Exhibit 10.32


 


THERAVANCE, INC.



2008 NEW EMPLOYEE EQUITY INCENTIVE PLAN



(AS ADOPTED EFFECTIVE JANUARY 29, 2008)


(AS AMENDED JULY 21, 2009)


(AS AMENDED DECEMBER 16, 2009)


 

















 


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 


 

















 


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 


 






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


 


2

















 


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 


 


5

















 


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.


 


8

















 


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

















 


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

















 


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

















 


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