Exhibit 10.40


 


THERAVANCE, INC. 2004
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 (the “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 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 agree to cover the applicable withholding
taxes as set forth more fully herein.  In
connection with your receipt of the restricted stock units, you are
simultaneously entering into a trading arrangement that complies with the
requirements of Rule 10b5-1(c)(1) under the Securities Exchange Act
of 1934 (a “10b5-1 Plan”).  As of the
date of the Agreement, you are not aware of any material nonpublic information
concerning the Company or its securities, or, as of the date any sales are
effected pursuant to the 10b5-1 Plan, you will not effect such sales on the
basis of material nonpublic information about the securities or the Company of
which you were aware at the time you entered into the Agreement.


 

















 


THERAVANCE, INC. 2004
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 or a lesser number necessary to meet tax withholding obligations.  You further 

  



 


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  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 all other restricted
  stock units granted to you prior to the Date of Grant or a lesser number of
  shares that vest under such other awards as necessary to meet tax withholding
  obligations.  Such sales shall be
  effected at a market price following the date that the restricted stock units
  vest (unless you and the Company have agreed to a later settlement
  date pursuant to procedures that the Company may prescribe at its discretion).

   

  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.

  
	
   

  	
   

  
	
  Rule 10b5-1 Plan

  	
  You acknowledge that
  the instruction to the broker to sell in the foregoing section is intended to
  comply with the requirements of Rule 10b5-1(c)(1)(i)(B) under the
  Securities Exchange Act of 1934 (the “Exchange Act”), and to be interpreted
  to comply with the requirements of Rule 10b5-1(c)(1) under the
  Exchange Act (a “10b5-1 Plan”).  This 10b5-1 Plan is adopted
  to be effective as of the first date on which the applicable restricted stock
  units vest.  This 10b5-1 Plan is being
  adopted to permit you to sell a number of shares awarded upon the vesting of
  restricted stock units sufficient to pay withholding taxes that become due as
  a result of the award or the vesting of the restricted stock units or, if you
  elect within thirty days following notification via the broker whom the
  Company has selected for this purpose of your restricted stock unit award, to
  permit you to sell all of the applicable vested restricted stock units.  You hereby appoint the Company as your
  agent and attorney-in-fact to instruct the broker with respect to the number
  of shares to be sold under this 10b5-1 Plan.

   

  You
  hereby authorize the broker to sell the number of shares of Common Stock
  determined as set forth above and acknowledge that the broker is under no
  obligation to arrange for such sale at any particular price. You acknowledge
  that the broker may aggregate your sales with sales occurring on the same day
  that are effected on behalf of other 

  



 


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  Company
  employees pursuant to sales of shares vesting under Company options or
  restricted stock unit awards and your proceeds will be based on a blended
  price for all such sales. You acknowledge that you will be responsible for
  all brokerage fees and other costs of sale, and you agree to indemnify and
  hold the Company harmless from any losses, costs, damages, or expenses
  relating to any such sale.  You
  acknowledge that it may not be possible to sell Common Stock during the term
  of this 10b5-1 Plan due to (a) a legal or contractual restriction
  applicable to you or to the broker, (b) a market disruption, (c) rules governing
  order execution priority on the Nasdaq Global Market, (d) a sale
  effected pursuant to this 10b5-1 Plan that fails to comply (or in the
  reasonable opinion of the broker’s counsel is likely not to comply) with Rule 144
  under the Securities Act of 1933, if applicable, or (e) if the Company
  determines that sales may not be effected under this 10b5-1 Plan.  You acknowledge that this 10b5-1 Plan is
  subject to the terms of any policy adopted now or hereafter by the Company
  governing the adoption of 10b5-1 plans.

  
	
   

  	
   

  
	
  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.

  
	
   

  	
   

  
	
  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.

  
	
   

  	
   

  
	
  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 

  



 


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  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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