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Exhibit 10.3    
    

 
 

THERAVANCE, INC.
  
    2004 EQUITY INCENTIVE PLAN
  
    (AS ADOPTED MAY 27, 2004)    
    

 
 
 

TABLE OF CONTENTS    
    

	 
	 	Page

	ARTICLE I. INTRODUCTION	 	1
	

ARTICLE II. ADMINISTRATION	
 	

1
	 	2.1 Committee Composition	 	1
	 	2.2 Committee Responsibilities	 	1
	 	2.3 Committee for Non-Officer Grants	 	1
	

ARTICLE III. SHARES AVAILABLE FOR GRANTS	
 	

1
	 	3.1 Basic Limitation	 	1
	 	3.2 Additional Shares	 	2
	 	3.3 Dividend Equivalents	 	2
	 	3.4 Shares Subject to Substituted Options	 	2
	

ARTICLE IV. ELIGIBILITY	
 	

2
	 	4.1 Incentive Stock Options	 	2
	 	4.2 Other Grants	 	2
	

ARTICLE V. OPTIONS	
 	

2
	 	5.1 Stock Option Agreement	 	2
	 	5.2 Number of Shares	 	3
	 	5.3 Exercise Price	 	3
	 	5.4 Exercisability and Term	 	3
	 	5.5 Modification or Assumption of Options	 	3
	 	5.6 Buyout Provisions	 	3
	

ARTICLE VI. PAYMENT FOR OPTION SHARES	
 	

3
	 	6.1 General Rule	 	3
	 	6.2 Surrender of Stock	 	3
	 	6.3 Exercise/Sale	 	3
	 	6.4 Exercise/Pledge	 	4
	 	6.5 Promissory Note	 	4
	 	6.6 Other Forms of Payment	 	4
	

ARTICLE VII. STOCK APPRECIATION RIGHTS	
 	

4
	 	7.1 SAR Agreement	 	4
	 	7.2 Number of Shares	 	4
	 	7.3 Exercise Price	 	4
	 	7.4 Exercisability and Term	 	4
	 	7.5 Exercise of SARs	 	4
	 	7.6 Modification or Assumption of SARs	 	5
	

ARTICLE VIII. RESTRICTED SHARES	
 	

5
	 	8.1 Restricted Stock Agreement	 	5
	 	8.2 Payment for Awards	 	5
	 	8.3 Vesting Conditions	 	5
	 	8.4 Voting and Dividend Rights	 	5
	 	 	 

i

 

	

ARTICLE IX. STOCK UNITS	
 	

6
	 	9.1 Stock Unit Agreement	 	6
	 	9.2 Payment for Awards	 	6
	 	9.3 Vesting Conditions	 	6
	 	9.4 Voting and Dividend Rights	 	6
	 	9.5 Form and Time of Settlement of Stock Units	 	6
	 	9.6 Death of Recipient	 	7
	 	9.7 Creditors' Rights	 	7
	

ARTICLE X. CHANGE IN CONTROL	
 	

7
	 	10.1 Effect of Change in Control	 	7
	 	10.2 Acceleration	 	7
	

ARTICLE XI. PROTECTION AGAINST DILUTION	
 	

7
	 	11.1 Adjustments	 	7
	 	11.2 Dissolution or Liquidation	 	8
	 	11.3 Reorganizations	 	8
	

ARTICLE XII. DEFERRAL OF AWARDS	
 	

8
	

ARTICLE XIII. AWARDS UNDER OTHER PLANS	
 	

9
	

ARTICLE XIV. PAYMENT OF FEES IN SECURITIES	
 	

9
	 	14.1 Effective Date	 	9
	 	14.2 Elections to Receive NSOs, Restricted Shares or Stock Units	 	9
	 	14.3 Number and Terms of NSOs, Restricted Shares or Stock Units	 	9
	

ARTICLE XV. LIMITATION ON RIGHTS	
 	

9
	 	15.1 Retention Rights	 	9
	 	15.2 Stockholders' Rights	 	9
	 	15.3 Regulatory Requirements	 	10
	

ARTICLE XVI. WITHHOLDING TAXES	
 	

10
	 	16.1 General	 	10
	 	16.2 Share Withholding	 	10
	

ARTICLE XVII. FUTURE OF THE PLAN	
 	

10
	 	17.1 Term of the Plan	 	10
	 	17.2 Amendment or Termination	 	10
	 	17.3 Stockholder Approval	 	11
	

ARTICLE XVIII. DEFINITIONS	
 	

11

ii

 
 

THERAVANCE, INC.
  2004 EQUITY INCENTIVE PLAN    
    

 
  ARTICLE I. INTRODUCTION.    
    

        The Plan was adopted by the Board to be effective at the IPO. The purpose of the Plan is to promote the long-term success of the Corporation and the
creation of stockholder value by (a) encouraging Employees, Outside Directors and Consultants to focus on critical long-range objectives, (b) encouraging the attraction and
retention of Employees, Outside Directors and Consultants with exceptional qualifications, and (c) linking Employees, Outside Directors and Consultants directly to stockholder interests through
increased stock ownership. The Plan seeks to achieve this purpose by providing for Awards in the form of Restricted Shares, Stock Units, Options (which may constitute incentive stock options or
nonstatutory stock options) or stock appreciation rights. 

        The
Plan shall be governed by, and construed in accordance with, the laws of the State of Delaware (except their choice-of-law provisions). 

 
 

ARTICLE II. ADMINISTRATION.    
    

        2.1   Committee Composition.    The Committee shall administer the Plan. The Committee shall consist exclusively of
two or more directors of the Corporation, who shall be appointed by the Board. In addition, each member of the Committee shall meet the following requirements: 

        (a)   Any
listing standards prescribed by the principal securities market on which the Corporation's equity securities are traded; 

        (b)   Such
requirements as the Internal Revenue Service may establish for outside directors acting under plans intended to qualify for exemption under
section 162(m)(4)(C) of the Code; 

        (c)   Such
requirements as the Securities and Exchange Commission may establish for administrators acting under plans intended to qualify for exemption under
Rule 16b-3 (or its successor) under the Exchange Act; and 

        (d)   Any
other requirements imposed by applicable law, regulations or rules. 

        2.2   Committee Responsibilities.    The Committee shall (a) select the Employees, Outside Directors and
Consultants who are to receive Awards under the Plan, (b) determine the type, number, vesting requirements and other features and conditions of such Awards, (c) interpret the Plan,
(d) make all other decisions relating to the operation of the Plan and (e) carry out any other duties delegated to it by the Board. The Committee may adopt such rules or guidelines as it
deems appropriate to implement the Plan. The Committee's determinations under the Plan shall be final and binding on all persons. 

        2.3   Committee for Non-Officer Grants.    The Board may also appoint a secondary committee of the Board,
which shall be composed of one or more directors of the Corporation who need not satisfy the requirements of Section 2.1. Such secondary committee may administer the Plan with respect to
Employees and Consultants who are not Outside Directors and are not considered executive officers of the Corporation under section 16 of the Exchange Act, may grant Awards under the Plan to
such Employees and Consultants and may determine all features and conditions of such Awards. Within the limitations of this Section 2.3, any reference in the Plan to the Committee shall include
such secondary committee. 

 
 

ARTICLE III. SHARES AVAILABLE FOR GRANTS.    
    

        3.1   Basic Limitation.    Shares of Common Stock issued pursuant to the Plan may be authorized but unissued shares
or treasury shares. The aggregate number of shares of Common stock that may be awarded pursuant to Awards granted under the Plan shall not exceed (a)
                         shares plus the number of
shares remaining available for issuance under the 1997 Stock Plan and the Long-Term Stock 

 

Option
Plan and (b) the additional shares of Common Stock described in Sections 3.2 and 3.4. Not more
than                        shares may be issued in the aggregate pursuant to SARs, Stock Units,
and Restricted Share Awards. The limitations of this Section 3.1 shall be subject to adjustment pursuant to Article 11. The number of shares of Common Stock that are subject to Options
or other rights outstanding at any time under the Plan shall not exceed the number of shares of Common Stock that then remain available for issuance under the Plan. 

        3.2   Additional Shares.    If Restricted Shares or shares of Common Stock issued upon the exercise of Options under
this Plan, the 1997 Stock Plan, or the Long-Term Stock Option Plan are forfeited or repurchased, then such shares of Common Stock shall again become available for Awards under this Plan.
If Stock Units, Options or SARs under this Plan, the 1997 Stock Plan, or the Long-Term Stock Option Plan are forfeited or terminate for any other reason before being exercised, then the
corresponding shares of Common Stock shall again become available for Awards under this Plan. If Stock Units are settled, then only the number of shares of Common Stock (if any) actually issued in
settlement of such Stock Units shall reduce the number available under Section 3.1 and the balance shall again become available for Awards under the Plan. If SARs are exercised, then only the
number of shares of Common Stock (if any) actually issued in settlement of such SARs shall reduce the number available under Section 3.1 and the balance shall again become available for Awards
under the Plan. 

        3.3   Dividend Equivalents.    Any dividend equivalents paid or credited under the Plan shall not be applied against
the number of Restricted Shares, Stock Units, Options or SARs available for Awards, whether or not such dividend equivalents are converted into Stock Units. 

        3.4   Shares Subject to Substituted Options.    The number of shares or Common Stock subject to Options granted by
the Corporation shall not reduce the number of shares of Common Stock that may be issued under Section 3.1 if (a) the Corporation or a Subsidiary is a party to a transaction with another
corporation described in section 424(a) of the Code, (b) employees or independent contractors of such corporation hold options to purchase shares of such corporation's stock that are
cancelled as part of such transaction and (c) the Corporation grants Options under the Plan to such employees or independent contractors to replace the cancelled options in accordance with
section 424(a) of the Code (whether or not such Options are ISOs). 

 
 

ARTICLE IV. ELIGIBILITY.    
    

        4.1   Incentive Stock Options.    Only Employees who are common-law employees of the Corporation, a
Parent or a Subsidiary shall be eligible for the grant of ISOs. In addition, an Employee who owns more than 10% of the total combined voting power of all classes of outstanding stock of the
Corporation or any of its Parents or Subsidiaries shall not be eligible for the grant of an ISO unless the requirements set forth in section 422(c)(6) of the Code are satisfied. 

        4.2   Other Grants.    Only Employees, Outside Directors and Consultants shall be eligible for the grant of
Restricted Shares, Stock Units, NSOs or SARs. 

 
 

ARTICLE V. OPTIONS.    
    

        5.1   Stock Option Agreement.    Each grant of an Option under the Plan shall be evidenced by a Stock Option
Agreement between the Optionee and the Corporation. Such Option shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The
Stock Option Agreement shall specify whether the Option is an ISO or an NSO. The provisions of the various Stock Option Agreements entered into under the Plan need not be identical. Options may be
granted in consideration of a reduction in the Optionee's other compensation. 

2

 

        5.2   Number of Shares.    Each Stock Option Agreement shall specify the number of shares of Common Stock subject to
the Option and shall provide for the adjustment of such number in accordance with Article 11. Options granted to any Optionee in a single fiscal year of the Corporation shall not cover more
than 1,500,000 shares of Common Stock, except that Options granted to a new Employee in the fiscal year of the Corporation in which his or her service as an Employee first commences shall not cover
more than 2,000,000 shares of Common Stock. The limitations set forth in the preceding sentence shall be subject to adjustment in accordance with Article 11. 

        5.3   Exercise Price.    Each Stock Option Agreement shall specify the Exercise Price; provided that the Exercise
Price shall in no event be less than 100% of the Fair Market Value of a share of Common Stock on the date of grant. 

        5.4   Exercisability and Term.    Each Stock Option Agreement shall specify the date or event when all or any
installment of the Option is to become exercisable. The Stock Option Agreement shall also specify the term of the Option; provided that the term of an ISO shall in no event exceed 10 years from
the date of grant. A Stock Option Agreement may provide for accelerated exercisability in the event of the Optionee's death, disability or retirement or other events and may provide for expiration
prior to the end of its term in the event of the termination of the Optionee's service. Options may be awarded in combination with SARs, and such an Award may provide that the Options will not be
exercisable unless the related SARs are forfeited. 

        5.5   Modification or Assumption of Options.    Within the limitations of the Plan, the Committee may modify, extend,
reprice or assume outstanding options or may accept the cancellation of outstanding options (whether granted by the Corporation or by another issuer) in return for the grant of new options for the
same or a different number of shares and at the same or a different exercise price. The foregoing notwithstanding, no modification of an Option shall, without the consent of the Optionee, alter or
impair his or her rights or obligations under such Option. 

        5.6   Buyout Provisions.    The Committee may at any time (a) offer to buy out for a payment in cash or cash
equivalents an Option previously granted or (b) authorize an Optionee to elect to cash out an Option previously granted, in either case at such time and based upon such terms and conditions as
the Committee shall establish. 

 
 

ARTICLE VI. PAYMENT FOR OPTION SHARES.    
    

        6.1   General Rule.    The entire Exercise Price of shares of Common Stock issued upon exercise of Options shall be
payable in cash or cash equivalents at the time such shares of Common Stock are purchased, except that the Committee at its sole discretion may accept payment of the Exercise Price in any other
form(s) described in this Article 6. However, if the Optionee is an Outside Director or executive officer of the Corporation, he or she may pay the Exercise Price in a form other than cash or
cash equivalents only to the extent permitted by section 13(k) of the Exchange Act. 

        6.2   Surrender of Stock.    With the Committee's consent, all or any part of the Exercise Price may be paid by
surrendering, or attesting to the ownership of, shares of Common Stock that are already owned by the Optionee. Such shares of Common Stock shall be valued at their Fair Market Value on the date the
new shares of Common Stock are purchased under the Plan. The Optionee shall not surrender, or attest to the ownership of, shares of Common Stock in payment of the Exercise Price if such action would
cause the Corporation to recognize compensation expense (or additional compensation expense) with respect to the Option for financial reporting purposes. 

        6.3   Exercise/Sale.    With the Committee's consent, all or any part of the Exercise Price and any withholding taxes
may be paid by delivering (on a form prescribed by the Corporation) an irrevocable direction to a securities broker approved by the Corporation to sell all or part of the shares of 

3

 

Common
Stock being purchased under the Plan and to deliver all or part of the sales proceeds to the Corporation. 

        6.4   Exercise/Pledge.    With the Committee's consent, all or any part of the Exercise Price and any withholding
taxes may be paid by delivering (on a form prescribed by the Corporation) an irrevocable direction to pledge all or part of the shares of Common Stock being purchased under the Plan to a securities
broker or lender approved by the Corporation, as security for a loan, and to deliver all or part of the loan proceeds to the Corporation. 

        6.5   Promissory Note.    With the Committee's consent, all or any part of the Exercise Price and any withholding
taxes may be paid by delivering (on a form prescribed by the Corporation) a full-recourse promissory note. However, the par value of the shares of Common Stock being purchased under the
Plan, if newly issued, shall be paid in cash or cash equivalents. 

        6.6   Other Forms of Payment.    With the Committee's consent, all or any part of the Exercise Price and any
withholding taxes may be paid in any other form that is consistent with applicable laws, regulations and rules. 

 
 

ARTICLE VII. STOCK APPRECIATION RIGHTS.    
    

        7.1   SAR Agreement.    Each grant of an SAR under the Plan shall be evidenced by an SAR Agreement between the
Optionee and the Corporation. Such SAR shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The provisions of the various
SAR Agreements entered into under the Plan need not be identical. SARs may be granted in consideration of a reduction in the Optionee's other compensation. 

        7.2   Number of Shares.    Each SAR Agreement shall specify the number of shares of Common Stock to which the SAR
pertains and shall provide for the adjustment of such number in accordance with Article 11. SARs granted to any Optionee in a single fiscal year shall in no event pertain to more than 1,500,000
shares of Common Stock, except that SARs granted to a new Employee in the fiscal year of the Corporation in which his or her service as an Employee first commences shall not pertain to more than
2,000,000 shares of Common Stock. The limitations set forth in the preceding sentence shall be subject to adjustment in accordance with Article 11. 

        7.3   Exercise Price.    Each SAR Agreement shall specify the Exercise Price. An SAR Agreement may specify an
Exercise Price that varies in accordance with a predetermined formula while the SAR is outstanding. 

        7.4   Exercisability and Term.    Each SAR Agreement shall specify the date all or any installment of the SAR is to
become exercisable. The SAR Agreement shall also specify the term of the SAR. An SAR Agreement may provide for accelerated exercisability in the event of the Optionee's death, disability or retirement
or other events and may provide for expiration prior to the end of its term in the event of the termination of the Optionee's service. SARs may be awarded in combination with Options, and such an
Award may provide that the SARs will not be exercisable unless the related Options are forfeited. An SAR may be included in an ISO only at the time of grant but may be included in an NSO at the time
of grant or thereafter. An SAR granted under the Plan may provide that it will be exercisable only in the event of a Change in Control. 

        7.5   Exercise of SARs.    Upon exercise of an SAR, the Optionee (or any person having the right to exercise the SAR
after his or her death) shall receive from the Corporation (a) shares of Common Stock, (b) cash or (c) a combination of shares of Common Stock and cash, as the Committee shall
determine. The amount of cash and/or the Fair Market Value of shares of Common Stock received upon exercise of SARs shall, in the aggregate, be equal to the amount by which the Fair Market Value (on
the date of surrender) of the shares of Common Stock subject to the SARs exceeds the Exercise Price. If, on the date an SAR expires, the Exercise Price under such SAR is less than the Fair Market 

4

 

Value
on such date but any portion of such SAR has not been exercised or surrendered, then such SAR shall automatically be deemed to be exercised as of such date with respect to such portion. 

        7.6   Modification or Assumption of SARs.    Within the limitations of the Plan, the Committee may modify, extend or
assume outstanding SARs or may accept the cancellation of outstanding SARs (whether granted by the Corporation or by another issuer) in return for the grant of new SARs for the same or a different
number of shares and at the same or a different exercise price. The foregoing notwithstanding, no modification of an SAR shall, without the consent of the Optionee, alter or impair his or her rights
or obligations under such SAR. 

 
 

ARTICLE VIII. RESTRICTED SHARES.    
    

        8.1   Restricted Stock Agreement.    Each grant of Restricted Shares under the Plan shall be evidenced by a
Restricted Stock Agreement between the recipient and the Corporation. Such Restricted Shares shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not
inconsistent with the Plan. The provisions of the various Restricted Stock Agreements entered into under the Plan need not be identical. 

        8.2   Payment for Awards.    Subject to the following two sentences, Restricted Shares may be sold or awarded under
the Plan for such consideration as the Committee may determine, including (without limitation) cash, cash equivalents, property, full-recourse promissory notes, past services and future
services. To the extent that an Award consists of newly issued Restricted Shares, the consideration shall consist exclusively of cash, cash equivalents, property or past services rendered to the
Corporation (or a Parent or Subsidiary) or, for the amount in excess of the par value of such newly issued Restricted Shares, full-recourse promissory notes. If the Participant is an
Outside Director or executive officer of the Corporation, he or she may pay for Restricted Shares with a promissory note only to the extent permitted by section 13(k) of the Exchange Act.
Within the limitations of the Plan, the Committee may accept the cancellation of outstanding options in return for the grant of Restricted Shares. 

        8.3   Vesting Conditions.    Each Award of Restricted Shares may or may not be subject to vesting. Vesting shall
occur, in full or in installments, upon satisfaction of the conditions specified in the Restricted Stock Agreement. A Restricted Stock Agreement may provide for accelerated vesting in the event of the
Participant's death, disability or retirement or other events. The Committee may include among such conditions the requirement that the performance of the Corporation or a business unit of the
Corporation for a specified period of one or more fiscal years equal or exceed a target determined in advance by the Committee. The Corporation's independent auditors shall determine such performance.
Such target shall be based on one or more of the criteria set forth in Section 9.2. The Committee shall identify such target not later than the 90th day of such period. Subject to
adjustment in accordance with Article 11, in no event shall more than 1,500,000 Restricted Shares that are subject to performance-based vesting conditions be granted to any Participant in a
single fiscal year of the Corporation, except that 2,000,000 Restricted Shares may be granted to a new Employee in the fiscal year of the Corporation in which his or her service as an Employee first
commences. A Restricted Stock Agreement may provide for accelerated vesting in the event of the Participant's death, disability or retirement or other events. 

        8.4   Voting and Dividend Rights.    The holders of Restricted Shares awarded under the Plan shall have the same
voting, dividend and other rights as the Corporation's other stockholders. A Restricted Stock Agreement, however, may require that the holders of Restricted Shares invest any cash dividends received
in additional Restricted Shares. Such additional Restricted Shares shall be subject to the same conditions and restrictions as the Award with respect to which the dividends were paid. 

5

 

 
 

ARTICLE IX. STOCK UNITS.    
    

        9.1   Stock Unit Agreement.    Each grant of Stock Units under the Plan shall be evidenced by a Stock Unit Agreement
between the recipient and the Corporation. Such Stock Units shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The
provisions of the various Stock Unit Agreements entered into under the Plan need not be identical. Stock Units may be granted in consideration of a reduction in the recipient's other compensation.
Stock Units granted to a recipient may in no event pertain to more than $10,000,000 in a single fiscal year. 

        9.d2 Payment for Awards.    To the extent that an Award is granted in the form of Stock Units, no cash
consideration shall be required of the Award recipients. Except in cases of certain terminations of employment or an extraordinary event, each grant of Stock Units shall be earned and vest over a
period defined by the Committee at the time of grant and governed by such conditions, restrictions and contingencies as the Committee shall determine. These may include continuous service and/or the
achievement of performance goals. The performance goals that may be used by the Committee for such awards shall consist of: operating profits (including EBITDA), net profits, earnings per share,
profit returns and margins, revenues, shareholder return and/or value, stock price and working capital. Performance goals may be measured solely on a corporate, subsidiary or business unit basis, or a
combination thereof. Further, performance criteria may reflect absolute entity performance or a relative comparison of entity performance to the performance of a peer group of entities or other
external measure of the selected performance criteria. Profit, earnings and revenues used for any performance goal measurement shall exclude: gains or losses on operating asset sales or dispositions;
asset write-downs; litigation or claim judgments or settlements; accruals for historic environmental obligations; effect of changes in tax law or rate on deferred tax liabilities; accruals for
reorganization and restructuring programs; uninsured catastrophic property losses; the cumulative effect of changes in accounting principles; and any extraordinary non-recurring items as
described in Accounting Principles Board Opinion No. 30 and/or in management's discussion and analysis of financial performance appearing in the Corporation's annual report to shareholders for
the applicable year. 

        9.3   Vesting Conditions.    Each Award of Stock Units may or may not be subject to vesting. Vesting shall occur, in
full or in installments, upon satisfaction of the conditions specified in the Stock Unit Agreement. A Stock Unit Agreement may provide for accelerated vesting in the event of the Participant's death,
disability or retirement or other events. 

        9.4   Voting and Dividend Rights.    The holders of Stock Units shall have no voting rights. Prior to settlement or
forfeiture, any Stock Unit awarded under the Plan may, at the Committee's discretion, carry with it a right to dividend equivalents. Such right entitles the holder to be credited with an amount equal
to all cash dividends paid on one share of Common Stock while the Stock Unit is outstanding. Dividend equivalents may be converted into additional Stock Units. Settlement of dividend equivalents may
be made in the form of cash, in the form of shares of Common Stock, or in a combination of both. Prior to distribution, any dividend equivalents which are not paid shall be subject to the same
conditions and restrictions as the Stock Units to which they attach. 

        9.5   Form and Time of Settlement of Stock Units.    Settlement of vested Stock Units may be made in the form of
(a) cash, (b) shares of Common Stock or (c) any combination of both, as determined by the Committee. The actual number of Stock Units eligible for settlement may be larger or
smaller than the number included in the original Award, based on predetermined performance factors. Methods of converting Stock Units into cash may include (without limitation) a method based on the
average Fair Market Value of shares of Common Stock over a series of trading days. Vested Stock Units may be settled in a lump sum or in installments. The distribution may occur or commence when all
vesting conditions applicable to the Stock Units have been satisfied or have lapsed, or it may be deferred to any later date. The amount of a deferred distribution may be increased by an interest
factor or by 

6

 

dividend
equivalents. Until an Award of Stock Units is settled, the number of such Stock Units shall be subject to adjustment pursuant to Article 11. 

        9.6   Death of Recipient.    Any Stock Units Award that becomes payable after the recipient's death shall be
distributed to the recipient's beneficiary or beneficiaries. Each recipient of a Stock Units Award under the Plan shall designate one or more beneficiaries for this purpose by filing the prescribed
form with the Corporation. A beneficiary designation may be changed by filing the prescribed form with the Corporation at any time before the Award recipient's death. If no beneficiary was designated
or if no designated beneficiary survives the Award recipient, then any Stock Units Award that becomes payable after the recipient's death shall be distributed to the recipient's estate. 

        9.7   Creditors' Rights.    A holder of Stock Units shall have no rights other than those of a general creditor of
the Corporation. Stock Units represent an unfunded and unsecured obligation of the Corporation, subject to the terms and conditions of the applicable Stock Unit Agreement. 

 
 

ARTICLE X. CHANGE IN CONTROL.    
    

        10.1 Effect of Change in Control.    In the event of any Change in Control, each outstanding Award shall
automatically accelerate so that each such Award shall, immediately prior to the effective date of the Change in Control, become fully exercisable for all of the shares of Common Stock at the time
subject to such Award and may be exercised for any or all of those shares as fully-vested shares of Common Stock. However, an outstanding Award shall  not so accelerate if and to the extent such Award is,
 in connection with the Change in Control, either to be assumed by the successor corporation (or
parent thereof) or to be replaced with a comparable Award for shares of the capital stock of the successor corporation (or parent thereof). The determination of Award comparability shall be made by
the Committee, and its determination shall be final, binding and conclusive. 

        10.2 Acceleration.    The Committee shall have the discretion, exercisable either at the time the Award is granted
or at any time while the Award remains outstanding, to provide for the automatic acceleration of vesting upon the occurrence of a Change in Control, whether or not the Award is to be assumed or
replaced in the Change in Control. 

 
 

ARTICLE XI. PROTECTION AGAINST DILUTION.    
    

        11.1 Adjustments.    In the event of a subdivision of the outstanding shares of Common Stock, a declaration of a
dividend payable in shares of Common Stock, a declaration of a dividend payable in a form other than shares of Common Stock in an amount that has a material affect on the price of shares of Common
Stock, a combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise) into a lesser number of shares of Common Stock, a recapitalization, a
spin-off or a similar occurrence, the Committee shall make such adjustments as it, in its sole discretion, deems appropriate in one or more of: 

        (a)   The
number of Options, SARs, Restricted Shares and Stock Units available for future Awards under Article 3; 

        (b)   The
limitations set forth in Sections 5.2 and 7.2; 

        (c)   The
number of shares of Common Stock covered by each outstanding Option and SAR; 

        (d)   The
Exercise Price under each outstanding Option and SAR; or 

        (e)   The
number of Stock Units included in any prior Award which has not yet been settled. 

Except
as provided in this Article 11, a Participant shall have no rights by reason of any issue by the Corporation of stock of any class or securities convertible into stock of any class, any
subdivision or 

7

 

consolidation
of shares of stock of any class, the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class. 

        11.2 Dissolution or Liquidation.    To the extent not previously exercised or settled, Options, SARs and Stock
Units shall terminate immediately prior to the dissolution or liquidation of the Corporation. 

        11.3 Reorganizations.    In the event that the Corporation is a party to a merger or consolidation, all outstanding
Awards shall be subject to the agreement of merger or consolidation. Such agreement shall provide for one or more of the following: 

        (a)   The
continuation of such outstanding Awards by the Corporation (if the Corporation is the surviving corporation). 

        (b)   The
assumption of such outstanding Awards by the surviving corporation or its parent (in a manner that complies with section 424(a) of the Code with respect to
Options). 

        (c)   The
substitution by the surviving corporation or its parent of new awards for such outstanding Awards (in a manner that complies with section 424(a) of the Code
with respect to Options). 

        (d)   Full
exercisability of such outstanding Awards and full vesting of the shares of Common Stock subject to such Awards, followed by the cancellation of such Awards. The
full exercisability of such Awards and full vesting of the shares of Common Stock subject to such Awards may be contingent on the closing of such merger or consolidation. The Participants shall be
able to exercise such Awards during a period of not less than five full business days preceding the closing date of such merger or consolidation, unless (i) a shorter period is required to
permit a timely closing of such merger or consolidation and (ii) such shorter period still offers the Participants a reasonable opportunity to exercise such Awards. Any exercise of such Awards
during such period may be contingent on the closing of such merger or consolidation. 

        (e)   The
cancellation of such outstanding Awards and a payment to the Participants equal to the excess of (i) the Fair Market Value of the shares of Common Stock
subject to such Awards (whether or not such Awards are then exercisable or such shares of Common Stock are then vested) as of the closing date of such merger or consolidation over (ii) their
Exercise Price. Such payment shall be made in the
form of cash, cash equivalents, or securities of the surviving corporation or its parent with a Fair Market Value equal to the required amount. Such payment may be made in installments and may be
deferred until the date or dates when such Awards would have become exercisable or such shares of Common Stock would have vested. Such payment may be subject to vesting based on the Optionee's
continuing service, provided that the vesting schedule shall not be less favorable to the Participants than the schedule under which such Awards would have become exercisable or such shares of Common
Stock would have vested. If the Exercise Price of the shares of Common Stock subject to such Awards exceeds the Fair Market Value of such shares of Common Stock, then such Awards may be cancelled
without making a payment to the Participants. For purposes of this Subsection (e), the Fair Market Value of any security shall be determined without regard to any vesting conditions that may apply to
such security. 

 
 

ARTICLE XII. DEFERRAL OF AWARDS.    
    

        The Committee (in its sole discretion) may permit or require a Participant to: 

        (a)   Have
cash that otherwise would be paid to such Participant as a result of the exercise of an SAR or the settlement of Stock Units credited to a deferred compensation
account established for such Participant by the Committee as an entry on the Corporation's books; 

        (b)   Have
shares of Common Stock that otherwise would be delivered to such Participant as a result of the exercise of an Option or SAR converted into an equal number of Stock
Units; or 

8

 

        (c)   Have
shares of Common Stock that otherwise would be delivered to such Participant as a result of the exercise of an Option or SAR or the settlement of Stock Units
converted into amounts credited to a deferred compensation account established for such Participant by the Committee as an entry on the Corporation's books. Such amounts shall be determined by
reference to the Fair Market Value of such shares of Common Stock as of the date they otherwise would have been delivered to such Participant. 

        A
deferred compensation account established under this Article 12 may be credited with interest or other forms of investment return, as determined by the Committee. A Participant
for whom such an account is established shall have no rights other than those of a general creditor of the Corporation. Such an account shall represent an unfunded and unsecured obligation of the
Corporation and shall be subject to the terms and conditions of the applicable agreement between such Participant and the Corporation. If the deferral or conversion of Awards is permitted or required,
the Committee (in its
sole discretion) may establish rules, procedures and forms pertaining to such Awards, including (without limitation) the settlement of deferred compensation accounts established under this
Article 12. 

 
 

ARTICLE XIII. AWARDS UNDER OTHER PLANS.    
    

        The Corporation may grant awards under other plans or programs. Such awards may be settled in the form of shares of Common Stock issued under this Plan. Such
shares of Common Stock shall be treated for all purposes under the Plan like shares of Common Stock issued in settlement of Stock Units and shall, when issued, reduce the number of shares of Common
Stock available under Article 3. 

 
 

ARTICLE XIV. PAYMENT OF FEES IN SECURITIES.    
    

        14.1 Effective Date.    No provision of this Article 14 shall be effective unless and until the Board has
determined to implement such provision. 

        14.2 Elections to Receive NSOs, Restricted Shares or Stock Units.    An Outside Director may elect to receive his
or her annual retainer payments or meeting fees from the Corporation in the form of cash, NSOs, Restricted Shares or Stock Units, or a combination thereof, as determined by the Board. Such NSOs,
Restricted Shares and Stock Units shall be issued under the Plan. An election under this Article 14 shall be filed with the Corporation on the prescribed form. 

        14.3 Number and Terms of NSOs, Restricted Shares or Stock Units.    The number of NSOs, Restricted Shares or Stock
Units to be granted to Outside Directors in lieu of annual retainers or meeting fees that would otherwise be paid in cash shall be calculated in a manner determined by the Board. The Board shall also
determine the terms of such NSOs, Restricted Shares or Stock Units. 

 
 

ARTICLE XV. LIMITATION ON RIGHTS.    
    

        15.1 Retention Rights.    Neither the Plan nor any Award granted under the Plan shall be deemed to give any
individual a right to remain an Employee, Outside Director or Consultant. The Corporation and its Parents, Subsidiaries and Affiliates reserve the right to terminate the service of any Employee,
Outside Director or Consultant at any time, with or without cause, subject to applicable laws, the Corporation's certificate of incorporation and by-laws and a written employment agreement
(if any). 

        15.2 Stockholders' Rights.    A Participant shall have no dividend rights, voting rights or other rights as a
stockholder with respect to any shares of Common Stock covered by his or her Award prior to the time a stock certificate for such shares of Common Stock is issued or, if applicable, the time he or she
becomes entitled to receive such shares of Common Stock by filing any required notice of exercise and paying any required Exercise Price. No adjustment shall be made for cash dividends or other rights
for which the record date is prior to such time, except as expressly provided in the Plan. 

9

 

        15.3 Regulatory Requirements.    Any other provision of the Plan notwithstanding, the obligation of the Corporation
to issue shares of Common Stock under the Plan shall be subject to all applicable laws, rules and regulations and such approval by any regulatory body as may be required. The Corporation reserves the
right to restrict, in whole or in part, the delivery of shares of Common Stock pursuant to any Award prior to the satisfaction of all legal requirements relating to the issuance of such shares of
Common Stock, to their registration, qualification or listing or to an exemption from registration, qualification or listing. 

 
 

ARTICLE XVI. WITHHOLDING TAXES.    
    

        16.1 General.    To the extent required by applicable federal, state, local or foreign law, a Participant or his or
her successor shall make arrangements satisfactory to the Corporation for the satisfaction of any withholding tax obligations that arise in connection with the Plan. The Corporation shall not be
required to issue any shares of Common Stock or make any cash payment under the Plan until such obligations are satisfied. 

        16.2 Share Withholding.    To the extent that applicable law subjects a Participant to tax withholding obligations,
the Committee may permit a Participant to satisfy all or part of his or her withholding or income tax obligations by having the Corporation withhold all or a portion of any shares of Common Stock that
otherwise would be issued to him or her or by surrendering all or a portion of any shares of Common Stock that he or she previously acquired. Such shares of Common Stock shall be valued at their Fair
Market Value on the date they are withheld or surrendered. 

 
 

ARTICLE XVII. FUTURE OF THE PLAN.    
    

        17.1 Term of the Plan.    The Plan, as set forth herein, shall become effective on the date of effectiveness of the
IPO. The Plan shall remain in effect until it is terminated under Section 17.2, except that no ISOs shall be granted on or after the 10thanniversary of the later of (a) the
date the Board adopted the Plan or (b) the date the Board adopted the most recent increase in the number of shares of Common Stock available under Article 3 which was approved by the
Corporation's stockholders. The Plan shall serve as the successor to the Predecessor Plans, and no further option grants shall be made under the Predecessor Plans after the Plan effective date. All
options outstanding under the Predecessor Plans as of such date shall, immediately upon effectiveness of the Plan, remain outstanding in accordance with their terms. Each outstanding option under the
Predecessor Plans shall continue to be governed solely by the terms of the documents evidencing such option, and no provision of the Plan shall be deemed to affect or otherwise modify the rights or
obligations of the holders of such options with respect to their acquisition of shares of Common Stock, except that the following vesting acceleration provisions relating to Change in Control shall be
extended to the options outstanding under the Predecessor Plans at the IPO: if the optionee experiences an involuntary termination within three months before or twenty-four months
following a Change in Control, each of such optionee's outstanding options shall automatically accelerate so that each such option shall, immediately prior to the effective date of the termination,
become fully exercisable for all of the shares of Common Stock at the time subject to such option and may be exercised for any or all of those shares as fully-vested shares of Common Stock, provided
that no options accelerated pursuant to the foregoing provision may become exercisable prior to September 1, 2007. 

        17.2 Amendment or Termination.    The Board may, at any time and for any reason, amend or terminate the Plan. No
Awards shall be granted under the Plan after the termination thereof. The termination of the Plan, or any amendment thereof, shall not affect any Award previously granted under the Plan. 

10

 

        17.3 Stockholder Approval.    An amendment of the Plan shall be subject to the approval of the Corporation's
stockholders only to the extent required by applicable laws, regulations or rules. However, section 162(m) of the Code may require that the Corporation's stockholders approve: 

        (a)   The
Plan not later than the first regular meeting of stockholders that occurs in the fourth calendar year following the calendar year in which the Corporation's initial
public offering occurred; and 

        (b)   The
performance criteria set forth in Article 9.2 not later than the first meeting of stockholders that occurs in the fifth year following the year in which the
Corporation's stockholders previously approved such criteria. 

 
 

ARTICLE XVIII. DEFINITIONS.    
    

        18.1 "Affiliate" means any entity other than a Subsidiary, if the Corporation and/or one or more Subsidiaries own not less
than 50% of such entity. 

        18.2 "Award" means any award of an Option, an SAR, a Restricted Share or a Stock Unit under the Plan. 

        18.3 "Board" means the Corporation's Board of Directors, as constituted from time to time. 

        18.4 "Change in Control" shall mean: 

        (a)   The
consummation of a merger or consolidation of the Corporation with or into another entity or any other corporate reorganization, if persons who were not stockholders
of the Corporation immediately prior to such merger, consolidation or other reorganization own immediately after such merger, consolidation or other reorganization 50% or more of the voting power of
the outstanding securities of each of (i) the continuing or surviving entity and (ii) any direct or indirect parent corporation of such continuing or surviving entity; 

        (b)   The
sale, transfer or other disposition of all or substantially all of the Corporation's assets; 

        (c)   A
change in the composition of the Board, as a result of which fewer than 50% of the incumbent directors are directors who either: 

	(i)
	Had
been directors of the Corporation on the date 24 months prior to the date of such change in the composition of the Board (the "Original Directors") or

	(ii)
	Were
appointed to the Board, or nominated for election to the Board, with the affirmative votes of at least a majority of the aggregate of (A) the Original
Directors who were in office at the time of their appointment or nomination and (B) the directors whose appointment or nomination was previously approved in a manner consistent with this
Paragraph (ii); or 

        (d)   Any
transaction as a result of which any person is the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Corporation representing at least 35% of the total voting power represented by the Corporation's then outstanding voting securities. For purposes of this Paragraph (d), the
term "person" shall have the same meaning as when used in sections 13(d) and 14(d) of the Exchange Act but shall exclude (i) a trustee or other fiduciary holding securities under an employee
benefit plan of the Corporation or of a Parent or Subsidiary and (ii) a corporation owned directly or indirectly by the stockholders of the Corporation in substantially the same proportions as
their ownership of the common stock of the Corporation. 

Notwithstanding
anything to the contrary herein, any stock purchase by SmithKline Beecham Corporation, a Pennsylvania corporation ("GSK"), pursuant to the Class A Common Stock Purchase 

11

 

Agreement
dated as of March 30, 2004 or (ii) the exercise by GSK of any of its rights under the Governance Agreement dated as of May 11, 2004 to representation on the Board (and
its committees) or (iii) any acquisition by GSK of securities of the Company (whether by merger, tender offer, private or market purchases or otherwise) shall not constitute a Change in
Control. A transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Corporation's incorporation or to create a holding company that will be owned in
substantially the same proportions by the persons who held the Corporation's securities immediately before such transaction. 

        18.5 "Code" means the Internal Revenue Code of 1986, as amended. 

        18.6 "Committee" means a committee of the Board, as described in Article 2. 

        18.7 "Common Stock" means the common stock of the Corporation. 

        18.8 "Corporation" means Theravance, Inc., a Delaware corporation. 

        18.9 "Consultant" means a consultant or adviser who provides bona fide services to the Corporation, a Parent, a Subsidiary or
an Affiliate as an independent contractor. Service as a Consultant shall be considered employment for all purposes of the Plan, except as provided in Section 4.1. 

        18.10 "Employee" means a common-law employee of the Corporation, a Parent, a Subsidiary or an Affiliate. 

        18.11 "Exchange Act" means the Securities Exchange Act of 1934, as amended. 

        18.12 "Exercise Price," in the case of an Option, means the amount for which one share of Common Stock may be purchased upon
exercise of such Option, as specified in the applicable Stock Option Agreement. "Exercise Price," in the case of an SAR, means an amount, as specified in the applicable SAR Agreement, which is
subtracted from the Fair Market Value of one share of Common Stock in determining the amount payable upon exercise of such SAR. 

        18.13 "Fair Market Value" means the market price of one share of Common Stock, determined by the Committee 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. Such determination shall be conclusive and binding on all persons. 

        18.14 "IPO" means the initial public offering of the Corporation's Common Stock. 

        18.15 "ISO" means an incentive stock option described in section 422(b) of the Code. 

        18.16 "NSO" means a stock option not described in sections 422 or 423 of the Code. 

        18.17 "Option" means an ISO or NSO granted under the Plan and entitling the holder to purchase shares of Common Stock. 

        18.18 "Optionee" means an individual who or estate that holds an Option or SAR. 

        18.19 "Outside Director" shall mean a member of the Board who is not an Employee. Service as an Outside Director shall be
considered employment for all purposes of the Plan, except as provided in Section 4.1. 

        18.20 "Parent" means any corporation (other than the Corporation) in an unbroken chain of corporations ending with the
Corporation, if each of the corporations other than the Corporation 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. A corporation that attains the status of a Parent on a date after the adoption of the Plan shall be considered a Parent commencing as of such date. 

        18.21 "Participant" means an individual who or estate that holds an Award. 

12

 

        18.22 "Plan" means this Theravance, Inc. 2004 Equity Incentive Plan, as amended from time to time. 

        18.23 "Predecessor Plans" means the Corporation's existing 1997 Stock Plan and Long-Term Stock Option Plan. 

        18.24 "Restricted Share" means a share of Common Stock awarded under Article 8 of the Plan. 

        18.25 "Restricted Stock Agreement" means the agreement between the Corporation and the recipient of a Restricted Share that
contains the terms, conditions and restrictions pertaining to such Restricted Share. 

        18.26 "SAR" means a stock appreciation right granted under the Plan. 

        18.27 "SAR Agreement" means the agreement between the Corporation and an Optionee which contains the terms, conditions and
restrictions pertaining to his or her SAR. 

        18.28 "Stock Option Agreement" means the agreement between the Corporation and an Optionee that contains the terms,
conditions and restrictions pertaining to his or her Option. 

        18.29 "Stock Unit" means a bookkeeping entry representing the equivalent of one share of Common Stock, as awarded under the
Plan. 

        18.30 "Stock Unit Agreement" means the agreement between the Corporation and the recipient of a Stock Unit which contains the
terms, conditions and restrictions pertaining to such Stock Unit. 

        18.31 "Subsidiary" means any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the
Corporation, 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. A corporation that attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as of such date. 

13

QuickLinks

Exhibit 10.3

THERAVANCE, INC. 2004 EQUITY INCENTIVE PLAN (AS ADOPTED MAY 27, 2004)

TABLE OF CONTENTS

THERAVANCE, INC. 2004 EQUITY INCENTIVE PLAN

ARTICLE I. INTRODUCTION.

ARTICLE II. ADMINISTRATION.

ARTICLE III. SHARES AVAILABLE FOR GRANTS.

ARTICLE IV. ELIGIBILITY.

ARTICLE V. OPTIONS.

ARTICLE VI. PAYMENT FOR OPTION SHARES.

ARTICLE VII. STOCK APPRECIATION RIGHTS.

ARTICLE VIII. RESTRICTED SHARES.

ARTICLE IX. STOCK UNITS.

ARTICLE X. CHANGE IN CONTROL.

ARTICLE XI. PROTECTION AGAINST DILUTION.

ARTICLE XII. DEFERRAL OF AWARDS.

ARTICLE XIII. AWARDS UNDER OTHER PLANS.

ARTICLE XIV. PAYMENT OF FEES IN SECURITIES.

ARTICLE XV. LIMITATION ON RIGHTS.

ARTICLE XVI. WITHHOLDING TAXES.

ARTICLE XVII. FUTURE OF THE PLAN.

ARTICLE XVIII. DEFINITIONS.QuickLinks
 -- Click here to rapidly navigate through this document

 
 

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
	 	 	 

i

 

	

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. 

2

 

        (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. 

3

 

 
 

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). 

4

 

        (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; 

5

 

         (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. 

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

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

7

 

        (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. 

8

 

        (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. 

9

QuickLinks

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

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