Document:

Exhibit 10.4

 

THERAVANCE, INC.

 

2004 EMPLOYEE
STOCK PURCHASE PLAN

 

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

 

 

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

  	
   

  	
  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

  	
   

  	
  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

  
	
  SECTION 12.
  NO RIGHTS AS A STOCKHOLDER

  	
   

  	
  7

  

 

i

 

	
  SECTION 13.
  SECURITIES LAW REQUIREMENTS

  	
   

  	
  7

  
	
  SECTION 14.
  AMENDMENT OR DISCONTINUANCE

  	
   

  	
  7

  
	
  (b) 
  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
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.

 

1

 

(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.

 

2

 

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.

 

3

 

(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.

 

4

 

(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 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:

 

5

 

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

 

6

 

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.

 

7

 

(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.

 

8

 

(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.

 

9EXHIBIT 10.1

SUMMARY OF COMPENSATION ARRANGEMENTS FOR EXECUTIVE
OFFICERS

All executive officers of
the Company are “at will” employees. Currently, other than “Change in Control”
agreements, which agreements were discussed in our most recent definitive Proxy
Statement for the Annual Meeting of Shareholders, which information is
incorporated in this exhibit by reference, we do not have any written or oral
employment arrangements with any of our executive officers.

Current
Executive Officer Annual Base Salary

The
table below summarizes the current annual base salary being paid to each of our
current named executive officers. All compensation arrangements between officer
and the Company are subject to oversight and approval of our Compensation
Committee, and may be modified from time to time.

	
  Name and Title

  	
   

  	
   

  	
   

  	
  Annual Base Salary as of

  March 31, 2005

  	
   

  
	
  Steven J. Goldman

  Chairman and Chief Executive Officer

  	
   

  	
   

  	
  $

  	
  520,000

  	
   

  	
   

  
	
  William T. Yeates

  President and Chief Operating Officer

  	
   

  	
   

  	
  $

  	
  350,012

  	
   

  	
   

  
	
  Brad W. Godfrey

  President, CAPS Division

  	
   

  	
   

  	
  $

  	
  275,000

  	
   

  	
   

  
	
  William
  Franciscovich

  Senior Vice President, Worldwide Sales

  	
   

  	
   

  	
  $

  	
  235,040

  	
   

  	
   

  
	
  Randall H. Holliday

  Secretary and General Counsel

  	
   

  	
   

  	
  $

  	
  235,040

  	
   

  	
   

  

 

Other
Compensation Arrangements for Officers and Directors

Other information regarding bonus eligibility, outside
director compensation arrangements, and other compensation entitlements is set
forth in our most recent definitive Proxy Statement for the Annual Meeting of
Shareholders, which information is incorporated in this exhibit by reference.

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