Document:

Exhibit 10.3

 

THERAVANCE, INC.
  
 2004 EQUITY INCENTIVE PLAN
  
  (AS AMENDED AND RESTATED FEBRUARY 10, 2010)

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
ARTICLE I.
    	
INTRODUCTION
    	
1
    
	
 
    	
 
    	
 
    
	
ARTICLE II.
    	
ADMINISTRATION
    	
1
    
	
2.1
    	
Committee Composition
    	
1
    
	
2.2
    	
Committee Responsibilities
    	
1
    
	
2.3
    	
Committee for   Non-Officer Grants
    	
2
    
	
 
    	
 
    	
 
    
	
ARTICLE III.
    	
SHARES AVAILABLE FOR   GRANTS
    	
2
    
	
3.1
    	
Basic Limitation
    	
2
    
	
3.2
    	
Additional Shares
    	
2
    
	
3.3
    	
Shares Subject to   Substituted Awards
    	
3
    
	
 
    	
 
    	
 
    
	
ARTICLE IV.
    	
ELIGIBILITY
    	
3
    
	
4.1
    	
Incentive Stock Options
    	
3
    
	
4.2
    	
Other Grants
    	
3
    
	
 
    	
 
    	
 
    
	
ARTICLE V.
    	
OPTIONS
    	
3
    
	
5.1
    	
Stock Option Agreement
    	
3
    
	
5.2
    	
Number of Shares
    	
3
    
	
5.3
    	
Exercise Price
    	
4
    
	
5.4
    	
Exercisability and Term
    	
4
    
	
5.5
    	
Modification or   Assumption of Options
    	
4
    
	
5.6
    	
Buyout Provisions
    	
4
    
	
 
    	
 
    	
 
    
	
ARTICLE VI.
    	
PAYMENT FOR OPTION SHARES
    	
4
    
	
6.1
    	
General Rule
    	
4
    
	
6.2
    	
Surrender of Stock
    	
5
    
	
6.3
    	
Exercise/Sale
    	
5
    
	
6.4
    	
Exercise/Pledge
    	
5
    
	
6.5
    	
Promissory Note
    	
5
    
	
6.6
    	
Other Forms of Payment
    	
5
    
	
 
    	
 
    	
 
    
	
ARTICLE VII.
    	
STOCK APPRECIATION   RIGHTS
    	
5
    
	
7.1
    	
SAR Agreement
    	
5
    
	
7.2
    	
Number of Shares
    	
5
    
	
7.3
    	
Exercise Price
    	
6
    
	
7.4
    	
Exercisability and Term
    	
6
    
	
7.5
    	
Exercise of SARs
    	
6
    
	
7.6
    	
Modification or   Assumption of SARs
    	
6
    
	
 
    	
 
    	
 
    
	
ARTICLE VIII.
    	
RESTRICTED SHARES
    	
7
    
	
8.1
    	
Restricted Stock   Agreement
    	
7
    
	
8.2
    	
Payment for Awards
    	
7
    
	
8.3
    	
Vesting Conditions
    	
7
    

 

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8.4
    	
Voting and Dividend   Rights
    	
7
    
	
 
    	
 
    	
 
    
	
ARTICLE IX.
    	
STOCK UNITS AND   PERFORMANCE CASH AWARDS
    	
8
    
	
9.1
    	
Stock Unit Agreement
    	
8
    
	
9.2
    	
Payment for Awards
    	
8
    
	
9.3
    	
Vesting Conditions
    	
8
    
	
9.4
    	
Voting and Dividend   Rights
    	
8
    
	
9.5
    	
Form and Time of   Settlement of Stock Units
    	
8
    
	
9.6
    	
Death of Recipient
    	
9
    
	
9.7
    	
Creditors’ Rights
    	
9
    
	
9.8
    	
Performance Cash Awards
    	
9
    
	
 
    	
 
    	
 
    
	
ARTICLE X.
    	
CHANGE IN CONTROL
    	
9
    
	
10.1
    	
Effect of Change in   Control
    	
9
    
	
10.2
    	
Acceleration
    	
10
    
	
 
    	
 
    	
 
    
	
ARTICLE XI.
    	
PROTECTION AGAINST   DILUTION
    	
10
    
	
11.1
    	
Adjustments
    	
10
    
	
11.2
    	
Dissolution or   Liquidation
    	
10
    
	
11.3
    	
Reorganizations
    	
10
    
	
 
    	
 
    	
 
    
	
ARTICLE XII.
    	
DEFERRAL OF AWARDS
    	
11
    
	
 
    	
 
    	
 
    
	
ARTICLE XIII.
    	
AWARDS UNDER OTHER   PLANS
    	
12
    
	
 
    	
 
    	
 
    
	
ARTICLE XIV.
    	
PAYMENT OF FEES IN   SECURITIES
    	
12
    
	
14.1
    	
Effective Date
    	
12
    
	
14.2
    	
Elections to Receive   NSOs, Restricted Shares or Stock Units
    	
12
    
	
14.3
    	
Number and Terms of   NSOs, Restricted Shares or Stock Units
    	
12
    
	
 
    	
 
    	
 
    
	
ARTICLE XV.
    	
LIMITATION ON RIGHTS
    	
13
    
	
15.1
    	
Retention Rights
    	
13
    
	
15.2
    	
Stockholders’ Rights
    	
13
    
	
15.3
    	
Regulatory Requirements
    	
13
    
	
15.4
    	
Transferability of   Awards
    	
13
    
	
 
    	
 
    	
 
    
	
ARTICLE XVI.
    	
WITHHOLDING TAXES
    	
13
    
	
16.1
    	
General
    	
13
    
	
16.2
    	
Share Withholding
    	
14
    
	
 
    	
 
    	
 
    
	
ARTICLE XVII.
    	
FUTURE OF THE PLAN
    	
14
    
	
17.1
    	
Term of the Plan
    	
14
    
	
17.2
    	
Amendment or   Termination
    	
14
    
	
17.3
    	
Stockholder Approval
    	
14
    
	
 
    	
 
    	
 
    
	
ARTICLE XVIII.
    	
DEFINITIONS
    	
15
    

 

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THERAVANCE, INC.
 2004 EQUITY INCENTIVE PLAN

 

ARTICLE I.                                                  INTRODUCTION.

 

The Plan was adopted by the Board on May 27, 2004 to be effective at the IPO, and the amendment and restatement of the Plan was approved by the Board and the Compensation Committee of the Board on February 10, 2010 to be effective on the date of the Corporation’s 2010 Annual Meeting of Stockholders assuming the Plan is approved by the Corporation’s stockholders at such meeting. 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, Outside Directors and Consultants to focus on critical long-range objectives, (b) encouraging the attraction and retention of Employees, Outside Directors and Consultants with exceptional qualifications, and (c) linking Employees, Outside Directors and Consultants directly to stockholder interests through increased stock ownership.  The Plan seeks to achieve this purpose by providing for the following Awards:  (i) Options (which may constitute incentive stock options or nonstatutory stock options), (ii) stock appreciation rights, (iii) Restricted Shares, (iv) Stock Units and (v) Performance Cash Awards.

 

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 II.                                             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 Internal Revenue Service may establish for outside directors acting under plans intended to qualify for exemption under section 162(m)(4)(C) of the Code;

 

(c)                                  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

 

(d)                                 Any other requirements imposed by applicable law, regulations or rules.

 

2.2                               Committee Responsibilities.  The Committee shall (a) select the Employees, Outside Directors and Consultants 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 and Consultants who are not Outside Directors and 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 Consultants 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 III.                                        SHARES AVAILABLE FOR GRANTS.

 

3.1                               Basic Limitation.  Shares of Common Stock issued pursuant to the Plan may be authorized but unissued shares or treasury shares.  The aggregate number of shares of Common Stock that may be awarded pursuant to Stock Awards granted under the Plan on or after January 1, 2010 shall not exceed (a) 7,600,000 shares (which includes 1,541,428 shares remaining available for issuance under the Plan as of January 1, 2010) and (b) the additional shares of Common Stock described in Sections 3.2 and 3.3(1).  The number of shares of Common Stock that may be awarded pursuant to ISOs granted under the Plan on or after January 1, 2010 shall not exceed 7,600,000 shares.  The number of shares of Common Stock that may be awarded under the Plan on or after January 1, 2010 shall be reduced by (a) one share for every option and stock appreciation right granted under the Plan or the Corporation’s 2008 New Employee Equity Incentive Plan on or after January 1, 2010 and (b) 1.45 shares for every stock award other than an option or stock appreciation right granted under the Plan or the Corporation’s 2008 New Employee Equity Incentive Plan on or after January 1, 2010.  The limitations of this Section 3.1 shall be subject to adjustment pursuant to Article 11.  The number of shares of Common Stock that are subject to Options or other rights outstanding at any time under the Plan shall not exceed the number of shares of Common Stock that then remain available for issuance under the Plan.   No further awards shall be granted under the Predecessor Plans after the dates specified in Section 17.1.

 

3.2                               Additional Shares.  If restricted shares or shares of Common Stock issued upon the exercise of options under this Plan or the Predecessor Plans are forfeited or repurchased, then such shares of Common Stock shall again become available for Stock Awards under this Plan.  If stock units, options or stock appreciation rights under this Plan or the Predecessor Plans are forfeited, settled in cash (in whole or in part) or terminate for any other reason before being exercised, then the corresponding shares of Common Stock shall again become available for

 

(1) The history of the Plan’s share reserve prior to January 1, 2010 includes the following: (i) an initial share reserve of 13,034,369 shares (consisting of 3,700,000 shares plus 9,334,369 shares remaining available for issuance under the Pre-IPO Plans on the date of effectiveness of the IPO) and (ii) an increase of 3,500,000 shares approved by the Compensation Committee of the Board of Directors on November 29, 2006 and the Board of Directors on December 6, 2006 (all  share numbers in clause (i) reflect the reverse stock split approved in connection with the Corporation’s IPO).

 

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Stock Awards under this Plan.  Notwithstanding anything to the contrary contained herein, on or after January 1, 2010, the following shares of Common Stock shall not be added back to the number of shares available for Stock Awards under Section 3.1:  (i) shares tendered by a Participant or withheld by the Corporation in payment of the exercise price of an option granted under this Plan or the Predecessor Plans, or to satisfy any tax withholding obligation with respect to a stock award granted under this Plan or the Predecessor Plans, (ii) shares subject to a stock appreciation right issued under this Plan or the Predecessor Plans that are not issued in connection with the stock settlement of the stock appreciation right on exercise thereof and (iii) shares reacquired by the Corporation on the open market or otherwise using cash proceeds from the exercise of an option granted under this Plan or the Predecessor Plans.  On or after January 1, 2010, any shares that again become available for Stock Awards under this Section 3.2 shall be added back as (i) one share if such shares were subject to options or stock appreciation rights granted under this Plan or the Predecessor Plans and (ii) 1.45 shares if such shares were subject to stock awards other than options or stock appreciation rights that were granted under this Plan or the Predecessor Plans.

 

3.3                               Shares Subject to Substituted Awards.  The number of shares of Common Stock subject to Substitute Awards granted by the Corporation shall not reduce the number of shares of Common Stock that may be issued under Section 3.1, nor shall shares subject to Substitute Awards again be available for Awards under the Plan to the extent of any forfeiture, expiration or cash settlement as provided under Section 3.2.

 

ARTICLE IV.                                         ELIGIBILITY.

 

4.1                               Incentive Stock Options.  Only Employees who are common-law employees of the Corporation, a Parent or a Subsidiary shall be eligible for the grant of ISOs.  In addition, an Employee who owns more than 10% of the total combined voting power of all classes of outstanding stock of the Corporation or any of its Parents or Subsidiaries shall not be eligible for the grant of an ISO unless the requirements set forth in section 422(c)(6) of the Code are satisfied.

 

4.2                               Other Grants.  Awards other than ISOs may only be granted to Employees, Outside Directors and Consultants.

 

ARTICLE V.                                              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 Stock Option Agreement shall specify whether the Option is an ISO or an NSO.  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.

 

5.2                               Number of Shares.  Each Stock Option Agreement shall specify the number of shares of Common Stock subject to the Option and shall provide for the adjustment of such number in accordance with Article 11.  Options granted to any Optionee in a single fiscal year of

 

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the Corporation shall not cover more than 1,500,000 shares of Common Stock, except that Options granted to a new Employee in the fiscal year of the Corporation in which his or her service as an Employee first commences shall not cover more than 2,000,000 shares of Common Stock.  The limitations set forth in the preceding sentence shall be subject to adjustment in accordance with Article 11.

 

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 share of Common Stock on the date of grant.   This Section 5.3 shall not apply to an Option granted pursuant to an assumption of, or substitution for, another option in a manner that complies with Section 424(a) of the Code (whether or not the Option is an ISO).

 

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; provided that the term of an Option shall in no event exceed 10 years from the date of grant.  A Stock Option Agreement may provide for accelerated exercisability in the event of  a Change in Control, 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.  Options may be awarded in combination with SARs, and such an Award may provide that the Options will not be exercisable unless the related SARs are forfeited.

 

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 10 and 11, neither the Committee nor any other person may (a) decrease the exercise price for any outstanding Option after the date of grant, (b) cancel or allow an optionee to surrender an outstanding Option to the Corporation in exchange for cash or 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 or (c) take any other action with respect to an Option that would be treated as a repricing under the rules and regulations of the NASDAQ Stock Market (or such other principal U.S. national securities exchange on which the Corporation’s Common Stock is traded).

 

5.6                               Buyout Provisions.  Except to the extent prohibited by Section 5.5, 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 VI.                                         PAYMENT FOR OPTION SHARES.

 

6.1                               General Rule.  The entire Exercise Price of shares of Common Stock issued upon exercise of Options shall be payable in cash or cash equivalents at the time such shares of Common Stock are purchased, except that the Committee at its sole discretion may accept

 

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payment of the Exercise Price in any other form(s) described in this Article 6.  However, if the Optionee is an Outside Director or 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, shares of Common Stock that are already owned by the Optionee.  Such shares of Common Stock shall be valued at their Fair Market Value on the date the new shares of Common Stock are purchased under the Plan.  The Optionee shall not surrender, or attest to the ownership of, shares of Common Stock in payment of the Exercise Price if such action would cause the Corporation to recognize compensation expense (or additional compensation expense) with respect to the Option for financial reporting purposes.

 

6.3                               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 shares of Common Stock being purchased under the Plan and to deliver all or part of the sales proceeds to the Corporation.

 

6.4                               Exercise/Pledge.  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 pledge all or part of the shares of Common Stock being purchased under the Plan to a securities broker or lender approved by the Corporation, as security for a loan, and to deliver all or part of the loan proceeds to the Corporation.

 

6.5                               Promissory Note.  To the extent permitted by Section 13(k) of the Exchange Act, 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) a full-recourse promissory note.  However, the par value of the shares of Common Stock being purchased under the Plan, if newly issued, shall be paid in cash or cash equivalents.

 

6.6                               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 VII.                                    STOCK APPRECIATION RIGHTS.

 

7.1                               SAR Agreement.  Each grant of an SAR under the Plan shall be evidenced by an SAR Agreement between the Optionee and the Corporation.  Such SAR 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 SAR Agreements entered into under the Plan need not be identical.  SARs may be granted in consideration of a reduction in the Optionee’s other compensation.

 

7.2                               Number of Shares.  Each SAR Agreement shall specify the number of shares of Common Stock to which the SAR pertains and shall provide for the adjustment of such number in accordance with Article 11.  SARs granted to any Optionee in a single fiscal year shall in no

 

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event pertain to more than 1,500,000 shares of Common Stock, except that SARs granted to a new Employee in the fiscal year of the Corporation in which his or her service as an Employee first commences shall not pertain to more than 2,000,000 shares of Common Stock.  The limitations set forth in the preceding sentence shall be subject to adjustment in accordance with Article 11.

 

7.3                               Exercise Price.  Each SAR Agreement shall specify the Exercise Price which, except with respect to Substitute Awards, shall not be less than Fair Market Value.  An SAR Agreement may specify an Exercise Price that varies in accordance with a predetermined formula while the SAR is outstanding.

 

7.4                               Exercisability and Term.  Each SAR Agreement shall specify the date all or any installment of the SAR is to become exercisable.  The SAR Agreement shall also specify the term of the SAR; provided that the term of a SAR shall in no event exceed 10 years from the date of grant.  An SAR Agreement may provide for accelerated exercisability in the event of a Change in Control, 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.  SARs may be awarded in combination with Options, and such an Award may provide that the SARs will not be exercisable unless the related Options are forfeited.  An SAR may be included in an ISO only at the time of grant but may be included in an NSO at the time of grant or thereafter.  An SAR granted under the Plan may provide that it will be exercisable only in the event of a Change in Control.

 

7.5                               Exercise of SARs.  Upon exercise of an SAR, the Optionee (or any person having the right to exercise the SAR after his or her death) shall receive from the Corporation (a) shares of Common Stock, (b) cash or (c) a combination of shares of Common Stock and cash, as the Committee shall determine.  The amount of cash and/or the Fair Market Value of shares of Common Stock received upon exercise of SARs shall, in the aggregate, be equal to the amount by which the Fair Market Value (on the date of surrender) of the shares of Common Stock subject to the SARs exceeds the Exercise Price.  If, on the date an SAR expires, the Exercise Price under such SAR is less than the Fair Market Value on such date but any portion of such SAR has not been exercised or surrendered, then such SAR shall automatically be deemed to be exercised as of such date with respect to such portion.

 

7.6                               Modification or Assumption of SARs.  Within the limitations of the Plan, the Committee may modify, extend or assume outstanding SARs.  The foregoing notwithstanding, no modification of an SAR shall, without the consent of the Optionee, alter or impair his or her rights or obligations under such SAR.  Notwithstanding anything in this Plan to the contrary, and except for the adjustments provided in Articles 10 and 11, neither the Committee nor any other person may (a) decrease the exercise price for any outstanding SAR after the date of grant, (b) cancel or allow an Optionee to surrender an outstanding SAR to the Corporation in exchange for cash or as consideration for the grant of a new SAR 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 SAR or (c) take any other action with respect to a SAR that would be treated as a repricing under the rules and regulations of the NASDAQ Stock Market (or such other principal U.S. national securities exchange on which the Corporation’s Common Stock is traded).

 

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ARTICLE VIII.                               RESTRICTED SHARES.

 

8.1                               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.

 

8.2                               Payment for Awards.  Subject to the following two sentences, 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.  To the extent that an Award consists of newly issued Restricted Shares, the consideration shall consist exclusively of cash, cash equivalents, property or past services rendered to the Corporation (or a Parent or Subsidiary) or, for the amount in excess of the par value of such newly issued Restricted Shares, full-recourse promissory notes.  If the Participant is an Outside Director or 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.

 

8.3                               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.  The Committee may include among such conditions the requirement that the performance of the Corporation or a business unit of the Corporation for a specified period of one or more fiscal years equal or exceed a target determined in advance by the Committee.  The Committee shall determine such performance.  Such target shall be based on one or more of the criteria set forth in Appendix A.  The Committee shall identify such target not later than the 90th day of such period.  Subject to adjustment in accordance with Article 11, in no event shall more than 1,500,000 Restricted Shares that are subject to performance-based vesting conditions be granted to any Participant in a single fiscal year of the Corporation, except that 2,000,000 Restricted Shares may be granted to a new Employee in the fiscal year of the Corporation in which his or her service as an Employee first commences.  A Restricted Stock Agreement may provide for accelerated vesting in the event of a Change in Control, the Participant’s death, disability or retirement or other events.

 

8.4                               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.  Cash dividends with respect to any Restricted Shares and any other property (other than cash) distributed as a dividend or otherwise with respect to Restricted Shares that vest based on the achievement of performance goals shall be accumulated, shall be subject to restrictions and risk of forfeiture to the same extent as the Restricted Shares with respect to which such cash, shares or other property has been distributed and shall be paid at the time such restrictions and risk of forfeiture lapse.

 

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ARTICLE IX.                                        STOCK UNITS AND PERFORMANCE CASH AWARDS.

 

9.1                               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 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.

 

9.2                               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.

 

9.3                               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.  The Committee may include among such conditions the requirement that the performance of the Corporation or a business unit of the Corporation for a specified period of one or more fiscal years equal or exceed a target determined in advance by the Committee.  The Committee shall determine such performance.  Such target shall be based on one or more of the criteria set forth in Appendix A.  The Committee shall identify such target not later than the 90th day of such period.  Subject to adjustment in accordance with Article 11, in no event shall more than 1,500,000 Stock Units that are subject to performance-based vesting conditions be granted to any Participant in a single fiscal year of the Corporation, except that up to 2,000,000 Stock Units subject to performance-based vesting conditions may be granted to a new Employee in the fiscal year of the Corporation in which his or her Service first commences.  A Stock Unit Agreement may provide for accelerated vesting in the event of a Change in Control, the Participant’s death, disability or retirement or other events.

 

9.4                               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 share of Common Stock 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 shares of Common Stock, or in a combination of both.  Prior to distribution, any dividend equivalents which are not paid shall be subject to the same conditions and restrictions as the Stock Units to which they attach.  Notwithstanding the foregoing, dividend equivalents with respect to any Stock Units that vest based on the achievement of performance goals shall be subject to the same conditions and restrictions as the Stock Units to which they attach.

 

9.5                               Form and Time of Settlement of Stock Units.  Settlement of vested Stock Units may be made in the form of (a) cash, (b) shares of Common Stock 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 shares of Common Stock 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

 

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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 11.

 

9.6                               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.

 

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

 

9.8                               Performance Cash Awards.  A Performance Cash Award is a cash award that may be granted upon the attainment of certain performance goals for a specified performance period of one or more fiscal years.  The Committee shall determine such performance.  The goals applicable to a Performance Cash Award shall be based on one or more of the criteria set forth in Appendix A.  The Committee shall determine such goals no later than the 90th day of such period.  Each Performance Cash Award shall be set forth in a written agreement or in a resolution duly adopted by the Committee which shall contain provisions determined by the Committee and not inconsistent with the Plan.  The terms of various Performance Cash Awards need not be identical.  The maximum amount that may be paid to any Participant for each fiscal year of the Corporation in a performance period attributable to Performance Cash Awards shall not exceed $2,000,000.  The Committee may determine, at the time of granting a Performance Cash Award or thereafter, that all or part of such Performance Cash Award shall become earned and payable in the event that the Corporation is subject to a Change in Control before the Participant’s service terminates or as otherwise determined by the Committee in special circumstances.

 

ARTICLE X.                                             CHANGE IN CONTROL.

 

10.1                        Effect of Change in Control.  Unless the Committee provides otherwise in a Stock Option Agreement, SAR Agreement, Restricted Stock Agreement or Stock Unit Agreement, in the event of any Change in Control, each outstanding Stock Award shall automatically accelerate so that each such Stock Award shall, immediately prior to the effective date of the Change in Control, become fully exercisable for all of the shares of Common Stock at the time subject to such Stock Award and may be exercised for any or all of those shares as fully-vested shares of Common Stock.  However, an outstanding Stock Award shall not so accelerate if and to the extent such Stock 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 Stock Award for shares of the capital stock of the successor corporation (or parent

 

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thereof).  The determination of award comparability shall be made by the Committee, and its determination shall be final, binding and conclusive.

 

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

 

ARTICLE XI.                                        PROTECTION AGAINST DILUTION.

 

11.1                        Adjustments.  In the event of a subdivision of the outstanding shares of Common Stock, a declaration of a dividend payable in shares of Common Stock, a declaration of a dividend payable in a form other than shares of Common Stock in an amount that has a material affect on the price of shares of Common Stock, a combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise) into a lesser number of shares of Common Stock, a recapitalization, a spin-off or a similar occurrence, corresponding adjustments shall automatically be made in each of the following:

 

(a)                                 The number of Options, SARs, Restricted Shares and Stock Units available for future Stock Awards under Article 3, including the limitation on the number of ISOs in Section 3.1;

 

(b)                                 The limitations set forth in Sections 5.2, 7.2, 8.3 and 9.3;

 

(c)                                  The number of shares of Common Stock covered by each outstanding Option and SAR;

 

(d)                                 The Exercise Price under each outstanding Option and SAR; or

 

(e)                                  The number of Stock Units included in any prior Award which has not yet been settled.

 

Except as provided in this Article 11, a Participant shall have no rights by reason of any issue 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.

 

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

 

11.3                        Reorganizations.  In the event that the Corporation is a party to a merger or consolidation, all outstanding Stock 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 Stock Awards by the Corporation (if the Corporation is the surviving corporation).

 

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(b)                                 The assumption of such outstanding Stock 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 Stock Awards (in a manner that complies with section 424(a) of the Code with respect to Options).

 

(d)                                 Full exercisability of such outstanding Stock Awards and full vesting of the shares of Common Stock subject to such Stock Awards, followed by the cancellation of such Stock Awards.  The full exercisability of such Stock Awards and full vesting of the shares of Common Stock subject to such Stock Awards may be contingent on the closing of such merger or consolidation.  The Participants shall be able to exercise such Stock 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 Stock Awards.  Any exercise of such Stock Awards during such period may be contingent on the closing of such merger or consolidation.

 

(e)                                  The cancellation of such outstanding Stock Awards and a payment to the Participants equal to the excess of (i) the Fair Market Value of the shares of Common Stock subject to such Stock Awards (whether or not such Stock Awards are then exercisable or such shares of Common Stock 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 Stock Awards would have become exercisable or such shares of Common Stock would have vested.  Such payment may be subject to vesting based on the Optionee’s continuing service, provided that the vesting schedule shall not be less favorable to the Participants than the schedule under which such Stock Awards would have become exercisable or such shares of Common Stock would have vested.  If the Exercise Price of the shares of Common Stock subject to such Stock Awards exceeds the Fair Market Value of such shares of Common Stock, then such Stock 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.

 

ARTICLE XII.                                   DEFERRAL OF AWARDS.

 

The Committee (in its sole discretion) may permit or require a Participant to:

 

(a)                                 Have cash that otherwise would be paid to such Participant as a result of the exercise of an SAR or the settlement of Stock Units credited to a deferred compensation account established for such Participant by the Committee as an entry on the Corporation’s books;

 

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(b)                                 Have shares of Common Stock that otherwise would be delivered to such Participant as a result of the exercise of an Option or SAR converted into an equal number of Stock Units; or

 

(c)                                  Have shares of Common Stock that otherwise would be delivered to such Participant as a result of the exercise of an Option or SAR or the settlement of Stock Units converted into amounts credited to a deferred compensation account established for such Participant by the Committee as an entry on the Corporation’s books.  Such amounts shall be determined by reference to the Fair Market Value of such shares of Common Stock as of the date they otherwise would have been delivered to such Participant.

 

A deferred compensation account established under this Article 12 may be credited with interest or other forms of investment return, as determined by the Committee.  A Participant for whom such an account is established shall have no rights other than those of a general creditor of the Corporation.  Such an account shall represent an unfunded and unsecured obligation of the Corporation and shall be subject to the terms and conditions of the applicable agreement between such Participant and the Corporation.  If the deferral or conversion of Awards is permitted or required, the Committee (in its sole discretion) may establish rules, procedures and forms pertaining to such Awards, including (without limitation) the settlement of deferred compensation accounts established under this Article 12.

 

ARTICLE XIII.                              AWARDS UNDER OTHER PLANS.

 

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

 

ARTICLE XIV.                               PAYMENT OF FEES IN SECURITIES.

 

14.1                        Effective Date.  No provision of this Article 14 shall be effective unless and until the Board has determined to implement such provision.

 

14.2                        Elections to Receive NSOs, Restricted Shares or Stock Units.  An Outside Director may elect to receive his or her annual retainer payments or meeting fees from the Corporation in the form of cash, NSOs, Restricted Shares or Stock Units, or a combination thereof, as determined by the Board.  Such NSOs, Restricted Shares and Stock Units shall be issued under the Plan.  An election under this Article 14 shall be filed with the Corporation on the prescribed form.

 

14.3                        Number and Terms of NSOs, Restricted Shares or Stock Units.  The number of NSOs, Restricted Shares or Stock Units to be granted to Outside Directors in lieu of annual retainers or meeting fees that would otherwise be paid in cash shall be calculated in a manner determined by the Board.  The Board shall also determine the terms of such NSOs, Restricted Shares or Stock Units.

 

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ARTICLE XV.                                    LIMITATION ON RIGHTS.

 

15.1                        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, Outside Director or Consultant.  The Corporation and its Parents, Subsidiaries and Affiliates reserve the right to terminate the service of any Employee, Outside Director or Consultant at any time, with or without cause, subject to applicable laws, the Corporation’s certificate of incorporation and by-laws and a written employment agreement (if any).

 

15.2                        Stockholders’ Rights.  A Participant shall have no dividend rights, voting rights or other rights as a stockholder with respect to any shares of Common Stock covered by his or her Award prior to the time a stock certificate for such shares of Common Stock is issued or, if applicable, the time he or she becomes entitled to receive such shares of Common Stock 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.

 

15.3                        Regulatory Requirements.  Any other provision of the Plan notwithstanding, the obligation of the Corporation to issue shares of Common Stock 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 shares of Common Stock pursuant to any Award prior to the satisfaction of all legal requirements relating to the issuance of such shares of Common Stock, to their registration, qualification or listing or to an exemption from registration, qualification or listing.

 

15.4                        Transferability of Awards.  Except as provided below, no Award and no shares subject to Awards that have not been issued or as to which any applicable restriction, performance or deferral period has not lapsed, may be sold, assigned, transferred, pledged or otherwise encumbered, other than by a beneficiary designation, will or the laws of descent and distribution, and such Award may be exercised during the life of a Participant only by the Participant or the Participant’s guardian or legal representative.  To the extent and under such terms and conditions as determined by the Committee, a Participant may assign or transfer an Award (each transferee there, a “Permitted Assignee”) other than an ISO to a “family member” as such term is defined in the General Instructions to Form S-8 (whether by gift or a domestic relations order); provided that such Permitted Assignee shall be bound by and subject to all of the terms and conditions of the Plan and the Award Agreement relating to the transferred Award and shall execute an agreement satisfactory to the Corporation evidencing such obligations; and provided further that such Participant shall remain bound by the terms and conditions of the Plan.

 

ARTICLE XVI.                               WITHHOLDING TAXES.

 

16.1                        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 shares of Common Stock or make any cash payment under the Plan until such obligations are satisfied.

 

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

 

ARTICLE XVII.                          FUTURE OF THE PLAN.

 

17.1                        Term of the Plan.  The Plan shall remain in effect until it is terminated under Section 17.2, except that no ISOs shall be granted on or after the 10th anniversary of the later of (a) the date the Board adopted the Plan or (b) the date the Board adopted the most recent increase in the number of shares of Common Stock available under Article 3 which was approved by the Corporation’s stockholders.  No further option grants shall be made under the Pre-IPO Plans after the Plan effective date.  No further awards shall be made under the Corporation’s 2008 New Employee Equity Incentive Plan after the date of the Corporation’s 2010 Annual Meeting of Stockholders, assuming this Plan is re-approved by the stockholders at such meeting.  All awards outstanding under the Predecessor Plans as of such dates shall, immediately upon effectiveness of the Plan, remain outstanding in accordance with their terms.  Each outstanding award under the Predecessor Plans shall continue to be governed solely by the terms of the documents evidencing such award, and no provision of the Plan shall be deemed to affect or otherwise modify the rights or obligations of the holders of such awards with respect to their acquisition of shares of Common Stock, except that the following vesting acceleration provisions relating to Change in Control shall be extended to the options outstanding under the Pre-IPO Plans at the IPO: if the optionee experiences an involuntary termination within three months before or twenty-four months following a Change in Control, each of such optionee’s outstanding options shall automatically accelerate so that each such option shall, immediately prior to the effective date of the termination, become fully exercisable for all of the shares of Common Stock at the time subject to such option and may be exercised for any or all of those shares as fully-vested shares of Common Stock.

 

17.2                        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.

 

17.3                        Stockholder Approval.  An amendment of the Plan shall be subject to the approval of the Corporation’s stockholders only to the extent required by applicable laws, regulations or rules.  However, an amendment of the last sentence of Section 5.5 or 7.6 is subject to the approval of the Corporation’s stockholders and section 162(m) of the Code may require that the Corporation’s stockholders approve:

 

(a)                                 The Plan not later than the first regular meeting of stockholders that occurs in the fourth calendar year following the calendar year in which the Corporation’s initial public offering occurred; and

 

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(b)                                 The performance criteria set forth on Appendix A not later than the first meeting of stockholders that occurs in the fifth year following the year in which the Corporation’s stockholders previously approved such criteria.

 

ARTICLE XVIII.                     DEFINITIONS.

 

18.1                        “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.

 

18.2                        “Award” means any award of a Stock Award or a Performance Cash Award under the Plan.

 

18.3                        “Board” means the Corporation’s Board of Directors, as constituted from time to time.

 

18.4                        “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 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.

 

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Except with respect to a GSK Change In Control (defined below), (i) any stock purchase by SmithKline Beecham Corporation, a Pennsylvania corporation (“GSK”), pursuant to the Class A Common Stock Purchase Agreement dated as of March 30, 2004 or (ii) the exercise by GSK of any of its rights under the Amended and Restated Governance Agreement dated as of June 4, 2004 among the Corporation, GSK, GlaxoSmithKline plc and Glaxo Group Limited, as amended (the “Governance Agreement”) to representation on the Board (and its committees) or (iii) any acquisition by GSK of securities of the 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.

 

18.5                        “Code” means the Internal Revenue Code of 1986, as amended.

 

18.6                        “Committee” means a committee of the Board, as described in Article 2.

 

18.7                        “Common Stock” means the common stock of the Corporation.

 

18.8                        “Corporation” means Theravance, Inc., a Delaware corporation.

 

18.9                        “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.  Service as a Consultant shall be considered employment for all purposes of the Plan, except as provided in Section 4.1.

 

18.10                 “Employee” means a common-law employee of the Corporation, a Parent, a Subsidiary or an Affiliate.

 

18.11                 “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

18.12                 “Exercise Price,” in the case of an Option, means the amount for which one share of Common Stock may be purchased upon exercise of such Option, as specified in the applicable Stock Option Agreement.  “Exercise Price,” in the case of an SAR, means an amount, as specified in the applicable SAR Agreement, which is subtracted from the Fair Market Value of one share of Common Stock in determining the amount payable upon exercise of such SAR.

 

18.13                 “Fair Market Value” means the closing selling price of one share of Common Stock 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.

 

18.14                 “IPO” means the initial public offering of the Corporation’s Common Stock.

 

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18.15                 “ISO” means an incentive stock option described in section 422(b) of the Code.

 

18.16                 “NSO” means a stock option not described in sections 422 or 423 of the Code.

 

18.17                 “Option” means an ISO or NSO granted under the Plan and entitling the holder to purchase shares of Common Stock.

 

18.18                 “Optionee” means an individual who or estate that holds an Option or SAR.

 

18.19                 “Outside Director” shall mean a member of the Board who is not an Employee.  Service as an Outside Director shall be considered employment for all purposes of the Plan, except as provided in Section 4.1.

 

18.20                 “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.

 

18.21                 “Participant” means an individual who or estate that holds an Award.

 

18.22                 “Performance Cash Award” means an award of cash granted under Section 9.8 of the Plan.

 

18.23                 “Plan” means this Theravance, Inc. 2004 Equity Incentive Plan, as amended from time to time.

 

18.24                 “Predecessor Plans” means the Corporation’s 1997 Stock Plan, Long-Term Stock Option Plan and 2008 New Employee Equity Incentive Plan.

 

18.25                 “Pre-IPO Plans” means the Corporation’s 1997 Stock Plan and Long-Term Stock Option Plan.

 

18.26                 “Restricted Share” means a share of Common Stock awarded under Article 8 of the Plan.

 

18.27                 “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.

 

18.28                 “SAR” means a stock appreciation right granted under the Plan.

 

18.29                 “SAR Agreement” means the agreement between the Corporation and an Optionee which contains the terms, conditions and restrictions pertaining to his or her SAR.

 

18.30                 “Stock Award” means any award of an Option, an SAR, a Restricted Share or a Stock Unit under the Plan.

 

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18.31                 “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.

 

18.32                 “Stock Unit” means a bookkeeping entry representing the equivalent of one share of Common Stock, as awarded under the Plan.

 

18.33                 “Stock Unit Agreement” means the agreement between the Corporation and the recipient of a Stock Unit which contains the terms, conditions and restrictions pertaining to such Stock Unit.

 

18.34                 “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.

 

18.35                 “Substitute Awards” means Awards or shares of Common Stock issued by the Corporation in assumption of, or substitution or exchange for, Awards previously granted, or the right or obligation to make future awards, in each case by a corporation acquired by the Corporation or any Affiliate or with which the Corporation or any Affiliates combines to the extent permitted by NASDAQ Marketplace Rule 5635 or any successor thereto.

 

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Appendix A

 

PERFORMANCE CRITERIA

FOR RESTRICTED SHARES, STOCK UNITS AND PERFORMANCE CASH AWARDS

 

The performance goals that may be used by the Committee for such awards shall consist of:  stock price; net sales; revenue; revenue growth or product revenue growth; operating income (before or after taxes); pre- or after-tax income or loss (before or after allocation of corporate overhead and bonus); earnings or loss per share; net income or loss (before or after taxes); return on equity; total stockholder return; return on assets or net assets; appreciation in and/or maintenance of the price of the Shares or any other publicly-traded securities of the Corporation; market share; gross profits; net profits; earnings or losses (including earnings or losses before taxes, before interest and taxes, or before interest, taxes, depreciation and amortization); economic value-added models or equivalent metrics; comparisons with various stock market indices; reductions in costs; cash flow or cash flow per share (before or after dividends); return on capital (including return on total capital or return on invested capital); cash flow return on investment; improvement in or attainment of expense levels or working capital levels, including cash, inventory and accounts receivable; operating margin; gross margin; year-end cash; cash margin; debt reduction; stockholders equity; operating efficiencies; market share; customer satisfaction; customer growth; employee satisfaction; drug development milestones; regulatory achievements (including submitting or filing applications or other documents with regulatory authorities, successfully executing an advisory committee meeting, or receiving approval of any such applications or other documents and passing pre-approval inspections (whether of the Corporation or the Corporation’s third-party manufacturer) and validation of manufacturing processes (whether the Corporation’s or the Corporation’s third-party manufacturer’s); initiation or completion of pre-clinical studies; clinical achievements (including initiating clinical studies; initiating enrollment, completing enrollment or enrolling particular numbers of subjects in clinical studies; completing phases of a clinical study (including the treatment phase); or announcing or presenting preliminary or final data from clinical studies; in each case, whether on particular timelines or generally); strategic partnerships or transactions (including in-licensing and out-licensing of intellectual property; establishing relationships with commercial entities with respect to the marketing, distribution and sale of the Corporation’s products or development candidates (including with group purchasing organizations, distributors and other vendors); supply chain achievements (including establishing relationships with manufacturers or suppliers of component materials and manufacturers of the Corporation’s products or development candidates); co-development, co-marketing, profit sharing, joint venture or other similar arrangements); financial ratios, including those measuring liquidity, activity, profitability or leverage; cost of capital or assets under management; financing and other capital raising transactions (including sales of the Corporation’s equity or debt securities; factoring transactions; sales or licenses of the Corporation’s assets, including its intellectual property, whether in a particular jurisdiction or territory or globally; or through partnering transactions); implementation, completion or attainment of measurable objectives with respect to research (including nominating a development candidate or initiating a new full discovery program), development, manufacturing (including initiating formulation or device development work or finalizing API or drug product processes), commercialization, development candidates, products

 

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or projects, safety, production volume levels, acquisitions and divestitures; factoring transactions; and recruiting and maintaining personnel.  In the areas of development, regulatory progress and commercialization, the achievements described above performed by a third party with which the Corporation has a licensing or collaborative agreement (a “Partner”) shall apply to the Corporation.  For example, if a Partner accomplishes development milestones, regulatory achievements, commercialization or sales targets with an asset within a program that is a subject of the licensing or collaboration agreement between the Corporation and the Partner, then such Partner’s accomplishments shall constitute achievements of the Corporation.  Such performance goals also may be based solely by reference to the Corporation’s performance or the performance of a Subsidiary, division, business segment or business unit of the Corporation, or based upon the relative performance of other companies or upon comparisons of any of the indicators of performance relative to other companies.  To the extent consistent with section 162(m) of the Code, the Committee may adjust the results under any performance criterion to exclude any of the following events that occurs during a performance measurement period: (a) asset write-downs, (b) litigation, claims, judgments or settlements, (c) the effect of changes in tax law, accounting principles or other such laws or provisions affecting reported results, (d) accruals for reorganization and restructuring programs and (e) any extraordinary, unusual or non-recurring items.

 

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Form of Notice of Grant and Stock Option Agreement under 2004 Equity Incentive Plan

 

THERAVANCE, INC. 2004 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:
    	
 
    	
«First» «Last»
    
	
 
    	
 
    	
 
    
	
ID Number:
    	
 
    	
«ID»
    
	
 
    	
 
    	
 
    
	
Total   Number of Shares:
    	
 
    	
«Shares»
    
	
 
    	
 
    	
 
    
	
Type   of Option:
    	
 
    	
Nonstatutory   Stock Option
    
	
 
    	
 
    	
 
    
	
Grant   Number:
    	
 
    	
«Number»
    
	
 
    	
 
    	
 
    
	
Exercise   Price Per Share:
    	
 
    	
«Price»
    
	
 
    	
 
    	
 
    
	
Date of Grant:
    	
 
    	
February 10, 2005
    
	
 
    	
 
    	
 
    
	
Vesting Schedule:
    	
 
    	
This   option becomes exercisable for the first time on the earlier of the Put Date   or January 1, 2008 (as applicable, the “First Exercise Date”) provided   you have remained in continuous Service from the Date of Grant through the   First Exercise Date. On the First Exercise Date, this option may be exercised   and shall be vested as to that number of Shares subject to the option equal   to 1/48th times the number of months that have elapsed   from the Date of Grant through the First Exercise Date. Thereafter, this   option may be exercised and shall be vested as to an additional 1/48th of the Shares subject to this option when   you complete each month of continuous Service  following the First Exercise Date.   The option shall be fully vested and exercisable on the 4-year anniversary of   the Date of Grant provided you have remained in continuous Service   through such date.
    
	
 
    	
 
    	
 
    
	
Expiration   Date:
    	
 
    	
February 9,   2015. 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 2004 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. 2004 EQUITY INCENTIVE PLAN

 

STOCK OPTION AGREEMENT

 

	
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 terminates, and you are subject to an Involuntary Termination (as   defined below) within three months prior or 24 months after the Change in   Control. Should the exercisability of this option accelerate as a result of   the occurrence of a Change in Control prior to the First Exercise Date, the   right to exercise this option shall be deferred as to the additional shares   until the First Exercise Date, provided and only if this option is   assumed by the surviving corporation or its parent or the surviving   corporation or its parent substitutes its own option for this option.

 

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.

 

For   purposes of this Agreement, “Put Date”   shall mean the day after the final day of the Put Period, as such term is   defined in the Restated Certificate of Incorporation of Theravance, Inc.   or, if earlier, the consummation of a Qualified Change in Control as defined   in the Restated Certificate of Incorporation of Theravance, Inc.

 

For   purposes of this Agreement, “Service”   means your service as an Employee, Outside Director or Consultant.

 

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 (giving effect where necessary to any deferred acceleration on   Change in Control as set forth under the heading “Vesting” above).
    
	
 
    	
 
    	
 
    
	
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 the later of your termination   date or the First Exercise 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 later of the date that is   three months after the First Exercise Date or 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 
    

 

4

 

	
 
    	
 
    	
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.
    
	
 
    	
 
    	
 
    
	
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 
    

 

5

 

	
 
    	
 
    	
the exercise price if your action would cause the Company to   recognize compensation expense (or 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.
    
	
 
    	
 
    	
 
    
	
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
    

 

6

 

	
 
    	
 
    	
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 Company   stock, the number of shares covered by this option and the exercise price per   share may be adjusted pursuant to 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).
    
	
 
    	
 
    	
 
    
	
The   Plan and Other Agreements
    	
 
    	
The   text of the Plan is incorporated in this Agreement by reference.

 

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.

 

7

 

Form of Notice of Restricted Stock Award and Restricted Stock Agreement under 2004 Equity Incentive Plan (form in effect through 2010)

 

THERAVANCE, INC. 2004 EQUITY INCENTIVE PLAN
 NOTICE OF RESTRICTED STOCK AWARD

 

You have been granted restricted shares of Common Stock of Theravance, Inc. (the “Company”) on the following terms:

 

	
 
    	
Name   of Recipient:
    	
 
    	
«Name»
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Total   Number of Shares Granted:
    	
 
    	
«TotalShares»
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Fair   Market Value per Share:
    	
 
    	
$«ValuePerShare»
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Total   Fair Market Value of Award:
    	
 
    	
$«TotalValue»
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Date   of Grant:
    	
 
    	
«DateGrant»
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Vesting   Commencement Date:
    	
 
    	
«VestDay»
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Vesting   Schedule:
    	
 
    	
«VestSchedule»
    

 

You and the Company agree that these shares are granted under and governed by the terms and conditions of the Theravance, Inc. 2004 Equity Incentive Plan (the “Plan”) and the Restricted Stock Agreement, which is attached to and made a part of this document.

 

You further 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.

 

 

	
RECIPIENT:
    	
 
    	
THERAVANCE, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:   
    	
 
    
	
 
    	
 
    	
Title:   
    	
 
    

 

 

THERAVANCE, INC. 2004 EQUITY INCENTIVE PLAN:
 RESTRICTED STOCK AGREEMENT

 

	
Payment   for Shares
    	
 
    	
No   payment is required for the shares that you are receiving, except for   satisfying any withholding taxes that may be due as a result of the grant of   this award or the vesting or transfer of the shares.
    
	
 
    	
 
    	
 
    
	
Transfer
    	
 
    	
On   the terms and conditions set forth in the Notice of Restricted Stock Award   and this Agreement, the Company agrees to transfer to you the number of   Shares set forth in the Notice of Restricted Stock Award.
    
	
 
    	
 
    	
 
    
	
Vesting
    	
 
    	
The   shares will vest in installments, as shown in the Notice of Restricted Stock   Award, as you continue in service as an employee, consultant or outside   director of the Company or a parent or subsidiary of the Company (“Service”).
    
	
 
    	
 
    	
 
    
	
Change   in Control
    	
 
    	
The   shares will fully vest if the Company is subject to a “Change in   Control” (as defined in the Plan) before your Service terminates   and you are subject to an Involuntary Termination (as defined below) within 3   months prior or 24 months after the Change in Control. Should the vesting of   the shares accelerate as the result of a Change in Control prior to the First   Vesting Date, the acceleration of vesting shall be deferred as to the   additional shares until the First Vesting Date.
    
	
 
    	
 
    	
 
    
	
Involuntary   Termination
    	
 
    	
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.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
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.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
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 3 months prior to a Change in Control.
    
	
 
    	
 
    	
 
    
	
Shares   Restricted
    	
 
    	
Unvested   shares will be considered “Restricted Shares.”   You may not sell, transfer, pledge or otherwise dispose of any Restricted   Shares without the written consent of the Company, except as provided in the   next sentence. You may transfer Restricted Shares to your spouse, children or   grandchildren or to a trust established by you for the benefit of yourself or   your spouse, children or grandchildren. However, a transferee of Restricted   Shares must agree in writing on a form prescribed by the Company to be bound   by all provisions of this Agreement.
    
	
 
    	
 
    	
 
    
	
Forfeiture
    	
 
    	
If   your Service terminates for any reason, then your shares will be forfeited to   the extent that they have not vested before the termination date and do not   vest as a result of the termination. This means that the Restricted Shares   will immediately revert to the Company. You receive no payment for Restricted   Shares 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. 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 Restricted Stock Award 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 Restricted Stock Award 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.
    
	
 
    	
 
    	
 
    
	
Stock   Certificates
    	
 
    	
The   certificates for Restricted Shares have stamped on them a special legend   referring to the Company’s forfeiture right. In addition to or in lieu of   imposing the legend, the Company may hold the certificates in escrow. As your   vested percentage increases, you may request (at reasonable intervals) that   the Company release to you a non-legended
    

 

2

 

	
 
    	
 
    	
certificate   for your vested shares.
    
	
 
    	
 
    	
 
    
	
Voting   Rights
    	
 
    	
You   may vote your shares even before they vest.
    
	
 
    	
 
    	
 
    
	
Withholding   Taxes
    	
 
    	
No   stock certificates will be released to you unless you have made arrangements   acceptable to the Company to pay any withholding taxes that may be due as a result   of this award or the vesting of the shares. With the Company’s consent, these   arrangements may include (a) withholding shares of Company stock that   otherwise would be issued to you when they vest or (b) surrendering   shares that you previously acquired. The fair market value of the shares you   surrender, determined as of the date taxes otherwise would have been withheld   in cash, will be applied as a credit against the withholding taxes.
    
	
 
    	
 
    	
 
    
	
Restrictions   on Resale
    	
 
    	
You   agree not to sell any 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.
    
	
 
    	
 
    	
 
    
	
No   Retention Rights
    	
 
    	
Your   award or this Agreement does not give you the right to be employed or   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.
    
	
 
    	
 
    	
 
    
	
Adjustments
    	
 
    	
In   the event of a stock split, a stock dividend or a similar change in Company   stock, the number of Restricted Shares that remain subject to forfeiture will   be adjusted accordingly.
    
	
 
    	
 
    	
 
    
	
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).
    
	
 
    	
 
    	
 
    
	
The   Plan and Other Agreements
    	
 
    	
The   text of the Plan is incorporated in this Agreement by reference.

 

This   Agreement 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 SIGNING THE COVER SHEET OF THIS AGREEMENT, YOU AGREE TO ALL OF THE
 TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.

 

3

 

Form of Notice of Stock Option Grant and Stock Option Agreement under 2004 Equity Incentive Plan (form in effect from 2007)

 

THERAVANCE, INC. 2004 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:
    	
 
    	
«First»   «Last»
    
	
 
    	
 
    	
 
    
	
ID   Number:
    	
 
    	
«ID»
    
	
 
    	
 
    	
 
    
	
Total   Number of Shares:
    	
 
    	
«Shares»
    
	
 
    	
 
    	
 
    
	
Type   of Option:
    	
 
    	
Nonstatutory   Stock Option
    
	
 
    	
 
    	
 
    
	
Grant   Number:
    	
 
    	
«Number»
    
	
 
    	
 
    	
 
    
	
Exercise   Price Per Share:
    	
 
    	
«Price»
    
	
 
    	
 
    	
 
    
	
Date   of Grant:
    	
 
    	
«Grant_Date»
    
	
 
    	
 
    	
 
    
	
Vesting   Schedule:
    	
 
    	
«VestSchedule»
    
	
 
    	
 
    	
 
    
	
Expiration   Date:
    	
 
    	
«Expiration_Date».   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 2004 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. 2004 EQUITY INCENTIVE PLAN

STOCK OPTION AGREEMENT

 

	
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 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.

 

For   purposes of this Agreement, “Service”   means your service as an Employee, Outside Director or Consultant.
    

 

 

	
 
    	
 
    	
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
    

 

3

 

	
 
    	
 
    	
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.
    
	
 
    	
 
    	
 
    
	
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 compensation expense (or 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
    

 

4

 

	
 
    	
 
    	
must be given by signing a special “Notice of Exercise” form provided   by the Company.
    
	
 
    	
 
    	
 
    
	
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 Company   stock, the number of shares covered by this option and the exercise price per   share may be adjusted pursuant to 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).
    

 

5

 

	
The   Plan and Other Agreements
    	
 
    	
The   text of the Plan is incorporated in this Agreement by reference.

 

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.

 

6

 

Form of Non-Employee Director Notice of Stock Option Grant and Stock Option Agreement under 2004 Equity Incentive Plan (form in effect through 2006)

 

THERAVANCE, INC. 2004 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»
    
	
 
    	
 
    	
 
    
	
Total   Number of Shares:
    	
 
    	
«Shares»
    
	
 
    	
 
    	
 
    
	
Type   of Option:
    	
 
    	
Nonstatutory   Stock Option
    
	
 
    	
 
    	
 
    
	
Exercise   Price Per Share:
    	
 
    	
$«PricePerShare»
    
	
 
    	
 
    	
 
    
	
Date   of Grant:
    	
 
    	
«DateGrant»
    
	
 
    	
 
    	
 
    
	
Vesting   Schedule:
    	
 
    	
«VestSched»
    
	
 
    	
 
    	
 
    
	
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 2004 Equity Incentive Plan (the “Plan”) and the Stock Option Agreement, both of which are attached to and made a part of this document.

 

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.

 

	
OPTIONEE:
    	
 
    	
THERAVANCE, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:   
    	
 
    
	
 
    	
 
    	
Title:   
    	
 
    

 

 

New Director Grant

 

THERAVANCE, INC. 2004 EQUITY INCENTIVE PLAN

STOCK OPTION AGREEMENT

 

	
Tax Treatment
    	
 
    	
This   option is intended to be an incentive stock option under section 422 of   the Internal Revenue Code or a nonstatutory stock option, as provided in the   Notice of Stock Option Grant.
    
	
 
    	
 
    	
 
    
	
Vesting
    	
 
    	
This   option becomes exercisable 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 8(b)(ii) or (iii) 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 terminates. Should the exercisability of   this option accelerate as a result of the occurrence of a Change in Control   prior to the First Exercise Date, the right to exercise this option shall be   deferred as to the additional shares until the First Exercise Date, provided   and only if this option is assumed by the surviving corporation or its   parent or the surviving corporation or its parent substitutes its own   option for this option.

 

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, “Put Date”   shall mean the day after the final day of the Put Period, as such term is   defined in the Restated Certificate of Incorporation of Theravance, Inc.   or, if earlier, the consummation of a Qualified Change in Control as defined   in the Restated Certificate of Incorporation of Theravance, Inc.

 

For   purposes of this Agreement, “Service”   means your service as an Outside Director.

 

This   option will in no event become exercisable for additional shares after your   Service has terminated for any reason except as set forth above
    
	
 
    	
 
    	
 
    
	
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.)
    
	
 
    	
 
    	
 
    
	
Termination   Prior to the Put Date
    	
 
    	
If   your Service terminates for any reason prior to the Put Date, then this   option will expire at the close of business at Company headquarters on the   date 36 months after your termination date. The Company determines when your   Service terminates for this purpose.
    
	
 
    	
 
    	
 
    
	
Regular   Termination on or after the Put Date
    	
 
    	
If   your Service terminates for any reason on or after the Put Date except a   Qualified Retirement, then this option will expire at the close of business   at Company headquarters on the date 12 months after your termination date.   The Company determines when your Service terminates for this purpose.
    
	
 
    	
 
    	
 
    
	
Qualified   Retirement
    	
 
    	
If   you retire from Service at or after the age of 65 or at or after the age of   55 and have provided 10 years of consecutive Service for the Company prior to   retirement (a “Qualified Retirement”), then this option will expire at the   close of business at the Company headquarters on the date 36 months after the   date of your Qualified Retirement.
    
	
 
    	
 
    	
 
    
	
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.
    
	
 
    	
 
    	
 
    
	
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
    

 

2

 

 

	
 
    	
 
    	
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   compensation expense (or 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.
    
	
 
    	
 
    	
 
    
	
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. Nor shall this Agreement in any way be construed or   interpreted so as to affect adversely or otherwise impair the right of the   Company or the stockholders to remove Optionee from the Board of Directors at   any time in accordance with the provisions of
    

 

3

 

	
 
    	
 
    	
applicable   law.
    
	
 
    	
 
    	
 
    
	
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 Company   stock, the number of shares covered by this option and the exercise price per   share may be adjusted pursuant to 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).
    
	
 
    	
 
    	
 
    
	
The   Plan and Other Agreements
    	
 
    	
The   text of the Plan is incorporated in this Agreement by reference.

 

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 SIGNING THE COVER SHEET OF THIS AGREEMENT, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.

 

4

 

Form of Non-Employee Director Notice of Stock Option Grant and Stock Option Agreement under 2004 Equity Incentive Plan (form in effect from 2007)

 

THERAVANCE, INC. 2004 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»
    
	
 
    	
 
    
	
Total   Number of Shares:
    	
«Shares»
    
	
 
    	
 
    
	
Type   of Option:
    	
Nonstatutory   Stock Option
    
	
 
    	
 
    
	
Exercise   Price Per Share:
    	
$«PricePerShare»
    
	
 
    	
 
    
	
Date   of Grant:
    	
«DateGrant»
    
	
 
    	
 
    
	
Vesting   Schedule:
    	
«VestSched»
    
	
 
    	
 
    
	
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 2004 Equity Incentive Plan (the “Plan”) and the Stock Option Agreement, both of which are attached to and made a part of this document.

 

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.

 

	
OPTIONEE:
    	
 
    	
THERAVANCE, INC.
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    

 

 

New Director Grant

 

THERAVANCE, INC. 2004 EQUITY INCENTIVE PLAN

 

STOCK OPTION AGREEMENT

 

	
Tax   Treatment
    	
 
    	
This   option is intended to be a nonstatutory stock option, as provided in the   Notice of Stock Option Grant.
    
	
 
    	
 
    	
 
    
	
Vesting
    	
 
    	
This   option becomes exercisable 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 8(b)(ii) or (iii) 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 terminates. Should the exercisability of   this option accelerate as a result of the occurrence of a Change in Control   prior to the First Exercise Date, the right to exercise this option shall be   deferred as to the additional shares until the First Exercise Date, provided   and only if this option is assumed by the surviving corporation or its   parent or the surviving corporation or its parent substitutes its own option   for this option. 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
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, “Put Date”   shall mean the day after the final day of the Put Period, as such term is   defined in the Restated Certificate of Incorporation of Theravance, Inc.   or, if earlier, the consummation of a Qualified Change in Control as defined   in the Restated Certificate of Incorporation of Theravance, Inc. 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
For   purposes of this Agreement, “Service”   means your service as an Outside Director. 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
This   option will in no event become exercisable for additional shares after your   Service has terminated for any reason except as set forth above.
    
	
 
    	
 
    	
 
    
	
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.)
    
	
 
    	
 
    	
 
    
	
Regular   Termination
    	
 
    	
If   your Service terminates for any reason except a termination for Cause, then   this option will expire at the close of business at Company headquarters on   the date 36 months after your termination date. If your Service terminates   for Cause, then this option will expire on your termination date. The Company   determines when your Service terminates for this purpose.
    
	
 
    	
 
    	
 
    
	
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.
    
	
 
    	
 
    	
 
    
	
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 compensation expense (or   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
    

 

2

 

	
 
    	
 
    	
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.
    
	
 
    	
 
    	
 
    
	
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. Nor shall this Agreement in any way be construed or   interpreted so as to affect adversely or otherwise impair the right of the   Company or the stockholders to remove Optionee from the Board of Directors at   any time in accordance with the provisions of applicable law.
    
	
 
    	
 
    	
 
    
	
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 Company   stock, the number of shares covered by this option and the
    

 

3

 

	
 
    	
 
    	
exercise   price per share may be adjusted pursuant to 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).
    
	
 
    	
 
    	
 
    
	
The   Plan and Other Agreements
    	
 
    	
The   text of the Plan is incorporated in this Agreement by reference. 

 

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 SIGNING THE COVER SHEET OF THIS AGREEMENT, YOU AGREE TO ALL OF THE TERMS AND
 CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.

 

4

 

 

Form of Time-Based Vesting Notice of Restricted Stock Unit Award and Restricted Stock Unit Agreement under 2004 Equity Incentive Plan (form in effect through 2007)

 

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.

 

Vesting Schedule:

 

Vesting is dependent upon continuous service as an employee 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 through <<FinalVestDate>>, 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 further 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.

 

 

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 to meet the withholding obligations. Such sales shall   be effected at the prevailing market price following the date that the   restricted stock units vest.
    

 

2

 

	
 
    	
 
    	
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.
    
	
 
    	
 
    	
 
    
	
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.
    

 

3

 

	
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.

 

4

 

 

Form of Non-Employee Director Time-Based Vesting Notice of Initial Restricted Stock Unit Award and Restricted Stock Unit Agreement under 2004 Equity Incentive Plan (form in effect through 2010)

 

Initial Director Auto Grant

 

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:
    	
 
    	
«Shares»
    

 

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 a member of the Board (“Service”) throughout the vesting period.  The units will vest in twenty-four (24) equal monthly installments, provided that you remain in continuous Service through each such date. In addition, all of the restricted stock units subject to this award will vest immediately if the Company is subject to a Change in Control (as defined in the Plan) before your continuous Service terminates and upon your death.

 

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.

 

	
RECIPIENT:
    	
 
    	
THERAVANCE, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By: 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Title: 
    	
 
    
	
Print Name 
    	
 
    	
 
    

 

 

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.
    
	
 
    	
 
    	
 
    
	
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.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
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.
    
	
 
    	
 
    	
 
    
	
Time of Settlement
    	
 
    	
A vested unit will be settled on the fourth   anniversary of the Date of Grant or, if earlier, 60 days following the   cessation of your Service for any reason.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
If a unit vests on an accelerated basis as the   result of a Change in Control, then it will be settled immediately prior to   the closing of the transaction that constitutes a Change in Control.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
If a unit vests on an accelerated basis as the result   of your death, then it will be settled 60 days following the cessation of   your Service due to your death.
    
	
 
    	
 
    	
 
    
	
Form of Settlement
    	
 
    	
At the time of settlement, you will receive one   share of the Company’s Common Stock for each vested unit.
    
	
 
    	
 
    	
 
    
	
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.
    
	
 
    	
 
    	
 
    
	
Stock Certificates
    	
 
    	
No shares of Common Stock shall be issued   to you prior to the date on
    

 

 

	
 
    	
 
    	
which the restricted stock units are settled.  At the time of   settlement, a stock certificate for the shares representing your vested   restricted stock units shall be released to you or the Company shall 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.
    
	
 
    	
 
    	
 
    
	
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 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. Nor   shall this Agreement in any way be construed or interpreted so as to affect   adversely or otherwise impair the right of the Company or the stockholders to   remove you from the Board at any time in accordance with the provisions of   applicable law.
    
	
 
    	
 
    	
 
    
	
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.
    

 

2

 

	
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 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.

 

3

 

Form of Non-Employee Director Time-Based Vesting Notice of Annual Restricted Stock Unit Award and Restricted Stock Unit Agreement under 2004 Equity Incentive Plan (form in effect through 2010)

 

Annual Director Auto Grant

 

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:
    	
«Shares»
    

 

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 a member of the Board (“Service”) throughout the vesting period.  The units will vest in twelve (12) equal monthly installments, provided that you remain in continuous Service through each such date. In addition, all of the restricted stock units subject to this award will vest immediately if the Company is subject to a Change in Control (as defined in the Plan) before your continuous Service terminates and upon your death.

 

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.

 

	
RECIPIENT:
    	
 
    	
THERAVANCE, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By: 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Title: 
    	
 
    
	
Print Name 
    	
 
    	
 
    

 

 

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.
    
	
 
    	
 
    	
 
    
	
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.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
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.
    
	
 
    	
 
    	
 
    
	
Time of Settlement
    	
 
    	
A vested unit will be settled on the fourth   anniversary of the Date of Grant or, if earlier, 60 days following the   cessation of your Service for any reason.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
If a unit vests on an accelerated basis as the   result of a Change in Control, then it will be settled immediately prior to   the closing of the transaction that constitutes a Change in Control.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
If a unit vests on an accelerated basis as the   result of your death, then it will be settled 60 days following the cessation   of your Service due to your death.
    
	
 
    	
 
    	
 
    
	
Form of Settlement
    	
 
    	
At the time of settlement, you will receive one   share of the Company’s Common Stock for each vested unit.
    
	
 
    	
 
    	
 
    
	
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.
    
	
 
    	
 
    	
 
    
	
Stock Certificates
    	
 
    	
No shares of Common Stock shall be issued   to you prior to the date on
    

 

 

	
 
    	
 
    	
which the restricted stock units are settled.  At the time of   settlement, a stock certificate for the shares representing your vested   restricted stock units shall be released to you or the Company shall 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.
    
	
 
    	
 
    	
 
    
	
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 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. Nor   shall this Agreement in any way be construed or interpreted so as to affect   adversely or otherwise impair the right of the Company or the stockholders to   remove you from the Board at any time in accordance with the provisions of   applicable law.
    
	
 
    	
 
    	
 
    
	
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.
    

 

2

 

	
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 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.

 

3

 

Form of Time-Based Vesting Notice of Restricted Stock Unit Award and Restricted Stock Unit Agreement under 2004 Equity Incentive Plan (sales plan applicable to more than one award, form used in 2008)

 

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 
    

 

2

 

	
 
    	
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 
    

 

3

 

	
 
    	
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 
    

 

4

 

	
 
    	
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.

 

5

 

Form of Time-Based Vesting Notice of Restricted Stock Unit Award and Restricted Stock Unit Agreement under 2004 Equity Incentive Plan (sales plan applicable to one award, form used in 2008)

 

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.  Such sales 
    

 

2

 

	
 
    	
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 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 this 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 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 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 
    

 

3

 

	
 
    	
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 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.

 

4

 

Form of Time-Based Vesting Notice of Restricted Stock Unit Award and Restricted Stock Unit Agreement under 2004 Equity Incentive Plan (executive officer replenishment 2009)

 

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 in equal quarterly installments over approximately four years as follows:  6.25% on <<InitialVestDate>>; 6.25% on <<SecondVestDate>>; and an additional 6.25% on the final day of each 3-month period thereafter, 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.

 

 

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. 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
At your discretion,   these arrangements may include (a) payment in cash, (b) payment from   the proceeds of the sale of shares through a Company-approved broker or   (c) withholding shares of Company stock that otherwise would be issued   to you when the units are settled, provided
    

 

2

 

	
 
    	
 
    	
that the Company,   acting through the Board of Directors or Compensation Committee, may provide   prospectively that it no longer authorizes (c) withholding of shares. 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
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 and   the fair market value of these shares, determined as of the date when   taxes otherwise would have been withheld in cash, will be applied to the   withholding taxes. 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
You   acknowledge that the proceeds of a sale pursuant to (b) above or   withholding pursuant to (c) above 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   withhold the balance of all applicable taxes legally payable by you from your   wages or other cash compensation paid to you by the Company.
    
	
 
    	
 
    	
 
    
	
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
    

 

3

 

	
 
    	
 
    	
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.

 

4

 

Form of Time-Based Vesting Notice of Restricted Stock Unit Award and Restricted Stock Unit Agreement under 2004 Equity Incentive Plan (employee replenishment 2009)

 

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 in equal quarterly installments over approximately four years as follows:  6.25% on <<InitialVestDate>>; 6.25% on <<SecondVestDate>>; and an additional 6.25% on the final day of each 3-month period thereafter, 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.  Such sales
    

 

2

 

	
 
    	
 
    	
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   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 this 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 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 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
    

 

3

 

	
 
    	
 
    	
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 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.
    

 

4

 

BY ACCEPTING THIS RESTRICTED STOCK UNIT AWARD, YOU AGREE TO

 

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

 

5

 

Form of Non-Employee Director Time-Based Vesting Notice of Initial Restricted Stock Unit Award and Restricted Stock Unit Agreement under 2004 Equity Incentive Plan (form in effect from December 2010)

 

Initial Director Auto Grant

 

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:
    	
 
    	
6,000
    

 

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 a member of the Board (“Service”) throughout the vesting period.  The units will vest in twenty-four (24) equal monthly installments, provided that you remain in continuous Service through each such date. In addition, all of the restricted stock units subject to this award will vest immediately if the Company is subject to a Change in Control (as defined in the Plan) before your continuous Service terminates and upon your death.

 

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.

 

 

	
RECIPIENT:
    	
 
    	
THERAVANCE, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    
	
Print   Name
    	
 
    	
 
    	
 
    

 

 

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.
    
	
 
    	
 
    	
 
    
	
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.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
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.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Regardless   of when the restricted stock units vest, settlement of the units will only   occur at the time specified below under “Time of Settlement”.
    
	
 
    	
 
    	
 
    
	
Time   of Settlement
    	
 
    	
A   vested unit will be settled on the fourth anniversary of the Date of Grant   or, if earlier, 60 days following your “separation from service” (within the   meaning of Section 409A of the Internal Revenue Code of 1986, as amended   (the “Code”)) or your death.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
In   the event of a Change in Control that also constitutes a “change in control   event” under Treasury Regulation 1.409A-3(a)(5) (a “409A CiC”), all   vested units will be settled immediately prior to the closing of the   transaction that constitutes a Change in Control. In the event of a Change in   Control that is not a 409A CiC, the vested units will be settled as described   in the rest of this section or, if sooner, immediately prior to a 409A CiC   after such Change in Control.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Notwithstanding   anything to the contrary in the Plan, the Notice of Restricted Stock Unit   Award or any other section of this Agreement, the Company may accelerate   settlement of these units from the time specified in this section only in   accordance with Treasury Regulation 1.409A-3(j)(4).
    
	
 
    	
 
    	
 
    
	
Form of   Settlement
    	
 
    	
At   the time of settlement, you will receive one share of the Company’s Common   Stock for each vested unit.
    

 

 

	
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.
    
	
 
    	
 
    	
 
    
	
Stock   Certificates
    	
 
    	
No   shares of Common Stock shall be issued to you prior to the date on which the   restricted stock units are settled.  At the time of settlement, a stock   certificate for the shares representing your vested restricted stock units   shall be released to you or the Company shall 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.
    
	
 
    	
 
    	
 
    
	
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.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
These   restricted stock units are subject to Code Section 409A. The Company has   attempted in good faith to structure this award in a manner that conforms to   the requirements of Code Sections 409A(a)(2), (3) and (4), and any   ambiguities herein will be interpreted to so comply to the maximum extent   permissible. However, you acknowledge and agree that the Company has made no   representations or warranties to you with respect to whether this award in   fact complies with Code Sections 409A(a)(2), (3) and (4) or the   income tax consequences related to this award
    
	
 
    	
 
    	
 
    
	
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
    

 

2

 

	
 
    	
 
    	
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 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. Nor shall this Agreement in any way be construed or   interpreted so as to affect adversely or otherwise impair the right of the   Company or the stockholders to remove you from the Board at any time in   accordance with the provisions of applicable law.
    
	
 
    	
 
    	
 
    
	
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 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.

 

3

 

Form of Non-Employee Director Time-Based Vesting Notice of Annual Restricted Stock Unit Award and Restricted Stock Unit Agreement under 2004 Equity Incentive Plan (form in effect from December 2010)

 

Annual Director Auto Grant

 

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:
    	
 
    	
6,000
    

 

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 a member of the Board (“Service”) throughout the vesting period.  The units will vest in twelve (12) equal monthly installments, provided that you remain in continuous Service through each such date. In addition, all of the restricted stock units subject to this award will vest immediately if the Company is subject to a Change in Control (as defined in the Plan) before your continuous Service terminates and upon your death.

 

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.

 

 

	
RECIPIENT:
    	
 
    	
THERAVANCE, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    
	
Print   Name
    	
 
    	
 
    	
 
    

 

 

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.
    
	
 
    	
 
    	
 
    
	
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.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
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. 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Regardless   of when the restricted stock units vest, settlement of the units will only   occur at the time specified below under “Time of Settlement”.
    
	
 
    	
 
    	
 
    
	
Time   of Settlement
    	
 
    	
A   vested unit will be settled on the fourth anniversary of the Date of Grant   or, if earlier, 60 days following your “separation from service” (within the   meaning of Section 409A of the Internal Revenue Code of 1986, as amended   (the “Code”)) or your death.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
In   the event of a Change in Control that also constitutes a “change in control   event” under Treasury Regulation 1.409A-3(a)(5) (a “409A CiC”), all   vested units will be settled immediately prior to the closing of the   transaction that constitutes a Change in Control. In the event of a Change in   Control that is not a 409A CiC, the vested units will be settled as described   in the rest of this section or, if sooner, immediately prior to a 409A CiC   after such Change in Control.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Notwithstanding   anything to the contrary in the Plan, the Notice of Restricted Stock Unit   Award or any other section of this Agreement, the Company may accelerate   settlement of these units from the time specified in this section only in   accordance with Treasury Regulation 1.409A-3(j)(4).
    
	
 
    	
 
    	
 
    
	
Form of   Settlement
    	
 
    	
At   the time of settlement, you will receive one share of the Company’s Common   Stock for each vested unit.
    

 

 

	
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.
    
	
 
    	
 
    	
 
    
	
Stock   Certificates
    	
 
    	
No   shares of Common Stock shall be issued to you prior to the date on which the   restricted stock units are settled. At the time of settlement, a stock   certificate for the shares representing your vested restricted stock units   shall be released to you or the Company shall 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.
    
	
 
    	
 
    	
 
    
	
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.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
These   restricted stock units are subject to Code Section 409A. The Company has   attempted in good faith to structure this award in a manner that conforms to   the requirements of Code Sections 409A(a)(2), (3) and (4), and any   ambiguities herein will be interpreted to so comply to the maximum extent   permissible. However, you acknowledge and agree that the Company has made no   representations or warranties to you with respect to whether this award in   fact complies with Code Sections 409A(a)(2), (3) and (4) or the   income tax consequences related to this award.
    
	
 
    	
 
    	
 
    
	
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 
    

 

2

 

	
 
    	
 
    	
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 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. Nor shall this Agreement in any way be construed or   interpreted so as to affect adversely or otherwise impair the right of the   Company or the stockholders to remove you from the Board at any time in   accordance with the provisions of applicable law.
    
	
 
    	
 
    	
 
    
	
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 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.

 

3Exhibit 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)

 

 

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
    

 

i

 

	
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
    

 

ii

 

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.

 

3

 

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

 

4

 

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.

 

6

 

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.

 

7

 

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
    

 

 

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. 
    

 

2

 

	
 
    	
 
    	
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.
    

 

3

 

	
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.

 

4

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