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Exhibit 10.4    
    


 
 

THERAVANCE, INC.
  
    2004 EMPLOYEE STOCK PURCHASE PLAN
  
    (AS ADOPTED MAY 27, 2004)    
    







 
 
 

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	 	1
	

SECTION 4. ENROLLMENT AND PARTICIPATION	
 	

1
	 	(a) Offering Periods	 	1
	 	(b) Accumulation Periods	 	2
	 	(c) Enrollment at IPO	 	2
	 	(d) Enrollment After IPO	 	2
	 	(e) Duration of Participation	 	2
	 	(f) 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	 	3
	 	(d) Discontinuing Payroll Deductions	 	3
	 	(e) Limit on Number of Elections	 	3
	

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	 	4
	

SECTION 8. PLAN ACCOUNTS AND PURCHASE OF SHARES	
 	

4
	 	(a) Plan Accounts	 	4
	 	(b) Purchase Price	 	4
	 	(c) Number of Shares Purchased	 	5
	 	(d) Available Shares Insufficient	 	5
	 	(e) Issuance of Stock	 	5
	 	(f) Tax Withholding	 	5
	 	(g) Unused Cash Balances	 	5
	 	(h) Stockholder Approval	 	5
	

SECTION 9. LIMITATIONS ON STOCK OWNERSHIP	
 	

5
	 	(a) Five Percent Limit	 	5
	 	(b) Dollar Limit	 	6
	

SECTION 10. RIGHTS NOT TRANSFERABLE	
 	

6
	

SECTION 11. NO RIGHTS AS AN EMPLOYEE	
 	

6
	 	 	 





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SECTION 12. NO RIGHTS AS A STOCKHOLDER	
 	

7
	

SECTION 13. SECURITIES LAW REQUIREMENTS	
 	

7
	

SECTION 14. AMENDMENT OR DISCONTINUANCE	
 	

7
	 	(a) General Rule	 	7
	 	(b) Impact on Purchase Price	 	7
	

SECTION 15. DEFINITIONS	
 	

7
	 	(a) Accumulation Period	 	7
	 	(b) Board	 	7
	 	(c) Code	 	7
	 	(d) Committee	 	8
	 	(e) Company	 	8
	 	(f) Compensation	 	8
	 	(g) Corporate Reorganization	 	8
	 	(h) Eligible Employee	 	8
	 	(i) Exchange Act	 	8
	 	(j) Fair Market Value	 	8
	 	(k) IPO	 	9
	 	(l) Offering Period	 	9
	 	(m) Participant	 	9
	 	(n) Participating Company	 	9
	 	(o) Plan	 	9
	 	(p) Plan Account	 	9
	 	(q) Purchase Price	 	9
	 	(r) Stock	 	9
	 	(s) Subsidiary	 	9




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
                        (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. 


         (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. 




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. 


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        (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. 


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



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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. 




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). 


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        (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 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; 



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         (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 rights are hereby expressly reserved by each,
to terminate his or her employment at any time and for any reason, with or without cause. 


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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. 



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


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



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        (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 Small Cap 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)   "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. 



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        (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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Exhibit 10.4


THERAVANCE, INC. 2004 EMPLOYEE STOCK PURCHASE PLAN (AS ADOPTED MAY 27, 2004)

TABLE OF CONTENTS


THERAVANCE, INC. 2004 EMPLOYEE STOCK PURCHASE PLAN


SECTION 1. PURPOSE OF THE PLAN.

SECTION 2. ADMINISTRATION OF THE PLAN.

SECTION 3. STOCK OFFERED UNDER THE PLAN.

SECTION 4. ENROLLMENT AND PARTICIPATION.

SECTION 5. EMPLOYEE CONTRIBUTIONS.

SECTION 6. WITHDRAWAL FROM THE PLAN.

SECTION 7. CHANGE IN EMPLOYMENT STATUS.

SECTION 8. PLAN ACCOUNTS AND PURCHASE OF SHARES.

SECTION 9. LIMITATIONS ON STOCK OWNERSHIP.

SECTION 10. RIGHTS NOT TRANSFERABLE.

SECTION 11. NO RIGHTS AS AN EMPLOYEE.

SECTION 12. NO RIGHTS AS A STOCKHOLDER.

SECTION 13. SECURITIES LAW REQUIREMENTS.

SECTION 14. AMENDMENT OR DISCONTINUANCE.

SECTION 15. DEFINITIONS.


Addendum for International Participants