholding taxes. If the Company satisfies the obligation for taxes
by withholding a number of shares of Common Stock as described above, you are
deemed to have been issued the full number of shares subject to the award of
restricted stock units.

 

 

 

Restrictions on Issuance

 

The Company will not issue shares to you if the issuance of shares at that time
would violate any law or regulation.

 

 

 

Restrictions on Resale

 

You agree not to sell any shares of Common Stock you receive under this
Agreement at a time when applicable laws, regulations, Company trading policies
(including the Company’s Insider Trading Policy, a copy of which can be found on
the Company’s intranet) or an agreement between the Company and its underwriters
prohibit a sale. This restriction will apply as long as your Service continues
and for such period of time after the termination of your Service as the Company
may specify.

 

 

 

No Retention Rights

 

Your award or this Agreement does not give you the right to be employed or
retained by the Company (or a Parent or Subsidiary) in any capacity. The Company
and its Parent and its Subsidiaries reserve the right to terminate your Service
at any time, with or without cause.

 

 

 

Beneficiary Designation

 

You may dispose of your units in a written beneficiary designation. A
beneficiary designation must be filed with the Company on the proper form. It
will be recognized only if it has been received at the Company’s headquarters
before your death. If you file no beneficiary designation or if none of your
designated beneficiaries survives you, then your estate will receive any vested
units that you hold at the time of your death.

 

 

 

Adjustments

 

In the event of a stock split, a stock dividend or a similar change in Common
Stock, the number of restricted stock units that will vest in any future
installments will be adjusted accordingly.

 

 

 

Applicable Law

 

This Agreement will be interpreted and enforced with respect to issues of
contract law under the laws of the State of Delaware.

 

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The Plan and Other Agreements

 

The text of the Plan is incorporated in this Agreement by reference. A copy of
the Plan is available on the Company’s intranet or by request to the Finance
Department.

 

 

 

 

 

This Agreement, the Notice of Restricted Stock Unit Award, and the Plan
constitute the entire understanding between you and the Company regarding this
award. Any prior agreements, commitments or negotiations concerning this award
are superseded. This Agreement may be amended only by another written agreement
between the parties.

 

BY ACCEPTING THIS RESTRICTED STOCK UNIT AWARD, YOU AGREE TO

 

ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.

 

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