Exhibit 10.1


 


THERAVANCE, INC.


 


2004 EMPLOYEE STOCK PURCHASE PLAN


 


(AS ADOPTED MAY 27, 2004 AND AMENDED ON APRIL 19,
2005)


 





















 


TABLE OF CONTENTS


 


	
  SECTION 1. PURPOSE OF THE PLAN

  	
   

  
	
  SECTION 2.
  ADMINISTRATION OF THE PLAN

  	
   

  
	
  (a)  Committee Composition

  	
   

  
	
  (b)  Committee
  Responsibilities

  	
   

  
	
  SECTION 3. STOCK
  OFFERED UNDER THE PLAN

  	
   

  
	
  (a)  Authorized Shares

  	
   

  
	
  (b)  Anti-Dilution Adjustments

  	
   

  
	
  (c)  Reorganizations

  	
   

  
	
  SECTION 4. ENROLLMENT
  AND PARTICIPATION

  	
   

  
	
  (a)  Offering Periods

  	
   

  
	
  (b)  Accumulation Periods

  	
   

  
	
  (c)  Enrollment at IPO

  	
   

  
	
  (d)  Enrollment After IPO

  	
   

  
	
  (e)  Duration of Participation

  	
   

  
	
  (f)  Applicable Offering Period

  	
   

  
	
  SECTION 5. EMPLOYEE
  CONTRIBUTIONS

  	
   

  
	
  (a)  Commencement of
  Payroll Deductions

  	
   

  
	
  (b)  Amount of Payroll
  Deductions

  	
   

  
	
  (c)  Changing
  Withholding Rate

  	
   

  
	
  (d)  Discontinuing
  Payroll Deductions

  	
   

  
	
  (e)  Limit on Number of
  Elections

  	
   

  
	
  SECTION 6. WITHDRAWAL
  FROM THE PLAN

  	
   

  
	
  (a)  Withdrawal

  	
   

  
	
  (b)  Re-Enrollment
  After Withdrawal

  	
   

  
	
  SECTION 7. CHANGE IN
  EMPLOYMENT STATUS

  	
   

  
	
  (a)  Termination of
  Employment

  	
   

  
	
  (b)  Leave of Absence

  	
   

  
	
  (c)  Death

  	
   

  
	
  SECTION 8. PLAN
  ACCOUNTS AND PURCHASE OF SHARES

  	
   

  
	
  (a)  Plan Accounts

  	
   

  
	
  (b)  Purchase Price

  	
   

  
	
  (c)  Number of Shares
  Purchased

  	
   

  
	
  (d)  Available Shares
  Insufficient

  	
   

  
	
  (e)  Issuance of Stock

  	
   

  
	
  (f)  Tax Withholding

  	
   

  
	
  (g)  Unused Cash
  Balances

  	
   

  
	
  (h)  Stockholder
  Approval

  	
   

  
	
  SECTION 9. LIMITATIONS
  ON STOCK OWNERSHIP

  	
   

  
	
  (a)  Five Percent Limit

  	
   

  
	
  (b)  Dollar Limit

  	
   

  
	
  SECTION 10. RIGHTS NOT
  TRANSFERABLE

  	
   

  
	
  SECTION 11. NO RIGHTS AS
  AN EMPLOYEE

  	
   

  
	
  SECTION 12. NO RIGHTS
  AS A STOCKHOLDER

  	
   

  



 


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  SECTION 13. SECURITIES
  LAW REQUIREMENTS

  	
   

  
	
  SECTION 14. AMENDMENT
  OR DISCONTINUANCE

  	
   

  
	
  (b)  General Rule

  	
   

  
	
  (b)  Impact on Purchase
  Price

  	
   

  
	
  SECTION 15. DEFINITIONS

  	
   

  
	
  (a)  Accumulation
  Period

  	
   

  
	
  (b)  Board

  	
   

  
	
  (c)  Code

  	
   

  
	
  (d)  Committee

  	
   

  
	
  (e)  Company

  	
   

  
	
  (f)  Compensation

  	
   

  
	
  (g)  Corporate
  Reorganization

  	
   

  
	
  (h)  Eligible Employee

  	
   

  
	
  (i)   Exchange Act

  	
   

  
	
  (j)   Fair Market
  Value

  	
   

  
	
  (k)  IPO

  	
   

  
	
  (l)   Offering
  Period

  	
   

  
	
  (m)  Participant

  	
   

  
	
  (n)  Participating
  Company

  	
   

  
	
  (o)  Plan

  	
   

  
	
  (p)  Plan Account

  	
   

  
	
  (q)  Purchase Price

  	
   

  
	
  (r)  Stock

  	
   

  
	
  (s)  Subsidiary

  	
   

  



 


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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
625,000(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.


 


(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, four overlapping Offering Periods shall commence
in each calendar year. The Offering Periods shall consist of the 27-month
periods commencing on each February 1, May 1, August 1, and November 1,
except that:


 


(i)        
The first Offering Period under the Plan shall commence on the date designated
by the Board and shall end on the date 27 months later.


 










(1)       All
share numbers reflect the reverse stock split approved in connection with the
IPO. Reflects 300,000 shares increase approved by the stockholder on June 30,
2005.


 


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(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.


 


(iv)      
The Committee may vary the beginning and ending dates of an Offering Period at
any time prior to the commencement of an Offering Period or at any time during
an Offering Period to be effective following the next purchase date.


 


(b)       
Accumulation Periods.  
While the Plan is in effect, four Accumulation Periods shall commence in each
calendar year. The Accumulation Periods shall consist of the three-month
periods commencing on each February 1, May 1, August 1, and November 1,
except that:


 


(i)        
The first Accumulation Period shall commence on the date designated by the
Board and end on the earliest of the next January 31, April 30, July 31,
or October 31 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.


 


(iii)     
The Committee may vary the beginning and ending dates of an Accumulation Period
at any time to be effective following the next purchase date.


 


(c)       
Enrollment at IPO.   If
the Board elects to implement the Plan effective on the date of the IPO, then
each individual who, on the day of the IPO, qualifies as an Eligible Employee
shall automatically become a Participant on such day. Each Participant who was
automatically enrolled on the day of the IPO shall file the prescribed
enrollment form with the Company. The enrollment form shall be filed at the
prescribed location within 10 business days after the Company files a
registration statement on Form S-8 for the shares of Stock offered under
the Plan. If a Participant who was automatically enrolled on the day of the IPO
fails to file such form in a timely manner, then such Participant shall be
deemed to have withdrawn from the Plan under Section 6(a). A former
Participant who is deemed to have withdrawn from the Plan shall not be a
Participant until he or she re-enrolls in the Plan under Subsection (d) below.
Re-enrollment may be effective only at the commencement of an Offering Period.


 


(d)       
Enrollment After IPO.  
If the Plan is implemented subsequent to the date of the IPO, then each
Eligible Employee may elect to become a Participant on the first day of the
first 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. In the case of any individual who
qualifies as an Eligible Employee on the first day of any Offering Period other
than the first Offering Period, he or she may elect to become a Participant by
filing the prescribed enrollment form with the Company.


 


(e)       
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;


 


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


 


(iv)      
Ceases to be an Eligible Employee.


 


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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.


 


(f)        
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%.


 


(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.


 


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(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.


 


(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, in the case of the first Offering Period under the Plan, 85% of the price
at which one share of Stock is offered to the public in the IPO; 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


 


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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 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.


 


(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


 


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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


 


(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.


 


(b)        Dollar Limit.   Any other
provision of the Plan notwithstanding, no Participant shall purchase Stock with
a Fair Market Value in excess of the following limit:


 


(i)        
In the case of Stock purchased during an Offering Period that commenced in the
current calendar year, the limit shall be equal to (A) $25,000 minus (B) the
Fair Market Value of the Stock that the Participant previously purchased in the
current calendar year (under this Plan and all other employee stock purchase
plans of the Company or any parent or Subsidiary of the Company).


 


(ii)      
In the case of Stock purchased during an Offering Period that commenced in the
immediately preceding calendar year, the limit shall be equal to (A) $50,000
minus (B) the Fair Market Value of the Stock that the Participant
previously purchased (under this Plan and all other employee stock purchase
plans of the Company or any parent or Subsidiary of the Company) in the current
calendar year and in the immediately preceding calendar year.


 


(iii)     
In the case of Stock purchased during an Offering Period that commenced in the
second preceding calendar year, the limit shall be equal to (A) $75,000
minus (B) the Fair Market Value of the Stock that the Participant
previously purchased (under this Plan and all other employee stock purchase
plans of the Company or any parent or Subsidiary of the Company) in the current
calendar year and in the two preceding calendar years.


 


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. Employee stock purchase plans not described in section 423 of
the Code shall be disregarded. 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


 


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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.


 


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.


 


(a)        General Rule.   The Board 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.


 


(b)        Impact on Purchase Price.   This
Subsection (b) shall apply in the event that (i) the Company’s
stockholders during an Accumulation Period approve an increase in the number of
shares of Stock that may be issued under Section 3 and (ii) the
aggregate number of shares to be purchased at the close of such Accumulation
Period exceeds the number of shares that remained available under Section 3
before such increase. In such event, the Purchase Price for each share of Stock
purchased at the close of such Accumulation Period shall be the lower of:


 


(i)        
The higher of (A) 85% of the Fair Market Value of such share on the last
trading day before the commencement of the applicable Offering Period or, in
the case of the first Offering Period under the Plan, 85% of the price at which
one share of Stock is offered to the public in the IPO (if applicable) or (B) 85%
of the Fair Market Value of such share on the last trading day before the date
the Company’s stockholders approve such increase; or


 


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


 


Immediately after the
close of such Accumulation Period, a new Offering Period shall commence for all
Participants.


 


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.


 


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(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


 


(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.


 


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(k)        “IPO” means the effective date of the
registration statement filed by the Company with the Securities and Exchange
Commission for its initial offering of Stock to the public.


 


(l)        
“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).


 


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


 


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


 


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


 


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


 


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


 


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


 


(s)        “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.


 


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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