Exhibit 10.4


 


THERAVANCE, INC.


 


2004
EMPLOYEE STOCK PURCHASE PLAN


 


(AS
ADOPTED MAY 27, 2004 AND AMENDED ON APRIL 19, 2005, DECEMBER 11, 2007 AND
DECEMBER 10, 2008)


 

















 


TABLE OF
CONTENTS


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  SECTION 1. PURPOSE OF THE PLAN

  	
   

  	
  1

  
	
   

  	
   

  	
   

  
	
  SECTION 2. ADMINISTRATION OF THE PLAN

  	
   

  	
  1

  
	
  (a) 
  Committee Composition

  	
   

  	
  1

  
	
  (b) 
  Committee Responsibilities

  	
   

  	
  1

  
	
   

  	
   

  	
   

  
	
  SECTION 3. STOCK OFFERED UNDER THE PLAN

  	
   

  	
  1

  
	
  (a) 
  Authorized Shares

  	
   

  	
  1

  
	
  (b) 
  Anti-Dilution Adjustments

  	
   

  	
  1

  
	
  (c) 
  Reorganizations

  	
   

  	
  2

  
	
   

  	
   

  	
   

  
	
  SECTION 4. ENROLLMENT AND PARTICIPATION

  	
   

  	
  2

  
	
  (a) 
  Offering Periods

  	
   

  	
  2

  
	
  (b) 
  Accumulation Periods

  	
   

  	
  2

  
	
  (c) 
  Enrollment

  	
   

  	
  2

  
	
  (d) 
  Duration of Participation

  	
   

  	
  2

  
	
  (e) 
  Applicable Offering Period

  	
   

  	
  3

  
	
   

  	
   

  	
   

  
	
  SECTION 5. EMPLOYEE CONTRIBUTIONS

  	
   

  	
  3

  
	
  (a) 
  Commencement of Payroll Deductions

  	
   

  	
  3

  
	
  (b) 
  Amount of Payroll Deductions

  	
   

  	
  3

  
	
  (c) 
  Changing Withholding Rate

  	
   

  	
  4

  
	
  (d) 
  Discontinuing Payroll Deductions

  	
   

  	
  4

  
	
  (e) 
  Limit on Number of Elections

  	
   

  	
  4

  
	
   

  	
   

  	
   

  
	
  SECTION 6. WITHDRAWAL FROM THE PLAN

  	
   

  	
  4

  
	
  (a) 
  Withdrawal

  	
   

  	
  4

  
	
  (b) 
  Re-Enrollment After Withdrawal

  	
   

  	
  4

  
	
   

  	
   

  	
   

  
	
  SECTION 7. CHANGE IN EMPLOYMENT STATUS

  	
   

  	
  4

  
	
  (a) 
  Termination of Employment

  	
   

  	
  4

  
	
  (b) 
  Leave of Absence

  	
   

  	
  4

  
	
  (c) 
  Death

  	
   

  	
  5

  
	
   

  	
   

  	
   

  
	
  SECTION 8. PLAN ACCOUNTS AND PURCHASE OF SHARES

  	
   

  	
  5

  
	
  (a) 
  Plan Accounts

  	
   

  	
  5

  
	
  (b) 
  Purchase Price

  	
   

  	
  5

  
	
  (c) 
  Number of Shares Purchased

  	
   

  	
  5

  
	
  (d) 
  Available Shares Insufficient

  	
   

  	
  6

  
	
  (e) 
  Issuance of Stock

  	
   

  	
  6

  
	
  (f) 
  Tax Withholding

  	
   

  	
  6

  
	
  (g) 
  Unused Cash Balances

  	
   

  	
  6

  



 


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  (h) 
  Stockholder Approval

  	
   

  	
  6

  
	
   

  	
   

  	
   

  
	
  SECTION 9. LIMITATIONS ON STOCK OWNERSHIP

  	
   

  	
  6

  
	
  (a) 
  Five Percent Limit

  	
   

  	
  6

  
	
  (b) 
  Dollar Limit

  	
   

  	
  7

  
	
   

  	
   

  	
   

  
	
  SECTION 10. RIGHTS NOT TRANSFERABLE

  	
   

  	
  7

  
	
   

  	
   

  	
   

  
	
  SECTION 11. NO RIGHTS AS AN EMPLOYEE

  	
   

  	
  7

  
	
   

  	
   

  	
   

  
	
  SECTION 12. NO RIGHTS AS A STOCKHOLDER

  	
   

  	
  7

  
	
   

  	
   

  	
   

  
	
  SECTION 13. SECURITIES LAW REQUIREMENTS

  	
   

  	
  8

  
	
   

  	
   

  	
   

  
	
  SECTION 14. AMENDMENT OR DISCONTINUANCE

  	
   

  	
  8

  
	
   

  	
   

  	
   

  
	
  SECTION 15. DEFINITIONS

  	
   

  	
  8

  
	
  (a) 
  Accumulation Period

  	
   

  	
  8

  
	
  (b) 
  Board

  	
   

  	
  8

  
	
  (c) 
  Code

  	
   

  	
  8

  
	
  (d) 
  Committee

  	
   

  	
  8

  
	
  (e) 
  Company

  	
   

  	
  8

  
	
  (f) 
  Compensation

  	
   

  	
  8

  
	
  (g) 
  Corporate Reorganization

  	
   

  	
  8

  
	
  (h) 
  Eligible Employee

  	
   

  	
  9

  
	
  (i) 
  Exchange Act

  	
   

  	
  9

  
	
  (j) 
  Fair Market Value

  	
   

  	
  9

  
	
  (k) 
  Offering Period

  	
   

  	
  9

  
	
  (l) 
  Participant

  	
   

  	
  9

  
	
  (m) 
  Participating Company

  	
   

  	
  10

  
	
  (n) 
  Plan

  	
   

  	
  10

  
	
  (o) 
  Plan Account

  	
   

  	
  10

  
	
  (p) 
  Purchase Price

  	
   

  	
  10

  
	
  (q) 
  Stock

  	
   

  	
  10

  
	
  (r) 
  Subsidiary

  	
   

  	
  10

  



 


ii

















 


THERAVANCE, INC.


 


2004 EMPLOYEE STOCK
PURCHASE PLAN


 


SECTION 1.                                               PURPOSE OF THE PLAN.


 


The Board adopted the Plan effective as of the date of the IPO.  The Plan shall be implemented on such date
following its effectiveness as shall be determined by the Board in its
discretion.  The purpose of the Plan is
to provide Eligible Employees with an opportunity to increase their proprietary
interest in the success of the Company by purchasing Stock from the Company on
favorable terms and to pay for such purchases through payroll deductions.  The Plan is intended to qualify for favorable
tax treatment under Section 423 of the Code.


 


SECTION 2.                                               ADMINISTRATION OF THE
PLAN.


 


(a)                                  Committee Composition. 
The Committee shall administer the Plan. 
The Committee shall consist exclusively of one or more directors of the
Company, who shall be appointed by the Board.


 


(b)                                 Committee Responsibilities. 
The Committee shall interpret the Plan and make all other policy
decisions relating to the operation of the Plan.  The Committee may adopt such rules,
guidelines and forms as it deems appropriate to implement the Plan.  The Committee’s determinations under the Plan
shall be final and binding on all persons.


 


SECTION 3.                                               STOCK OFFERED UNDER
THE PLAN.


 


(a)                                  Authorized Shares. 
The number of shares of Stock available for purchase under the Plan
shall be 1,475,000(1) (subject to adjustment pursuant to Subsection (b) below).


 


(b)                                 Anti-Dilution Adjustments. 
The aggregate number of shares of Stock offered under the Plan, the
2,500-share limitation described in Section 8(c) and the price of
shares that any Participant has elected to purchase shall be adjusted
proportionately for any increase or decrease in the number of outstanding
shares of Stock resulting from a subdivision or consolidation of shares or the
payment of a stock dividend, any other increase or decrease in such shares
effected without receipt or payment of consideration by the Company, the
distribution of the shares of a Subsidiary to the Company’s stockholders, or a
similar event.


 






(1) All share
numbers reflect the reverse stock split approved in connection with the
IPO.  Reflects: a 300,000 share increase
approved by the stockholders on June 30, 2005; a 300,000 share increase
approved by the stockholders on April 22, 2008; and a 550,000 share increase
approved by the stockholders on April 24, 2009.


 

















 


(c)                                  Reorganizations. 
Any other provision of the Plan notwithstanding, immediately prior to
the effective time of a Corporate Reorganization, the Offering Period and
Accumulation Period then in progress shall terminate and shares shall be
purchased pursuant to Section 8, unless the Plan is continued or assumed
by the surviving corporation or its parent corporation.  The Plan shall in no event be construed to
restrict in any way the Company’s right to undertake a dissolution,
liquidation, merger, consolidation or other reorganization.


 


SECTION 4.                                               ENROLLMENT AND
PARTICIPATION.


 


(a)                                  Offering Periods. 
While the Plan is in effect, two overlapping Offering Periods shall
commence in each calendar year.  The
Offering Periods shall consist of the 24-month periods commencing on each May 16
and November 16, except that:


 


(i)                                     Each Offering Period shall commence on
the date designated by the Board or Committee and shall end on the date 24
months later or such shorter period selected by the Board or Committee.


 


(ii)                                  The Committee may determine that the
first Offering Period applicable to the Eligible Employees of a new
Participating Company shall commence on any date specified by the Committee.


 


(iii)                               An Offering Period shall in no event be
longer than 27 months.


 


(b)                                 Accumulation Periods. 
While the Plan is in effect, two Accumulation Periods shall commence in
each calendar year.  The Accumulation
Periods shall consist of the six-month periods commencing on each May 16
and November 16, except that:


 


(i)                                     Each Accumulation Period shall commence
on May 16 and November 16 and end on the earliest of the next November 15
and May 15, respectively, unless otherwise provided by the Committee.


 


(ii)                                  The Committee may determine that the
first Accumulation Period applicable to the Eligible Employees of a new
Participating Company shall commence on any date specified by the Committee.


 


(c)                                  Enrollment. 
Each Eligible Employee may elect to become a Participant on the first
day of an Offering Period by filing the prescribed enrollment form with the
Company.  The enrollment form shall be
filed at the prescribed location not later than the day designated by the
Company but in any event prior to the commencement of the Offering Period.


 


(d)                                 Duration of Participation. 
Once enrolled in the Plan, a Participant shall continue to participate
in the Plan until he or she:


 


(i)                                     Reaches the end of the Accumulation
Period in which his or her employee contributions were discontinued under Section 5(d) or
9(b);


 


(ii)                                  Is deemed to withdraw from the Plan under
Subsection (c) above;


 


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(iii)                               Withdraws from the Plan under Section 6(a);
or


 


(iv)                              Ceases to be an Eligible Employee.


 


A Participant whose employee contributions were
discontinued automatically under Section 9(b) shall automatically
resume participation at the beginning of the earliest Accumulation Period
ending in the next calendar year, if he or she then is an Eligible Employee.  In all other cases, a former Participant may
again become a Participant, if he or she then is an Eligible Employee, by
following the procedure described in Subsection (d) above.


 


(e)                                  Applicable Offering Period. 
For purposes of calculating the Purchase Price under Section 8(b),
the applicable Offering Period shall be determined as follows:


 


(i)                                     Once a Participant is enrolled in the
Plan for an Offering Period, such Offering Period shall continue to apply to
him or her until the earliest of (A) the end of such Offering Period, (B) the
end of his or her participation under Subsection (e) above or (C) re-enrollment
for a subsequent Offering Period under Paragraph (ii), (iii) or (iv) below.


 


(ii)                                  In the event that the Fair Market Value
of Stock on the last trading day before the commencement of the Offering Period
for which the Participant is enrolled is higher than on the last trading day
before the commencement of any subsequent Offering Period, the Participant
shall automatically be re-enrolled for such subsequent Offering Period.


 


(iii)                               If Section 14(b) applies, the
Participant shall automatically be re-enrolled for a new Offering Period.


 


(iv)                              Any other provision of the Plan
notwithstanding, the Company (at its sole discretion) may determine prior to the
commencement of any new Offering Period that all Participants shall be
re-enrolled for such new Offering Period.


 


(v)                                 When a Participant reaches the end of an
Offering Period but his or her participation is to continue, then such
Participant shall automatically be re-enrolled for the Offering Period that
commences immediately after the end of the prior Offering Period.


 


SECTION 5.                                               EMPLOYEE
CONTRIBUTIONS.


 


(a)                                  Commencement of Payroll
Deductions.  A Participant may purchase shares of Stock
under the Plan solely by means of payroll deductions.  Payroll deductions shall commence as soon as
reasonably practicable after the Company has received the prescribed enrollment
form.


 


(b)                                 Amount of Payroll Deductions. 
An Eligible Employee shall designate on the enrollment form the portion
of his or her Compensation that he or she elects to have withheld for the
purchase of Stock.  Such portion shall be
a whole percentage of the Eligible Employee’s Compensation, but not less than
1% nor more than 15%.


 


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(c)                                  Changing Withholding Rate. 
If a Participant wishes to change the rate of payroll withholding, he or
she may do so by filing a new enrollment form with the Company at the
prescribed location at any time.  The new
withholding rate shall be effective as soon as reasonably practicable after the
Company has received such form.  The new
withholding rate shall be a whole percentage of the Eligible Employee’s
Compensation, but not less than 1% nor more than 15%.


 


(d)                                 Discontinuing Payroll Deductions. 
If a Participant wishes to discontinue employee contributions entirely,
he or she may do so by filing a new enrollment form with the Company at the
prescribed location at any time.  Payroll
withholding shall cease at the date requested by the Participant or thereafter
as soon as reasonably practicable after the Company has received such
form.  (In addition, employee
contributions may be discontinued automatically pursuant to Section 9(b).)  A Participant who has discontinued employee
contributions may resume such contributions by filing a new enrollment form
with the Company at the prescribed location. 
Payroll withholding shall resume as soon as reasonably practicable after
the Company has received such form.


 


(e)                                  Limit on Number of Elections. 
No Participant shall make more than 2 elections under Subsection (c) or
(d) above during any Accumulation Period.


 


SECTION 6.                                               WITHDRAWAL FROM THE
PLAN.


 


(a)                                  Withdrawal. 
A Participant may elect to withdraw from the Plan by filing the
prescribed form with the Company at the prescribed location at any time before
the last day of an Accumulation Period. 
As soon as reasonably practicable thereafter, payroll deductions shall
cease and the entire amount credited to the Participant’s Plan Account shall be
refunded to him or her in cash.  No
partial withdrawals shall be permitted.


 


(b)                                 Re-Enrollment After Withdrawal. 
A former Participant who has withdrawn from the Plan shall not be a
Participant until he or she re-enrolls in the Plan under Section 4(d).  Re-enrollment may be effective only at the
commencement of an Offering Period.


 


SECTION 7.                                               CHANGE IN EMPLOYMENT
STATUS.


 


(a)                                  Termination of Employment. 
Termination of employment as an Eligible Employee for any reason,
including death, shall be treated as an automatic withdrawal from the Plan
under Section 6(a).  (A transfer
from one Participating Company to another shall not be treated as a termination
of employment.)


 


(b)                                 Leave of Absence. 
For purposes of the Plan, employment shall not be deemed to terminate
when the Participant goes on a military leave, a sick leave or another bona fide leave of absence, if the leave was approved by the
Company in writing.  Employment, however,
shall be deemed to terminate 90 days after the Participant goes on a leave,
unless a contract or statute guarantees his or her right to return to
work.  Employment shall be deemed to
terminate in any event when the approved leave ends, unless the Participant
immediately returns to work.


 


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(c)           Death.  In the event of the Participant’s death, the
amount credited to his or her Plan Account shall be paid to a beneficiary
designated by him or her for this purpose on the prescribed form or, if none,
to the Participant’s estate.  Such form
shall be valid only if it was filed with the Company at the prescribed location
before the Participant’s death.


 


SECTION 8.                                               PLAN ACCOUNTS AND
PURCHASE OF SHARES.


 


(a)           Plan
Accounts.  The Company shall
maintain a Plan Account on its books in the name of each Participant.  Whenever an amount is deducted from the
Participant’s Compensation for purposes of the Plan, such amount shall be
credited to the Participant’s Plan Account. 
Amounts credited to Plan Accounts shall not be trust funds and may be
commingled with the Company’s general assets and applied to general corporate
purposes.  No interest shall be credited
to Plan Accounts, except to the extent otherwise provided by the Committee.


 


(b)           Purchase
Price.  The Purchase Price for
each share of Stock purchased at the close of an Accumulation Period shall not
be less than the lower of:


 


(i)            85% of the Fair Market Value of such
share on the last trading day before the commencement of the applicable
Offering Period (as determined under Section 4(f)); or


 


(ii)           85% of the Fair Market Value of such
share on the last trading day in such Accumulation Period.


 


(iii)          The Committee may determine at any
time prior to the start of an Accumulation Period that the Purchase Price will
be such percentage of the Fair Market Value as the Committee shall determine
provided that the price shall not be lower than 85% nor higher than 100% of the
Fair Market Value of such share on the last trading day before the commencement
of the applicable Offering Period or on the last trading day of an Accumulation
Period (whichever of such days is selected by the Committee).


 


(c)           Number of
Shares Purchased.  As of the
last day of each Accumulation Period, each Participant shall be deemed to have
elected to purchase the number of shares of Stock calculated in accordance with
this Subsection (c), unless the Participant has previously elected to
withdraw from the Plan in accordance with Section 6(a).  The amount then in the Participant’s Plan
Account shall be divided by the Purchase Price, and the number of shares that
results shall be purchased from the Company with the funds in the Participant’s
Plan Account.  The foregoing
notwithstanding, no Participant shall purchase more than 2,500 shares of Stock
with respect to any Accumulation Period (or such lesser number established by
the Committee prior to the beginning of an Accumulation Period) nor more than
the amounts of Stock set forth in Sections 3(a) and 9(b).  The Committee may determine with respect to
all Participants that any fractional share, as calculated under this
Subsection (c), shall be (i) rounded down to the next lower whole
share or (ii) credited as a fractional share.


 


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(d)           Available
Shares Insufficient.  In the
event that the aggregate number of shares that all Participants elect to
purchase during an Accumulation Period exceeds the maximum number of shares
remaining available for issuance under Section 3, then the number of
shares to which each Participant is entitled shall be determined by multiplying
the number of shares available for issuance by a fraction.  The numerator of such fraction is the number
of shares that such Participant has elected to purchase, and the denominator of
such fraction is the number of shares that all Participants have elected to
purchase.


 


(e)           Issuance of
Stock.  Certificates
representing the shares of Stock purchased by a Participant under the Plan
shall be issued to him or her as soon as reasonably practicable after the close
of the applicable Accumulation Period, except that the Committee may determine
that such shares shall be held for each Participant’s benefit by a broker
designated by the Committee (unless the Participant has elected that
certificates be issued to him or her). 
Shares may be registered in the name of the Participant or jointly in
the name of the Participant and his or her spouse as joint tenants with right
of survivorship or as community property.


 


(f)            Tax Withholding.  To
the extent required by applicable federal, state, local or foreign law, a
Participant shall make arrangements satisfactory to the Company for the
satisfaction of any withholding tax obligations that arise in connection with
the Plan.  The Company shall not be
required to issue any shares of Stock under the Plan until such obligations are
satisfied.


 


(g)           Unused Cash
Balances.  An amount remaining
in the Participant’s Plan Account that represents the Purchase Price for any
fractional share shall be carried over in the Participant’s Plan Account to the
next Accumulation Period.  Any amount
remaining in the Participant’s Plan Account that represents the Purchase Price
for whole shares that could not be purchased by reason of Subsection (c) above,
Section 3 or Section 9(b) shall be refunded to the Participant
in cash, without interest.


 


(h)           Stockholder
Approval.  Any other provision
of the Plan notwithstanding, no shares of Stock shall be purchased under the
Plan unless and until the Company’s stockholders have approved the adoption of
the Plan.


 


SECTION 9.                                               LIMITATIONS ON STOCK
OWNERSHIP.


 


(a)           Five Percent
Limit.  Any other provision of
the Plan notwithstanding, no Participant shall be granted a right to purchase
Stock under the Plan if such Participant, immediately after his or her election
to purchase such Stock, would own stock possessing more than 5% of the total
combined voting power or value of all classes of stock of the Company or any
parent or Subsidiary of the Company.  For
purposes of this Subsection (a), the following rules shall apply:


 


(i)            Ownership of stock shall be determined
after applying the attribution rules of Section 424(d) of the
Code;


 


(ii)           Each Participant shall be deemed to
own any stock that he or she has a right or option to purchase under this or
any other plan; and


 


6

















 


(iii)          Each Participant shall be deemed to
have the right to purchase 2,500 shares of Stock under this Plan with respect
to each Accumulation Period (or such lesser number established by the Committee
prior to the beginning of an Accumulation Period).


 


(b)           Dollar Limit.  Any other provision of the Plan
notwithstanding, no Participant shall purchase Stock with a Fair Market Value
in excess of the amount permitted by Section 423(b)(8) of
the Code and accordingly rights to purchase Stock under all employee stock
purchase plans of the Company or any parent or Subsidiary of the Company shall not
accrue at a rate which exceeds twenty-five thousand dollars ($25,000) of Fair
Market Value of Stock for each calendar year in which such rights are
outstanding and exercisable at any time. 
Employee stock
purchase plans not described in Section 423 of the Code shall be
disregarded. For purposes of this Subsection (b), the Fair Market Value of
Stock shall be determined in each case as of the beginning of the Offering
Period in which such Stock is purchased. 
If a Participant is precluded by this Subsection (b) from
purchasing additional Stock under the Plan, then his or her employee
contributions shall automatically be discontinued and shall automatically
resume at the beginning of the earliest Accumulation Period ending in the next
calendar year (if he or she then is an Eligible Employee).


 


SECTION 10.                                        RIGHTS NOT
TRANSFERABLE.


 


The rights of any Participant under the Plan, or any Participant’s
interest in any Stock or moneys to which he or she may be entitled under the
Plan, shall not be transferable by voluntary or involuntary assignment or by
operation of law, or in any other manner other than by beneficiary designation
or the laws of descent and distribution. 
If a Participant in any manner attempts to transfer, assign or otherwise
encumber his or her rights or interest under the Plan, other than by
beneficiary designation or the laws of descent and distribution, then such act
shall be treated as an election by the Participant to withdraw from the Plan
under Section 6(a).


 


SECTION 11.                                        NO RIGHTS AS AN
EMPLOYEE.


 


Nothing in the Plan or in any right granted under the Plan shall confer
upon the Participant any right to continue in the employ of a Participating
Company for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Participating Companies or of the
Participant, which rights are hereby expressly reserved by each, to terminate
his or her employment at any time and for any reason, with or without cause.


 


SECTION 12.                                        NO RIGHTS AS A
STOCKHOLDER.


 


A Participant shall have no rights as a stockholder with respect to any
shares of Stock that he or she may have a right to purchase under the Plan
until such shares have been purchased on the last day of the applicable
Accumulation Period.


 


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SECTION 13.                                        SECURITIES LAW
REQUIREMENTS.


 


Shares of Stock shall not be issued under the Plan unless the issuance
and delivery of such shares comply with (or are exempt from) all applicable
requirements of law, including (without limitation) the Securities Act of 1933,
as amended, the rules and regulations promulgated thereunder, state
securities laws and regulations, and the regulations of any stock exchange or
other securities market on which the Company’s securities may then be traded.


 


SECTION 14.                                        AMENDMENT OR
DISCONTINUANCE.


 


The Board or Committee shall have the right to amend, suspend or
terminate the Plan at any time and without notice.  Except as provided in Section 3, any
increase in the aggregate number of shares of Stock that may be issued under
the Plan shall be subject to the approval of the Company’s stockholders.  In addition, any other amendment of the Plan
shall be subject to the approval of the Company’s stockholders to the extent
required by any applicable law or regulation. 
The Plan shall terminate automatically 20 years after its adoption by
the Board, unless (a) the Plan is extended by the Board and (b) the
extension is approved within 12 months by a vote of the stockholders of the
Company.


 


SECTION 15.                                        DEFINITIONS.


 


(a)           “Accumulation Period” means a period during which
contributions may be made toward the purchase of Stock under the Plan, as
determined pursuant to Section 4(b).


 


(b)           “Board” means the Board of Directors of the Company, as
constituted from time to time.


 


(c)           “Code” means the Internal Revenue Code of 1986, as amended.


 


(d)           “Committee” means a committee of the Board, as described in Section 2.


 


(e)           “Company” means Theravance, Inc., a Delaware
corporation.


 


(f)            “Compensation” means (i) the total compensation paid in
cash to a Participant by a Participating Company, including salaries, wages,
bonuses, incentive compensation, commissions, overtime pay and shift premiums,
plus (ii) any pre-tax contributions made by the Participant under
section 401(k) or 125 of the Code. 
“Compensation” shall exclude all non-cash items, moving or relocation
allowances, cost-of-living equalization payments, car allowances, tuition reimbursements,
imputed income attributable to cars or life insurance, severance pay, fringe
benefits, contributions or benefits received under employee benefit plans,
income attributable to the exercise of stock options, and similar items.  The Committee shall determine whether a
particular item is included in Compensation.


 


(g)           “Corporate Reorganization” means:


 


(i)            The consummation of a merger or
consolidation of the Company with or into another entity or any other corporate
reorganization; or


 


8

















 


(ii)           The sale, transfer or other
disposition of all or substantially all of the Company’s assets or the complete
liquidation or dissolution of the Company.


 


(h)           “Eligible Employee” means any employee of a Participating
Company who meets both of the following requirements:


 


(i)            His or her customary employment is
for more than five months per calendar year and for more than 20 hours per
week; and


 


(ii)           He or she has been an employee of a
Participating Company for such period (if any) as the Committee may determine
before the beginning of the applicable Offering Period.


 


Officers of the Company shall not participate in the
initial Offering Period or in any subsequent Offering Period unless the
Committee announces prior to commencement of an Offering Period that officers
shall be eligible to participate.  The
foregoing notwithstanding, an individual shall not be considered an Eligible
Employee if his or her participation in the Plan is prohibited by the law of
any country that has jurisdiction over him or her or if he or she is subject to
a collective bargaining agreement that does not provide for participation in
the Plan.


 


(i)            “Exchange Act” means the Securities Exchange Act of 1934, as
amended.


 


(j)            “Fair Market Value” means the market price of Stock,
determined by the Committee as follows:


 


(i)            If the Stock was traded on The
Nasdaq National Market or The Nasdaq SmallCap Market on the date in question,
then the Fair Market Value shall be equal to the last-transaction price quoted
for such date by such Market;


 


(ii)           If the Stock was traded on a stock
exchange on the date in question, then the Fair Market Value shall be equal to
the closing price reported by the applicable composite transactions report for
such date; or


 


(iii)          If none of the foregoing provisions is
applicable, then the Committee shall determine the Fair Market Value in good
faith on such basis as it deems appropriate.


 


Whenever possible, the determination of Fair Market
Value by the Committee shall be based on the prices reported in The Wall
Street Journal or as reported directly to the Company by Nasdaq or a stock
exchange.  Such determination shall be
conclusive and binding on all persons.


 


(k)           “Offering Period” means a period with respect to which the
right to purchase Stock may be granted under the Plan, as determined pursuant
to Section 4(a).


 


(l)            “Participant” means an Eligible Employee who participates in
the Plan, as provided in Section 4.


 


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(m)          “Participating
Company” means (i) the Company and (ii) each present or
future Subsidiary designated by the Committee as a Participating Company.


 


(n)           “Plan” means this Theravance, Inc. 2004 Employee Stock
Purchase Plan, as it may be amended from time to time.


 


(o)           “Plan Account” means the account established for each
Participant pursuant to Section 8(a).


 


(p)           “Purchase Price” means the price at which Participants may
purchase Stock under the Plan, as determined pursuant to Section 8(b).


 


(q)           “Stock” means the Common Stock of the Company.


 


(r)            “Subsidiary” means any corporation (other than the Company)
in an unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.


 


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Addendum for International Participants


 


The Committee may allow Participants who are employed
by a Participating Company designated by the Committee, who are not employed by
the Company and who work or reside outside of the United States an opportunity
to acquire Common Stock pursuant to the Plan in accordance with such special
terms and conditions as the Committee may designate with respect to each such
Participating Company.  Without limiting
the authority of the Committee, the special terms and conditions which may be
established with respect to each such Participating Company, and which need not
be the same for all Participating Companies, include but are not limited to the
right to participate, procedures for elections to participate, the payment of
any interest with respect to amounts received from or credited to accounts held
for the benefit of Participants, the purchase price of any shares to be
acquired, the length of any purchase period, the maximum amount of
contributions, credits or Stock which may be acquired by any Participant, and a
Participant’s rights in the event of his or her death, disability, withdrawal
from the Plan, termination of employment on behalf of the Company and all
matters related thereto.  This Addendum
is not subject to Section 423 of the Code or any other provision of the
Plan that refers to or is based upon such Section.  For purposes of United States tax laws, this
Addendum shall be treated as separate and apart from the balance of the Plan.


 


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