UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC  20549

FORM 8-K

Current Report Pursuant

to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event Reported):  May 31, 2014

THERAVANCE, INC.

(Exact Name of Registrant as Specified in its Charter)

951 Gateway Boulevard
South San Francisco, California 94080
(650) 238-9600

(Addresses, including zip code, and telephone numbers, including area code, of principal
executive offices)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement

On April 25, 2013, we announced our intention to separate our late-stage partnered respiratory assets from our biopharmaceutical research and development operations and create two companies, Theravance, Inc. (the royalty management company, “Theravance” or “we”) and Theravance Biopharma, Inc. (the research and development company, “Theravance Biopharma”). On June 1, 2014 we transferred our research and development operations to Theravance Biopharma and on June 2, 2014 made a pro rata dividend distribution to our stockholders of record on May 15, 2014 of one ordinary share of Theravance Biopharma for every three and one half shares of Theravance common stock outstanding on the record date (the “Spin-Off”).  Our primary assets are now our royalty assets, and our business will focus on managing all development and commercial responsibilities under our respiratory partnership agreements with Glaxo Group Limited (together with its affiliates, “GSK”) and associated royalty revenues, including royalties from RELVAR®/BREO® ELLIPTA® and ANORO™ ELLIPTA®, with the intention of providing capital returns to stockholders. The research and development company, Theravance Biopharma, is a biopharmaceutical company focused on discovery, development and commercialization of small molecule product candidates in the bacterial infections, central nervous system (CNS)/pain, respiratory disease, and gastrointestinal (GI) motility dysfunction therapeutic areas. The Spin-Off was announced in a press release on June 2, 2014. A copy of this press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

The Spin-Off was effected pursuant to a Separation and Distribution Agreement with Theravance Biopharma, dated June 1, 2014 (the “Separation Agreement”), which provides, among other things, for the principal corporate transactions required to effect the Spin-Off and certain other agreements governing Theravance’s relationship with Theravance Biopharma after the Spin-Off.  A copy of the Separation Agreement is attached hereto as Exhibit 10.1 and is incorporated herein by reference.  In connection with the Spin-Off, Theravance and Theravance Biopharma entered into certain other agreements to govern the terms of the Spin-Off and to define the ongoing relationships. Those agreements include:

·      Transition Services Agreement between Theravance and Theravance Biopharma dated June 2, 2014, a copy of which is attached hereto as Exhibit 10.2 and is incorporated herein by reference;

·      Tax Matters Agreement between Theravance and Theravance Biopharma dated June 2, 2014, a copy of which is attached hereto as Exhibit 10.3 and is incorporated herein by reference;

·      Employee Matters Agreement between Theravance and Theravance Biopharma dated June 1, 2014, a copy of which is attached hereto as Exhibit 10.4 and is incorporated herein by reference; and

·      Theravance Respiratory Company, LLC Limited Liability Company Agreement between Theravance and Theravance Biopharma dated May 31, 2014, a copy of which is attached hereto as Exhibit 10.5 and is incorporated herein by reference (the “TRC LLC Agreement”).

Separation and Distribution Agreement

In connection with the Spin-Off, on June 1, 2014, Theravance and Theravance Biopharma entered into the Separation Agreement.  The Separation Agreement identifies the assets transferred, liabilities assumed and contracts assigned to Theravance Biopharma as part of the Spin-Off, and describes when and how these transfers, assumptions and assignments occur.  In particular, all of the assets and liabilities associated or primarily used in connection with the drug discovery and development business operations were transferred to Theravance Biopharma, including:

·                  VIBATIV® (telavancin), a bactericidal, once daily injectable antibiotic;

·                  The small molecule product candidate pipeline currently focused on bacterial infections, CNS/pain, respiratory disease, and GI motility dysfunction; and

·                  A portion of the equity interests in Theravance Respiratory Company, LLC, which will entitle Theravance Biopharma to receive 85% of the economic interest in any future payments made by GSK under the various GSK agreements relating to UMEC/VI/FF and the MABA program, as monotherapy and in combination with other therapeutically active components, such as an inhaled corticosteroid (ICS), and any other product or combination of products that may be discovered and developed in the future under the GSK agreements (other than RELVAR®/ELLIPTA®, BREO®/ELLIPTA®, ANORO™ ELLIPTA™ and VI monotherapy).

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As a result, the primary non-cash assets and liabilities retained by us after the Spin-Off are those related to RELVAR® ELLIPTA®/ BREO® ELLIPTA®, ANORO™ ELLIPTA™, and vilanterol monotherapy.  In connection with the Spin-Off, we capitalized Theravance Biopharma with $393.0 million in cash, cash equivalents and marketable securities and pursuant to the Separation Agreement will make an additional cash payment to Theravance Biopharma following the companies’ agreement on the amount of current liabilities assumed by Theravance Biopharma related to accrued nondiscretionary cash bonus expenses, accrued clinical and development expenses and accrued sales and marketing expenses, which additional payment is expected to be made in late June or early July.  Except as expressly set forth in the Separation Agreement or any ancillary agreement, all assets were transferred to Theravance Biopharma on an “as is,” “where is” basis.  Under the terms of the Separation Agreement, Theravance Biopharma will indemnify us, and we will indemnify Theravance Biopharma from and after the Spin-Off with respect to all debts, liabilities and obligations transferred to Theravance Biopharma by us in connection with the Spin-Off (including failure to pay, perform or otherwise promptly discharge any such debts, liabilities or obligations after the Spin-Off) and any breach by Theravance Biopharma of the Separation Agreement, the Transition Services Agreement, the Employee Matters Agreement and the Tax Matters Agreement.  The foregoing description of the Separation Agreement is qualified in its entirety by reference to Exhibit 10.1.

Transition Services Agreement

On June 2, 2014, we also entered into a Transition Services Agreement with Theravance Biopharma pursuant to which Theravance Biopharma and we will provide each other with a variety of administrative services, including financial, tax, accounting, information technology, legal and human resources services, for a period of time of up to two years following the Spin-Off.  In connection with the services performed under the Transition Services Agreement, each party shall pay a monthly fee to the performing party.  The foregoing description of the Transition Services Agreement is qualified in its entirety by reference to Exhibit 10.2.

Tax Matters Agreement

On June 2, 2014, we also entered into a Tax Matters Agreement with Theravance Biopharma that will govern Theravance Biopharma’s and our respective rights, responsibilities and obligations after the Spin-Off with respect to taxes.  Under the Tax Matters Agreement, all tax liabilities (including tax refunds and credits) (i) attributable to Theravance’s drug discovery and development business for any and all periods or portions thereof ending prior to or on, the Spin-Off date, (ii) resulting or arising from the contribution of Theravance’s drug discovery and development business to Theravance Biopharma, the distribution of Theravance Biopharma ordinary shares to Theravance stockholders and the other separation transactions and (iii) otherwise attributable to Theravance, will be borne solely by Theravance. As a result, Theravance Biopharma should generally expect to be liable only for tax liabilities attributable to, or incurred with respect to, the drug discovery and development business after the Spin-Off date.  The foregoing description of the Tax Matters Agreement is qualified in its entirety by reference to Exhibit 10.3.

Employee Matters Agreement

On June 1, 2014, we also entered into an Employee Matters Agreement with Theravance Biopharma, which governs the employee benefit obligations of Theravance and Theravance Biopharma as they relate to current and former employees. The Employee Matters Agreement allocates liabilities and responsibilities relating to employee benefit matters, including 401(k) plan matters that are subject to ERISA in connection with the separation, as well as other employee benefit programs. The Employee Matters Agreement also provides the mechanics for the adjustment on the distribution date of equity awards (including stock options, restricted stock, and restricted stock units) granted under Theravance’s equity compensation programs. The foregoing description of the Employee Matters Agreement is qualified in its entirety by reference to Exhibit 10.4.

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Theravance Respiratory Company, LLC Limited Liability Company Agreement

On May 31, 2014, we also entered into the TRC LLC Agreement with Theravance Biopharma that will govern the operation of Theravance Respiratory Company LLC, a Delaware limited liability company (“TRC”).  Under the TRC LLC Agreement, Theravance is the manager of TRC, and the business and affairs of TRC will be managed exclusively by the manager, including (i) day to day management of the drug programs in accordance with the existing GSK agreements, (ii) preparing an annual operating plan for TRC and (iii) taking all actions necessary to ensure that the formation, structure and operation of TRC complies with applicable law and partner agreements.  On June 1, 2014, Theravance Biopharma assigned its interests in TRC to Theravance Biopharma R&D, Inc., a wholly-owned subsidiary of Theravance Biopharma.  The foregoing description of the TRC LLC Agreement is qualified in its entirety by reference to Exhibit 10.5.

Item 2.01 Completion of Acquisition or Disposition of Assets.

The information included in Item 1.01 of this Current Report on Form 8-K is incorporated by reference to this Item 2.01.

The unaudited pro forma financial information of Theravance giving effect to the Spin-Off, and the related notes thereto, are attached hereto as Exhibit 99.2.

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On June 2, 2014, immediately after the Spin-Off, Catherine J. Friedman, Paul Pepe and James L. Tyree (collectively, the “New Directors”) became members of the Board of Directors of Theravance.  Ms. Friedman will serve on the Audit Committee and Compensation Committee of the Board; Mr. Pepe will serve on the Audit Committee and Nominating / Corporate Governance Committee of the Board; and Mr. Tyree will serve on the Audit Committee, Compensation Committee and Nominating / Corporate Governance Committee of the Board.  The Theravance Board of Directors has determined that each of the New Directors is independent within the meaning of the independent director standards of the Securities and Exchange Commission and Nasdaq Stock Market, Inc.  In connection with their appointment to the Board, each of the New Directors will be entitled to receive cash and equity compensation consistent with that of Theravance’s other non-employee directors. Such compensation is described in Theravance’s definitive proxy statement filed with the Securities and Exchange Commission on April 15, 2014.

On June 2, 2014, immediately after the effectiveness of the appointment of the New Directors, the members of the Board of Directors of Theravance listed below, each of whom is a member of the Board of Directors of Theravance Biopharma, resigned as directors of Theravance:

·                  Henrietta H. Fore;

·                  Robert V. Gunderson, Jr., Esq.;

·                  Burton G. Malkiel, Ph.D.;

·                  Peter S. Ringrose, Ph.D.;

·                  George M. Whitesides, Ph.D.; and

·                  William D. Young.

Item 8.01 Other Events

On June 2, 2014, Theravance and Theravance Biopharma issued a joint press release, a copy of which is hereby incorporated by reference and attached hereto as Exhibit 99.1.

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Forward-Looking Statements

This Form 8-K contains certain “forward-looking” statements as that term is defined in the Private Securities Litigation Reform Act of 1995 regarding, among other things, statements relating to goals, plans, objectives and future events. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Examples of such statements include statements relating to the expected timing of our payment of additional cash amounts to Theravance Biopharma.  Forward-looking statements are subject to risks, uncertainties, changes in circumstances, assumptions and other factors that may cause our actual results to be materially different from those reflected in the forward-looking statements. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include, among others, risks related to the disruption of operations during the transition period following the Spin-Off, including the diversion of our management’s and employees’ attention,  disruption of our relationships with collaborators and increased employee turnover, and difficulties or delays in reaching agreement with Theravance Biopharma on the amount of liabilities assumed by Theravance Biopharma. Other risks affecting us are described under the heading “Risk Factors” contained in our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission (SEC) on May 7, 2014 and the risks discussed in our other periodic filings with the SEC. Given these uncertainties, you should not place undue reliance on these forward-looking statements. We assume no obligation to update our forward-looking statements.

Item 9.01 Financial Statements and Exhibits.

(b) Pro Forma Financial Information

The pro forma financial information specified in Article 11 of Regulation S-X is filed as Exhibit 99.2 hereto.

(d) Exhibits

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

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Exhibit 10.1

SEPARATION AND DISTRIBUTION AGREEMENT

by and between

THERAVANCE, INC.

and

THERAVANCE BIOPHARMA, INC.

Dated as of June 1, 2014

Table of Contents

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ATTACHMENTS

Attachment 1.4 — List of Ancillary Agreements

Attachment 1.9 — Consents

Attachment 1.20(a) — Excluded Trademarks

Attachment 1.20(b) — Excluded Patents and Patent Applications

Attachment 1.20(c) — Excluded Domain Names

Attachment 1.23 —FF

Attachment 1.43 — ParentCo Fixed Assets

Attachment 1.60(b) — SpinCo Patents and Patent Applications

Attachment 1.60(c) — SpinCo Trademarks

Attachment 1.60(d) — SpinCo Domain Names

Attachment 1.60(g) — Registrations

Attachment 1.60(k) — Assumed Contracts

Attachment 1.62 — SpinCo Employees

Attachment 1.63(g) — SpinCo Liabilities

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Attachment 1.64 — SpinCo Policies

Attachment 1.80— UMEC

Attachment 1.81 — VI

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SEPARATION AND DISTRIBUTION AGREEMENT

This SEPARATION AND DISTRIBUTION AGREEMENT (this “Agreement”), dated as of June 1, 2014, is entered into by and between Theravance, Inc., a Delaware corporation (“ParentCo”), and Theravance Biopharma, Inc., a Cayman Islands corporation (“SpinCo”) (each a “Party” and collectively, the “Parties”).  Capitalized terms used herein and not otherwise defined shall have the respective meanings assigned to them in Article I.

RECITALS

WHEREAS, the Board of Directors of ParentCo has determined that it is appropriate, desirable and in the best interests of ParentCo and its stockholders to separate its two businesses, the ParentCo Business and the SpinCo Business, into ParentCo and SpinCo respectively, two publicly traded companies, by means of the transfer/assumption of certain assets and liabilities from ParentCo to SpinCo or any of the SpinCo Subsidiaries, all as more fully described in this Agreement and the Ancillary Agreements (the “Separation”);

WHEREAS, in order to effect the Separation, the Board of Directors of ParentCo has further determined that it is appropriate, desirable and in the best interests of ParentCo and its stockholders to distribute to holders of shares of ParentCo Common Stock, on a pro rata basis, all of the issued and outstanding ordinary shares, par value $0.00001 per share, of SpinCo, all as more fully described in this Agreement and the Ancillary Agreements (such shares, the “SpinCo Common Shares”, and such distribution, the “Distribution”); and

WHEREAS, the Parties intend in this Agreement to set forth the principal corporate arrangements between the Parties with respect to the Separation and the Distribution.

NOW, THEREFORE, in consideration of the foregoing and the terms, conditions, covenants and provisions of this Agreement, ParentCo and SpinCo mutually covenant and agree as follows:

Article I

DEFINITIONS

1.1                               “Action” shall mean any demand, action, cause of action, suit, countersuit, arbitration, inquiry, proceeding or investigation by or before any federal, state, local, foreign or international Governmental entity or any arbitration or mediation tribunal.

1.2                               “Affiliate” of a Person shall mean any firm, individual, corporation, business trust, joint venture, association, company, limited liability company, partnership, or other organization or entity, that directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control (provided that such common control is not by a natural person) with such specified Person.  As used herein, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities or other interests, by contract or otherwise; provided that if control is deemed solely on the basis of ownership of voting securities or other interests, such ownership must be in excess of fifty percent (50%) of the then-

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outstanding shares of common stock or the combined voting power of such Person.  For the sake of clarity, neither SpinCo nor any of the SpinCo Subsidiaries shall be considered Affiliates of ParentCo and the ParentCo Subsidiaries under this Agreement and vice versa.

1.3                               “Agent” shall have the meaning set forth in Section 3.1(a).

1.4                               “Ancillary Agreements” shall mean all of the contracts, obligations, indentures, agreements, leases, purchase orders, commitments, permits, licenses, notes, bonds, mortgages, arrangements or undertakings (whether written or oral and whether express or implied) that are legally binding on either Party or any part of its property under applicable Law entered into in connection with the transactions contemplated hereby, including the documents listed on Attachment 1.4, to be delivered by SpinCo and ParentCo in connection with the Separation.

1.5                               “ANORO” means (a) the combination medicine comprising UMEC with VI, with no other therapeutically active component, and explicitly excluding either component as a monotherapy, and which is proposed, as of the date hereof, to be sold under the brand name “ANORO® ELLIPTA®”, and (b) any and all product improvements, additional claims, line extensions, dosage changes and alternate delivery systems, in each case, with respect to only such combination medicine set forth in subsection (a) comprising UMEC with VI, with no other therapeutically active component (and explicitly excluding either component as a monotherapy).

1.6                               “BREO/RELVAR” means (a) the combination medicine comprising FF and VI, with no other therapeutically active component, and explicitly excluding either component as a monotherapy, and which is proposed, as of the date hereof, to be sold under the brand name “BREO® ELLIPTA®” in the United States and “RELVAR® ELLIPTA®” in the European Union and Japan, and (b) any and all product improvements, additional claims, line extensions, dosage changes and alternate delivery systems, in each case, with respect only to such combination medicine set forth in subsection (a) comprising FF and VI, with no other therapeutically active component (and explicitly excluding either component as a monotherapy).

1.7                               “Collaboration Agreement” means that certain Collaboration Agreement, dated as of November 14, 2002, by and between ParentCo and Glaxo Group Limited, including all amendments and supplements thereto.

1.8                               “Combined Books and Records” shall have the meaning set forth in Section 8.1(b).

1.9                               “Consents” shall mean any and all consents, waivers or approvals from, or notification requirements to, any Third Parties, including those set forth on Attachment 1.9.

1.10                        “Contract” shall mean any contract, obligation, indenture, agreement, lease, purchase order, commitment, permit, license, note, bond, mortgage, arrangement or undertaking (whether written or oral and whether express or implied) that is legally binding on any Person or any part of its property under applicable Law, but excluding this Agreement and any Ancillary Agreement save as otherwise expressly provided in this Agreement or any Ancillary Agreement.

1.11                        “Convertible and Non-Recourse Debt” shall mean the (i) 2.125% Convertible Subordinated Notes due 2023 issued by ParentCo and (ii) notes issued by LABA Royalty Sub

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LLC, a wholly owned subsidiary of ParentCo, pursuant to April 17, 2014 note purchase agreements relating to the private placement of $450.0 million aggregate principal amount of non-recourse 9% fixed rate term notes due 2029.

1.12                        “Distribution” shall have the meaning set forth in the recitals hereto.

1.13                        “Distribution Date” shall mean the date on which the Distribution to the stockholders of ParentCo is effective, which is June 2, 2014.

1.14                        “Effective Time” shall mean 12:01 a.m. Pacific Daylight Time on the day immediately preceding the Distribution Date.

1.15                        “Environmental Laws” shall mean any environmental laws, rules and regulations of any jurisdiction.

1.16                        “Environmental Liabilities” shall mean any Liabilities relating to Environmental Laws.

1.17                        “Exchange” shall mean the NASDAQ Global Market.

1.18                        “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC thereunder, all as the same shall be in effect at the time that reference is made thereto.

1.19                        “Excluded Assets” shall mean all assets solely relating to the ParentCo Business, including (a) the Excluded Intellectual Property and the Excluded Products; (b) and any and all Contracts of ParentCo (including, without limitation and for the avoidance of doubt, the Collaboration Agreement) other than the Assumed Contracts and the Leases; (c) all of ParentCo’s right, title and interest in and to any and all other assets that are expressly contemplated to be retained by ParentCo by this Agreement or any Ancillary Agreement (or the Attachments and Schedules hereto or thereto), including all of the TRC Class A Units and 750 of the TRC Class C Units; (d) all of the assets held by TRC; and (e) all of the capital stock of ParentCo Subsidiary.

1.20                        “Excluded Intellectual Property” shall mean (a) the Trademarks listed in Attachment 1.20(a); (b) the patents and patent applications listed in Attachment 1.20(b), and any patents of addition, re-examinations, reissues, extensions, granted supplementary protection certifications, substitutions, confirmations, registrations, revalidations, revisions, additions and the like, of or to said patents and any and all divisionals, continuations and continuations-in-part, and any patents issuing therefrom, as well as any patent applications related thereto; (c) the domain names listed in Attachment 1.20(c), (d) all U.S. and foreign copyrights and copyrightable subject matter solely related to the ParentCo Business (but excluding the SpinCo Copyrights), whether registered or unregistered, published or unpublished, statutory or common law, and all Actions against past, present, and future infringement, misappropriation, or other violation of the foregoing; and (e) all other Intellectual Property solely related to the ParentCo Business.

1.21                        “Excluded Liabilities” shall mean (a) any and all Liabilities of ParentCo and its Affiliates, relating solely to the ParentCo Business or arising out of or relating to the Excluded

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Assets, (b) any and all Liabilities of ParentCo and its Affiliates, relating to ParentCo’s guaranty of TRC’s performance under the portion of the Collaboration Agreement assigned to TRC and under the Strategic Alliance Agreement, (c) any and all Liabilities of ParentCo and its Affiliates relating to, arising out of or resulting from ParentCo’s performance or obligations under any Ancillary Agreement or this Agreement and (d) the Convertible and Non-Recourse Debt.

1.22                        “Excluded Products” shall mean any products developed under the Collaboration Agreement and under the Strategic Alliance Agreement.

1.23                        “FF” shall mean the inhaled corticosteroid known as Fluticasone Furorate (with the chemical structure as set forth in Attachment 1.23) or an ester, salt or other noncovalent derivative thereof.

1.24                        “Form 10” shall mean the registration statement on Form 10 filed by SpinCo with the SEC relating to the SpinCo Common Shares, as amended from time to time.

1.25                        “Governmental Approvals” shall mean any notices, reports or other filings to be made, or any consents, registrations, approvals, permits or authorizations to be obtained from, any Governmental Entity.

1.26                        “Governmental Entity” shall mean any federal, state, local, foreign or international court, government department, commission, board, bureau, agency, official or other regulatory, administrative or governmental entity.

1.27                        “IND” shall mean an investigational new drug application, including any amendments and supplements thereto, and all reports, correspondence and other submissions related thereto.

1.28                        “Indemnifying Party” shall have the meaning set forth in Section 5.4(a).

1.29                        “Indemnitee” shall have the meaning set forth in Section 5.4(a).

1.30                        “Indemnity Payment” shall have the meaning set forth in Section 5.4(a).

1.31                        “Information” shall mean information, whether or not patentable or copyrightable, in written, oral, electronic or other tangible or intangible forms, stored in any medium, including studies, reports, records, books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how, techniques, designs, specifications, drawings, blueprints, diagrams, models, prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes, computer programs or other software, marketing plans, customer names, communications by or to attorneys (including attorney-client privileged communications), memos and other materials prepared by attorneys or under their direction (including attorney work product), communications and materials otherwise related to or made or prepared in connection with or in preparation for any legal proceeding, and other technical, financial, employee or business information or data.

1.32                        “Insurance Proceeds” shall mean those monies (a) received by an insured from an unaffiliated Third Party insurer under any ParentCo Pre-Distribution Policy, or (b) paid by such Third Party insurer on behalf of an insured under any ParentCo Pre-Distribution Policy, in either

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case net of any applicable premium adjustment, retrospectively-rated premium, deductible, retention, or cost of reserve paid or held by or for the benefit of such insured.

1.33                        “Intellectual Property” shall mean all intellectual property and industrial property rights of any kind or nature, including all United States and foreign (a) patents, patent applications, patent disclosures, and all related continuations, continuations-in-part, divisionals, reissues, re-examinations, substitutions and extensions thereof, (b) Trademarks and all goodwill associated therewith, (c) copyrights and copyrightable subject matter, whether statutory or common law, registered or unregistered and published or unpublished, (d) rights of publicity, (e) moral rights and rights of attribution and integrity, (f) rights in Software, (g) trade secrets and all other confidential and proprietary information, know-how, inventions, improvements, processes, formulae, models and methodologies, (h) rights to domain names, (i) rights to personal information, (j) telephone numbers and internet protocol addresses, (k) applications and registrations for the foregoing, and (l) Actions against past, present, and future infringement, misappropriation, or other violation of the foregoing.

1.34                        “Law” shall mean any United States or non-United States federal, national, supranational, state, provincial, local or similar statute, law, ordinance, regulation, rule, code, order, requirement or rule of law (including common law).

1.35                        “Leases” shall mean that certain (i) Amended and Restated Lease Agreement, 951 Gateway Boulevard, between ParentCo and HMS Gateway Office L.P., dated as of January 1, 2001 and (ii) Lease Agreement, 901 Gateway Boulevard, between ParentCo and HMS Gateway Office L.P., dated as of January 1, 2001, in each case, including all amendments and supplements thereto.

1.36                        “Liabilities” shall mean any and all debts, liabilities, and obligations, whether accrued or fixed, known or unknown, absolute or contingent, matured or unmatured, reserved or unreserved, or determined or determinable of any kind or nature whatsoever, including those arising under any Law or Action, whether asserted or unasserted, or order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental entity, and those arising under any Contract or any fines, damages or equitable relief which may be imposed in connection with any of the foregoing and including all costs and expenses related thereto.

1.37                        “NDA” shall mean a new drug application, including any amendments or supplements thereto, and all reports, correspondence and other submissions related thereto.

1.38                        “Opening SpinCo Balance Sheet” shall mean the combined balance sheet of SpinCo, dated as of the Distribution Date, prepared on the same basis as the unaudited pro forma condensed combined balance sheet, dated December 31, 2013, included in the Form 10.

1.39                        “ParentCo Business” shall mean the pharmaceutical royalty management business of ParentCo, other than the SpinCo Business, as conducted or proposed to be conducted by ParentCo prior to or as of the Effective Time.  For the avoidance of doubt, the ParentCo Business includes the management of ParentCo’s rights to receive payments under the Collaboration Agreement and Strategic Alliance Agreement with respect to the Excluded Products, including

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as a result of ownership of the TRC Class A Units and TRC Class C Units, rights to receive distributions from TRC with respect to the TRC Class A Units and TRC Class C Units, and other assets, Contracts and Liabilities related the foregoing.

1.40                        “ParentCo Common Stock” shall mean the Common Stock, $0.01 par value per share, of ParentCo.

1.41                        “ParentCo Consolidated Balance Sheet” shall have the meaning set forth in Section 2.5(a).

1.42                        “ParentCo Employee” shall mean an active employee or an employee on vacation or on approved leave of absence (including maternity, paternity, family, sick leave, salary continuation, qualified military service under the Uniformed Services Employment and Reemployment Rights Act of 1994, and leave under the Family Medical Leave Act and other approved leaves) who, on the Distribution Date, is employed or will be employed by ParentCo.

1.43                        “ParentCo Fixed Assets” shall mean the fixed assets listed on Attachment 1.43 and such other fixed assets of SpinCo with an aggregate value of no more than $20,000 that the parties may determine within six (6) months after the Effective Time are reasonably required by ParentCo for the ParentCo Business.

1.44                        “ParentCo General Liability Policies” shall mean all ParentCo Pre-Distribution Policies that respond to claims on an occurrence basis.

1.45                        “ParentCo Policies” shall mean all ParentCo Pre-Distribution Policies that respond to claims on a claims-made basis.

1.46                        “ParentCo Pre-Distribution Policies” shall mean all Policies, other than the SpinCo Policies and including the ParentCo General Liability Policies and the ParentCo Policies, entered prior to or as of the Effective Time, which are between or among ParentCo and one or more Third Parties, that benefit either or both the ParentCo Business and the SpinCo Business.

1.47                        “ParentCo Subsidiary” shall mean Advanced Medicine East, Inc., a Delaware corporation.

1.48                        “Party” shall have the meaning set forth in the preamble hereof.

1.49                        “Person” shall mean any natural person, firm, individual, corporation, business trust, joint venture, association, company, limited liability company, partnership, or other organization or entity, whether incorporated or unincorporated, or any governmental entity.

1.50                        “Policies” shall mean insurance policies and insurance Contracts of any kind (other than life and benefits policies or Contracts), including primary, excess and umbrella policies, comprehensive general liability policies, director and officer liability, fiduciary liability, automobile, aircraft, property and casualty, business interruption, workers’ compensation and employee dishonesty insurance policies, bonds and self-insurance and captive insurance company arrangements, together with the rights, benefits and privileges thereunder.

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1.51                        “Post-Closing Cash” shall have the meaning set forth in Section 2.5(d).

1.52                        “Products” shall mean, individually and collectively, telavancin and all of the products under development, regardless of the state of development, by ParentCo, other than the Excluded Products.

1.53                        “Record Date” shall mean the close of business on the date to be determined by the ParentCo Board of Directors as the record date for the Distribution.

1.54                        “SEC” shall mean the United States Securities and Exchange Commission or any successor agency thereto.

1.55                        “Security Interest” shall mean any mortgage, security interest, pledge, lien, charge, claim, option, right to acquire, voting or other restriction, right-of-way, covenant, condition, easement, encroachment, restriction on transfer, or other encumbrance of any nature whatsoever, excluding restrictions on transfer under security Laws.

1.56                        “Selected Liabilities” shall have the meaning set forth in Section 2.5(b).

1.57                        “Selected Liabilities Statement” shall have the meaning set forth in Section 2.5(d).

1.58                        “Separation” shall have the meaning set forth in the recitals hereto.

1.59                        “Software” shall mean all computer programs (whether in source code, object code, or other form), algorithms, databases, compilations and data, and technology supporting the foregoing, and all documentation, including flowcharts and other logic and design diagrams, technical, functional and other specifications, and user manuals and training materials related to any of the foregoing.

1.60                        “SpinCo Assets” shall mean:

(a)                                 All categories of assets that are reflected as assets of SpinCo in the unaudited pro forma condensed combined balance sheet of SpinCo, dated December 31, 2013, included in the Form 10, with the value of such asset as reflected in the Opening SpinCo Balance Sheet.

(b)                                 All of ParentCo’s rights, title and interest in and to the patents and patent applications listed in Attachment 1.60(b), and any patents of addition, re-examinations, reissues, extensions, granted supplementary protection certifications, substitutions, confirmations, registrations, revalidations, revisions, additions and the like, of or to said patents and any and all divisionals, continuations and continuations-in-part, and any patents issuing therefrom, as well as any patent applications related thereto and all Actions against past, present, and future infringement, misappropriation, or other violation of the foregoing.

(c)                                  All of ParentCo’s rights, title and interest in and to the Trademarks listed on Attachment 1.60(c), together with (i) all common law rights to such Trademarks, (ii) the goodwill of the SpinCo Business symbolized by such Trademarks, (iii) all Actions for, or arising

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from any infringement, dilution, unfair competition, or other violation, including past infringement, dilution, unfair competition, or other violation, of such Trademarks, and (iv) all rights corresponding thereto throughout the world.

(d)                                 All of ParentCo’s rights, title and interest in and to the domain names listed in Attachment 1.60(d) and all Actions against past, present, and future infringement, misappropriation, or other violation of the foregoing.

(e)                                  All U.S. and foreign copyrights and copyrightable subject matter related to the SpinCo Business, whether registered or unregistered, published or unpublished, statutory or common law, including all related registrations, applications and common law rights, in any labels, product marketing materials or other copyrighted works related to the SpinCo Business and all Actions against past, present, and future infringement, misappropriation, or other violation of the foregoing (“SpinCo Copyrights”).

(f)                                   All of ParentCo’s rights, title and interest in and to all Intellectual Property, including trade secrets, not hereto forth described in the definition of SpinCo Assets that are reasonably likely to be used in the SpinCo Business, but excluding the Excluded Intellectual Property.

(g)                                  With respect to the Products, all (i) material regulatory filings and regulatory approvals, registrations and governmental authorizations, (ii) each NDA, (iii) each IND or equivalent, (iv) all licenses and permits relating to the Products, and (v) all applications to the FDA or the comparable foreign law or bodies in effect or pending at the Effective Time, all as set forth on Attachment 1.60(g), and all other information contained therein or materials relating thereto (collectively, the “Registrations”).

(h)                                 All SpinCo Books and Records.  “SpinCo Books and Records” shall mean books and records which relate to SpinCo, the SpinCo Assets, the SpinCo Liabilities or the conduct of the SpinCo Business.

(i)                                     All pre-clinical and clinical data related to the SpinCo Business and which is contained in ParentCo’s databases or otherwise in ParentCo’s possession or control.

(j)                                    All fixed assets of ParentCo as of the Effective Time except for the ParentCo Fixed Assets.

(k)                                 All rights and benefits of ParentCo in existence as of the Effective Time or arising after the Effective Time under the Contracts listed in Attachment 1.60(k) (the “Assumed Contracts”), including any rights to Intellectual Property or SpinCo Copyrights contained therein.  The Assumed Contracts shall be deemed to include all purchase, work and change orders related thereto.

(l)                                     All of ParentCo’s rights, title and interest in and to the Trial Materials.

(m)                             All of ParentCo’s rights, title and interest in and to the Trial Study Reports.

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(n)                                 Cash and cash equivalents in the amount of three hundred ninety three million U.S. Dollars ($393,000,000) in the aggregate plus the amount of the Post-Closing Cash, as determined in accordance with Section 2.5.

(o)                                 All of ParentCo’s rights under the Leases, including the right to possess, use and occupy the Premises and the Subleased Premises (as defined in the Leases), and all of ParentCo’s rights, title and interest in and to the Lessee Improvements and the Sublessee Improvements (as those terms are defined in the Leases).

(p)                                 Any and all interest in the SpinCo Subsidiaries, including, without limitation, all of the capital stock of Theravance UK Limited.

(q)                                 All of the TRC Class B Units and 6,375 TRC Class C Units.

(r)                                    SpinCo Policies.

(s)                                   All of ParentCo’s rights, title and interest in and to any and all other assets that are expressly contemplated by this Agreement or any Ancillary Agreement (or the Attachments and Schedules hereto or thereto) to be transferred to SpinCo or any of the SpinCo Subsidiaries.

For the avoidance of doubt and notwithstanding anything to the contrary herein, SpinCo Assets shall not include (i) any cash or cash equivalents other than as described in clause (n) above, (ii) any net operating losses, net operating loss carry-forwards or other Tax attributes of ParentCo, whether or not relating to SpinCo or the SpinCo Business, or (iii) the Excluded Assets.

1.61                        “SpinCo Business” shall mean the business of ParentCo related to (i) the discovery, development and commercialization of medicines and technologies related thereto, including the Products (but excluding the Excluded Products), as conducted or proposed to be conducted by ParentCo prior to or as of the Effective Time and (ii) ownership of all of the TRC Class B Units and 6,375 TRC Class C Units.

1.62                        “SpinCo Employees” shall mean all employees of Theravance Biopharma US, Inc., a Delaware corporation, listed on Attachment 1.62.

1.63                        “SpinCo Liabilities” shall mean:

(a)                                 All categories of Liabilities that are reflected as liabilities of SpinCo in the unaudited pro forma condensed combined balance sheet of SpinCo, dated December 31, 2013, included in the Form 10 with the value of such liabilities as reflected in the Opening SpinCo Balance Sheet.

(b)                                 All Liabilities under the Assumed Contracts.

(c)                                  All Liabilities under the Leases.

(d)                                 All Liabilities under the Registrations arising after the Effective Time.

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(e)                                  All other Liabilities (other than Excluded Liabilities) arising out of the conduct of ParentCo’s business prior to the Effective Time, other than liabilities solely related to the ParentCo Business, including Liabilities arising out of the conduct of the SpinCo Business or arising out of or related to the SpinCo Assets.

(f)                                   Any and all Environmental Liabilities.

(g)                                  Any and all Liabilities expressly set forth on Attachment 1.63(g).

(h)                                 The Selected Liabilities, as described in Section 2.5.

(i)                                     Any and all other Liabilities of SpinCo relating to, arising out of or resulting from SpinCo’s performance or obligations under any Ancillary Agreement or this Agreement.

(j)                                    Any and all other Liabilities that are expressly contemplated by this Agreement or any Ancillary Agreement (or the Attachments and Schedules hereto or thereto) to be transferred to and assumed by SpinCo or any of the SpinCo Subsidiaries.

For the avoidance of doubt, SpinCo Liabilities shall not include the Excluded Liabilities.

1.64                        “SpinCo Policies” shall mean all Policies, current or past, which are owned or maintained by or on behalf of ParentCo or its Subsidiaries, which relate solely to the SpinCo Business and are assignable to SpinCo, as listed on Attachment 1.64.

1.65                        “SpinCo Subsidiaries” shall mean Theravance Biopharma US, Inc., a Delaware corporation, Theravance Biopharma Antibiotics, Inc., a Cayman Islands exempted company, Theravance Biopharma R&D, Inc., a Cayman Islands exempted company, Theravance Biopharma R&D IP, LLC, a Delaware limited liability company, Theravance Biopharma Antibiotics IP, LLC, a Delaware limited liability company, and Theravance UK Limited, a company organized under the laws of the United Kingdom.

1.66                        “Strategic Alliance Agreement” means that certain Strategic Alliance Agreement, dated as of March 30, 2004, by and between ParentCo and Glaxo Group Limited, including all amendments and supplements thereto.

1.67                        “Subsidiary” of a Person shall mean any firm, individual, corporation, business trust, joint venture, association, company, limited liability company, partnership, or other organization or entity, whether incorporated or unincorporated of which at least a majority of the securities or interests having by the terms thereof ordinary voting power to elect at least a majority of the board of directors or others performing similar functions with respect to such corporation or other organization, that is directly or indirectly owned or controlled by such Person or by any one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries; provided, however, that no Person that is not directly or indirectly wholly owned by any other Person shall be a Subsidiary of such other Person unless such other Person controls, or has the right, power or ability to control, that Person.  For the sake of clarity, SpinCo shall not be considered a Subsidiary of ParentCo under this Agreement, and TRC shall be considered a Subsidiary of ParentCo.

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1.68                        “Third Party” shall mean any Person other than ParentCo, any ParentCo Affiliate, SpinCo and any SpinCo Affiliate.

1.69                        “Third-Party Claim” shall have the meaning set forth in Section 5.5(a).

1.70                        “Trademarks” shall mean all trademarks, service marks, trade names, names, slogans, taglines, logos, design marks, trade dress, product designs, and product packaging, including all applications for and registrations of the foregoing, and including those at common law.

1.71                        “Transfer” shall have the meaning set forth in Section 2.2(a).

1.72                        “TRC” shall mean Theravance Respiratory Company, LLC, a Delaware limited liability company.

1.73                        “TRC Class A Units” shall mean the Class A membership units in TRC.

1.74                        “TRC Class B Units” shall mean the Class B membership units in TRC.

1.75                        “TRC Class C Units” shall mean the Class C membership units in TRC.

1.76                        “TRC Operating Agreement” shall mean that certain Limited Liability Company Agreement of Theravance Respiratory Company, LLC, dated as of May 31, 2014, by and between ParentCo and SpinCo.

1.77                        “Trial” shall mean a pre-clinical or clinical trial related to the Products.

1.78                        “Trial Materials” shall mean the Products and the placebo for each of these Products for use in Trials, whether in bulk, formulated or finished form and whether or not in existence at the Effective Time.

1.79                        “Trial Study Reports” shall mean all reports or summaries of all data, records and documents resulting from the Trials.

1.80                        “UMEC” means the long-acting muscarinic antagonist umeclidinium bromide (with the chemical structure as set forth in Attachment 1.80) or an ester, salt or other noncovalent derivative thereof.

1.81                        “VI” means the long-acting beta2 agonist vilanterol (with the chemical structure as set forth in Attachment 1.81) or an ester, salt or other noncovalent derivative thereof.

1.82                        “VI Monotherapy” means (a) VI, solely as a monotherapy (i.e., excluding VI in combination with any one or more other therapeutically active component(s)), and (b) any and all product improvements, additional claims, line extensions, dosage changes and alternate delivery systems, in each case, with respect to only VI solely as a monotherapy (i.e., excluding VI in combination with any one or more other therapeutically active component(s)).

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Article II

THE SEPARATION

2.1                               General.  Subject to the terms and conditions of this Agreement, the Parties shall use, and shall cause any of their respective Subsidiaries to use, their respective reasonable best efforts to consummate the transactions contemplated hereby.

2.2                               Transfer of SpinCo Assets and Assumption of SpinCo Liabilities.  Subject to Sections 2.3, 2.4 and 2.5:

(a)                                 At the Effective Time, ParentCo shall, and hereby does, transfer, contribute, assign, distribute and convey, or cause to be transferred, contributed, assigned, distributed and conveyed, to SpinCo and/or its designated Subsidiaries all of ParentCo’s right, title and interest in and to the SpinCo Assets (the “Transfer”).

(b)                                 At the Effective Time, SpinCo shall, and hereby does, on behalf of itself and certain of its Subsidiaries, accept the Transfer from ParentCo.

(c)                                  On or before the Distribution Date, ParentCo shall transfer, or cause to be transferred, the SpinCo Employees to SpinCo and/or its designated Subsidiaries, as the case may be and as more particularly set forth on Attachment 1.62.

(d)                                 Except as otherwise specifically set forth in this Agreement or any Ancillary Agreement, at the Effective Time SpinCo shall, and hereby does, accept, assume or, as applicable, retain (on behalf of itself and /or its designated Subsidiaries) all the SpinCo Liabilities and shall after the Effective Time perform, discharge and fulfill (or cause its Subsidiaries to perform, discharge and fulfill), in accordance with their respective terms, all the SpinCo Liabilities, in each case, unless specified otherwise in the definition of SpinCo Liabilities, regardless of (i) when or where such Liabilities arose or arise, (ii) where or against whom such Liabilities are asserted or determined, (iii) which entity is named in any action associated with any Liability, and (iv) whether the facts on which they are based occurred prior to, on or after the Effective Time (the “Assumption”).  Notwithstanding the foregoing, SpinCo shall not assume (on behalf of itself and /or its designated Subsidiaries) any Liability attributable to the failure of ParentCo or its officers, directors, employees, agents or Affiliates to materially perform ParentCo’s obligations to SpinCo pursuant to this Agreement or the Ancillary Agreements.

(e)                                  If at any time, after the Effective Time, the Parties agree that ParentCo or its Subsidiaries possess any assets or liabilities related to the SpinCo Business, ParentCo shall as promptly as practicable transfer or cause to be transferred, at SpinCo’s expense, and SpinCo shall accept such transfer and/or assume (on behalf of itself and /or its designated Subsidiaries), for no additional consideration, such SpinCo Asset and/or Liability, including any and all economic benefits or detriments generated from such SpinCo Asset and/or Liabilities after the Effective Time, to SpinCo.  Each such transferred asset or liability shall be deemed a SpinCo Asset or a SpinCo Liability, respectively, and shall be subject to the terms and conditions of this Agreement applicable thereto.

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(f)                                   If at any time, after the Effective Time, the Parties agree that SpinCo or its Subsidiaries possess any assets or liabilities solely related to the ParentCo Business, SpinCo shall as promptly as practicable transfer or cause to be transferred (on behalf of itself and /or its designated Subsidiaries), at ParentCo’s expense, and ParentCo shall accept such transfer and/or assume, for no consideration, such ParentCo Asset and/or Liability, including any and all economic benefits or detriments generated from such ParentCo Asset and/or Liabilities after the Effective Time, to ParentCo.  Each such transferred asset or liability shall be deemed a ParentCo Asset or a ParentCo Liability, respectively, and shall be subject to the terms and conditions of this Agreement applicable thereto.

(g)                                  In furtherance of the Transfer and the assumption of the SpinCo Liabilities by SpinCo as set forth above, and simultaneously with the execution and delivery of this Agreement (i) ParentCo shall execute and deliver such bills of sale, stock powers, certificates of title, assignments of contracts and other instruments of transfer, conveyance and assignment as and to the extent necessary to evidence the Transfer, and (ii) SpinCo (on behalf of itself and /or its designated Subsidiaries) shall execute and deliver to ParentCo such bills of sale, stock powers, certificates of title, assumptions of contracts, indemnity agreements and other instruments of assumption as and to the extent necessary to evidence the valid and effective Assumption.

2.3                               Governmental Approvals; Consents.

(a)                                 To the extent that the Transfer or the Assumption requires any Governmental Approvals, the Parties shall use reasonable best efforts to obtain any such Governmental Approvals.  If and to the extent that the Transfer or the Assumption would be a violation of applicable laws or require any Governmental Approval in connection with the Separation or the Distribution, then, unless ParentCo shall otherwise determine, the Transfer to or Assumption by SpinCo of such SpinCo Assets or SpinCo Liabilities, as the case may be, shall be automatically deemed deferred and any such purported Transfer or the Assumption shall be null and void until such time as all legal impediments are removed and/or each of such Governmental Approval has been obtained.

(b)                                 The Parties shall use reasonable best efforts to obtain any Consents required in connection with the transactions contemplated by this Agreement.  Notwithstanding the foregoing, no Party shall be obligated to pay any consideration therefor to any Third Party from whom any such Consent, substitution or amendment is requested (unless such Party is fully reimbursed by the requesting Party).

2.4                               Deferred Transfers/Assumptions.

(a)                                 If the Transfer of any SpinCo Asset or Assumption intended to be Transferred and assumed hereunder is not consummated prior to or at the Effective Time, whether as a result of the provisions of Section 2.3 or for any other reason, then ParentCo shall thereafter hold such SpinCo Asset for the use and benefit of SpinCo if permitted by Law.

(b)                                 If and when the Consents and/or Governmental Approvals, or any other impediments to Transfer or Assumption, the absence of which caused the deferral of Transfer of

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any SpinCo Asset or Assumption pursuant to Section 2.3 or otherwise, are obtained or removed (as appropriate), the Transfer of the applicable SpinCo Asset or Assumption shall be effected in accordance with the terms of this Agreement and/or the applicable Ancillary Agreement.

(c)                                  With respect to any SpinCo Asset retained by ParentCo due to the deferral of the Transfer of such SpinCo Asset, ParentCo shall take such actions with respect to such SpinCo Asset as may be reasonably requested by SpinCo (and SpinCo shall fully reimburse ParentCo for all costs and expenses associated therewith).

(d)                                 If the Parties are unable to obtain, or to cause to be obtained, any such required Governmental Approvals, Consents, release, substitution or amendment pursuant to Section 2.3 or otherwise, ParentCo shall (i) continue to be bound by such Contract, license or other obligation, which shall not constitute a Liability of ParentCo (unless not permitted by Law or the terms thereof), (ii) as agent or subcontractor for SpinCo, pay, perform and discharge fully all the obligations or other SpinCo Liabilities thereunder after the Effective Time, and (iii) deliver to SpinCo any payments, benefits or other consideration received by ParentCo under such Contract, license or other obligation; provided, however, that ParentCo shall not be obligated to extend, renew or otherwise cause such Contract, license or other obligation to remain in effect beyond the term in effect as of the Effective Time.  SpinCo shall have the right to direct ParentCo to exercise ParentCo’s rights under such Contract, license or other obligation for the benefit of SpinCo.  SpinCo shall fully indemnify ParentCo and its Affiliates, officers, directors, employees, agents and hold each of them harmless against any and all obligations or SpinCo Liabilities arising in connection therewith and also for any actions requested by SpinCo pursuant to Section 2.4(c), provided, however, that SpinCo shall have no obligation to indemnify ParentCo with respect to any matter to the extent that ParentCo has engaged in any violation of Law or fraud in connection therewith.  ParentCo shall, without further consideration, promptly pay and remit, or cause to be promptly paid or remitted, to SpinCo, all money, rights and other consideration received by it or any of its Subsidiaries in respect of such performance on behalf of SpinCo (unless any such consideration is an Excluded Asset of ParentCo pursuant to this Agreement).  If and when any such Governmental Approval, Consent, release, substitution or amendment shall be obtained or such agreement, lease, license or other rights or obligations shall otherwise become assignable or capable of novation, ParentCo shall promptly assign, or cause to be assigned, all rights, obligations and other SpinCo Liabilities thereunder of ParentCo’s to SpinCo or its designated Subsidiary without payment of any further consideration and SpinCo (or its designated Subsidiary, as applicable), without the payment of any further consideration, shall assume such rights and obligations and other SpinCo Liabilities.

2.5                               Calculation, Adjustment and Payment of Selected Liabilities.

(a)                                 “ParentCo Consolidated Balance Sheet” shall mean the unaudited consolidated balance sheet of ParentCo, dated as of the day immediately preceding the Distribution Date, prepared on a basis consistent with the basis on which the unaudited consolidated balance sheet included in ParentCo’s Quarterly Report on Form 10-Q for the three-month period ended March 31, 2014 and filed with the Securities and Exchange Commission on May 7, 2014 was prepared.  As soon as reasonably practicable after the Effective Time, the Parties shall coordinate in the preparation of the ParentCo Consolidated Balance Sheet.

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(b)                                 “Selected Liabilities” shall mean certain current liabilities that are both recorded on the ParentCo Consolidated Balance Sheet in accordance with U.S. generally accepted accounting principles (“GAAP”) and unpaid as of the Effective Time, in the following categories: accrued nondiscretionary cash bonus expenses, accrued clinical and development expenses, and accrued sales and marketing expenses.  For clarity, the Selected Liabilities shall be recorded on the Opening SpinCo Balance Sheet.

(c)                                  Payment of Current Liabilities.  ParentCo shall under the terms of each respective Contract remit payment to payees for all current liabilities that are both recorded on the ParentCo Consolidated Balance Sheet in accordance with GAAP and unpaid as of the Effective Time, with the exception of (i) the Selected Liabilities and (ii) any deferred revenue,  deferred rent, accrued vacation expenses, and accrued discretionary cash bonus expenses that are recorded on the Opening SpinCo Balance Sheet.  SpinCo shall remit payment for the Selected Liabilities to the payees identified by ParentCo under the terms of each respective Contract.

(d)                                 Initial Selected Liabilities Statement and Post-Closing Cash.  SpinCo shall provide ParentCo in writing with its estimate for the amount of the Selected Liabilities within fifteen (15) business days after the Effective Time (the “Selected Liabilities Statement”).  ParentCo shall have ten (10) business days following the receipt of the Selected Liabilities Statement to review and analyze SpinCo’s calculation of the amount set forth in the Selected Liabilities Statement (the “Post-Closing Cash”) and ParentCo shall then pay to SpinCo any undisputed part of the Post-Closing Cash.  If ParentCo does not agree with SpinCo’s calculation of the Post-Closing Cash, the parties shall work in good faith to resolve the disagreement.  After resolution of such disagreement, any payments owing either to SpinCo as a result of such adjustment shall be made within five (5) business days after the agreement of the parties.

2.6                               Termination of Agreements.  Except with respect to this Agreement and the Ancillary Agreements (and agreements expressly contemplated herein or therein to survive by their terms), the Parties hereby terminate any and all written or oral agreements, arrangements, commitments or understandings, between or among them, effective as of the Effective Time; and each Party shall, at the reasonable request of the other Party, take, or cause to be taken, such other actions as may be necessary to effect the foregoing.

2.7                               Disclaimer of Representations and Warranties.  THE PARTIES UNDERSTAND AND AGREE THAT, EXCEPT AS EXPRESSLY SET FORTH HEREIN OR IN ANY ANCILLARY AGREEMENT, NO PARTY TO THIS AGREEMENT, ANY ANCILLARY AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT CONTEMPLATED BY THIS AGREEMENT HEREBY OR THEREBY, IS REPRESENTING OR WARRANTING IN ANY WAY AS TO THE SPINCO ASSETS, SPINCO BUSINESS OR SPINCO LIABILITIES CONTRIBUTED, TRANSFERRED, DISTRIBUTED OR ASSUMED AS CONTEMPLATED HEREBY OR THEREBY, AS TO ANY CONSENTS OR GOVERNMENTAL APPROVALS REQUIRED IN CONNECTION HEREWITH OR THEREWITH, AS TO THE VALUE OR FREEDOM FROM ANY SECURITY INTERESTS OF, OR ANY OTHER MATTER CONCERNING, ANY SPINCO ASSETS, SPINCO BUSINESS OR SPINCO LIABILITIES OR AS TO THE ABSENCE OF ANY DEFENSES OR RIGHT OF SETOFF OR FREEDOM FROM COUNTERCLAIM WITH RESPECT TO ANY CLAIM, INCLUDING ANY

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ACCOUNTS RECEIVABLE, OF ANY PARTY, OR AS TO THE LEGAL SUFFICIENCY OF ANY CONTRIBUTION, DISTRIBUTION, ASSIGNMENT, DOCUMENT, CERTIFICATE OR INSTRUMENT DELIVERED HEREUNDER TO CONVEY TITLE TO ANY SPINCO ASSET OR THING OF VALUE UPON THE EXECUTION, DELIVERY AND FILING HEREOF OR THEREOF.  EXCEPT AS MAY EXPRESSLY BE SET FORTH HEREIN OR IN ANY ANCILLARY AGREEMENT, ALL SUCH SPINCO ASSETS ARE BEING TRANSFERRED ON AN “AS IS,” “WHERE IS” BASIS AND SO LONG AS THE TRANSFEROR IS IN COMPLIANCE WITH THE TERMS OF THIS AGREEMENT RELATING TO THE TRANSFER, THE TRANSFEREE SHALL BEAR THE ECONOMIC AND LEGAL RISKS THAT (I) ANY CONVEYANCE SHALL PROVE TO BE INSUFFICIENT TO VEST IN THE TRANSFEREE GOOD AND MARKETABLE TITLE, FREE AND CLEAR OF ANY SECURITY INTEREST, AND (II) ANY NECESSARY CONSENTS OR GOVERNMENTAL APPROVALS ARE NOT OBTAINED OR THAT THE REQUIREMENTS OF LAWS, CONTRACTS, OR JUDGMENTS ARE NOT COMPLIED WITH.

Article III

THE DISTRIBUTION

3.1                               The Distribution.

(a)                                 Subject to Section 3.3, on or prior to the Distribution Date, for the benefit of and distribution to the holders of ParentCo Common Stock on the Record Date, ParentCo will deliver stock certificates, endorsed by ParentCo in blank, to the distribution agent, Computershare (the “Agent”), representing all of the outstanding and issued SpinCo Common Shares then owned by ParentCo.  ParentCo shall instruct the Agent to electronically distribute on the Distribution Date the appropriate number of such SpinCo Common Shares to each such holder or designated transferee or transferees of such holder.

(b)                                 Subject to Section 3.4, each holder of ParentCo Common Stock on the Record Date (or such holder’s designated transferee or transferees) will be entitled to receive in the Distribution one (1) SpinCo Common Share for every three and one-half (3.5) shares of ParentCo Common Stock.  No investment decision or action by any such stockholder shall be necessary for such stockholder (or such stockholder’s designated transferee or transferees) to receive the applicable number of SpinCo Common Shares.

(c)                                  SpinCo and ParentCo, as the case may be, will provide to the Agent any and all information required in order to complete the Distribution.

3.2                               Actions in Connection with the Distribution.

(a)                                 SpinCo shall prepare and, in accordance with applicable Law, file with the SEC and cause to become effective the Form 10, including amendments, supplements, exhibits and any such other documentation which is necessary or desirable to effectuate the Separation and the Distribution, and ParentCo and SpinCo shall each use reasonable best efforts to obtain all necessary approvals from the SEC with respect thereto as soon as practicable.

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(b)                                 In connection with the Distribution, ParentCo and SpinCo shall prepare and mail to the holders of ParentCo Common Stock such information concerning SpinCo, the SpinCo Business, the SpinCo Assets, the SpinCo Liabilities, operations and management, the Distribution, the Separation and such other matters as ParentCo shall reasonably determine and as may be required by Law.

(c)                                  SpinCo shall also prepare, file with the SEC and cause to become effective any registration statements or amendments thereto required to effect the establishment of, or amendments to, any employee benefit and other plans necessary or appropriate in connection with the transactions contemplated by this Agreement, or any of the Ancillary Agreements.

(d)                                 ParentCo and SpinCo shall take all such action as may be necessary or appropriate under the securities or blue sky laws of the states or other political subdivisions of the United States or of other foreign jurisdictions in connection with the Distribution.

(e)                                  ParentCo and SpinCo shall take all reasonable steps necessary and appropriate to cause the conditions set forth in Section 3.3 to be satisfied and to effect the Distribution on the Distribution Date.

(f)                                   SpinCo shall prepare and file, and shall use reasonable best efforts to have approved and made effective, an application for the original listing on the Exchange of the SpinCo Common Shares to be distributed in the Distribution, subject to official notice of distribution.

(g)                                  ParentCo shall give the Exchange not less than ten (10) days’ advance notice of the Record Date in compliance with Rule 10b-17 under the Exchange Act.

(h)                                 ParentCo and SpinCo shall take all actions necessary to cause, immediately prior to the Distribution, the number of SpinCo Common Shares issued and outstanding to be increased to equal the number of SpinCo Common Shares to be distributed to holders of ParentCo Common Stock in accordance with this Agreement.

(i)                                     ParentCo and SpinCo shall cooperate to change the name, effective on or prior to the Distribution Date, of any entity that is part of (i) SpinCo and any of its Affiliates so that the word “Theravance,” without “Biopharma” immediately following, is changed to “Theravance Biopharma”, and (ii) ParentCo and its Affiliates so that the words “Theravance Biopharma” are changed to “Theravance” without “Biopharma” as part of any such name. The parties acknowledge and agree that the name of Theravance UK Limited will not be changed to “Theravance Biopharma UK Limited” or a comparable name prior to the Distribution Date, but SpinCo agrees to do so promptly following the Distribution Date.

(j)                                    The Board of Directors of ParentCo and SpinCo shall have obtained an opinion from a nationally recognized appraisal, valuation and investment banking firm, in a form reasonably satisfactory to the Parties, substantially to the effect that each of ParentCo and SpinCo will be solvent and adequately capitalized immediately after the Distribution and ParentCo has sufficient surplus under the Laws of Delaware to distribute the SpinCo Common Shares.

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3.3                               Conditions to Distribution.  Subject to Section 3.2, the following are conditions to the consummation of Distribution.  The conditions are for the sole benefit of ParentCo and shall not give rise to or create any duty on the part of ParentCo or the Board of Directors of ParentCo to waive or not waive any such condition:

(a)                                 The Form 10 shall have been declared effective by the SEC, with no stop order in effect with respect thereto;

(b)                                 All permits, registrations and consents required under the securities or blue sky laws of the states or other political subdivisions of the United States or of other foreign jurisdictions in connection with the Separation and the Distribution shall have been obtained and be in full force and effect;

(c)                                  All material Government Approvals and other consents necessary to consummate the Separation and the Distribution shall have been obtained and be in full force and effect;

(d)                                 No order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Separation and the Distribution shall be in effect and no other event outside the control of ParentCo shall have occurred or failed to occur that prevents the consummation of the Distribution;

(e)                                  The Board of Directors of ParentCo shall have authorized and approved the Distribution and not withdrawn such authorization and approval;

(f)                                   The Board of Directors of ParentCo shall have approved the basis of the determination of the Selected Liabilities and categories of assets and liabilities included in both the Opening SpinCo Balance Sheet and the ParentCo Consolidated Balance Sheet.

(g)                                  The SpinCo Common Shares to be delivered in the Distribution shall have been approved for listing on the Exchange;

(h)                                 ParentCo shall have completed the Transfer of SpinCo Assets and transfer of SpinCo Employees to SpinCo, and the Assumption of all the SpinCo Liabilities by SpinCo shall be completed;

(i)                                     All Ancillary Agreements shall have been entered into by the Parties and all other Parties thereto, as applicable, and shall remain in full force and effect; and

(j)                                    No other events or developments shall have occurred that, in the sole discretion of the Board of Directors of ParentCo, would result in the Distribution having a material adverse effect on ParentCo or on the stockholders of ParentCo or not being in the best interest of ParentCo and its stockholders.

3.4                               Fractional Shares.  The Agent and ParentCo shall, as soon as practicable after the Distribution Date (a) determine the number of whole and fractional of SpinCo Common Shares allocable to each holder of record or beneficial owner of ParentCo Common Stock as of close of business on the Record Date, (b) aggregate all such fractional shares into whole shares and sell

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the whole shares obtained thereby in open market transactions at then-prevailing trading prices on behalf of holders who would otherwise be entitled to fractional share interests, and (c) distribute to each such holder, or for the benefit of each such beneficial owner, such holder’s or owner’s ratable share of the net proceeds of such sale, based upon the average gross selling price per SpinCo Common Share after making appropriate deductions for any amount required to be withheld for United States federal income tax purposes.  The Agent, in its sole discretion, will determine the timing and method of selling such fractional shares, the selling price of such fractional shares and the broker-dealer to which such fractional shares will be sold, provided that the designated broker-dealer is not an Affiliate of ParentCo or SpinCo.  Neither ParentCo nor SpinCo will pay any interest on the proceeds from the sale of fractional shares.

Article IV

INSURANCE

4.1                               Policies and Rights Included Within the SpinCo Assets.  Without limiting the generality of the definition of the SpinCo Assets, the SpinCo Assets shall include (a) the SpinCo Policies and (b) any and all rights of an insured Party or its Affiliates under each of the ParentCo Pre-Distribution Policies, to the extent allowable under such Policies, including rights of indemnity and the right to be defended by or at the expense of the insurer, with respect to all injuries, losses, Liabilities, damages and expenses incurred or claimed to have been incurred prior to the Effective Time by any Party or any of its Affiliates in connection with the SpinCo Business (provided ParentCo shall have equal rights with respect to indemnity and the right to be defended to the extent practical and appropriate) and which injuries, losses, liabilities, damages and expenses may arise out of insured or insurable occurrences or events under one or more of the ParentCo Pre-Distribution Policies; provided, however, that nothing in this Section 4.1 shall be deemed to constitute (or to reflect) the assignment of the ParentCo Pre-Distribution Policies, or any of them, to SpinCo.

4.2                               Post-Effective Time Claims.

(a)                                 If, subsequent to the Effective Time, any Person shall assert a claim against SpinCo or its Affiliates with respect to any injury, loss, Liability, damage or expense incurred or claimed to have been incurred prior to the Effective Time, including claims related to the SpinCo Business, or in connection with the Distribution, and such injury, loss, Liability, damage or expense may have or has arisen out of insured or insurable occurrences, claims or events under one or more of the ParentCo Pre-Distribution Policies, ParentCo shall at the time such claim is asserted (except to the extent inconsistent with Section 4.1 and to the extent allowable under the ParentCo Pre-Distribution Policies) be deemed to assign, without need of further documentation, to SpinCo or its Affiliates, any and all rights of an insured party under the applicable ParentCo Pre-Distribution Policy with respect to such asserted claim, including rights of indemnity and the right to be defended by or at the expense of the insurer; provided, however, that nothing in this Section 4.2 shall be deemed to constitute (or to reflect) the assignment of the ParentCo Pre-Distribution Policies, or any of them, to SpinCo.

(b)                                 In the event that any ParentCo Pre-Distribution Policy does not allow such assignment of a claim to SpinCo or its Affiliates, at SpinCo’s sole option, cost and expense,

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claims for coverage of insured SpinCo Liabilities shall be tendered by ParentCo as necessary to invoke the benefit of the ParentCo Pre-Distribution Policies.  If such insurers do not promptly acknowledge insurance coverage in connection with such insured SpinCo Liabilities, then, with respect to such insured SpinCo Liabilities, SpinCo, on an as-incurred basis (i) shall advance all amounts expended by ParentCo, incurred at the request of SpinCo, for or with respect to such insured SpinCo Liabilities, including all costs and expenses in connection with the defense and settlement and in satisfaction of any judgment incurred, and amounts sufficient to cover any Liabilities required to be paid by ParentCo or its Subsidiaries, and (ii) shall pay all costs incurred in connection with pursuing and recovering Insurance Proceeds with respect to the insured SpinCo Liabilities, but only to the extent so requested by SpinCo, which shall be entitled to direct such recovery efforts.  Any payments made to ParentCo or its Subsidiaries by SpinCo or the SpinCo Subsidiaries on account of such insured SpinCo Liabilities shall be deemed to be advances pursuant to this Section 4.2.  SpinCo and the SpinCo Subsidiaries shall have the right to recover any advances made pursuant to Section 4.3 from ParentCo and its Subsidiaries, and ParentCo and its Subsidiaries shall have the obligation promptly to reimburse SpinCo and the SpinCo Subsidiaries for such advances, solely from the Insurance Proceeds of the ParentCo Pre-Distribution Policies that cover such insured SpinCo Liabilities and that are received by ParentCo or its Subsidiaries.  ParentCo and its Subsidiaries (i) shall, at all times until paid to SpinCo, hold Insurance Proceeds received for or with respect to insured SpinCo Liabilities in trust for the benefit of SpinCo; and (ii) shall promptly remit such Insurance Proceeds to SpinCo.

4.3                               ParentCo Policies.  ParentCo shall, to the extent that the ParentCo Policies cover the SpinCo Liabilities, after discussion with SpinCo, either (a) maintain the ParentCo Policies, (b) buy replacement insurance, or (c) purchase an extended reporting period endorsement for the ParentCo Policies.  In each of (a), (b) and (c), such coverage shall be at the expense of SpinCo and be of a type and with a limit and terms and conditions similar to those in force under the ParentCo Policies as of the Effective Time and shall be maintained for a minimum of eight (8)  years after the Effective Time.

Article V

RELEASES AND INDEMNIFICATION

5.1                               Release of Pre-Distribution Claims.

(a)                                 Except as otherwise provided in this Agreement or any Ancillary Agreement, SpinCo, together with its Subsidiaries, executors, administrators, successors and assigns, does hereby, effective as of the Effective Time, remise, release and forever discharge ParentCo, its respective Affiliates and all Persons who at any time prior to the Effective Time were stockholders, directors, officers, agents or employees of ParentCo or any of its Affiliates (in each case, in their respective capacities as such), in each case, together with their respective heirs, executors, administrators, successors and assigns, from all Liabilities existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed on or before the Effective Time.

(b)                                 Except as otherwise provided in this Agreement or any Ancillary Agreement, ParentCo, together with its respective Subsidiaries, executors, administrators,

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successors and assigns, does hereby, effective as of the Effective Time, remise, release and forever discharge SpinCo, its respective Affiliates and all Persons who at any time prior to the Effective Time were stockholders, directors, officers, agents or employees of SpinCo or any of its Affiliates (in each case, in their respective capacities as such), in each case, together with their respective heirs, executors, administrators, successors and assigns, from all Liabilities existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed on or before the Effective Time.

(c)                                  Nothing contained in Section 5.1(a) and Section 5.1(b) shall impair or otherwise affect any right of any Party to enforce this Agreement or any Ancillary Agreement.  In addition, nothing contained in Section 5.1(a) and Section 5.1(b) shall release any Party from:

(i)                                     any Liability assumed by, or transferred, or assigned or allocated to, a Party or its respective Affiliates pursuant to or contemplated by this Agreement or any Ancillary Agreement;

(ii)                                  any Liability provided in or resulting from any other Contract or understanding that is entered into after the Effective Time between one Party (and/or a member of such Party’s Affiliates), on the one hand, and the other Party (and/or a member of such Party’s Affiliates), on the other hand; and

(iii)                               any Liability that the Parties may have with respect to indemnification or contribution pursuant to this Agreement or otherwise for claims brought against the Parties by a Third Party, which Liability shall be governed by the provisions of this Article V and, if applicable, the appropriate provisions of the Ancillary Agreements.

(d)                                 Each Party shall not, and shall not permit any of its Subsidiaries to, make any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or indemnification, against the other Party or any member of the other Party’s Affiliates, or any other Person released pursuant to Section 5.1(a) and Section 5.1(b), with respect to any and all Liabilities released pursuant to Section 5.1(a) and Section 5.1(b).  If a Party breaches this Section 5.1(d), such breaching Party shall be liable for all related expenses, including court costs, attorneys’ fees, and all other legal expenses of the other Party.

(e)                                  It is the intent of each Party, by virtue of the provisions of this Section 5.1, to provide for a full and complete release and discharge of all Liabilities existing or arising from all acts and events occurring or failing to occur or alleged to have occurred or to have failed to occur and all conditions existing or alleged to have existed on or before the Effective Time, whether known or unknown, between one Party (and/or any Affiliate of such Party) and the other Party (and/or a member of such other Party) (including any contractual agreements or arrangements existing or alleged to exist between or among any such members on or before the Effective Time), except as otherwise set forth in this Section 5.1.

(f)                                   Each Party hereby acknowledges that it has considered the possibility that it may not now fully know the nature or value of the claims which are generally released pursuant to this Section 5.1 and that such general release extends to all claims of every nature

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and kind, known or unknown, suspected or unsuspected, past or present, however arising, and that any and all rights granted to such Party pursuant to Section 1542 of the California Civil Code or any analogous applicable state or federal law or regulation are hereby expressly waived.  Said Section 1542 of the Civil Code of the State of California reads as follows:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.”

(g)                                  If any Person associated with a Party (including any director, officer or employee of a Party) initiates an Action with respect to claims released by this Section 5.1, the Party with which such Person is associated shall indemnify the other Party against such Action in accordance with the provisions set forth in this Article V.

(h)                                 At any time, at the request of a Party, each Party shall, and to the extent practicable, cause each other Person on whose behalf it released Liabilities pursuant to this Section 5.1, to execute and deliver releases in customary form reflecting the provisions hereof.

5.2                               Indemnification by SpinCo.  Except as otherwise provided in this Agreement or any Ancillary Agreement, following the Effective Time, SpinCo shall indemnify, defend and hold harmless ParentCo and its Affiliates and all Persons who at any time prior to the Effective Time were directors, officers, agents or employees of ParentCo or any of its Affiliates (in each case, in their respective capacities as such), in each case, together with their respective heirs, executors, administrators, successors and assigns (collectively, the “ParentCo Indemnitees”), from and against any and all Liabilities and related losses of the ParentCo Indemnitees relating to, arising out of or resulting from any of the following:

(a)                                 The failure of SpinCo, its Subsidiaries or any of their respective Affiliates or any other Person to pay, perform or otherwise promptly discharge after the Effective Time any SpinCo Liabilities in accordance with their respective terms;

(b)                                 The SpinCo Liabilities (including any subsequently identified SpinCo Liabilities under Section 2.2(e));

(c)                                  Any untrue statement, alleged untrue statement, omission or alleged omission of a material fact in the Form 10, resulting in a misleading statement, with respect to all information contained in the Form 10; and

(d)                                 Any breach by SpinCo of this Agreement or any of the Ancillary Agreements.

5.3                               Indemnification by ParentCo.  Except as otherwise provided in this Agreement or any Ancillary Agreement, following the Effective Time, ParentCo shall indemnify, defend and hold harmless SpinCo, its Subsidiaries and any of their respective Affiliates and all Persons who are directors, officers, agents or employees of SpinCo, its Subsidiaries  or any of their respective Affiliates (in each case, in their respective capacities as such), in each case, together with their

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respective heirs, executors, administrators, successors and assigns (collectively, the “SpinCo Indemnitees”), from and against any and all Liabilities and related losses of the SpinCo Indemnitees relating to, arising out of or resulting from any of the following items:

(a)                                 The failure of ParentCo, its Affiliates or any other Person to pay, perform or otherwise promptly discharge after the Effective Time any Excluded Liabilities;

(b)                                 The Excluded Liabilities; and

(c)                                  Any breach by ParentCo of this Agreement or any of the Ancillary Agreements.

5.4                               Reduction for Insurance Proceeds and Other Recoveries.

(a)                                 The amount that any Party is required to provide indemnification (the “Indemnifying Party”) to or on behalf of the Party entitled to such indemnification (the “Indemnitee”) pursuant to this Article V, shall be reduced (retroactively or prospectively) by Insurance Proceeds or other amounts actually recovered from Third Parties on behalf of such Indemnitee in respect of the Liability or related loss.  If an Indemnitee receives a payment as required by this Agreement from an Indemnifying Party in respect of any Liability or related loss (an “Indemnity Payment”) and subsequently receives Insurance Proceeds in respect of such Liability or related loss, then such Indemnitee shall hold such Insurance Proceeds in trust for the benefit of the Indemnifying Party (or Indemnifying Parties) and shall pay to the Indemnifying Party, as promptly as practicable after receipt, a sum equal to the amount of such Insurance Proceeds received, up to the aggregate amount of any payments received from the Indemnifying Party pursuant to this Agreement in respect of such indemnifiable loss of such Insurance Proceeds.

(b)                                 An insurer who would otherwise be obligated to pay any claim shall not be relieved of the responsibility with respect thereto or, solely by virtue of the indemnification provisions hereof, have any subrogation rights with respect thereto, it being expressly understood and agreed that no insurer or any other Third Party shall be entitled to a “windfall” (i.e., a benefit they would not be entitled to receive in the absence of the indemnification provisions) by virtue of the indemnification provisions hereof.  Notwithstanding the foregoing, each Party shall be required to use reasonable best efforts to collect or recover any available Insurance Proceeds.

5.5                               Procedures For Indemnification of Third-Party Claims.  The following procedures shall apply to indemnification of Third-Party Claims under this Agreement.

(a)                                 If an Indemnitee shall receive notice or otherwise learn of the assertion by a Third Party (including any Governmental entity) of any claim or of the commencement by any such Person of any Action (collectively, a “Third-Party Claim”) with respect to which an Indemnifying Party may be obligated to provide indemnification to such Indemnitee, such Indemnitee shall give such Indemnifying Party and each Party to this Agreement, written notice thereof as soon as reasonably practicable, but no later than thirty (30) days after becoming aware of such Third-Party Claim.  Any such notice shall describe the Third-Party Claim in reasonable detail.  If any Party shall receive notice or otherwise learn of the assertion of a Third-Party Claim which may reasonably be determined to be a Liability of the Parties, such Party shall give the

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other Party to this Agreement written notice thereof within thirty (30) days after becoming aware of such Third-Party Claim.  Any such notice shall describe the Third-Party Claim in reasonable detail.  Notwithstanding the foregoing, the failure of any Indemnitee or other Party to give notice as provided in this Section 5.5(a) shall not relieve the related Indemnifying Party of its obligations under this Article V, except to the extent that such Indemnifying Party is actually prejudiced by such failure to give notice.

(b)                                 An Indemnifying Party shall be entitled to participate in the defense of any Third-Party Claim, at such Indemnifying Party’s own expense and by such Indemnifying Party’s own counsel; provided that if the defendants in any such claim include both the Indemnifying Party and one or more Indemnitees and in such Indemnitees’ reasonable judgment a conflict of interest between such Indemnitees and such Indemnifying Party exists in respect of such claim, such Indemnitees shall have the right to employ separate counsel and in that event the reasonable fees and expenses of such separate counsel (but not more than one separate counsel reasonably satisfactory to the Indemnifying Party) shall be paid by such Indemnifying Party.  Within thirty (30) days after the receipt of notice from an Indemnitee in accordance with Section 5.5(a) (or sooner, if the nature of such Third-Party Claim so requires), the Indemnifying Party shall notify the Indemnitee of its election whether the Indemnifying Party will assume responsibility for defending such Third-Party Claim.  After notice from an Indemnifying Party to an Indemnitee of its election to assume the defense of a Third-Party Claim, such Indemnitee shall have the right to employ separate counsel and to participate in (but not control) the defense, compromise, or settlement thereof, but the fees and expenses of such counsel shall be the expense of such Indemnitee.

(c)                                  With respect to any Third-Party Claim, the Indemnifying Party and Indemnitees agree, and shall cause their respective counsel (if applicable), to cooperate fully (in a manner that will preserve all attorney-client privilege or other privileges) to mitigate any such claim and minimize the defense costs associated therewith.

(d)                                 If an Indemnifying Party fails to assume the defense of a Third-Party Claim within thirty (30) days after receipt of written notice of such claim, the Indemnitee will, upon delivering notice to such effect to the Indemnifying Party, have the right to undertake the defense, compromise or settlement of such Third-Party Claim on behalf of and for the account of the Indemnifying Party subject to the limitations as set forth in this Section 5.5; provided, however, that such Third-Party Claim shall not be compromised or settled without the written consent of the Indemnifying Party, which consent shall not be unreasonably withheld, delayed or conditioned.  If the Indemnitee assumes the defense of any Third-Party Claim, it shall keep the Indemnifying Party reasonably informed of the progress of any such defense, compromise or settlement.  The Indemnifying Party shall reimburse all such costs and expenses of the Indemnitee in the event it is ultimately determined that the Indemnifying Party is obligated to indemnify the Indemnitee with respect to such Third-Party Claim.  In no event shall an Indemnifying Party be liable for any settlement effected without its consent, which consent will not be unreasonably withheld, delayed or conditioned.

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5.6                               Additional Matters.  The following shall apply to indemnification matters under this Agreement.

(a)                                 Any claim on account of a Liability which does not result from a Third-Party Claim shall be asserted by written notice given by the Indemnitee to the related Indemnifying Party.  Such Indemnifying Party shall have a period of thirty (30) days after the receipt of such notice within which to respond thereto.  If such Indemnifying Party does not respond within such sixty (60) day period, such Indemnifying Party shall be deemed to have accepted responsibility to make payment.  If such Indemnifying Party rejects such claim in whole or in part, such Indemnitee shall be free to pursue such remedies as may be available to such party as contemplated by this Agreement and the Ancillary Agreements.

(b)                                 In the event of payment by or on behalf of any Indemnifying Party to any Indemnitee in connection with any Third-Party Claim, such Indemnifying Party shall be subrogated to and shall stand in the place of such Indemnitee as to any events or circumstances in respect of which such Indemnitee may have any right, defense or claim relating to such Third-Party Claim against any claimant or plaintiff asserting such Third-Party Claim or against any other person.  Such Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner, and at the cost and expense (including allocated costs of in-house counsel and other in-house personnel) of such Indemnifying Party, in prosecuting any subrogated right, defense or claim.

(c)                                  In the event of an Action in which the Indemnifying Party is not a named defendant, if the Indemnifying Party shall so request, the Parties shall endeavor to substitute the Indemnifying Party for the named defendant, and add the Indemnifying Party as a named defendant if at all practicable.  If such substitution or addition cannot be achieved for any reason or is not requested, the named defendant shall allow the Indemnifying Party to manage the Action as set forth in this section and subject to Section 5.5 with respect to Liabilities, the Indemnifying Party shall fully indemnify the named defendant against all costs of defending the Action (including court costs, sanctions imposed by a court, attorneys’ fees, experts’ fees and all other external expenses, and the allocated costs of in-house counsel and other in-house personnel), the costs of any judgment or settlement, and the cost of any interest or penalties relating to any judgment or settlement.

5.7                               Survival of Indemnities.  The rights and obligations of each Party and their respective Indemnitees under this Article V shall survive the sale or other transfer by any Party or its Affiliates of any assets or businesses or the assignment by it of any and all Liabilities.

Article VI

CERTAIN COVENANTS AND OTHER AGREEMENTS OF THE PARTIES

6.1                               Legal Names.  Absent a written agreement to the contrary, as soon as reasonably practicable and in any event within one hundred eighty (180)  days after the Distribution Date, each Party shall (i) cease to make any use of the other Party’s respective name and any Trademarks related thereto or containing or comprising the foregoing, including any name or mark confusingly similar thereto or dilutive thereof (the “Marks”), (ii) take all steps necessary,

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and fully cooperate with the other Party and its Affiliates, to remove the Marks from any corporate, trade, and assumed names and cancel any recordation of such names with any Governmental entity, and change any corporate, trade, and assumed name that uses the Marks to a name that does not include the Marks or any variation, derivation, or colorable imitation thereof, and (iii) remove, strike over or otherwise obliterate all Marks from (or otherwise not use) in all materials owned by each Party and its Affiliates, including without limitation, any business cards, stationary, packaging materials, displays, signs, promotional and advertising materials, and other materials or media including any internet usage or domain names that include the Marks.

6.2                               Preparation of Opening SpinCo Balance Sheet.  As soon as practicable after the Distribution Date, the Parties shall cooperate in the preparation of the Opening SpinCo Balance Sheet, prepared on the same basis as the unaudited pro forma condensed combined balance sheet of SpinCo, dated as of December 31, 2013, included in the Form 10.

Article VII

CONFIDENTIALITY

7.1                               Confidentiality.

(a)                                 Notwithstanding any termination of this Agreement and subject to Section 7.2, for a period of ten (10) years after the Distribution Date, each Party agrees to hold, and to cause its respective Subsidiaries, Affiliates, directors, officers, employees, agents, accountants, counsel and other advisors and representatives to hold, in strict confidence, and undertake all reasonable precautions to safeguard and protect the confidentiality of, all Information concerning the other Party that is in its possession after the Distribution Date or furnished by the other Party or its respective directors, officers, employees, agents, accountants, counsel and other advisors and representatives at any time pursuant to this Agreement, any Ancillary Agreement or otherwise, and shall not use any such Information other than for such purposes as shall be expressly permitted hereunder or thereunder, except, in each case, to the extent that such Information has been (i) in the public domain through no fault of such Party, its respective Subsidiaries, Affiliates, directors, officers, employees, agents, accountants, counsel and other advisors and representatives, (ii) lawfully acquired from other sources, which are not bound by a confidentiality obligation, by such Party or its respective Subsidiaries or Affiliates, or (iii) independently generated without reference to any proprietary or confidential Information of the other Party or its Subsidiaries.

(b)                                 Each Party agrees not to release or disclose, or permit to be released or disclosed, any such Information to any other Person, except its directors, officers, employees, agents, accountants, counsel and other advisors and representatives who need to know such Information and who are informed and advised that the Information is confidential and subject to the obligations hereunder, except in compliance with Section 7.2.  Without limiting the foregoing, when any Information is no longer needed for the purposes contemplated by this Agreement or any Ancillary Agreement, each Party will promptly after request of the other Party either (i) destroy all copies of the Information in such Party’s possession, custody or control (including any that may be stored in any computer, word processor, or similar device, to the

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extent not commercially impractical to destroy such copies) including any copies, summaries, analyses, compilations, reports, extracts or other reproductions, in whole or in part, of such written, electronic or other tangible material or any other materials in written, electronic or other tangible format based on, reflecting or containing Information prepared by such Party, and/or (ii) return to the requesting Party, at the expense of the requesting Party, all copies of the Information furnished to such Party by or on behalf of the requesting Party.  Notwithstanding the foregoing, each Party may maintain the confidential Information of the other Party that is contained in such Party’s electronic back-up files that are created in the normal course of business pursuant to such Party’s standard protocol for preserving its electronic records.

7.2                               Protective Arrangements.  In the event that either Party or their respective Subsidiaries or Affiliates, either (i) determines after consultation with counsel, in the opinion of such counsel that it is required by law to disclose any Information, or (ii) receives any demand under lawful process or from any Governmental entity to disclose or provide Information of the other Party or their respective Subsidiaries that is subject to the confidentiality provisions hereof, such Party shall notify the other Party prior to disclosing or providing such Information and shall cooperate at the expense of the requesting party (and to the extent legally permissible) in seeking any reasonable protective arrangements requested by such other Party.  Subject to the foregoing, the Party that received such request may thereafter (i) furnish only that portion of the Confidential Information that is legally required, (ii) give notice to the other Party of the Information to be disclosed as far in advance as is practical, and (iii) exercise reasonable best efforts to obtain reliable assurance that the confidential nature of such Information shall be maintained.

Article VIII

ACCESS TO INFORMATION AND SERVICES

8.1                               Provision of Books and Records.

(a)                                 Except as otherwise provided in any Ancillary Agreement, as soon as practicable after the Distribution Date, ParentCo and SpinCo shall cooperate to provide that originals of SpinCo Books and Records (including all documents and electronically stored information except e-mails or other electronic correspondence not readily available in hard copy) which solely relate to SpinCo or the conduct of the SpinCo Business, as the case may be, up to the Effective Time, are in the possession or control of SpinCo or a SpinCo Subsidiary.

(b)                                 With respect to SpinCo Books and Records (including e-mails and other electronic correspondence not readily available in hard copy) that relate to both the SpinCo Business and the ParentCo Business (the “Combined Books and Records”), (i) the Parties shall use good faith efforts to divide as soon as practicable but no later than six (6) months following the Distribution Date such Combined Books and Records into the books and records which solely relate to ParentCo or the conduct of the ParentCo Business and those that relate solely to SpinCo and the SpinCo Business, as the case may be, up to the Effective Time, as appropriate, and (ii) to the extent such Combined Books and Records are not so divided, each Party shall keep and maintain copies of such Combined Books and Records as reasonably appropriate under the

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circumstances, subject to applicable confidentiality provisions hereof and of any Ancillary Agreement.

8.2                               Access to Information.  Except as otherwise provided in any Ancillary Agreement, after the Distribution Date, each Party shall provide the other Party and such other Party’s authorized accountants, counsel and other designated representatives reasonable access and duplicating rights during normal business hours to all records, books, contracts, instruments, computer data and other data and Information relating to pre-Distribution operations of the SpinCo Business or ParentCo Business, as applicable, or within such Party’s possession or control or such other Information reasonably necessary for the preparation, review or auditing for spin-out financials for such other Party (including using reasonable best efforts to give access to Persons or firms possessing Information) insofar as such access is reasonably required by such other Party for the conduct of the SpinCo Business or ParentCo Business, as applicable, subject to appropriate restrictions for classified or privileged information.

8.3                               Production of Witnesses.  At all times after the Effective Time, each of SpinCo and ParentCo shall use reasonable best efforts to make available to the other, upon prior written request, its and its Subsidiaries’ officers, directors, employees and agents as witnesses to the extent that such Persons may reasonably be required in connection with any Action.

8.4                               Reimbursement.  Except to the extent otherwise contemplated in any Ancillary Agreements, a Party providing any information under Section 8.2 or witness services under Section 8.3 to the other Party shall be entitled to receive from the recipient, upon the presentation of invoices therefor, payments of such amounts, relating to supplies, disbursements and other out-of-pocket expenses (at cost) and direct and indirect expenses of employees who are witnesses or otherwise furnish assistance (at cost), as may be reasonably incurred in providing any such information under Section 8.2 or witness services under Section 8.3.

8.5                               Privileged Matters.  To allocate the interests of each Party with respect to privileged information, the Parties agree as follows:

(a)                                 ParentCo shall be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with privileged information which relates solely to the ParentCo Business, whether or not the privileged information is in the possession of or under the control of ParentCo or SpinCo.  ParentCo shall also be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with privileged information that relates solely to the subject matter of any claims constituting Liabilities of ParentCo and its Affiliates and all Persons who at any time prior to or as of the Effective Time were directors, officers, agents or employees of ParentCo or any of its Affiliates (in each case, in their respective capacities as such), in each case, together with their respective heirs, executors, administrators, successors and assigns, now pending or which may be asserted in the future, in any lawsuits or other Actions initiated against or by ParentCo, whether or not the privileged information is in the possession of or under the control of ParentCo or SpinCo.

(b)                                 SpinCo shall be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with privileged information which relates solely to the SpinCo Business, whether or not the privileged information is in the possession of or under the control of

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ParentCo or SpinCo.  SpinCo shall also be entitled, in perpetuity, to control the assertion or waiver of all privileges in connection with privileged information which relates solely to the subject matter of any claims constituting SpinCo Liabilities, now pending or which may be asserted in the future, in any lawsuits or other Actions initiated against or by SpinCo, whether or not the privileged information is in the possession of SpinCo or under the control of ParentCo or SpinCo.

(c)                                  ParentCo and SpinCo agree that they shall have a shared privilege, with equal right to assert or waive, subject to the restrictions of this Section 8.5, with respect to all privileges not allocated pursuant to the terms of Sections 8.5(a) and (b).  All privileges relating to any claims, proceedings, litigation, disputes or other matters which involve both ParentCo and SpinCo in respect of which ParentCo and SpinCo retain any responsibility or liability under this Agreement shall be subject to a shared privilege.

(d)                                 No Party may waive any privilege which could be asserted under any applicable law, if the other Party has a shared privilege, without the consent of the other Party, except to the extent reasonably required in connection with any litigation with Third Parties or as provided in Section 8.5(e).  Such consent shall be in writing, or shall be deemed to be granted unless written objection is made within twenty (20) days after notice upon the other Party requesting such consent.

(e)                                  In the event of any litigation or dispute between the Parties and any of its Affiliates, either Party may waive a privilege in which the other Party has a shared privilege, without obtaining the consent of the other Party, provided that such waiver of a shared privilege shall be effective only as to the use of Information with respect to the litigation or dispute between the Parties and any of its Affiliates, and shall not operate as a waiver of the shared privilege with respect to Third Parties.

(f)                                   If a dispute arises between the Parties regarding whether a privilege should be waived to protect or advance the interest of either Party, each Party agrees that it shall negotiate in good faith, shall endeavor to minimize any prejudice to the rights of the other Party, and shall not unreasonably withhold consent to any request for waiver by the other Party.  Each Party specifically agrees that it will not withhold consent to waiver for any purpose except to protect its own legitimate interests.

(g)                                  Upon receipt by any Party of any subpoena, discovery or other request which arguably calls for the production or disclosure of Information subject to a shared privilege or as to which the other Party has the sole right hereunder to assert a privilege, or if any Party obtains knowledge that any of its current or former directors, officers, agents or employees has received any subpoena, discovery or other request which arguably calls for the production or disclosure of such privileged information, such Party shall promptly notify the other Party of the existence of the request and shall provide the other Party a reasonable opportunity to review the Information and to assert any rights it may have under this Section 8.5 or otherwise to prevent the production or disclosure of such privileged information.

(h)                                 The transfer of all Information pursuant to this Agreement is made in reliance on the agreement of ParentCo and SpinCo, as set forth in this Section 8.5 and elsewhere

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in this Agreement, to maintain the confidentiality of privileged information and to assert and maintain applicable privileges.  The access to Information being granted pursuant to Sections 8.1 and 8.2, the agreement to provide witnesses and individuals pursuant to Section 8.3 and the transfer of privileged information between the Parties pursuant to this Agreement shall not be deemed a waiver of any privilege that has been or may be asserted under this Agreement or otherwise.

8.6                               GSK Agreements.  Notwithstanding any other provision contained herein, ParentCo shall not, and shall cause its Affiliates and its and its Affiliates’ officers, directors, employees, agents and representatives (collectively, “Representatives”) not to, take (or omit to take) any action (including, without limitation, the disclosure of any information to SpinCo or any of its Representatives), that is or would be reasonably expected to result in a breach or violation of, or be in conflict with, any ParentCo confidentiality obligation to GSK under the Collaboration Agreement and/or the Strategic Alliance Agreement.  To the extent that SpinCo or any of its Representatives becomes aware or believes that it has or may have received from ParentCo or any of its Representatives Confidential Information (as defined in the Collaboration Agreement or the Strategic Alliance Agreement) of GSK, it will promptly notify ParentCo in writing, will follow any reasonable instructions from ParentCo with respect to the return or destruction of such information, and will not use or disclose such information unless ParentCo confirms that it is not Confidential Information (as defined in the Collaboration Agreement or the Strategic Alliance Agreement) of GSK.  Each party agrees and understands that monetary damages would not adequately compensate the non-breaching party for a breach of this Section 8.6, that this Section 8.6 shall, to the fullest extent permitted by law, be specifically enforceable, and that any breach or threatened breach of this Section 8.6  shall be the proper subject of a temporary or permanent injunction or restraining order sought pursuant to Section 12.9 hereof.  Further, ParentCo and SpinCo waive, to the fullest extent permitted by law, any claim or defense that there is an adequate remedy at law for such breach or threatened breach.  Notwithstanding any other provision contained herein, SpinCo acknowledges and agrees that it has no rights to any non-public information under the Collaboration Agreement and/or the Strategic Alliance Agreement, the disclosure of which by ParentCo or any of its Representatives to SpinCo or any of its Representatives is or would be reasonably expected to result in a breach or violation of, or be in conflict with, any ParentCo confidentiality obligation to GSK under the Collaboration Agreement and/or the Strategic Alliance Agreement.  Notwithstanding anything else to the contrary, in the event of any conflict between this Section 8.6, or any covenant, right, agreement, obligation or duty of ParentCo or SpinCo (or any of their respective Representatives) under this Section 8.6, on the one hand, and any other provision of this Agreement, or any attachment hereto or any covenant, right, agreement, obligation or duty of ParentCo or SpinCo (or any of their respective Representatives) thereunder, on the other hand, this Section 8.6 shall govern and supersede such other provision, attachment, covenant, agreement, obligation or duty. Each party will be liable for breach of this Section 8.6 by any of its Representatives.

Article IX

DISPUTE RESOLUTION

9.1                               Disputes and Negotiation.  ParentCo and SpinCo recognize that disputes as to certain matters may from time to time arise during the effectiveness of this Agreement and the

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Ancillary Agreements which relate to either Party’s rights and obligations hereunder or thereunder.  It is the objective of the Parties to establish procedures to facilitate the resolution of disputes arising under this Agreement and the Ancillary Agreements (other than the TRC Operating Agreement) in an expedient manner by mutual cooperation and without resort to litigation.  To accomplish this objective, the Parties agree to follow the procedures set forth in this Article IX if and when a dispute arises under this Agreement or the Ancillary Agreements (other than the TRC Operating Agreement).  In the event of a dispute between the Parties, a designated representative of each of ParentCo and SpinCo will meet as reasonably requested by either Party to review any such dispute.  If the disagreement is not resolved by the designated representatives by mutual agreement within thirty (30) days after a meeting to discuss the disagreement, either Party may at any time thereafter provide the other Party written notice specifying the terms of such disagreement in reasonable detail.  Upon receipt of such notice, the chief executive officers of ParentCo and SpinCo shall meet at a mutually agreed upon time and location for the purpose of resolving such disagreement.  The chief executive officers of ParentCo and SpinCo will discuss such disagreement and/or negotiate for a period of up to sixty (60) days in an effort to resolve such disagreement or negotiate an acceptable interpretation or revision of the applicable portion of this Agreement or the Ancillary Agreements (other than the TRC Operating Agreement) mutually agreeable to both Parties, without the necessity of formal procedures relating thereto.  During the course of such negotiations, the Parties will reasonably cooperate and provide information that is not materially confidential in order that each of the Parties may be fully informed with respect to the issues in dispute.  The institution of a formal proceeding, including arbitration under Section 9.2, to resolve the disagreement may occur by written notice to the other Party only after the earlier of: (i) the chief executive officers of ParentCo and SpinCo mutually agreeing that resolution of the disagreement through continued negotiation is not likely to occur; or (ii) the expiration of the sixty (60) day negotiation period.

9.2                               Dispute Resolution and Arbitration.  Disputes arising out of, relating to or in connection with this Agreement or the Ancillary Agreements (other than the TRC Operating Agreement), or in relations between the parties with respect to the subject matter hereof, for any reason or under any circumstances, will be finally settled by a single arbitrator in a binding arbitration in accordance with the Judicial Arbitration and Mediation Services (“JAMS”) Comprehensive Arbitration Rules and Procedures (the “Rules”).  Upon receipt of written notice by one Party to the other of the existence of a dispute, the Parties shall, within thirty (30) days conduct a meeting of one or more senior executives of each Party, with full settlement authority, in an attempt to resolve the dispute.  Each Party shall make available appropriate personnel to meet and confer with the other Party reasonably within the thirty-day period.  Upon the expiration of the thirty-day period, or upon the termination of discussions between the senior executives, either Party may elect arbitration of any dispute by written notice to the other (the “Arbitration Notice”).  The arbitration shall be held in San Francisco, California before one (1) arbitrator from JAMS  having substantial experience as a jurist and mediator with significant disputes in the pharmaceutical industry selected by the mutual agreement of SpinCo and ParentCo; provided, however, that if such parties cannot agree on an arbitrator within thirty (30) days of the Arbitration Notice, either Party may request JAMS select the arbitrator, and JAMS shall select an arbitrator pursuant to the procedure set out by the Rules; provided, however, that the arbitrator selected by JAMS shall be a former judge with at least fifteen (15) years’ experience addressing as a jurist and/or mediator significant disputes in the pharmaceutical industry.  The arbitration shall be administered by JAMS pursuant to the Rules.  Judgment on the

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arbitration award may be entered in any court having jurisdiction.  The arbitrator may, in the arbitration award, allocate for payment by the non-prevailing party all or part of the costs of the arbitration, including fees of the arbitrator and the reasonable attorneys’ fees and costs incurred by the prevailing party.  This Section shall not preclude the parties from seeking provisional remedies in aid of arbitration or equitable relief from a court of appropriate jurisdiction.  In respect of any actions for such provisional remedies, injunctive or other equitable relief hereunder, any action or proceeding may be brought against any Party in the state and federal courts located in the county of San Mateo, California and each of the parties consents to the jurisdiction of such courts in any such action or proceeding and waives any objection to venue laid therein.

9.3                               Confidentiality. The arbitration proceeding shall be confidential and the arbitrator(s) shall issue appropriate protective orders to safeguard each Party’s confidential Information. Except as required by law, no Party shall make (or instruct the arbitrator(s) to make) any public announcement with respect to the proceedings or decision of the arbitrator(s) without prior written consent of each other Party. The existence of any dispute submitted to arbitration, and the award, shall be kept in confidence by the Parties and the arbitrator(s), except as may be required in connection with the enforcement of such award or as otherwise required by applicable law or regulatory authority.

9.4                               Limitation of Liability. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES, INCLUDING, WITHOUT LIMITATION, LOST PROFITS AND BUSINESS INTERRUPTION.

Article X

FURTHER ASSURANCES

10.1                        Further Assurances.

(a)                                 In addition to and without limiting the actions specifically provided in this Agreement, each of the Parties shall use its reasonable best efforts, prior to, on and after the Distribution Date, to take, or cause to be taken, all actions, and to do, or cause to be done, all things, reasonably necessary, proper or advisable under applicable laws, regulations and agreements to consummate and make effective the transactions contemplated by this Agreement and the Ancillary Agreements.

(b)                                 Without limiting the foregoing, prior to, on and after the Distribution Date, each Party shall cooperate with the other Party, and without any further consideration, but at the expense of the requesting Party, to execute and deliver, or use its reasonable best efforts to cause to be executed and delivered, all instruments, including instruments of conveyance, assignment and transfer, and to make all filings with, and to obtain all consents, approvals or authorizations of, any Governmental entity or any other Person under any permit, license, agreement, indenture or other instrument (including any Consents or Governmental Approvals), and to take all such other actions as such Party may reasonably be requested to take by the other Party from time to time, consistent with the terms of this Agreement and the Ancillary Agreements, in order to

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effectuate the provisions and purposes of this Agreement and the Ancillary Agreements and the transfers of the SpinCo Assets and the assignment and assumption of the SpinCo Liabilities and the other transactions contemplated hereby and thereby.

Article XI

TERMINATION

11.1                        Termination.  Notwithstanding anything to the contrary herein, this Agreement (including Article V (Indemnification)) may be terminated and the Separation and Distribution may be amended, modified or abandoned at any time prior to the Distribution by and in the sole discretion of ParentCo without the approval of SpinCo or the stockholders of ParentCo.  In the event of such termination, no Party shall have any Liability to the other Party or any other Person.  After the Distribution, this Agreement may not be terminated except by an agreement in writing signed by each Party.

Article XII

MISCELLANEOUS

12.1                        Governing Law; Jurisdiction.  This Agreement shall be deemed to have been made in the State of Delaware and its form, execution, validity, construction and effect shall be determined in accordance with the laws of the State of Delaware, without giving effect to the principles of conflicts of law thereof. In respect of any actions for injunctive or other equitable relief hereunder, any action or proceeding may be brought against any Party in the state and federal courts located in the county of San Mateo, California and each of the parties consents to the jurisdiction of such courts in any such action or proceeding and waives any objection to venue laid therein.

12.2                        Assignability.  Except as otherwise provided in the TRC Operating Agreement, the provisions of this Agreement, each Ancillary Agreement and the obligations and rights hereunder shall be binding upon, inure to the benefit of and be enforceable by (and against) the Parties and their respective successors and permitted transferees and assigns.  Notwithstanding the foregoing, this Agreement shall not be assignable, in whole or in part, by any Party without the prior written consent of the other Party, and any attempt to assign any rights or obligations arising under this Agreement without such consent shall be null and void; provided, however, that a Party may assign this Agreement to an Affiliate controlled by such Party or in connection with a merger transaction in which such Party is not the surviving entity or in connection with the sale or other transfer by such Party of all or substantially all of its assets, and upon the effectiveness of such assignment, the assigning Party shall be released from all of its obligations under this Agreement if the surviving entity of such merger or the transferee of such assets shall agree in writing, in form and substance reasonably satisfactory to the other Party, to be bound by all terms of this Agreement as if named as a “Party” hereto.

12.3                        Third Party Beneficiaries.  Except for the indemnification rights under this Agreement of any ParentCo Indemnitee or SpinCo Indemnitee in their respective capacities as such, (a) the provisions of this Agreement and each Ancillary Agreement (other than the TRC

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Operating Agreement) are solely for the benefit of the Parties and are not intended to confer upon any Person except the Parties any rights or remedies hereunder, and (b) there are no Third Party beneficiaries of this Agreement or any Ancillary Agreement (other than the TRC Operating Agreement) and neither this Agreement nor any Ancillary Agreement (other than the TRC Operating Agreement) shall provide any Third Party with any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement or any Ancillary Agreement (other than the TRC Operating Agreement).

12.4                        Notices.  All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given:  (a) upon personal delivery to the Party to be notified, (b) when sent by confirmed facsimile, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt.  All communications shall be sent to the respective parties at the addresses set forth below (or at such other addresses as shall be specified by notice given in accordance with this Section):

12.5                        Severability.  If any provision of this Agreement or any Ancillary Agreement (other than the TRC Operating Agreement) or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof or thereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby or thereby, as the case may be, is not affected in any manner adverse to any Party.  Upon such determination, the Parties shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to affect the original intent of the Parties.

12.6                        Expenses.  Except as expressly set forth in this Agreement or in any Ancillary Agreement, whether or not the Separation or the Distribution is consummated, all Third Party fees, costs and expenses paid or incurred in connection with the Separation and Distribution shall be paid by ParentCo but only to the extent such fees arise or were paid or incurred prior to the Effective Time.

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12.7                        Survival of Covenants.  Except as expressly set forth in any Ancillary Agreement, all covenants, representations and warranties contained in this Agreement and each Ancillary Agreement, and liability for the breach of any obligations contained herein, shall survive the Effective Time and remain in full force and effect in accordance with their applicable terms.

12.8                        Waivers of Default.  The failure of either Party to require strict performance by the other Party of any provision in this Agreement or any Ancillary Agreement will not waive or diminish such Party’s right to demand strict performance thereafter of that or any other provision hereof.

12.9                        Specific Performance.  The Parties agree that irreparable damage would occur in the event that the provisions of this Agreement were not performed in accordance with their specific terms.  Accordingly, it is hereby agreed that the Parties shall be entitled to (a) an injunction or injunctions to enforce specifically the terms and provisions hereof in any arbitration in accordance with Article IX, (b) provisional or temporary injunctive relief in accordance therewith in the courts located in San Mateo County, California, and (c) enforcement of any such award of an arbitral tribunal in any court of the United States, or any other any court or tribunal sitting in any state of the United States or in any foreign country that has jurisdiction, this being in addition to any other remedy or relief to which they may be entitled.

12.10                 Waiver of Jury Trial. SUBJECT TO ARTICLE IX HEREIN, EACH OF THE PARTIES HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY COURT PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF AND PERMITTED UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH OF THE PARTIES HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 12.10.

12.11                 Amendments.  This Agreement may not be modified or amended except by an agreement in writing signed by each of the Parties.

12.12                 Schedules.  All schedules attached hereto are hereby incorporated in and made a part of this Agreement as if set forth in full herein.  Capitalized terms used in the schedules hereto but not otherwise defined therein will have the respective meanings assigned to such terms in this Agreement.

12.13                 Construction.

(a)                                 This Agreement has been prepared jointly and shall not be strictly construed against either Party.

(b)                                 For purposes of this Agreement, whenever the context requires:  the singular number shall include the plural, and vice versa; the masculine gender shall include the

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feminine and neuter genders; the feminine gender shall include the masculine and neuter genders; and the neuter gender shall include the masculine and feminine genders.

(c)                                  Except as otherwise indicated, all references in this Agreement to “Articles,” “Sections,” “Exhibits” and “Attachments” are intended to refer to Articles and Sections of , and Exhibits and Attachments, to this Agreement.

(d)                                 The words “include” and “including,” shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words “without limitation.”

(e)                                  The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

12.14                 Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but which together shall constitute one and the same instrument.  Any executed counterpart delivered by facsimile or other means of electronic transmission shall be deemed an original for all purposes.

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, the Parties have caused this Separation and Distribution Agreement to be executed by their duly authorized representatives as of the day and year first above written.

 [Signature Page to Separation and Distribution Agreement]

IN WITNESS WHEREOF, the Parties have caused this Separation and Distribution Agreement to be executed by their duly authorized representatives as of the day and year first above written.

[Signature Page to Separation and Distribution Agreement]

Exhibit 10.2

TRANSITION SERVICES AGREEMENT

by and between

THERAVANCE, INC.

and

THERAVANCE BIOPHARMA, INC.

Dated as of June 2, 2014

TRANSITION SERVICES AGREEMENT

This TRANSITION SERVICES AGREEMENT (this “Agreement”) is entered into as of June 2, 2014, by and between Theravance, Inc., a Delaware corporation (“ParentCo”), and Theravance Biopharma, Inc., a Cayman Island exempted company  (“SpinCo”), each a “Party” and together, the “Parties”.  Capitalized terms not defined herein shall have the meaning set forth in that certain Separation and Distribution Agreement, dated June 1, 2014 (as amended or otherwise modified from time to time, the “Separation Agreement”) by and between the Parties.  This Agreement shall be effective on the Distribution Date, as defined in the Separation Agreement.

RECITALS

WHEREAS, the Board of Directors of ParentCo has determined that it is appropriate, desirable and in the best interests of ParentCo and its stockholders to separate ParentCo into two separate, independent and publicly traded companies;

WHEREAS, to effect this separation the Parties entered into the Separation Agreement;

WHEREAS, the Parties have agreed to enter into this Agreement in order for ParentCo to assist SpinCo, and for SpinCo to assist ParentCo, each for a period from and after the Distribution Date, by providing to SpinCo and ParentCo, respectively, certain services and support not otherwise specified in the Separation Agreement or any other Ancillary Agreement.

NOW, THEREFORE, in consideration of the foregoing premises, the mutual promises and covenants hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:

Article 1

DEFINITIONS

As used in this Agreement, the following capitalized terms shall have the following meanings:

1.1                               “Additional Service” shall have the meaning set forth in Section 2.7(a).

1.2                               “Agreement Dispute” shall have the meaning set forth in Section 11.

1.3                               “Business” shall mean the ParentCo Business or the SpinCo Business, as applicable.

1.4                               “Collaboration Agreement” shall have the meaning set forth in the Separation Agreement.

1.5                               “Default Interest Rate” shall have the meaning set forth in Section 3.2(b).

1.6                               “Due Date” shall have the meaning set forth in Section 3.2(a).

1.7                               “Fee” or “Fees” shall have the meaning set forth in Section 3.1(a).

1.8                               “Force Majeure” shall mean, with respect to a Party, an event beyond the reasonable control of such Party (or any Person acting on its behalf), which by its nature could not have been foreseen by such Party (or such Person), or, if it could have been foreseen, was unavoidable, and includes acts of God, storms, floods, earthquakes, hurricanes, riots, pandemics, fires, sabotage, strikes, lockouts, civil commotion or civil unrest, interference by civil or military authorities, acts of war (declared or undeclared) or armed hostilities or other national or international calamity or one or more acts of terrorism.

1.9                               “ParentCo Project Manager” shall have the meaning set forth in Section 2.9.

1.10                        “ParentCo Services” shall mean the enumerated services described on Schedule A attached hereto.

1.11                        “Schedules” shall mean Schedule A and Schedule B attached hereto.

1.12                        “Service” shall mean any of the SpinCo Services or the ParentCo Services, as applicable.

1.13                        “Service Provider” shall mean ParentCo with respect to the ParentCo Services, and SpinCo with respect to the SpinCo Services.

1.14                        “Service Recipient” shall mean SpinCo with respect to the ParentCo Services, and ParentCo with respect to the SpinCo Services.

1.15                        “Services Group” shall mean any Services or group of Services identified on one of the Schedules for which a single, separate Fee is specified on such Schedule.

1.16                        “Services Term” shall have the meaning set forth in Section 4.1.

1.17                        “SpinCo Project Manager” shall have the meaning set forth in Section 2.9.

1.18                        “SpinCo Services” shall mean the enumerated services described on Schedule B attached hereto.

1.19                        “Strategic Alliance Agreement” shall have the meaning set forth in the Separation Agreement.

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Article 2

SERVICES

2.1                               Scope of Services.

(a)                                 SpinCo hereby retains ParentCo to provide, and ParentCo hereby agrees to provide, the ParentCo Services to SpinCo or any of its Subsidiaries, as designated by SpinCo, during the relevant Services Term.

(b)                                 ParentCo hereby retains SpinCo to provide, and SpinCo hereby agrees to provide, the SpinCo Services to ParentCo or any of its Subsidiaries, as designated by ParentCo, during the relevant Services Term.

(c)                                  Notwithstanding anything to the contrary in this Agreement, (i) the ParentCo Services shall be available to SpinCo or any of its Subsidiaries only for the purposes of conducting the SpinCo Business substantially in the same manner as it was conducted immediately prior to the Distribution Date; and (ii) the SpinCo Services shall be available to ParentCo or any of its Subsidiaries only for the purposes of conducting the ParentCo Business substantially in the same manner as it was conducted immediately prior to the Distribution Date.

(d) any employee or consultant of ParentCo or SpinCo who will be performing any Service hereunder shall, as a condition to performing such Service, sign a confidentiality  agreement in the form attached as Schedule C or Schedule D, as applicable.

2.2                               Provision of Services.  The ParentCo Services may be directly provided by ParentCo or may be provided through any of its Affiliates or subcontractors, and the SpinCo Services may be directly provided by SpinCo or may be provided through any of its Affiliates or subcontractors; provided, however, that the applicable Service Provider shall remain responsible, in accordance with this Agreement, for performance of any Service it causes to be so provided.

2.3                               No Assumption or Modification of Obligations.  Nothing herein shall be deemed to (a) constitute the assumption by Service Provider or any of its Affiliates, or the agreement to assume, any duties, obligations or liabilities of Service Recipient or its Affiliates whatsoever; or (b) alter, amend or otherwise modify any obligation of ParentCo or SpinCo, as the case may be, under the Separation Agreement.

2.4                               Application of Resources.  Unless otherwise expressly required under the terms of the Separation Agreement or any Schedules, or otherwise agreed to by the Parties in writing, in providing the Services, Service Provider or its Affiliates shall not be obligated to: (a) expend funds and other resources beyond levels that would be customary and reasonable for any other nationally recognized service provider to perform services that are similar to the relevant Services; (b) maintain the employment of any specific employee or subcontractor; provided, however that Service Provider shall use commercially reasonable efforts to provide a replacement with the necessary skill and expertise; (c) purchase, lease or license any additional (measured as of the date hereof) equipment or materials (but expressly excluding any renewal or extension of any leases or licenses required for Service Provider to perform the relevant Services during the relevant Services Term); (d) pay any of Service Recipient’s costs related to its or any

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of its Subsidiaries’ receipt of the Services; (e) lend any funds to a Service Recipient or its Subsidiaries; or (f) make any payments or disbursements on behalf of Service Recipient, except to the extent Service Recipient has previously delivered to Service Provider sufficient funds to make any such payment or disbursement.

2.5                               Performance of Services.  Subject to the other terms (a) in this Agreement setting forth and circumscribing Service Provider’s performance obligations hereunder (including in this Article 2 and in Article 6), and (b) in the relevant Schedules, each Service Provider shall perform the Services required to be provided by it hereunder in a manner specifically described in the relevant Schedules, or, to the extent not so described in such Schedules, in a manner that is substantially the same in nature, accuracy, quality, completeness, timeliness, responsiveness and efficiency with how such relevant Services have been rendered in support of the SpinCo Business and/or the ParentCo Business prior to the Distribution Date.  To the extent that either ParentCo or SpinCo determines that any sharing of information or historical knowledge would be commercially detrimental in any material respect, violate any Law or agreement or waive any attorney-client privilege, the work product doctrine or other applicable privilege, the Parties shall take all reasonable measures to permit the compliance with such obligations in a manner that avoids any such harm or consequence.

2.6                               Transitional Nature of Services; Changes.  The Parties acknowledge the transitional nature of the Services and agree that, notwithstanding anything to the contrary herein, each Service Provider may make changes from time to time in the manner of performing the Services if such Service Provider is making similar changes in performing similar services for itself and/or its Subsidiaries; provided that Service Provider must provide Service Recipient with at least thirty (30) days prior written notice of material changes and reasonably cooperate with Service Recipient in adjusting to such change.

2.7                               Additional Services; Extension of Services Terms.  In the event that the Parties identify and agree upon (a) an additional service to be provided under this Agreement, as well as the related fees and other specific terms and conditions applicable thereto (an “Additional Service”), or (b) an extension of any particular Service Term for any Services Group, as well as the related fees and other specific terms and conditions applicable thereto, the Parties shall execute an amendment to this Agreement that provides for the substitution of the relevant Schedule, or additions of supplements to the relevant Schedule, in order to describe such Additional Service or extension, and the agreed upon related fees and other specific terms and conditions applicable thereto.  It is understood that the Service Provider has no obligation to provide Additional Services and may reject any request by any Service Recipient for Additional Services for any reason or for no reason.

2.8                               Impracticability.  Subject to the provisions of Section 2.10, Service Provider shall not be required to provide any Service to the extent: (a) that the performance of the Services would (i) require Service Provider or any of its Subsidiaries to violate any applicable Laws (including any applicable codes or standards of conduct established by any Governmental Entity with respect to their activities subject to the jurisdiction of such Governmental Entity) or any internal policy reasonably adopted in order to comply with any applicable Laws; (ii) result in the breach of any software license, lease, or other Contract; or (iii) require prior approval of a Governmental Entity (except to the extent such approval has already been obtained); or (b) that

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Service Provider cannot provide such Service due to a Force Majeure event; provided, however that Service Provider shall resume such Service as soon as practicable after such Force Majeure event.

2.9                               Project Managers.  ParentCo shall designate from time to time at least one individual, and shall inform SpinCo of the identity of such individual, to whom all of SpinCo’s communications may be addressed with respect to the ParentCo Services and who has authority to act for and bind ParentCo in all aspects with respect to the ParentCo Services (the “ParentCo Project Manager”).   SpinCo shall designate from time to time at least one individual and shall inform ParentCo of the identity of such individual, to whom all of ParentCo’s communications may be addressed with respect to the SpinCo Services and who has authority to act for and bind SpinCo in all aspects with respect to the SpinCo Services (the “SpinCo Project Manager”).   The initial ParentCo Project Manager designated by ParentCo shall be Michael W. Aguiar and the initial SpinCo Project Manager designated by SpinCo shall be Renee D. Gala.

2.10                        Cooperation.  In the event that there is nonperformance of any Service as a result of impracticability pursuant to Section 2.8, the Parties agree to work together in good faith to arrange for an alternative means by which the applicable Service Recipient may obtain, at its sole cost and expense, the Service so affected.  The Service Provider shall cooperate with the Service Recipient in connection with the performance of the Services, including producing on a timely basis all Contracts, documents and other information that is reasonably requested with respect to the performance of Services; provided, however, that such cooperation shall not unreasonably disrupt the normal operations of the Service Recipient or its respective Subsidiaries.

2.11                        Independent Contractor Relationship.  The relationship of the Parties hereunder is that of independent contractors, and nothing in this Agreement is intended to, or shall be construed to, create a partnership, agency, joint venture, employment or similar relationship.

Article 3
PRICING

3.1                               Fees.  In consideration of Services performed pursuant to this Agreement, the Parties shall pay the applicable fees set forth in the Schedules with respect to each Service (individually a “Fee” and collectively the “Fees”).

3.2                               Payment Procedures.  If Fees are payable pursuant to Section 3.1:

(a)                                 Service Provider shall invoice Service Recipient on a monthly basis for all Fees accrued with respect to the prior month.   Fees shall be payable by Service Recipient within thirty (30) days after Service Recipient’s receipt of an invoice (the “Due Date”).  All amounts (i) payable pursuant to the terms of this Agreement shall be paid to Service Provider as directed by Service Provider, and (ii) due and payable hereunder shall be invoiced and paid in U.S. dollars, except as may be expressly provided in any relevant Schedule.  A Service Recipient’s obligation to make any required payments under this Agreement shall not be subject to any unilateral right of offset, set-off, deduction or counterclaim, however arising.

(b)                                 Default Interest Rate.  Subject to the provisions of Section 3.2(c), amounts not paid on or before the Due Date shall be payable with accrued interest thereon, from the date

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originally due, at an interest rate per annum equal to the prime rate as published by The Wall Street Journal (or any successor) as its prime rate in effect on the date that such payment was first due plus two percent (2%).

(c)                                  Disputes.  In the event that Service Recipient disputes the accuracy of any invoice or portion thereof, Service Recipient shall provide Service Provider on or prior to the Due Date written notice of the disputed amounts, together with a statement of the particulars of the dispute.  Should Service Recipient fail to provide notice of any disputed amounts on or before the Due Date, the amounts set forth on the invoice shall be owed with interest at the Default Interest Rate from the Due Date until payment is received.  Should Service Recipient provide the required information on or before the Due Date, Service Provider shall have thirty (30) days following receipt of the required information to reject Service Recipient’s modified invoice (or portion thereof) by providing Service Recipient notice of such rejection within such 30-day period.  Should Service Provider fail to provide such notice within the time period allowed, Service Recipient’s modified invoice (or portion thereof) shall be deemed to be the correct invoice.  Should Service Provider provide the required notice within such 30-day period, resolution of the disputed invoice shall be in accordance with the provisions of Article 11 hereof.  If Service Recipient has underpaid the amount actually due, Service Recipient shall remit to the Service Provider, within five (5) business days after receipt of the determination from Service Provider, any amount due plus interest at the Default Interest Rate from the Due Date until paid.  Notwithstanding any disputed invoice or portion thereof, Service Recipient shall nevertheless pay when due any undisputed amount of such invoice to Service Provider.

3.3                               Taxes.  If any Governmental Entity shall impose a tax on the Services rendered to a Service Recipient or its Subsidiaries by Service Provider hereunder, Service Recipient agrees to pay, or remit to Service Provider so that Service Provider may pay, the amount of such tax imposed now or in the future on the Services rendered to Service Recipient or its Subsidiaries by Service Provider under this Agreement.  Notwithstanding anything to the contrary contained in this Agreement, Service Recipient shall have no liability for, and shall not be obligated to pay for, any property taxes of any kind or type applicable to the property of Service Provider or any of its Subsidiaries or any income taxes of any kind or type applicable to the income of Service Provider or any of its Subsidiaries, except as may be expressly provided in any relevant Schedule.

3.4                               Expenses.  In addition to the payment of all Fees, at the end of each month during the Services Term, Service Recipient shall reimburse Service Provider for all reasonable out-of-pocket costs and expenses incurred by Service Provider or its Subsidiaries in connection with providing the Services (including pass-through costs for third party contractors and travel-related expenses); provided, however, that any such costs and expenses greater than $75,000 must be pre-approved in writing.  Any travel-related expenses incurred in performing the Services shall be incurred and charged to Service Recipient in accordance with Service Provider’s then applicable business travel policies.

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Article 4
SERVICES TERM; TERMINATION

4.1                               Services Term.  The performance of the Services shall commence on the Distribution Date and shall, unless otherwise agreed to by the Parties, expire on the earlier of (i) the expiration date set forth on Schedule A or Schedule B, as applicable, with respect to each such Service, unless earlier terminated pursuant to Section 4.2 hereof, or (ii) the second anniversary of the date of this Agreement (the “Services Term”).

4.2                               Termination.  The obligations under this Agreement may be terminated prior to the expiration of the relevant Services Term only as provided on Schedule A or Schedule B, as applicable, with respect to each such Service, or otherwise with the mutual written agreement of the Parties.

4.3                               Rights and Obligations Upon Termination.  Upon expiration of the Services Term or in the event of a termination pursuant to Section 4.2, no Party, nor any of its Affiliates, shall have any liability or further obligation to any other Party or any of its Affiliates pursuant to this Agreement, except: (a) that the provisions of Sections 3 (to the extent of amounts accrued thereunder through the date of such expiration or termination), 4.3, 5, 6, 7, 8, 9, 10, 11, 12, 13, and 14 (as well as in each case associated defined terms) shall survive any such expiration or termination and not be extinguished thereby; and (b) any Party nevertheless shall be entitled to seek any remedy to which it may be entitled at law or in equity for the violation or breach by the other Party of any agreement, covenant, representation, warranty, or indemnity contained in this Agreement that occurs prior to such expiration or termination.

Article 5
RETURN OF LEASED PROPERTY OR LICENSED SOFTWARE

Service Recipient shall be liable for all costs and expenses incurred by Service Provider or any of its Subsidiaries resulting from any delay or failure of Service Recipient to return to Service Provider or any licensor, as applicable, any leased property or licensed software that is included as part of the Services provided to such Service Recipient upon (a) the termination of the relevant Services as provided herein, or (b) the expiration of the term of the applicable lease or license, provided that Services Provider has provided Service Recipient with at least sixty (60) days prior written notice of such expiration.

Article 6
INTERNAL CONTROLS AND PROCEDURES

In addition to the record retention requirements of the Separation Agreement, with respect to the Services for which each Service Provider is responsible, such Service Provider shall maintain and comply with such internal controls and procedures as are necessary to comply with the Sarbanes-Oxley Act of 2002 or as otherwise agreed by the Parties to be implemented by the Parties to comply with internal controls and procedures or applicable Law.  In the event a Service Recipient requires a change to the internal controls or procedures, or requires the implementation of additional internal controls or procedures, related to the Services required to be provided to such Service Recipient in order for such Service Recipient to comply with

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changes to applicable Law, Service Provider shall change or add to such Service Provider’s internal controls or procedures related to such Services as reasonably requested by such Service Recipient; provided, however, in connection with a Service Provider changing or adding to internal controls or procedures as required by the foregoing, Service Recipient shall pay for any and all additional costs and expenses associated with the implementation or maintenance of the applicable change or addition; provided further, however, that if such change or addition is required for the compliance by both Parties with a Law applicable to both Parties, the Parties shall negotiate in good faith an equitable sharing of the costs and expenses associated with such change or addition.

Article 7
BOOKS AND RECORDS

The Parties shall keep and maintain books, records, accounts and other documents sufficient to reflect accurately and completely the transactions conducted, and all associated costs incurred, pursuant to this Agreement.  Such records shall include receipts, invoices, memoranda, vouchers, inventories, timesheets and accounts pertaining to the Services, as well as complete copies of all contracts, purchase orders, service agreements and other such arrangements entered into in connection therewith.

Article 8
COMPLIANCE WITH LAWS AND GOVERNMENTAL REQUIREMENTS

Each Party shall be responsible for compliance with all Laws affecting its Business.  Each Service Recipient shall be responsible for any use such Service Recipient may make of the Services to assist it in complying with applicable Laws.  Each Service Provider shall comply with (a) all Laws applicable to the provision by it of the Services hereunder, and (b) the accounting and reporting requirements of any Governmental Entity having jurisdiction over it or any Party with respect to their respective activities related to such Service Provider’s performance of the Services.

Article 9
DISCLAIMER AND LIMITATION OF LIABILITY

9.1                               EACH PARTY ACKNOWLEDGES AND AGREES (A) THAT ALL SERVICES ARE PROVIDED BY SERVICE PROVIDER ON AN “AS IS” BASIS, AND (B) THAT NEITHER SERVICE PROVIDER MAKES ANY REPRESENTATIONS OR WARRANTIES, WHETHER STATUTORY, EXPRESS, OR IMPLIED, TO SERVICE RECIPIENT OR ANY OF ITS AFFILIATES WITH RESPECT TO THE SERVICES, ANY EQUIPMENT OR MATERIALS PROVIDED UNDER THIS AGREEMENT, OR OTHERWISE HEREUNDER, INCLUDING ANY WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, OR ANY WARRANTIES ARISING FROM COURSE OF DEALING OR USAGE OF TRADE.

9.2                               NO PARTY SHALL UNDER ANY CIRCUMSTANCES BE LIABLE TO ANY OTHER PARTY FOR ANY SPECIAL, INDIRECT, INCIDENTAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES (INCLUDING LOSS OF PROFITS OR

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REVENUE, LOSS OF BUSINESS, LOSS OF USE OR OF DATA, INTERRUPTION OF BUSINESS OR OTHERWISE) RESULTING OR ARISING FROM THE SERVICES, ANY PERFORMANCE OR NONPERFORMANCE OF THE SERVICES OR TERMINATION OF THE SERVICES REGARDLESS OF WHETHER SUCH DAMAGES OR OTHER RELIEF ARE SOUGHT BASED ON BREACH OF WARRANTY, BREACH OF CONTRACT, NEGLIGENCE, STRICT LIABILITY IN TORT, OR ANY OTHER LEGAL OR EQUITABLE THEORY, EXCEPT TO THE EXTENT THAT ANY SUCH DAMAGES RELATE TO A CLAIM FOR INDEMNIFICATION PURSUANT TO ARTICLE 10, A BREACH OF ANY OF THE CONFIDENTIALITY PROVISIONS OF THIS AGREEMENT OR THE SEPARATION AGREEMENT, OR FRAUD, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE SERVICE PROVIDER OR ITS AFFILIATES.

Article 10
INDEMNITY

10.1                        Service Recipient Indemnity.  Service Recipient hereby agrees to indemnify, defend and hold harmless Service Provider and each of its Affiliates from and against any and all claims, losses, demands, liabilities, costs and expenses (including reasonable attorneys’ fees and costs and expenses related thereto) suffered or incurred by Service Provider or any of its Affiliates as a result of or in connection with any third party claims to the extent caused, in whole or in part, by the fraud, gross negligence or willful misconduct of Service Recipient or any of its Affiliates in its receipt of the Services or in its provision to Service Provider or any of its Affiliates of any information reasonably required for performance of the Services by Service Provider or any of its Affiliates.  In no event shall the aggregate liability of Service Recipient and its Affiliates to Service Provider and its Affiliates, for any damages concerning Service Recipient’s or its Subsidiaries’ receipt of the Services or any other matter arising out of, or related to, this Agreement (regardless of whether any such claim for such damages is based in contract or in tort) exceed the amounts actually paid to Service Provider by Service Recipient pursuant to this Agreement.

10.2                        Service Provider Indemnity.  Service Provider hereby agrees to indemnify, defend and hold harmless Service Recipient and each of its Affiliates from and against any and all claims, losses, demands, liabilities, costs and expenses (including reasonable attorney’s fees and costs and expenses related thereto) suffered or incurred by Service Recipient or any of its Affiliates as a result of, or in connection with, any third party claims to the extent caused, in whole or in part, by the fraud, gross negligence or willful misconduct of Service Provider or any of its Affiliates in performing the Services.  In no event shall the aggregate liability of Service Provider and its Affiliates to Service Recipient and its Affiliates, for any damages concerning Service Provider’s or its Subsidiaries’ or subcontractors’ performance or nonperformance of the Services or any other matter arising out of, or related to, this Agreement (regardless of whether any such claim for such damages is based in contract or in tort) exceed the amounts actually paid to Service Provider by Service Recipient pursuant to this Agreement.

10.3                        Procedures.  Any claim for indemnification under this Article 10 shall be governed by, and be subject to, the provisions of Article V of the Separation Agreement, which provisions are hereby incorporated by reference into this Agreement and any references to

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“Agreement” in such Article V as incorporated herein shall be deemed to be references to this Agreement.

Article 11
DISPUTE RESOLUTION

Any controversy, dispute or claim arising out of, in connection with, or in relation to the interpretation, performance, nonperformance, validity, termination or breach of this Agreement or otherwise arising out of, or in any way related to this Agreement or the transactions contemplated hereby, including any claim based on contract, tort, statute or constitution (but excluding any controversy, dispute or claim arising out of any Contract relating to the use or lease of real property if any third party is a necessary party to such controversy, dispute or claim) (collectively, “Agreement Dispute”), shall be governed by, and be subject to, the provisions of Article IX of the Separation Agreement, which provisions (and related defined terms) are hereby incorporated by reference into this Agreement.

Article 12
PROPERTY RIGHTS

The Parties acknowledge and agree that nothing in this Agreement is intended to transfer any right, title, or interest in and to any tangible, intangible, real or personal property (including any and all intellectual property rights).  Notwithstanding any materials, deliverables, or other products that may be created or developed by Service Provider or its Subsidiaries from the date hereof through the expiration or termination of the relevant  Services Term, Service Provider does not hereby convey, nor does Service Recipient nor any of its Subsidiaries hereby obtain, any right, title, or interest in or to any of Service Provider’s or any of its Subsidiaries’ equipment, materials, deliverables, products, or any other rights or property used to provide the Services.  All customer and personnel data, files and input and output materials and the media upon which they are located that are supplied by Service Recipient or any of its Subsidiaries in connection with this Agreement shall remain Service Recipient’s or such Subsidiary’s property, respectively, and Service Provider shall not have any rights or interests with respect thereto.

Article 13
CONFIDENTIAL INFORMATION

Any Confidential Information received by either Party or its Affiliates from the other Party or any of its Affiliates in connection with this Agreement shall be governed by, and be subject to, the provisions of Article VII of the Separation Agreement, which provisions are hereby incorporated by reference into this Agreement and any references to “Agreement” in such Article VII as incorporated herein shall be deemed to be references to this Agreement.  However, for the avoidance of doubt, neither Party shall be obligated to disclose its own Confidential Information in the course of providing the Services hereunder.

Article 14
GSK AGREEMENTS

Notwithstanding any other provision contained herein, ParentCo shall not, and shall cause its Affiliates and its and its Affiliates’ officers, directors, employees, agents and

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representatives (collectively, “Representatives”) not to, take (or omit to take) any action (including, without limitation, the disclosure of any information to SpinCo or any of its Representatives), that is or would be reasonably expected to result in a breach or violation of, or be in conflict with, any ParentCo confidentiality obligation to GSK under the Collaboration Agreement and/or the Strategic Alliance Agreement.  To the extent that SpinCo or any of its Representatives becomes aware or believes that it has or may have received from ParentCo or any of its Representatives Confidential Information (as defined in the Collaboration Agreement or the Strategic Alliance Agreement) of GSK, it will promptly notify ParentCo in writing, will follow any reasonable instructions from ParentCo with respect to the return or destruction of such information, and will not use or disclose such information unless ParentCo confirms that it is not Confidential Information (as defined in the Collaboration Agreement or the Strategic Alliance Agreement) of GSK.  Each party agrees and understands that monetary damages would not adequately compensate the non-breaching party for a breach of this Article 14, that this Article 14 shall, to the fullest extent permitted by law, be specifically enforceable, and that any breach or threatened breach of this Article 14 shall be the proper subject of a temporary or permanent injunction or restraining order.  Further, ParentCo and SpinCo waive, to the fullest extent permitted by law, any claim or defense that there is an adequate remedy at law for such breach or threatened breach.  Notwithstanding any other provision contained herein, SpinCo acknowledges and agrees that it has no rights to any non-public information under the Collaboration Agreement and/or the Strategic Alliance Agreement, the disclosure of which by ParentCo or any of its Representatives to SpinCo or any of its Representatives is or would be reasonably expected to result in a breach or violation of, or be in conflict with, any ParentCo confidentiality obligation to GSK under the Collaboration Agreement and/or the Strategic Alliance Agreement.  Notwithstanding anything else to the contrary, in the event of any conflict between this Article 14, or any covenant, right, agreement, obligation or duty of ParentCo or SpinCo (or any of their respective Representatives) under this Article 14, on the one hand, and any other provision of this Agreement, or any attachment hereto or any covenant, right, agreement, obligation or duty of ParentCo or SpinCo (or any of their respective Representatives) thereunder, on the other hand, this Article 14 shall govern and supersede such other provision, attachment, covenant, agreement, obligation or duty. Each party will be liable for breach of this Article 14 by any of its Representatives.

Article 15
MISCELLANEOUS

15.1                        Incorporation.  The provisions of Article XII (Miscellaneous) (except for Section 12.8) of the Separation Agreement are incorporated herein, mutatis mutandis, by reference.

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, the Parties caused this Transition Services Agreement to be duly executed as of the day and year first above written.

Exhibit 10.3

TAX MATTERS AGREEMENT

by and between

THERAVANCE, INC.

and

THERAVANCE BIOPHARMA, INC.

Dated as of June 2, 2014

TABLE OF CONTENTS

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ii

TAX MATTERS AGREEMENT

THIS TAX MATTERS AGREEMENT (as the same may be amended or supplemented from time to time, this “Agreement”)  is entered into as of June 2, 2014, by and between Theravance, Inc., a Delaware corporation (“Theravance”), and Theravance Biopharma, Inc., a Cayman corporation (“Biopharma”).  Theravance and Biopharma are sometimes referred to herein individually as a “Party,” and collectively as the “Parties.”  Capitalized terms used herein and not otherwise defined have the respective meanings set forth in Article I.

RECITALS

WHEREAS, Theravance and Biopharma have entered into a Separation and Distribution Agreement, dated as of June 1, 2014 (the “Separation Agreement”), pursuant to which Theravance will be separated into two independent publicly-traded companies:  (a) Biopharma, which, following consummation of the transactions contemplated by the Separation Agreement, will own and conduct the Biopharma Business, and (b) Theravance, which, following the consummation of the transactions contemplated by the Separation Agreement, will own and conduct the Theravance Business;

WHEREAS, on July 29, 2013, Theravance formed Biopharma as a wholly-owned subsidiary;

WHEREAS, as set forth in the Separation Agreement, and subject to the terms and conditions thereof, the Parties currently intend to effect (i) the transfer by Theravance to Biopharma of certain assets and liabilities related to the Biopharma Business (the “Contribution”); and (ii) the distribution by Theravance to the holders of outstanding shares of common stock, par value $0.01 per share, of Theravance, on a pro rata basis, of all of the outstanding shares of common stock, par value $0.00001 per share, of Biopharma, owned by Theravance as of the Distribution Date (which shall represent 100% of the issued and outstanding shares of Biopharma common stock) (the “Distribution”); and

WHEREAS, the Parties desire to set forth their agreement on the rights and obligations, following the Distribution, of the members of the Theravance Group, on the one hand, and the members of the Biopharma Group, on the other hand, with respect to (a) handling and allocating United States federal, state and local and foreign Taxes in periods both before and after the Distribution Date, (b) Taxes resulting from transactions effectuated in connection with the Distribution, and (c) various other Tax matters.

NOW, THEREFORE, in consideration of the foregoing and the terms, conditions, covenants and provisions of this Agreement, the Parties mutually covenant and agree as follows:

ARTICLE I

DEFINITIONS

“Affiliate” has the meaning set forth in the Separation Agreement.

“After Tax Amount” means any additional amount necessary to reflect (through a gross-up mechanism) the hypothetical Tax consequences of the receipt or accrual of any payment required to be made under this Agreement (including payment of an additional amount or amounts hereunder and the effect of the deductions available for interest paid or accrued and for Taxes such as state and local Income

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Taxes), determined by using the highest marginal corporate Tax rate (or rates, in the case of an item that affects more than one Tax) for the relevant Taxable Period (or portion thereof).

“Agreement” means this Tax Matters Agreement.

“Ancillary Agreements” has the meaning set forth in the Separation Agreement.

“Audit” means any audit, assessment of Taxes, or other examination by any Taxing Authority, proceeding, or appeal of such a proceeding relating to Taxes, whether administrative or judicial, including proceedings relating to competent authority determinations.

“Biopharma” has the meaning set forth in the first sentence of this Agreement.

“Biopharma Affiliate” means any previous, current or future Affiliate of Biopharma and/or one or more of its Affiliates.

“Biopharma Business” has the meaning given to the term “SpinCo Business” in the Separation Agreement.

“Biopharma Group” means Biopharma and each Biopharma Affiliate.

“Biopharma Group Member” means Biopharma, each Person that is or was an Biopharma Affiliate and each Person that becomes an Biopharma Affiliate after the Distribution.

“Code” means the Internal Revenue Code of 1986, as amended, and any successor thereto.

“Collaboration Agreement” has the meaning set forth in the Separation Agreement.

“Contribution” has the meaning set forth in the recitals to this Agreement.

“Dispute Resolution Commencement Date” has the meaning set forth in Section 8.3.

“Dispute” has the meaning set forth in Section 8.3.

“Distribution” has the meaning set forth in the recitals to this Agreement.

“Distribution Date” means the date on which the Distribution occurs, such date to be determined by, or under the authority of, the Board of Directors of Theravance, in its sole and absolute discretion.

“Employee Matters Agreement” means the Employee Matters Agreement entered into between Theravance and Biopharma as of the date hereof.

“Final Determination” means the final resolution of liability for any Tax for any Taxable Period, by or as a result of: (i) a final and unappealable decision, judgment, decree or other order by any court of competent jurisdiction; (ii)  a final settlement with the IRS, a closing agreement or accepted offer in compromise under Code section 7121 or 7122, or a comparable agreement under the laws of other jurisdictions, which resolves the entire liability for such Tax for any Taxable Period; (iii) any allowance of a refund or credit in respect of an overpayment of Tax, but only after the expiration of all periods during which such refund may be recovered by the jurisdiction imposing the Tax; or (iv) any other final disposition, including by reason of the expiration of the applicable statute of limitations.

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“GSK” has the meaning set forth in the Collaboration Agreement.

“Income Tax” means any federal, state, local or foreign Tax based upon, measured by or calculated by reference to net income or profits, net receipts or gross receipts (regardless of whether denominated as an “income tax,” a “franchise tax” or otherwise).

“Indemnifiable Loss Deduction” has the meaning set forth in Section 5.3.

“Indemnified Loss” has the meaning set forth in Section 5.3.

“Indemnifying Party” has the meaning set forth in Section 5.3.

“Indemnitee” has the meaning set forth in Section 5.3.

“IRS” means the United States Internal Revenue Service or any successor thereto, including, but not limited to its agents, representatives, and attorneys.

“LLC Agreement” means the Limited Liability Company Agreement of Theravance Respiratory Company, LLC, as the same may be amended and restated from time to time.

“Owed Party” has the meaning set forth in Section 6.1.

“Owing Party” has the meaning set forth in Section 6.1.

“Party” has the meaning set forth in the second sentence of this Agreement.

“Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.

“Post-Distribution Period” means a Taxable Period (or portion thereof) beginning after the Distribution Date.

“Refund” means any refund (or credit in lieu thereof) of Taxes (including any overpayment of Taxes that can be refunded or, alternatively, applied to other Taxes payable), including any interest paid on or with respect to such refund of Taxes; provided that for purposes of this Agreement, the amount of any Refund required to be paid to another Party shall be reduced by the net amount of any Income Taxes imposed on, related to, or attributable to, the receipt or accrual of such Refund.

“Restated Tax Saving Amount” has the meaning set forth in Section 5.4.

“Representatives” has the meaning set forth in Section 8.7.

“Separation Agreement” has the meaning set forth in the recitals to this Agreement.

“Straddle Period” means a Taxable Period that begins on or before and ends after the Distribution Date.

“Strategic Alliance Agreement” has the meaning set forth in the Separation Agreement.

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“Tax” and “Taxes” include all taxes, charges, fees, duties, levies, imposts or other assessments imposed by any federal, state, local or foreign Taxing Authority, including, but not limited to, income, gross receipts, excise, property, sales, use, license, capital stock, transfer, franchise, payroll, withholding, social security, value added and other taxes, and any interest, penalties or additions attributable thereto.

“Tax Asset” means any Tax Item that has accrued for Tax purposes, but has not been used during a Taxable Period, and that could reduce a Tax in another Taxable Period, including, but not limited to, a net operating loss, net capital loss, investment tax credit, foreign tax credit, charitable deduction, credit related to alternative minimum tax and any other Tax credit.

“Tax Benefit” means a reduction in the Tax liability of a taxpayer for any Taxable Period.  A Tax Benefit shall be deemed to have been realized or received from a Tax Item in a Taxable Period only if and to the extent that the Tax liability of the taxpayer for such period, after taking into account the effect of the Tax Item on the Tax liability of such taxpayer in the current period and all prior periods, is less than it would have been if such Tax liability were determined without regard to such Tax Item.

“Tax Item” means any item of income, gain, loss, deduction, credit, recapture of credit or any other attribute or item (including the adjusted basis of property) that may have the effect of increasing or decreasing any Tax.

“Tax Return” means any return, report, certificate, form or similar statement or document (including any related or supporting information or schedule attached thereto and any information return, amended tax return, claim for refund or declaration of estimated tax) supplied or required to be supplied to, or filed or required to be filed with, a Taxing Authority in connection with the determination, assessment or collection of any Tax or the administration of any laws, regulations or administrative requirements relating to any Tax.

“Tax Saving Amount” has the meaning set forth in Section 5.3.

“Tax Services” has the meaning set forth in Section 2.5(a).

“Taxable Period” means any period for which a liability for Tax is determined.

“Taxing Authority” means any governmental authority or any subdivision, agency, commission or authority thereof or any quasi-governmental or private body having jurisdiction over the assessment, determination, collection or imposition of any Tax (including the IRS).

“Theravance” has the meaning set forth in the first sentence of this Agreement.

“Theravance Affiliate” means any previous, current or future Affiliate of Theravance and/or one or more of its Affiliates, but excluding Biopharma and any Biopharma Affiliate.

“Theravance Business” has the meaning given to the term “ParentCo Business” in the Separation Agreement.

“Theravance Group” means Theravance and each Theravance Affiliate, but excluding any Biopharma Group Member.

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“Theravance Group Member” means Theravance, each Person that is or was a Theravance Affiliate, and each Person that becomes a Theravance Affiliate after the Distribution, but excluding any Biopharma Group Member.

“Transition Services Agreement” means the Transition Services Agreement by and between Theravance and Biopharma dated as of the date hereof.

“Treasury Regulations” means the final and temporary (but not proposed) income tax regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).

ARTICLE II

PREPARATION AND FILING OF TAX RETURNS

Section 2.1                                    Theravance’s Responsibility.  Except as may be provided in the LLC Agreement, Theravance shall have sole and exclusive responsibility for the preparation and filing of:

(a)                       all Tax Returns that include only Theravance and/or any Theravance Affiliate; and

(b)                       any Tax Returns required to be filed for a Taxable Period ending on or before, or that includes, the Distribution Date that are not otherwise described in Section 2.1 or Section 2.2.

Section 2.2                                    Biopharma’s Responsibility.  Except as may be provided in the LLC Agreement, Biopharma shall have sole and exclusive responsibility for the preparation and filing of all Tax Returns that include only Biopharma and/or any Biopharma Affiliate.

Section 2.3                                    Agent.  Subject to the other applicable provisions of this Agreement, Biopharma hereby irrevocably designates, and agrees to cause each Biopharma Affiliate to so designate, Theravance as its sole and exclusive agent and attorney-in-fact to take such actions (including execution of documents) as are appropriate in any and all matters (including Audits) relating to any Tax Return described in Section 2.1(b).  Notwithstanding the foregoing, Biopharma may participate at its own expense in any such Audit, and Theravance shall keep Biopharma updated as to any developments with respect to any such Audit in a timely manner.

Section 2.4                                    Manner of Tax Return Preparation.  Unless otherwise required by a Taxing Authority or by applicable law, the Parties shall prepare and file all Tax Returns, and take all other actions, in a manner consistent with this Agreement, the Separation Agreement and past practice.  All Tax Returns shall be filed on a timely basis (taking into account applicable extensions) by the Party responsible for filing such Tax Returns under this Agreement.  For the avoidance of doubt, the Parties shall prepare and file all Tax Returns in a manner consistent with the characterization of the Distribution as a taxable transaction for U.S. federal income tax purposes, and not as a transaction governed by Section 355 of the Code.

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Section 2.5                                    Tax Services.

(a)                       In General.  It is the intention of the Parties that except as specifically provided herein, the Transition Services Agreement shall govern the provision of tax services by Biopharma to Theravance and the other members of the Theravance Group (the “Tax Services”).

(b)                       Right to Review.  Theravance shall provide or cause to be provided any Tax Return (or portion or excerpt thereof relating exclusively to Biopharma or Biopharma Affiliates) to be filed by Theravance on behalf of Biopharma pursuant to this Agreement at least ten (10) business days prior to the due date of such Tax Return, including extensions.  Biopharma shall have the right to comment on any such Tax Return (or portion or excerpt thereof, as applicable), and Theravance shall reasonably consider Biopharma’s comments.

(c)                        Information.  Theravance shall provide or cause to be provided to Biopharma copies of all Tax Returns (or portions or excerpts thereof relating exclusively to Biopharma or Biopharma Affiliates) filed on behalf of Biopharma, in each case within fifteen (15) days of filing pursuant to this Agreement, and shall promptly provide any notices or communications from any Taxing Authority relating to any Tax or Tax Return of Biopharma or an Biopharma Affiliate covered by the Tax Services.

(d)                       List of Tax Returns.  As soon as practicable after the Distribution Date, but in any event within sixty (60) days, Theravance shall provide to Biopharma a list of all Tax Returns, if any, to be filed by Theravance on behalf of Biopharma or Biopharma Affiliates pursuant to Section 2.1(b).

ARTICLE III

LIABILITY FOR TAXES

Section 3.1                                    Theravance’s Liability.

(a)                       Theravance shall be liable for all Taxes due with respect to all Tax Returns described in Section 2.1(a) or Section 2.1(b).  Theravance shall be entitled to receive and retain all Refunds of Taxes previously paid by Theravance or any Theravance Affiliates with respect to Taxes described in this Section 3.1.  For the avoidance of doubt, (i) Theravance shall be liable for all Taxes imposed on Theravance as result of the characterization of the Contribution and/or the Distribution as taxable transactions, in whole or in part, and (ii) Theravance shall not be obligated to make any payment to Biopharma with respect to the utilization of any Tax Asset created by the Biopharma Business.

Section 3.2                                    Biopharma’s Liability.  Biopharma shall be liable for all Taxes due with respect to Tax Returns described in Section 2.2.  Biopharma shall be entitled to receive and retain all Refunds of Taxes previously paid by Biopharma or any Biopharma Affiliates with respect to Taxes described in this Section 3.2.

ARTICLE IV

ALLOCATION

Section 4.1                                    Allocation of Tax Assets.

(a)                       Theravance and Biopharma shall cooperate, each at its own expense, in determining the allocation of any Tax Assets or Tax liabilities among the Parties in accordance with the Code and Treasury Regulations (and any applicable state, local and foreign laws).  In the absence of

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controlling legal authority or unless otherwise provided under this Agreement, Tax Assets or Tax liabilities shall be allocated to the legal entity that incurred the cost or burden associated with the creation of such Tax Assets or Tax liabilities.  Theravance and Biopharma hereby agree to compute all Taxes for Post-Distribution Periods and Straddle Periods consistently with the determinations made pursuant to this Section 4.1 unless otherwise required by a Final Determination.

(b)                       To the extent that the amount of any Tax Asset is later reduced or increased by a Taxing Authority, or as a result of an Audit or carrybacks of Tax Assets from Post-Distribution Periods of either the Theravance Group or the Biopharma Group, such reduction or increase shall be allocated to the Party to which such Tax Attribute was allocated pursuant to Section 4.1(a).

ARTICLE V

INDEMNIFICATION

Section 5.1                                    Generally.  The Theravance Group shall jointly and severally indemnify Biopharma, each Biopharma Affiliate, and their respective directors, officers and employees, and hold them harmless from and against any and all Taxes or Tax deficiencies for which Theravance or any Theravance Affiliate is liable under this Agreement and any loss, cost, damage or expense, including reasonable attorneys’ fees and costs, that are attributable to, or result from the failure of Theravance or any director, officer or employee to make any payment required to be made under this Agreement.  The Biopharma Group shall jointly and severally indemnify Theravance, each Theravance Affiliate, and their respective directors, officers and employees, and hold them harmless from and against any and all Taxes or Tax deficiencies for which Biopharma or any Biopharma Affiliate is liable under this Agreement and any loss, cost, damage or expense, including reasonable attorneys’ fees and costs, that is attributable to, or results from, the failure of Biopharma, any Biopharma Affiliate or any director, officer or employee to make any payment required to be made under this Agreement.

Section 5.2                                    Inaccurate, Incomplete or Untimely Information.  The Theravance Group shall jointly and severally indemnify Biopharma, each Biopharma Affiliate, and their respective directors, officers and employees, and hold them harmless from and against any loss, cost, damage, fine, penalty, or other expense of any kind attributable to the negligence of Theravance or any Theravance Affiliate in supplying Biopharma or any Biopharma Affiliate with inaccurate, incomplete or untimely information, in connection with the preparation of any Tax Return.  The Biopharma Group shall jointly and severally indemnify Theravance, each Theravance Affiliate, and their respective directors, officers and employees, and hold them harmless from and against any loss, cost, damage, fine, penalty, or other expense of any kind attributable to the negligence of Biopharma or any Biopharma Affiliate in supplying Theravance or any Theravance Affiliate with inaccurate, incomplete or untimely information, in connection with the preparation of any Tax Return.

Section 5.3                                    Adjustments to Payments.  Any Party that is entitled to receive a payment (the “Indemnitee”) under this Agreement from another Party (the “Indemnifying Party”) with respect to any Taxes, losses, costs, damages or expenses suffered or incurred by the Indemnitee (an “Indemnified Loss”) shall pay to such Indemnifying Party, or the Indemnifying Party shall pay to the Indemnitee, as applicable, an amount equal to the difference between any “Tax Saving Amount” actually realized by the Indemnitee in the year of the payment and the amount of the Indemnified Loss.  For purposes of this Section 5.3, the “Tax Saving Amount” shall equal the amount by which the Income Taxes of the Indemnitee or any of its affiliates are reduced (including, without limitation, through the receipt of a refund, credit or otherwise), plus any related interest received by the Indemnitee (net of Tax) from a Taxing Authority, as a result of claiming as a deduction or offset on any relevant Tax Return amounts attributable to an Indemnified Loss (the “Indemnifiable Loss Deduction”).

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Section 5.4                                    Reporting of Indemnifiable Loss.  In the event that an Indemnitee incurs an Indemnified Loss, such Indemnitee shall claim as a deduction or offset on any relevant Tax Return (including, without limitation, any claim for refund) such Indemnified Loss to the extent such position is more likely than not to be sustained with respect to United States federal, state and local Tax Returns or has similar appropriate authoritative support with respect to any Tax Return other than a United States federal, state or local Tax Return.  Except as otherwise provided in this Agreement, the Indemnitee shall have primary responsibility for the preparation of its Tax Returns and reporting thereon such Indemnifiable Loss Deduction; provided that the Indemnitee shall consult with, and provide the Indemnifying Party with a reasonable opportunity to review and comment on the portion of the Indemnitee’s Tax Return relating to the Indemnified Loss.  If a Dispute arises between the Indemnitee and the Indemnifying Party as to whether a deduction or tax position with respect to an Indemnified Loss is “more likely than not” (with respect to United States federal, state and local Tax Returns) to be sustained or similar appropriate authoritative support (with respect to any Tax Return other than a United States federal, state or local Tax Return) for the claiming of an Indemnifiable Loss Deduction, such Dispute shall be resolved in accordance with the principles and procedures set forth in Section 8.3.  Theravance and Biopharma shall act in good faith to coordinate their Tax Return filing positions with respect to the Taxable Periods that include an Indemnifiable Loss Deduction.  Any Tax Saving Amount calculated under Section 5.3 hereof shall be adjusted in the event of an Audit which results in a Final Determination that increases or decreases the amount of the Indemnifiable Loss Deduction reported on any relevant Tax Return of the Indemnitee.  The Indemnitee shall promptly inform the Indemnifying Party of any such Audit and shall attempt in good faith to sustain the Indemnifiable Loss Deduction at issue in the Audit.  Upon receiving a written notice of a Final Determination in respect of an Indemnifiable Loss Deduction, the Indemnitee shall redetermine the Tax Saving Amount attributable to the Indemnifiable Loss Deduction under Section 5.3 hereof, taking into account the Final Determination (the “Restated Tax Saving Amount”).  If the Restated Tax Saving Amount is greater than the Tax Saving Amount, the Indemnitee shall promptly pay the Indemnifying Party an amount equal to the difference between such amounts.  If the Restated Tax Saving Amount is less than the Tax Saving Amount, then the Indemnifying Party shall pay to the Indemnitee an amount equal to the difference between such amounts promptly after receipt of written notice setting forth the amount due and the computation thereof.

Section 5.5                                    No Indemnification for Tax Items.  Nothing in this Agreement or any other ancillary document shall be construed as a guarantee of the existence or amount of any loss, credit, carryforward, basis or other Tax Item, whether past, present or future, of any Party.

Section 5.6                                    Double Recovery.  Notwithstanding anything herein to the contrary, no Party shall be entitled to indemnification hereunder for any amount to the extent such Party has otherwise been reimbursed for such amount.

ARTICLE VI

PAYMENTS

Section 6.1                                    In General.  In the event that one party (the “Owing Party”) is required to make a payment to another party (the “Owed Party”) pursuant to this Agreement, then such payments shall be made according to this Article VI.  All payments shall be made to the Owed Party or to the appropriate Taxing Authority as specified by the Owed Party within the time prescribed for payment in this Agreement, or if no period is prescribed, within twenty (20) days after delivery of written notice of payment owing together with a computation of the amounts due.

Section 6.2                                    Treatment of Payments.  Unless otherwise required by any Final Determination, the Parties agree that any payments made by one Party to the other Party (other than

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payments of interest pursuant to Section 6.5 and payments of After Tax Amounts pursuant to Section 6.4) pursuant to this Agreement shall be treated for all Tax as payments made immediately prior to the Distribution.

Section 6.3                                    Prompt Performance.  All actions required to be taken by any Party under this Agreement shall be performed within the time prescribed for performance in this Agreement, or if no period is prescribed, such actions shall be performed promptly.

Section 6.4                                    After Tax Amounts.  If pursuant to a Final Determination it is determined that the receipt or accrual of any payment made under this Agreement (other than payments of interest pursuant to Section 6.5) is subject to any Tax, the Party making such payment shall be liable for (a) the After Tax Amount with respect to such payment and (b) interest at the rate described in Section 6.5 on the amount of such Tax from the date such Tax accrues through the date of payment of such After Tax Amount.  A Party making a demand for a payment pursuant to this Agreement and for a payment of an After Tax Amount with respect to such payment shall separately specify and compute such After Tax Amount.  However, a Party may choose not to specify an After Tax Amount in a demand for payment pursuant to this Agreement without thereby being deemed to have waived its right subsequently to demand an After Tax Amount with respect to such payment.

Section 6.5                                    Interest.  If an Owing Party fails to make any payment pursuant to this Agreement within the period prescribed for such payment in this Agreement, such Owing Party shall be obligated to pay, in addition to the amount otherwise due, interest on such amount at a rate per annum equal to five percent (5%).  Such interest shall be payable at the same time as the payment to which it relates.

ARTICLE VII

TAX PROCEEDINGS

Section 7.1                                    Audits.  Except as otherwise provided in Section 7.3, the Party responsible for preparing and filing a Tax Return pursuant to Article II shall have the right to control, contest, and represent the interests of itself and any of its Affiliates in any Audit relating to such Tax Return and shall bear all costs related thereto.

Section 7.2                                    Notice.  Within twenty (20) business days after a Party receives a written notice or other information from a Taxing Authority of the existence of a Tax issue that may give rise to an indemnification obligation under this Agreement, such Party shall notify the other Party of such issue, and thereafter shall promptly forward to the other Party copies of notices and material communications with any Taxing Authority relating to such issue.  The failure of one Party to notify the other Party of any matter relating to a particular Tax for a Taxable Period or to take any action specified in this Agreement shall not relieve such other Party of any liability and/or obligation which it may have under this Agreement with respect to such Tax for such Taxable Period, except to the extent that such other Party’s rights under this Agreement are materially prejudiced by such failure.

ARTICLE VIII

MISCELLANEOUS PROVISIONS

Section 8.1                                    Effectiveness.  This Agreement shall become effective on June 2, 2014.

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Section 8.2                                    Cooperation and Exchange of Information.

(a)                       Cooperation.  Theravance and Biopharma shall each cooperate fully (and each shall cause its respective Affiliates to cooperate fully) with all reasonable requests from another Party hereto, or from an agent, representative or advisor to such Party, in connection with the preparation and filing of Tax Returns, claims for refund, and Audits concerning issues or other matters covered by this Agreement.  Such cooperation shall include, without limitation:

(i)             the retention until the expiration of the applicable statute of limitations, and the provision upon request, of Tax Returns, books, records (including information regarding earnings and profits and the ownership and Tax basis of property), documentation and other information relating to the Tax Returns, including accompanying schedules, related work papers, and documents relating to rulings, closing agreements or other determinations by Taxing Authorities;

(ii)          providing Biopharma access to Theravance’s tax software in order to input relevant data and otherwise prepare and file all Tax Returns for which Biopharma is responsible pursuant to Section 2.2;

(iii)       the execution of any document that may be necessary or reasonably helpful in connection with any Audit, or the filing of a Tax Return or refund claim by a member of the Biopharma Group or the Theravance Group, including certification, to the best of a Party’s knowledge, of the accuracy and completeness of the information it has supplied or any power of attorney required by the applicable Taxing Authority to be provided by one Party to another Party for the performance by such other Party of acts required or permitted under this Agreement; and

(iv)      the use of the Party’s reasonable best efforts to obtain any documentation that may be necessary or reasonably helpful in connection with any of the foregoing.

Each Party shall use reasonable best efforts to comply in connection with the foregoing matters within ten (10) business days or such shorter period as may be required by the applicable Taxing Authority or otherwise in connection with any Audit.  Each Party shall make its employees and facilities available on a reasonable and mutually convenient basis in connection with the foregoing matters, at the expense of the requesting Party.

(b)                       Failure to Perform.  If a Party materially fails to comply with any of its obligations set forth in Section 8.2(a) upon reasonable request and notice by the other Party, and such failure results in the imposition of additional Taxes, the non-performing Party shall be liable in full for such additional Taxes notwithstanding anything to the contrary in this Agreement.

Section 8.3                                    Dispute Resolution.  Unless otherwise agreed by the Parties, any dispute, controversy or claim arising out of or relating to this Agreement or the breach, termination or validity hereof (“Dispute”) which arises between Theravance and Biopharma shall be resolved pursuant to this Section 8.3.  The Dispute shall first be negotiated between the appropriate senior executives of Theravance and Biopharma who shall have the authority to resolve the matter.  Such executives shall meet to attempt in good faith to negotiate a resolution of the Dispute prior to pursuing other available remedies, within ten (10) days of receipt by Theravance or Biopharma, as applicable, of notice of a Dispute, which date of receipt shall be referred to herein as the “Dispute Resolution Commencement Date.”  If the senior executives are unable to resolve the Dispute within thirty (30) days from the Dispute

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Resolution Commencement Date, then Theravance and Biopharma shall jointly retain a nationally recognized accounting firm reasonably acceptable to both Parties to resolve the Dispute.  The accounting firm selected by the Parties shall act as an arbitrator to resolve all points of disagreement, and its decision shall be final and binding upon all parties involved.  Following the decision of such accounting firm, Theravance and Biopharma shall each take or cause to be taken any action necessary to implement the decision of such accounting firm.  Theravance and Biopharma shall share equally the administrative costs of the arbitration and such accounting firm’s fees, disbursements and expenses, and shall each bear their respective other costs and expenses related to the arbitration.

Section 8.4                                    Changes in Law.

(a)                       Any reference to a provision of the Code, Treasury Regulations, or a law of another jurisdiction shall include a reference to any applicable successor provision or law.

(b)                       If, due to any change in applicable law or regulations or their interpretation by any court of law or other governing body having jurisdiction subsequent to the date of this Agreement, performance of any provision of this Agreement or any transaction contemplated hereby shall become impracticable or impossible, the Parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such provision.

Section 8.5                                    Confidentiality.  Each of the Parties hereto shall hold and cause its directors, officers, employees, advisors and consultants to hold in strict confidence, unless compelled to disclose by judicial or administrative process or, in the opinion of its counsel, by other requirements of law, all information (other than any such information relating solely to the business or affairs of such party) concerning the other Party hereto furnished it by such other Party or its representatives pursuant to this Agreement (except to the extent that such information can be shown to have been (1) in the public domain through no fault of such Party or (2) later lawfully acquired from other sources not under a duty of confidentiality by the party to which it was furnished), and no Party shall release or disclose such information to any other Person, except its directors, officers, employees, auditors, attorneys, financial advisors, bankers or other consultants who shall be advised of and agree to be bound by the provisions of this Section 8.5.  Each of the Parties hereto shall be deemed to have satisfied its obligation to hold confidential information concerning or supplied by the other Party if it exercises the same care as it takes to preserve confidentiality for its own similar information.

Section 8.6                                    Affiliates.

(a)                       Theravance shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any other Theravance Group Member; provided that if it is contemplated that a Theravance Group Member may cease to be controlled, directly or indirectly, by Theravance as a result of a transfer of its stock or other ownership interests to a third party in exchange for consideration in an amount approximately equal to the fair market value of the stock or other ownership interests transferred and such consideration is not distributed outside of the Theravance Group to the shareholders of Theravance, then Theravance may request in writing no later than thirty (30) days prior to such cessation that Biopharma execute a release of such Theravance Group Member from its obligations under this Agreement effective as of such transfer, provided that Theravance shall succeed to the rights of such Theravance Group Member under this Agreement and shall have confirmed in writing the obligations of Theravance and the remaining Theravance Group Members with respect to their own obligations and the obligations of the departing Theravance Group Member, and that such departing Theravance Group Member shall have executed a release of any rights it may have against Biopharma by reason of this Agreement.

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(b)                       Biopharma shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by any other member of the Biopharma Group; provided that if it is contemplated that member of the Biopharma Group may cease to be controlled, directly or indirectly, by Biopharma as a result of a transfer of its stock or other ownership interests to a third party in exchange for consideration in an amount approximately equal to the fair market value of the stock or other ownership interests transferred and such consideration is not distributed outside of the Biopharma Group to the shareholders of Biopharma, then Biopharma may request in writing no later than thirty (30) days prior to such cessation that Theravance execute a release of such member of the Biopharma  Group from its obligations under this Agreement effective as of such transfer, provided that Biopharma shall succeed to the rights of such member of the Biopharma Group under this Agreement and shall have confirmed in writing the obligations of Biopharma and the remaining members of the Biopharma Group with respect to their own obligations and the obligations of the departing member of the Biopharma Group, and that such departing member of the Biopharma Group shall have executed a release of any rights it may have against Theravance by reason of this Agreement.

Section 8.7                                    GSK Agreements.  Notwithstanding any other provision contained herein, Theravance shall not, and shall cause its Affiliates and its and its Affiliates’ officers, directors, employees, agents and representatives (collectively, “Representatives”) not to, take (or omit to take) any action (including, without limitation, the disclosure of any information to Biopharma or any of its Representatives), that is or would be reasonably expected to result in a breach or violation of, or be in conflict with, any Theravance confidentiality obligation to GSK under the Collaboration Agreement and/or the Strategic Alliance Agreement.  To the extent that Biopharma or any of its Representatives becomes aware or believes that it has or may have received from Theravance or any of its Representatives Confidential Information (as defined in the Collaboration Agreement or the Strategic Alliance Agreement) of GSK, it will promptly notify Theravance in writing, will follow any reasonable instructions from Theravance with respect to the return or destruction of such information, and will not use or disclose such information unless Theravance confirms that it is not Confidential Information (as defined in the Collaboration Agreement or the Strategic Alliance Agreement) of GSK.  Each party agrees and understands that monetary damages would not adequately compensate the non-breaching party for a breach of this Section 8.7, that this Section 8.7 shall, to the fullest extent permitted by law, be specifically enforceable, and that any breach or threatened breach of this Section 8.7 shall be the proper subject of a temporary or permanent injunction or restraining order.  Further, Theravance and Biopharma waive, to the fullest extent permitted by law, any claim or defense that there is an adequate remedy at law for such breach or threatened breach.  Notwithstanding any other provision contained herein, Biopharma acknowledges and agrees that it has no rights to any non-public information under the Collaboration Agreement and/or the Strategic Alliance Agreement, the disclosure of which by Theravance or any of its Representatives to Biopharma or any of its Representatives is or would be reasonably expected to result in a breach or violation of, or be in conflict with, any Theravance confidentiality obligation to GSK under the Collaboration Agreement and/or the Strategic Alliance Agreement.  Notwithstanding anything else to the contrary, in the event of any conflict between this Section 8.7, or any covenant, right, agreement, obligation or duty of Theravance or Biopharma (or any of their respective Representatives)under this Section 8.7, on the one hand, and any other provision of this Agreement, or any attachment hereto or any covenant, right, agreement, obligation or duty of Theravance or Biopharma (or any of their respective Representatives)thereunder, on the other hand, this Section 8.7 shall govern and supersede such other provision, attachment, covenant, agreement, obligation or duty. Each party will be liable for breach of this Section 8.7 by any of its Representatives.

Section 8.8                                    Authority.  Each of the Parties hereto represents, on behalf of itself and its affiliates, to the other that (a) it has the corporate power and authority to execute, deliver and perform this Agreement, (b) the execution, delivery and performance of this Agreement by it have been duly authorized by all necessary corporate or other action, (c) it has duly and validly executed and delivered

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this Agreement and (d) this Agreement is a legal, valid and binding obligation, enforceable against it in accordance with its terms subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and general equity principles.

Section 8.9                                    Setoff.  All payments to be made by any Party under this Agreement may be netted against payments due to such Party under this Agreement, but otherwise shall be made without setoff, counterclaim or withholding, all of which are hereby expressly waived.

Section 8.10                             Amendments and Waivers.

(a)                       This Agreement may not be amended except by an agreement in writing signed by both Parties.

(b)                       Any term or provision of this Agreement may be waived, or the time for its performance may be extended, by the Party entitled to the benefit thereof and any such waiver shall be validly and sufficiently given for the purposes of this Agreement if it is in writing signed by an authorized representative of such Party.  No delay or failure in exercising any right, power or remedy hereunder shall affect or operate as a waiver thereof; nor shall any single or partial exercise thereof or any abandonment or discontinuance of steps to enforce such a right, power or remedy preclude any further exercise thereof or of any other right, power or remedy.  The rights and remedies hereunder are cumulative and not exclusive of any rights or remedies that either Party would otherwise have.

Section 8.11                             Entire Agreement.  This Agreement, the Separation Agreement, the other Ancillary Agreements and the Exhibits and Schedules attached thereto, constitute the entire agreement between the Parties with respect to the subject matter hereof and shall supersede all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject matter hereof.

Section 8.12                             Third-Party Beneficiaries.  Except as provided in Article V relating to Indemnitees, this Agreement is solely for the benefit of Theravance, the Theravance Affiliates, Biopharma and the Biopharma Affiliates, and shall not be deemed to confer upon any other third parties any remedy, claim, liability, reimbursement, cause of action or other right in excess of those existing without reference to this Agreement.

Section 8.13                             Notices.  All notices, requests, permissions, waivers and other communications hereunder shall be provided in accordance with the provisions of Section 12.4 of the Separation Agreement.

Section 8.14                             Counterparts; Electronic Delivery.  This Agreement may be executed in multiple counterparts, each of which when executed shall be deemed to be an original, but all of which together shall constitute one and the same agreement.  Execution and delivery of this Agreement or any other documents pursuant to this Agreement by facsimile or other electronic means shall be deemed to be, and shall have the same legal effect as, execution by an original signature and delivery in person.

Section 8.15                             Severability.  If any term or other provision of this Agreement is determined by a nonappealable decision by a court, administrative agency or arbitrator to be invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to either Party.  Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the court, administrative agency or arbitrator shall interpret this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that

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transactions contemplated hereby are fulfilled to the fullest extent possible.  If any provision in this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only as broad as is enforceable.

Section 8.16                             Assignability; Binding Effect.  Except as otherwise expressly provided in this Agreement, neither Party may assign this Agreement or any rights or obligations hereunder without the prior written consent of the other Party, and any attempt to assign this Agreement without such consent shall be void and of no effect.  This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. This Agreement may be enforced separately by each member of the Theravance Group and each member of the Biopharma Group.

Section 8.17                             Governing Law  This Agreement shall be governed by, and construed and enforced in accordance with, the substantive laws of the State of Delaware, without regard to any conflicts of law provisions thereof that would result in the application of the laws of any other jurisdiction.

Section 8.18                             Construction.  This Agreement shall be construed as if jointly drafted by the Parties, and no rule of construction or strict interpretation shall be applied against either Party.  The Parties represent that this Agreement is entered into with full consideration of any and all rights which the Parties may have.  The Parties have relied upon their own knowledge and judgment and upon the advice of the attorneys of their choosing.  The Parties have had access to independent legal advice, have conducted such investigations they and their counsel thought appropriate, and have consulted with such other independent advisors as they and their counsel deemed appropriate regarding this Agreement and their rights and asserted rights in connection therewith.  The Parties are not relying upon any representations or statements made by the other Party, or such other Party’s employees, agents, representatives or attorneys, regarding this Agreement, except to the extent such representations are expressly set forth or incorporated in this Agreement.  The Parties are not relying upon a legal duty, if one exists, on the part of the other Party (or such other Party’s employees, agents, representatives or attorneys) to disclose any information in connection with the execution of this Agreement or its preparation, it being expressly understood that neither Party shall ever assert any failure to disclose information on the part of the other Party as a ground for challenging this Agreement.

Section 8.19                             Titles and Headings.  Titles and headings to Sections and Articles herein are inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.

Section 8.20                             Coordination with Employee Matters Agreement.  To the extent any covenants or agreements between the Parties with respect to employment Taxes are set forth in the Employee Matters Agreement, such matters shall be governed exclusively by the Employee Matters Agreement and not by this Agreement.

Section 8.21                             Conflict or Inconsistency Between Agreements.  Except as provided in Section 8.20, in the event of any conflict or inconsistency between any provision of this Agreement and any provision of either the Separation Agreement or any of the other Ancillary Agreements, the applicable provisions of this Agreement shall prevail.

[Signature Page Follows]

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WHEREFORE, the Parties have signed this Tax Matters Agreement effective as of the date first set forth above.

[Signature Page to Tax Matters Agreement]

Exhibit 10.4

EMPLOYEE MATTERS AGREEMENT

by and between

THERAVANCE, INC.

and

THERAVANCE BIOPHARMA, INC.

Dated as of June 1, 2014

EMPLOYEE MATTERS AGREEMENT

This EMPLOYEE MATTERS AGREEMENT (this “Agreement”), dated as of June 1, 2014, is entered into by and between Theravance, Inc., a Delaware corporation (“ParentCo”), and Theravance Biopharma, Inc., a Cayman Islands corporation (“SpinCo”) (each a “Party” and collectively, the “Parties”).

RECITALS:

WHEREAS, ParentCo currently conducts a number of businesses, including (i) the ParentCo Business and (ii) the SpinCo Business;

WHEREAS, the Board of Directors of ParentCo has determined that it is appropriate, desirable and in the best interests of ParentCo and its stockholders to separate its two businesses, the ParentCo Business and the SpinCo Business, into ParentCo and SpinCo respectively, two publicly traded companies, by means of the transfer/assumption of certain assets and liabilities from ParentCo to SpinCo (the “Separation”);

WHEREAS, to effect the Separation, the Parties entered into that certain Separation and Distribution Agreement, dated as of the date hereof (as amended or otherwise modified from time to time, the “Separation Agreement”); and

WHEREAS, in connection with the Separation, ParentCo and SpinCo desire to enter into this Agreement for the purpose of allocating assets, liabilities and responsibilities with respect to certain employee compensation and benefit plans and programs between them.

NOW, THEREFORE, in consideration of the foregoing premises, the mutual promises and covenants hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:

ARTICLE I

DEFINITIONS AND INTERPRETATION

1.1                               Definitions.  The following terms shall have the following meanings:

“401(k) Plan” shall mean the 401(k) Plan described in Section 2.1(a) of this Agreement.

“Affiliate” shall mean the definition as set forth in the Separation Agreement.

“Benefit Plan” shall mean, with respect to an entity, each plan, program, arrangement, agreement or commitment that is an employment, change in control/severance, consulting, non-competition or deferred compensation agreement, or an executive compensation, incentive bonus or other bonus, employee pension, profit-sharing, savings, retirement, supplemental retirement, stock option, stock purchase, stock appreciation rights, restricted stock, other equity-based compensation, severance pay, salary continuation, life, health, hospitalization, sick leave, vacation pay, disability or accident insurance plan, corporate-owned or key-man life insurance or

other employee benefit plan, program, arrangement, agreement or commitment, including any “employee benefit plan” (as defined in Section 3(3) of ERISA), sponsored or maintained by such entity (or to which such entity contributes or is required to contribute).

“COBRA” shall mean the continuation coverage requirements for “group health plans” under (i) Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and as codified in Section 4980B of the Code and Sections 601 through 608 of ERISA, together with all regulations and proposed regulations promulgated thereunder and (ii) any analogous provision of state law (including, without limitation, Cal-COBRA).

“Code” shall mean the Internal Revenue Code of 1986, as amended, including any successor statute, regulation and guidance thereto.

“Collaboration Agreement” shall mean the definition as set forth in the Separation Agreement.

“Distribution” shall mean the definition as set forth in the Separation Agreement.

“Distribution Date” shall mean the definition as set forth in the Separation Agreement.

“Dual Employee” shall mean a person listed on Attachment 1 hereto.  For purposes of Sections 2.1(a), 2.1(b) and 7.2 hereof, a Dual Employee shall be considered both a ParentCo Employee and a SpinCo Employee.  In the event a Dual Employee terminates employment with either SpinCo (or a SpinCo Parent, a SpinCo Subsidiary or a SpinCo Affiliate) or ParentCo (or a ParentCo Subsidiary or a ParentCo Affiliate) after the Distribution Date but remains employed by the other, such Dual Employee shall thereafter be considered either a ParentCo Employee or a SpinCo Employee, as applicable.

“Effective Time” shall mean the definition as set forth in the Separation Agreement.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

“ERISA Affiliate” shall mean with respect to any Person, each business or entity which is a member of a “controlled group of corporations,” under “common control” or a member of an “affiliated service group” with such Person within the meaning of Sections 414(b), (c) or (m) of the Code, or required to be aggregated with such Person under Section 414(o) of the Code, or under “common control” with such Person within the meaning of Section 4001(a)(14) of ERISA.

“Exchange Act” shall mean the definition as set forth in the Separation Agreement.

“Excluded Liabilities” shall mean the definition as set forth in the Separation Agreement.

“Former ParentCo Employee” shall mean, as of the Effective Time, any individual who, on or before the Distribution Date, ceased being employed, directly or indirectly, with ParentCo or its predecessors or any member of the ParentCo Group and whose principal services to the ParentCo Group related to the ParentCo Business.

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“Former SpinCo Employee” shall mean, as of the Effective Time, any individual who, on or before the Distribution Date, ceased being employed, directly or indirectly, with ParentCo or its predecessors or any member of the ParentCo Group and is not listed on Attachment 1.62 to the Separation Agreement, other than any Former ParentCo Employee.

“Governmental Entity” shall mean the definition as set forth in the Separation Agreement.

“HIPAA” shall mean the Health Insurance Portability and Accountability Act of 1996, as amended.

“Law” shall mean the definition as set forth in the Separation Agreement.

“Liabilities” shall mean the definition as set forth in the Separation Agreement.

“Participating Company” shall mean ParentCo or any Person (other than an individual) participating in a ParentCo Benefit Plan.

“ParentCo Benefit Plan” shall mean any Benefit Plan sponsored, maintained or contributed to by any member of the ParentCo Group or any ERISA Affiliate thereof other than SpinCo or any member of the SpinCo Group.

“ParentCo Business” shall mean the definition as set forth in the Separation Agreement.

“ParentCo Common Stock” shall mean the definition as set forth in the Separation Agreement.

“ParentCo Employee” shall mean the definition as set forth in the Separation Agreement.

“ParentCo Equity Plans” shall mean, collectively, (i) the Theravance, Inc. 1997 Stock Plan, (ii) the Theravance, Inc. Long-Term Stock Option Plan, (iii) the Theravance, Inc. 2004 Equity Incentive Plan, (iv) the Theravance, Inc. 2008 New Employee Equity Incentive Plan, and (v) the Theravance, Inc. 2012 Equity Incentive Plan.

“ParentCo Group” shall mean ParentCo and each Person, other than any member of the SpinCo Group, that is an Affiliate of ParentCo immediately after the Distribution Date or that becomes an Affiliate of ParentCo after the Distribution Date.

“ParentCo Option” shall mean an option to purchase shares of ParentCo Common Stock granted pursuant to one of the ParentCo Equity Plans.

“ParentCo Participant” shall mean any individual who, immediately following the Effective Time, is a ParentCo Employee, a Former ParentCo Employee or a beneficiary, dependent or alternate payee of any of the foregoing.  If a Dual Employee is (or later becomes) employed for at least 30 hours per week by ParentCo, a ParentCo Subsidiary or a ParentCo Affiliate, such Dual Employee shall be considered a ParentCo Participant for purposes of this Agreement.  If a Dual Employee is (or later becomes) employed for less than 30 hours per week by ParentCo, a ParentCo Subsidiary or a ParentCo Affiliate, such Dual Employee shall not be

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considered a ParentCo Participant for purposes of this Agreement, but shall instead be considered a SpinCo Participant.

“ParentCo Ratio” shall mean (a) the sum of (i) the SpinCo Stock Price divided by three and one-half (3.5) and (ii) the ParentCo Stock Price, then divided by (b) the ParentCo Stock Price.

“ParentCo RSA” shall mean a share of ParentCo Common Stock granted pursuant to one of the ParentCo Equity Plans that is subject to a vesting requirement that has not been satisfied as of the Distribution Date.

“ParentCo RSU Award” shall mean an award of restricted stock units granted pursuant to one of the ParentCo Equity Plans, with each unit representing an unfunded and unsecured promise by ParentCo to issue a share of ParentCo Common Stock after the Distribution Date.

“ParentCo Stock Price” shall mean the Volume-Weighted Average Price of one share of ParentCo Common Stock for the first three (3) trading days following the Distribution Date.

“ParentCo TFIO RSA” shall mean a ParentCo RSA granted on February 11, 2011 that is subject to both performance-based vesting conditions and service-based vesting conditions.

“ParentCo Welfare Plans” shall mean, collectively, the health and welfare benefit plans maintained by a member of the ParentCo Group.

“Person” shall mean any natural person, firm, individual, corporation, business trust, joint venture, association, company, limited liability company, partnership, or other organization or entity, whether incorporated or unincorporated, or any governmental entity.

“Post-Distribution ParentCo Option” shall mean the definition set forth in Section 5.1(a) of this Agreement.

“Post-Distribution ParentCo RSAs” shall mean the definition set forth in Section 5.3(a) of this Agreement.

“Post-Distribution ParentCo RSU Award” shall mean the definition set forth in Section 5.2(a) of this Agreement.

“SpinCo Affiliate” shall mean any entity other than a SpinCo Subsidiary, if SpinCo and/or one or more SpinCo Subsidiaries own not less than 50% of such entity.

“SpinCo Benefit Plan” shall mean any Benefit Plan sponsored, maintained or contributed to by any member of the SpinCo Group or any ERISA Affiliate thereof immediately following the Effective Time, including the 401(k) Plan and the SpinCo Welfare Plans.

“SpinCo Business” shall mean the definition as set forth in the Separation Agreement.

“SpinCo Common Share” shall mean the definition as set forth in the Separation Agreement.

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“SpinCo Employee” shall mean a person listed on Attachment 1.62 to the Separation Agreement.

“SpinCo Group” shall mean SpinCo and each Person that is an Affiliate of SpinCo immediately after the Distribution Date or that becomes an Affiliate of SpinCo after the Distribution Date.

“SpinCo Liabilities” shall mean the definition as set forth in the Separation Agreement.

“SpinCo Non-Employee Director” shall mean all individuals listed on Attachment 2.

“SpinCo Parent” shall mean any corporation (other than SpinCo) in an unbroken chain of corporations ending with SpinCo, if each of the corporations other than SpinCo owns shares possessing 50% or more of the total combined voting power of all classes of shares in one of the other corporations in such chain.  A corporation that attains the status of a SpinCo Parent on a date after this Agreement is entered into shall be considered a SpinCo Parent commencing as of such date.  For sake of clarity, ParentCo shall not be considered a SpinCo Parent.

“SpinCo Participant” shall mean any individual who, immediately following the Effective Time, is a SpinCo Employee, a Former SpinCo Employee or a beneficiary, dependent or alternate payee of any of the foregoing.  If a Dual Employee is (or later becomes) employed for at least 30 hours per week by SpinCo, a SpinCo Parent, a SpinCo Subsidiary or a SpinCo Affiliate, such Dual Employee shall be considered a SpinCo Participant for purposes of this Agreement.  If a Dual Employee is (or later becomes) employed for less than 30 hours per week by SpinCo, a SpinCo Parent, a SpinCo Subsidiary or a SpinCo Affiliate, such Dual Employee shall not be considered a SpinCo Participant for purposes of this Agreement, but shall instead be considered a ParentCo Participant.

“SpinCo RSA” shall mean a SpinCo Common Share issued to the holder of a ParentCo RSA in the Distribution that is subject to a vesting requirement that has not been satisfied as of the Distribution Date.

“SpinCo Stock Price” shall mean the Volume-Weighted Average Price of one SpinCo Common Share for the first three (3) trading days following the Distribution Date.

“SpinCo Subsidiary” shall mean any corporation (other than SpinCo) in an unbroken chain of corporations beginning with SpinCo, if each of the corporations other than the last corporation in the unbroken chain owns shares possessing 50% or more of the total combined voting power of all classes of shares in one of the other corporations in such chain.  A corporation that attains the status of a SpinCo Subsidiary on a date after this Agreement is entered into shall be considered a SpinCo Subsidiary commencing as of such date.

“SpinCo Welfare Plans” shall mean health and welfare plans maintained by a member of the SpinCo Group.

“Strategic Alliance Agreement” shall mean the definition as set forth in the Separation Agreement.

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“Subsidiary” shall mean the definition as set forth in the Separation Agreement.

“TFIO Cash Award” shall mean a cash award granted by ParentCo pursuant to the Theravance, Inc. 2004 Equity Incentive Plan on March 31, 2011 that is subject to both performance-based vesting conditions and service-based vesting conditions, and which have not been fully satisfied as of the Distribution Date.

“TFIO Recipient” shall mean the holder of a ParentCo TFIO RSA.

“Third Party” shall mean the definition as set forth in the Separation Agreement.

1.2                               References; Interpretation.  References in this Agreement to any gender include references to all genders, and references to the singular include references to the plural and vice versa.  Unless the context otherwise requires, the words “include”, “includes” and “including” when used in this Agreement shall be deemed to be followed by the phrase “without limitation”.  Unless the context otherwise requires, references in this Agreement to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement.  Unless the context otherwise requires, the words “hereof”, “hereby”, “herein” and “herewith” and words of similar import when used in this Agreement refer to this Agreement in its entirety and not to any particular Article, Section or provision of this Agreement.  The word “or” shall not be exclusive.

ARTICLE II

GENERAL PRINCIPLES

2.1                               Assumption and Retention of Liabilities; Related Assets.

(a)                                 As of the date hereof and with effect at the Effective Time, except as otherwise expressly provided in this Agreement, ParentCo shall, or shall cause one or more members of the ParentCo Group to, assume or retain, as applicable, and pay, perform, fulfill and discharge, in due course in full (i) all Liabilities under all ParentCo Benefit Plans (except with regard to the Theravance, Inc. 401(k) Plan (the “401(k) Plan”), as discussed below), (ii) all Liabilities (excluding Liabilities incurred under a Benefit Plan except as otherwise provided in this Agreement) with respect to the employment, service, termination of employment or termination of service of all ParentCo Employees, Former ParentCo Employees and their dependents and beneficiaries (and any alternate payees in respect thereof) and other service providers (including any individual who is, or was, an independent contractor, temporary employee, temporary service worker, consultant, freelancer, agency employee, leased employee, on-call worker, incidental worker, or non-payroll worker or in any other employment, non-employment, or retainer arrangement, or relationship with any member of the ParentCo Group), in each case to the extent arising in connection with or as a result of employment with or the performance of services for any member of the ParentCo Group, and (iii) any other Liabilities or obligations expressly assigned to ParentCo or any of its Affiliates (other than any member of the SpinCo Group) under this Agreement.  For purposes of clarification, the Liabilities assumed or retained by the ParentCo Group as provided for in this Section (a) or elsewhere in this Agreement are intended to be Excluded Liabilities.  Notwithstanding the foregoing, sponsorship

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and associated Liabilities of the 401(k) Plan shall transfer to SpinCo; however, ParentCo will remain a participating employer of the 401(k) Plan for the benefit of its employees, and as such will retain any Liabilities associated with such status.

(b)                                 As of the date hereof and with effect at the Effective Time, except as otherwise expressly provided in this Agreement, SpinCo shall, or shall cause one or more members of the SpinCo Group to, assume or retain, as applicable, and pay, perform, fulfill and discharge, in due course in full (i) all Liabilities under all SpinCo Benefit Plans, (ii) all Liabilities (excluding Liabilities incurred under a Benefit Plan except as otherwise provided in this Agreement) with respect to the employment, service, termination of employment or termination of service of all SpinCo Employees, Former SpinCo Employees and their dependents and beneficiaries (and any alternate payees in respect thereof) and other service providers (including any individual who is, or was, an independent contractor, temporary employee, temporary service worker, consultant, freelancer, agency employee, leased employee, on-call worker, incidental worker, or non-payroll worker or in any other employment, non-employment, or retainer arrangement, or relationship with any member of the ParentCo Group or SpinCo Group), in each case to the extent arising in connection with or as a result of employment with or the performance of services for any member of the SpinCo Group, or in the case of Former SpinCo Employees, the ParentCo Group, and (iii) any other Liabilities or obligations expressly assigned to SpinCo or any of its Affiliates (other than any member of the ParentCo Group), under this Agreement.  For purposes of clarification, the Liabilities assumed or retained by the SpinCo Group as provided for in this Section 2.1(b) or elsewhere in this Agreement are intended to be SpinCo Liabilities as such term is defined in the Separation Agreement.

(c)                                  From time to time after the Distribution Date, the Parties shall promptly reimburse one another, upon written request of the Party requesting reimbursement and the presentation by such Party of such substantiating documentation as the other Party shall reasonably request, for the reasonable cost of any obligations or Liabilities satisfied or assumed by the Party requesting reimbursement or its Affiliates that are, or that have been made pursuant to this Agreement, the responsibility of the other Party or any of its Affiliates.  Any such request for reimbursement must be made not later than the first anniversary of the Distribution Date.

(d)                                 ParentCo shall retain responsibility for all employee-related regulatory filings for reporting periods through the Distribution Date except for Equal Employment Opportunity Commission EEO-1 reports and affirmative action program (AAP) reports and responses to Office of Federal Contract Compliance Programs (OFCCP) submissions or other Governmental Entity inquiries, for which ParentCo will provide data and information (to the extent permitted by applicable Laws and consistent with Section 9.1) to SpinCo, who will be responsible for making such filings in respect of SpinCo Employees and Dual Employees (as relates to such Dual Employee’s employment with SpinCo, a SpinCo Parent, a SpinCo Subsidiary or a SpinCo Affiliate).

2.2                               Service Recognition.  SpinCo shall give each SpinCo Participant full credit for purposes of eligibility, vesting, determination of level of benefits, and, to the extent applicable, benefit accruals under any SpinCo Benefit Plan, respectively, for such SpinCo Participant’s service with any member of the ParentCo Group through the Distribution Date to the same extent such service was recognized by the applicable ParentCo Benefit Plans as of the Distribution

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Date; provided, that, such service shall not be recognized to the extent that such recognition would result in the duplication of benefits.

ARTICLE III

QUALIFIED DEFINED CONTRIBUTION PLAN

3.1                               401(k) Plan.

(a)                                 Sponsorship of the 401(k) Plan.  Effective as of the date of Separation, SpinCo shall become the sponsor of the 401(k) Plan.  As a part of the transfer of sponsorship from ParentCo to SpinCo, SpinCo shall permit ParentCo to be an adopting employer of the 401(k) Plan.  SpinCo shall be responsible for taking all necessary, reasonable and appropriate action to maintain and administer the 401(k) Plan so that it is qualified under Section 401(a) of the Code and that the related trust thereunder is exempt from Federal income tax under Section 501(a) of the Code.  SpinCo (acting directly or through its Affiliates) shall be responsible for any and all Liabilities and other obligations with respect to the 401(k) Plan other than Liabilities and other obligations attributable to ParentCo as an adopting employer of the 401(k) Plan, for which ParentCo will retain responsibility.

(b)                                 Continuation of Elections. As of the day after the Distribution Date, the ParentCo Participants and SpinCo Participants shall continue to participate in the 401(k) Plan, and SpinCo (acting directly or through its Affiliates) shall cause the 401(k) Plan to recognize and maintain all 401(k) Plan elections made by ParentCo Participants and SpinCo Participants, including, but not limited to, deferral, investment, and payment form elections, dividend elections, beneficiary designations, and the rights of alternate payees under qualified domestic relations orders with respect to ParentCo Participants and SpinCo Participants, to the extent such election or designation is available under the 401(k) Plan.

(c)                                  Contributions.  All contributions payable to the 401(k) Plan with respect to employee deferrals and contributions, matching contributions and other contributions for ParentCo and SpinCo, determined in accordance with the terms and provisions of the 401(k) Plan, ERISA and the Code, shall be paid by ParentCo or SpinCo respectively to the 401(k) Plan on behalf of each company’s participating employees commencing following the date of transfer of the sponsorship of the 401(k) Plan described in subsection (a), above.

ARTICLE IV

HEALTH AND WELFARE PLANS

4.1                               Health and Welfare Plans Maintained By ParentCo through the Distribution Date.

(a)                                 Establishment of Welfare Plans.  ParentCo or one or more of its Affiliates shall maintain the ParentCo Welfare Plans for the benefit of eligible ParentCo Participants and SpinCo Participants.  Effective as of the Distribution Date, all of the ParentCo Welfare Plans (other than those ParentCo Welfare Plans listed on Attachment 3) shall be transferred to SpinCo (or a SpinCo Affiliate) solely for the benefit of SpinCo Participants and become SpinCo Welfare Plans; provided, however, that for a period of time mutually agreed upon by SpinCo and

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ParentCo, certain ParentCo Employees will be eligible for the following fully insured SpinCo Welfare Plans: (i) vision (VSP), (ii) life and accidental death and dismemberment insurance (Lincoln), (iii) dental (Delta Dental) and (iv) employee assistance plan (EAP).  Other than the four plans listed in the immediately preceding sentence, ParentCo shall maintain its own ParentCo Welfare Benefit Plans solely for the benefit of ParentCo Participants.  Notwithstanding the foregoing, ParentCo Employees who were covered under the major medical plan as of the Distribution Date will continue such coverage until the first day of the month after the Distribution Date.

(b)                                 Terms of Participation in SpinCo Welfare Plans. SpinCo (acting directly or through its Affiliates) shall use reasonable best efforts to cause all SpinCo Welfare Plans, respectively, to continue to operate in a similar manner as when such plans were maintained by ParentCo, such as (i) waiving all limitations as to preexisting conditions, exclusions, and service conditions with respect to participation and coverage requirements applicable to SpinCo Participants, respectively, other than limitations that were in effect with respect to SpinCo Participants as of the Distribution Date, (ii) waiving any waiting period limitation or evidence of insurability requirement that would otherwise be applicable to a SpinCo Participant, respectively, following the Distribution Date to the extent such SpinCo Participant had satisfied any similar limitation when such plans were maintained by ParentCo and (iii) credit SpinCo Participants (and their dependents) for any deductibles and out-of-pocket expenses paid under such plans when such plans were maintained by ParentCo.

(c)                                  Employees on Leave.  Notwithstanding any other provision of this Agreement to the contrary, SpinCo shall assume Liability for payment of any salary continuation, short term disability or health and welfare coverage with respect to SpinCo Employees and ParentCo shall have no further responsibility for such disabled SpinCo Employees or SpinCo Employees on approved leave after the Distribution Date.

(d)                                 COBRA and HIPAA.  Effective as of the Effective Time, ParentCo shall retain responsibility for compliance with the health care continuation coverage requirements of COBRA with respect to SpinCo Participants who, as of the Distribution Date, were covered under a ParentCo Welfare Plan and had a qualifying event within the meaning of Code §4980B(f)(3) before the Effective Time.  The Parties hereto agree that neither the Distribution nor any transfers of employment that occur as of the Distribution Date shall constitute a COBRA qualifying event for purposes of COBRA; provided, that, in all events, SpinCo (acting directly or through its Affiliates) shall assume, or shall have caused the SpinCo Welfare Plans to assume, responsibility for compliance with the health care continuation coverage requirements of COBRA with respect to those individuals whose employment is transferred directly from the ParentCo Group to the SpinCo Group, as of the Effective Time, to the extent such individual was, as of such transfer of employment, covered under a ParentCo Welfare Plan or becomes covered under a SpinCo Welfare Plan.

(e)                                  Liabilities.

(i)                                     Insured Benefits.  With respect to employee welfare and fringe benefits that are provided through the purchase of insurance (including, without limitation, health, disability and workers’ compensation benefits), ParentCo shall timely pay all premiums

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in respect of coverage of SpinCo Participants in respect of the period through the Distribution Date and shall retain all claims incurred by the SpinCo Participants through the Distribution Date, and SpinCo shall cause ParentCo not to have any liability in respect of any and all claims of SpinCo Participants that are incurred under the SpinCo Welfare Plans.

(ii)                                  Incurred Claim Definition.  For purposes of this Section 4.1(e), a claim or Liability is deemed to be incurred (A) with respect to medical, dental, vision and/or prescription drug benefits, upon the rendering of health services giving rise to such claim or Liability; (B) with respect to life insurance, accidental death and dismemberment and business travel accident insurance, upon the occurrence of the event giving rise to such claim or Liability; and (C) with respect to disability benefits, upon the date of an individual’s disability, as determined by the disability benefit insurance carrier or claim administrator, giving rise to such claim or Liability.

4.2                               Time-Off Benefits.  SpinCo shall credit each SpinCo Participant with the amount of accrued but unused paid time-off benefits as such SpinCo Participant had with the ParentCo Group as of the Distribution Date.  Notwithstanding the above, SpinCo shall not be required to credit any SpinCo Participant with any accrual to the extent that a benefit attributable to such accrual is provided or continues to be provided by the ParentCo Group.

ARTICLE V

EQUITY AWARDS

5.1                               Treatment of Outstanding ParentCo Options.

(a)                                 Each ParentCo Option that is outstanding on the Distribution Date shall, as of the Distribution Date, be adjusted in the following manner (as adjusted, a “Post-Distribution ParentCo Option”):

(i)                                     The number of shares subject to the Post-Distribution ParentCo Option shall be equal to the product of (1) the number of shares subject to the ParentCo Option immediately prior to the Distribution multiplied by (2) the ParentCo Ratio, rounded down to the nearest whole share.  The per share exercise price of the Post-Distribution ParentCo Option shall be equal to the product of (1) the per share exercise price of the ParentCo Option immediately prior to the Distribution divided by (2) the ParentCo Ratio, rounded up to the nearest whole cent.

(ii)                                  Prior to the Distribution Date, ParentCo shall take all actions necessary to provide that, effective as of the Distribution Date, for purposes of Post-Distribution ParentCo Options held by a SpinCo Non-Employee Director that are vested as of the Distribution Date, continuous service as a non-employee director of SpinCo following the Distribution Date shall be deemed continuous service with ParentCo.

(iii)                               Prior to the Distribution Date, ParentCo shall take all actions necessary to provide that, effective as of the Distribution Date, for purposes of Post-Distribution ParentCo Options (including vesting, exercisability and expiration of such options), other than any ParentCo Options that were incentive stock options immediately prior to the Distribution Date, a SpinCo Employee’s continuous service with SpinCo, a SpinCo Parent, a SpinCo

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Subsidiary or a SpinCo Affiliate (including (A) any ParentCo Employee who becomes an employee or consultant of SpinCo, a SpinCo Parent, a SpinCo Subsidiary or a SpinCo Affiliate after the Distribution Date and (B) any Dual Employee who becomes solely an employee or consultant of SpinCo, a SpinCo Parent, a SpinCo Subsidiary or a SpinCo Affiliate after the Distribution Date) following the Distribution Date shall be deemed continuous service with ParentCo.

(iv)                              ParentCo shall honor the terms of any written agreement entered into on or before the Distribution Date with any SpinCo Employee insofar as such written agreement provides for accelerated vesting of any ParentCo Option.

(v)                                 Except as otherwise provided herein, the Post-Distribution ParentCo Options shall remain subject to the terms and conditions of the underlying ParentCo Options as in effect immediately prior to the Distribution Date (taking into account changes in the identity of the employer).

(b)                                 Upon the exercise of a Post-Distribution ParentCo Option, regardless of the holder thereof, the exercise price shall be paid to (or otherwise satisfied to the satisfaction of) ParentCo in accordance with the terms of the Post-Distribution ParentCo Option, and ParentCo shall be solely responsible for the issuance of ParentCo Common Stock, for ensuring the collection of the employee portion of all applicable withholding tax on behalf of the employing entity of such holder and for ensuring the remittance of such withholding taxes to the employing entity of such holder, provided, however, that ParentCo is solely responsible for ensuring the collection of the employee portion of all applicable withholding tax related to Post-Distribution ParentCo Options that vested prior to the Distribution Date and for remitting such amounts directly to the applicable taxing authority.

(c)                                  The adjustments made pursuant to this Section 5.1 are intended to be consistent with the provisions of Section 409A of the Code and, to the extent applicable, Section 424 of the Code, and shall be construed accordingly.

5.2                               Treatment of Outstanding ParentCo RSU Awards.