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Exhibit 10.13    
    

 
 

THERAVANCE, INC.
  
  AMENDED AND RESTATED
  
  INVESTORS' RIGHTS AGREEMENT    
    

May 11, 2004  

  

 
 

TABLE OF CONTENTS    
    

	 
	 	 
	 	 
	 	Page

	1.	 	Registration Rights	 	1
	 	 	1.1	 	Definitions	 	1
	 	 	1.2	 	Request for Registration	 	2
	 	 	1.3	 	Company Registration	 	4
	 	 	1.4	 	Form S-3 Registration	 	5
	 	 	1.5	 	Obligations of the Company	 	5
	 	 	1.6	 	Information from Holder	 	6
	 	 	1.7	 	Expenses of Registration	 	6
	 	 	1.8	 	Delay of Registration	 	7
	 	 	1.9	 	Indemnification	 	7
	 	 	1.10	 	Reports Under Securities Exchange Act of 1934	 	9
	 	 	1.11	 	Assignment of Registration Rights	 	9
	 	 	1.12	 	"Market Stand-Off" Agreement	 	9
	 	 	1.13	 	Termination of Registration Rights	 	10
	 	 	1.14	 	Limitation on Subsequent Registration Rights	 	10
	

2.	
 	

Covenants of the Company	
 	

10
	 	 	2.1	 	Delivery of Annual Financial Statements	 	10
	 	 	2.2	 	Delivery of Other Financial Information	 	11
	 	 	2.3	 	Inspection	 	11
	 	 	2.4	 	Termination of Information and Inspection Covenants	 	11
	 	 	2.5	 	Right of First Offer	 	11
	 	 	2.6	 	Termination of Certain Covenants	 	12
	 	 	2.7	 	Proprietary Information Agreements	 	13
	

3.	
 	

Miscellaneous	
 	

13
	 	 	3.1	 	Successors and Assigns	 	13
	 	 	3.2	 	Governing Law	 	13
	 	 	3.3	 	Counterparts	 	13
	 	 	3.4	 	Titles and Subtitles	 	13
	 	 	3.5	 	Notices	 	13
	 	 	3.6	 	Expenses	 	13
	 	 	3.7	 	Entire Agreement: Amendments and Waivers	 	13
	 	 	3.8	 	Severability	 	14
	 	 	3.9	 	Aggregation of Stock	 	14
	 	 	3.10	 	Waiver of Right of First Offer	 	14
	 	 	3.11	 	Prior Agreement	 	14

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AMENDED AND RESTATED
  INVESTORS' RIGHTS AGREEMENT    
    

        THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT is made as of the 11th day of May, 2004, by and among Theravance, Inc., a Delaware
corporation (the "Company"), certain of the holders of the Company's Common Stock (as defined below) listed on Schedule A that are signatories
hereto and/or are signatories to the Prior Agreement (as defined below), each of which is herein referred to as an "Investor", and certain holders of the Company's Common Stock listed on  Schedule B,
 each of which is herein referred to as an "Original Common Holder." 

 
 

RECITALS  
    

        WHEREAS, certain of the Investors (the "Existing Investors") are holders of shares of the Company's Common Stock (which have been issued upon conversion of the
Company's outstanding Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and/or Series D-1 Preferred
Stock) and/or shares of the Company's Class A Common Stock (which have been issued upon conversion of the Company's Series E Preferred Stock) and possess registration rights, information
rights, rights of first refusal and other rights pursuant to an Amended and Restated Investors' Rights Agreement dated as of December 19, 2002, by and among the Company, the Original Common
Holders and such Existing Investors (the "Prior Agreement"); and 

        WHEREAS,
the Existing Investors are holders of at least a majority of the "Registrable Securities" of the Company (as defined in the Prior Agreement), and desire to amend, supersede and
replace the Prior Agreement and to accept the rights created pursuant hereto in lieu of the rights granted to them under the Prior Agreement; 

        WHEREAS,
SmithKline Beecham Corporation, a Pennsylvania corporation ("GSK") is a party to the Class A Common Stock Purchase Agreement of even date herewith among the Company and
GSK (the "Class A Agreement"), which provides that as a condition to the closing of the sale of the Class A Common Stock, this Agreement must be executed and delivered by GSK, Existing
Investors holding at least a majority of the "Registrable Securities" of the Company (as defined in the Prior Agreement) and the Company; and 

        WHEREAS,
in connection with the Class A Agreement the Company and GSK (and certain of its affiliates) have also entered into a Governance Agreement (the "Governance Agreement")
which provides certain limitations with respect to issuance by the Company of its securities. 

        NOW,
THEREFORE, in consideration of the mutual promises and covenants set forth herein, the Company and the Existing Investors hereby agree that the Prior Agreement shall be amended,
superseded and replaced in its entirety by this Agreement, and the parties hereto further agree as follows: 

        1.    Registration Rights.    The Company covenants and agrees as follows: 

        1.1    Definitions.    For purposes of this Section 1: 

        (a)   The
term "Act" means the Securities Act of 1933, as amended. 

        (b)   The
term "Form S-3" means such form under the Act as in effect on the date hereof or any registration form under the Act subsequently adopted by the
SEC that permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC. 

        (c)   The
term "GSK Holders" means GSK, Glaxo Group Limited, a limited liability company organized under the laws of England and Wales and any of their permitted assignees
pursuant to Section 1.11 owning or having the right to acquire Registrable Securities. 

        (d)   The
term "Holder" means any person owning or having the right to acquire Registrable Securities or any assignee thereof in accordance with Section 1.11 hereof; 

 

provided,
however, that the Original Common Holders shall not be deemed to be Holders for purposes of Section 1.2, 1.4 and 3.7. 

        (e)   The
term "Initial Offering" means the Company's first firm commitment underwritten public offering of its Common Stock under the Act. 

        (f)    The
term "Major Investor" means any Investor that holds on the date hereof at least (i) 750,000 shares of Common Stock or (ii) 750,000 shares of
Class A Common Stock. 

        (g)   The
term "1934 Act" means the Securities Exchange Act of 1934, as amended. 

        (h)   The
term "Common Stock" means, collectively, the Company's Common Stock and Class A Common Stock, each $.01 par value. 

        (i)    The
term "register," "registered," and "registration" refer to a registration effected by preparing and filing a registration statement or similar document in compliance
with the Act, and the declaration or ordering of effectiveness of such registration statement or document. 

        (j)    The
term "Registrable Securities" means (i) the shares Common Stock held by the Investors (provided,  however, that prior to the Conversion Date (as such
term is defined in the Restated Certificate) none of the shares of Class A Common Stock shall
be deemed to be Registrable Securities for the purposes of Section 1), (ii) the shares of Common Stock held by the Original Common Holders; provided, however, that such shares of Common
Stock shall not be deemed Registrable Securities for the purposes of Section 1.2, 1.4 and 3.7 and (iii) any Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security that is issued as) a dividend or other distribution with respect to, or in exchange for, or in replacement of, the shares referenced in (i) and
(ii) above, excluding in all cases, however, any Registrable Securities sold by a person in a transaction in which his rights under this Section 1 are not assigned. 

        (k)   The
number of shares of "Registrable Securities" outstanding shall be determined by the number of shares of Common Stock outstanding that are, and the number of shares
of Common Stock issuable pursuant to then exercisable or convertible securities that are, Registrable Securities. 

        (l)    The
term "SEC" shall mean the Securities and Exchange Commission. 

        1.2    Request for Registration.    

        (a)   Subject
to the conditions of this Section 1.2, if the Company shall receive at any time six (6) months after the effective date of the Initial Offering, a
written request from the Holders of fifty percent (50%) or more of the Registrable Securities then outstanding (the "Initiating Holders") that the Company file a registration statement under
the Act covering the registration of Registrable Securities, then the Company shall, within twenty (20) days of the receipt thereof, give written notice of such request to all Holders, and
subject to the limitations of this Section 1.2, use all reasonable efforts to
effect, as soon as practicable, the registration under the Act of all Registrable Securities that the Holders request to be registered in a written request received by the Company within twenty
(20) days of the mailing of the Company's notice pursuant to this Section 1.2(a). 

        (b)   If
the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a
part of their request made pursuant to this Section 1.2 and the Company shall include such information in the written notice referred to in Section 1.2(a). In such event the right of any
Holder to include its Registrable Securities in such registration shall be conditioned upon such Holder's 

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participation
in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders
and such Holder) to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by a majority of the participating Holders (which underwriter or underwriters shall be reasonably acceptable to the Company). Notwithstanding
any other provision of this Section 1.2, if the underwriter advises the Company that marketing factors require a limitation of the number of securities underwritten (including Registrable
Securities), then the Company shall so advise all Holders of Registrable Securities that would otherwise be underwritten pursuant hereto, and the number of shares that may be included in the
underwriting shall be allocated to the Holders of such Registrable Securities on a pro rata basis based on the number of Registrable Securities held by all such Holders (including the Initiating
Holders); provided, however, that the number of shares of Registrable Securities to be included in such underwriting and registration shall not be reduced unless all other securities of the Company
are first entirely excluded from the underwriting and registration. Any Registrable Securities excluded or withdrawn from such underwriting shall be withdrawn from the registration. 

        (c)   The
Company shall not be required to effect a registration pursuant to this Section 1.2: 

        (i)    in
any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, unless the
Company is already subject to service in such jurisdiction and except as may be required under the Act; or 

        (ii)   after
the Company has effected one (1) registration pursuant to this Section 1.2, and such registration has been declared or ordered effective (provided,
however, that beginning twelve (12) months following the effective date of the Initial Offering, for so long as the Company does not satisfy the eligibility requirements for utilization of a
registration statement on Form S-3, the Company shall not be required to effect a registration pursuant to this Section 1.2 if the Company has, within the twelve
(12) month period preceding the date of such request, already effected two registrations for the Holders pursuant to this Section 1.2); or 

        (iii)  during
the period starting with the date of the filing of, and ending on a date one hundred eighty (180) days following the effective date of, a
Company-initiated registration subject to Section 1.3 below, provided that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become
effective; or 

        (iv)  if
the Initiating Holders propose to dispose of Registrable Securities that may be registered on Form S-3 pursuant to Section 1.4 hereof; or 

        (v)   if
the Company shall furnish to Holders requesting a registration statement pursuant to this Section 1.2, a certificate signed by the Company's Chief Executive
Officer or Chairman of the Board stating that in the good faith judgment of the Board of Directors of the Company (the "Board"), it would be seriously detrimental to the Company and its stockholders
for such registration statement to be effected at such time, in which event the Company shall have the right to defer such filing for a period of not more than ninety (90) days after receipt of
the request of the Initiating Holders, provided that such right to delay a request shall be exercised by the Company not more than once in any twelve (12)-month period. 

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        1.3    Company Registration.    

        (a)   If
(but without any obligation to do so) the Company proposes to register (including for this purpose a registration effected by the Company for stockholders other than
the Holders) any of its stock or other securities under the Act in connection with the public offering of such securities (other than a registration relating solely to the sale of securities to
participants in a Company stock plan, a registration relating to a corporate reorganization or other transaction under Rule 145 of the Act, or a registration in which the only Common Stock
being registered is Common Stock issuable upon conversion of debt securities that are also being registered), the Company shall, at such time, promptly give each Holder written notice of such
registration. Upon the written request of each Holder given within twenty (20) days after mailing of such notice by the Company in accordance with Section 3.5, the Company shall, subject
to the provisions of Section 1.3(c), use all reasonable efforts to cause to be registered under the Act all of the Registrable Securities that each such Holder has requested to be registered. 

        (b)    Right to Terminate Registration.    The Company shall have the right to terminate or withdraw any registration
initiated by it under this Section 1.3 prior to the effectiveness of such registration whether or not any Holder has elected to include securities in such registration. The expenses of such
withdrawn registration shall be borne by the Company in accordance with Section 1.7 hereof. 

        (c)    Underwriting Requirements.    In connection with any offering involving an underwriting of shares of the
Company's capital stock, the Company shall not be required under this Section 1.3 to include any of the Holders' securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by other persons entitled to select the underwriters) and enter into an underwriting agreement in customary form with an
underwriter or underwriters selected by the Company, and then only in such quantity as the underwriters determine in their sole discretion will not jeopardize the success of the offering by the
Company. If the total amount of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the amount of securities sold other than by the Company
that the underwriters determine in their sole discretion is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such
securities, including Registrable Securities, that the underwriters determine in their sole discretion will not jeopardize the success of the offering (the securities so included to be apportioned pro
rata among the selling Holders according to the total amount of securities entitled to be included therein owned by each selling Holder or in such other proportions as shall mutually be agreed to by
such selling Holders). For purposes of the preceding parenthetical concerning apportionment, for any selling stockholder that is a Holder of Registrable Securities and that is a partnership or
corporation, the partners, retired partners and stockholders of such Holder, or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the
foregoing persons shall be deemed to be a single "selling Holder," and any pro rata reduction with respect to such "selling Holder" shall be based upon the aggregate amount of Registrable Securities
owned by all such related entities and individuals. If the underwriters determine in good faith to so limit the number of shares to be underwritten, the number of shares that may be included in the
underwriting shall be allocated first to the Company, second, to the Holders on a pro rata basis; and third, to any stockholder of the Company other than a Holder on a pro rata basis. No such
reduction shall reduce the amount of securities of the selling Holders below 25% of the total amount of securities included in such registration, unless such offering is the Initial 

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Offering
and such registration does not include shares of any other selling stockholders, in which event any or all of the Registrable Securities of the Holders may be excluded. 

        1.4    Form S-3 Registration.    In case the Company shall receive from the Holders of at least ten
percent (10%) of the Registrable Securities a written request or requests that the Company effect a registration on Form S-3 and any related qualification or compliance with respect
to all or a part of the Registrable Securities owned by such Holder or Holders, the Company shall: 

        (a)   promptly
give written notice of the proposed registration, and any related qualification or compliance, to all other Holders; and 

        (b)   use
all reasonable efforts to effect, as soon as practicable, such registration and all such qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holders' Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of
any other Holders joining in such request as are specified in a written request given within fifteen (15) days after receipt of such
written notice from the Company, provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance, pursuant to this Section 1.4: 

        (i)    if
Form S-3 is not available for such offering by the Holders; 

        (ii)   if
the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and
such other securities (if any) at an aggregate price to the public (net of any underwriters' discounts or commissions) of less than $1,000,000; 

        (iii)  if
the Company shall furnish to the Holders a certificate signed by the Company's Chief Executive Officer or Chairman of the Board stating that in the good faith
judgment of the Board, it would be seriously detrimental to the Company and its stockholders for such Form S-3 Registration to be effected at such time, in which event the Company
shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than ninety (90) days after receipt of the request of the Holder or
Holders under this Section 1.4; provided, however, that the Company shall not utilize this right more than once in any twelve month period; 

        (iv)  if
the Company has, within the twelve (12) month period preceding the date of such request, already effected two registrations on Form S-3 for
the Holders pursuant to this Section 1.4; or 

        (v)   in
any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such
registration, qualification or compliance. 

        (c)   Subject
to the foregoing, the Company shall file a registration statement covering the Registrable Securities and other securities so requested to be registered
as soon as practicable after receipt of the request or requests of the Holders. Registrations effected pursuant to this Section 1.4 shall not be counted as requests for registration effected
pursuant to Sections 1.2. 

        1.5    Obligations of the Company.    Whenever required under this Section 1 to effect the registration of any
Registrable Securities, the Company shall, as expeditiously as reasonably possible: 

        (a)   prepare
and file with the SEC a registration statement with respect to such Registrable Securities and use all reasonable efforts to cause such registration statement to
become effective, and, upon the request of the Holders of a majority of the Registrable 

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Securities
registered thereunder, keep such registration statement effective for a period of up to one hundred twenty (120) days or, if earlier, until the distribution contemplated in the
Registration Statement has been completed; 

        (b)   prepare
and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as
may be necessary to comply with the provisions of the Act with respect to the disposition of all securities covered by such registration statement; 

        (c)   furnish
to the Holders such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Act, and such other
documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them; 

        (d)   use
all reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Holders, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or jurisdictions; 

        (e)   in
the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement (including, but not limited to, reasonable due
diligence), in usual and customary form, with the managing underwriter of such offering; 

        (f)    notify
each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the
Act or the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing and the Company shall amend or supplement such
prospectus in order to cause such prospectus not to include any untrue statement of material fact or omit to statement a material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing; 

        (g)   cause
all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange on which similar securities issued by the Company are then
listed; and 

        (h)   provide
a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case
not later than the effective date of such registration. 

        1.6    Information from Holder.    It shall be a condition precedent to the obligations of the Company to take any
action pursuant to this Section 1 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Holder's Registrable Securities. 

        1.7    Expenses of Registration.    All expenses other than underwriting discounts and commissions incurred in
connection with registrations, filings or qualifications pursuant to Sections 1.2, 1.3 and 1.4, including (without limitation) all registration, filing and qualification fees, printers' and accounting
fees, fees and disbursements of counsel for the Company and reasonable fees of one special counsel for the selling Holders not to exceed $35,000 shall be borne by the Company. Notwithstanding the
foregoing, the Company shall not be required to pay for any expenses of any 

6

 

registration
proceeding begun pursuant to Section 1.2 or Section 1.4 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable
Securities to be registered (in which case all participating Holders shall bear such expenses pro rata based upon the number of Registrable Securities that were to be requested in the withdrawn
registration), provided, however, that if at the time of such withdrawal, the Holders have learned of a material adverse change in the condition, business, or prospects of the Company from that known
to the Holders at the time of their request and have withdrawn the request with reasonable promptness following disclosure by the Company of such material adverse change, then the Holders shall not be
required to pay any of such expenses. 

        1.8    Delay of Registration.    No Holder shall have any right to obtain or seek an injunction restraining or
otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 1. 

        1.9    Indemnification.    In the event any Registrable Securities are included in a registration statement under this
Section 1: 

        (a)   To
the extent permitted by law, the Company will indemnify and hold harmless each Holder, the partners or officers, directors and stockholders of each Holder, legal
counsel and accountants for each Holder, any underwriter (as defined in the Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Act or the
1934 Act, against any losses, claims, damages or liabilities (joint or several) to which they may become subject under the Act, the 1934 Act or any state securities laws, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a "Violation"): (i) any
untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the Act, the 1934 Act, any state securities laws or any rule or regulation promulgated under the Act, the 1934 Act or any state
securities laws; and the Company will reimburse each such Holder, underwriter or controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this subsection l.9(a) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in
any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation that occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by any such Holder, underwriter or controlling person; provided further, however, that the foregoing indemnity agreement
with respect to any preliminary prospectus shall not inure to the benefit of any Holder or underwriter, or any person controlling such Holder or underwriter, from whom the person asserting any such
losses, claims, damages or liabilities purchased shares in the offering, if a copy of the prospectus (as then amended or supplemented if the Company shall have furnished any amendments or supplements
thereto) is provided to the Holder but was not sent or given by or on behalf of such Holder or underwriter to such person, if required by law so to have been delivered, at or prior to the written
confirmation of the sale of the shares to such person, and if the prospectus (as so amended or supplemented) would have cured the defect giving rise to such loss, claim, damage or liability. 

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        (b)   To
the extent permitted by law, each selling Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the
registration statement, each person, if any, who controls the Company within the meaning of the Act, legal counsel and accountants for the Company, any underwriter, any other Holder selling securities
in such registration statement and any controlling person of any such underwriter or other Holder, against any losses, claims, damages or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Act, the 1934 Act or any state securities laws, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based
upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for
use in connection with such registration; and each such Holder will reimburse any person intended to be indemnified pursuant to this subsection l.9(b), for any legal or other expenses reasonably
incurred by such person in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this subsection
l.9(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder (which consent shall
not be unreasonably withheld), provided further that in no event shall any indemnity under this subsection l.9(b) exceed the net proceeds from the offering received by such Holder. 

        (c)   Promptly
after receipt by an indemnified party under this Section 1.9 of notice of the commencement of any action (including any governmental action), such
indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 1.9, deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without
conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if materially prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 1.9, but the omission so to deliver written notice to the indemnifying party will not
relieve it of any liability that it may have to any indemnified party otherwise than under this Section 1.9. 

        (d)   If
the indemnification provided for in this Section 1.9 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any
loss, liability, claim, damage or expense referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of
the indemnified party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense, as well as any other relevant equitable
considerations; provided, however, that such contribution shall not exceed the net proceeds from the offering received by such Holder. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or 

8

 

by
the indemnified party and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. 

        (e)   Notwithstanding
the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection
with the underwritten public offering are in conflict with the foregoing provisions, with the consent of the holders of a majority of the Registrable Securities, the provisions in the underwriting
agreement shall control. 

        (f)    The
obligations of the Company and Holders under this Section 1.9 shall survive the completion of any offering of Registrable Securities in a registration
statement under this Section 1, and otherwise. 

        1.10    Reports Under Securities Exchange Act of 1934.    With a view to making available to the Holders the benefits
of Rule 144 promulgated under the Act and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to: 

        (a)   make
and keep public information available, as those terms are understood and defined in SEC Rule 144, at all times after ninety (90) days after the
effective date of the Initial Offering; 

        (b)   file
with the SEC in a timely manner all reports and other documents required of the Company under the Act and the 1934 Act; and 

        (c)   furnish
to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) a written statement by the Company that it has complied
with the reporting requirements of SEC Rule 144 (at any time after ninety (90) days after the effective date of the first registration statement filed by the Company), the Act and the
1934 Act (at any time after it has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any
time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other
information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration or pursuant to such form. 

        1.11    Assignment of Registration Rights.    The rights to cause the Company to register Registrable Securities
pursuant to this Section 1 may be assigned (but only with all related obligations) by a Holder to a transferee or assignee of such securities that (i) is a subsidiary, parent, partner,
limited partner, retired partner or stockholder of a Holder or is controlling, controlled by or under common control with, the Holder, (ii) is a Holder's family member or trust for the benefit
of an individual Holder, or (iii) after such assignment or transfer, holds at least 50,000 shares of Registrable Securities (subject to appropriate adjustment for stock splits, stock dividends,
combinations and other recapitalizations), provided: (a) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee
or assignee and the securities with respect to which such registration rights are being assigned; and (b) such transferee or assignee agrees in writing to be bound by and subject to the terms
and conditions of this Agreement, including without limitation the provisions of Section 1.12 below. 

        1.12    "Market Stand-Off" Agreement.    Each Holder hereby agrees that it will not, without the prior
written consent of the managing underwriter, during the period commencing on the date of the final prospectus relating to the Company's initial public offering and ending on the date specified by the
Company and the managing underwriter (such period not to exceed one hundred eighty (l80) days) (i) lend, offer, pledge, sell, contract to sell, sell any option or contract to 

9

 

purchase,
purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock (whether such shares or any such securities are then owned by the Holder or are thereafter acquired), or (ii) enter
into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. This Section 1.12 shall not apply to transactions relating to
shares of Common Stock acquired in open market transactions after completion of the Company's initial public offering. The foregoing provisions of this Section 1.12 shall only be applicable to
the Holders if all non-selling officers and directors and greater than two percent (2%) stockholders of the Company enter into similar agreements. The underwriters in connection with the
Company's initial public offering are intended third party beneficiaries of this Section 1.12 and shall have the right, power and authority to enforce the provisions hereof as though they were
a party hereto. 

        In
order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the Registrable Securities of each Holder (and the shares or
securities of every other person subject to the foregoing restriction) until the end of such period. 

        1.13    Termination of Registration Rights.    

        (a)   No
Holder, other than GSK Holders, shall be entitled to exercise any right provided for in this Section 1 after five (5) years following the consummation
of the Initial Offering or, as to any Holder holding two percent (2%) or less of the outstanding capital stock of the Company, such earlier time at which all Registrable Securities held by such Holder
(and any affiliate of the Holder with whom such Holder must aggregate its sales under Rule 144) can be sold in a single transaction without registration in compliance with Rule 144 of
the Act. 

        (b)   No
GSK Holder shall be entitled to exercise any right provided for in this Section 1 after seven (7) years following the Call/Put Termination Date (as
defined in the Governance Agreement) or, as to any GSK Holder holding two percent (2%) or less of the outstanding capital stock of the Company, such earlier time at which all Registrable Securities
held by such GSK Holder (and any affiliate of the GSK Holder with whom such GSK Holder must aggregate its sales under Rule 144) can be sold in a single transaction without registration in
compliance with Rule 144 of the Act. 

        1.14    Limitation on Subsequent Registration Rights.    From and after the date of this Agreement, the Company shall
not, without the prior written consent of the holders of a majority of the Registrable Securities then outstanding, enter into any agreement with any holder or prospective holder of any securities of
the Company that would grant such holder registration rights senior to those granted to the Holders hereunder. 

        2.    Covenants of the Company.    

        2.1    Delivery of Annual Financial Statements.    The Company shall deliver to each Investor as soon as practicable,
but in any event within ninety (90) days after the end of each fiscal year of the Company, an income statement for such fiscal year, a balance sheet of the Company and statement of
stockholder's equity as of the end of such year, and a statement of cash flows for such year, such year-end financial reports to be in reasonable detail, prepared in accordance with US
generally accepted accounting principles ("GAAP"), and audited and certified by independent public accountants of nationally recognized standing selected by the Company. 

10

 

        2.2    Delivery of Other Financial Information.    The Company shall deliver to each Major Investor: 

        (a)   as
soon as practicable, but in any event within forty-five (45) days after the end of each of the first three (3) quarters of each fiscal year
of the Company, an unaudited income statement, statement of cash flows for such fiscal quarter and an unaudited balance sheet as of the end of such fiscal quarter. 

        (b)   within
thirty (30) days of the end of each month, an unaudited income statement and statement of cash flows and balance sheet for and as of the end of such month,
in reasonable detail including comparison figures; 

        (c)   as
soon as practicable, but in any event at least thirty (30) days prior to the end of each fiscal year, a budget and business plan for the next fiscal year,
prepared on a monthly basis, including balance sheets, income statements and statements of cash flows for such months and, as soon as prepared, any other budgets or revised budgets prepared by the
Company; 

        (d)   with
respect to the financial statements called for in subsections (a) and (b) of this Section 2.2, an instrument executed by the Chief Financial
Officer or President of the Company certifying that such
financials were prepared in accordance with GAAP consistently applied with prior practice for earlier periods (with the exception of footnotes that may be required by GAAP) and fairly present the
financial condition of the Company and its results of operation for the period specified, subject to year-end audit adjustment; and 

        (e)   such
other information relating to the financial condition, business, prospects or corporate affairs of the Company as the Investor or any assignee of the Investor may
from time to time request, provided, however, that the Company shall not be obligated under this subsection (e) or any other subsection of Sections 2.1 and 2.2 to provide information that it
deems in good faith to be a trade secret or similar confidential information. 

        2.3    Inspection.    The Company shall permit each Major Investor, at such Major Investor's expense, to visit and
inspect the Company's properties, to examine its books of account and records and Board minutes and to discuss the Company's affairs, finances and accounts with its officers, all at such reasonable
times as may be requested by the Major Investor; provided, however, that the Company shall not be obligated pursuant to this Section 2.3 to provide access to any information that the Board
determines in good faith to be a trade secret or similar confidential information. 

        2.4    Termination of Information and Inspection Covenants.    The covenants set forth in Sections 2.1, 2.2 and 2.3
shall terminate as to each Investor and Major Investor and be of no further force or effect when the sale of securities pursuant to a registration statement filed by the Company under the Act in
connection with the firm commitment underwritten offering of its securities to the general public is consummated or when the Company first becomes subject to the periodic reporting requirements of
Sections 12(g) or 15(d) of the 1934 Act, whichever event shall first occur. 

        2.5    Right of First Offer.    Subject to GSK's preemptive rights set forth in Article II,
Section 2.1(d) of the Governance Agreement, and further subject to the terms and conditions specified in this Section 2.5, the Company hereby grants to each Investor that holds at least
25,000 shares of Common Stock ("Minimum Investor") a right of first offer with respect to future sales by the Company of its Shares (as hereinafter defined). For purposes of this Section 2.5, a
Minimum Investor includes any general partners and affiliates of a Minimum Investor. A Minimum Investor shall be entitled to apportion the right of first offer hereby granted it among itself and its
partners and affiliates in such proportions as it deems appropriate. 

11

 

        Each
time the Company proposes to offer any shares of, or securities convertible into or exchangeable or exercisable for any shares of, any class of its capital stock ("Shares"), the
Company shall first make an offering of such Shares to each Investor in accordance with the following provisions. 

        (a)   The
Company shall deliver a notice in accordance with Section 3.5 ("Notice") to the Investors stating (i) its bona fide intention to offer such Shares,
(ii) the number of such Shares to be offered, and (iii) the price and terms upon which it proposes to offer such Shares. 

        (b)   By
written notification received by the Company, within twenty (20) calendar days after receipt of the Notice, the Investor may elect to purchase or obtain, at
the price and on the terms specified in the Notice, up to that portion of such Shares that equals the proportion that the number of shares of Common Stock issued and held by such Investor bears to the
total number of shares of Common Stock of the Company then outstanding (assuming full conversion and exercise of all securities convertible or exercisable for shares of Common Stock). 

        (c)   If
all Shares that Investors are entitled to obtain pursuant to subsection 2.5(b) are not elected to be obtained as provided in subsection 2.5(b) hereof, the Company
may, during the ninety (90) day period following the expiration of the period provided in subsection 2.5(b) hereof, offer the remaining unsubscribed portion of such Shares to any person or
persons at a price not less than, and upon terms no more favorable to the offeree than those specified in the Notice. If the Company does not enter into an agreement for the sale of the Shares within
such period, or if such agreement is not consummated within ninety (90) days of the execution thereof, the right provided hereunder shall be deemed to be revived and such Shares shall not be
offered unless first reoffered to the Investors in accordance herewith. 

        (d)   The
right of first offer in this Section 2.5 shall not be applicable to (i) the issuance or sale of shares of Common Stock (or options therefor) to
employees, directors and consultants for the primary purpose of soliciting or retaining their services pursuant to a plan approved by the Board; (ii) the issuance of shares of Class A
Common Stock pursuant to the Class A Agreement, (iii) the issuance of securities pursuant to a bona fide, firmly underwritten public offering of shares of Common Stock, registered under
the Act, (iv) the issuance of securities pursuant to the conversion or exercise of convertible or exercisable securities, (v) the issuance of securities in connection with a bona fide
business acquisition of or by the Company, whether by merger, consolidation, sale of assets, sale or exchange of stock or otherwise, (vi) the issuance of stock, warrants or other securities or
rights to persons or entities with which the Company has business relationships provided such issuances are for other than primarily equity financing purposes and have been approved by the Board,
(vii) the issuance of any equity security, including any security convertible into or exercisable for any equity security, that is not senior to the Company's Common Stock with respect to
dividends, liquidation, redemption or voting, provided that such securities are issued to a person or entity that has a research, development, clinical, regulatory, marketing, sales or other
operational or strategic relationship with the Company or (viii) the issuance of any securities to GSK or its affiliates pursuant to the terms of the Governance Agreement or the Strategic
Alliance Agreement dated as of March 30, 2004 by and between the Company and GSK. 

        (e)   In
the event of any conflict between the provisions of this Section 2.5 and those of Section 2.1 of the Governance Agreement, those of Section 2.1
of the Governance Agreement shall prevail. 

        2.6    Termination of Certain Covenants.    The covenant set forth in Section 2.5 shall terminate and be of no
further force or effect upon the consummation of the sale of securities pursuant to a bona fide, firmly underwritten public offering of shares of common stock, registered under the Act. 

12

 

        2.7    Proprietary Information Agreements.    The Company covenants that it will cause each employee and consultant of
the Company to execute a Proprietary Information and Inventions Agreement in the form previously provided to the Investors. 

        3.    Miscellaneous.    

        3.1    Successors and Assigns.    Except as otherwise provided herein, the terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and assigns of the parties (including transferees of any shares of Registrable Securities); provided that, except as
explicitly provided herein, the rights hereunder may not be assigned to a person without a corresponding transfer of shares to such person. Nothing in this Agreement, express or implied, is intended
to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement. 

        3.2    Governing Law.    This Agreement shall be governed by and construed under the laws of the State of Delaware as
applied to agreements among Delaware residents entered into and to be performed entirely within Delaware. Any action with respect to this Agreement shall be brought in the state courts of Delaware or
the US District Court for the District of Delaware. 

        3.3    Counterparts.    This Agreement may be executed in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same instrument. 

        3.4    Titles and Subtitles.    The titles and subtitles used in this Agreement are used for convenience only and are
not to be considered in construing or interpreting this Agreement. 

        3.5    Notices.    All notices required or permitted hereunder shall be in writing and shall be deemed effectively
given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient, if not, then
on the next business day or (c) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All notices
and certificates will be
addressed to an Investor at the address set forth in the books and records of the Company or at such other address as the Company or the Investor may designate by ten (10) days advance written
notice to the other parties hereto. 

        3.6    Expenses.    If any action at law or in equity is necessary to enforce or interpret the terms of this
Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled. 

        3.7    Entire Agreement: Amendments and Waivers.    This Agreement (including the Schedules hereto) constitutes the
full and entire understanding and agreement among the parties with regard to the subjects hereof and thereof and expressly supercedes and replaces the Prior Agreement in its entirety. Any term of this
Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written
consent of the Company and the holders of a majority of the Registrable Securities; provided, however, that in the event that such amendment or waiver adversely affects the obligations and/or rights
of the Original Common Holders in a different manner than the other Holders, such amendment or waiver shall also require the written consent of the holders of a majority in interest of the Original
Common Holders. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any Registrable Securities, each future holder of all such Registrable
Securities, each Original Common Holder, each future Original Common Holder and the Company. 

13

 

        3.8    Severability.    If one or more provisions of this Agreement are held to be unenforceable under applicable law,
such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. 

        3.9    Aggregation of Stock.    All shares of Registrable Securities held or acquired by affiliated entities or
persons shall be aggregated together for the purpose of determining the availability of any rights under this Agreement, including, but not limited to, for purposes of Sections 1.1(e), 1.3(c) and
1.11. 

        3.10    Waiver of Right of First Offer.    Each Existing Investor hereby waives its right of first offer as set forth
in the Prior Agreement (including any notice provisions therein) with respect to the sale of shares of Class A Common Stock pursuant to the terms of the Class A Agreement. Such waiver
shall be binding upon all parties to the Prior Agreement. 

        3.11    Prior Agreement.    The Prior Agreement is hereby amended and restated in its entirety and shall be of no
further force or effect. 

        3.12    Conflict with Governance Agreement.    For the avoidance of doubt, in the event of any conflict between the
provisions of this Agreement and the Governance Agreement, the provisions set forth in the Governance Agreement shall prevail. 

        [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]  

14

        IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. 

	 	THERAVANCE, INC.
	

 	

By:	

/s/  RICK E WINNINGHAM      
 Rick E Winningham

Chief Executive Officer

SIGNATURE PAGE TO THERAVANCE, INC.

AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT  

	 	ORIGINAL COMMON HOLDER:
	

 	

 Name of Original Common Holder
	

 	

By:	

    

	 	Signature of Authorized Person

Name:

Title:
	

 	

Address:	

    

	

 	

	

 	

SIGNATURE PAGE TO THERAVANCE, INC.

AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT  

	 	INVESTOR:
	

 	

SMITHKLINE BEECHAM CORPORATION
 Name of Investor
	

 	

By:	

/s/  DONALD F. PARMAN      

	

 	

Signature of Authorized Person
	

 	

Name:	

Donald F. Parman

	 	Title:	Vice President and Secretary

	

 	

Address:	

One Franklin Plaza FP2355

	

 	

200 N. 16th St.

	

 	

Philadelphia, PA 19102

SIGNATURE PAGE TO THERAVANCE, INC.

AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT  

	 	INVESTOR:
	

 	

 Name of Investor
	

 	

By:	

    

	 	Signature of Authorized Person

Name:

Title:
	

 	

Address:	

    

	

 	

	

 	

SIGNATURE PAGE TO THERAVANCE, INC.

AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT  

 
 

SCHEDULE A
  
  INVESTORS  
    

 
 

SCHEDULE B
  
  ORIGINAL COMMON HOLDERS  
    

James
Tananbaum

George Whitesides

John Griffin

Mathai Mammen

The Marianthi Foundation, Inc

Andrew S. Vagelos

Randall H. Vagelos

Ellen T. Vagelos

Cynthia M. Vagelos Roberts

Cara Diana Roberts Trust Dated 9/2/94

Olivia Sophia Vagelos Trust Dated 9/2/94

Lydia Joan Roberts Trust Dated 10/26/95 

QuickLinks

Exhibit 10.13

THERAVANCE, INC. AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT

TABLE OF CONTENTS

AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT

RECITALS

SCHEDULE A INVESTORS

SCHEDULE B ORIGINAL COMMON HOLDERSQuickLinks
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Exhibit 10.14    
    

 
 

AMENDED AND RESTATED GOVERNANCE AGREEMENT    
    

        This AMENDED AND RESTATED GOVERNANCE AGREEMENT (this "Agreement") is dated as of June    , 2004 among SmithKline Beecham Corporation, a Pennsylvania
corporation ("GSK"), Theravance, Inc., a Delaware corporation (the "Company"), solely with respect to Articles III, IV and VI hereof, GlaxoSmithKline plc, an English public limited company
("GlaxoSmithKline"), and, solely with respect to Articles II, IV and VI hereof, Glaxo Group Limited, a limited liability company organized under the laws of England and Wales ("GGL" and
with each of GSK, GlaxoSmithKline and the Company, a "Party"). 

        WHEREAS,
GGL and the Company have entered into that certain Strategic Alliance Agreement dated as of March 30, 2004 (the "Alliance Agreement"), pursuant to which, among other
things, the Company has granted GGL an option to develop and commercialize certain therapeutic compounds on an exclusive, worldwide basis; 

        WHEREAS,
GSK and the Company have entered into that certain Class A Common Stock Purchase Agreement dated as of March 30, 2004 (the "Class A Stock Purchase
Agreement"), pursuant to which GSK has purchased shares of the Company's Class A Common Stock; 

        WHEREAS,
as a condition to the stock purchase contemplated by the Class A Stock Purchase Agreement and to facilitate an eventual underwritten public offering of the Company's
equity securities, all outstanding shares of the Company's Preferred Stock have been converted into shares of the Company's Common Stock (the "Common Stock"); 

        WHEREAS,
GGL through a previous stock purchase agreement held shares of the Company's preferred stock that were converted into common stock and then exchanged for shares of the Company's
Class A Common Stock pursuant to Section 1.3 of the Class A Common Stock Purchase Agreement; 

        WHEREAS,
GSK and the Company have agreed to establish in this Agreement certain terms and conditions concerning the corporate governance of the Company; 

        WHEREAS,
GSK, GGL and the Company also have agreed to establish in this Agreement certain terms and conditions concerning the acquisition, disposition and voting of securities of the
Company beneficially owned by GSK and its Affiliates (as defined herein); and 

        WHEREAS,
GSK, GlaxoSmithKline, GGL and the Company have agreed to set forth in this Agreement the terms and conditions upon which the Company shall redeem the Common Stock; 

        WHEREAS,
each of the parties hereto has entered into that certain Governance Agreement, dated as of May 11, 2004 (the "Prior Agreement"); 

        WHEREAS,
each of the parties hereto desire to amend and restate the Prior Agreement as set forth in this Agreement; and 

        WHEREAS,
each of the parties hereto hereby agrees to waive all rights granted to each such Party under the Prior Agreement and to accept the rights created pursuant hereto in lieu of the
rights created under the Prior Agreement. 

 

        NOW,
THEREFORE, in consideration of the foregoing and the mutual promises and agreements contained herein, each Party hereto hereby agrees as follows: 

ARTICLE I  

 BOARD OF DIRECTORS AND CERTAIN CORPORATE ACTIONS  

        SECTION
1.1.    Initial Composition of Board of Directors at the Effective Date.    

        (a)   The
number of directors comprising the full Board of Directors of the Company (the "Board") immediately after the Effective Date shall be 12. The directors of the
Company following the Effective Date shall be the directors of the Company immediately prior to the Effective Date, and shall serve until their successors have been duly elected or appointed and
qualified or until the earlier death, resignation or removal in accordance with the Company's Restated Certificate of Incorporation (the "Certificate of Incorporation"), the Company's Bylaws and this
Agreement. GSK shall have the right, but not the obligation, to nominate an individual to serve as a member of the Board (in which case the size of the Board will be increased by one) or alternatively
to designate an individual to serve as an observer at Board meetings. Notwithstanding the foregoing, GSK shall have no right to nominate or designate any individual to serve as a member or observer of
the Board under this Section 1.1 if, (i) GSK's Percentage Interest (as defined below) has fallen below 15% or (ii) directly as a result of any sale or other disposition by GSK of
Voting Stock, GSK's Percentage Interest has fallen below 19.0%, and the term of any such existing member or observer shall automatically cease upon such reduction in GSK's Percentage Interest. In
addition, GSK's right to nominate or designate an individual to serve as a member or observer to the Board under this Section 1.1 shall be suspended for the duration of any period in which GSK
is otherwise entitled to nominate directors pursuant to Section 1.2 or Section 1.3 below. 

        (b)   Any
individual designated by GSK pursuant to paragraph (a) of this Section 1.1 to be an observer to the Board shall have the right to attend all meetings
of its Board in a nonvoting observer capacity and, in this respect, the Company shall give such observer copies of all notices, minutes, consents and other materials that it provides to its directors;
provided, however, that such observer shall not be permitted to attend any meeting of the Board unless such individual signs an agreement to hold such materials in confidence and trust and to act in a
fiduciary manner with respect to the Company with respect to all information so provided as if such individual was a GSK Director (as defined below); and, provided further, that the Company reserves
the right to withhold any information and to exclude such observer from any meeting or portion thereof if access to such information or attendance at such meeting (i) could adversely affect the
attorney-client privilege between the Company and its counsel or (ii) would result in the disclosure of competitive or other sensitive information to GSK or its observer in such a manner that
any GSK Director would need to be recused to abide by their fiduciary duties to the Company and its stockholders. 

        SECTION
1.2.    Composition of the Board Following 50.1% or Greater Ownership by GSK.    (a) The Company agrees
that after, and so long as, GSK's Percentage Interest is 50.1% or greater, the Board shall include (i) such number of nominees designated by GSK equal to one-third of the then
aggregate number of directors comprising the Board (the "GSK Directors") and (ii) two officers of the Company nominated by the nominating committee of the Board. The remaining directors of the
Board shall be composed of Independent Directors. For purposes of this Agreement, an "Independent Director" shall mean a director who complies with the independence requirements for directors with
respect to the Company (without reference to any applicable exemptions from such requirements) for companies listed on the Nasdaq National Market and shall be individuals who have business or
technical experience, stature and character as is commensurate with service on the board of a publicly traded enterprise. With respect to any GSK Independent Nominees (as defined below), each such
nominee, in 

2

 

addition
to meeting the independence requirements with respect to the Company as described in the immediately preceding sentence, shall also meet such independence requirements with respect to
GlaxoSmithKline and any of its Affiliates as if such Independent Director was a director of GlaxoSmithKline or one of its Affiliates. So long as GSK's Percentage Interest is 50.1% or greater, the
Board shall be comprised of nine members, or any greater number that is divisible by three. 

        (b)   With
respect to the Independent Directors referred to above in paragraph (a) and so long as GSK's Percentage Interest is 50.1% or greater, GSK shall, upon its
request, be entitled to designate nominees (the "GSK Independent Nominees") for one-half of the total number of Independent Directors. Subject to the approval of the majority of the
members of the Board other than the GSK Directors and GSK Independent Nominees (the "Non-GSK Directors"), such approval not to be unreasonably withheld or delayed, the GSK Independent
Nominees shall be included as nominees to be voted upon by the Company's stockholders. An equal number of Independent Directors shall be nominated by the Non-GSK Directors. Subject to the
approval of the GSK Directors, such approval not to be unreasonably withheld or delayed, such nominees shall be included as nominees to be voted upon by the Company's stockholders. In the event that
approval of any Independent Director nominee is properly withheld, the nominating directors (the GSK Directors or the Non-GSK Directors, as the case may be) shall be entitled to propose an
alternate candidate (who shall be subject to the relevant approval described in this paragraph (b)) for nomination as an Independent Director in accordance with this Section 1.2. For
purposes of this Agreement, "GSK's Percentage Interest" shall mean the percentage of voting power, determined on the basis of the number of shares of Voting Stock actually outstanding, that is
controlled directly or indirectly by GSK and its Affiliates and held prior to the date of this Agreement or obtained in accordance with this Agreement, the Class A Stock Purchase Agreement and
the Certificate of Incorporation. Notwithstanding the foregoing, GSK shall have no right to designate any nominees for directors under this Section 1.2 at any time after GSK's Percentage
Interest has fallen below 50.1%, and the term of each then existing GSK Director and GSK Independent Nominees nominated pursuant to this Section 1.2 shall automatically cease upon such
reduction in GSK's Percentage Interest. (For the avoidance of doubt, nothing in this section shall limit or affect GSK's rights pursuant to Section 1.1(a)). 

        SECTION
1.3.    Composition of the Board following 35.1% or Greater Ownership by GSK.    From and after the Call/Put
Termination Date (as defined in Section 6.10) and until September 1, 2008 or, if on or after September 1, 2008, GSK commences an offer to purchase additional shares of Voting
Stock as contemplated by Section 2.1(b)(viii), the expiration date of such offer (which shall not occur later than October 15, 2008) (the "Interim Period"), so long as, during the
Interim Period, GSK's Percentage Interest is 35.1% or greater and less than 50.1%, the Board shall be comprised of no less than six members and shall include, (i) one nominee designated by GSK
(who shall be deemed to be a "GSK Director") and (ii) two officers of the Company nominated by the nominating committee of the Board. The remaining members of the Board shall be Independent
Directors. GSK, upon its request, shall be entitled to designate nominees (who shall be deemed to be "GSK Independent Nominees") for a number of Independent Directors equal to GSK's Percentage
Interest at such time times the total number of such Independent Directors (with such number being rounded to the nearest whole number) and provided further, that such nominees shall meet the
independence requirements for GSK Independent Nominees as set forth in Section 1.2 above. Such nominees shall be subject to the approval, not to be unreasonably withheld or delayed, of the
majority of the then existing directors (other than any director nominated by GSK). In the event that approval of any Independent Director nominee proposed by GSK is properly withheld by the then
existing directors, GSK shall be entitled to propose an alternate candidate (who shall be subject to the relevant approval described in this Section 1.3) for nomination as an Independent
Director in accordance with this Section 1.3. The rights set forth in this Section 1.3 shall terminate upon the expiration of the Interim Period, and the term of each GSK Director and
GSK Independent Nominee under this Section 1.3 shall automatically cease on 

3

 

such
date; provided however, that the termination of such rights shall not affect GSK's right to immediately nominate one or more directors pursuant to Section 1.1 or 1.2. 

        SECTION
1.4.    Other Matters Related to the Board.    

        (a)   The
Company agrees to increase or decrease, as the case may be, the size of the Board, and to fill the newly created directorships created by any such increase, as
appropriate in order to achieve the composition required by Sections 1.1, 1.2 and 1.3. Any directors elected to fill a vacancy shall serve until the next annual meeting of stockholders. Whenever
necessary pursuant to a decrease in the size of the Board, GSK will cause directors nominated by GSK to resign from the Board to maintain the composition required by Sections 1.2 and 1.3, and the
Company shall cause such number of Non-GSK Directors to resign as necessary to maintain the composition required by Sections 1.2 and 1.3. To facilitate compliance with the provisions of
this Article I, GSK shall cause each GSK Director and GSK Independent Nominee, and the Company shall cause each other director of the Board, to enter into an agreement with the Company that
provides for the resignation of such director upon the occurrence of the events requiring such resignation as set forth in this Agreement; provided, however, that this sentence shall only come into
effect two weeks prior to the Call/Put Termination Date. 

        (b)   The
Company shall always have the right to decrease the size of the Board without GSK's consent (and, if desired, and subject to the provisions of Section 1.2(a),
to increase it again without GSK's
consent to no more than 13 seats); provided, however, that in no event will GSK lose its right to designate or nominate the GSK Director(s) or GSK Independent Nominees pursuant to Sections 1.1, 1.2 or
1.3 of this Agreement. 

        (c)   GSK
and the Non-GSK Directors shall have the right to nominate any replacement for a director nominated by GSK or nominated by the Non-GSK
Directors, respectively, at the termination of such director's term or upon death, resignation, retirement, disqualification, removal from office or other cause, subject to any rights of approval set
forth in Sections 1.2 and 1.3. To the extent permitted by the Certificate of Incorporation or Bylaws of the Company, the Board shall appoint each person so designated or nominated. 

        (d)   No
individual nominated by GSK shall serve as a director unless such individual has such business or technical experience, stature and character as is commensurate with
service on the board of a publicly held enterprise. No such individual who is an officer, director, partner or principal stockholder of any competitor of the Company and its subsidiaries (other than
GSK and its Affiliates) shall serve as a director of the Company except by agreement of the Independent Directors in their sole discretion. 

        (e)   So
long as GSK's Percentage Interest is 50.1% or greater, each committee of the Board (other than any Common Stock committee or committee of Independent Directors
constituted for the purposes of making any determination that is to be made under the terms of this Agreement or the Certificate of Incorporation or as expressly prohibited by applicable law,
regulation or stock exchange or trading system listing requirement) shall at all times include at least one GSK Director and no action by any such committee shall be valid unless taken at a meeting
for which adequate notice has been duly given to or waived by all of the members of such committee. Such notice shall include a description of the general nature of the business to be transacted at
the meeting and no other business may be transacted at such committee meeting. Any committee member unable to attend any committee meeting in person shall be given the opportunity to participate by
telephone. Prior to the Initial Public Offering, the GSK Director designated to serve on any such committee may designate as his/her alternate another GSK Director. 

        SECTION
1.5.    Director Approval Required for Certain Actions.    (a) After, and so long as GSK's Percentage
Interest is 50.1% or greater, the approval of a majority of GSK Directors (for clarity, 

4

 

should
there be an even number of GSK Directors, such approval shall mean that more GSK Directors voted for approval than against) shall be required to approve any of the following: 

          (i)  the
acquisition by the Company of any business or assets that would constitute a substantial portion of the business or assets of the Company, whether such acquisition
be by merger or consolidation or the purchase of stock or assets or otherwise; 

         (ii)  the
sale, lease, license, transfer or other disposal of a substantial portion of the business or assets, tangible or intangible, of the Company; provided, however, that
the approval of a majority of the GSK Directors shall not be required for the sale, license or transfer to another party, in the ordinary course of business, of any Company asset (regardless of its
value or what portion of the Company's business or assets it may represent) over which GSK has no contractual rights in accordance with the provisions of the Alliance Agreement; or 

        (iii)  the
repurchase or redemption of any Equity Security or other capital stock of the Company, other than (A) redemptions required by the terms thereof,
(B) purchases made at fair market value in connection with any deferred compensation plan maintained by the Company and (C) repurchases of unvested or restricted stock at or below cost
pursuant to any employee, officer, director or consultant compensation plan. For purposes of this Agreement, "Equity Security" means any (i) Voting Stock of the Company, (ii) securities
of the Company convertible into or exchangeable for Voting Stock and (iii) options, rights and warrants issued by the Company to acquire Voting Stock. "Voting Stock" shall mean the outstanding
securities of the Company having the right to vote generally in any election of directors of the Board. 

        (b)   During
the Interim Period, any of the actions described in Section 1.5(a) or Section 1.6(b) shall require the approval of a majority of the Independent
Directors. 

        SECTION
1.6.    GSK Approval for Certain Issuances of Equity Securities.    

        (a)   Prior
to the Call/Put Termination Date, the Company shall not, without the prior written consent of GSK, issue any Equity Security other than (i) shares of Common
Stock, (ii) options to acquire Common Stock and (iii) to the extent constituting an Equity Security, Permitted Indebtedness; provided, however, the Company shall only issue such Equity
Securities if as a consequence of such issuance, the aggregate number of Callable/Puttable Shares (as defined in Section 6.10) would not exceed 84,000,000 (such amount to be adjusted for stock
splits, stock dividends, combinations and other recapitalizations); provided further, that, in determining such aggregate number of Callable/Puttable Shares, the number of any Callable/Puttable Shares
subject to Executive Lock-Up Agreements entered into pursuant to the Class A Purchase Agreement shall not be included. 

        (b)   If
GSK's Percentage Ownership is 35.1% or greater on the Call/Put Termination Date, following the Call/Put Termination Date and until the End of the Equity Limitation
Period (as defined below), the Company shall not issue any Equity Security other than Permitted Equity Issuances. "Permitted Equity Issuances" shall mean (i) the issuance of Equity Securities
pursuant to any employee, officer, director or consultant compensation plan that has been approved by the majority of the Board or (ii) issuances by the Company of Equity Securities to third
parties (other than as contemplated by the preceding clause (i)), including pursuant to the exercise, conversion or exchange of Equity Securities other than Callable/Puttable Shares issued
prior to the Call Date or the final day of the Put Period, as the case may be, provided that, the aggregate number of shares of any such Equity Securities issued to such third parties following the
Call/Put Termination Date and until the End of the Equity Limitation Period shall in no event exceed the equivalent of 25,000,000 shares of Common Stock (on an as converted basis) (such amount to be
adjusted for stock splits, stock dividends, combinations and other recapitalizations). The "End of the Equity 

5

 

Limitation
Period" shall mean: (x) September 1, 2012, if GSK's Percentage Interest is 50.1% or greater on the Call/Put Termination Date or if GSK's Percentage Interest is less than 50.1%
on the Call/Put Termination Date, but exceeds 50.1% at any time on or prior to December 31, 2008 and (y) in all other cases, December 31, 2008. 

        SECTION
1.7.    Limitation on Indebtedness Prior to Call/Put Termination Date.    Except with respect to Permitted
Indebtedness (as defined in Section 6.10), prior to the Call/Put Termination Date, the Company shall not borrow money or otherwise incur Indebtedness to the extent that the Company on a
consolidated basis has financial Indebtedness that exceeds cash and cash equivalents under US generally accepted accounting principles at any time prior to the Call/Put Termination Date. 

        SECTION
1.8.    Directors and Officers Liability Insurance.    From and after the date that GSK nominates one or more
directors to serve on the Board, the Company shall maintain directors and officers liability insurance coverage to the extent and in the amounts common to comparable companies. To the extent that such
insurance coverage is in place, the GSK nominees shall be named as designated insureds under such policy. 

        SECTION
1.9.    Consolidation with GlaxoSmithKline.    At such time as GlaxoSmithKline is required by applicable
accounting standards to include the Company's results in the consolidated financial results for GlaxoSmithKline, the Company (i) shall provide such information based on or derived from the
Company's U.S. GAAP financial reporting and (ii) shall provide such additional information and take such steps that are reasonably requested by GlaxoSmithKline to comply with applicable law or
to prepare its consolidated financial statements on such time schedule as GlaxoSmithKline may reasonably request for purposes of preparation of GlaxoSmithKline's consolidated financial results;
provided, however, that GSK or any of its affiliates shall be required to pay all incremental documented expenses (personnel or otherwise) arising out of the Company's obligations pursuant to
subsection (ii) of this Section 1.9. The Company shall take all such steps necessary in order to comply with its obligations (if any) under the Sarbanes-Oxley Act of 2002 and the rules
and regulations adopted pursuant thereto. 

ARTICLE II  

 LIMITATIONS RELATING TO COMPANY EQUITY SECURITIES  

        SECTION
2.1.    Acquisition of Company Equity Securities.    

        (a)    Acquisition of Equity Securities.    Except as contemplated by this Agreement, as permitted by
Section 2.1(b), (c) or (d) or as otherwise agreed in writing by the Company (following approval of a majority of the Independent Directors), GSK and its Affiliates will not (and
will not assist or encourage others to) directly or indirectly in any manner: 

          (i)  acquire,
or agree to acquire, directly or indirectly, alone or in concert with others, by purchase, gift or otherwise, any direct or indirect beneficial ownership
(within the meaning of Rule l3d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) or interest in any securities or direct or indirect rights, warrants or
options to acquire, or securities convertible into or exchangeable for, any Equity Securities; 

         (ii)  make,
or in any way participate in, directly or indirectly, alone or in concert with others, any "solicitation" of "proxies" to vote (as such terms are used in the
proxy rules of the Securities and Exchange Commission (the "SEC") promulgated pursuant to Section 14 of the Exchange Act); provided, however, that the prohibition in this
Section 2.1(a)(ii) shall not apply to solicitations exempted from the proxy solicitation rules by Rule 14a-2 under the Exchange Act or any successor provision; 

6

 

        (iii)  form,
join or in any way participate in a "group" within the meaning of Section 13(d)(3) of the Exchange Act with any person not bound by the terms of this
Agreement (other than persons deemed to be a member of such group solely by virtue of being an Affiliate of GSK) with respect to any Voting Stock; 

        (iv)  acquire
or agree to acquire, directly or indirectly, alone or in concert with others, by purchase, exchange or otherwise, (A) any of the assets, tangible or
intangible, of the Company or (B) direct or
indirect rights, warrants or options to acquire any assets of the Company, except for (X) such assets as are then being offered for sale by the Company or (Y) acquisitions of assets of
the Company pursuant to or as contemplated by the Alliance Agreement or the Collaboration Agreement between GSK and the Company dated as of November 14, 2002 (the "Collaboration Agreement"); 

         (v)  enter
into any arrangement or understanding with others to do any of the actions restricted or prohibited under Sections 2.1 (a) (i), (ii), (iii) or (iv); 

        (vi)  otherwise
act in concert with others, to seek to offer to the Company or any of its stockholders any business combination, restructuring, recapitalization or similar
transaction to or with the Company or otherwise seek in concert with others, to control, change or influence the management, board of directors or policies of the Company or nominate any person as a
director of the Company who is not nominated by the then incumbent directors, or propose any matter to be voted upon by the stockholders of the Company; or 

       (vii)  prior
to August 31, 2007, request that the Company (or the Board) amend or waive any provisions of this Section 2.1. 

        (b)    Exceptions for Certain Acquisitions of Equity Securities of the Company.    Nothing herein shall prevent GSK or
its Affiliates (or in the case of Section 2.1(b)(v), their employees) from: 

          (i)  purchasing
the Class A Stock of the Company on the Effective Date; 

         (ii)  purchasing
additional Equity Securities of the Company pursuant to the provisions of Article III of this Agreement and Article IV of the Certificate of
Incorporation; 

        (iii)  purchasing
additional Equity Securities of the Company after the Effective Date to maintain GSK's Percentage Interest in accordance with Section 2.1(d) hereof; 

        (iv)  acquiring
securities of the Company issued in connection with stock splits or recapitalizations or pursuant to Section 2.5 of that certain Investors' Rights
Agreement dated as of May 11, 2004 (the "Investors' Rights Agreement"); 

         (v)  following
the Company's initial public offering of Voting Stock (the "Initial Offering"), purchasing Equity Securities of the Company for (A) a pension plan
established for the benefit of GSK's employees, (B) any employee benefit plan of GSK, (C) any stock portfolios not controlled by GSK or
any of its Affiliates that invest in the Company among other companies, or (D) any account of a GSK employee in such employee's personal capacity; 

        (vi)  acquiring
securities of another biotechnology or pharmaceutical company that beneficially owns any of the Equity Securities, provided that any Equity Securities so
acquired shall be subject to the provisions of Sections 2.1(a), 2.2 and 2.3 of this Agreement on the same basis as the Class A Common Stock purchased pursuant to the Class A Stock
Purchase Agreement; 

       (vii)  in
the event that GSK's Percentage Interest is 50.1% or greater at any time on or after the Call/Put Termination Date, on or after September 1, 2012, GSK and/or
its Affiliates may make an offer that does not include any condition as to financing to the Company's 

7

 

stockholders
to merge the Company or otherwise to acquire outstanding Voting Stock that would bring GSK's Percentage Interest to 100%, provided that such offer is approved by a majority of the
Independent Directors and includes a condition to consummation of the transaction that a majority of the shares of the then outstanding Voting Stock not owned by GSK or any of its Affiliates shall
have accepted the offer by tendering such shares or voting such shares in favor thereof; 

      (viii)  in
the event that GSK's Percentage Interest is less than 50.1% on the Call/Put Termination Date, on or after September 1, 2008, GSK and/or its Affiliates may
make an offer that does not include any condition as to financing to the Company's stockholders to acquire outstanding Voting Stock that would bring GSK's Percentage Interest to no greater than 60%,
provided that such offer is approved by a majority of the Independent Directors and includes a condition to consummation of the transaction that a majority of the shares of the then outstanding Voting
Stock not owned by GSK or any of its Affiliates shall have accepted the offer by tendering such shares in the offer; provided, further, that, any Equity Securities so acquired shall be subject to the
provisions of Sections 2.1(a), 2.2 and 2.3 of this Agreement on the same basis as the Class A Common Stock purchased pursuant to the Class A Stock Purchase Agreement (for the avoidance
of doubt, the parties acknowledge that, if the GSK Percentage Interest is less than 50.1% on the Call/Put Termination Date, GSK shall not, prior to September 1, 2012, be permitted to make an
offer to acquire additional outstanding Equity Securities of the Company except as expressly permitted in this Section 2.1(b) or Sections 2.1(c) or (d)); 

        (ix)  at
any time following the Call/Put Termination Date and prior to September 1, 2012 that the GSK Percentage Interest is 50.1% or greater, GSK and/or its
Affiliates may make an offer that does not include any condition as to financing to acquire outstanding Voting Stock that would bring GSK's Percentage Interest to 100%; provided that, any such offer
shall be approved by a majority of the Independent Directors and includes a condition to consummation of the transaction that a majority of the shares of the then outstanding Voting Stock not owned by
GSK or any of its Affiliates shall have accepted the offer by tendering such shares or voting such shares in favor thereof and that such offer be for not less than the greater of (i) the Fair
Market Value Per Share (as defined in Section 6.10) on the date immediately preceding the date of the first public announcement of such offer or (ii) $105 per
share of Common Stock or Common Stock equivalent (appropriately adjusted to take into account stock dividends, stock splits, recapitalizations and the like); and 

         (x)  only
after, and so long as, GSK's Percentage Interest is 50.1% or greater, with such Voting Stock acquired in accordance with the terms of this Agreement and the
Certificate of Incorporation, purchasing additional Equity Securities of the Company if the Company has otherwise determined to sell Equity Securities to pay all or any portion of the milestones that
it may owe to GSK pursuant to Section 6.2.3 of the Collaboration Agreement. In this event, GSK shall have the first right to purchase such additional Equity Securities on the terms under which
the Company intends to sell such Equity Securities. 

        (c)    Third Party Offers.    Nothing herein shall prevent GSK or its Affiliates from, in the event that
(A) the Board formally acts to cause the Company to (i) enter into a written agreement pursuant to which a Change in Control transaction with a third party is provided for,
(ii) amend the Rights Plan (as defined in Section 6.10) in order to render the Rights Plan inapplicable with respect to any third party or (iii) render inapplicable to any third
party the restrictions contained in Section 203 of the DGCL or any similar anti-takeover provision or (B) a person or group (within the meaning of 13(d)(3) of the Exchange
Act and not including GSK or any of its Affiliates or any underwriter in connection with a public offering) (each, a "Third Party Acquiror") acquires 20% or more of the then outstanding Voting Stock
(a "Significant Third Party 

8

 

Acquisition"),
making an offer to acquire, and acquiring, Equity Securities pursuant to the terms of GSK's offer; provided that GSK's offer must be an offer for 100% of the Voting Stock of the Company
that does not include any condition as to financing and includes a condition to consummation of the transaction that a majority of the shares of the then outstanding Voting Stock not owned by GSK or
any of its Affiliates or by any such Third Party Acquiror (or its or their Affiliates) shall have accepted the offer by tendering such shares or voting such shares in favor of thereof. 

        (d)    Exceptions for Acquisitions to Maintain GSK's Percentage Interest.    

          (i)  In
the event that the Company proposes to issue (an "Offering") any Equity Securities (other than pursuant to exercise of options or vesting of restricted shares issued
as compensation to directors, officers, employees or consultants of the Company) the Company shall deliver to GSK at least fifteen (15) days prior to the issuance of such Equity Securities, a
notice (the "Offer Notification") stating (i) its bona fide intention to offer such Equity Securities, (ii) the number of such Equity Securities to be offered, and (iii) the
price, or if relevant, the anticipated range of prices, and other terms upon which the Company proposes to offer such Equity Securities. By written notification received by the Company prior to the
issuance of Equity Securities described in the Offer Notification, GSK may elect to purchase in such Offering (or, if such purchase is not then permitted under applicable laws, rules or regulations,
as soon thereafter as such purchase is so permitted), Equity Securities (the "First Offer Shares") at the same price as the Equity Securities are sold to others in such Offering and up to such amount
as required to maintain GSK's Percentage Interest at the same level as immediately prior to
such issuance. With respect to any purchase by GSK of First Offer Shares prior to the Call/Put Termination Date in connection with an Offering that is of Common Stock, the First Offer Shares purchased
by GSK shall consist of one-half (1/2) Common Stock and one-half (1/2) Class A Common Stock. With respect to any purchase by GSK of First
Offer Shares prior to the Call/Put Termination Date in connection with an Offering of an Equity Security other than Common Stock (the "Non-Common Stock Security"), the First Offer Shares
shall consist entirely of the Non-Common Stock Security; provided, however, if such Non-Common Stock Security is convertible into Common Stock prior to the Call/Put Termination
Date, one-half (1/2) of such securities purchased by GSK shall be convertible into Common Stock and one-half (1/2) convertible into Class A
Common Stock. With respect to any purchase by GSK of First Offer Shares following the Call/Put Termination Date, the First Offer Shares shall consist entirely of the Equity Securities offered in the
Offering. Notwithstanding anything to the contrary in the foregoing, in the event that the Offering is the Company's Initial Offering and GSK elects to purchase First Offer Shares, (a) the
First Offer Shares shall consist entirely of Class A Common Stock and (b) GSK shall purchase the First Offer Shares in a private placement upon the closing of the Initial Offering or at
such later date as is necessary to comply with any federal or state securities or antitrust laws or the rules and regulations of the SEC, the National Association of Securities Dealers, Inc.
("NASD"), NASDAQ National Market ("NASDAQ"), or any other such self-regulating organization. 

         (ii)  With
respect to exercise of stock options or vesting of restricted stock, on a quarterly basis, GSK shall be afforded the opportunity by the Company to purchase shares
of Common Stock, or, if before the Call/Put Termination Date, Class A Common Stock, sufficient to maintain GSK's Percentage Interest at the same level as prior to the exercises and vestings
during such quarter. The Company shall deliver to GSK as soon as reasonably practicable, but in any event within forty-five (45) days after the end of each quarter of each fiscal
year, a schedule (the "Schedule") setting forth the number of shares of Equity Securities issued upon exercise of options and the number of shares of restricted stock that have vested during such 

9

 

quarter.
The Schedule shall also set forth the number of shares of Common Stock, or, if before the Call/Put Termination Date, Class A Common Stock, necessary for GSK to purchase to maintain its
Percentage Interest pursuant to this Section 2.1(d)(ii) (the "Catch-up Shares"). By written notification received by the Company within twenty (20) days after receipt
of the Schedule, GSK may elect to purchase the Catch-up Shares from the Company. GSK or its Affiliates shall acquire the Catch-up Shares either from the Company at the then
Fair Market Value Per Share on the date of such notification or, at the discretion of the Company, via written notification to GSK, through open market purchases. 

        (iii)  If
GSK's Percentage Interest is 50.1% or greater on the Call/Put Termination Date solely as a result of the exercise of the Put, if at any time following the Call/Put
Termination Date and until September 1, 2012, the Company issues Equity Securities (other than pursuant to exercise of options or vesting of restricted shares issued as compensation to
directors, officers, employees or consultants of the Company) and GSK declines to purchase Equity Securities in such offering pursuant to its rights under Section 2.1(d)(i), GSK, for a period
of six months following such issuance of Equity Securities by the Company, shall, nonetheless, have the right to cause the Company to issue Common Stock to GSK (the "Post Put Offer Shares") in such
amount as required to maintain GSK's Percentage Interest at the
same level as GSK's Percentage Interest on the Call/Put Termination Date and at a price equal to the greater of (i) the Fair Market Value Per Share of Equity Securities on the date of the
notification by GSK as provided in the following sentence or (ii) the price per share of the Equity Securities issued by the Company in the transaction that resulted in GSK's rights pursuant to
this Section 2.1(d)(iii) (where the consideration does not consist solely of cash, the fair market value of the non-cash consideration as determined in good faith by the
Independent Directors). By written notification to the Company prior to the end of the six month period, GSK may elect to purchase the Post Put Offer Shares. The Company shall use its commercially
reasonable efforts to issue the Post Put Offer Shares to GSK within thirty (30) days after receipt of notice from GSK or such later date as is necessary to comply with any federal or state
securities or antitrust laws or the rules and regulations of the SEC, NASD, NASDAQ, or any other such self-regulating organization. 

        (iv)  If
GSK's Percentage Interest is 50.1% or greater on the Call/Put Termination Date solely as a result of the exercise of the Call, if at any time following the Call/Put
Termination Date and until September 1, 2012, the Company issues Equity Securities (other than pursuant to exercise of options or vesting of restricted shares issued as compensation to
directors, officers, employees or consultants of the Company) and GSK declines to purchase Equity Securities in such offering pursuant to its rights under Section 2.1(d)(i), GSK, for so long as
the GSK Percentage Interest is 50.1% or greater, shall have the right to purchase Common Stock (the "Post Call Offer Shares") in such amount as required to maintain GSK's Percentage Interest at the
same level as GSK's Percentage Interest on the Call/Put Termination Date and at the price per share of the Equity Securities issued by the Company in the transaction that resulted in GSK's rights
pursuant to this Section 2.1(d)(iv) (where the consideration does not consist solely of cash, the fair market value of the non-cash consideration as determined in good faith
by the Independent Directors). During such time as the GSK Percentage Interest is 50.1% or greater, by written notification to the Company, GSK may elect to purchase the Post Call Offer Shares. The
Company shall use its commercially reasonable efforts to issue the Post Call Offer Shares to GSK within thirty (30) days after receipt of notice from GSK or such later date as is necessary to
comply with any federal or state securities or antitrust laws or the rules and regulations of the SEC, NASD, NASDAQ, or any other such self-regulating organization. 

10

 

         (v)  Notwithstanding
anything contained in this Section 2.1(d)(i), (ii), (iii) and (iv), if the Company shall issue Permitted Indebtedness consisting of
securities exchangeable or convertible into Voting Stock, the Company shall provide written notice to GSK of the conversion or exchange of any such Permitted Indebtedness within ten (10) days
following any such conversion or exchange. GSK shall notify the Company within twenty (20) days following the receipt of such notice if it intends to purchase that number of shares of Voting
Stock from the Company required to maintain GSK's Percentage Interest as measured immediately prior to the date of such conversion or exchange of Permitted Indebtedness at a price per share equal to
the greater of (x) the conversion or exchange price of such Permitted Indebtedness or (y) the Fair Market Value Per Share on the date of such purchase by GSK. The Company shall use its
commercially reasonable efforts to issue such shares of Voting Stock to GSK within thirty (30) days after receipt of notice from GSK of its intention to purchase such shares or such later date
as is necessary to comply with any federal or state securities or antitrust laws or the rules and regulations of the SEC, NASD, NASDAQ, or any other such self-regulating organization. 

        (vi)  In
the event that GSK's Percentage Interest falls below 50.1% (or, in the case of Sections 1.3, 1.6 and 2.3, 35.1%, or in the case of Section 1.1(a), 19.0%)
solely as a consequence of any issuance of Equity Securities with respect to which GSK has the right to acquire further Equity Securities under this Section 2.1(d), GSK's Percentage Interest
shall be deemed to be greater than 50.1% for purposes of Articles I and II, 35.1% for purposes of Sections 1.3, 1.6 and 2.3, and 19.0% for purposes of Section 1.1(a), unless and until GSK
declines to purchase the Equity Securities it is entitled to purchase under this Section 2.1(d). 

        (e)    Rights Plan.    The Company will, subject to the Board's exercise of its fiduciary duties, implement a Rights
Plan on or before the Initial Offering. The Company shall take all necessary action to render inapplicable to GSK the Rights Plan, Section 203 of the Delaware General Corporation Law (the
"DGCL") and any other applicable similar anti-takeover provision. 

        SECTION
2.2.    Disposition of Equity Securities.    

        (a)    Prior to the Call/Put Termination Date.    Prior to the Call/Put Termination Date, neither GSK nor any of its
Affiliates shall dispose of beneficial ownership of any Voting Stock held by them without the prior approval of a majority of the Board other than any director nominated by GSK, except: (A) to
any other Affiliate of GSK who agrees in writing to be bound hereunder; or (B) pursuant to a Change in Control transaction of the Company approved by a majority of the Board other than any
director nominated by GSK and consummated prior to August 1, 2007. 

        (b)    Following the Call/Put Termination Date.    

          (i)  Following
the Call/Put Termination Date, neither GSK nor any of its Affiliates shall dispose of beneficial ownership of Voting Stock without the prior approval of a
majority of the Independent Directors prior to (A) September 1, 2008 if GSK's Percentage Interest is less than 50.1% on the Call/Put Termination Date, or (B) September 1,
2012 if GSK's Percentage Interest is 50.1% or more on the Call/Put Termination Date. If GSK's Percentage Interest is less than 50.1% on the Call/Put Termination Date but is increased to 50.1% or more
at any time prior to September 1, 2012 neither GSK nor any of its Affiliates shall dispose of any beneficial ownership of Voting Stock from and after the date GSK's Percentage Interest first
equals or exceeds 50.1% until September 1, 2012. In the event that GSK's Percentage Interest is 50.1% or greater and GSK breaches its obligation not to dispose of beneficial ownership of Voting
Stock prior to September 1, 2012 pursuant to Section 2.2(b)(i)(B), the "Research Term" under the Alliance Agreement shall lapse simultaneously with such breach and in accordance with
Section 3.1.1 of the Alliance Agreement, GSK's future opt-in rights to the Company's Discovery Programs on or after the date of such breach shall terminate. 

11

 

         (ii)  In
the event that the prohibition on disposition of Voting Stock set forth in Subsection 2.2(b)(i) expires on September 1, 2008, neither GSK nor any of
its Affiliates shall dispose of beneficial ownership of Voting Stock prior to September 1, 2012 except (A) pursuant to a public offering registered under the Securities Act of 1933, as
amended (the "Securities Act") of Equity Securities (in which public offering the securities are broadly distributed and neither GSK nor any of its Affiliates selects the purchasers); or
(B) pursuant to Rule 144 under the Securities Act (provided that if Rule 144(k) is available, such disposition nevertheless is within the volume limits and manner of sale
requirements applicable to non-144(k) transfers under Rule 144). 

        (iii)  In
the event that the prohibition on disposition of Voting Stock set forth in Section 2.2(b)(i) expires on September 1, 2012, if GSK or any of its
Affiliates disposes of Voting Stock after that date, neither GSK nor any of its Affiliates may purchase any Voting Securities without the prior approval of a majority of Independent Directors for one
year after the date of any such disposition. 

        (iv)  Neither
GSK nor any of its Affiliates may make any public disclosure of any holdings of or disposition of beneficial ownership of the Voting Stock unless such
disclosure is approved in advance in writing by the Company, such approval not to be unreasonably withheld or delayed. Notwithstanding the foregoing, no consent of the Company shall be required for
any filing that GSK or any of its Affiliates is required to make under applicable Law in any jurisdiction, including without limitation any Form 144 under the Securities Act, any Form 4
under the Exchange Act, or any Schedule 13D or 13G or any amendments thereto under the Exchange Act; provided that, prior to making any such filings, GSK shall use reasonable efforts to
(A) to provide the Company notice and a copy of such proposed filings and (B) consult with the Company on the content of such filings. 

         (v)  Notwithstanding
the foregoing, GSK shall be permitted to dispose of beneficial ownership of any Voting Stock pursuant to a Change in Control transaction of the Company
approved by a majority of Independent Directors. 

        (c)    Required Dispositions.    Notwithstanding anything to the contrary contained herein, GSK shall be permitted to
dispose of beneficial ownership of Voting Stock as and to the extent (but only to the extent) GSK reasonably determines such disposition to be necessary in order for it to comply with its obligations
under Section 3.5. 

        SECTION
2.3.    Voting.    (a) Except as set forth in Sections 2.3(b) and 2.3(c), prior to the Initial
Offering, GSK shall ensure that all Voting Stock beneficially owned by GSK and/or any GSK Affiliate is voted (i) for Company nominees to the Board in accordance with Article I and
(ii) on all other matters to be voted on by stockholders, in accordance with the recommendation of a majority of the Board other than any GSK Director. Except as set forth in Sections 2.3(b)
and 2.3(c), following the Initial Offering, GSK shall ensure that all Voting Stock beneficially owned by GSK and/or any GSK Affiliate shall be voted on all matters, at the election of GSK, either
(i) in accordance with the recommendation of the Independent Directors of the Board or (ii) in proportion to the votes cast by the other holders of the Company's Voting Stock. 

        (b)   Subject
to paragraph (c) below with respect to the Interim Period, so long as GSK's Percentage Interest is less than 50.1%, GSK shall ensure that all Voting Stock
beneficially owned by GSK and/or any GSK Affiliate is voted as set forth in Section 2.3(a), unless the matter being voted upon involves any of
the following: 

          (i)  any
proposal to amend the provisions in the Certificate of Incorporation related to the Put and Call; 

12

 

         (ii)  any
proposal to issue Equity Securities to one or more parties in one transaction or a series of transactions that result in any person or group (within the meaning
Section 13(d)(3) of the Exchange Act) owning or having the right to acquire or intent to acquire beneficial ownership of Equity Securities with aggregate voting power of greater than 20% or
more of the aggregate voting power of all outstanding Equity Securities (for the avoidance of doubt, in no event shall any such proposed issuance covered by this clause (ii) include a sale of
the Company's securities in a public offering); or 

        (iii)  any
Change in Control. 

        (c)   (A)
After, and so long as, GSK's Percentage Interest is 50.1% or greater and (B) during the Interim Period so long as the GSK Percentage Interest is 35.1% or
greater, GSK shall ensure that all Voting Stock beneficially owned by GSK and/or any GSK Affiliate is voted as set forth in this Section 2.3(a),  unless the matter being voted upon involves any of
the following: 

          (i)  any
Change in Control; 

         (ii)  the
acquisition by the Company of any business or assets that would constitute a substantial portion of the business or assets of the Company, whether such acquisition
be by merger or consolidation or the purchase of stock or assets or otherwise; 

        (iii)  the
sale, lease, license, transfer or other disposal of all or a substantial portion of the business or assets of the Company; provided, however that the sale, license
or transfer to another party, in the ordinary course of business, of any Company asset (regardless of its value or what portion of the Company's business or assets it may represent) over which GSK has
no contractual rights in accordance with the provisions of the Alliance Agreement shall be considered an ordinary matter pursuant to
which GSK must vote its shares in accordance with the recommendation of the Independent Directors of the Board; 

        (iv)  any
proposal to issue Equity Securities to one or more parties in one transaction or a series of transactions that result in any person or group (within the meaning
Section 13(d)(3) of the Exchange Act) owning or having the right to acquire or intent to acquire beneficial ownership of Equity Securities with aggregate voting power of greater than 20% or
more of the aggregate voting power of all outstanding Equity Securities (for the avoidance of doubt, in no event shall any such proposed issuance covered by this clause (iv) include a sale of
the Company's securities in a public offering); or 

         (v)  any
proposal to amend the provisions in the Certificate of Incorporation related to the Put and Call. 

        (d)   Notwithstanding
anything to the contrary herein, following a Significant Third Party Acquisition, GSK shall be entitled to vote its Voting Stock without any
restrictions. 

        (e)   GSK
hereby grants to the Board, and appoints the Board as, its irrevocable proxy to vote, or execute and deliver written consents or otherwise act with respect to all
Voting Stock now owned or hereafter acquired by GSK in the manner in which GSK is obligated to vote, consent or act pursuant to this Section 2.3. Such proxy shall be irrevocable until this
Agreement terminates pursuant to its terms or this Section 2.3 is amended to remove such grant of proxy in accordance with Section 6.2 hereof, and is coupled with an interest in all
voting stock owned by GSK. This Agreement shall constitute the proxy granted pursuant hereto. 

        SECTION
2.4.    Collaboration Agreement.    The provisions of this Article II shall apply to all Equity
Securities beneficially owned by GSK and/or its Affiliates and supersedes in its entirety Article 15 of the Collaboration Agreement. 

13

 
ARTICLE III  

 REDEMPTION AND REPURCHASE OF COMMON STOCK  

        SECTION
3.1.    Redemption and Repurchase of Common Stock.    

        (a)   GSK
shall, in the period between June 1, 2007 and July 1, 2007, inform the Company in writing whether or not it desires to request the redemption of
certain Common Stock pursuant to Section C.4 of Article IV of the Certificate of Incorporation. If GSK does request the redemption, it shall provide the desired date for redemption of
such Common Stock (the "Call Date") in such notice. Subject to Section 3.1(c), the Company shall, promptly upon receipt of such written request from GSK for the redemption of certain Common
Stock, designate a depositary (the "Depositary") for such redemption in accordance with Section C.6(a) of Article IV of the Certificate of Incorporation and notify GSK of such
designation. The Company shall give, or cause to be given, the Call Notification (as defined in Section C.4(b) of Article IV of the Certificate of Incorporation) in accordance with such
Section C.4(b) of Article IV of the Certificate of Incorporation. The Company shall set as the date of redemption the Call Date; provided that such date shall be consistent with the
notice requirements of such paragraph (b). The calculation of the Call Price per share of Common Stock, which shall be made in accordance with paragraphs (a) and (c) of
Section C.4 of Article IV of the Certificate of Incorporation, shall be verified with GSK prior to the mailing of such notice. GSK or GlaxoSmithKline shall deposit with the Company at
least one business day prior to the Call Price Deposit Date (as defined in Section C.6(a)(i) of Article IV of the Certificate of Incorporation) sufficient funds to pay the Call
Amount (as defined in Section C.4(d) of Article IV of the Certificate of Incorporation) and the Company shall deposit those funds with the Depositary in accordance with
Section C.6(a)(i) of Article IV of the Certificate of Incorporation. The Company shall only use the funds received from GSK, GlaxoSmithKline or their Affiliates to fund the
Depositary for the purposes of effecting the Call pursuant to this Article III. In exchange for such payment, the Company will issue to GSK (or to its designated Affiliate), on the Call Date as
specified in the Call Notification, a number of duly authorized and validly issued shares of Class A Common Stock equal to the number of shares of Common Stock acquired thereby by the Company
upon cancellation of the Common Stock subject to the Call pursuant to Section C.6(a) of Article IV of the Certificate of Incorporation. 

        (b)   At
least ten, but not more than thirty, days prior to the commencement of the Put Period (as defined in Section C.11(e) of Article IV of the Certificate of
Incorporation), or, in the event of an acceleration of the Put in accordance with the terms of Section C.7 of Article IV of the Certificate of Incorporation, as soon as practicable
following the date of the occurrence of the Insolvency Event (as defined in Section C.7 of Article IV of the Certificate of Incorporation) giving rise to such acceleration (but in no
event later than the tenth day following such date), the Company shall (i) designate the Depositary for making payments to, and receiving shares from, holders of Common Stock in connection with
exercises of the Put (as defined in Section C.5 of Article IV of the Certificate of Incorporation) in accordance with Section C.5 of Article IV of the Certificate of
Incorporation and notify GSK and GlaxoSmithKline of such designation and (ii) give, or cause to be given, the Put Notification (as defined in Section C.11 of Article IV of the
Certificate of Incorporation) in accordance with Section C.5(b) of Article IV of the Certificate of Incorporation or Section C.7 thereof, as the case may be. The Company shall set
as the Put Period the period required to be set pursuant such Section C.5 or Section C.7, as the case may be. 

        (c)   The
Company's obligations under Sections 3.1(a) and 3.1(b) hereof shall be suspended during any period when, in the good faith judgment of the majority of the Company's
Independent Directors, the redemption of the Common Stock would be prohibited under the DGCL or other applicable Laws. 

14

 

        (d)   Subject
to the provisions of Section 3.1(c), the Company hereby irrevocably appoints GSK and GlaxoSmithKline its attorneys-in-fact for
purposes of redeeming the Common Stock in accordance with the terms of Sections 3.1(a) and 3.1(b) hereof and the Certificate of Incorporation. 

        (e)   Any
Depositary selected by the Company shall have at the time of its selection short-term credit ratings of not less than A-1 from
Standard & Poor's Rating Services ("S&P") and not less than P-1 from Moody's Investors Service, Inc. ("Moody's"), and shall have at the time of its selection
long-term credit ratings of not less than AA from S&P and not less than Aa2 from Moody's. 

        SECTION
3.2.    Indemnification.    GSK and GlaxoSmithKline shall indemnify the Company and its directors, officers,
employees and agents against all losses, claims, damages, liabilities and expenses (including attorneys' fees) arising out of the redemption (pursuant to the Call or the Put (each as defined in the
Certificate of Incorporation) of the Common Stock in accordance with the provisions of this Agreement (including, without limitation, in the event of the Company's consummation of the redemption of
Common Stock in contravention of Section 160 of the DGCL or any other law for the protection of creditors), other than any such losses, claims, damages, liabilities and expenses that result
primarily from actions taken or omitted in bad faith by the indemnified person or from the indemnified person's gross negligence or willful misconduct. 

        SECTION
3.3.    Options, Warrants and Other Convertible Securities.    GSK and the Company will make appropriate
provisions to assure that any options, warrants, rights or securities issued by the Company, convertible into or exercisable or exchangeable for shares of Common Stock that constitute
Callable/Puttable Shares, become convertible into or exercisable or exchangeable for consideration of the same type and amount as the holders thereof would have received had they converted, exercised
or exchanged such options, warrants, rights or securities prior to the Call Date. If the Call is exercised by GSK, the consideration payable to a holder of options, warrants, rights or securities
issued by the Company, convertible into or exercisable or exchangeable for shares of Common Stock that constitute Callable/Puttable Shares shall be paid upon the date of conversion, exercise or
exchange of such option, warrant, right or security. Nothing herein shall be deemed or construed as a waiver of any other rights that a holder of any such securities may have. 

        SECTION
3.4.    Capital Contribution and Assumption of Put Obligations.    

        (a)   GSK
or GlaxoSmithKline (or one or more of their Affiliates) shall contribute to the Company, immediately prior to the time that any amounts become due and payable to the
holders of Common Stock pursuant to Section C.5 of Article IV of the Certificate of Incorporation, (i) funds in an amount equal to the product of the number of Callable/Puttable
Shares with respect to which the Put has been properly exercised multiplied by the Put Price (as defined in Section C.5 of Article IV of the Certificate of Incorporation) plus
(ii) such additional funds, if any, sufficient to permit the Company to redeem the Callable/Puttable Shares with respect to which the Put has been properly exercised without violating
Section 160 of the DGCL, any bankruptcy or insolvency law or other law or regulation for the protection of creditors. In exchange for such payment, the Company will issue to GSK (or to its
designated Affiliate), within five business days following the end of the Put Period, a number of duly authorized and validly issued shares of Class A Common Stock equal to the number of shares
of Common Stock acquired thereby by the Company. Notwithstanding the foregoing, in the event that GSK or GlaxoSmithKline is required to make any contributions under clause (ii) of the first
sentence of this paragraph (a), GSK's and GlaxoSmithKline's obligation to make any such payment to the Company under this Section 3.4 shall be void and of no further force and effect if,
in lieu thereof, GSK or GlaxoSmithKline shall (or shall cause one of its Affiliates to) elect to purchase, and make all arrangements necessary (including compliance by GSK or GlaxoSmithKline, or any
such Affiliate or Affiliates, with the 

15

 

Exchange
Act, the Securities Act and any other applicable Federal or state securities laws) to purchase, at the expiration of the Put Period, directly from each holder of Common Stock, the
Callable/Puttable Shares which such holders elect to have purchased (up to 50% of all Callable/Puttable Shares owned by such holder) at a price per share equal to the Put Price. Notwithstanding
anything to the contrary contained herein or in the Certificate of Incorporation, unless otherwise agreed to in writing by GSK, in no event shall the amount required to be paid by GSK or
GlaxoSmithKline to the Company and/or to holders of Common Stock in connection with the Put exceed $525,000,000. 

        (b)   Notwithstanding
any other term or provision hereof or of the Alliance Agreement, Section C of Article IV of the Certificate of Incorporation or any other
agreement, GSK or GlaxoSmithKline shall either (i) make (or cause one or more of its Affiliates to make) the aggregate payments required to be made under the first sentence of
Section 3.4(a) hereof or (ii) if such payments are not made for any reason, make (or cause one of its Affiliates to make) the election to purchase referred to in the third sentence of
Section 3.4(a) hereof and comply (or cause one of its Affiliates to comply) fully with such sentence; provided, however, that if an Insolvency Event (as defined in Section C.7 of
Article IV of the Certificate of Incorporation) occurs, GSK or GlaxoSmithKline shall, within 10 days after the occurrence of such Insolvency Event, either (x) contribute (or cause
one or more of its Affiliates to contribute) to the Company an amount equal to the aggregate amount that would be required to be contributed to the Company under the first sentence of
Section 3.4(a) hereof assuming (for purposes of clause (i) of such sentence) that the holders of all Callable/Puttable Shares were to exercise the Put with respect to 50% of the
Callable/Puttable Shares owned by such holder or (y) elect (or cause one of its Affiliates to elect) to purchase, and make all arrangements necessary (including compliance by GSK or
GlaxoSmithKline, or any such Affiliate, with the Exchange Act, the Securities Act and any other Federal or state securities laws) to purchase, at the expiration of the Put Period, directly from the
holders of Common Stock at the Put Price the shares of Callable/Puttable Shares which such stockholders elect to have purchased (up to 50% of all Callable/Puttable Shares owned by such holder). In
exchange for the payment by GSK or GlaxoSmithKline or any of their Affiliates of the amount specified in clause (x) of the immediately preceding sentence (which amount shall be invested by the
Company in a money market fund which holds primarily U.S. government obligations until such time as any amounts are paid to creditors or stockholders (it being specified that the returns on such
investment shall be paid to GSK or GlaxoSmithKline upon demand)), the Company will issue to GSK (or its designated Affiliate) a number of duly authorized and validly issued shares of Class A
Common Stock equal to 50% the number of Callable/Puttable Shares. Immediately following the expiration of the Put Period, if the Put has not been exercised with respect to 50% of the then
Callable/Puttable Shares and if GSK or GlaxoSmithKline shall have complied with clause (x) of the first sentence of this Section 3.4(b), (1) the Company shall refund to GSK or
GlaxoSmithKline, as the case may be, (or their designated Affiliate) an amount (together with any interest actually earned thereon) equal to the product of the Put Price times the number of
Callable/Puttable Shares with respect to which the Put has not been exercised and (2) GSK (or by its designated Affiliate) shall, in exchange for such payment by the Company, contribute to the
Company a number of shares of Class A Common Stock equal to the number of Callable/Puttable Shares with respect to which the Put has not been exercised. In the event that GSK or GlaxoSmithKline
pays the amount specified in clause (x) of the first sentence of this Section 3.4(b), GSK or GlaxoSmithKline and any of their Affiliates shall not be entitled to any payments or other
distributions on or in respect of any Equity Security unless and until the Company has redeemed all of the shares of Common Stock with respect to which the Put has been properly exercised. 

        (c)   It
is understood and agreed that, if GSK so elects, the obligation of GSK and GlaxoSmithKline to purchase shares of Common Stock pursuant to any of the provisions in
this 

16

 

Section 3.4
may, at the election of GSK, be assigned by GSK to any Affiliate of GSK (other than the Company). No assignment pursuant to this Section 3.4(c) shall relieve GSK or
GlaxoSmithKline of any of its obligations under this Section 3.4 or otherwise. 

        (d)   The
Company shall take (and shall have no corporate power or capacity to refuse to take) such actions as may be necessary to enforce the obligations of GSK and
GlaxoSmithKline under this Section 3.4 directly against GSK and GlaxoSmithKline, or in the event of assignment by GSK, against GSK and any Affiliate of GSK to which any assignment is made. 

        (e)   The
Company shall only use the funds received from GSK, GlaxoSmithKline or their Affiliates to fund the Depositary for the purposes of effecting the Put pursuant to this
Article III. 

        SECTION
3.5.    Required Regulatory Filings.    GSK, GlaxoSmithKline and the Company agree to take all actions
necessary to make all required filings and thereafter make any other required submissions with respect to the transactions contemplated under this Agreement under any applicable law, including,
without limitation, any applicable federal or state securities Law, the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") and foreign antitrust regulations. With respect
to the transactions contemplated by the Put and Call, in furtherance of the foregoing, GSK, GlaxoSmithKline and the Company agree to take all necessary actions to make any required filings under the
HSR Act and any applicable foreign antitrust regulations prior to February 1, 2007. GSK,
GlaxoSmithKline and the Company shall respond as promptly as practicable to all inquiries or requests received from any such antitrust regulator. The parties shall cooperate with each other in
connection with the making of all such filings or requests. GSK, GlaxoSmithKline and the Company shall take all required action to cause any waiting period (and any extension thereof) applicable to
the transactions contemplated hereunder to expire or be terminated under the HSR Act and any waiting period (and any extension thereof) applicable to the transactions contemplated hereunder under any
foreign antitrust Law (or any approval thereunder) to expire or be terminated or be obtained prior to June 1, 2007. 

ARTICLE IV  

 REPRESENTATIONS AND WARRANTIES  

        SECTION
4.1.    Representations of the Company.    

        (a)   The
execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby are within the
Company's corporate powers and have been duly authorized by all necessary corporate action. This Agreement constitutes a valid and binding agreement of the Company. 

        (b)   The
execution, delivery and performance by the Company of this Agreement require no action by or in respect of, or filing with, any governmental body, agency, official
or authority. 

        (c)   The
execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby do not and will not
(i) contravene or conflict with the Certificate of Incorporation or Bylaws of the Company, and (ii) contravene or conflict with or constitute a violation of any provision of any law,
regulation, judgment, injunction, order or decree binding upon or applicable to the Company. 

        SECTION
4.2.    Representations of GSK, GlaxoSmithKline and GGL.    

        Each
of GSK, GlaxoSmithKline and GGL represent that: 

        (a)   The
execution, delivery and performance by it of this Agreement and the consummation by it of the transactions contemplated hereby are within its corporate powers and
have been duly 

17

 

authorized
by all necessary corporate action. This Agreement constitutes its valid and binding agreement. 

        (b)   The
execution, delivery and performance by it of this Agreement require no action by or in respect of, or filing with, any governmental body, agency, official or
authority. 

        (c)   The
execution, delivery and performance by it of this Agreement and the consummation by it of the transactions contemplated hereby do not and will not
(i) contravene or conflict with its charter or Bylaws, and (ii) contravene or conflict with or constitute a violation of any provision of any law, regulation, judgment, injunction, order
or decree binding upon or applicable to it. 

ARTICLE V  

 SEVERANCE ARRANGEMENTS  

        SECTION
5.1.    Severance Arrangements.    The Company will not and will not permit any of its subsidiaries to,
(i) enter into any contract, agreement, plan or arrangement covering any director, officer or employee of the Company or any subsidiary that provides for the making of any payments, the
acceleration of vesting of any benefit or right or any other entitlement contingent upon (A) (x) the stock purchase by GSK pursuant to the Class A Stock Purchase Agreement,
(y) the exercise by GSK of any of its rights under this Agreement to representation on the Board (and its committees) or (z) any acquisition by GSK of securities of the Company (whether
by merger, tender offer, private or market purchases or otherwise) not prohibited by this Agreement or (B) the termination of employment after the occurrence of any such contingency if such
payment, acceleration or entitlement would not otherwise have been provided but for such contingency or (ii) amend any existing contract, agreement, plan or arrangement to so provide.
Notwithstanding anything to the contrary in the foregoing, GSK agrees to the adoption by the Company of the Company's "Change In Control Severance Plan" in effect as of the date of this Agreement. 

ARTICLE VI  

 MISCELLANEOUS  

        SECTION
6.1.    Notices.    All notices, requests and other communications to any party hereunder shall be in writing
(including facsimile or similar writing) and shall be given: 

If
to the Company: 

Theravance, Inc.

901 Gateway Boulevard

South San Francisco, CA 94080

Facsimile: 650-808-6095

Attn: General Counsel 

With
a copy to: 

Gunderson
Dettmer et al.

155 Contitution Drive

Menlo Park, CA 94025

Facsimile: 650-321-2800

Attn: Christopher D. Dillon

         Jay K. Hachigian 

18

 

If
to GSK: 

SmithKline
Beecham Corporation

One Franklin Plaza (FP2355)

200 N. 16th Street

Philadelphia, PA 19102

Attn: Company Secretary

Facsimile: 215-751-5349 

With
a copy to: 

GlaxoSmithKline

One Franklin Plaza (FP2355)

200 N. 16th Street

Philadelphia, PA 19102

Facsimile: 215-751-5349

Attn: Corporate Law 

and
with a copy to: 

GlaxoSmithKline

Greenford Road

Greenford

Middlesex

UB6 0HE

United Kingdom

Attn: Vice President, Worldwide Business Development

Facsimile: 011 44 208-966-5371 

and
with a copy to: 

Glaxo
Group Limited

Glaxo Wellcome House

Berkeley Avenue

Greenford

Middlesex UB6 0NN

United Kingdom

Attn: Company Secretary

Facsimile: 011 44 208-047-6904 

or
such other address or facsimile number as such party may hereafter specify for the purpose by notice to the other parties hereto. Each such notice, request or other communication shall be effective
(i) if given by facsimile when such facsimile is transmitted to the facsimile number specified in this Section and the appropriate answerback is received or (ii) if given by any other
means, when delivered at the address specified in this Section 6.1. 

        SECTION
6.2.    Amendments; Waivers.    

        (a)   Any
provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by GSK and the
Company, or in the case of a waiver, by the party against whom the waiver is to be effective; provided that, in the case of the Company, no such amendment or waiver shall be effective without the
approval of a majority of the Independent Directors. 

        (b)   No
failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other 

19

 

or
further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by
law. 

        SECTION
6.3.    Successors and Assigns.    The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns; provided that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement
without the written consent of the other party hereto. 

        SECTION
6.4.    Governing Law.    This Agreement shall be governed by and construed in accordance with and governed by
the law of the State of Delaware, without regard to the conflicts of laws principles thereof. Any action brought, arising out of, or relating to this Agreement shall be brought in the Court of
Chancery of the State of Delaware. Each party hereby irrevocably submits to the exclusive jurisdiction of said Court in respect of any claim relating to the validity, interpretation and enforcement of
this Agreement, and hereby waives, and agrees not to assert, as a defense in any action, suit or proceeding in which any such claim is made that it is not subject thereto or that such action suit or
proceeding may not be brought or is not maintainable in such courts, or that the venue thereof may not be appropriate or that this agreement may not be enforced in or by such courts. The parties
hereby consent to and grant the Court of Chancery of the State of Delaware jurisdiction over such parties and over the subject matter of any such claim and agree that mailing of process or other
papers in connection with any such action, suit or proceeding in the manner provided in Section 6.1, or in such other manner as may be permitted by law, shall be valid and sufficient thereof. 

        SECTION
6.5.    Counterparts; Effectiveness.    This Agreement may be executed in any number of counterparts, each of
which, when executed, shall be deemed to be an original and which together shall constitute one and the same document. 

        SECTION
6.6.    Specific Performance.    Each party acknowledges and agrees that their respective remedies at law for
a breach or threatened breach of any of the provisions of this Agreement would be inadequate and, in recognition of that fact, agrees that, in the event of a breach or threatened breach by the
Company, on the one hand, or GSK, GGL and GlaxoSmithKline (the "Glaxo Parties"), on the other hand, of the provisions of this Agreement, in addition to any remedies at law, the Glaxo Parties and the
Company, respectively, without posting any bond shall be entitled to obtain equitable relief in the form of specific performance, a temporary restraining order, a temporary or permanent injunction or
any other equitable remedy which may then be available. 

        SECTION
6.7.    Termination.    This Agreement (other than Sections 3.2 and 3.3 hereof) shall terminate at the
earliest of (i) such time as GSK and its Affiliates beneficially own 100% of the outstanding Voting Stock, (ii) the effective time of a Change in Control, and
(iii) September 1, 2015. 

        SECTION
6.8.    Severability.    In the event of the invalidity of any provisions of this Agreement or if this
Agreement contains any gaps, the parties agree that such invalidity or gap shall not affect the validity of the remaining provisions of this Agreement. The parties will replace an invalid provision or
fill any gap with valid provisions which most closely approximate the purpose and economic effect of the invalid provision or, in case of a gap, the parties' presumed intentions. In the event that the
terms and conditions of this Agreement are materially altered as a result of the preceding sentences, the parties shall renegotiate the terms and conditions of this Agreement in order to resolve any
inequities. Nothing in this Agreement shall be interpreted so as to require either party to violate any applicable laws, rules or regulations. 

        SECTION
6.9.    Registration and Filing of This Agreement.    To the extent, if any, that either the Company, on the
one hand, or the Glaxo Parties, on the other hand, concludes in good faith that such party or the other party is required to file or register this Agreement or a notification thereof with any
governmental authority, including without limitation the SEC, the Competition Directorate of the 

20

 

Commission
of the European Communities or the U.S. Federal Trade Commission, in accordance with Law, such party shall inform the other party thereof. Should the Company and the Glaxo Parties jointly
agree that either of them is required to submit or obtain any such filing, registration or notification, they shall cooperate, each at its own expense, in such filing, registration or notification and
shall execute all documents reasonably required in connection therewith. In such filing, registration or notification, the parties shall request confidential treatment of sensitive provisions of this
Agreement, to the extent permitted by Law. The parties shall promptly inform each other as to the activities or inquiries of any such Governmental Authority relating to this Agreement, and shall
reasonably cooperate to respond to any request for further information therefrom on a timely basis. 

        SECTION
6.10.    Certain Definitions.    

        (a)   As
used in this Agreement, the following terms shall have the following meanings: 

          (i)  "Affiliate"
of a party means any Person, whether de jure or de facto, which directly or indirectly controls, is controlled by, or is under common control with such
Person for so long as such control exists, where "control" means the decision-making authority as to such Person and, further, where such control shall be presumed to exist where a Person owns more
than fifty percent (50%) of the equity (or such lesser percentage which is the maximum allowed to be owned by a foreign corporation in a particular jurisdiction) having the power to vote on or direct
the affairs of the entity; it being specified that for purposes of this Agreement, the Company and its direct and indirect subsidiaries, if any, shall not be deemed to be Affiliates of GSK. 

         (ii)  "Call"
shall have the meaning set forth in Section 4 of Article IV of the Certificate of Incorporation. 

        (iii)  "Callable/Puttable
Shares" means (i) all outstanding shares of Common Stock that are not subject to repurchase by the Company pursuant to any employee, officer,
director or consultant compensation plan as of the Call Date or the final day of the Put Period, as the case may be, (ii) all shares of Common Stock subject to issuance upon the exercise of
options to acquire Common Stock granted pursuant to any employee, officer, director or consultant compensation plan that are or will be fully vested as of the Call Date or the final day of the Put
Period, as the case may be, (iii) all shares of Common Stock subject to issuance upon the exercise, exchange or conversion of warrants, exchangeable or convertible securities (other than any
such options described in clause (ii)) that are by their terms exercisable, exchangeable or convertible as of the Call Date or the final day of the Put Period, as the case may be. 

        (iv)  "Call/Put
Termination Date" shall have the meaning set forth in Section C.8 of Article IV of the Certificate of Incorporation. 

         (v)  "Change
in Control" means, with respect to (A) the Company, any transaction or series of related transactions (including mergers, consolidations and other forms
of business consolidations) following which continuing stockholders of the Company hold less than 50% of the outstanding voting securities of either the Company, the entity surviving such transaction
or any direct or indirect parent entity of such continuing or surviving entity or (B) the sale, lease, license, transfer or other disposal of all or substantially all of the business or assets
of the Company (provided, however, that the sale, license or transfer to another party, in the ordinary course of business, of any Company asset (regardless of its value or what portion of the
Company's business or assets it may represent) over which GSK has no contractual rights in accordance with the provisions of the Alliance Agreement shall not be considered a Change in Control
transaction); it being understood that GSK's exercise of its rights or performance of its obligations pursuant to the Put or Call shall not be deemed a Change in Control. 

21

 

        (vi)  "Effective
Date" means May 11, 2004 (the first business day following the date on which the last of the conditions contained in Section 15.14 of the
Alliance Agreement was satisfied). 

       (vii)  "Fair
Market Value Per Share" means, with respect to an Equity Security as of a particular date, (a) if the Equity Security is traded on a securities exchange
or through NASDAQ, the closing price of the Equity Security on such exchange or system on such date or (b) if the Equity Security is not traded on a securities exchange or through NASDAQ, the
value on such date as determined in good faith after consultation with a nationally recognized financial advisor by a majority of the Independent Directors. 

      (viii)  "Indebtedness"
of any Person means, without duplication, the following, (a) all Obligations of such Person for borrowed money, (b) all Obligations of
such Person evidenced by bonds, debentures, notes or similar instruments, (c) all Obligations of such Person to pay the deferred purchase price of property or services, except trade accounts
payable or accruals arising in the ordinary course of business, (d) all Obligations of such Person in respect of any capital lease, (e) all Obligations of such Person to repurchase or
redeem equity securities, whether or not pursuant to the terms thereof, other than the Put and except to the extent such Obligations are payable solely in the form of other equity securities, and
(f) all Obligations of such Person with respect to any financial hedging arrangements. For purposes of this definition, "Obligations" shall mean any principal, interest, penalties, fees,
guarantees, reimbursements, damages, costs of unwinding and other liabilities payable under the documentation governing any Indebtedness. 

        (ix)  "Initial
Offering" means the closing of the Company's sale of its securities pursuant to a bona fide, firmly underwritten public offering of shares of Common Stock,
registered under the Securities Act. 

         (x)  "Law"
means any law, statute, rule, regulation, ordinance and other pronouncement having the binding effect of any court, tribunal, arbitrator, agency, legislative body,
commission, official or other instrumentality of (x) any government of any country, (y) a federal, state, province, county, city or other political subdivision thereof or (z) any
supranational body. 

        (xi)  "Permitted
Indebtedness" means any Indebtedness of the Company that is issued prior to the Call/Put Termination Date and in an amount equal to or less than
$100 million; provided, however, if such indebtedness may be convertible or exchangeable into
Voting Stock, the terms of such indebtedness shall provide that any such conversion or exchange may not occur prior to the Call/Put Termination Date. 

       (xii)  "Person"
means any natural person, corporation, general partnership, limited partnership, limited liability company, joint venture, proprietorship or other business
organization. 

      (xiii)  "Put"
shall have the meaning set forth in Section 5 of Article IV of the Certificate of Incorporation. 

      (xiv)  "Rights
Plan" means any rights plan adopted by the Company that has the effect (or similar effect) of providing, upon the acquisition of a specified percentage of
Voting Stock by a third party without the approval of the Board, stockholders (other than such acquiring party) the right to acquire Voting Stock of the Company in a manner designed to significantly
dilute the ownership stake of such acquiring party. 

22

 

        (b)   The
following terms shall have the meanings defined for such terms in the Sections of this Agreement set forth below: 

	Term
 
	 	Section

	Agreement	 	Preamble
	Alliance Agreement	 	Recitals
	Board	 	1.1(a)
	Call Date	 	3.1(a)
	Catch-up Shares	 	2.1(d)(ii)
	Certificate of Incorporation	 	1.1(a)
	Common Stock	 	Recitals
	Class A Stock Purchase Agreement	 	Recitals
	Collaboration Agreement	 	2.1(a)(iv)
	Company	 	Preamble
	DGCL	 	2.1(e)
	Depositary	 	3.1(a)
	End of the Equity Limitation Period	 	1.6(b)
	Equity Security	 	1.5(a)(iii)
	Exchange Act	 	2.1(a)(i)
	First Offer Shares	 	2.1(d)(i)
	Glaxo Parties	 	6.6
	GlaxoSmithKline	 	Preamble
	GSK	 	Preamble
	GSK Directors	 	1.2(a)
	GSK Independent Nominees	 	1.2(b)
	GSK's Percentage Interest	 	1.2(b)
	HSR Act	 	3.5
	Independent Directors	 	1.2(a)
	Initial Offering	 	2.1(b)(v)
	Investors' Rights Agreement	 	2.1(b)(iv)
	NASD	 	2.1(d)(i)
	NASDAQ	 	2.1(d)(i)
	Non-GSK Directors	 	1.2(b)
	Offer Notification	 	2.1(d)(i)
	Offering	 	2.1(d)(i)
	Party	 	Preamble
	Post Call Offer Shares	 	2.1(d)(iv)
	Post Put Offer Shares	 	2.1(d)(iii)
	Prior Agreement	 	Recitals
	Schedule	 	2.1(d)(ii)
	SEC	 	2.1(a)(ii)
	Securities Act	 	2.2(b)(ii)
	Third Party Acquiror	 	2.1(c)
	Voting Stock	 	1.5(a)(iii)

        SECTION
6.11.    Captions.    The captions, headings and arrangements used in this Agreement are for convenience only
and do not in any way limit or amplify the terms and provisions hereof. 

        SECTION
6.12.    Prior Agreement.    The Prior Agreement is hereby amended and restated in its entirety and shall be
of no further force or effect. 

23

        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. 

	 	 	THERAVANCE, INC.
	

 	
 	

By:	

/s/  RICK E WINNINGHAM      

	

 	
 	

Name:	

Rick E Winningham

	

 	
 	

Title:	

Chief Executive Officer

	

 	
 	

SMITHKLINE BEECHAM CORPORATION
	

 	
 	

By:	

/s/  DONALD F. PARMAN      

	

 	
 	

Name:	

Donald F. Parman

	

 	
 	

Title:	

Vice President and Secretary

	

 	
 	

GLAXOSMITHKLINE plc

[solely with respect to Articles III, IV and VI]
	

 	
 	

By:	

/s/  GLAXOSMITHKLINE PLC      

	

 	
 	

Name:	

  

	

 	

 	

Title:	

  

	

 	
 	

GLAXO GROUP LIMITED

[solely with respect to Articles II, IV and VI]
	

 	
 	

By:	

/s/  GLAXO GROUP LIMITED      

	

 	
 	

Name:	

  

	

 	
 	

Title:	

  

SIGNATURE PAGE TO GOVERNANCE AGREEMENT  

QuickLinks

Exhibit 10.14

AMENDED AND RESTATED GOVERNANCE AGREEMENT

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