UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC  20549

FORM 8-K

Current Report Pursuant

to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event Reported):  December 5, 2008

THERAVANCE, INC.

(Exact Name of Registrant as Specified in its Charter)

901 Gateway Boulevard
South San Francisco, California 94080
(650) 808-6000

(Addresses, including zip code, and telephone numbers, including area code, of principal executive offices)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(b)           As previously announced, in connection with a restructuring of its workforce that commenced on April 21, 2008, Theravance, Inc. (the “Company” or “Theravance”) eliminated the position of Senior Vice President of Technical Operations, held by Dr. Arthur Campbell.  Dr. Campbell’s employment with Theravance ended on December 5, 2008.

(e)           In connection with his termination of employment, the Company intends to enter into a letter agreement (the “Separation Agreement”) with Dr. Campbell pursuant to which Theravance agrees to pay Dr. Campbell a severance payment of $197,742 following his cessation of employment based on his length of employment and level of seniority at Theravance, and health insurance premiums through December 31, 2009, or earlier if Dr. Campbell accepts new employment.  The Separation Agreement also contains certain restrictive covenants, releases and other customary terms and conditions. The foregoing description of the Separation Agreement does not purport to be complete, and is qualified in its entirety by reference to the form of Separation Agreement, a copy of which is filed as Exhibit 10.1 hereto and is incorporated herein by reference.

Theravance and Dr. Campbell also entered into a consulting agreement dated December 6, 2008 (the “Consulting Agreement”) pursuant to which Dr. Campbell has agreed to perform consulting services three and a half days per week in a variety of technical operations areas including process chemistry, formulation, manufacturing and quality assurance.  As full consideration for these services, Dr. Campbell will receive a monthly consulting fee of $21,422 and his outstanding stock options and restricted stock unit award will continue to vest until the expiration of the Consulting Agreement at the end of 2009, unless earlier terminated under certain circumstances.  The foregoing description of the Consulting Agreement does not purport to be complete, and is qualified in its entirety by reference to the Consulting Agreement, a copy of which is filed as Exhibit 10.2 hereto and is incorporated herein by reference.

Item 9.01.  Financial Statements and Exhibits.

(d)   Exhibits

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

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EXHIBIT INDEX

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Exhibit 10.1

AGREEMENT AND GENERAL RELEASE

Theravance, Inc. (collectively referred to throughout this Agreement as “Employer”), and Archie Campbell, his heirs, executors, administrators, successors, and assigns (collectively referred to throughout this Agreement as “Employee”), agree that:

1. Last Day of Employment:  Employee’s last day of employment with Employer is December 5, 2008 (“Separation Date”).  Employee will be paid at his present rate of base pay through his last day of employment.  On Employee’s Separation Date, he will also receive any accrued but unused vacation pay.

Prior to his last day of employment, Employee must return to Employer all documents (paper and electronic, including all copies of the same) and all other property in Employee’s possession or custody in any way relating to the business of the Employer.  Such property includes, but is not limited to, any computer or other electronic equipment that has been provided to Employee by Employer.  An Employee’s failure to return company property shall forfeit the Employee’s eligibility to receive severance per the terms of this Agreement and General Release.

2. Basic Severance Payment:  If Employee does not enter into this Agreement, Employer will pay Employee the equivalent of two (2) weeks of Employee’s last base pay, which equals the gross amount of $14,124.42 and will be subject to all applicable withholding taxes (the “Basic Severance Payment”).  The Basic Severance Payment will automatically be paid on the Separation Date and does not constitute consideration for the signing of this Agreement and General Release.

3. Consideration:  In consideration for signing this Agreement and General Release and compliance with the promises made herein, Employer agrees:

A.     Enhanced Severance Payment:  Following the Separation Date, Theravance will pay Employee a lump sum equivalent to 28 weeks of Employee’s last base pay, which equals the gross amount of $197,741.88, and will be subject to all applicable withholding taxes (the “Enhanced Severance Payment”). Theravance will not accept a signed Agreement and General Release prior to the Separation Date.  After Theravance receives Employee’s signed Agreement and General Release, the Enhanced Severance Payment will be sent to Employee on January 30, 2009, provided Employee has not revoked his acceptance pursuant to Paragraph 9 of this Agreement. For purposes of Section 409A of the Internal Revenue Code of 1986, as amended, each of the Basic Severance Payment and the Enhanced Severance Payment is hereby designated as a separate payment.  If this Agreement and General Release has not been signed and become effective by January 30, 2009, then the offer of Enhanced Severance contained herein is withdrawn.

B.     COBRA:  if Employee elects to continue medical, dental and/ or vision coverage under the Theravance Plan in accordance with the continuation requirements of COBRA, the Employer shall pay for the cost of said coverage beginning on the first day of the month following the Employee’s last day of employment and ending on the earliest of

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(a) December 31, 2009, (b) the expiration of Employee’s continuation coverage under COBRA or (c) the date Employee becomes eligible for health insurance in connection with new employment.  Thereafter, Employee shall be entitled to elect to continue such COBRA coverage for the remainder of the COBRA period, at his own expense.

4. No Consideration Absent Execution of this Agreement:  Employee understands and agrees that he would not receive the monies and/or benefits specified in paragraph “3” above, except for his execution of this Agreement and General Release and the fulfillment of the promises contained herein.

5. General Release of Claims:  Employee knowingly and voluntarily releases and forever discharges Employer, its parent corporation, affiliates, subsidiaries, divisions, successors and assigns and the current and former employees, attorneys, officers, directors and agents thereof (collectively referred to throughout the remainder of this Agreement as “Employer”), of and from any and all claims, known and unknown, which the Employee has or may have against Employer as of the date of execution of this Agreement and General Release, including, but not limited to, any alleged violation of:

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6.  Employee hereby waives the provisions of Section 1542 of the California Civil Code, which provides as follows:

A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.

7.  Employee understands and agrees that this Agreement and General Release extends to all claims, of every nature and kind whatsoever, known or unknown, suspected or unsuspected, enumerated in this Agreement or otherwise. Employee understands and agrees that he may hereafter discover facts different from or in addition to those he now knows or believes to be true in respect to the claims, demands, damages, liabilities, actions or causes of action herein released, and he agrees that this release shall be and remain in effect in all respects as complete and general releases as to the matters to be released, notwithstanding any such different and additional facts.

8. Affirmations:  Employee affirms that he has not filed, caused to be filed, or presently is a party to any claim, complaint, or action against Employer in any forum or form.  Employee further affirms that he has been paid and has received all leave (paid or unpaid), compensation, wages, bonuses, commissions, and/or benefits to which he may be entitled and that no other leave (paid or unpaid), compensation, wages, bonuses, commissions and/or benefits are due to him, except as provided in this Agreement and General Release. Employee furthermore affirms that he has no known workplace injuries or occupational diseases and has been provided and/or has not been denied any leave requested under the Family and Medical Leave Act, the California Family Rights Act, or any other leave of absence provided for under California or federal law.

9. Applicable Data and Revocation:  Attached as Exhibit “A” is a list of the job titles and ages of employees that the Employer is required to provide to the Employee pursuant to the Older Workers Benefit Protection Act (“OWBPA”).  Employees are entitled to forty five (45) days from the date of receipt of the list to consider this Agreement.  Employee may revoke this Agreement and General Release for a period of seven (7) calendar days following the day he executes this Agreement and General Release.  Any revocation within this period must be submitted, in writing, to Dennis Driver and state, “I hereby revoke my acceptance of our Agreement and General Release.”  The revocation must be personally delivered to Dennis Driver or his designee, or mailed to Dennis Driver at 901 Gateway Boulevard, South San Francisco, CA 94080 and postmarked within seven (7) calendar days of execution of this Agreement and General Release.  This Agreement and General Release shall not become effective or enforceable

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until the revocation period has expired.  If the last day of the revocation period is a Saturday, Sunday, or legal holiday in the state in which Employee was employed at the time of his last day of employment, then the revocation period shall not expire until the next following day which is not a Saturday, Sunday, or legal holiday.

10. Confidentiality:  Employee agrees not to disclose any information regarding the existence or substance of this Agreement and General Release, except to his spouse, tax advisor, and an attorney with whom Employee chooses to consult regarding his consideration of this Agreement and General Release. Nothing herein is intended to or shall preclude Employee from filing a complaint and/or charge with any appropriate federal, state, or local government agency and/or cooperating with said agency in its investigation. Employee, however, shall not be entitled to receive any relief, recovery, or monies in connection with any complaint or charge brought against Employer, without regard as to who brought any said complaint or charge.

11. Governing Law and Interpretation:  This Agreement and General Release shall be governed and conformed in accordance with the laws of the state of California.  In the event the Employee breaches any provision of this Agreement and General Release, Employee and Employer affirm that either may institute an action to specifically enforce any term or terms of this Agreement and General Release.  Should any provision of this Agreement and General Release be declared illegal or unenforceable by any court of competent jurisdiction and cannot be modified to be enforceable, excluding the general release language, such provision shall immediately become null and void, leaving the remainder of this Agreement and General Release in full force and effect.

12. Nonadmission of Wrongdoing:  The Parties agree that neither this Agreement and General Release nor the furnishing of the consideration for this Release shall be deemed or construed at anytime for any purpose as an admission by either party, or evidence of any liability or unlawful conduct of any kind.

13. Amendment:  This Agreement and General Release may not be modified, altered or changed except in writing and signed by both parties wherein specific reference is made to this Agreement and General Release.

14. Entire Agreement:  This Agreement and General Release sets forth the entire agreement between the parties hereto, and fully supersedes any prior agreements or understandings between the parties, except the attached copy of the Employees signed Confidentiality Agreement.  Employee acknowledges that he has not relied on any representations, promises, or agreements of any kind made to him in connection with his decision to accept this Agreement and General Release, except for those set forth in this Agreement and General Release.

EMPLOYEE HAS BEEN ADVISED THAT HE HAS AT LEAST FORTY-FIVE (45) CALENDAR DAYS TO CONSIDER THIS AGREEMENT AND GENERAL RELEASE AND HAS BEEN ADVISED IN WRITING TO CONSULT WITH AN

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ATTORNEY PRIOR TO EXECUTION OF THIS AGREEMENT AND GENERAL RELEASE.

EMPLOYEE AGREES THAT ANY MODIFICATIONS, MATERIAL OR OTHERWISE, MADE TO THIS AGREEMENT AND GENERAL RELEASE DO NOT RESTART OR AFFECT IN ANY MANNER THE ORIGINAL FORTY-FIVE (45) CALENDAR DAY CONSIDERATION PERIOD.

HAVING ELECTED TO EXECUTE THIS AGREEMENT AND GENERAL RELEASE, TO FULFILL THE PROMISES SET FORTH HEREIN, AND TO RECEIVE THEREBY THE SUMS AND BENEFITS SET FORTH IN PARAGRAPH “3” ABOVE, EMPLOYEE FREELY AND KNOWINGLY, AND AFTER DUE CONSIDERATION, ENTERS INTO THIS AGREEMENT AND GENERAL RELEASE INTENDING TO WAIVE, SETTLE AND RELEASE ALL CLAIMS HE HAS OR MIGHT HAVE AGAINST EMPLOYER.

IN WITNESS WHEREOF, the parties hereto knowingly and voluntarily executed this Agreement and General Release as of the date set forth below:

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Exhibit 10.2

CONSULTING AGREEMENT

Effective December 6, 2008, Arthur Campbell, One Marigold Lane, San Carlos, CA 94070 (“Consultant”) and Theravance, Inc., 901 Gateway Boulevard, South San Francisco CA 94080 (“Theravance” or the “Company”) agree as follows:

1.             Services and Payment. Consultant agrees to consult with and advise Theravance from time to time, at Theravance’s request (“Services”) for three and one-half (3.5) days per week on site at Theravance or traveling as necessary to perform the Services.  Services to be provided hereunder are set forth in Exhibit A attached hereto.  As full payment for the Services, Consultant will (i) receive a consulting fee of $21,422 per month payable monthly within thirty (30) days of Theravance’s receipt of reasonably detailed invoices therefor, and (ii) continue to vest in any currently outstanding (a) options to purchase the Company’s Common Stock and (b) time-based restricted stock unit award (RSU) during the term of this Agreement in accordance with the terms of such options and the RSU. Consultant shall also be entitled to reimbursement for expenses for which Consultant has received prior approval from Theravance within thirty (30) days of Consultant’s submission of receipts thereof.

2.             Ownership of Inventions.  Theravance shall own all right, title and interest (including patent rights, copyrights, trade secret rights, trademark rights and all other rights of any sort throughout the world) relating to any and all inventions (whether or not patentable), including without limitation, discoveries, compositions of matter, pharmaceutical formulations, methods of use, methods of making, techniques, processes, formulas, improvements, works of authorship, designations, designs, know-how, ideas and information made or conceived or reduced to practice, in whole or in part, by Consultant (solely or jointly with others) during the term of this Agreement that arise out of or relate to the Services or any Proprietary Information (as defined below) (collectively, “Inventions”).  Consultant will promptly disclose, provide and assign all Inventions to Theravance.  Consultant shall further assist Theravance, at Theravance’s expense, to further evidence, record and perfect such assignments, and to perfect, obtain, maintain, enforce, and defend any rights assigned throughout the world. Such assistance may include, but is not limited to, execution of documents and assistance or cooperation in legal proceedings.  Consultant hereby irrevocably designates and appoints Theravance as his agent and attorney-in-fact to act for and on Consultant’s behalf to execute and file any document and to do all other lawfully permitted acts to further the foregoing with the same legal force and effect as if executed by Consultant.  When requested by Theravance, Consultant will make available to Theravance all notes, data and other information relating to any Invention.

3.             Proprietary Information.  Consultant agrees that all Inventions and other business, technical and financial information concerning Theravance (including, without limitation, the identity of and information relating to Theravance’s employees, vendors and service providers) that Consultant develops, learns or obtains during the term of this Agreement or while he is providing Services constitute “Proprietary Information.”  Consultant will hold in confidence and not disclose or make available to third parties or make use of any Proprietary

Information except with the prior written consent of Theravance or to the extent necessary in performing Services for Theravance.  However, Consultant shall not be obligated under this paragraph with respect to information Consultant can document (i) is or becomes readily publicly available without restriction through no fault of Consultant, or (ii) that Consultant knew without restriction prior to its disclosure by Theravance.  Upon termination of this Agreement or as otherwise requested by Theravance, Consultant will promptly return to Theravance all documents, materials and copies containing or embodying Proprietary Information, except that Consultant may keep a personal copy of (i) compensation records relating to the Services and (ii) this Agreement.

4.             Solicitation.  As additional protection for Proprietary Information, Consultant agrees that during the term of this Agreement and for one year thereafter, Consultant will not encourage or solicit any employee of or consultant to Theravance to leave Theravance for any reason.

5.             Term and Termination.  This Agreement shall become effective on December 6, 2008 and remain in force until the earlier of December 31, 2009 or when terminated by either party. Consultant may terminate this Agreement at any time, for any reason, by giving the Company 10 days’ written notice.  The Company may terminate this Agreement prior to December 31, 2009 only as provided in Section 8.2 hereof or for cause, which for purposes hereof shall mean:  (i) the unauthorized use or disclosure of the confidential information or trade secrets of the Company; (ii) conviction of a felony under the laws of the United States or any state thereof; (iii) negligence or misconduct; (iv) failure to perform lawful assigned services for ten days after receiving written notification from the Company; (v) providing services to another company or entity that has a product or program that is competitive with the Company’s products or programs without the prior written consent of the Company; (vi) Consultant’s revocation of the separation agreement dated December 5, 2008 between Consultant and Theravance; or (vii) Consultant’s acceptance of new employment. All provisions of this Agreement and any remedies for breach of this Agreement shall survive any termination or expiration.

6.             Relationship of the Parties.  Notwithstanding any provision hereof, for all purposes of this Agreement each party shall be and act as an independent contractor and not as a partner, joint venturer, or agent of the other and shall not bind nor attempt to bind the other to any contract.  Consultant is an independent contractor and is solely responsible for all taxes, withholdings, and other statutory or contractual obligations of any sort, including, but not limited to, Workers’ Compensation Insurance. Consultant recognizes and agrees that Consultant has no expectation of privacy with respect to Theravance’s telecommunications, networking or information processing systems (including, without limitation, computer files, email messages and attachments, and voice messages) and that Consultant’s activity, and any files or messages, on or using any of those systems may be monitored at any time without notice.

7.             Assignment.  This Agreement and the Services performed hereunder are personal to Consultant and Consultant shall not have the right or ability to assign, transfer, or subcontract any obligations under this Agreement without the written consent of Theravance. 

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Any attempt to do so shall be void.  Theravance shall be free to assign or transfer this Agreement to a third party.

8.             Representations.

8.1           Consultant represents and warrants that he has never been: (1) debarred, excluded or convicted of a crime for which a person can be debarred under 21 U.S.C. § 335a; (2) excluded by the OIG or other government entity as listed on http://exclusions.oig.hhs.gov or http://epls.arnet.gov; or (3) threatened to be debarred, excluded or indicted for a crime or otherwise engaged in conduct for which a person can be debarred, excluded or indicted.  Consultant agrees to notify Theravance immediately in the event of any such debarment, exclusion, conviction, threat or indictment occurring during the term of this Agreement, or the three (3) year period following the termination or expiration of this Agreement.

8.2           If at any time during the term of this Agreement, Consultant becomes the subject of any proceedings for disqualification, debarment, delisting, exclusion, or denial or revocation of licensure, as described above, Theravance shall have the right to terminate this Agreement effective upon the date of such notice by Consultant.

8.3           Consultant represents and warrants that (i) his performance hereunder will not breach any agreement or obligation to keep in confidence proprietary information acquired by Consultant in confidence or trust prior to or during Consultant’s engagement with Theravance, and (ii) all work under this Agreement will be Consultant’s original work and none of the Services or Inventions or any development, use, production, distribution or exploitation thereof will infringe, misappropriate or violate any intellectual property or other right of any person or entity.  Consultant represents and warrants that he has not entered into, and agrees that he will not enter into, any agreement whether written or oral in conflict with this Agreement or with his obligations as a consultant to Theravance. In this regard, during the term of this Agreement, Consultant agrees to (i) notify the Company in advance of accepting any employment or additional consulting assignments, and (ii) refrain from working on any product or program that is competitive with a Company product or program without the prior written consent of the Company.

9.             Company Policies.  Consultant represents that he has read the Theravance Insider Trading Policy, the Theravance Travel Policy and the Theravance Code of Business Conduct located at http://ir.theravance.com/conduct.cfm, and agrees to abide by each such policy during the term of this Agreement.

10.           Remedies.  Any breach of Section 2, 3, 4, 8 or 9 will cause irreparable harm to Theravance for which damages would not be an adequate remedy, and, therefore, Theravance will be entitled to injunctive relief with respect thereto in addition to any other remedies.  The failure of either party to enforce its rights under this Agreement at any time for any period shall not be construed as a waiver of such rights.

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11.           Entire Agreement.  This Agreement supersedes all prior agreements between the parties and constitutes the entire agreement between the parties as to the subject matter hereof, except that if the Consultant has signed Theravance’s Nondisclosure Agreement, it shall remain in full force and effect.

12.           Notices.  All notices, requests and other communications called for by this Agreement shall be deemed to have been given if made in writing and mailed, postage prepaid, to the address of each party set forth above, or to such other addresses as either party shall specify to the other.

13.           Amendments.  No changes or modifications or waivers to this Agreement will be effective unless in writing and signed by both parties.

14.           Severability.  In the event that any provision of this Agreement shall be determined to be illegal or unenforceable, that provision will be limited or eliminated to the minimum extent necessary so that this Agreement shall otherwise remain in full force and effect and enforceable.

15.           Arbitration.  Subject to the exceptions set forth below, Consultant understands and agrees that any disagreement regarding this Agreement will be determined by submission to arbitration as provided by Section 1280 et seq. of the California Code of Civil Procedure, and not by a lawsuit or resort to court process proceedings.  The only claims or disputes not covered by this paragraph are claims or disputes related to issues affecting the validity, infringement or enforceability of any trade secret or patent rights held or sought by Theravance or which Theravance could otherwise seek; in which case such claims or disputes shall not be subject to arbitration and will be resolved pursuant to applicable law.

16.           Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of California without regard to conflicts of law provisions thereof.  In any action or proceeding to enforce rights under this Agreement, the prevailing party shall be entitled to recover costs and attorneys fees.

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EXHIBIT A

Description of Services

Consultant may be asked to perform some or all of the services described below:

1.               Support the Technology Development Laboratory, in particular the Company’s efforts to utilize the facility for third party process development and manufacturing activities.

2.               As requested, provide insight and direction on process chemistry, formulation and manufacturing issues.

3.               As requested, provide insight into Quality Assurance activities.

4.               As requested, and with the mutual agreement of Consultant and the Company, provide insight and direction into other aspects of the Company’s business

5.               Meetings related to any of the above.

Invoices shall include a description of the Services performed and the number of hours spent, specify the product candidate to which each segment of work was dedicated, specify the Purchase Order number related to the Services (to be supplied by Theravance following execution of this agreement), and be sent to:

Theravance, Inc.

901 Gateway Boulevard

South San Francisco, CA 94080

Attention:  Accounts Payable (Tom Catalano)

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